Exhibit 6.14

 

Contribution and Sale Agreement

This Contribution and Sale Agreement (this “Agreement”) is made as of July 12, 2017 by and between Lubbock Energy Partners LLC, a Texas limited liability company, with a mailing address of 1616 S. Voss Road, Suite 530, Houston, Texas 77057 (“LEP”), and Energy Hunter Resources, Inc., a Delaware corporation with a mailing address of P.O. Box 540308, Dallas, Texas 75354 (“EHR”).  LEP and EHR are sometimes referred to in this Agreement collectively as the “Parties” and individually as a “Party”.

WITNESSETH

WHEREAS, LEP is the owner of the Assets (as defined below) and all oil, gas and other hydrocarbons produced or processed in association therewith (“Hydrocarbons”); and

WHEREAS, LEP will contribute, convey, transfer, assign and sell the Assets to EHR in return for the issuance of common stock of EHR and cash, upon the terms and conditions set forth in this Agreement.

NOW THEREFORE, in consideration of the mutual promises of the Parties contained in this Agreement, the Parties agree as follows:

ARTICLE I

PURCHASE AND SALE

1.1           Agreement to Sell and Purchase.  Subject to the terms and conditions of this Agreement, LEP agrees to contribute, convey, transfer, assign and sell the Assets to EHR, as of the Effective Time, subject to the terms and conditions of this Agreement, as set forth below.

1.2           The Assets.  Subject to Section 1.8 herein (pertaining to Excluded Assets), the term “Assets” shall mean all LEP’s right, title and interests in:

(a)           The oil and gas leases, and other interests more fully described in Exhibit A to the extent such leases cover the lands described in Exhibit A, together with all rights incident thereto and derived therefrom (the “Leases”), and together with (i) the interests in any units or pooled lands arising on account of the Leases having been unitized, pooled  or consolidated into such units or with such lands (LEP’s interests in such units, the “Unit Interests”), (ii) all rights of use and occupation of the surface of and the subsurface depths under the lands covered by the Leases or included in the Unit Interests, and (iii) all interests, tenements, hereditaments, and appurtenances belonging to or derived from the Leases, including all working interests, net revenue interests, royalty interests, overriding royalty interests, net profits interests and other interests of any kind or character;

 

(b)           All operating agreements, pooling and unitization agreements, consolidation agreements, declarations of pooling or unitization, pooling orders, farmout and farmin agreements, participation agreements, assignments, oil sales contracts, gas sales, gas processing, gas gathering, and transportation agreements, surface leases, rights-of-way, easements, permits, licenses, and other instruments and agreements pertaining to the Leases and the Unit Interests (the “Existing Contracts”);

(c)           All wells on or attributable to the Leases or Unit Interests (LEP’s interests in such wells, collectively and including the wells listed in Exhibit B, the “Wells”, and the Leases, the Unit Interests and the Wells being collectively referred to hereinafter as the “Assets”);

(d)           All gathering systems and pipelines and any and all other surface fee and leaseholds, and other real property interests, including any roads, easements, rights-of-way, surface fee interests, surface leases, servitudes and franchises including all saltwater disposal leases described and all saltwater disposal wells located on such saltwater disposal leases used in or useful to operation of the Wells;

(e)           All production facilities, structures, tubular goods, well equipment, communication equipment associated with the Assets, trailers, production equipment, pipelines, inventory and all other personal property, fixtures and facilities to the extent appurtenant to, or used in connection with the Assets, and all lease and surface equipment, personal property, fixtures, joint accounts, easements, rights-of-way and appurtenances used or related to the Assets (collectively, the  “Facilities and Equipment”);

(f)            All files, records and data relating to the items described in subsections A through C above including title records (including abstracts of title, title opinions, title reports and title curative documents), G&G Data, contracts, correspondence, and all related matters in the possession of LEP (the “Records”).  For purposes of this Agreement, “G&G Data” means all geological or geophysical information constituting proprietary data, studies, core samples, maps, related technical data and any other geological or geophysical information covering the Assets which LEP is not prohibited by agreement from transferring to EHR;

(g)           The Hydrocarbons produced from or attributable to the Assets from and after the Effective Time and all Hydrocarbons produced therefrom prior to the Effective Time that are in storage prior to sale and that are upstream of the sales metering point as of the Closing Date, and all gas imbalances favoring the Assets; and

(h)           Without limiting the foregoing, all other rights, titles and interests of LEP of whatever kind or character, whether legal or equitable, vested or contingent, in and to the oil, gas and other minerals in and under or that may be produced from or attributable to the Assets, including oil and gas leases, production payments, and other interests in such Assets whether such interests are specifically described in this Agreement and its Exhibits, and even though LEP’s interest in such Assets or the oil, gas or other minerals derived thereunder may be incorrectly described in or omitted from this Agreement and its Exhibits.

 

1.3           Effective Time.  Ownership of the Assets shall be transferred from LEP to EHR at the Closing, effective as of 7:00 a.m. (local time) on June 1, 2017 (the “Effective Time”).  LEP shall be entitled to any amount realized from and accruing to the Assets prior to the Effective Time, if any, and shall be responsible for the payment of all expenses attributable to the Assets prior to the Effective Time.  EHR shall be entitled to any amount realized from and accruing to the Assets on or after the Effective Time, and shall be responsible for the payment of all expenses attributable to the Assets on or after the Effective Time.

1.4           Revenues and Operating Expenses. Subject to the provisions hereof, LEP shall remain entitled to all of the rights of ownership (including the right to all production, proceeds of production and other proceeds) and shall remain responsible for all operating expenses (in each case) attributable to the Assets for the period of time prior to the Effective Time.  Subject to the provisions hereof, from and after Closing, EHR shall be entitled to all of the rights of ownership (including the right to all production, proceeds of production and other proceeds) and shall be responsible for all liabilities and expenses (in each case) attributable to the Assets for the period of time from and after the Effective Time.  All operating expenses attributable to the Assets (in each case) that are: (a) incurred with respect to operations conducted or Hydrocarbons produced prior to the Effective Time shall be paid by or allocated to LEP and (b) incurred with respect to operations conducted or Hydrocarbons produced from and after the Effective Time shall be paid by or allocated to EHR.  LEP shall, upon receipt of any amounts owed to EHR under this Section 1.4 that are not accounted for in the Adjusted Contribution Value (or agreed adjustments thereto), promptly deliver any such amounts to EHR.  EHR shall, upon its receipt of any amounts owed to LEP under this Section 1.4 that are not accounted for in the Adjusted Contribution Value (or agreed adjustments thereto), promptly deliver any such amounts to LEP.

1.5           Adjustments to Contribution Value.

(a)           The Contribution Value will be adjusted upward by the following amounts (without duplication):

(i)          an amount equal to the value of all Hydrocarbons attributable to the Assets in storage or existing in stock tanks, pipelines and/or plants (including inventory) as of the Effective Time, the value to be based upon the applicable Existing Contract price in effect as of the Effective Time (or if there is no Existing Contract price, then the posted price in the field in which such Hydrocarbons were produced or if no such posted price exists for such Hydrocarbons, the market price in the field in which such Hydrocarbons were produced, in each case, in effect as of the Effective Time);

(ii)         to the extent that LEP is underproduced as of the Effective Time as shown with respect to the net Well Imbalances set forth in Schedule 4.15, an amount equal to the product of (A) the underproduced volumes multiplied by (B) $1.00 per MMBtu  for gaseous Hydrocarbons (the “Gas Price”); and an amount equal to the product of (X) the underproduced volumes multiplied by (Y) the price per Bbl (as of the Effective Time) for liquid Hydrocarbons subject to purchase under the Existing Contracts applicable to the purchase of liquid Hydrocarbons produced from the Assets (the “Liquids Price”); plus

 

(iii)        to the extent that LEP has overdelivered any Hydrocarbons as of the Effective Time as shown with respect to the net Marketing Imbalances set forth in Schedule 4.15, an amount equal to the product of (A) the overdelivered volumes multiplied by (B) Gas Price; and an amount equal to the product of (X) the overdelivered volumes multiplied by (Y) the Liquids Price; plus

(iv)        if a positive number, the aggregate amount of all Title Benefit Amounts attributable to Title Benefit Properties pursuant to Section 1.6 less $1,075,000.

(b)           The Contribution Value will be adjusted downward by the following amounts (without duplication):

(i)          an amount equal to all proceeds received by LEP attributable to the sale of Hydrocarbons produced from or allocable to the Assets between the Effective Time and the Closing Date, net of expenses incurred by LEP in earning or receiving such proceeds and any severance, sales, excise or similar Taxes or fees paid by LEP and not reimbursed to LEP by a Third Party purchaser;

(ii)         to the extent that LEP is overproduced as of the Effective Time as shown with respect to the net Well Imbalances set forth in Schedule 4.15, an amount equal to the product of (A) the overproduced volumes multiplied by (B) the Gas Price; and an amount equal to the product of (X) the overproduced volumes multiplied by (Y) Liquids Price;

(iii)        to the extent that LEP has underdelivered any Hydrocarbons as of the Effective Time as shown with respect to the net Marketing Imbalances set forth in Schedule 4.15, an amount equal to the product of (A) the underdelivered volumes multiplied by (B) the Gas Price; and an amount equal to the product of (X) the underdelivered volumes multiplied by (Y) the Gas Price;

(iv)        all Suspense Funds that are held in suspense by LEP as of the Closing Date, if any, and disclosed on Schedule 4.12; and

(v)         if a positive number, the sum of (1) the aggregate amount of all Environmental Defect Amounts attributable to uncured Environmental Defects pursuant to Section 3.5  plus (2) the aggregate amount of all Title Defect Amounts attributable to uncured Title Defects pursuant to Section 1.6 less (3) $1,075,000.

1.6           Title Defects and Title Benefits.  Except for the Special Warranty of title set forth in Section 3.2, LEP makes no warranty or representation, express, implied, statutory or otherwise, with respect to LEP’s title to any of the Assets, and EHR hereby acknowledges and agrees that EHR’s sole remedy for any defect of title, including any Title Defect, with respect to any of the Assets (a) before Closing, shall be as set forth in this Section 1.6 and (b) after Closing, shall be pursuant to the Special Warranty of title set forth in Section 3.2.

 

(a)           Title Defect Notices.  On or before the date that is thirty (30) days following the execution date (the “Defect Claim Date”), EHR must deliver claim notices to LEP meeting the requirements of this Section 1.6(a) (collectively, the “Title Defect Notices”) setting forth any matters that, in EHR’s reasonable opinion, constitute Title Defects and that EHR intends to assert as a Title Defect pursuant to this Section 1.6.  For all purposes of this Agreement and notwithstanding anything herein to the contrary (except for the limited Special Warranty of title contained herein and in the Assignment), EHR shall be deemed to have waived, and LEP shall have no liability for, any Title Defect or other title matter that EHR fails to assert as a Title Defect by a Title Defect Notice received by LEP on or before the Defect Claim Date.  To be effective, each Title Defect Notice shall be in writing and shall include:  (i) a description of the alleged Title Defect, (ii) identification of the Well or Lease affected by the Title Defect (such Well or Lease, each, as applicable, a “Title Defect Property”), (iii) the Allocated Value (as hereafter defined) of each Title Defect Property, (iv) supporting documents available to EHR reasonably necessary for LEP to verify the existence of the alleged Title Defect, and (v) the amount by which EHR reasonably believes the Allocated Value of each Title Defect Property is reduced by the alleged Title Defect and the computations (with reasonable supporting detail) upon which EHR’s belief is based.

