Purchase and Sale Agreement among Wilshire Enterprises, Inc., San Francisco Oil Company, Rockland Resources, Co., Britalta Venezolano, Ltd., and Crow Creek Energy L.L.C. dated March 17, 2004

Summary

This agreement is between Wilshire Enterprises, Inc., San Francisco Oil Company, Rockland Resources, Co., Britalta Venezolano, Ltd. (the Sellers), and Crow Creek Energy L.L.C. (the Purchaser). The Sellers agree to sell, and the Purchaser agrees to buy, certain assets under specified terms, including payment, closing procedures, and conditions. The agreement outlines each party’s responsibilities, representations, and warranties, as well as procedures for title and environmental review, indemnities, and termination. The transaction is subject to certain conditions and may be terminated if those conditions are not met.

EX-10.91 3 b331035_ex10-91.txt PURCHASE AND SALE AGREEMENT PURCHASE AND SALE AGREEMENT BY AND AMONG WILSHIRE ENTERPRISES, INC. a Delaware Corporation, SAN FRANCISCO OIL COMPANY a California Corporation, ROCKLAND RESOURCES, CO., an Oklahoma corporation and BRITALTA VENEZOLANO, LTD. an Alberta private corporation as Sellers and CROW CREEK ENERGY L.L.C. as Purchaser DATED March 17, 2004 TABLE OF CONTENTS ARTICLE 1 INTERPRETATION....................................................1 1.1 Definitions.....................................................1 1.2 Plurality and Gender............................................7 1.3 References......................................................7 1.4 Currency........................................................8 1.5 Headings........................................................8 1.6 Knowledge or Awareness..........................................8 1.7 Schedules.......................................................8 ARTICLE 2 PURCHASE AND SALE.................................................9 2.1 Purchase and Sale...............................................9 2.2 Purchase Price..................................................9 2.3 Allocation of Base Price........................................9 2.4 Deposit........................................................10 2.5 Payment of Purchase Price......................................10 2.6 Holdback.......................................................10 ARTICLE 3 CLOSING..........................................................11 3.1 Place of Closing...............................................11 3.2 Effective Time of Transfer of Title............................11 3.3 Deliveries at Closing..........................................11 3.4 Delivery of Data...............................................12 3.5 Fees, Expenses, Taxes and Recording............................12 ARTICLE 4 ADJUSTMENTS......................................................12 4.1 Costs and Revenues to be Apportioned...........................12 4.2 Imbalances, Prepayments and Refunds............................14 4.3 Suspense Accounts..............................................15 4.4 Adjustments to Account.........................................15 4.5 Limitation on Adjustments......................................15 ARTICLE 5 CONDITIONS OF CLOSING............................................16 5.1 Purchaser's Conditions.........................................16 5.2 Sellers' Conditions............................................16 5.3 Efforts to Fulfill Conditions Precedent........................16 5.4 Failure of a Condition Due to a Breach.........................16 ARTICLE 6 REPRESENTATIONS AND WARRANTIES...................................16 6.1 Representations and Warranties of Sellers......................16 6.2 Negation of Other Representations..............................20 6.3 Representations and Warranties of Purchaser....................21 6.4 Limitation.....................................................22 ARTICLE 7 INDEMNITIES......................................................22 7.1 Sellers' Limited Indemnity.....................................22 7.2 General Purchaser Indemnity....................................23 7.3 Environmental and Related Obligations..........................23 7.4 Limitation.....................................................23 7.5 No Incidental or Consequential Damages.........................23 ARTICLE 8 MAINTENANCE OF ASSETS............................................24 8.1 Maintenance of Assets Prior to Closing.........................24 8.2 Consent of Purchaser...........................................24 ARTICLE 9 PREFERENTIAL PURCHASE RIGHTS AND CONSENTS........................25 9.1 Preferential Purchase Rights...................................25 9.2 Effect of Exercise of Preferential Rights......................25 ARTICLE 10 TITLE REVIEW AND ENVIRONMENTAL REVIEW...........................25 10.1 Title Review...................................................25 10.2 Environmental Review...........................................25 10.3 Valuation Resulting from Review................................25 10.4 Inspection and Testing.........................................28 ARTICLE 11 ARBITRATION.....................................................28 11.1 Selection......................................................28 11.2 Location.......................................................29 11.3 Rules..........................................................29 11.4 Time...........................................................29 11.5 Replacement....................................................29 ARTICLE 12 OPERATORSHIP....................................................29 12.1 Transfer of Operatorship.......................................29 12.2 Removal of Signs...............................................30 ARTICLE 13 TERMINATION.....................................................30 13.1 Causes of Termination..........................................30 13.2 Effect of Termination..........................................30 ARTICLE 14 GENERAL.........................................................31 14.1 Further Assurances.............................................31 14.2 No Merger......................................................31 14.3 Entire Agreement...............................................31 14.4 Governing Law..................................................31 ii 14.5 Assignment.....................................................31 14.6 Time of Essence................................................31 14.7 Notices........................................................32 14.8 Invalidity of Provisions.......................................33 14.9 Waiver.........................................................33 14.10 Remedies Generally.............................................33 14.11 Amendment......................................................33 14.12 Public Announcements...........................................33 14.13 Counterpart Execution..........................................33 14.14 Express Negligence Rule........................................34 14.15 Waiver of Deceptive Trade Practices Acts.......................34 14.16 Appointment of WEI as Nominee..................................34 iii PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT is entered into as of the 17th day of March, 2004, by and among WILSHIRE ENTERPRISES, INC., a Delaware corporation ("WEI"), ROCKLAND RESOURCES, CO., an Oklahoma corporation ("RRC"), BRITALTA VENEZOLANO, LTD., an Alberta private corporation ("BV") and SAN FRANCISCO OIL COMPANY, a California corporation ("SFO", which together with WEI, RRC and BV may be collectively referred to herein as the "Sellers") and CROW CREEK ENERGY L.L.C., a Delaware limited liability company ("Purchaser"). R E C I T A L S A. Sellers own the Assets. B. Sellers desire to sell the Assets and Purchaser desires to purchase the Assets subject to and in accordance with the terms and conditions hereof. NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth, the Parties covenant and agree as follows: ARTICLE 1 INTERPRETATION 1.1 Definitions In this Agreement, including the recitals and the Schedules the following terms still have the following meanings: "Abandonment and Reclamation Obligations" means all obligations to abandon the Wells and restore and reclaim the sites thereof, to decommission and remove the facilities and equipment comprised in the Tangibles and restore and reclaim the sites thereof and to reclaim and restore the lands to which the Surface Rights relate, including such obligations relating to Wells that were abandoned prior to the Effective Time. "AFEs" means authorities for expenditure, cash calls or any other similar requests for approval received by the Sellers in relation to the Petroleum and Natural Gas Rights or the Tangibles, if any, set out in Schedule C. "Agreement", "herein", "hereto", "hereof" and similar expressions refer to this Purchase and Sale Agreement, as amended or modified from time to time by written instrument signed by Sellers and Purchaser. "Assets" means the Petroleum and Natural Gas Rights, the Tangibles and the Miscellaneous Interests. "Assignment" means the assignment in the form of Schedule E. "Base Price" means $13,700,000. "Base Price Allocation" means the allocation of the Base Price among the Assets as set forth in Schedule A. "Business Day" means any day which is not a Saturday, Sunday or statutory holiday in Houston, Texas. "Closing" means the transfer of legal ownership of the Assets from Sellers to Purchaser and the completion of other matters incidental thereto as herein provided for. "Closing Date" means April 23, 2004, or such other date as mutually agreed to by the Parties. "Closing Time" means 10:00 a.m. on the Closing Date, or such other time as may be agreed upon in writing by Sellers and Purchaser. "Code" has the meaning ascribed to such term in Section 2.3. "Data" means all records, data and information directly relating to the Petroleum and Natural Gas Rights or the Tangibles, including well files, lease files, agreement files and production records (including the Title and Operating Documents), but specifically excludes Proprietary Information. "Defensible Title" means, with respect to the Leases, Wells and Lands which comprise the Petroleum and Natural Gas Rights, such title held by Sellers that, subject to and except for Permitted Encumbrances: (i) entitles Sellers to receive not less than the NRI for such Lease, Well or Lands set forth on Schedule A; (ii) obligates Sellers to bear costs and expenses relating to the maintenance, development, operation and the production of Petroleum Substances from the Lease, Well or Lands in an amount not greater than the corresponding WI set forth in Schedule A; and (iii) is free and clear of encumbrances, liens and defects. "Deposit Escrow" has the meaning given to such term in Section 2.4. "Deposit Escrow Agreement" has the meaning given to such term in Section 2.4. "Due Diligence Reduction" has the meaning given to such term in Section 10.3(a). "Effective Time" means 7:00 A.M. on March 1, 2004, at the location of the Assets. 2 "Environmental Liabilities" means all environmental liabilities that relate to the Assets or that arise in connection with the ownership thereof or operations pertaining thereto, including, without limitation, liabilities related to or arising from: (i) transportation, storage, use or disposal of toxic or hazardous substances; (ii) release, spill, escape or emission of toxic or hazardous substances; or (iii) pollution or contamination of or damage to the environment; including, without limitation, liabilities to compensate Third Parties for damages and losses resulting from the items described in items (i), (ii) and (iii) above (including, without limitation, damage to property, personal injury and death) and obligations to take action to prevent or rectify damage to or otherwise protect the environment and, for purposes of this Agreement, "the environment" includes, without limitation, the air, the surface and subsurface of the earth, bodies of water (including, without limitation, rivers, streams, lakes and aquifers) and plant, human and animal life; "Facilities" means Sellers' interest in the tangible property, apparatus, plant, equipment, machinery and facilities related to the Petroleum and Natural Gas Rights. "Final Settlement Date" means July 22, 2004, or such other date as mutually agreed to by the Parties. "Holdback Amount" has the meaning given to such term in Section 2.6. "Holdback Escrow Account" has the meaning give to such term in Section 2.6. "Holdback Escrow Agreement" has the meaning given to such term in Section 2.6. "Lands" means the Petroleum Substances within, under or upon all lands located anywhere in United States in which the Sellers hold any, interest, right or entitlement, including, without limitation, the lands described in the Land Schedule or lands unitized therewith. "Land Schedule" means Schedule A, which shall include a description of the interests of Sellers relating to the Lands. "Leases" means the oil and gas leases, licenses, permits, pooling orders, farmout agreements and similar documents of title by virtue of which the holder thereof is entitled to drill for, take, own or remove Petroleum Substances within, upon or under the Lands and includes, if applicable, all renewals and extensions of such documents and all documents entered or granted in substitution therefor. "Losses and Liabilities" means, in relation to a Party, losses, costs, damages and expenses which such Party suffers, sustains, pays or incurs including attorneys' fees and expenses. 3 "Miscellaneous Interests" means Sellers' interests in all property, assets, interests and rights (other than the Petroleum and Natural Gas Rights and the Tangibles) related to the Petroleum and Natural Gas Rights or the Tangibles, including without limitation any and all of the following: (i) contracts and agreements related to the Petroleum and Natural Gas Rights or the Tangibles including, without limitation, the Title and Operating Documents; (ii) the Surface Rights; (iii) the Seismic Data and Data; and (iv) the Wells, including well bores and casing, but specifically excludes (a) Proprietary Information; (b) Petroleum Substances produced prior to the Effective Time; and (c) accounts receivable accruing prior to the Effective Time. "NRI" means net revenue interest. "Parties" means the parties to this Agreement and "Party" means Purchaser or the Sellers. "Pending Claims" has the meaning ascribed thereto in Section 6.1(g). "Permitted Encumbrances" means: (i) liens for taxes, assessments and governmental charges for which payment is not due; (ii) liens incurred or created in the ordinary course of business as security in favor of the person who is conducting the development or operation of the property to which such liens relate for Sellers' proportionate share of costs and expenses of such development or operation for which payment is not due including pursuant to any Operating Documents; (iii) mechanics', builders' and materialmen's liens in respect of services rendered or goods supplied for which payment is not due; (iv) easements, rights of way, servitudes and other similar rights in land (including, without limitation, rights of way and servitudes for roads, railways, sewers, drains, gas and oil pipelines, gas and water mains and electric light, power, telephone, telegraph and cable television conduits, poles, wires and cables); (v) the right reserved to or vested in any municipality or government or other public authority by the terms of any lease, license, franchise, grant or permit or by any statutory provision, to terminate any such lease, license, franchise, grant or permit or to require annual or other periodic payments as a condition of the continuance thereof; 4 (vi) rights of general application reserved to or vested in any governmental authority to levy taxes on Petroleum Substances or any of them or the income therefrom, and governmental requirements and limitations of general application; (vii) royalty burdens, reductions in interests, rights of first refusal, and other encumbrances set out in the Land Schedule; (viii) required Party consents to assignments and similar rights held by third parties with respect to which (a) prior to Closing waivers or consents are obtained from the appropriate parties, or (b) consents need not be obtained prior to an assignment and/or are routinely obtained after Closing; (ix) the terms and conditions of the Leases and the Title and Operating Documents; (x) such Title Defects as Purchaser may have expressly waived in writing; (xi) imperfections of title which do not materially interfere with the use, operation and possession of any particular Assets or which do not cause Sellers' title to be less than Defensible Title; and (xii) liens and security interests which are released at or prior to Closing. "Person" means any partnership, corporation, trust, unincorporated organization, union, government, governmental department or agency, individual or any heir, executor, administrator or other legal representative of an individual other than a Party. "Petroleum and Natural Gas Rights" means the entire interest of the Sellers in and to the Lands, including, without limitation, all leasehold interests, mineral interests, royalty interests and overriding royalty interests therein, and, insofar as they pertain to the Lands, the Leases and Wells. "Petroleum Substances" means crude oil, petroleum, natural gas, coal seam gas, casinghead gas, natural gas liquids, and other related hydrocarbons and any and all other substances whether liquid, solid or gaseous and whether hydrocarbons or not, produced in association therewith, the rights to which are granted pursuant to the Leases. "Preferential Purchase Right" means a right of first refusal, preemptive right of purchase or similar right whereby a Party has the right to acquire or purchase a portion of the Assets as a consequence of Sellers having agreed to sell the Assets to Purchaser in accordance herewith. 