(b)           Title Benefit Notices.  LEP shall have the right, but not the obligation, to deliver to EHR on or before the Defect Claim Date a notice meeting the requirements of this Section 1.6(b) (collectively, the “Title Benefit Notices”) setting forth any additional matters that, in LEP’s reasonable opinion, constitute Title Benefits and that LEP intends to assert as a Title Benefit pursuant to this Section 1.6.  To be effective, each Title Benefit Notice shall be in writing and shall include:  (i) a description of the alleged Title Benefit, (ii) the Subject Property affected by the Title Benefit (each, as applicable, a “Title Benefit Property”), (iii) the Allocated Value of the Title Benefit Property, (iv) supporting documents available to LEP reasonably necessary for EHR to verify the existence of the alleged Title Benefit, and (v) the amount by which LEP reasonably believes the Allocated Value of each Title Benefit Property should be increased by the alleged Title Benefit and the computations (with reasonable supporting detail) upon which LEP’s belief is based.

(c)           LEP’s Right to Cure.  Notwithstanding anything to the contrary herein, LEP shall have the right, but not the obligation, to attempt, at its sole cost, to cure, at any time after the date of this Agreement and before the expiration of 180 days following the Closing Date (the “Cure Period”), any Title Defects of which it has timely received a Title Defect Notice from EHR.  In the event that (i) an adjustment for a Title Defect Amount is made to the Contribution Value pursuant to Section 1.5(b)(vi) and LEP thereafter cures, during the Cure Period, the Title Defect for which such adjustment was made, then the Contribution Value shall be adjusted upward by the amount by which the Contribution Value was reduced on account of such Title Defect or (ii) a Title Defect Property is retained by LEP pursuant to Section 1.6(d)(ii) and LEP thereafter cures, during the Cure Period, the Title Defect for which such exclusion was made, then within ten (10) Business Days after the expiration of the Cure Period, subject to any other provisions of this Agreement that would require the exclusion of such Asset, such Title Defect Property (or portion thereof) that was previously excluded shall again be subject to the terms of this Agreement and the Contribution Value shall be adjusted upward by the amount by which the Contribution Value was reduced on account of the previous exclusion, and, contemporaneously with EHR’s payment to LEP of the portion of the Contribution Value adjusted upward for such cured Title Defect Property (or portion thereof), LEP shall convey to EHR such previously excluded Title Defect Property (or portion thereof) pursuant to an assignment instrument in form and substance of Exhibit C and EHR shall pay the increased Contribution Value to LEP in the form of cash or, at LEP’s option and written direction to EHR, in the form of common stock of EHR, or partly in cash and common stock of EHR (as directed by LEP), with the number of shares issued to LEP being calculated based on the price per share offered and sold in the Offering.

 

(d)           Remedies for Title Defects.  Subject to (x) LEP’s continuing right to dispute the existence of a Title Defect and/or the Title Defect Amount asserted with respect thereto, and (y) LEP’s ongoing right to cure any Title Defect under Section 1.6(c), whether before, at or after Closing, if any Title Defect timely asserted by EHR in accordance with Section 1.6(a) is not waived in writing by EHR or cured by Closing, then in connection with the Closing (unless, as of the Closing, the Parties are in disagreement with respect to the existence of such Title Defect or any associated Title Defect Amount, in each of which case the applicable dispute regarding a Title Defect (“Title Dispute”) shall, unless otherwise agreed by the Parties, be addressed pursuant to Section 1.6(d)(i)), LEP shall at its sole option and discretion, elect one or more of the following remedies for such Title Defect:

(i)          convey the entirety of the Title Defect Property that is subject to such Title Defect to EHR, together with all associated Assets, at Closing, and make an accompanying reduction to the Contribution Value, subject to the limitations set forth in Section 1.5(b), in an amount determined pursuant to Section 1.6(f) as being the value of such Title Defect to the extent affecting the applicable Title Defect Property (the “Title Defect Amount”), subject to LEP’s right to cure in Section 1.6(c) above; or

(ii)         retain the entirety of the Title Defect Property that is subject to such Title Defect, together with all associated Assets (in which case, such Assets shall become excluded hereunder), and reduce the Contribution Value by an amount equal to the Allocated Value of such Title Defect Property.

(e)           Remedies for Title Benefits.  If any Title Benefits are timely asserted for a Subject Property by LEP in accordance with Section 1.6(b), then in connection with the Closing (unless, as of the Closing, with respect to each Title Benefit Property, the Parties are in disagreement with respect to the existence of such Title Benefit or any associated Title Benefit Amount, in each of which case the applicable Title Dispute shall, unless otherwise agreed by the Parties, be addressed pursuant to Section 1.6(d)(ii)), the Contribution Value, subject to the limitations set forth in Sections 1.5(a), shall be adjusted upwards by an amount equal to the applicable Title Benefit Amount, net of any Title Defect Amounts.

 

(f)            Title Defect Amount.  The Title Defect Amount resulting from a Title Defect shall be the amount by which the Net Acres of the affected Title Defect Property is reduced as a result of the existence of such Title Defect multiplied by the Per Acre Allocated Value, and shall be determined in accordance with the following terms and conditions:

(i)          if LEP and EHR agree on the Title Defect Amount, then that amount shall be the Title Defect Amount;

(ii)         if the Title Defect is an obligation, encumbrance or burden (other than a Permitted Encumbrance) that is undisputed and liquidated in amount, then the Title Defect Amount shall be the amount necessary to be paid to remove the Title Defect from the Title Defect Property;

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

(iv)        notwithstanding anything to the contrary in this Section 1.6, the aggregate Title Defect Amounts attributable to the effects of all Title Defects upon any Title Defect Property (whether related to an adjustment to the Contribution Value or any other remedy provided by LEP hereunder or any claim for any breach of the limited Special Warranty of title contained in this Agreement and the Assignment) shall not exceed the lesser of: (A) the reasonable cost and expense of curing all such Title Defects (if such Title Defects are reasonably capable of being cured) and (B) the decrease in Net Acres caused by reason of such Title Defect multiplied by the Per Acre Allocated Value.

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

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

(ii)         in all other instances, the Title Benefit would be represented by an increase in the number of Net Acres for such Title Benefit Property such that the actual Net Acres for such Title Benefit Property is more than the Net Acres set forth in Exhibit A for such Title Benefit Property. In such event, the Title Benefit Amount shall be the product of the Per Acre Allocated Value multiplied by the increased number of Net Acres for such Title Benefit Property in Exhibit A.

 

1.7           Allocated Values.  The “Allocated Value” for Lease shall equal the net mineral acres (“Net Acres”) represented by such Lease (as reflected on Exhibit A) multiplied by $2,250.00 (the “Per Acre Allocated Value”) and the Allocated Value of each Lease arrived at using the Per Acre Allocated Value is set forth for on Schedule 1.7.

1.8           Excluded Assets.  Notwithstanding anything herein to the contrary, LEP does not agree to sell or contribute to EHR, and shall reserve and retain unto LEP, all of the following properties, rights, and interests (the “Excluded Assets”):

(a)         all trade credits, accounts receivable, notes receivable, and other receivables attributable to the Assets with respect to any period of time prior to the Effective Time;

 

(b)         all corporate, financial, tax and legal records of LEP that relate to LEP’s business generally or that relate to the other Excluded Assets, together with a duplicate copy (electronic or otherwise) of all of the Records;

 

(c)         all refunds of fees, Taxes or other costs or expenses attributable to any periods of time prior to the Effective Time;

(d)         all area-wide permits and licenses or other permits, licenses or authorizations used in the conduct of LEP’s business generally;

(e)         all bonds, letters of credit and guarantees, if any, posted by LEP or its Affiliates with Governmental Authorities and relating to the Assets;

(f)          subject to the provisions of Section 8.1 herein, all rights, titles, claims and interests of LEP or its Affiliates to or under any insurance policy or agreement, any insurance proceeds or to or under any bond or bond proceeds;

(g)         all patents, patent applications, logos, service marks, copyrights, trade names or trademarks of or associated with LEP, its Affiliates or their businesses;

(h)         all privileged attorney-client communications, files or records;

(i)          all amounts paid by third parties to LEP or its Affiliates as overhead under any joint operating agreements burdening the Assets;

(j)          all assets in possession of LEP but owned by third parties;

(k)         all third party indemnities where LEP is an indemnified party and the proceeds afforded thereby to the extent relating to the Excluded Assets; and

(l)          all Existing Contracts with any Affiliate of LEP that pertain to operating the Assets as a contract operator.

 

ARTICLE II

CONTRIBUTION VALUE

2.1           Determination of Adjusted Contribution Value.  The agreed contribution value of the Assets is $22,679,835.00 (the “Contribution Value”).  The Contribution Value shall be adjusted upward or downward as may be agreed to in writing by EHR and LEP to take into account expenditures made and revenues received by one Party that are allocable to the other Party as provided in Section 1.4 and Section 1.5 of this Agreement, with the resulting amount being referred to herein as the “Adjusted Contribution Value”.

2.2           Delivery of Consideration for Contribution of Assets.  In return for the contribution of the Assets by LEP to EHR, EHR shall at the Closing:

(a)           Pay to LEP the cash sum of $10,589,917.50 (the “Cash Consideration”), in immediately available wire-transfer funds;

(b)           Issue to LEP shares of common stock of EHR (the “Stock Consideration”) equal to $12,089,917.50 adjusted up or down to reflect any decreases or increases to the Contribution Value made to arrive at the Adjusted Contribution Value as provided in Section 1.4 and Section 1.5 of this Agreement, if applicable.  The number of shares issued to LEP shall be calculated based on the price per share issued in the Offering (as defined below).

2.3           Assumption of Obligations. At Closing, EHR shall assume and agree to pay or perform all of the Assumed Obligations (defined below).  The term “Assumed Obligations” means all the obligations, liabilities and duties arising from, related to, or attributable to, the ownership, operation or use of the Assets on and after the Effective Time.

ARTICLE III

TITLE AND ENVIRONMENTAL MATTERS

3.1           Title Defect.  An Asset shall be deemed to have a title defect (“Title Defect”) if LEP is found to have less than the following:

(a)           The actual Net Acres owned by LEP for each Lease that is listed in Exhibit A is the Net Acres reflected on Exhibit A.

(b)           The Assets are free from all liens, mortgages, security interests, and other encumbrances, other than Permitted Encumbrances.  “Permitted Encumbrances” means any or all of the following:

 

(i)          the terms and conditions of the Leases and Existing Contracts and all royalties and any overriding royalties, net profits interests, free gas arrangements, production payments, reversionary interests and other similar burdens on production to the extent that the net cumulative effect of such burdens does not decrease the Net Acres for any Lease to an amount less than the Net Acres shown on Exhibit A;

(ii)         all unit agreements, pooling agreements, operating agreements, farmout agreements, Hydrocarbon production sales contracts, division orders and other contracts, agreements and instruments applicable to the Assets, to the extent that the net cumulative effect of such instruments does not decrease the Net Acres for any Lease to an amount less than the Net Acres shown on Exhibit A;

(iii)        preferential rights to purchase, third-party consents to assignment and similar transfer restrictions, provided that such preferential rights have expired or been waived prior to Closing;

(iv)        liens for taxes or assessments not yet delinquent or if delinquent, being contested in good faith by appropriate actions;

(v)         materialman’s, mechanic’s, repairman’s, employee’s, contractor’s, operator’s and other similar liens or charges arising in the ordinary course of business for amounts not yet delinquent (including any amounts being withheld as provided by applicable laws, rules or regulations (“Laws”) and set forth in Schedule 3.1(d) hereto, or if delinquent, being contested in good faith by appropriate actions by or on behalf of LEP;

(vi)        all rights to consent by, required notices to, filings with, or other actions by means any federal, state, local or foreign government, any political subdivision thereof, or any court, administrative or regulatory agency, department, instrumentality, body or commission or other governmental authority or agency, or any self-regulating body, including a stock exchange, and any related arbitrator (“Governmental Authority”) in connection with the sale or assignment of the Assets or interests therein if they are not required or customarily obtained in the region where the Assets are located prior to the sale or conveyance;

(vii)       excepting circumstances where such rights have already been triggered, conventional rights of reassignment arising upon final intention to abandon or release any Asset;

(viii)      easements, rights-of-way, covenants, servitudes, Permits (as defined below), surface leases and other rights in respect of surface operations that do not prevent or adversely affect operations as currently conducted on the Assets (“Permits” means notifications, licenses, permits (including environmental, construction and operation permits), qualifications, franchises, certificates, approvals, exemptions, classifications, registrations and other similar documents and authorizations issued by any Governmental Authority, and applications therefor);

 

(ix)         calls on production under Existing Contracts that can be terminated upon not more than 60 days’ notice;

(x)          all rights reserved to or vested in any Governmental Authority to control or regulate any of the Assets in any manner or to assess tax with respect to the Assets, the ownership, use or operation thereof, or revenue, income or capital gains with respect thereto, and all obligations and duties under all applicable Laws of any such Governmental Authority or under any franchise, grant, license or Permit issued by any Governmental Authority;

(xi)         any lien, charge or other encumbrance on or affecting the Assets that is waived in writing by EHR at or prior to Closing or that is discharged by LEP at or prior to Closing; and

(xii)        any other liens, charges, encumbrances, defects or irregularities that (A) do not, individually or in the aggregate, materially interfere with the use or ownership of the Assets subject thereto or affected thereby (as currently used or owned) and (B) do not decrease the Net Acres for any Lease to an amount less than the Net Acres shown on Exhibit A.

(e)           Notwithstanding anything to the contrary, none of the following shall constitute a Title Defect:

(i)          the loss of or reduction of interest in any Lease following the date hereof due to any election or decision made by LEP in accordance with applicable joint operating agreements as permitted under this Agreement, so long as such election or decision is consented to in writing by EHR;

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

(iii)        defects in the chain of title consisting of the failure to recite marital status in a document (provided that such document contains the signature of all Persons whose signature is required thereby) or, omissions of successions of heirship, estate or probate proceedings, in each case, unless EHR provides affirmative evidence that such failure or omission results in another party’s actual and superior claim of title to the relevant Asset;

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

(v)         defects based on failure to record Leases issued by any Governmental Authority, or any assignments of record title or operating rights in such Leases, in the real property, conveyance or other records of the county in which such Property is located;

 

(vi)        defects that have been cured by applicable Laws of limitations or prescription; provided that such cure is free of reasonable doubt;

(vii)       defects arising from a mortgage encumbering the oil, gas or mineral estate of any lessor under a Lease, unless a complaint of foreclosure has been filed or any similar action taken by the mortgagee thereunder and in such case such mortgage has not been subordinated to the Lease applicable to such Asset; and

(viii)      the matters set forth on Schedule 3.1(e).

3.2           Special Warranty of Title.  If the Closing occurs, then effective as of the Closing Date, LEP hereby warrants title to the Assets against all Title Defects that exist by reason of lawful claims of third parties arising by, through or under LEP, but not otherwise, subject, however, to the Permitted Encumbrances and all terms of this Agreement (the “Special Warranty”). The Special Warranty shall also be included in the Assignment and all other documents of conveyance to the Assets.

3.3           No Known Environmental Defects.  To the actual knowledge with no duty of investigation or inquiry of LEP (“Knowledge”), the Assets are not subject to any uncured Environmental Defects. An “Environmental Defect” means a condition that exists with respect to the air, land, soil, surface, subsurface strata, surface water, ground water or sediments which causes an Asset to be subject to fine, liability, clean-up or remediation under any of the Environmental Laws. The term, “Environmental Laws” means any and all applicable Laws pertaining to the safety, health or conservation or protection of the Assets, the environment, wildlife, or natural resources in effect in any and all jurisdictions in which the Assets are located, including, without limitation, the Clean Air Act, as amended, the Federal Water Pollution Control Act, as amended, the Safe Drinking Water Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, as amended (“SARA”), the Resource Conservation and Recovery Act, as amended (“RCRA”), the Hazardous and Solid Waste Amendments Act of 1984, as amended, the Toxic Substances Control Act, as amended, the Occupational Safety and Health Act, as amended (“OSHA”), and any applicable state, tribal, or local counterparts, but shall not include any applicable Law associated with plugging and abandonment of any of the Wells.  The terms “hazardous substance”, “release”, and “threatened release” have the meanings specified in CERCLA; provided, however, that to the extent the Laws of the state in which the Assets are located are applicable and have established a meaning for “hazardous substance”, “release”, “threatened release”, “solid waste”, “hazardous waste”, and “disposal” that is broader than that specified in CERCLA or RCRA, such broader meaning shall apply with respect to the matters covered by such Laws. The term “Remediation” means, with respect to any Environmental Condition, the implementation and completion of any remedial, removal, response, construction, closure, disposal or other corrective actions required under Environmental Laws to correct or remove such Environmental Condition, including monitoring, reporting, permitting, or the investigation of any necessary pollution control equipment.  The term “Remediation Amount” means, with respect to any Environmental Condition asserted in relation to an Environmental Defect Notice, the cost of the lowest cost Remediation of such Environmental Condition that is reasonably effective and available and in compliance with Environmental Laws. The term “Environmental Condition” means a condition that causes a Well or a Lease to be in violation of, or not to be in compliance with, an Environmental Law with respect to which remediation may be required, or any condition that requires reporting, correction or response under any Environmental Law.

 

3.4           Phase I.  EHR shall have the option, but not the obligation, to cause an environmental consulting or engineering firm (the “Environmental Consultant”), to conduct, an inspection of the environmental condition and compliance status of the Assets (the “Environmental Review”), which shall include conducting a Phase I Environmental Site Assessment in accordance with the American Society for Testing and Materials (A.S.T.M.) Standard Practice Environmental Site Assessments: Phase I Environmental Site Assessment Process (Publication Designation: E1527-13) (“Phase I”).  LEP shall cooperate in allowing access to the Assets for EHR and the Environmental Consultant to conduct the Environmental Review of the Assets, provided, however, that EHR shall bear the sole cost and expense of such study, and EHR shall assume all risks, known or unknown, in accessing the Assets, and EHR shall cause the Environmental Consultant to provide a copy of the Phase I report to LEP.  Nothing herein grants to EHR the right or ability to do soil testing or sampling (or to conduct a phase II study), which may only be done with the written consent of LEP, which may be withheld in its sole and absolute discretion.  In addition, EHR’s shall indemnify and hold LEP harmless from any all claims of injury, damages and/or losses to persons or property resulting from EHR’s Environmental Review including (without limitation) WHETHER OR NOT THE LOSSES IN QUESTION AROSE OR RESULTED SOLELY OR IN PART FROM THE SOLE, JOINT, ACTIVE, PASSIVE, CONCURRENT, CONTRIBUTORY OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY LEP OR ANY OF LEP’S AFFILIATES, AND WHETHER ANY LIABILITY OR CLAIM IS IN TORT, UNDER CONTRACT OR OTHERWISE AT LAW.  EHR AND LEP ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.

 

3.5           Environmental Defects.

 

(a)           Assertions of Environmental Defects.  On or before the Defect Claim Date (or ten (10) Business Days following the date upon which all Phase I studies are delivered to EHR, whichever is later), EHR must deliver claim notices to LEP meeting the requirements of this Section 3.5(a) (collectively, the “Environmental Defect Notices”) setting forth any matters that, in EHR’s reasonable opinion, constitute Environmental Defects and that EHR intends to assert as Environmental Defects pursuant to this Section 3.5.   To be effective, each Environmental Defect Notice shall be in writing, and shall include (i) a description of the alleged Environmental Defect (including the applicable Environmental Law(s) violated or implicated thereby), (ii) identification of the Well or Lease affected by the alleged Environmental Defect (each such Property, as applicable, an “Environmental Defect Property”), (iii) the Allocated Value of each Environmental Defect Property, (iv) supporting documents available to EHR reasonably necessary for LEP to verify the existence of the alleged Environmental Defect, and (v) a calculation (with reasonable supporting detail) of the Remediation Amount that EHR asserts as the reasonably anticipated cost to fully remediate (“Remediate”) the the alleged Environmental Defect in accordance with standards provided under applicable Environmental Laws.  Notwithstanding anything to the contrary herein, LEP shall have the right, but not the obligation, to attempt, at its sole cost, to Remediate, at any time prior to the end of the Cure Period, any Environmental Defect of which it has timely received an Environmental Defect Notice from EHR.  In the event that (i) an adjustment for a Remediation Amount is made to the Contribution Value pursuant to Section 1.5(b) and LEP thereafter Remediates, during the Cure Period, the Environmental Defect for which such adjustment was made, then the Contribution Value shall be adjusted upward by the amount by which the Contribution Value was reduced on account of such Environmental Defect, or (ii) an Environmental Defect Property is retained by LEP pursuant to Section 3.5(b)(ii) and LEP thereafter Remediates, during the Cure Period, the Environmental Defect for which such exclusion was made, then within ten (10) Business Days after the expiration of the Cure Period, subject to any other provisions of this Agreement that would require the exclusion of such Asset, such Environmental Defect Property (or portion thereof) that was previously excluded shall again be subject to the terms of this Agreement and the Contribution Value shall be adjusted upward by the amount by which the Contribution Value was reduced on account of the previous exclusion, and, contemporaneously with EHR’s payment to LEP of the portion of the Contribution Value adjusted upward for such Remediated Environmental Defect Property (or portion thereof), LEP shall convey to EHR such previously excluded Environmental Defect Property (or portion thereof) pursuant to an assignment instrument in form and substance of Exhibit C and EHR shall pay the increased Contribution Value to LEP in the form of cash or, at LEP’s option and written direction to EHR, in the form of common stock of EHR, or partly in cash and common stock of EHR (as directed by LEP), with the number of shares issued to LEP being calculated based on the price per share offered and sold in the Offering.

(b)           Remedies for Environmental Defects.  If any Environmental Defect timely asserted by EHR in accordance with Section 3.5(a) is not waived in writing by EHR or Remediated, then in connection with the Closing, LEP shall, at its sole option and discretion, elect one or more of the following remedies for such Environmental Defect:

 

(ii)         LEP will retain the entirety of the Environmental Defect Property that is subject to such Environmental Defect, together with all associated Assets (in which case, such Assets shall be excluded hereunder), and reduce the Contribution Value by an amount equal to the Allocated Value of such Environmental Defect Property and such associated Assets.

If the option set forth in clause (i) above is selected, subject always to LEP’s right to Remediate any Environmental Defect under Section 3.5(a), (x) EHR shall be deemed to have assumed responsibility for all costs and expenses attributable to the Remediation of the applicable Environmental Defect and all Liabilities with respect thereto, and (y) EHR’s obligations with respect to the foregoing shall be deemed to constitute Assumed Obligations.  If LEP elects to attempt to Remediate any Environmental Defect pursuant to Section 3.5(a), LEP shall use diligent efforts to implement such Remediation in a manner which is consistent with the requirements of Environmental Laws in a prompt fashion for the type of Remediation that LEP elects to undertake and EHR, effective as of the Closing, to the extent necessary, hereby grants to LEP and its representatives access to (x) the Assets to conduct such Remediation and (y) any utilities located on the Assets in order to undertake such Remediation.  LEP will be deemed to have adequately completed the Remediation required in the immediately preceding sentence (A) upon receipt of a certificate or approval from the applicable Governmental Authority that the Remediation has been implemented to the extent necessary to comply with existing Laws or (B) upon receipt of a certificate from a licensed professional engineer, addressed to EHR and stating that EHR may rely on such certificate, that the Remediation has been implemented to the extent necessary to comply with applicable Laws.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF LEP

As of the date of this Agreement and as of Closing, LEP makes to EHR the following representations and warranties:

4.1           Organization; Existence and Power.  LEP is duly formed, validly existing and (to the extent applicable) in good standing under the laws of the State of Texas. LEP is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its business as now conducted makes such qualification necessary, except where the failure to be so qualified or in good standing would not materially hinder or impede the consummation by LEP of the transactions contemplated by this Agreement. LEP has the power and is authorized to enter into and perform this Agreement and the transactions contemplated by this Agreement.  The execution, delivery and performance of this Agreement by LEP, and the transactions contemplated by this Agreement, will not violate (a) any provision of the organizational documents of LEP, (b) any material agreement or instrument to which LEP is a party or by which LEP or any of the Assets are bound, (c) any judgment, order, ruling, or decree applicable to LEP as a party in interest, or (d) any Law applicable to LEP relating to the Assets.  This Agreement constitutes a legal, valid and binding obligation of LEP, enforceable in accordance with its terms.