5 "Prime Rate" means the rate of interest, expressed as a rate per annum, designated by Bank of Oklahoma, N.A., as the reference rate used by it to determine rates of interest charged by it on commercial loans made and which is announced by such bank, from time to time, as its prime rate, provided that whenever such bank announces a change in such reference rate, the "Prime Rate" shall correspondingly change effective on the date the change in such reference rate is effective. "Proprietary Information" means (i) Sellers' independent valuations of the Assets, (ii) seismic data that is subject to contractual restrictions against assignment and maps and interpretations made therefrom and (iii) all corporate income tax and financial information. "Purchase Price" has the meaning ascribed thereto in Section 2.2. "Sale, Processing and Transportation Agreements" means agreements for the sale of Petroleum Substances produced from the Lands or lands pooled or unitized therewith and agreements providing for the gathering, transportation, compression, processing, treatment or storage of Petroleum Substances produced from the Lands or lands pooled or unitized therewith. "Seismic Data" means seismic data owned solely by the Sellers, including surveyors' ground elevation records, shot point maps, drillers' logs, shooters' records, seismograph records, seismograph magnetic tapes, monitor records, field records and record sections, excluding maps and interpretations made therefrom. "Specific Conveyances" means all conveyances, assignments, transfers, novations and other documents or instruments that are reasonably required or desirable, in accordance with normal oil and gas industry practices, to convey, assign and transfer the Assets to Purchaser and to novate Purchaser into the Title and Operating Documents in the place and stead of Sellers with respect to the Assets. "Surface Rights" means all rights to use or occupy the surface of lands (including, but not limited to, the Lands) which are used or held for use in connection with the Petroleum and Natural Gas Rights or the Tangibles, including rights to enter upon and occupy the surface of lands on which the Tangibles and the Wells are located and rights to use the surface of lands to gain access thereto. "Take or Pay Obligations" means take or pay and similar obligations related to the Assets arising after the Effective Time as a result of payments made prior to the Effective Time by or on behalf of buyers of Petroleum Substances in lieu of or in satisfaction of their obligations to buy Petroleum Substances, including obligations to sell or deliver Petroleum Substances or any of them to a Party after the Effective Time without being entitled in due course to receive and retain full payment for such Petroleum Substances and obligations to repay such payments and\or interest thereon. 6 "Tangibles" means (i) the interest of Sellers in the Facilities and (ii) the interests of Sellers that are directly related to the Petroleum and Natural Gas Rights in all other tangible depreciable property and assets used or intended to be used in producing, processing, gathering, treating, storing, measuring or injecting Petroleum Substances or any of them from the Lands or lands pooled or unitized therewith or in connection with water injection or removal operations that pertain to the Petroleum and Natural Gas Rights, including, without limitation, gas plants, oil batteries, production equipment, pipelines, pipeline connections, meters, dehydrators, motors, compressors, treaters, dehydrators, scrubbers, separators, pumps, tanks, boilers and communication equipment. "Termination Amount" has the meaning ascribed therein in Section 13.1(c). "Title Defect" means any lien, encumbrance, adverse claim (including without limitation, Pending Claims), encroachment, irregularity, cloud or uncertainty, defect and/or objection to real property title, excluding Permitted Encumbrances, that alone or in combination with other defects renders Sellers' title less than Defensible Title. "Title and Operating Documents" means, to the extent related to the Petroleum and Natural Gas Rights or the Tangibles, (i) the Leases, (ii) unit agreements, assignments, trust declarations, operating agreements, royalty agreements, overriding royalty agreements, gross overriding agreements, participation agreements, farm-in and farmout agreements, sale and purchase agreements, pooling agreements, common stream agreements, easements, surface leases and pipeline crossing agreements, (iii) Sale, Processing and Transportation Agreements; (iv) agreements for construction, ownership and operation of gas plants, gas gathering systems and other facilities, (v) permits, licenses and approvals and (vi) other agreements which relate to the Petroleum and Natural Gas Rights, the Tangibles, the Miscellaneous Interests or the ownership, operation or exploitation thereof. "Sellers' Counsel" means Porter & Hedges, L.L.P., 700 Louisiana, Suite 3500, Houston, Texas, 77002. "Wells" means those wells set forth in Schedule A and all wells (including without limitation producing, shut-in, suspended, capped, abandoned, injection and disposal wells), located on the Lands or lands pooled or unitized therewith. "WI" means working interest. 1.2 Plurality and Gender Unless otherwise expressly stated, words importing the singular number shall, where the context permits, include the plural and vice versa, and words suggesting one gender shall be construed as suggesting other genders. 1.3 References Unless otherwise expressly stated: 7 (a) references to "herein", "hereto", "hereby", "hereunder", "hereof" and similar expressions are references to this Agreement and not to any particular Article, Section, subsection or Schedule. (b) references to "including" means including without limitation, and "includes" or other derivatives thereof shall have corresponding meanings. (c) references to an "Article", "Section", "subsection", "paragraph" or "Schedule" are references to an Article, Section, subsection, paragraph or Schedule of or to this Agreement. (d) any reference herein to any agreement, statute, instrument, published data, or published information, including this Agreement, is a reference to it as varied, amended, modified, supplemented or replaced from time to time, and a reference to any legislation or regulation is a reference to it as re-enacted, varied, amended, modified, supplemented or replaced from time to time. 1.4 Currency Unless otherwise stated, any reference to dollars means currency of the United States of America. 1.5 Headings The use of headings in this Agreement is for convenience of reference only and shall not affect the construction or interpretation of this Agreement. 1.6 Knowledge or Awareness Where in this Agreement a representation or warranty is limited to the knowledge or awareness of Sellers, such knowledge or awareness shall mean that which is known or understood or should have been known or understood on the part of the person having supervising management authority over the matters to which such representation or warranty pertains, after reasonable investigation. 1.7 Schedules The following Schedules are attached to and form a part of this Agreement for all purposes: Schedule A - Land Schedule, Represented Interests and Base Price Allocations Schedule B - Sale, Processing and Transportation Agreements Schedule C - Authorizations for Expenditures Schedule D - Lawsuits and Claims Schedule E - Assignment, Conveyance and Bill of Sale 8 Schedule F - Intentionally Omitted Schedule G - Gas Imbalances Schedule H - Intentionally Omitted Schedule I - Preferential Purchase Rights Schedule J - Deposit Escrow Agreement Schedule K - Holdback Escrow Agreement Wherever any term or condition, express or implied, of such Schedules conflicts or is at variance with any term or condition in the body of this Agreement, such term or condition in the body of this Agreement shall prevail. ARTICLE 2 PURCHASE AND SALE 2.1 Purchase and Sale Sellers hereby agree to sell the Assets to Purchaser and Purchaser hereby agrees to purchase the Assets from Sellers, subject to and in accordance with this Agreement. 2.2 Purchase Price The purchase price to be paid by Purchaser to Sellers for the Assets (the "Purchase Price") will be the Base Price plus or minus (as applicable) the net amount of the adjustments made pursuant to Article 4. 2.3 Allocation of Base Price Subject to the adjustments made pursuant to Article 4, the Base Price shall be allocated among the Assets as set forth in Schedule A . For the purpose of making the requisite filings under Section 1060 of Internal Revenue Code of 1986, as amended, (the "Code") and the regulations thereunder the Parties shall utilize the Base Price allocation as adjusted pursuant to Article 4. Sellers and Purchaser each agree to report the federal, state and local income and other Tax consequences of the transactions contemplated herein, and in particular to report the information required by Section 1060(b) of the Code, and to jointly prepare Form 8594 (Asset Acquisition Statement under Section 1060) in a manner consistent with the Base Price Allocation (as herein adjusted) and shall not take any position inconsistent therewith upon examination of any tax return, in any refund claim, in any litigation, investigation or otherwise. Sellers and Purchaser agree that each shall furnish the other a copy of Form 8594 (Asset Acquisition Statement under Section 1060) proposed to be filed with the Internal Revenue Service by such Party or any affiliate thereof within ten (10) days prior to the filing of such form with the Internal Revenue Service. The value allocated to an Asset as set forth in Schedule A is referred to as the "Allocated Value" for that Asset for purposes of seeking adjustments to the Purchase Price pursuant to Article 10 below. 9 2.4 Deposit Purchaser has paid to Sellers a performance guarantee deposit (the "Deposit") in an amount equal to One Million Dollars ($1,000,000), which Deposit has been deposited contemporaneously herewith in an interest-bearing escrow account with Bank of Oklahoma, N.A. (the "Deposit Escrow") pursuant to an escrow agreement in the form attached hereto as Exhibit J (the "Deposit Escrow Agreement"). If Closing occurs, (i) the Deposit Escrow shall be terminated, and (ii) the Deposit, together with interest earned thereon, shall be delivered into a separate escrow account with Bank of Oklahoma, N.A. pursuant to Section 2.6 below to serve as the Holdback Amount. If this Agreement is terminated, the Deposit, together with interest thereon, shall be handled as provided in Section 2.5 below. 2.5 Payment of Purchase Price (a) If Closing does not occur due to a breach of this Agreement by Purchaser which remains uncured ten (10) days after Purchaser has received written notice of breach from Sellers, the Deposit together with all interest earned thereon shall be forfeited to and retained by Sellers as liquidated damages, which forfeiture shall be Sellers' sole remedy at law and in equity. The parties agree that the damages that would be suffered by Sellers as a result of Purchaser's breach would be difficult to estimate and that the liquidated damages described herein represent a reasonable estimation of such damages and do not constitute a penalty. (b) If Closing does not occur for any reason or circumstance other than that described in Section 2.5(a), the Deposit together with all interest earned thereon shall be returned to the Purchaser. (c) At Closing, Purchaser shall pay to Sellers or as directed by Sellers by wire transfer the Purchase Price, adjusted as provided in Article 4 below and less and except the Deposit (together with interest earned thereon) to the account or accounts designated by Sellers. 2.6 Holdback At Closing, the Deposit Escrow shall be terminated and the Deposit, together with interest earned thereon (the "Holdback Amount"), shall be deposited into an escrow account with Bank of Oklahoma, N.A. (the "Holdback Escrow Account") and held pursuant to an escrow agreement in the form attached hereto as Exhibit K to be executed at Closing ("Holdback Escrow Agreement") for a period expiring ninety (90) days after the Closing Date (unless extended pursuant to Sections 10.1 and/or 10.2 below), for the purpose of securing (i) Purchaser's rights post-Closing to seek a Due Diligence Reduction pursuant to Section 10.3 below, and (ii) the limited indemnity obligations of Sellers as set forth in Section 7.1 below. All portions of the Holdback Amount with respect to which no claim has been made by Purchaser on or before the Final Settlement Date (or such later date, if the escrow is extended pursuant to Sections 10.1 and/or 10.2 below) shall be promptly released to Sellers pursuant to the Holdback Escrow Agreement. 10 ARTICLE 3 CLOSING 3.1 Place of Closing Unless otherwise agreed to in writing by the Parties, Closing shall take place at the Closing Time on the Closing Date at the offices of Seller's Counsel. 3.2 Effective Time of Transfer of Title The transfer and assignment of the Assets from Sellers to Purchaser shall be effective as of the Effective Time. However, possession and title to the Assets shall not pass to Purchaser until Closing. 3.3 Deliveries at Closing (a) At Closing, Sellers shall deliver the following: (i) the Assignment (whether one or more) fully executed and acknowledged by Sellers; (ii) all required Specific Conveyances fully executed and, if necessary, acknowledged by Sellers; (iii) copies of all consents to disposition and waivers of Preferential Purchase Right obtained by Sellers with respect to the sale of the Assets to Purchaser; (iv) affidavits of non-foreign status and no requirement for withholding under Section 1445 of the Code; (v) a termination of the Deposit Escrow agreement; and (vi) such other items as may be specifically required hereunder. (b) At Closing, Purchaser shall deliver the following: (i) the Purchase Price, adjusted as provided in Article 4 below and less and except the Deposit; --------- (ii) counterpart originals of the Holdback Escrow Agreement to be executed by Sellers and Purchaser; and (iii) such other items as may be specifically required hereunder. 11 In addition, Purchaser will execute the Assignment and the Specific Conveyances delivered by Seller. 3.4 Delivery of Data Sellers shall, within ten (10) Business Days after Closing, make available to Purchaser original copies of the Data which it has in its possession. If reasonably required by Sellers after Closing for the completion of tax returns or dealing with tax matters, Purchaser shall make original copies of Data available to Sellers, at Sellers' sole cost and expense. 3.5 Fees, Expenses, Taxes and Recording (a) Each Party shall be solely responsible for all costs and expenses incurred by it in connection with this transaction (including, but not limited to fees and expenses of its counsel and accountants) and shall not be entitled to any reimbursements from the other Party, except as otherwise provided in this Agreement. (b) Purchaser shall file all necessary tax returns and other documents with respect to all transfer, documentary, sales, use, stamp, registration and other similar taxes and fees, and, if required by applicable law, Sellers shall join in the execution of any such tax returns and other documentation. Notwithstanding anything set forth in this Agreement to the contrary, Purchaser shall pay any transfer, documentary, sales, use, stamp, registration and other similar taxes and fees incurred in connection with this Agreement and the transactions contemplated hereby. (c) Purchaser shall, at its own cost, immediately record all instruments of conveyance and sale in the appropriate office of the state and county in which the lands covered by such instrument are located. Purchaser shall immediately file for and obtain the necessary approval of all federal, Indian, tribal or state government agencies to the assignment of the Assets. The assignment of any state, federal or Indian tribal oil and gas leases shall be filed in the appropriate governmental offices on a form required and in compliance with the applicable rules of the applicable government agencies. If requested in writing by Sellers, Purchaser shall supply Sellers, at Sellers' expense, with true and accurate photocopies reflecting the recording information of all the recorded and filed assignments within a reasonable period of time after their recording and filing. ARTICLE 4 ADJUSTMENTS 4.1 Costs and Revenues to be Apportioned (a) The transfer and assignment of the Assets by Sellers to Purchaser shall occur at the Closing Time and be effective as of the Effective Time. SUBJECT ALWAYS TO SECTION 4.5, Sellers will be responsible for and cause the payment of all costs, and take the benefit of all revenues incurred in relation to the Assets prior to the Effective Time and Purchaser will be responsible for and cause payment of all costs, and take the benefit of all revenues relating to the Assets incurred from and subsequent to the Effective Time. Except as otherwise provided in this Agreement, all costs and expenses relating to the Assets (including, without limitation, maintenance, development, capital and operating costs) and all revenues relating to the Assets (including, without limitation, proceeds from the sale of production and fees from processing, treating or transporting Petroleum Substances on behalf of Third Parties) shall be apportioned as of the Effective Time between Sellers and Purchaser on an accrual basis in accordance with generally accepted accounting principles, provided that: 12 (i) advances made by Sellers in respect of the costs of operations on the Lands or lands pooled or unitized therewith or facilities interests included in the Assets which are attributable to periods of ownership or operation from and after the Effective Time will be transferred to Purchaser and an adjustment will be made in favor of Sellers equal to the amount of the advance transferred; (ii) Sellers will be reimbursed expenses related to the continued operations of the Assets (including personnel and general and administrative expenses) for periods after the Closing Date at a rate equal to $1,325 per day. Sellers shall be given at least fifteen (15) days' notice of the date Purchaser shall take over operations of the Assets. (iii) deposits made by Sellers relative to operations on the Lands and attributable to periods of ownership or operation from and after the Effective Time, other than as referred to in Section 4.1(a)(i), shall be returned to Sellers; (iv) costs and expenses of work done, services provided and goods supplied shall be deemed to accrue for the purposes of this Article when the work is done or the goods or services are provided, regardless of when such costs and expenses become payable; (v) revenues from the sale of Petroleum Substances will be deemed to accrue when the Petroleum Substances are produced; (vi) all rentals and similar payments in respect of the Leases or Surface Rights comprised in the Assets and all taxes (other than income taxes) levied with respect to the Assets or operations in respect thereof shall be apportioned between Sellers and Purchaser on a per diem basis as of the Effective Time; and (vii) the Purchase Price shall be reduced by any Due Diligence Reduction to be made prior to Closing pursuant to Section 10.3. (b) SUBJECT ALWAYS TO SECTION 4.5, Petroleum Substances that were produced, but not sold, as of the Effective Time shall be retained by Sellers and Sellers shall be responsible for all royalties or other encumbrances thereon and all processing, treating and transportation expenses pertaining thereto. Petroleum Substances will be deemed to be sold on a first in, first out basis. For purposes of this Section 4.1(b), Sellers will cause the merchantable oil in oil storage facilities above the load lines which comprise a portion of the Petroleum Substances to be gauged or strapped as of the Effective Time. The oil in such storage facilities above the load lines after the Effective Time and retained by Sellers shall be deemed sold at the per-barrel price of $30.83, and such proceeds shall be provided to the Seller pursuant to the terms herein. 13 4.2 Imbalances, Prepayments and Refunds The Parties recognize that as of the Effective Time there may be (i) gas imbalances ("Imbalances") with respect to production from or attributable to certain of the Assets, whether such Imbalances be instances of overproduction ("Imbalance Obligations") or underproduction ("Imbalance Entitlements"), and including, without limitation, the imbalances set forth in Schedule G), (ii) prepayment obligations due to monies received by Sellers under production sales contracts or similar agreements containing "take-or-pay" clauses (or similar arrangements), whereby Sellers are obligated to deliver oil or gas produced after the Effective Time with respect to an Asset without receiving payment therefor in the ordinary course of business ("Prepayment Obligations"), or (iii) refund obligations arising from Sellers' sale of oil or gas produced from an Asset prior to the Effective Time at prices exceeding the applicable maximum lawful prices ("Refund Obligations"). The Parties agree that, from and after the date of this Agreement, they shall jointly attempt to ascertain prior to Closing all Imbalances, Prepayment Obligations and Refund Obligations affecting the Assets as of the Effective Time. The Parties further agree that they shall adjust the Purchase Price at Closing for all discovered Imbalances, Prepayment Obligations and Refund Obligations in accordance with the following procedures: (a) Imbalances. The value of discovered Imbalances (including, without limitation, those set forth in Schedule G existing as of the Effective Time shall be calculated by multiplying the overproduced or underproduced volumes by $1.05 per Mcf. At Closing or on the Final Settlement Date, as the case may be, the Purchase Price shall be adjusted upward for the aggregate value of all Imbalance Entitlements and downward for the aggregate value of all Imbalance Obligations. Respecting Imbalances discovered after the Final Settlement Date, Purchaser shall bear all obligations with respect to any overproduction liability and shall receive the benefit of and be credited with any underproduction credit, including overproduction and underproduction attributable to periods of time prior to the Effective Time. (b) Prepayment Obligations. At Closing or on the Final Settlement Date, as the case may be, the Purchase Price shall be adjusted downward by all amounts received by Sellers prior to the Closing with respect to Prepayment Obligations. (c) Refund Obligations. At Closing or on the Final Settlement Date, as the case may be, the Purchase Price shall be adjusted downward by all amounts received by Sellers prior to the Closing with respect to Refund Obligations. 14 4.3 Suspense Accounts The parties agree that all suspended royalties and other proceeds which are held by Sellers (or by a third-party designee on behalf of Sellers) in suspense for third parties attributable to production from the Assets shall be transferred to Purchaser at the Closing. As of February 28, 2004, the aggregate amount of such suspended royalties is $124,766.00. Purchaser shall and does hereby assume responsibility for the payment of all suspended revenues to third parties entitled to the same and shall and does hereby hold Sellers harmless from and against any loss, liability, cost or expense (other than those that may be attributed to Sellers' improper placement of such revenues in suspense) which might arise from claims of third parties asserted following Sellers' transfer to Purchaser of the suspended revenues pursuant to this Section 4.3. 4.4 Adjustments to Account (a) An interim accounting of the adjustments pursuant to Sections 4.1 and 4.2 shall be made at Closing, based on (i) Sellers' good faith estimate and Purchaser's verification of the costs and expenses paid by Sellers prior to Closing and the revenues received by Sellers prior to Closing, and (ii) the quantification of Imbalances, Prepayments and Refunds existing as of the Effective Time and confirmed by the Parties pursuant to Section 4.2 above. Sellers shall provide a statement setting forth the adjustments to be made at Closing not later than three (3) Business Days prior to Closing and shall assist Purchaser in verifying the amounts set forth in such statement. A further accounting of the adjustments pursuant to Sections 4.1 and 4.2 shall be conducted on or before the Final Settlement Date. Any adjustment due from a Party for which such Party has received written notice not later than the Final Settlement Date, shall be settled by payment by such Party required to make payment hereunder within 15 days of being notified of the determination of the amount owing. (b) During the 90 day period following the Closing Date, Purchaser may audit the books, records and accounts of Sellers respecting the Assets, for the purpose of effecting adjustments pursuant to this Article. Such audit shall be conducted upon reasonable notice to Sellers at Sellers' offices during Sellers' normal business hours, and shall be conducted at the sole expense of Purchaser; provided, that Sellers shall supply such documentation as Purchaser reasonably requests to support Sellers' proposed final accounting. (c) All adjustments provided for in this Article 4 shall be adjustments to the Base Price. 4.5 Limitation on Adjustments NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NEITHER PARTY SHALL BE ENTITLED TO, OR LIABLE FOR, ANY ADJUSTMENTS PURSUANT TO THIS AGREEMENT (INCLUDING THIS ARTICLE 4) UNLESS WRITTEN NOTICE OF SUCH ADJUSTMENT HAS BEEN RECEIVED BY THE PARTY LIABLE TO MAKE PAYMENT (OR NET PAYMENT) IN RESPECT OF SUCH ADJUSTMENT(S) NOT LATER THAN THE FINAL SETTLEMENT DATE. 15 ARTICLE 5 CONDITIONS OF CLOSING 5.1 Purchaser's Conditions The obligation of Purchaser to purchase the Assets pursuant hereto is subject to the satisfaction at or prior to the Closing Date of the following conditions, which are for the exclusive benefit of Purchaser and may be waived by Purchaser: (a) Representations and Warranties. The representations and warranties of Sellers herein contained shall be true in all material respects when made and as of the Closing Date; (b) Obligations. All obligations of Sellers contained in this Agreement to be performed prior to or at Closing shall have been timely performed in all material respects; and (c) No Material Damage. There having been no physical damage to, or other alteration in or to the Assets between the date hereof and the Closing Time which materially and adversely affects the value of the Assets. If any of the foregoing conditions has not been complied with, or waived by Purchaser at or before the Closing Date, Purchaser may, in addition to any other remedies which it may have available to it, terminate its obligations to purchase the Assets by written notice to Sellers specifying what conditions have not been satisfied and, in such event, Purchaser and Sellers shall be released and discharged from all obligations hereunder except as provided in Section 5.4. The Purchaser's decision to cause Closing to occur shall be deemed its agreement and acknowledgment that the foregoing conditions have been complied with to Purchaser's satisfaction or waived by Purchaser. 5.2 Sellers' Conditions The obligation of Sellers to sell the Assets pursuant hereto is subject to the satisfaction at or prior to the Closing Date of the following conditions, which are for the exclusive benefit of Sellers and may be waived by Sellers: (a) Representations and Warranties. The representations and warranties of Purchaser herein contained shall be true in all material respects when made and as of the Closing Date; (b) Obligations. All obligations of Purchaser contained in this Agreement to be performed prior to or at Closing shall have been timely performed in all material respects; and 16 (c) Payment. All amounts to be paid by Purchaser to Sellers at Closing pursuant to this Agreement hereto shall have been paid to Sellers by Purchaser in the form stipulated in this Agreement. If any of the foregoing conditions precedent has not been complied with, or waived by Sellers at or before the Closing Date, Sellers may, in addition to any other remedies which it may have available to it, terminate its obligations to sell the Assets to Purchaser by written notice to Purchaser specifying what conditions have not been satisfied and, in such event, Purchaser and Sellers shall be released and discharged from all obligations hereunder except as provided in Section 5.4. The Sellers' decision to cause Closing to occur shall be deemed its agreement and acknowledgment that the foregoing conditions have been complied with to Sellers' satisfaction or waived by Purchaser. 5.3 Efforts to Fulfill Conditions Precedent Purchaser and Sellers shall proceed diligently and in good faith and use all commercially reasonable efforts to fulfill and assist in the fulfillment of the conditions precedent. 5.4 Failure of a Condition Due to a Breach If a condition set forth in Section 5.1 or 5.2 is not satisfied as a result of a breach by a Party of its obligations hereunder, the following shall occur: (a) Purchaser's Breach. If Closing does not occur because Purchaser wrongfully fails to tender performance at Closing or otherwise breaches this Agreement prior to Closing, Seller shall be entitled to the Deposit, and all earned interest thereon, as liquidated damages and Sellers' sole remedy at law and in equity, as more particularly provided in Section 2.5(a) above. (b) Sellers' Breach. If Closing does not occur because Sellers wrongfully fail to tender performance at Closing or otherwise breaches this Agreement, Purchaser shall be entitled to receive the Deposit, and all earned interest thereon, immediately after the determination that the Closing will not occur, and Purchaser shall retain any legal or equitable remedies for Sellers' breach of this Agreement including, without limitation, specific performance subject to the terms and conditions of this Agreement (including payment in full of the Purchase Price as set forth herein). ARTICLE 6 REPRESENTATIONS AND WARRANTIES 6.1 Representations and Warranties of Sellers Sellers represents and warrants to Purchaser that: (a) Standing. Each Seller is a corporation, duly organized and validly existing under the laws of the state of its formation, is authorized to carry on business in all jurisdictions in which the Assets are located, and now has all the requisite corporate power and authority to sell, assign, transfer and convey the Assets to Purchaser in accordance with this Agreement; 17 (b) No Conflicts. The consummation of the transactions contemplated herein will not violate, nor be in conflict with, any of the controlling documents, by-laws or governing documents of Sellers or any judgment, decree, order, law, statute, rule or regulation applicable to Sellers; (c) Execution of Documents. This Agreement has been duly executed and delivered by Sellers and all other documents (including the Assignments and the Specific Conveyances) executed and delivered by Sellers pursuant hereto will be duly executed and delivered by Sellers, and this Agreement does, and such documents will, constitute legal, valid and binding obligations of Sellers enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, preference, reorganization, moratorium and other similar laws affecting creditors' rights generally and the discretion of courts with respect to equitable or discretionary remedies and defenses; (d) Finders' Fees. Sellers have not incurred any obligation or liability, contingent or otherwise, for brokers' or finders' fees in respect of this transaction for which Purchaser shall have any obligation or liability; (e) No Authorizations. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body exercising jurisdiction over the Assets or Sellers are required for the due execution, delivery and performance by Sellers of this Agreement, other than authorizations, approvals or exemptions previously obtained and currently in force; (f) Title. Except for the Permitted Encumbrances, the Assets are free and clear of all liens, mortgages, royalties, encumbrances and adverse claims created by, through or under Sellers; (g) No Lawsuits or Claims. There are no judgments and no claims, proceedings, actions or lawsuits pending or, to Sellers' knowledge, contemplated or threatened against or with respect to the Assets or the interests of Sellers therein other than as disclosed in Schedule D (the "Pending Claims"); (h) Good Standing under Agreements. To Sellers' knowledge, Sellers are not in material breach of any term or provision of any of the Title and Operating Documents; (i) AFEs. As of the Effective Time, there are no AFEs, unit budget or similar financial commitments pursuant to which expenditures in respect of the Assets (in excess of $50,000 net to Sellers) other than ordinary course operating costs are or may be required after the Effective Time other than as described in Schedule C and as permitted by Section 8.2; 18 (j) Assessments. To Sellers' knowledge, all ad valorem, property, production, severance and similar taxes and assessments based on or measured by the ownership of property or the production of Petroleum Substances or the receipt of proceeds therefrom in respect of the Assets which have become due and payable prior to the Effective Time (including all prior years) have been properly and fully paid and discharged; (k) Preferential Purchase Right. Except as set forth in Schedule I, the sale of the Assets pursuant hereto is not subject to any Preferential Purchase Right created by, through or under Sellers; (l) Sale, Processing and Transportation Agreements; No Hedging. Schedule B includes all Sale, Processing and Transportation Agreements to which Sellers is a party or is bound and to be assumed by Purchaser that cannot be terminated without penalty on notice from Sellers of 30 days or less. Sellers have entered no hedging arrangements for the sale of Petroleum Substances which would affect the Properties (or the sale or marketing of Petroleum Substances therefrom) for periods from and after the Effective Time; (m) Imbalances; Take or Pay. To Sellers' knowledge, (i) the Imbalances affecting the Assets as of the Effective Time and reflected on Schedule G are true and correct in all material respects, and (ii) there are no Assets which are subject to gas balancing agreements containing a provision that would require cash balancing upon the transfer of the affected Lease or Well through a transaction of the nature contemplated in this Agreement. There are no Take or Pay Obligations related to the Assets; (n) Environmental Matters. To Sellers' knowledge, Sellers have given Purchaser access to all written information in its possession relating to Environmental Liabilities and Abandonment and Reclamation Obligations and, except as otherwise disclosed in writing to the Purchaser prior to the execution of this Agreement, Sellers have not received actual notice, written or oral, received by any officer of the Sellers, of: (i) any material non-compliance in relation to the Assets of which Sellers is the operator with any law intended to protect the environment which has not been remedied in all material respects; or (ii) any claim in relation to the Assets by any Party of material Environmental Liabilities (including pollution) (or material Abandonment and Reclamation Obligations). (o) Affiliate Agreements. Sellers are not subject to any agreement (other than agreements relating to assets that are unrelated to the Assets purchased herein) with an Affiliate of any of the Sellers that cannot be terminated by Purchaser after Closing without penalty, cost or liability. For purposes hereof, "Affiliate" shall mean (i) any person directly or indirectly owning, controlling or holding with power to vote 10% or more of the outstanding voting securities of any Seller or shareholder of any Seller, (ii) any person 10% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote by any Seller or shareholder of any Seller, (iii) any person directly or indirectly controlling, controlled by or under common control with any Seller or shareholder of any Seller, (iv) any officer, director, member, manager or partner of any Seller or any shareholder of Seller, or (v) any person described in clause (i), (ii), (iii) or (iv) of this Section 6.1(o). 