 

4.2           Brokers.  LEP has incurred no obligation or liability for brokers’ or finders’ fees relating to the matters provided for in this Agreement which will be the responsibility of EHR, and any such obligation or liability that might exist shall be the sole obligation of LEP.

4.3           Claims and Litigation.  There are no legal or administrative proceedings, claims or investigations pending or, to the Knowledge of LEP, threatened before any court, administrative, or Governmental Authority or arbitrator either (a) with respect to the Assets or (b) against LEP which, if determined adversely to LEP, would have a material adverse effect on the Assets.

4.4           Lease Administration.  LEP has not received notice from any lessor under the Leases (a) seeking to cancel or terminate any such Leases or (b) alleging any unresolved material default under the Leases.

4.5           Compliance.  To the LEP’s Knowledge, LEP has complied with the provisions and requirements of all laws, rules, regulations and orders applicable to the Assets.

4.6           Existing Contracts.  Schedule 4.6 contains a list of all Existing Contracts.  With respect to the Existing Contracts: (a) all Existing Contracts are in full force and effect and are the valid and legally binding obligations of the parties thereto and are enforceable in accordance with their respective terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and similar laws affecting creditor’s rights generally, and by general equitable principles; (b) LEP is not in breach or default of any of its obligations under any Existing Contract; and (c) neither LEP nor, to LEP’s Knowledge, any other party to any Existing Contract has given or threatened to give notice of any action to terminate, cancel, rescind or procure a judicial reformation of any Existing Contract or any provision thereof.

4.7           Marketing.  No Hydrocarbons produced from the Assets are subject to a sales agreement (except contracts terminable without penalty by LEP on not more than 180 days’ notice), no entity has any call upon, option to purchase or similar right under any agreement with respect to the Assets or to the production therefrom.  LEP has not been nor will LEP be obligated by virtue of any prepayment made under any production sales contract or any other contract containing a “take-or-pay” clause, or under any gas balancing, deferred production or similar arrangement to deliver oil, gas or other minerals produced from or allocated to any of the Assets at some future time without receiving full payment therefor at the time of delivery.

4.8           Permits.  LEP possesses all permits, licenses, certificates, consents, approvals, and other authorizations required by any Governmental Authority, which are necessary for LEP’s ownership and operation of the Assets.

 

4.10         Equipment.  In connection with any well operated by LEP, all currently producing well or wells and all equipment and facilities on or used in connection therewith are in an operable state of repair adequate to maintain normal operations in accordance with past practices.

4.11         Royalty Payments.  During LEP’s period of ownership, (a) where LEP or an affiliate of LEP is the party responsible for payment of Royalties, LEP or such affiliate has paid all Royalties with respect to the Leases (other than any Royalties held in escrow or suspense accounts or escheated) due from LEP in compliance with applicable law and the terms of the applicable Leases and (b) where a third-party operator is or was responsible, such third-party operator has paid all Royalties with respect to the Leases (other than any Royalties held in escrow or suspense accounts) in compliance with applicable laws and the terms of the applicable Leases. “Royalties” shall mean any and all royalties, non-participating royalty interests, shut-in royalties, overriding royalties production payments, carried interests, net profits interests, reversionary interests, back-in interests and all other burdens upon, measured by or payable out of on production with respect to the Leases.

4.12         Suspense; Payout Status and Non-Consent Operations. Except as set forth in Schedule 4.12, as of the date set forth on such schedule, neither LEP nor any of its affiliates holds (in escrow or otherwise) any third party funds in suspense with respect to production of Hydrocarbons from any of the Assets.  All funds described in Schedule 4.12 are being held in suspense in material compliance with applicable Law and Existing Contracts. In addition, Schedule 4.12 contains a list of the status of any “payout” balance, as of the date set forth on such schedule, for the Wells subject to a reversion or other adjustment at some level of cost recovery or payout (or passage of time or other event other than termination of a Lease by its terms).

4.13         Taxes.  Except as described on Schedule 4.13:

(a)           all Taxes (whether or not shown on any tax return) relating to or applicable to LEP’s acquisition, ownership or operation of the Assets that have become due and payable have been duly paid in full, and LEP is not delinquent in the payment of any such Taxes;

(b)           all tax returns relating to or in connection with LEP’s acquisition, ownership, or operation of the Assets required to be filed have been timely filed and all such tax returns are correct and complete in all material respects;

(c)           there is not currently in effect any extension or waiver of any statute of limitations of any jurisdiction regarding the assessment or collection of any Taxes of LEP relating to LEP’s acquisition, ownership or operation of the Assets;

 

(d)           there are no administrative or judicial proceedings pending against LEP or the Assets relating to or in connection with the Assets by any Governmental Authority with respect to Taxes;

(e)           all tax withholding and deposit requirements imposed by applicable Law with respect to any of the Assets or the business of LEP have been satisfied in full in all material respects; and

(f)            none of the Assets is subject to any tax partnership agreement or provisions requiring a partnership income tax return to be filed under Subchapter K of Chapter 1 of Subtitle A of the Internal Revenue Code or any similar state statute.

(g)           “Taxes” means any taxes, assessments and other governmental charges imposed by any Governmental Authority, including net income, gross income, profits, gross receipts, license, employment, stamp, occupation, premium, alternative or add-on minimum, ad valorem, real property, personal property, transfer, real property transfer, value added, sales, use, environmental (including taxes under Code Section 59A), customs, duties, capital stock, franchise, excise, withholding, social security (or similar), unemployment, disability, payroll, fuel, excess profits, windfall profit, severance, estimated or other tax, including any interest, penalty or addition thereto, whether disputed or not, and any reasonable expenses incurred in connection with the determination, settlement or litigation of the tax liability.

4.14         Consents and Preferential Purchase Rights.  There are no preferential rights to purchase, rights of first refusal, rights of first offer, tag-along rights or required third person consents which may be applicable to the sale of the Assets by LEP as contemplated by this Agreement.

4.15         Imbalances. Except as set forth on Schedule 4.15, as of the date set forth on Schedule 4.15, LEP does not have production, transportation, plant, or other Imbalances with respect to production from the Assets. The term “Imbalances” means, collectively, (a) any imbalance at the wellhead between the amount of Hydrocarbons produced from a Well and allocable to the interests of LEP therein and the shares of production from the relevant Well to which LEP is entitled, together with any appurtenant rights and obligations concerning future in kind and/or cash balancing at the wellhead (“Well Imbalances”) and (b) any marketing imbalance between the quantity of Hydrocarbons attributable to the Wells required to be delivered by LEP under any of the Existing Contracts relating to the purchase and sale, gathering, transportation, storage, processing (including any production handling and processing at a separation facility) or marketing of Hydrocarbons and the quantity of Hydrocarbons attributable to the Wells actually delivered by LEP pursuant to the relevant Existing Contract, together with any appurtenant rights and obligations concerning production balancing at the delivery point into the relevant sale, gathering, transportation, storage or processing facility (“Marketing Imbalances”).

 

4.16         Plugging Obligations.  Except as set forth on Schedule 4.16, there are no Wells located on the Leases that: (i) LEP is currently obligated by law or contract to plug and abandon; or (ii) to the Knowledge of LEP have been plugged and abandoned in a manner not in substantial compliance with all applicable requirements of regulatory authority having jurisdiction thereof.

4.17         Non-Consent Operations. Except as set forth on Schedule 4.17, LEP has not elected not to participate in any operation or activity proposed with respect to the Assets which could result in any of LEP’s interest in such Assets becoming subject to a penalty or forfeiture as a result of such election not to participate in such operation or activity.

4.18         Bankruptcy. There are no bankruptcy, reorganization, or receivership proceedings pending, being contemplated by, or, to LEP’s Knowledge, threatened against LEP (whether by LEP or a third person). Immediately prior to, and immediately subsequent to, the Closing, (a) LEP will not have incurred, nor does it intend to or believe that it will incur, debts (including contingent obligations) beyond its ability to pay such debts as such debts mature or come due (taking into account the timing and amounts of cash to be received from any source, and amounts to be payable on or in respect of debts), (b) the amount of cash available to LEP after taking into account all other anticipated uses of funds is anticipated to be sufficient to pay all such amounts on or in respect of debts, when such amounts are required to be paid, and (c) LEP will have sufficient capital with which to conduct its business.

4.19         Hedges; Bonds and Credit Support. There are no futures, options, swaps, or other derivatives with respect to the sale of Hydrocarbons from the Assets that will be binding on the Assets after Closing. Schedule 4.19 lists all bonds, letters of credit and other similar credit support instruments maintained by LEP and its affiliates with any Governmental Authority or other third person with respect to the Assets.

4.20         Investment Intent. LEP is receiving the Stock Consideration for its own account and not with a view to their sale or distribution in violation of the Securities Act of 1933, as amended, the rules and regulations thereunder, any applicable state blue sky Laws, or any other applicable securities Laws.  LEP has such knowledge and experience in financial and business matters, including business experience in private investments, so as to be capable of evaluating and understanding, and has evaluated and understood, the merits and risks of an investment in EHR and receipt of the Stock Consideration, and LEP has been given the opportunity (i) to obtain information and to examine all documents relating to EHR and EHR’s business, (ii) to ask questions of, and to receive answers from, EHR concerning EHR’s business, and (iii) to obtain any additional information, to the extent EHR possesses such information or could acquire such information without unreasonable effort or expense, necessary to verify the accuracy of any information previously furnished.  LEP is relying solely on LEP’s own decision or the advice of LEP’s own advisers with respect to an investment in EHR and the Stock Consideration, and has neither received nor relied on any communication from EHR, EHR’s directors or officers or EHR’s agents regarding any legal, investment or tax advice relating to contribution of the Assets and the receipt of the Stock Consideration.

 

4.21         Disclaimer of Warranties. Other than the representations and warranties expressly set out in this Agreement and the Special Warranty of title set forth in the Assignment to be delivered at Closing, LEP expressly disclaims any and all representations or warranties with respect to the Assets, and EHR agrees that the Assets are being sold by LEP and accepted by EHR “as is” and “where is”, with all faults. Specifically as a part of (but not in limitation of) the foregoing, except as expressly set forth in this Agreement, EHR acknowledges that, with the exception of the representations and warranties expressly set out in this Agreement and the Special Warranty of title set forth in the Assignment to be delivered at Closing, LEP has not made, and LEP expressly disclaims, any representation or warranty (express, implied, under common law, by statute or otherwise) as to the title or condition of the Assets (INCLUDING ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS). OTHER THAN THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET OUT IN THIS AGREEMENT OR THE SPECIAL WARRANTY OF TITLE SET FORTH IN THE ASSIGNMENT TO BE DELIVERED AT CLOSING, LEP MAKES NO REPRESENTATION OR WARRANTY AS TO (I) THE AMOUNT, VALUE, QUALITY, QUANTITY, VOLUME, OR DELIVERABILITY OF ANY HYDROCARBON OR OTHER MINERALS OR RESERVES (IF ANY) IN, UNDER, OR ATTRIBUTABLE TO THE PROPERTIES, (II) THE PHYSICAL, OPERATING, REGULATORY COMPLIANCE, SAFETY, OR ENVIRONMENTAL CONDITION OF THE PROPERTIES, BOTH SURFACE AND SUBSURFACE, INCLUDING MATTERS RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS MATERIALS, SOLID WASTES, ASBESTOS OR NATURALLY OCCURRING RADIOACTIVE MATERIALS (“NORM”), OR (III) THE GEOLOGICAL OR ENGINEERING CONDITION OF THE PROPERTIES OR ANY VALUE THEREOF. OTHER THAN THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET OUT IN THIS AGREEMENT OR IN ANY CERTIFICATE DELIVERED BY LEP PURSUANT HERETO OR THE SPECIAL WARRANTY OF TITLE SET FORTH IN THE ASSIGNMENT, LEP MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, STATUTORY, OR IMPLIED, AS TO (A) THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA, INFORMATION, OR RECORDS FURNISHED TO EHR IN CONNECTION WITH THE PROPERTIES OR OTHERWISE CONSTITUTING A PORTION OF THE PROPERTIES; (B) THE CONTENT, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY THIRD PARTIES; (C) THE PRESENCE, QUALITY, AND QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE PROPERTIES;  (D)  THE     ABILITY     OF     THE     PROPERTIES     TO     PRODUCE HYDROCARBONS, INCLUDING PRODUCTION RATES, DECLINE RATES, AND RECOMPLETION OPPORTUNITIES; (E) IMBALANCE OR PAYOUT ACCOUNT INFORMATION, ALLOWABLES, OR OTHER REGULATORY MATTERS; (F) THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS, OR PROFITS, IF ANY, TO BE DERIVED FROM THE PROPERTIES; (G) THE ENVIRONMENTAL CONDITION OF THE PROPERTIES; (H) ANY PROJECTIONS AS TO EVENTS THAT COULD OR COULD NOT OCCUR; AND (I) ANY OTHER MATTERS CONTAINED IN OR OMITTED FROM ANY INFORMATION OR MATERIAL FURNISHED TO EHR BY LEP OR OTHERWISE CONSTITUTING A PORTION OF THE PROPERTIES. OTHER THAN THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET OUT IN THIS AGREEMENT OR THE ASSIGNMENT TO BE DELIVERED BY LEP PURSUANT HERETO, ANY DATA, INFORMATION, OR OTHER RECORDS FURNISHED BY LEP ARE PROVIDED TO EHR AS A CONVENIENCE AND EHR’S RELIANCE ON OR USE OF THE SAME IS AT EHR’S SOLE RISK.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF EHR

As of the date of this Agreement and as of Closing, EHR makes to LEP the following representations and warranties:

5.1           Organization and Capitalization. EHR is duly incorporated, validly existing and in good standing under the laws of the state of Delaware. EHR is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its business as now conducted makes such qualification necessary, except where the failure to be so qualified or in good standing would not have a material adverse effect on the assets, business, operations, prospects or condition (financial or otherwise) of EHR and its subsidiaries taken as a whole or materially hinder or impede the consummation by EHR of the transactions contemplated by this Agreement (a “Material Adverse Effect”).  The current capitalization of EHR is as follows:  (a) 500,000,000 shares of common stock authorized, 991,228 shares of common stock issued and outstanding as of the date of this Agreement; (b) 10,000,000 shares of preferred stock authorized, none designated or issued or outstanding as of the date of this Agreement; (c) $3,000,000 aggregate principal amount of Senior Secured Convertible Notes outstanding as of the date of this Agreement; and (d) $525,000 Pre-Paid Warrants outstanding as of the date of this Agreement.  Other than as set forth in (a), (b), (c), or (d) (including outstanding shares of common stock under restricted stock awards issued pursuant to the 2016 Omnibus Incentive Plan  as of the date of this Agreement, (i) there are no outstanding options, warrants, subscriptions, puts, calls or other rights, agreements, arrangements or commitments obligating EHR to offer, issue, sell, redeem, repurchase, otherwise acquire or transfer, pledge or encumber any equity interest in EHR; (ii) there are no outstanding securities or obligations of any kind of EHR that are convertible into or exercisable or exchangeable for any equity interest in EHR, and EHR does not have any obligation of any kind to issue any additional securities or to pay for or repurchase any securities; (iii) there are not outstanding any equity appreciation rights, phantom equity, profit sharing or similar rights, agreements, arrangements or commitments based on the value of the equity, book value, income or any other attribute of EHR; (iv) there are no outstanding bonds, debentures or other evidence of indebtedness of EHR having the right to vote (or that are exchangeable for or convertible or exercisable into securities having the right to vote) with the holders of equity interests in EHR on any matter; and (v) except as disclosed in any Offering Statement (as defined below) there are no stockholder agreements, proxies, voting trusts, rights to require registration under securities laws or other arrangements or commitments to which EHR is a party or by which any of its securities are bound with respect to the voting, disposition or registration of any outstanding securities of EHR.  EHR does not own any equity interests in any other person other than wholly owned subsidiaries.  Each of the subsidiaries of EHR is duly formed, validly existing and in good standing (where applicable) under the laws of the state of its formation.  Each of the subsidiaries of EHR is duly qualified to do business and is in good standing in each jurisdiction in which the nature of its business as now conducted makes such qualification necessary, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.

 

5.2           Existence and Power.  EHR has the power and is authorized to enter into and perform this Agreement and the transactions contemplated by this Agreement.  The execution, delivery and performance of this Agreement by EHR, and the transactions contemplated by this Agreement, will not violate (a) any provision of the organizational documents of EHR, (b) any material agreement or instrument to which EHR is a party or by which EHR is bound, (c) any judgment, order, ruling, or decree applicable to EHR as a party in interest, or (d) any law, rule or regulation applicable to EHR.  This Agreement constitutes a legal, valid and binding obligation of EHR, enforceable in accordance with its terms.

5.3           Brokers.  EHR has incurred no obligation or liability for brokers’ or finders’ fees relating to the matters provided for in this Agreement which will be the responsibility of LEP, and any such obligation or liability that might exist shall be the sole obligation of EHR.

5.4           Claims and Litigation.  There are no legal or administrative proceedings, claims or investigations pending or, to the best of EHR’s knowledge, threatened before any court or administrative body against EHR or its subsidiaries which would reasonably be expected to have a Material Adverse Effect.

5.5           Qualified Leaseholder and Investor. EHR shall be, at Closing, and thereafter shall continue to be, to  the  extent  applicable  to  the  Assets,  qualified  to  own  and  assume operatorship of federal and state oil, gas and mineral leases in all jurisdictions where the Assets to be transferred to it are located, and the consummation of the transactions contemplated under this Agreement will not cause EHR to be disqualified as such an owner or operator. To the extent required by the applicable law, EHR currently has, and will continue to maintain lease bonds, area-wide bonds or any other surety bonds as may be required by, and in accordance with, such state or federal regulations governing the ownership and operation of the Assets. EHR is an experienced and knowledgeable investor in the oil and gas business.  Prior to entering into this Agreement, EHR was advised by and has relied solely on its own legal, tax and other professional counsel concerning this Agreement, the Assets and the value thereof.  In making the decision to enter into this Agreement and consummate the transactions contemplated hereby, EHR has relied solely on the basis of its own independent valuation and due diligence investigation of the Assets.  EHR acknowledges that it has conducted to its satisfaction an independent investigation of the Assets and the financial condition, operations, assets, liabilities and properties of LEP. In making its determination to proceed with the Transaction, EHR has relied on (a) the results of its own independent investigation and (b) the representations and warranties of LEP expressly and specifically set forth in this Agreement, including the Schedules attached hereto, and the Special Warranty to be contained in the Assignment. EHR AGREES THAT SUCH REPRESENTATIONS AND WARRANTIES BY LEP CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF LEP TO EHR IN CONNECTION WITH THE TRANSACTION, AND EHR UNDERSTANDS, ACKNOWLEDGES, AND AGREES THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE EXPRESS OR IMPLIED (INCLUDING, BUT NOT LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION, RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OR PROSPECTS OF LEP AND THE ASSETS) ARE SPECIFICALLY DISCLAIMED BY LEP AND EHR HAS NOT RELIED UPON ANY SUCH DISCLAIMED REPRESENTATIONS AND WARRANTIES.

 

5.6           Stock Consideration. The Stock Consideration has been duly authorized and, when issued and paid for as set forth herein at Closing, will be duly and validly issued, fully paid and non-assessable, free and clear of all liens, other than restrictions on transfer under applicable securities laws.  As of the date hereof, EHR has reserved from its duly authorized capital stock the shares of common stock issuable as Stock Consideration pursuant to this Agreement.

5.7           Investment Intent. EHR is acquiring the Assets for its own account and not with a view to their sale or distribution in violation of the Securities Act of 1933, as amended, the rules and regulations thereunder, any applicable state blue sky Laws, or any other applicable securities Laws.

5.8           Financing of Cash Consideration. After giving effect to the completion of an offering with gross proceeds to EHR of no less than $35 million (the “Offering”) on Form 1-A under Regulation A as promulgated under the Securities Act of 1933, as amended (the “Securities Act”), EHR will have sufficient cash and other sources of immediately available funds, as are necessary in order to pay the Cash Consideration as provided in this Agreement.

5.9           Offering.  Any offering statement on Form 1-A, including all information deemed to be a part of the offering statement pursuant to incorporation by reference or otherwise or omitted from the offering circular pursuant to Rule 253(b) of Regulation A under the Securities Act, relating to the Offering (the “Offering Statement”), will be qualified under the Securities Act.  The Offering Statement does not and will not, as of its date, as of the date of any amendment or supplement thereto, and as of the Closing Date, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, provided, however, that EHR will not be responsible for any untrue statement of a material fact or omission to state a material fact which arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission made in the Offering Statement, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to EHR, by or through LEP or its Affiliates, specifically for use therein. The financial statements, including the notes thereto, included in the Offering Statement present fairly the financial position of the Company as of the dates indicated and the results of operations and changes in financial position and cash flows of the Company for the periods specified; and such financial statements have been or will be prepared in conformity with generally accepted accounting principles as applied in the United States and on a consistent basis during the periods involved and in accordance with Part F/S of Regulation A.  The representations and warranties made to any underwriter in connection with the Offering shall be true and correct as of the Closing Date.

 

ARTICLE VI

PRE-CLOSING OBLIGATIONS; CONDITIONS TO CLOSING

6.1           Operations; Access. From the date of this Agreement until Closing (the “Interim Period”), LEP shall consult with EHR with respect to all material decisions to be made with respect to the Assets.  LEP shall act with respect to the Assets in good faith and in accordance with past practices and the ordinary course of business and shall exercise reasonable diligence in safeguarding and maintaining secure and confidential all geophysical and geological data and confidential reports and data in its possession relating to the Assets, and shall not transfer, sell, or otherwise dispose of any of the Assets without the express written consent of EHR other than Hydrocarbons produced from the Wells in the ordinary course of business.  From the date of this Agreement and up to and including the Closing Date (or earlier termination of this Agreement), LEP shall afford to EHRand its Affiliates and their respective officers, employees, agents, accountants, attorneys, investment bankers, consultants and other authorized representatives (the “EHR Representatives”), upon prior reasonable notice, reasonable access, during normal business hours, to the Assets and to all Records and other documents in LEP’s or its Affiliates’ possession, in each case, to the extent relating to the Assets.

6.2           Permissions; Offering.  During the Interim Period, EHR shall obtain all permissions, approvals, consents and waivers of preferential rights of purchase by third parties, federal, state and local governmental authorities and others as may be required to consummate the sale contemplated by this Agreement (excluding governmental permissions, approvals, and consent which are customarily obtained after assignment of an oil and gas interest.)  EHR shall use its commercially reasonable efforts to consummate the Offering as promptly as practicable after the date of this Agreement, and in any event prior to the Termination Date.  LEP agrees to provide such assistance in connection with required information for the Offering as is reasonably requested by the EHR.  EHR shall be responsible for all costs and expenses, including, without limitation, fees and disbursements of financial advisors and accountants, incurred in connection with the Offering, and EHR agrees to advance payment or promptly reimburse LEP for any out-of-pocket costs and expenses incurred by LEP in connection with the Offering, including any accounting, petroleum reserve engineer or legal fees.