19 6.2 Negation of Other Representations (a) SELLERS MAKE NO REPRESENTATIONS OR WARRANTIES (EXPRESS, IMPLIED OR STATUTORY AND WHETHER IN CONTRACT OR IN TORT) EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 6.1 AND, IN PARTICULAR, AND WITHOUT LIMITATION, SELLERS HEREBY EXPRESSLY NEGATE AND DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED BY THEM, WHETHER CONTAINED IN ANY INFORMATION MEMORANDUM OR OTHERWISE, WITH RESPECT TO: (i) ANY DATA OR INFORMATION SUPPLIED BY SELLERS TO PURCHASER OR ITS REPRESENTATIVES; (ii) THE QUALITY, QUANTITY OR RECOVERABILITY OF PETROLEUM SUBSTANCES WITHIN OR UNDER THE LANDS OR ANY LANDS POOLED OR UNITIZED THEREWITH; (iii) THE VALUE OF THE ASSETS OR THE FUTURE CASHFLOW THEREFROM; OR (iv) THE QUALITY, CONDITION, FITNESS OR MERCHANTABILITY OF ANY TANGIBLE DEPRECIABLE EQUIPMENT OR PROPERTY INTERESTS WHICH COMPRISE ALL OR PART OF THE ASSETS. PURCHASER ACKNOWLEDGES AND CONFIRMS THAT IT HAS NOT RELIED ON ANY DATA, INFORMATION OR ADVICE FROM SELLERS WITH RESPECT TO ANY OR ALL OF THE MATTERS SPECIFICALLY ENUMERATED IN THIS PARAGRAPH IN CONNECTION WITH THE PURCHASE OF THE ASSETS PURSUANT HERETO, BUT HAS RELIED SOLELY UPON SELLERS' REPRESENTATIONS SET FORTH IN SECTION 6.1 ABOVE. PURCHASER FURTHER ACKNOWLEDGES THAT, SUBJECT TO SELLERS' LIMITED INDEMNITY PURSUANT TO SECTION 7.1 BELOW AND PURCHASER'S RIGHTS TO SEEK DUE DILIGENCE REDUCTIONS PURSUANT TO SECTION 10.3 BELOW ON OR BEFORE THE FINAL SETTLEMENT DATE, PURCHASER IS PURCHASING THE ASSETS PURSUANT HERETO ON A "AS IS, WHERE IS" BASIS WITH ALL FAULTS AND DEFECTS. PURCHASER CONFIRMS THAT IT HAS NOT RELIED ON ANY COVENANTS, REPRESENTATIONS OR WARRANTIES OUTSIDE THIS AGREEMENT (WHETHER IN CONTRACT OR IN TORT). PURCHASER ACKNOWLEDGES AND CONFIRMS THAT IT HAS PERFORMED OR SHALL PERFORM PRIOR TO THE FINAL SETTLEMENT DATE ITS OWN DUE DILIGENCE AND WILL CONTINUE TO RELY UPON ITS OWN DUE DILIGENCE, EVALUATIONS AND PROJECTIONS AS THE SAME RELATE TO THE ASSETS, INCLUDING WITHOUT LIMITATION, ENVIRONMENTAL DUE DILIGENCE. 20 (b) PURCHASER FOREVER RELEASES AND DISCHARGES SELLERS AND ITS SHAREHOLDERS, DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES FROM ANY CLAIMS AND ALL LIABILITY (WHETHER IN CONTRACT OR IN TORT) TO THE PURCHASER OR PURCHASER'S REPRESENTATIVES, ASSIGNS AND SUCCESSORS, AS A RESULT OF THE USE OR RELIANCE UPON ADVICE, INFORMATION, STATEMENTS, OPINIONS OR MATERIALS PERTAINING TO THE ASSETS WHICH WAS OR WERE DELIVERED OR MADE AVAILABLE TO PURCHASER BY SELLERS OR ANY OF ITS DIRECTORS, OFFICERS, AGENTS OR EMPLOYEES. 6.3 Representations and Warranties of Purchaser Purchaser represents and warrants to Sellers, that: (a) Standing. Purchaser is a limited liability company, duly organized and validly existing under the laws of Delaware, is authorized to carry on business in all jurisdictions in which the Assets are located, and now has the requisite power and authority to purchase and pay for the Assets in accordance with this Agreement; (b) No Conflicts. The consummation of the transactions contemplated by this Agreement will not violate, nor be in conflict with, the controlling documents, by-laws or governing documents of Purchaser or any judgment, decree, order, law, statute, rule or regulation applicable to Purchaser; (c) Execution of Documents. This Agreement has been duly executed and delivered by Purchaser and all other documents (including the Assignment and the Specific Conveyances) executed and delivered by Purchaser pursuant hereto will be duly executed and delivered by Purchaser, and this Agreement does, and such documents will, constitute legal, valid and binding obligations of Purchaser enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, preference, reorganization, moratorium and other similar laws affecting creditors' rights generally and the discretion of the courts with respect to equitable or discretionary remedies and defenses; (d) Finders' Fees. Purchaser has not incurred any liability, contingent or otherwise, for brokers' or finders' fees in respect of this transaction for which Sellers shall have any obligation or liability; 21 (e) Purchase Price. Purchaser either now has or will have at Closing all money that Purchaser will need to pay to Sellers upon Closing or Purchaser has a contractual right to receive all money that Purchaser will need to pay to Sellers and such money will be available to Purchaser for payment to Sellers at Closing; and (f) No Authorizations. No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body exercising jurisdiction over the Assets or Purchaser is required for the due execution, delivery and performance by Purchaser of this Agreement, other than authorizations, approvals or exemptions previously obtained and currently in force. 6.4 Limitation If Closing occurs: no claim for a breach of a representation or warranty contained in Sections 6.1(a) through (o), or Section 6.3 shall be made or be enforceable by a Party unless written notice of such claim, with reasonable particulars, is given by such Party to the Party against whom the claim is made on or before the Final Settlement Date. No claim shall be made by a Party in respect of the representations and warranties made by the other Party in this Agreement except pursuant to this Article 6. ARTICLE 7 INDEMNITIES 7.1 Sellers' Limited Indemnity (a) Subject to the limitations set forth in subparagraph (b) below, if the Closing occurs, Sellers agree, jointly and severally, to indemnify, defend and hold harmless the Purchaser Indemnified Persons from and against all Losses and Liabilities that arise out of (i) any breach by Sellers, or any of them, of any representation, warranty, covenant or agreement hereunder, and (ii) the ownership and/or operation of the Assets for periods prior to the Effective Time during which Sellers owned the Assets. "Purchaser Indemnified Persons" means Purchaser and its members, managers, officers, directors, agents and employees. (b) Sellers' indemnification obligations set forth in subparagraph (a) above are subject to the following limitations: (i) Sellers' indemnification obligations shall only extend to and cover claims made by an Purchaser Indemnified Person on or before the Final Settlement Date, and all other claims shall be deemed waived and forever barred, (ii) Sellers' aggregate liability to Purchaser shall be limited to the Holdback Amount (and interest earned thereon), (iii) Sellers' indemnification obligations shall not apply to (A) any amount which is attributed to an issue that was taken into account as an adjustment to the Purchase Price at Closing (including any such amounts deemed to be waived under Section 10.3(b)), or (B) either Party's costs and expenses with respect to the negotiation and consummation of this Agreement and the purchase and sale of the Assets. 22 7.2 General Purchaser Indemnity Except as otherwise provided in this Article 7 or in Article 4, Purchaser shall, from and after Closing, be liable for and indemnify Sellers and its shareholders, directors, officers, agents and employees (collectively the "Sellers Indemnified Persons") from and against all of Sellers' Losses and Liabilities in respect of, any claim arising directly from the ownership and/or operation of the Assets (whether valid or invalid) made by a Person claiming liabilities of any Sellers Indemnified Person as a consequence of any acts or omissions which occurred or are alleged by the Person to have occurred and which directly relate to the Assets, regardless of when such acts or omissions occurred or are alleged to have occurred, subject only to Section 7.1 above and the adjustments permitted pursuant to Article 4 (and restricted by Section 4.5). 7.3 Environmental and Related Obligations Subject to Section 7.1 and Purchaser's rights under Section 10.3 with respect to Environmental Liabilities asserted prior to the Final Settlement Date, Purchaser shall be liable for and indemnify and save harmless all Sellers Indemnified Persons from and against all Losses and Liabilities of Sellers in respect of, all Environmental Liabilities howsoever and by whomsoever caused and whether they occur or arise in whole or in part prior to, on or subsequent to the Closing Date and all Abandonment and Reclamation Obligations; provided, however, that Purchaser's indemnification is expressly limited pursuant to Section 7.5 below. Subject to Section 7.1 above and Purchaser's rights to assert Environmental Liabilities pursuant to Section 10.3 below prior to the Final Settlement Date, Purchaser shall not be entitled to exercise and hereby waives any rights or remedies Purchaser may now or in the future have against any Sellers Indemnified Person in respect of such Environmental Liabilities or the Abandonment and Reclamation Obligations, whether such rights and remedies are pursuant to the common law or statute or otherwise, including without limitation, the right to name any Sellers Indemnified Person as a Party to any action commenced by any Person against Purchaser. 7.4 Limitation The indemnities provided for in this Article 7 apply only if Closing occurs. 7.5 No Incidental or Consequential Damages NEITHER PARTY SHALL BE LIABLE PURSUANT TO THIS AGREEMENT FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, ECONOMIC LOSS OR LOSS OR DEFERRAL OF PROFITS) SUFFERED BY THE OTHER PARTY OR ITS SHAREHOLDERS, DIRECTORS, OFFICERS, EMPLOYEES OR AGENTS, WHETHER BASED UPON BREACH OF CONTRACT (FUNDAMENTAL OR OTHERWISE), TORT (INCLUDING NEGLIGENCE), OFFENCES AND QUASI-OFFENCES, STRICT LIABILITY OR ANY OTHER THEORY OF LAW. 23 ARTICLE 8 MAINTENANCE OF ASSETS 8.1 Maintenance of Assets Prior to Closing From the date hereof until the Closing Date, Sellers shall, to the extent that the nature of its interest permits, and subject to the Title and Operating Documents and any other agreements and documents to which the Assets are subject: (a) maintain and operate (to the extent Sellers serve as operator of Leases or Wells) the Assets in a proper and prudent manner in accordance with good oil and gas industry practices, including maintaining adequate insurance, in material compliance with all applicable laws, rules, regulations, orders and directions of governmental and other competent authorities; (b) pay or cause to be paid all costs and expenses relating to the Assets which become due from the date hereof to the Closing Date; (c) perform and comply with all covenants and conditions contained in the Title and Operating Documents and any other agreements and documents to which the Assets are subject; and (d) utilize its best efforts to settle, pay or otherwise resolve the Pending Claims. 8.2 Consent of Purchaser Notwithstanding Section 8.1, from the date hereof until the Closing Date, Sellers shall not, without the written consent of Purchaser, which consent shall not be unreasonably withheld by Purchaser and which, if provided, will be provided in a timely manner: (a) make any commitment or propose, initiate or authorize any capital expenditure with respect to the Assets of which Sellers' share is in excess of $50,000, except in case of an emergency or in respect of amounts which Sellers is committed to expend or is deemed to authorize without its specific authorization or approval; (b) surrender or abandon any of the Assets; (c) amend or terminate any Title and Operating Documents or enter into any new agreement or commitment relating to the Assets; or (d) sell, encumber or otherwise dispose of any of the Assets or any part or portion thereof, except sales of Petroleum Substances in the normal course of business. 24 ARTICLE 9 PREFERENTIAL PURCHASE RIGHTS AND CONSENTS 9.1 Preferential Purchase Rights Within five (5) Business Days after the date of this Agreement, each Seller shall promptly provide to each Person that possesses a Preferential Purchase Right any notice that is required in respect of the transaction contemplated hereby, and each Seller shall use its commercially reasonable efforts to secure the consent of any party whose consent is required to effect any sale and purchase herein provided. No Seller shall have liability to Purchaser for its failure for any reason to obtain such a consent or for any error in good faith made in any notice so given. 9.2 Effect of Exercise of Preferential Rights If a Person that possesses a Preferential Purchase Right exercises such right with respect to a particular Asset, the particular Asset as to which such Preferential Purchase Right exercised shall be excluded from the sale and the Base Price shall be reduced by the Allocated Value for such excluded Asset. An Asset which is excluded from the Assets as the result of this Section 9.2 shall not be used in calculating the Termination Amount and the Termination Amount shall be calculated utilizing such reduced Base Price. In the event a Person elects to exercise its Preferential Purchase Right to purchase a Asset but such sale has not been consummated prior to the Closing under this Agreement, Purchaser shall pay Sellers the Allocated Value of such Asset and Seller shall assign to Purchaser the Asset and Purchaser shall take the Asset subject to the Preferential Purchase Right and will have the right to receive the proceeds from the Preferential Purchase Right sale. ARTICLE 10 TITLE REVIEW AND ENVIRONMENTAL REVIEW 10.1 Title Review Between the execution of this Agreement and the Closing, subject to contractual and fiduciary obligations and limits, Sellers shall make available to Purchaser and its representatives all title documents (including contracts, correspondence, files and prior title opinions) in its possession pertaining to the Assets for purposes of permitting Purchaser to review Seller's title to the Assets. Purchaser shall conduct its review of Seller's title to the Assets with reasonable diligence. If there are Title Defects affecting the Assets, Purchaser shall give written notice of such Title Defects to Sellers and Sellers shall use reasonable efforts to cure such Title Defects prior to Closing. Such notice shall specify such Title Defects in reasonable detail, the Assets directly affected thereby and Purchaser's reasonable requirements for rectification or curing thereof, including the proposed adjustment to the Base Price based, in large part, upon the Allocated Value for each such Asset. In no event shall the adjustment to the Base Price for any particular Asset resulting from a Title Defect exceed the Allocated Value for such Asset. Purchaser's title review shall continue after Closing and Purchaser shall have a continuing right to assert Title Defects until the Final 25 Settlement Date, provided that (i) Title Defects asserted by Purchaser after Closing and agreed to by Sellers shall be handled between the Parties through the post-Closing accounting pursuant to Section 4.4(a) above, (ii) Title Defects asserted by Purchaser prior to the Final Settlement Date, but not agreed to by Sellers, will be subject to arbitration pursuant to Article 11 below, and (iii) the Holdback Escrow will be extended beyond the Final Settlement Date to the extent necessary to accommodate any arbitration initiated by a Party, except that those portions of the Holdback Amount remaining in escrow on the Final Settlement Date which are not at issue in the arbitration shall be released to Sellers. For all purposes, Purchaser shall be deemed to have asserted Title Defects as to any and all Pending Claims that have not been finally settled or otherwise resolved by Sellers prior to Closing. 10.2 Environmental Review Between the execution of this Agreement and the Closing, subject to contractual and fiduciary obligations and limits, Sellers shall make available to Purchaser and its representatives all documents (including contracts, correspondence and files) in its possession relating to the Assets and will allow Purchaser site access reasonably necessary for purposes of permitting Purchaser to evaluate the potential for existence of any Environmental Liabilities. Purchaser shall conduct its environmental review with reasonable diligence. If there are potential Environmental Liabilities, Purchaser shall give written notice of such potential Environmental Liabilities to Sellers. Such notice shall specify the Asset and the potential Environmental Liabilities in reasonable detail. Purchaser shall have the right to continue its environmental review after Closing and until the Final Settlement Date, provided that (i) Environmental Liabilities asserted by Purchaser after Closing and agreed to by Sellers shall be handled between the Parties through the post-Closing accounting pursuant to Section 4.4(a) above, (ii) Environmental Liabilities asserted by Purchaser prior to the Final Settlement Date, but not agreed to by Sellers, will be subject to arbitration pursuant to Article 11 below, and (iii) the Holdback Escrow will be extended beyond the Final Settlement Date to the extent necessary to accommodate any arbitration initiated by a Party, except that those portions of the Holdback Amount remaining in escrow on the Final Settlement Date which are not at issue in the arbitration shall be released to Sellers. 