 

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

(a)           The representations and warranties of EHR set forth in Article V shall be true and correct in all material respects (and in all respects in the case of representations and warranties qualified by materiality or material adverse effect) as of the date hereof and as of the Closing Date as though made on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and accurate as of such specified date);

(b)           EHR shall have performed and observed, in all material respects (and in all respects in the case of any covenants and agreements qualified by materiality or material adverse effect), all covenants and agreements to be performed or observed by EHR under this Agreement prior to or on the Closing Date;

(c)           On the Closing Date, no injunction, order or award restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement, or granting substantial damages in connection therewith, shall have been issued and remain in force, and no suit, action, or other proceeding (excluding any such matter initiated by EHR or its affiliates) shall be pending or threatened in writing before any Governmental Authority or body of competent jurisdiction seeking to enjoin or restrain or otherwise prohibit the consummation of the transactions contemplated by this Agreement or recover damages from LEP or any affiliate of LEP resulting therefrom;

(d)           EHR shall have delivered or be prepared to deliver all of the deliverables EHR is required to deliver pursuant to Section 7.2.

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

(a)           An Offering with gross proceeds to EHR of no less than $35 million and net proceeds of not less than $32 million shall have been consummated by EHR, and in connection therewith, (i) each outstanding Pre-paid Common Stock Warrant of the Company shall have been exchanged in accordance with its terms and (ii) each outstanding Amended and Restated 10.00% Senior Secured Promissory Note shall have been repaid or converted in accordance with its terms;

(b)           The representations and warranties of LEP set forth in Article IV shall be true and correct as of the date hereof and as of the Closing Date as though made again on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct as of such specified date), except where the failure to be so true and correct, individually or in the aggregate, has not had, or would not reasonably be expected to have, a material adverse effect;

 

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

(d)           On the Closing Date, no injunction, order or award restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated by this Agreement, or granting substantial damages in connection therewith, shall have been issued and remain in force, and no suit, action, or other proceeding (excluding any such matter initiated by EHR or any of its affiliates) shall be pending or threatened in writing before any Governmental Authority or body of competent jurisdiction seeking to enjoin or restrain or otherwise prohibit the consummation of the transactions contemplated by this Agreement or recover substantial Damages from EHR or any affiliate of EHR resulting therefrom; and

(e)           LEP shall have delivered or be prepared to deliver all of the deliverables LEP is required to deliver pursuant to Section 7.2.

ARTICLE VII

CLOSING

7.1           Time and Place of Closing.  The consummation of the transactions contemplated by this Agreement (the “Closing”) shall be held within three Business Days of the satisfaction or waiver by the appropriate Party of the conditions set forth in Sections 6.3 and 6.4 (the “Closing Date”), at the offices of Nance & Simpson, LLP, 2603 Augusta, Suite 1000, Houston, Texas, or at such other time and place as the Parties agree, or if mutually agreeable among the Parties.  Closing may occur by mail or electronic delivery of scanned documents as mutually agreed to by the Parties and their respective counsel.

7.2           Closing Obligations.  At the Closing,

(a)           LEP and EHR shall execute, acknowledge and deliver an assignment and bill of sale in substantially the form of Exhibit C, which will convey title to the Assets to EHR, and deliver possession thereof to EHR.

(b)           LEP and EHR shall execute such other instruments, including change of operator forms and letters-in-lieu, and take such other action as may be necessary or advisable to carry out their respective obligations under this Agreement.

(c)           LEP shall deliver to EHR:

(i)          originals or legible copies of the Records;

(ii)         a non-foreign entity affidavit in the form of Exhibit D;

 

(iii)        assignments in form required by any Governmental Authority for the assignment of any Assets controlled by such governmental Authority, duly executed by LEP, in sufficient duplicate originals to allow recording and filing in all appropriate offices;

(iv)        any other forms required by any Governmental Authority relating to the assignments of the Assets; and

(v)         appropriate change of operator forms (including Texas Railroad Commission Form P-4s) for the Assets operated by LEP or its affiliates, designating EHR as operator of such Assets, duly executed by LEP or its applicable affiliate.

(d)           EHR shall pay or deliever the following:

(i)          pay the Cash Consideration to LEP in immediately available wire-tranfer funds;

(ii)         deliver to LEP a copy of the completed the Phase I report;

(ii)         deliver the Stock Consideration to LEP (or its permitted assignees); and

(iv)        execute and deliver to LEP (or its permitted assignees) the Registration Rights Agreement (in the form attached hereto as Exhibit E).

7.3           Right of Termination.  The following applies to the termination of this Agreement:

(a)           This Agreement and the transactions contemplated hereby may be completely terminated at any time at or prior to the Closing:

(i)          at any time by mutual written consent of the Parties;

(ii)         by LEP, by written notice to the EHR, if the Closing shall not have occurred on or before September 30, 2017, unless the failure of Closing to occur by such date was by reason of the material breach of this Agreement by LEP; or

(iii)        by either Party, by written notice to the other, if the aggregate sum of (A) all Title Defect Amounts, (B) Environmental Defect Amounts, and (C) the Allocated Value of any Assets destroyed by fire or other casualty or taken in condemnation or under right of eminent domain, collectively, exceeds $1,075,000.

 

(b)           In the event of the termination of this Agreement as provided above in Section 7.3(a), the Parties shall have no further obligations to one another and this Agreement shall be deemed null and void, save and except that (i) EHR shall deliver to LEP,  within 5 Business Days after the date this Agreement is terminated, (i) legible copies of all written and physical materials, maps, reports, well logs, reserve analysis, appraisals, and data of any kind or nature attributable or related, directly or indirectly, to the “San Andres Properties” that were to be acquired from LEP under this Agreement or any other such properties located in the Texas counties of Cochran, Hockley and/or Yoakum possessed by EHR or any of its Affiliates or representatives (the “San Andres Data”), (ii) electronic copies of all electronic forms of the San Andres Data held by EHR or any of its Affiliates or representatives in electronic format.  This Section 7.3(b) shall survive termination of this Agreement and (iii) EHR shall remain liable and obligated for its obligations of indemnity under Section 3.4 of this Agreement.

ARTICLE VIII

POST-CLOSING OBLIGATIONS AND COVENANTS

8.1           Indemnity.  If the Closing occurs, (a) EHR assumes all obligations that are attributable to the Assets on or after the Effective Time and all obligations to properly plug and abandon all wells now or hereafter located on the lands covered by the Leases, (b) EHR shall indemnify, defend and hold harmless LEP from and against any and all claims, liabilities, losses, costs and expenses (including court costs and reasonable attorneys’ fees) that are attributable to the Assets on or after the Effective Time, and any breach of any representation, warranty or covenant made by EHR in this Agreement, and (c) LEP shall indemnify, defend and hold harmless EHR from and against any and all claims, liabilities, losses, costs and expenses (including court costs and reasonable attorneys’ fees) that are attributable to the Assets before the Effective Time (other than plugging and abandoning all wells now or hereafter located on the lands covered by the Leases), and any breach of any representation, warranty or covenant made by LEP in this Agreement.

8.2           Post-Closing Settlement Statement.  Within sixty (60) days following Closing, LEP shall prepare and deliver to EHR a final, post-closing settlement statement consistent with the provisions of Sections 1.4 and 2.1.  Such post-closing settlement statement shall include but not be limited to the sale proceeds received by LEP from the sale of all Hydrocarbons (described in Section 1.2(g)) and operating expenses paid by LEP (if any), if any, that are applicable to pre-Effective Time periods.  EHR and LEP will in good faith negotiate to resolve all disputes associated with the post-closing settlement statement within ninety (90) days following Closing, and any adjustments from the Contribution Value paid at Closing shall be paid to the appropriate Party by the obligated Party.

8.3           Cooperation.  After Closing, LEP and EHR agree to take such further actions and to execute, acknowledge and deliver all such further documents that are necessary or useful in carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.

 

8.4           Survival.

 

(a)           The representations and warranties of the Parties contained in this Agreement shall survive the Closing and shall remain in effect thereafter for the period that an Indemnified Party is entitled to indemnification as provided below in this Article VIII.

(b)           No Party shall have any indemnification obligation pursuant to this Article XII or otherwise in respect of any representation, warranty or covenant unless (i) the Party seeking indemnification gives written notice of the existence of the claim for which indemnification is being sought to the Indemnifying Party and (ii) if applicable, such notice is given on or before the expiration of the applicable survival period (the “Indemnity Notice”). Such Indemnity Notice shall set forth with reasonable specificity (A) the basis under this Agreement, and the facts that otherwise form the basis of such claim, (B) the estimate of the amount of such claim (which estimate shall not be conclusive of the final amount of such claim) and an explanation of the calculation of such estimate, including a statement of any significant assumptions employed, and (C) the date on and manner in which the Party delivering such notice became aware of the existence of such claim.

8.5           LEP’s Indemnification Obligations. LEP shall indemnify, defend and hold harmless EHR from and against any and all claims, liabilities, losses, costs and expenses (including court costs and reasonable attorneys’ fees) that are attributable to the Assets before the Effective Time (other than plugging and abandoning all wells now or hereafter located on the lands covered by the Leases), and any breach of any representation, warranty or covenant made by LEP in this Agreement, provided, however, that LEP’s indemnification obligations for such breaches shall expire on the 180th day immediately following the Closing Date and LEP shall have no obligation or liability to indemnify EHR under this Agreement except to the extent the actual damages sustained by EHR by reason of such breach exceed $210,000.00 and once the amount of EHR’s actual damages exceeds $210,000.00, LEP shall be obligated to indemnify EHR only for the amount of EHR’s actual damages in excess of $210,000.00 up to but not exceeding $1,050,000.00.

8.6           Indemnification Exclusive Remedy. Notwithstanding anything to the contrary contained in this Agreement, Article VIII of this Agreement contains the Parties’ exclusive remedy against each other following the Closing with respect to breaches of this Agreement, including breaches of the representations and warranties contained in Articles III, IV and V, the covenants and agreements that survive Closing pursuant to the terms of this Agreement and the affirmations of such representations, warranties, covenants and agreements contained in documents executed at Closing, as applicable.

8.7           Limited to Actual Damages. The indemnification obligations of the Parties pursuant to this Article VIII shall be limited to actual damages of the Party, as the case may be, and shall not include any incidental, consequential, indirect, punitive, or exemplary damages.

 

8.8           Closing Over Breaches or Unsatisfied Conditions.  Notwithstanding anything to the contrary contained in this Agreement, if there is a failure of any condition to be satisfied in favor of EHR or if there is a breach of any representation or warranty or covenant of LEP to EHR’s knowledge (meaning actual knowledge after due investigation and inquiry) and EHR elects to proceed with the Closing, then, except to the extent such failure or breach is described in a written notice given by EHR to LEP prior to the Closing Date, the condition that is unsatisfied or the representation, warranty or covenant that is breached at the Closing Date will be deemed waived by EHR, and, absent a written waiver, the terms of which shall govern, EHR will be deemed to fully release and forever discharge LEP on account of any and all liabilities with respect to the same, including any claims for indemnification hereunder or under the Special Warranty, and EHR agrees not to make, file or bring any claim with respect to such released liabilities.

8.9           Post-Closing Obligations Relating to the Stock Consideration.

(a)           Stock Consideration may only be disposed of by LEP (or its permitted assignees) in compliance with state and federal securities laws.

(b)           Certificates evidencing the Shares will contain the following legend, until such time as they are not required under Section 8.8(c):

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.  THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

(c)           Certificates evidencing the Stock Consideration shall not contain any legend (including the legend set forth in Section 8.8(b)): (i) following a sale of such Stock Consideration pursuant to an effective registration statement, or (ii) following a sale of such Stock Consideration pursuant to Rule 144 of the Securities Act (assuming the transferor is not an affiliate of EHR), or (iii) while such Stock Consideration is eligible for sale under Rule 144(b)(1).