10.3 Valuation Resulting from Review (a) Purchaser shall, acting reasonably, make a valuation of: (i) the amount by which the value of the Assets is reduced by Title Defects identified in the notice contemplated in Section 10.1 that have not been cured to Purchaser's reasonable satisfaction; and (ii) the estimated reduction in the value of the Assets associated with the Environmental Liabilities in Section 10.2, provided that, when determining the value impact of Environmental Liabilities: (A) the costs associated with ordinary course Abandonment and Reclamation Obligations relating to the Wells and the Tangibles shall not be considered except, and only to the extent that, such costs are forecast to be materially higher than a prudent purchaser would have expected them to be prior to conducting its due diligence; and 26 (B) where the particular Environmental Liabilities relate to matters which a prudent operator in the United States upstream oil and gas industry would, if aware of such Environmental Liabilities, not be legally required to commence remediation operations in respect thereof within twelve (12) months of the Closing Date, such Environmental Liabilities shall be deemed to have no adverse impact on the value of the Assets. and shall provide notice of such valuation to Sellers not later than ten (7) days before the Closing Date, or Final Settlement Date, as applicable. If Sellers do not agree with the Purchaser's valuations of the amounts contemplated in paragraphs 10.3(a)(i) and (ii), Sellers may submit the matter to arbitration in accordance with Article 11. The arbitration amount shall be the differential amount between the valuation determined by the Sellers and the valuation determined by the Purchaser. The aggregate amount ultimately agreed by the Parties or determined by arbitration shall be referred to herein as the "Due Diligence Reduction". If the Parties cannot agree on the value of the Due Diligence Reduction prior to Closing but both of them agree (acting reasonably) that it is less than ten percent (10%) of the Base Price, and all other conditions precedent to Closing have been satisfied, then the Purchase Price payable by Purchaser to Sellers at Closing shall reflect the Due Diligence Reduction as calculated by Sellers; and, after Closing, the Holdback Amount held in escrow shall serve to secure Purchaser's potential entitlement to the difference between Purchaser's valuation of the Due Diligence Reduction and Sellers' valuation of the Due Diligence Reduction. The Parties' respective entitlements to such disputed funds shall be resolved by arbitration pursuant to Article 11, and the escrowed funds comprising the Holdback Amount shall be paid from the escrow account as directed by the arbitrator or as otherwise agreed by the Parties. (b) If the Due Diligence Reduction is, in the aggregate, less than one and one-half percent (1.5%) of the Base Price, Purchaser shall be deemed to have waived such Title Defects and accepted such Environmental Liabilities; provided, however, that such 1.5% monetary threshold shall not be applicable to Title Defects that are Pending Claims. (c) If the Due Diligence Reduction is equal to or greater than one and one-half percent (1.5%) of the Base Price but less than ten percent (10%) of the Base Price, the Base Price shall be reduced by the amount of such Due Diligence Reduction. If the Due Diligence Reduction is (i) quantified and sought by Purchaser prior to Closing, and (ii) equal to or greater than ten percent (10%) of the Base Price, the Base Price shall be reduced by the amount of such Due Diligence Reduction, provided that either Sellers or Purchaser will then have the right to terminate this Agreement such that Closing shall not occur. If both Parties nevertheless agree to proceed to Closing, the Base Price shall be 27 reduced by the amount of such Due Diligence Reduction. If the Parties cannot agree on the value of the Due Diligence Reduction and at least one of them values it (acting reasonably) at ten percent (10%) of the Base Price or more and the Parties agree to proceed to Closing, the Purchase Price payable to by Purchaser to Sellers at Closing shall reflect the Due Diligence Reduction as calculated by Sellers; and, after Closing, the Holdback Amount held in escrow shall serve to secure Purchaser's potential entitlement to the difference between Purchaser's valuation of the Due Diligence Reduction and Sellers' valuation of the Due Diligence Reduction. The Parties' respective entitlements to such disputed funds shall be resolved by arbitration pursuant to Article 11, and the escrowed funds comprising the Holdback Amount (and any interest that has accrued thereon) shall be paid as directed by the arbitrator or as otherwise agreed by the Parties. Absent agreement of the Parties to proceed to Closing as a result of only one of them valuing the Due Diligence Reduction at an amount equal to or greater than ten percent (10%) of the Base Price, the other Party may refer the matter of the value of the Due Diligence Reduction to arbitration pursuant to Article 11. (d) For the avoidance of doubt, any Due Diligence Reduction on the Final Settlement Date is expressly limited to the lesser of (i) the Holdback Amount, or (ii) the amount which, when combined with the sum of the Due Diligence Reductions made at Closing, is equal to the Termination Amount. 10.4 Inspection and Testing Purchaser waives and releases all claims against Sellers, and each of their respective directors, officers, employees, agents and other representatives and their successor and assigns for injury to or death of persons, or damage to property, arising in any way from the exercise of rights granted to Purchaser hereby or the activities of Purchaser or its employees, agents or contractors on the Assets. PURCHASER SHALL INDEMNIFY THE SELLERS AND EACH OF THEIR RESPECTIVE DIRECTORS, OFFICER, EMPLOYEES, AGENTS AND OTHER REPRESENTATIVES AND THEIR SUCCESSORS AND ASSIGNS AGAINST AND HOLD EACH AND ALL OF SAID INDEMNITEES HARMLESS FROM ANY AND ALL LOSSES WHATSOEVER ARISING OUT OF (I) ANY AND ALL STATUTORY OR COMMON LAW LIENS OR OTHER ENCUMBRANCES FOR LABOR OR MATERIALS FURNISHED IN CONNECTION WITH SUCH TESTS, SAMPLINGS, STUDIES OR SURVEYS AS BUYER MAY CONDUCT WITH RESPECT TO THE ASSETS; AND (II) ANY INJURY TO OR DEATH OF PERSONS OR DAMAGE TO PROPERTY OCCURRING IN, ON OR ABOUT THE ASSETS AS A RESULT OF SUCH EXERCISE OR ACTIVITIES. ARTICLE 11 ARBITRATION 11.1 Selection Any disagreement, difference or dispute between Sellers and Purchaser under this Agreement shall be resolved by arbitration in accordance with this Article 11. In the event arbitration to resolve a dispute is necessary, Sellers and Purchaser agree to jointly select, an individual who (i) is acknowledged by the Parties as being an expert with respect to the oil and gas, land and legal issues and/or environmental issues, as applicable, (ii) who has at least ten (10) years experience in the oil and gas industry, and (iii) is independent of the Parties and/or their counsel, which individual shall be the sole arbitrator to hear and decide all matters that are subject to arbitration pursuant to this Article 11. If Sellers and Purchaser are unable to mutually agree on such individual, then the Sellers and Purchaser shall each select an individual who qualifies as an arbitrator and who will in turn select an individual to act as arbitrator. 28 11.2 Location. Any arbitration hearing shall be held in Houston, Texas or at such other location as mutually agreed by the Parties. 11.3 Rules. The arbitrator shall settle all disputes in accordance with the Rules of the American Arbitration Association. The decision of the arbitrator shall be final and binding on the Parties, and, if necessary, enforced in any court of competent jurisdiction. Sellers and Purchaser, respectively, shall bear their own legal fees and other costs incurred in presenting their respective cases to the arbitrator. The charges and expenses of the arbitrator shall be shared equally by Sellers and Purchaser. 11.4 Time. The arbitration shall commence within ten (10) days after selection of the arbitrator. In the case of a dispute over a Due Diligence Reduction the arbitrator shall be selected in accordance with Section 11.1 within five (5) days after Closing or the Final Settlement Date, as applicable. Each Party shall have five (5) days to present its position on the issues being arbitrated. In fulfilling his duties, the arbitrator shall be bound by the terms and provisions contained herein but may consider such other matters as in the opinion of the arbitrator are necessary or helpful to make a proper determination. Additionally, the arbitrator may consult with and engage disinterested Party experts to advise the arbitrator, including without limitation, petroleum engineers and consultants. The arbitrator shall issue its final determination of all issues on or before thirty (30) days after the Parties have completed their presentation of the issues. 11.5 Replacement. If any arbitrator selected hereunder should die, resign or otherwise be unable to perform his or her duties hereunder, the procedure set forth in this Article 11 shall be used to select a replacement arbitrator. ARTICLE 12 OPERATORSHIP 12.1 Transfer of Operatorship Purchaser acknowledges that Sellers may not be able to transfer operatorship of some or all of the Assets to Purchaser at or after Closing. Sellers covenants with Purchaser that Sellers shall do such reasonable things as Purchaser may request in order to obtain the appropriate consents and approvals for the assignment and transfer to Purchaser of operatorship of those of the Assets which Sellers currently operates. 29 12.2 Removal of Signs From and after Closing and upon written notice to Purchaser, Sellers may remove any signs which indicate its ownership or operation of the Assets. Purchaser will be responsible to erect or install signs required by governmental agencies to indicate that Purchaser is the operator of the Assets and to notify other working interest owners, gas purchasers, suppliers, contractors, governmental agencies and other Third Parties of Purchaser's interest in the Assets on and after Closing. ARTICLE 13 TERMINATION 13.1 Causes of Termination This Agreement and the transactions contemplated herein may be terminated: (a) At any time by mutual consent of the Parties; (b) By Purchaser and Sellers, if the Closing shall not have occurred by April 30, 2004, despite the good faith reasonable efforts of the Parties, and if the Party desiring to terminate is not in breach of this Agreement; (c) By either Party, if the Due Diligence Reduction quantifiable by Closing is equal to or exceeds ten percent (10%) of the Base Price (the "Termination Amount"); (d) By Buyer if, on the Closing Date, any of the conditions set forth in Section 5.1 shall not have been satisfied or waived; or (e) By Seller if, on the Closing Date, any of the conditions set forth in Section 5.2 shall not have been satisfied or waived. 13.2 Effect of Termination In the event of the termination of this Agreement pursuant to the provisions of this Article 13 or elsewhere in this Agreement, this Agreement shall become void and have no further force and effect and, except for the indemnities provided for in Section 10.4, any breach of this Agreement prior to such termination and any continuing confidentiality requirement, no Party shall have any further right, duty or liability to the other hereunder. Upon termination, Purchaser agrees to use its best efforts to return to Seller or destroy, all materials, documents and copies thereof provided, obtained or discovered in the course of any due diligence investigations. 30 ARTICLE 14 GENERAL 14.1 Further Assurances Each Party will, from time to time and at all times after Closing, without further consideration, do such further acts and deliver all such further assurances, deeds and documents as shall be reasonably required in order to fully perform and carry out the terms of this Agreement. 14.2 No Merger Subject to the limitations set forth herein, the covenants, representations, warranties and indemnities contained in this Agreement shall not merge in any assignments, conveyances, transfers or other documents executed and delivered at or after Closing, notwithstanding any rule of law, equity or statute to the contrary and such rules are hereby waived. 14.3 Entire Agreement The provisions contained in any and all documents and agreements collateral hereto shall at all times be read subject to the provisions of this Agreement and, in the event of conflict, the provisions of this Agreement shall prevail. This Agreement supersedes all other agreements, documents, writings and verbal understanding among the Parties relating to the subject matter hereof. 14.4 Governing Law THIS AGREEMENT, ALL DOCUMENTS DELIVERED PURSUANT HERETO AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO ANY PRINCIPLES OF CONFLICTS OF LAWS. THE VALIDITY OF THE VARIOUS CONVEYANCES AFFECTING TITLE TO REAL PROPERTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE JURISDICTION IN WHICH THE PARTICULAR ASSETS ARE LOCATED. 14.5 Assignment This Agreement may not be assigned by a Party without the prior written consent of the other Party. This Agreement shall be binding upon and shall enure to the benefit of the Parties and their respective administrators, trustees, receivers, successors and permitted assigns. 14.6 Time of Essence Time shall be of the essence in this Agreement. 31 14.7 Notices The addresses and fax number of each Party for notices shall be as follows: Sellers: Wilshire Enterprises, Inc. 921 Bergen Avenue Jersey City, New Jersey 07306 U.S.A. Fax: (201) 420-6012 Attention: Philip Kupperman with Copies to: White Stone Energy, LLC 3838 N. Sam Houston Pkwy E. Suite 395 Houston, Texas 77032 U.S.A. Attention: Burt Williams Fax: (281) 219-4122 and: Porter & Hedges, L.L.P. 700 Louisiana, Suite 3500 Houston, Texas 77002-2764 U.S.A. Attention: Douglas C. Atnipp Fax: (713) 226-0264 Purchaser: Crow Creek Energy L.L.C. 2100 South Utica, Suite 200 Tulsa, Oklahoma 74114 Attn: Maurice Storm [Fax: (918) 745-1701] Any notice, communication or statement (a "notice") required, permitted or contemplated hereunder shall be in writing and shall be delivered as follows: (a) by delivery to a Party between 8:00 a.m. and 5:00 p.m. on a Business Day at the address of such Party for notices, in which case the notice shall be deemed to have been received by that Party when it is delivered; or (b) by fax to a Party to the fax number of such Party for notices, in which case, if the notice was faxed prior to 5:00 p.m. on a Business Day the notice shall be deemed to have been received by that Party when it was faxed and if it was faxed on a day which is not a Business Day or is faxed after 5:00 p.m. on a Business Day, it shall be deemed to have been received on the next following Business Day. 32 A Party may from time to time change its address for service or its fax number for service by giving written notice of such change to the other Party. 14.8 Invalidity of Provisions In case any of the provisions of this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality or enforceability of the remaining, provisions contained herein shall not in any way be affected or impaired thereby. 14.9 Waiver No waiver by any Party of any breach (whether actual or anticipated) of any of the terms, conditions, representations or warranties contained herein shall take effect or be binding upon that Party unless the waiver is expressed in writing under the authority of that Party. Any waiver so given shall extend only to the particular breach so waived and shall not limit or affect any rights with respect to any other or future breach. 14.10 Remedies Generally No failure on the part of any Party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or remedy preclude any other or further exercise thereof or the exercise of any other right or remedy in law or in equity or by statute or otherwise conferred. 14.11 Amendment This Agreement shall not be varied in its terms or amended by oral agreement or by representations or otherwise other than by an instrument in writing dated subsequent to the date hereof, executed by a duly authorized representative of each Party. 14.12 Public Announcements Until Closing has occurred, no Party shall release any information concerning this Agreement and the transactions herein provided for without the prior written consent of the other Party, which consent shall not be unreasonably withheld. Nothing contained herein shall prevent a Party at any time from furnishing information (i) to any governmental agency or regulatory authority including applicable recognized stock exchanges and securities commissions, or to the public if required by applicable law, provided that the Parties shall advise each other in advance of any public statement which they propose to make, or (ii) in connection with obtaining consents or complying with Preferential Purchase Rights. 14.13 Counterpart Execution This Agreement may be executed in counterpart and all executed counterparts together shall constitute one agreement. 33 14.14 Express Negligence Rule ALL INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS CONTAINED IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANY INDEMNIFIED PARTY (EXCLUDING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT). PURCHASER AND EACH SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS. 14.15 Waiver of Deceptive Trade Practices Acts PURCHASER WAIVES ITS RIGHTS UNDER DECEPTIVE TRADE PRACTICES ACT SECTION 17.41 et seq., TEXAS BUSINESS & COMMERCE CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS, AND UNDER SIMILAR STATUTES ADOPTED IN OTHER STATES, TO THE EXTENT THEY HAVE APPLICABILITY TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. AFTER CONSULTATION WITH AN ATTORNEY OF ITS SELECTION, BUYER CONSENTS TO THIS WAIVER. 14.16 Appointment of WEI as Nominee SFO, RRC and BV each hereby appoints WEI as its nominee and authorizes WEI to act on its behalf (i) for purposes of receiving notices due Sellers hereunder, and (ii) for purposes of executing and acting under the Deposit Escrow Agreement and Holdback Escrow Agreement. 34 IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and year first above written. SELLERS: WILSHIRE ENTERPRISES, INC. By:_________________________________________ Printed Name: ______________________________ Title: ________________ President SAN FRANCISCO OIL COMPANY By:_________________________________________ Printed Name: ______________________________ Title: ________________ President ROCKLAND RESOURCES, CO. By:_________________________________________ Printed Name: ______________________________ Title: ________________ President BRITALTA VENEZOLANO, LTD. By:_________________________________________ Printed Name: ______________________________ Title: ________________ President This is the execution page to a Purchase and Sale Agreement dated March 17, 2004 among Wilshire Enterprises, Inc., San Francisco Oil Company, Rockland Resources, Co. and Britalta Venezolano, Ltd., as Sellers, and Crow Creek Energy L.L.C., as Purchaser. PURCHASER: CROW CREEK ENERGY L.L.C. By:_______________________________________ Printed Name:_____________________________ Title: Manager This is the execution page to a Purchase and Sale Agreement dated March 17, 2004 among Wilshire Enterprises, Inc., San Francisco Oil Company, Rockland Resources, Co., and Britalta Venezolano, Ltd., as Sellers, and Crow Creek Energy L.L.C., as Purchaser. 35 SCHEDULE A - Land Schedule