(d)           EHR shall use commercially reasonable efforts to file a registration statement under the Securities Act within 180 days of the Closing Date registering the Stock Consideration, provided, however, that such timeline shall be subject to adjustment due to any lock-up or other contractual agreements made with the underwriters in connection with the Offering.

 

ARTICLE IX

TAXES

9.1           Ad Valorem and Property Taxes.  All ad valorem taxes, real property taxes, personal property taxes, and similar obligations relating to the Assets (collectively “Property Taxes”) with respect to tax periods prior to the Effective Time, shall be apportioned to LEP and all other tax periods from Effective Time forward shall be apportioned to EHR.

9.2           Sales Taxes.  EHR shall pay sales taxes or other transfer taxes, if any, in connection with the sale of the Assets.  EHR shall be responsible for any applicable conveyance, transfer and recording fees, and real estate transfer stamps or taxes imposed on the transfer of the Assets pursuant to this Agreement.

9.3           Other Taxes.  All production, severance, excise and other taxes (other than income taxes, which shall be the sole responsibility of each Party as to their own income taxes) relating to production of oil, gas and condensate attributable to the Assets prior to the Effective Time shall be paid by LEP, and all such taxes relating to such production on or after the Effective Time shall be paid by EHR.

9.4           Like-Kind Exchange.  EHR agrees to cooperate (at no additional cost to EHR) with LEP so that LEP’s transfer of the Assets to EHR shall, at LEP’s election, be accomplished in a manner enabling the transfer of all or part of the Assets to qualify as a part of a like-kind exchange of property by LEP within the meaning of Section 1031 of the Code. If LEP so elects, EHR shall reasonably cooperate with LEP to effect such like-kind exchange, which cooperation shall include, without limitation, taking such actions as LEP reasonably requests in order to pay the Cash Consideration in a manner which enables such transfer to qualify as part of a like-kind exchange of property within the meaning of Section 1031 of the Code, and EHR agrees that LEP may assign all or a portion of its rights (but not its obligations) under this Agreement to a qualified intermediary as defined in the Treasury Regulations, to qualify the transfer of the Cash Consideration as a part of a like-kind exchange of property within the meaning of Section 1031 of the Code.

ARTICLE X

MISCELLANEOUS

10.1         Entire Agreement.  This Agreement, including Exhibits A through E, attached hereto and incorporated herein, constitutes the entire agreement between the Parties as to the subject matter of this Agreement and supersedes all prior agreements, understandings, negotiations and discussions of the Parties, whether oral or written.  No supplement, amendment, alteration, modification or waiver of this Agreement shall be binding unless executed in writing by the Parties.

 

10.2         References.  All references in this Agreement to articles, sections and other subdivisions refer to corresponding articles, sections and other subdivisions of this Agreement unless expressly provided otherwise.  Titles appearing at the beginning of any of such subdivisions are for convenience only and shall not constitute part of such subdivisions and shall be disregarded in construing the language contained in such subdivisions.  The words “this Agreement,” “this instrument,” “herein,” “hereof,” “hereby,” “hereunder,” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited.  Pronouns in masculine, feminine, and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.  All references to “$” or “dollars” are references to United States dollars. Derivatives and other forms of the terms defined in this Agreement shall have meanings consistent with the definitions herein provided.  The term “including” (or “included”) shall be deemed to be followed by the phrase “but not limited to.”  Unless otherwise expressly provided herein, any reference herein to a “day” shall refer to a calendar day.  Time is of the essence of this Agreement. Except as expressly provided otherwise in this Agreement, references to any Law or agreement means such Law or agreement as it may be amended from time to time.  References to any date shall mean such date in Dallas, Texas and for purposes of calculating the time period in which any notice or action is to be given or undertaken hereunder, such period shall be deemed to begin at 12:01 a.m. on the applicable date in Dallas, Texas.  The word “extent” in the phrase “to the extent” shall mean the degree or proportion to which a subject or other thing extends, and such phrase shall not mean simply “if”. The term “Business Day” shall mean any day other than a Saturday, a Sunday or a day on which banks in Houston, Texas or Dallas, Texas are authorized or obligated by Law to close.

10.3         Assignment.  No Party shall assign all or any part of this Agreement, nor shall any Party assign or delegate any of its rights or duties hereunder, without the prior written consent of the other Party and any assignment made without such consent shall be void; provided, notwithstanding the foregoing, LEP shall be entitled to assign its rights to receive the Stock Consideration at Closing to its members subject to Section 8.9.  Subject to this Section 11.3, this Agreement shall be binding upon and inure to the benefit of the Parties and their respective permitted successors, assigns and legal representatives.

10.4         Governing Law; Venue; Waiver of Jury Trial.  THIS AGREEMENT AND THE LEGAL RELATIONS AMONG THE PARTIES SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION.  ALL OF THE PARTIES HERETO CONSENT TO THE EXERCISE OF JURISDICTION IN PERSONAM BY THE COURTS OF THE STATE OF TEXAS FOR ANY ACTION ARISING OUT OF THIS AGREEMENT.  ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE EXCLUSIVELY LITIGATED IN COURTS HAVING SITUS IN HARRIS COUNTY, TEXAS.  EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

10.5         Specific Performance. Notwithstanding anything in this Agreement to the contrary, the parties hereby acknowledge and agree that the failure of any party to perform its agreements and covenants hereunder, including its failure to take all actions as are necessary on its part to the consummation of the transactions contemplated hereby, will cause irreparable injury to the other parties, for which damages, even if available, will not be an adequate remedy. Accordingly, each party hereby consents to the issuance of injunctive relief by any court of competent jurisdiction to compel performance of such party’s obligations and to the granting by any court of the remedy of specific performance of its obligations hereunder, without bond or other security being required, this being in addition to any other remedy to which they are entitled at law or in equity.

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

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

10.8         Allocation of Contribution Value. Schedule 1.7 sets forth the allocation of the Contribution Value and any other items constituting consideration for applicable income tax purposes (to the extent known at such time) among the Assets in accordance with Section 1060 of the Code (and the Treasury Regulations promulgated thereunder). LEP and EHR agree to amend Schedule 1.7 to reflect adjustments to the Contribution Value and to report the transactions contemplated by this Agreement consistently with Schedule 1.7, as adjusted by the Parties, on any tax return, including Internal Revenue Service Form 8594, and will not assert, and will cause their affiliates not to assert, in connection with any tax audit or other proceeding with respect to taxes, any asset values or other items inconsistent with the amounts set forth on Schedule 1.7 except with the written agreement of the other Parties or as required by applicable law.

10.9         Notices.  Any notice required or permitted by this Agreement shall be given in writing by personal service, overnight delivery service, email, or by certified mail, return receipt requested, postage prepaid, as follows:

 

If to LEP:

Lubbock Energy Partners LLC

1616 S. Voss Road, Suite 530

Houston, TX 77057

Attention: John A. Weinzierl

Email: johnw@katlaenergy.com

With copy to:

Lubbock Energy Operating LLC

5065 Westheimer, Suite 625

Houston, TX 77056

Attn: Wallis Marsh

Email: wmarsh@extex.net

Nance & Simpson, LLP

2603 Augusta, Suite 1000

Houston, TX 77057

Attn: Glynn D. Nance, Jr.

Email: gnance@nancesimpson.com

Andrews Kurth Kenyon LP

600 Travis, Suite 4200

Houston, TX  77002

Attn: David Buck

Email: dbuck@andrewskurth.com

If to EHR:

Energy Hunter Resources, Inc.

P.O. Box 540308

Dallas, TX  75354

Attention:  Gary C. Evans, CEO

Email: gevans@energyhunter.energy

With a copy to:

Duane Morris LLP

1037 Raymond Blvd

Newark, NJ  07102-5429

Attention: Dean Colucci

Email:  dmcolucci@duanemorris.com

(or such other address as designated in writing by either Party to the other) and shall be deemed to have been given as of the date of receipt by the intended Party.

 

10.10       Confidentiality. LEP and EHR each acknowledge that confidential information of the other may be disclosed to, made available to, or otherwise obtained by such Party (in its capacity as the recipient of such confidential information, the “Receiving Party”), whether prior to or after the date of this Agreement. Receiving Party may disclose such information to its affiliates and to its and their respective directors, officers, employees, agents, representatives, consultants, contractors, attorneys, advisors, lenders (current and prospective) and investors (current and prospective) who need to know such information for the purpose of aiding such Party in the transactions contemplated hereby or matters relating thereto; provided, however, that, subject to the remainder of this Section 10.10, until the first to occur of the one year anniversary of the Closing or the one year anniversary of the termination of this Agreement, Receiving Party agrees to maintain (and to cause its affiliates, and its and their respective directors, officers, employees, agents, representatives, consultants, contractors, attorneys, advisors, lenders and investors, to maintain) all information made available to it pursuant to this Agreement confidential, except to the extent such information (a) is or becomes generally available to the public other than as a result of a breach by Receiving Party of this Section 10.10, (b) was (or becomes) available to Receiving Party (or its affiliates, or its or their respective directors, officers, employees, agents, representatives, consultants, advisors, lenders and investors) on a non-confidential basis prior to its disclosure to Receiving Party, (c) is required by applicable securities or other laws or the applicable rules of any stock exchange having jurisdiction over the Receiving Party or its affiliates, to be disclosed, (d) is required, by deposition, interrogatories, requests for information or documents in legal or regulatory proceedings, subpoena, civil investigative demand or other similar process or law to be disclosed (provided that Receiving Party shall, if not prohibited by law, provide disclosing Party with prompt written notice of any such request or requirement so disclosing Party may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Section 10.10) or (e) as may be required or permitted pursuant to the exercise of the rights and fulfillment of the obligations of a Party under this Agreement. Notwithstanding anything to the contrary in the foregoing provisions of this Section 10.10, (y) where EHR is the Receiving Party, information included in or related to the Assets transferred to EHR at Closing shall not constitute confidential information as to EHR, provided, however, that until one year after the Closing, LEP shall be subject to the non-disclosure provisions contained herein with respect to such information as if LEP was the Receiving Party of such information and (z) in the event that this Agreement is terminated without the occurrence of Closing, any information received by LEP as a Receiving Party with respect to the Assets shall not constitute confidential information effective as of the date of the termination of this Agreement.

10.11       Press Release.  Notwithstanding the provisions of Section 10.10, EHR shall be permitted to issue a press release regarding the transactions contemplated hereby upon execution of this Agreement, subject to the consent of LEP, such consent not to be unreasonably withheld.

 

10.12       Non-binding Mediation; Prevailing Party.

 

(a)           Non-binding Mediation.  Any controversy, dispute or claim arising out of this Agreement or any other documents executed at Closing shall first be submitted to non-binding mediation prior to the filing of any litigation to resolve such controversy, dispute or claim.  Both parties shall share equally in the expense of such mediation in which a non-interested mediator shall serve to facilitate the resolution of the dispute.  If such controversy, dispute or claim cannot be settled or resolved by non-binding mediation, either party may then submit such dispute for resolution by a court in keeping with Section 10.4 of this Agreement.

(b)           Prevailing Party. If any litigation or other court action, arbitration or similar adjudicatory proceeding is commenced by any party hereto to enforce its rights under this Agreement against any other party, all fees, costs and expenses, including, without limitation, reasonable attorneys’ fees and court costs, incurred by the prevailing party in such litigation, action, arbitration or proceeding shall be reimbursed by the losing party; provided, that if a party to such litigation, action, arbitration or proceeding prevails in part, and loses in part, the court, arbitrator or other adjudicator presiding over such litigation, action, arbitration or proceeding shall award a reimbursement of the fees, costs and expenses incurred by such party on an equitable basis.