SCHEDULE A - Land Schedule

SCHEDULE A - Land Schedule

SCHEDULE A - Land Schedule

SCHEDULE A - Land Schedule

SCHEDULE A - Land Schedule

SCHEDULE A - Land Schedule

SCHEDULE A - Land Schedule

SCHEDULE A - Land Schedule

SCHEDULE A - Land Schedule

SCHEDULE A - Land Schedule

SCHEDULE A - Land Schedule

SCHEDULE A - Land Schedule

Schedule "B" Sale, Processing and Transportation Agreements Oil - None Gas A. Contract dated 02-02-94; terminable annually on thirty days notice prior to May 1. 0.2.471.2A 1. Lucille 2. Wanda 3. Sandy 4. Maxine 5. Gwyn 6. Carol 7. Ima 8. Ruth 9. Krannig #2 B. Contract dated 08-03-88; terminable annually on thirty days notice prior to August 3. 0.2.471.18A 1. Vilhauer C. Contract dated 09-06-78; terminable annually on sixty days notice prior to March 1. 0.2.538.2A 1. Government #2 D. Contract dated 03-01-71; area rate clause; terminable annually on thirty days notice prior to September 30 if price not agreed upon by March 15. 0.2.538.2A 1. White "E" E. Contract dated 08-03-88; terminable annually on thirty days notice prior to August 3. 0.2.600.13 1. Jenkins #2 F. Contract effective 06-01-98; terminable on sixty days notice. 0.2.1097.3 1. Stotts #1 and #3 2. Breshears #1 and #2 3. Dickson #1 4. Smith #1-3 5. Suzy West #1-13 6. Paul Foster #1-4 G. Contract dated 05-16-78; GPC2545A; expires in May of 2004. 0.2.655.1 1. PA 1978 Program H. Contract dated 04-17-79; GPC2581A; 18.9% WI expires around May of 2005; 13.3% expires January of 2007. 0.2.655.1 1. PA 1979 Program I. Contract dated 03-12-98; term not known; no copy. 0.2.893(D). 1. Simpson #1-29 J. Contract dated 12-22-87; terminable annually on thirty days notice prior to December 12. 0.2.893.G (A). 1. Ellithorpe #1-29 (but possibly covered under contract J. above). K. Contract dated 09-16-94; terminable annually on thirty days notice prior to September 16. 0.2.1121(B) 1 1. McConnaughey #1-23-H 2. McConnaughey #1-26H 3. Leroy #41-33 4. McConnaughey #1-13H if redrilled 5. McConnaughey #1-14H if redrilled L. Contract dated 02-09-01; contract terminable annually on sixty days notice prior to January 1. 0.2.1177.2 1. Edward #3-12 2. Edwards #5-12 3. Lance #1-11 M. Contract dated 02-24-97; five year primary term; no copy of contract in files. 0.2.1177.1 1. Edwards #4-11 END Schedule C Authorizations for Expenditures None Schedule "D" Pending or Threatened Lawsuits and Claims 1. BIA-BLM Roye #1, Roye #2, Burge #1. Sections 30 and 31, Township 8 North, Range 21 East, Haskell County, Oklahoma. Wilshire had not paid gas royalties or had underpaid them on these wells from July 1993 through 2003. The principal already paid is $17,315.33. Penalty and interest will eventually be demanded by the MMS. MC5253A 2. ONEOK Energy Resources. Wilhite #1-35. Section 35-23N-26W, Ellis County, Oklahoma. There was an allocation problem on a central point meter into which the Wilhite and an offsetting well were producing. The problem related back to January of 1999. ONEOK has stated that Wilshire was overpaid for 123,705 mcf. Settlement talks are ongoing. No lawsuit has been filed to date. 0.2.939.5 3. Greka Energy. Richfield East Dome Unit, Orange County, California. Greka has failed and refused to pay Wilshire (San Francisco Oil Company) for oil and gas production from January of 2000 through September of 2002. Average monthly revenue received from October of 2002 through May of 2002 was approximately $750.00 per month. 0.2.583.1 4. W. Plack Carr. Dunagan "A" #1. Ongoing claim for cash balancing by underproduced royalty owner. Wilshire offered interim cash balancing in 1997 for $3,339.02 which was rejected by Mr. Carr. He has been calling since mid- 2003 to see if Wilshire has been sold. 0.2.431 5. Coowners. Cestos Prospect, Dewey County, Oklahoma. Wilshire needs to provide updated over-and-short reports on the Blaine #1-29, the Blaine #2-29, and the Hill Pickering #2-32 wells. There have been no demand on these in five years. 0.2.741.27 6. Axis Energy. Murrin #1-23, Section 23-7N-14E, Pittsburg County, Oklahoma. Wilshire filed suit for $22,962.12. A settlement offer from Axis is under review and will probably be acceptable. 0.2.594 7. Wyoming Oil and Gas Commission. Routine oil and gas site cleanup request. Some equipment needs to be removed and a very small oil leak fixed. 0.2.1121 END SCHEDULE "E" RETURN TO: [Name] STATE OF _________________) [Company] ) ss. [Address] COUNTY OF _______________ ) [City, State, Zip] ASSIGNMENT, CONVEYANCE AND BILL OF SALE WILSHIRE ENTERPRISES, INC., a Delaware corporation, SAN FRANCISCO OIL COMPANY, a California corporation, ROCKLAND RESOURCES, CO., an Oklahoma corporation, and BRITALTA VENEZOLANO, LTD., an Alberta private corporation (herein collectively called "Assignor"), for Ten Dollars and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER and DELIVER unto CROW CREEK ENERGY L.L.C., a Delaware limited liability company (herein called "Assignee"), as of the Effective Date (hereinafter defined), all of Assignor's right, title and interest in and to the following: (a) The oil, gas and/or mineral leases (and interests therein, including overriding royalty interests), whether producing or non-producing, which are referenced in and/or described on Exhibit A attached hereto or which otherwise cover and affect the lands covered by the leases referenced in and/or described on Exhibit A, and whether or not fully or accurately set forth on Exhibit A (hereinafter called the "Leases"), including all seismic and geological information specific thereto; (b) The fee mineral interests, term mineral interests and any other interest in the oil, gas and other minerals in and/or under and that may be produced from all or any portion of the lands referenced in and/or described on Exhibit A, and whether or not fully or accurately set forth on Exhibit A (hereinafter called the "Mineral Interests"), together with all of Assignor's rights, if any, of ingress and egress, and rights to explore for and develop (or at the option of the holder thereof, to grant oil and gas leases authorizing other parties to explore for and develop) the minerals in, on or under such lands, including both producing and non-producing lands; (c) The lands and other rights described (in whole or in part) in the Leases or encompassed (in whole or in part) by the Mineral Interests ("Lands"); (d) The oil, condensate or natural gas wells, water source wells, and water and other types of injection wells (hereinafter called the "Subject Wells") and associated materials and other personal property situated on the Lands; (e) All other properties and rights used or held for use directly and exclusively in connection with the production, storage, gathering, processing and treating of oil, gas and other liquid and gaseous hydrocarbons from, and the disposal of salt water produced from, the Leases and the Subject Wells, including, without limitation, all materials, equipment, personal property and fixtures located thereon or used in connection therewith; (f) All easements, servitudes, rights-of-way, surface leases and other surface rights affecting the Lands; and (g) All leases, options, rights of first refusal, rights arising under forced pooling and other similar regulatory orders, contracts, operating agreements or other agreements (including specifically, but without limitation, all salt water disposal surface leases or agreements) and instruments to the extent that the same relate, appertain, belong to or are incidental to the Leases, Lands or Subject Wells. The interests described in paragraphs (a) through (g) above are hereinafter collectively called the "Subject Interests." TO HAVE AND TO HOLD the Subject Interests unto Assignee, its successors and assigns, forever. This Assignment, Conveyance and Bill of Sale (the "Assignment") is made without warranty of title, either express or implied. This Assignment is made without warranty of title, express, implied or statutory, even as to the return of the purchase price paid therefor. Any covenants implied by statute or law by the use of the word "Grant" or other similar words in this Assignment are hereby expressly restrained, disclaimed, waived and negated. This Assignment is made with full substitution and subrogation of Assignee and all persons claiming by, through, or under Assignee, to the extent assignable, in and to all representations and warranties of title heretofore given or made by Assignor's predecessors in title with respect to the Subject Interests. Assignor and Assignee agree that, to the extent required by applicable law to be operative, the disclaimers of certain warranties contained in this paragraph are "conspicuous" disclaimers for the purposes of any applicable law, rule or order. WITHOUT LIMITATION OF THE GENERALITY OF THE PRECEDING SENTENCE, ASSIGNOR HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AS TO THOSE PORTIONS OF THE SUBJECT INTERESTS CONSTITUTING PERSONAL PROPERTY, ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE, OR OTHERWISE RELATING TO THE CONDITION OF THE SUBJECT INTERESTS (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS). Assignor agrees to execute such further assurances as may be reasonably requested or required to allow Assignee full use and enjoyment of the Subject Interests conveyed by this Assignment. 2 This Assignment is expressly made and accepted subject to the terms and conditions of the Leases and all contracts relating to the purchase or sale of production therefrom, to all operating agreements, permits, rights of way, licenses, easements, options, orders and any other agreements or contracts comprising or attributable to and affecting the Subject Interests and to all reservations, exceptions, limitations or other burdens applicable thereto and which are valid, subsisting, enforceable and of record and of which Assignee has actual or constructive notice. This Assignment is made expressly subject to the terms and provisions of that Purchase and Sale Agreement by and between Assignor and Assignee, dated effective as of March 1, 2004. IN WITNESS WHEREOF, this Assignment has been executed and delivered on April _____, 2004, effective as to runs of oil and deliveries of gas, and for all other purposes as of 7:00 a.m. local time at the locations of the Subject Interests, respectively, on March 1, 2004 (the "Effective Date"). ASSIGNORS: WILSHIRE ENTERPRISES, INC. By: ------------------------------------ Name: ---------------------------------- Title: ------------------------------ SAN FRANCISCO OIL COMPANY By: ------------------------------------ Name: ---------------------------------- Title: ------------------------------ ROCKLAND RESOURCES, CO. By: ------------------------------------ Name: ---------------------------------- Title: ------------------------------ BRITALTA VENEZOLANO, LTD. By: ------------------------------------ Name: ---------------------------------- Title: ------------------------------ 3 ASSIGNEE: CROW CREEK ENERGY L.L.C. By: ------------------------------------ Name: ---------------------------------- Title: ------------------------------ 4 STATE OF _____________________________) ) ss. COUNTY OF ____________________________) Before me, the undersigned, a Notary Public, in and for said County and State, on this ____ day of April, 2004, personally appeared _______________________, to me known to be the identical person who subscribed the name of Wilshire Enterprises, Inc. to the foregoing instrument as its ____________________, and acknowledged to me that __he executed the same as his/her free and voluntary act and deed and as the free and voluntary act and deed of such Corporation, for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. ------------------------ Notary Public My Commission Expires: - ------------------------ STATE OF _____________________________) ) ss. COUNTY OF ____________________________) Before me, the undersigned, a Notary Public, in and for said County and State, on this ____ day of April, 2004, personally appeared _______________________, to me known to be the identical person who subscribed the name of San Francisco Oil Company to the foregoing instrument as its _________________, and acknowledged to me that __he executed the same as his/her free and voluntary act and deed and as the free and voluntary act and deed of such Corporation, for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. ------------------------ Notary Public My Commission Expires: - ------------------------ 5 STATE OF _____________________________) ) ss. COUNTY OF ____________________________) Before me, the undersigned, a Notary Public, in and for said County and State, on this ____ day of April, 2004, personally appeared _______________________, to me known to be the identical person who subscribed the name of Rockland Resources, Co. to the foregoing instrument as its _________________________, and acknowledged to me that __he executed the same as his/her free and voluntary act and deed and as the free and voluntary act and deed of such Corporation, for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. ------------------------ Notary Public My Commission Expires: - ------------------------ STATE OF _____________________________) ) ss. COUNTY OF ____________________________) Before me, the undersigned, a Notary Public, in and for said County and State, on this ____ day of April, 2004, personally appeared _______________________, to me known to be the identical person who subscribed the name of Britalta Venezolano, Ltd. to the foregoing instrument as its __________________, and acknowledged to me that __he executed the same as his/her free and voluntary act and deed and as the free and voluntary act and deed of such Corporation, for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. ------------------------ Notary Public My Commission Expires: - ------------------------ 6 STATE OF _____________________________) ) ss. COUNTY OF ____________________________) Before me, the undersigned, a Notary Public, in and for said County and State, on this ____ day of April, 2004, personally appeared _______________________, to me known to be the identical person who subscribed the name of Crow Creek Energy L.L.C. to the foregoing instrument as its Manager, and acknowledged to me that __he executed the same as his/her free and voluntary act and deed and as the free and voluntary act and deed of such limited liability company, for the uses and purposes therein set forth. Given under my hand and seal of office the day and year last above written. ------------------------ Notary Public My Commission Expires: - ------------------------ 7 Exhibit A TO ASSIGNMENT Schedule of Leases 8

SCHEDULE "J" ESCROW TRUST AGREEMENT This Escrow Trust Agreement (the "Agreement") is made and entered into as of this ____ day of March, 2004 (the "Effective Date") by and among CROW CREEK ENERGY L.L.C., a Delaware limited liability company ("CCE" or "Purchaser"), WILSHIRE ENTERPRISES, INC., a Delaware corporation ("WEI"), SAN FRANCISCO OIL COMPANY, a California corporation ("SFO"), ROCKLAND RESOURCES, CO., an Oklahoma corporation ("RRC"), BRITALTA VENEZOLANO, LTD., an Alberta private corporation ("BV", together with WEI, SFO and RRC, the "Sellers"), and BANK OF OKLAHOMA, N.A. ("Escrow Agent"). For all purposes herein, WEI shall act on behalf of itself and the other Sellers. CCE, each of the Sellers and Escrow Agent sometimes individually may be referred to as a "Party" and collectively may be referred to as the "Parties." RECITALS A. CCE and the Sellers have entered into a Purchase and Sale Agreement dated as of March 17, 2004, but effective for all purposes as of March 1, 2004 (the "Purchase Agreement"). B. Pursuant to the Purchase Agreement, CCE will place One Million Dollars ($1,000,000.00) in escrow (the "Escrow Amount") with Escrow Agent. C. Each of CCE and the Sellers desire to establish an escrow with Escrow Agent to provide for the retention, administration and controlled access of the Escrow Amount. AGREEMENT NOW, THEREFORE, in consideration of the premises and mutual agreements and covenants contained in this Agreement, and including to be legally bound hereby, the Parties agree as follows: ARTICLE 1. ESTABLISHMENT OF ESCROW 1.1 Appointment of Escrow Agent. Each of CCE and the Sellers hereby appoint and direct Escrow Agent to act as escrow agent in accordance with the terms of this Agreement, and the Escrow Agent hereby accepts such appointment. 1.2 Deposit of Escrow Amount. (a) Upon the execution of this Agreement, CCE has deposited or caused to be deposited the Escrow Amount into an account established by Escrow Agent. The Escrow Amount shall be held and disposed of by Escrow Agent in accordance with the terms and conditions of this Agreement. (b) Each of CCE and the Sellers hereby authorize and direct the Escrow Agent to keep and preserve the Escrow Amount in its possession, free and clear of any and all claims, liens and encumbrances whatsoever, subject to the terms of this Agreement regarding the disbursement of all or part of such Escrow Amount. 1.3 Investment of Escrow Amount. Escrow Agent shall be permitted, and is hereby authorized to deposit, transfer, hold and invest the Escrow Amount, including principal and interest, in a money market fund managed by Escrow Agent, during the period of this escrow in accordance with such instructions and directions as may from time to time be provided to Escrow Agent in writing and signed by CCE and WEI (on behalf of the Sellers). Any interest received by Escrow Agent with respect to the Escrow Amount, including reinvested interest ("Interest"), shall become part of the Escrow Amount. The Interest earned on the Escrow Amount shall be distributed in accordance with the terms of this Agreement. 1.4 Tax Related Terms. (a) Tax Reporting. CCE and the Sellers agree that, for tax reporting purposes, all Interest or other taxable income earned from the investment of the Escrow Amount in any tax year shall be taxable to the Party who receives such Interest under this Agreement or under the escrow agreement with Bank of Oklahoma, N.A. established pursuant to Section 2.1(c) below. (b) Certification of Tax Identification Number. CCE within 30 days after the date hereof, shall provide Escrow Agent with certified tax identification numbers by furnishing appropriate forms and documents that the Escrow Agent may reasonably request. CCE understands that if such tax reporting documentation is not so certified to Escrow Agent, then Escrow Agent may be required by the Internal Revenue Code of 1986, as amended, to withhold a portion of any Interest or other income earned on the investment of the Escrow Amount pursuant to this Agreement. (c) Tax Allocation. To the extent that the Escrow Agent becomes liable for the payment of any taxes in respect of income derived from the investment of the Escrow Amount, Escrow Agent shall satisfy such liability to the extent possible from the Escrow Amount and the Interest. Each of CCE and the Sellers agree to indemnify and hold the Escrow Agent harmless from and against any taxes, additions for late payment, interest, penalties and other expenses that may be assessed against the Escrow Agent on or with respect to any payment or other activities under this Agreement unless any such tax, addition for late payment, interest, penalties and other expenses shall arise out of or be caused by the actions of, or failure to act by, the Escrow Agent. ARTICLE 2. RELEASE OF ESCROW AMOUNT 2.1 Release of Escrow Amount. (a) Escrow Agent shall release the Escrow Amount, together with Interest thereon, to WEI (on behalf of itself and the Sellers) upon delivery by WEI of a duly executed certificate to Escrow Agent certifying that it is entitled to the release of the Escrow Amount pursuant to Section 2.5(a) of the Purchase Agreement along with evidence that a copy of such certificate has been delivered to CCE in accordance with Section 6.2 of this Agreement. 2 (b) Escrow Agent shall release the Escrow Amount, together with Interest thereon, to CCE upon delivery by CCE of a duly executed certificate to Escrow Agent certifying that it is entitled to the release of the Escrow Amount pursuant to Section 2.5(b) of the Purchase Agreement along with evidence that a copy of such certificate has been delivered to WEI (on behalf of itself and the Sellers) in accordance with Section 6.2 of this Agreement. (c) Escrow Agent shall, pursuant to Section 2.4 of the Purchase Agreement, retain the Escrow Amount, together with Interest thereon as the Holdback Amount (as defined in the Purchase Agreement) upon receipt of joint written instructions signed by each of CCE and WEI (on behalf of the Sellers) certifying that Closing (as defined in the Purchase Agreement) has occurred and specifying that the Holdback Escrow Agreement (as defined in the Purchase Agreement) has been executed by CCE and the Sellers. (d) Notwithstanding anything herein to the contrary, upon the receipt of joint written instructions signed by each of CCE and WEI (on behalf of the Sellers), Escrow Agent shall deliver the Escrow Amount, or portions thereof and inclusive of Interest thereon, in accordance with such instructions. ARTICLE 3. TERM AND TERMINATION 3.1 Term of Agreement. This Agreement shall remain in effect until the Escrow Amount (and Interest thereon) is distributed. This Agreement may be terminated by joint instructions in writing from CCE and WEI (on behalf of the Sellers). 3.2 Termination for Nonpayment. In the event of the nonpayment of fees owed to Escrow Agent, Escrow Agent shall provide written notice of delinquency to CCE and WEI (on behalf of the Sellers). Any Party to this Agreement shall have the right to make the payment to Escrow Agent to cure the default. If the past due payment is not received in full by Escrow Agent within 30 days of the date of such notice, then Escrow Agent shall have the right either to (a) terminate this Agreement at any time thereafter by sending written notice of termination to CCE and WEI (on behalf of the Sellers), or (b) cure the default by deducting the unpaid and owing fees from (i) the Interest and (ii) if the amount of Interest is insufficient, by deducting the remainder from the Escrow Amount. Escrow Agent shall have no obligation to take any action under this Agreement so long as any payment due to Escrow Agent remains unpaid. 3.3 Survival of Terms Following Termination. Upon termination of this Agreement, the following provisions of this Agreement shall survive. (a) The provisions of Article 2; (b) The obligation to pay Escrow Agent any fees and expenses due; (c) The provisions of Article 5; and 3 (d) Any provisions in this Agreement which specifically state they survive the termination or expiration of this Agreement. ARTICLE 4. ESCROW AGENT'S FEES 4.1 Fee Schedule. Escrow Agent is entitled to be paid its standard fees and expenses applicable to the services provided. Escrow Agent shall notify CCE and WEI (on behalf of the Sellers) for payment of Escrow Agent's fees at least sixty (60) days prior to any increase in fees. For any service not listed on Escrow Agent's standard fee schedule, Escrow Agent will provide a quote prior to rendering the service, if requested. 4.2 Payment Terms. Escrow Agent shall not be required to perform any service unless the payment for such service and any outstanding balances owed to Escrow Agent are paid in full. All invoiced fees shall be payable out of Interest; provided, that any fees in excess of accrued Interest shall be paid one-half (1/2) by CCE and one-half (1/2) by the Sellers. Late fees on past due amounts shall accrue at the rate of __________ percent per month (__% per annum) from the date of the invoice. ARTICLE 5. LIABILITY AND DISPUTES 5.1 Right to Rely on Instructions. Escrow Agent may act in reliance upon any instruction, instrument, certificate or signature reasonably believed by Escrow Agent to be genuine. Escrow Agent shall only act upon written notice, request or instruction given by the designated contacts of a Party to this Agreement. Escrow Agent shall not be responsible for failure to act as a result of causes beyond the reasonable control of Escrow Agent. 5.2 Indemnification. Escrow Agent shall be responsible to perform its obligations under this Agreement and to act in a reasonable and prudent manner with regard to this escrow arrangement. Provided Escrow Agent has acted in the manner stated in the preceding sentence, CCE and the Sellers each agree to indemnify, defend and hold harmless Escrow Agent from any and all claims, actions, damages, arbitration fees and expenses, costs, attorney's fees and other liabilities incurred by Escrow Agent relating in any way to this Agreement. 5.3 Disputes. If any disagreement or dispute arises between the Parties to this Agreement concerning the meaning or validity of any provision hereunder or concerning any other matter relating to this Agreement, the Escrow Agent shall be under no obligation to act, except under process or order of court, or until it has been adequately indemnified to its full satisfaction, and shall sustain no liability for its failure to act pending such process, court order or indemnification; and may, in its sole discretion, interplead the Escrow Amount or that portion of the Escrow Amount it then holds with the District Court of Harris County, Texas, and name the Parties in such action. Upon filing the interpleader action, the Escrow Agent shall be relieved of all liability as to the Escrow Amount and shall be entitled to recover from the Parties, its reasonable attorneys fees and other costs incurred in commencing and maintaining such action. In no event shall the institution of such interpleader action impair the rights of the Escrow Agent set forth in Section 5.3 above. 4 5.4 Controlling Law. This agreement is to be governed and construed in accordance with the laws of the state of Texas, without regard to its conflicts of law provisions. The Parties irrevocably submit to the exclusive jurisdiction of the state courts of Harris County, Texas, and the Federal courts of the United States located in Houston, Texas, with regard to any action brought to enforce this Agreement. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, CLAIM OR COUNTERCLAIM ARISING OUT OF OR RELATED TO THIS AGREEMENT. ARTICLE 6. GENERAL PROVISIONS 6.1 Entire Agreement. This Agreement, which includes the Exhibits described herein, embodies the entire understanding among the Parties with respect to its subject matter and supersedes all previous communications, representations or understandings, either oral or written. No amendment or modification of this Agreement shall be valid or binding unless signed by all the Parties hereto. 6.2 Notices. All notices, invoices, payments, deposits and other documents and communications shall be given to the Parties at the addresses specified in the attached Exhibit A. It shall be the responsibility of the Parties to notify each other as provided in this Section in the event of a change of address. The Parties shall have the right to rely on the last known address of the other Parties. Unless otherwise provided in this Agreement, all documents and communications may be delivered by First Class mail or by facsimile. 6.3 Severability. In the event any provision of this Agreement is found to be invalid, voidable or unenforceable, the Parties agree that unless it materially affects the intent and purpose of this Agreement, such invalidity, voidability or unenforceability shall affect neither the validity of this Agreement nor the remaining provisions herein, and the provision in question shall be deemed to be replaced with a valid and enforceable provision most closely reflecting the intent and purpose of the original provision. 6.4 Successors. This Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the Parties. However, Escrow Agent shall have no obligation in performing this Agreement to recognize any successor or assign of CCE or any of the Sellers unless Escrow Agent receives written evidence of the change of Parties. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 5 The Parties have executed this Agreement effective as of the date first above written. PURCHASER: CROW CREEK ENERGY L.L.C., a Delaware limited liability company By: _______________________________________ Name: _____________________________________ Title: ____________________________________ SELLERS: WILSHIRE ENTERPRISES, INC., a Delaware corporation By: _______________________________________ Name: _____________________________________ Title: ____________________________________ SAN FRANCISCO OIL COMPANY, a California corporation By: _______________________________________ Name: _____________________________________ Title: ____________________________________ ROCKLAND RESOURCES CO., an Oklahoma corporation By: _______________________________________ Name: _____________________________________ Title: ____________________________________ 6 BRITALTA VENEZOLANO, LTD., an Alberta private corporation By: _______________________________________ Name: _____________________________________ Title: ____________________________________ ESCROW AGENT: BANK OF OKLAHOMA, N.A. By: _______________________________________ Name: _____________________________________ Title: ____________________________________ 7 EXHIBIT A TO ESCROW TRUST AGREEMENT DESIGNATED CONTACT Notices, deposit materials and communications to CCE should be addressed to: Company Name: Crow Creek Energy L.L.C. Address: 2100 South Utica, Suite 200 Tulsa, Oklahoma 74114 Attn: Maurice Storm Facsimile: (918) 745-1701 Notices and communications to Sellers should be addressed to: Company Name: Wilshire Enterprises, Inc. Address: 921 Bergen Avenue Jersey City, New Jersey 07306 Attn: Philip Kupperman Facsimile: (201) 420-6012 Contracts, deposit materials and notices Escrow Invoices inquiries and fee to Escrow Agent should be addressed to: remittances to Escrow Agent should be addressed to: Bank of Oklahoma, N.A. _____________________________________ _______________________________________ _____________________________________ _______________________________________ _____________________________________ Attn: Attn: Telephone: Telephone: Facsimile: Facsimile: SCHEDULE "K" HOLDBACK ESCROW AGREEMENT THIS ESCROW AGREEMENT (the "Agreement"), is made and entered into as of this ____ day of March, 2004 (the "Effective Date") by and among CROW CREEK ENERGY L.L.C., a Delaware limited liability company ("Purchaser"), WILSHIRE ENTERPRISES, INC., a Delaware corporation ("WEI"), SAN FRANCISCO OIL COMPANY, a California corporation ("SFO"), ROCKLAND RESOURCES, CO., an Oklahoma corporation ("RRC"), BRITALTA VENEZOLANO, LTD., an Alberta private corporation ("BV", together with WEI, SFO and RRC, the "Sellers"), and BANK OF OKLAHOMA, N.A. ("Escrow Agent"). For all purposes herein, WEI shall act on behalf of itself and the other Sellers. CCE, each of the Sellers and Escrow Agent sometimes individually may be referred to as a "Party" and collectively may be referred to as the "Parties." RECITALS A. Purchaser and Sellers have entered into a Purchase and Sale Agreement dated as of March __, 2004, but effective for all purposes as of March 1, 2004 (the "Purchase Agreement"); B. The Purchase Agreement provides for, among other things, a Sellers' limited indemnity, indemnifying Purchaser from and against certain claims and losses that may be asserted against or incurred by Purchaser as well as setting forth procedures after Closing for addressing title defects and environmental liabilities. C. As security for the limited indemnity obligation of Sellers and the rights of Purchaser after Closing to address title defects and environmental liabilities under the Purchase Agreement, the Parties have agreed that a holdback amount equal to the earnest money (together with interest thereon), previously escrowed under the Purchase Agreement, remain in an escrow fund (as defined below); and D. The Escrow Agent has agreed to hold such funds pursuant to the terms of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, the parties hereby agree as follow 1. Holdback Escrow Fund. (a) On the date hereof, Purchaser and Sellers, by written instructions to the Escrow Agent, have directed that the Deposit (as defined in the Purchase Agreement) (together with interest thereon), in the amount of $1,000,000 plus accrued interest (the "Holdback Amount") in immediately available funds (as increased by any earnings thereon and as reduced by any disbursements or losses on investments, the ("Holdback Escrow Fund"), remain in escrow in accordance with this Agreement. The Escrow Agent hereby acknowledges receipt thereof. (b) The Escrow Agent hereby agrees to act as escrow agent and to hold, safeguard and disburse the Holdback Escrow Fund pursuant to the terms and conditions hereof. Subject to and in accordance with the terms and conditions hereof, Escrow Agent agrees that it shall receive, hold in escrow, invest and reinvest and release or distribute the Holdback Escrow Fund. It is hereby expressly stipulated and agreed that all interest and other earnings on the Holdback Escrow Fund shall become a part of the Holdback Escrow Fund for all purposes, and that all losses resulting from the investment or reinvestment thereof from time to time and all amounts charged thereto to compensate or reimburse the Escrow Agent from time to time for amounts owing to it hereunder shall from the time of such loss or charge no longer constitute part of the Holdback Escrow Fund. 2. Investment of the Holdback Escrow Fund. Escrow Agent shall invest and reinvest the Holdback Escrow Fund, including principal and interest, in a money market fund managed by Escrow Agent, during the period of this escrow and unless otherwise instructed in writing by Purchaser and Sellers. Such written instructions, if any, shall specify the type and identity of the investments to be purchased and/or sold and shall also include the name of the broker-dealer, if any, any particular settlement procedures required, if any (which settlement procedures shall be consistent with industry standards and practices), and such other information as Escrow Agent may require. Escrow Agent shall not be liable for failure to invest or reinvest funds absent sufficient written direction. Unless Escrow Agent is otherwise directed in such written instructions, Escrow Agent may use a broker-dealer of its own selection, including a broker-dealer owned by or affiliated with Escrow Agent or any of its affiliates. The Escrow Agent or any of its affiliates may receive compensation with respect to any investment directed hereunder. Escrow Agent shall not be liable for losses on any investments, including, but not limited to, losses from market risks due to premature liquidation or resulting from other actions taken pursuant to this Escrow Agreement. 3. Release of Holdback Escrow Funds. The Escrow Agent shall release the Holdback Escrow Fund as follows: (a) The Escrow Agent shall release the Holdback Escrow Fund in accordance with the written instructions of both Purchaser and Sellers (written instructions by either Purchaser or the Sellers acting independently shall not be sufficient to release the Holdback Escrow Fund). (b) Purchaser may, from time to time, submit a demand to Sellers, with a copy to the Escrow Agent, specifying any claim (a "Claim") against Sellers made pursuant to Section 7.1 or Article 10 of the Purchase Agreement, and if known, the amount of the Claim, and certifying that Purchaser is entitled to payment from Sellers with respect to such Claim pursuant to the terms of Section 7.1 or Article 10, as applicable, of the Purchase Agreement (a "Notice of Claim"). Upon agreement among Purchaser and Sellers as to the validity and value of a Claim or upon a final determination by the Arbitrator as set forth in Article 11 of the Purchase Agreement as to the validity and amount of a Claim, Purchaser and Sellers shall submit a notice in writing signed by both Purchaser and Sellers (a "Payment Notice") to the Escrow Agent, setting forth the amount of payment due from Sellers that Purchaser is entitled to pursuant to the Purchase Agreement (the "Payment Amount"), with a copy of the Payment Notice to Sellers. The Escrow Agent shall release the Payment Amount to Purchaser pursuant to the terms of the Payment Notice. (c) Unless the Escrow Agent shall have received a Notice of Claim from Purchaser that has not been paid or otherwise resolved on or before the Final Settlement Date (as defined in the Purchase Agreement), the Escrow Agent shall distribute the Holdback Escrow Fund (or, if pending Notice(s) of Claim specify a maximum Claim, and the Holdback Escrow Fund exceeds the amount of such Claim, the Escrow Agent shall distribute such excess) to Sellers. (d) On or after the Final Settlement Date (as defined in the Purchase Agreement) and for each outstanding Claim that is resolved, to the extent the Holdback Escrow Fund exceeds the Payment Amount for such resolved Claim plus the maximum amount of Claims subject to any unresolved Notice of a Claim, the Escrow Agent shall distribute such excess to Sellers. (e) Upon resolution and payment (if necessary) after the Final Settlement Date (as defined in the Purchase Agreement) of all outstanding Notices of Claim, the Escrow Agent shall distribute the Holdback Escrow Fund to Sellers. (f) The Escrow Agent shall release the Holdback Escrow Fund in accordance with the terms of an order, judgment or decree of a court or administrative agency of competent jurisdiction ordering the release of the Holdback Escrow Fund or any portion thereof, accompanied by an opinion of counsel of the party requesting release of the Holdback Escrow Fund to the effect that such order, judgment or decree represents a final adjudication of the rights of the parties hereto by a court of competent jurisdiction, and that the time for appeal from such order, judgment or decree has expired without an appeal having been perfected. 4. Matters Relating to the Escrow Agent. (a) Indemnification of Escrow Agent. Purchaser and Sellers, jointly and severally, agree to hold the Escrow Agent harmless and to indemnify the Escrow Agent against any loss, liability, expense (including reasonable attorney's fees and expenses), claim, or demand arising out of or in connection with the performance of its obligations in accordance with the provisions of this Agreement, except for gross negligence or willful misconduct of the Escrow Agent. The foregoing indemnities in this paragraph shall survive the resignation of the Escrow Agent or the termination of this Agreement. (b) Specific Duties: No Liability. The Escrow Agent's duties are only such as are specifically provided herein, and the Escrow Agent shall incur no liability whatsoever to Purchaser or Sellers, except for gross negligence or willful misconduct. The Escrow Agent shall have no responsibility hereunder other than to follow faithfully the instructions herein contained. The Escrow Agent may consult with counsel and shall be fully protected in any action taken in good faith in accordance with such advice. The Escrow Agent shall be fully protected in acting in accordance with any written instructions given to it hereunder and believed by it to have been executed by the proper parties. (c) Fees. The Escrow Agent shall be entitled to a fee of _______________________ Dollars ($______________) for the services rendered under this Agreement, which fee shall be paid from interest and other earnings on the Holdback Amount; provided that any fees in excess of accrued interest and earnings shall be paid by Sellers and Purchaser in equal shares. The Escrow Agent shall have a lien on the Holdback Escrow Fund for all expenses and fees incurred by it pursuant to this Agreement and shall have the right to reimbursement for all such expenses and fees from the Holdback Escrow Fund. If the Escrow Agent believes it to be reasonably necessary to consult with counsel concerning any of its duties hereunder, or if the Escrow Agent becomes involved in litigation as a result of acting as Escrow Agent hereunder, then in either case, the costs, expenses, and reasonable attorneys fees of the Escrow Agent shall be borne equally by the Purchaser and the Sellers. (d) Disputes. It is understood and agreed that should any dispute arise with respect to the payment, ownership, or right of possession of the Holdback Escrow Fund, the Escrow Agent is authorized and directed to retain in its possession, without liability to anyone, all or any part of such funds until such dispute shall have been settled either by mutual agreement by the parties concerned or by the making of a final written arbitration award rendered in an arbitration proceeding conducted pursuant to Article 11 of the Purchase Agreement, but the Escrow Agent shall be under no duty whatsoever to institute or defend any such proceedings. (e) Resignation. The Escrow Agent may resign at any time by giving written notice thereof to the other Parties, but such resignation shall not become effective until a successor escrow agent shall have been appointed and shall have accepted such assignment in writing. If an instrument of acceptance by a successor escrow agent shall not have been delivered to the Escrow Agent within 30 days after the giving of such notice of resignation, the resigning Escrow Agent may at the expense of the other parties hereto petition any court of competent jurisdiction for the appointment of a successor escrow agent. 5. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Texas applicable to contracts made and to be performed entirely within such State. 6. Notices. All notices, consents, waivers and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile (with written confirmation of receipt) provided that a copy is mailed by registered mail, return receipt requested, or (c) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers, as follows: If to Sellers: Wilshire Enterprises, Inc., for itself and San Francisco Oil Company 921 Bergen Avenue Jersey City, New Jersey 07306 Attn: Philip Kupperman Fax: (201) 420-6012 If to Purchaser: Crow Creek Energy L.L.C. 2100 South Utica, Suite 200 Tulsa, Oklahoma 74114 Attn: Maurice Storm Fax: (918) 745-1701 If to the Escrow Agent: Bank of Oklahoma, N.A. ---------------------- ---------------------- 7. Termination. This Agreement shall terminate upon the disbursement of the Holdback Escrow Fund. 8. Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original and all of which, when taken together, will be deemed to constitute one and the same. 9. Section Headings. The headings of sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. 10. Waiver. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no Claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the Claim or right unless in a writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above.