[Signature Page Follows]

 

IN WITNESS WHEREOF, EHR and LEP have executed and delivered this Agreement effective as of the Effective Time.

LEP:

LUBBOCK ENERGY PARTNERS LLC

EHR:

ENERGY HUNTER RESOURCES, INC.

 

Attached to and made a part of that certain Contribution and Sale Agreement dated as of July 12, 2017, by and between Lubbock Energy Partners LLC, as LEP, and Energy Hunter Resources, Inc., as EHR.

THE LEASES

 

Lessor		Lessee	Lease Date		Vol				Page				WI				Net Working Interest Acres
CUNNINGHAM														97.00	%			335.62
Leo P. Cunningham and wife, Elnora E. Cunningham		J. G. Stacy, et a	03/23/73			27				704
Elnora E. Cunningham, Individually and as Trustee of the Leo P. Cunningham Estate Trust		The Redmon Oil Company, Inc.	05/31/07			279				517
Elnora E. Cunningham, Individually and as Trustee of the Leo P. Cunningham Estate Trust		The Redmon Oil Company, Inc.	01/03/08			283				179
DEAN UNIT														100.00	%			1,120.00
Carrie Slaughter Dean		Honolulu Oil Corporation	01/03/39			2				350

DEAN 'B' UNIT														100.00	%			5,333.64
Carrie Slaughter Dean		P. N. Wiggins, Jr.	05/31/37			1				625
Carrie Slaughter Dean		P. N. Wiggins, Jr.	04/05/37			1				435
Carrie Slaughter Dean		Honolulu Oil Corporation	01/03/39			2				350
Carrie Slaughter Dean		E. Constantin, Jr.	11/15/51			10				571

LEAGUE 91														100.00	%			1,163.00
Carrie Slaughter Dean		P. N. Wiggins, Jr.	04/05/37			1				435

STARNES LEASE														100.00	%			191.00
Calvin R. Starnes, et al		W. W. Carter	07/01/44			4				587

STARNES 28														100.00	%			120.00
Laura M. Reed, et ux		W. L. Fetty	05/14/51			10				361
Calvin R. Starnes, Jr., et al		W. L. Fetty	05/14/51			10				366
Glenn J. Smith, et al		W. L. Fetty	05/14/51			10				537

STARNES 29														93.00	%			37.20
Calvin R. Starnes Jr., et ux		W. W. Carter	07/01/44			4				587

STARNES 34

91.00

%

509.60

American National Bank of Austin, Trustee, et al

W. B. Preston, Jr

08/29/77

29

415

Wood Oil Company, et al

Castex Energy, Inc

08/20/88

179 197

824 149 (amend)

W. F. Starnes

Castex Energy, Inc

09/06/88

179 197

829 166 (amend)

Bain Foster & Crystal Yanero Whiting

Castex Energy, Inc

08/29/88

179 197

832 170 (amend)

Calvin R. Starnes, Jr., et al

Castex Energy, Inc

08/09/88

179 197

835 170 (amend)

STARNES 35														92.00	%			147.20
Wood Oil Company, et al		Monsanto Company	01/03/76			29				475
W. F. Starnes		Monsanto Company	01/03/78			29				430
C. R. Starnes, Jr., et al		Monsanto Company	01/03/78			29				428
C. R. Starnes, Jr., et al		Monsanto Company	01/03/78			29				425

American National Bank of Austin, Trustee, et al

W. B. Preston, Jr.

08/09/77

29

415

C. R. STARNES														95.00	%			456.00
Bain Foster		The McDaniel Company	04/06/95			220				514
C. R. Starnes, III, et al		The McDaniel Company	04/06/95			219				61
C. R. Starnes, III		The McDaniel Company	04/06/95			220				522
Calvin Rhea Starnes, Jr., et al		The McDaniel Company	04/06/95			219				57
Crystal Whiting		The McDaniel Company	04/06/95			219				73
Dale J. Smith		The McDaniel Company	05/03/95			219				81
David Reed Hall No. 1 Trust		The McDaniel Company	05/03/95			220				505
Estate of Jack Carpenter Smith		The McDaniel Company	05/03/95			220				497
Estate of Mabel Clark Reed		The McDaniel Company	04/06/95			219				69
Faith Starnes		The McDaniel Company	04/06/95			220				510
Glenn A. Wright		The McDaniel Company	05/03/95			220				493
Glenn J. Smith, III		The McDaniel Company	05/03/95			220				489
Jane L. Starnes		The McDaniel Company	04/06/95			219				77
Joe W. Smith		The McDaniel Company	05/03/95			219				53
Laura Dyke Jackson		The McDaniel Company	04/06/95			220				501
Lloyd G. Wright		The McDaniel Company	05/03/95			219				41
Patience Anne Starnes		The McDaniel Company	04/06/95			220				518
Patricia L. Forgus		The McDaniel Company	05/03/95			220				485
Richard  B. Dyke Jr 1975 Trust		The McDaniel Company	04/06/95			220				782
Rita Reed George		The McDaniel Company	04/06/95			219				65
Texas Commerce Bank, Trustee of the Rita Reed George Trust 2, et al		The McDaniel Company	08/03/95			220				790
						220				798
Ruth Reed Dyke		The McDaniel Company	04/06/95			220				526
Thomas W. Young		The McDaniel Company	05/03/95			219				45
Wood Oil Company		The McDaniel Company	05/03/95			219				49

Bain Foster		The McDaniel Company	04/06/95			220				469
C. R. Starnes III		The McDaniel Company	04/06/95			220				477
C. R. Starnes, III, et al		The McDaniel Company	04/06/95			219				25
Calvin Rhea Starnes, Jr., et al		The McDaniel Company	04/06/95			219				21
Crystal Whiting		The McDaniel Company	04/06/95			219				33
Dale J. Smith		The McDaniel Company	05/03/95			219				1
David Reed Hall No. 1 Trust		The McDaniel Company	04/06/95			220				460
Estate of Jack Carpenter Smith		The McDaniel Company	05/03/95			220				452
Faith Starnes		The McDaniel Company	04/06/95			220				465
Glenn A. Wright		The McDaniel Company	05/03/95			220				448
Glenn J. Smith II		The McDaniel Company	05/03/95			220				444
Jane L. Starnes		The McDaniel Company	04/06/95			219				37
Joe W. Smith		The McDaniel Company	05/03/95			219				17
Laura Dyke Jackson		The McDaniel Company	04/06/95			220				456
Lloyd G. Wright		The McDaniel Company	05/03/95			219				5
Patience Anne Starnes		The McDaniel Company	04/06/95			220				473
Patricia L. Forgus		The McDaniel Company	05/03/95			220				440
Richard B. Dyke Jr. 1975 Trust		The McDaniel Company	04/06/95			220				786
Rita Reed George		The McDaniel Company	04/06/95			219				29
Texas Commerce Bank, Trustee of the Rita Reed George Trust 2, et al		The McDaniel Company	08/03/95			220				790
						220				798
Ruth Reed Dyke		The McDaniel Company	04/06/95			220				481
Thomas W. Young		The McDaniel Company	05/03/95			219				9
Wood Oil Company		The McDaniel Company	05/03/95			219				13

TOTAL NET MINERAL ACRES

9,413.26

Attached to and made a part of that certain Contribution and Sale Agreement dated as of July 12, 2017, by and between Lubbock Energy Partners LLC, as LEP, and Energy Hunter Resources, Inc., as EHR.

THE WELLS, INCLUDING WORKING INTERESTS

AND NET REVENUE INTERESTS

 

Lease Name	Well No.	Working Interest	NRI
DEAN UNIT	1	100.000%	79.908890%
DEAN UNIT	2W	100.000%	79.908890%
DEAN UNIT	3	100.000%	79.908890%
DEAN UNIT	4W	100.000%	79.908890%
DEAN UNIT	5	100.000%	79.908890%
DEAN UNIT	6W	100.000%	79.908890%
DEAN UNIT	7	100.000%	79.908890%
DEAN UNIT	8W	100.000%	79.908890%
DEAN UNIT	9	100.000%	79.908890%
DEAN UNIT	10W	100.000%	79.908890%
DEAN UNIT	11	100.000%	79.908890%
DEAN UNIT	12W	100.000%	79.908890%
DEAN UNIT	13	100.000%	79.908890%
DEAN UNIT	14	100.000%	79.908890%
DEAN UNIT	15W	100.000%	79.908890%
DEAN UNIT	16	100.000%	79.908890%
DEAN UNIT	17W	100.000%	79.908890%
DEAN UNIT	18	100.000%	79.908890%
DEAN UNIT	19W	100.000%	79.908890%
DEAN UNIT	20	100.000%	79.908890%
DEAN UNIT	21	100.000%	79.908890%
DEAN UNIT	22	100.000%	79.908890%
DEAN UNIT	23	100.000%	79.908890%
DEAN UNIT	25WS	100.000%	79.908890%
DEAN UNIT	26	100.000%	79.908890%
DEAN UNIT	27	100.000%	79.908890%
DEAN UNIT	28W	100.000%	79.908890%
DEAN UNIT	29	100.000%	79.908890%
DEAN UNIT	30	100.000%	79.908890%
DEAN UNIT "B"	1W	100.000%	79.3945850%
DEAN UNIT "B"	2W	100.000%	79.3945850%
DEAN UNIT "B"	2RW	100.000%	79.3945850%
DEAN UNIT "B"	3	100.000%	79.3945850%
DEAN UNIT "B"	3R	100.000%	79.3945850%
DEAN UNIT "B"	4W	100.000%	79.3945850%
DEAN UNIT "B"	5W	100.000%	79.3945850%
DEAN UNIT "B"	6W	100.000%	79.3945850%
DEAN UNIT "B"	7W	100.000%	79.3945850%
DEAN UNIT "B"	8RW	100.000%	79.3945850%
DEAN UNIT "B"	9W	100.000%	79.3945850%
DEAN UNIT "B"	10W	100.000%	79.3945850%

DEAN UNIT "B"	11W	100.000%	79.3945850%
DEAN UNIT "B"	12W	100.000%	79.3945850%
DEAN UNIT "B"	13W	100.000%	79.3945850%
DEAN UNIT "B"	14W	100.000%	79.3945850%
DEAN UNIT "B"	15W	100.000%	79.3945850%
DEAN UNIT "B"	16	100.000%	79.3945850%
DEAN UNIT "B"	17W	100.000%	79.3945850%
DEAN UNIT "B"	18R	100.000%	79.3945850%
DEAN UNIT "B"	19W	100.000%	79.3945850%
DEAN UNIT "B"	20	100.000%	79.3945850%
DEAN UNIT "B"	21W	100.000%	79.3945850%
DEAN UNIT "B"	22W	100.000%	79.3945850%
DEAN UNIT "B"	23W	100.000%	79.3945850%
DEAN UNIT "B"	24W	100.000%	79.3945850%
DEAN UNIT "B"	25	100.000%	79.3945850%
DEAN UNIT "B"	26W	100.000%	79.3945850%
DEAN UNIT "B"	27	100.000%	79.3945850%
DEAN UNIT "B"	27RW	100.000%	79.3945850%
DEAN UNIT "B"	28	100.000%	79.3945850%
DEAN UNIT "B"	29W	100.000%	79.3945850%
DEAN UNIT "B"	30W	100.000%	79.3945850%
DEAN UNIT "B"	31W	100.000%	79.3945850%
DEAN UNIT "B"	32R	100.000%	79.3945850%
DEAN UNIT "B"	33W	100.000%	79.3945850%
DEAN UNIT "B"	34W	100.000%	79.3945850%
DEAN UNIT "B"	35	100.000%	79.3945850%
DEAN UNIT "B"	36W	100.000%	79.3945850%
DEAN UNIT "B"	37	100.000%	79.3945850%
DEAN UNIT "B"	38W	100.000%	79.3945850%
DEAN UNIT "B"	39W	100.000%	79.3945850%
DEAN UNIT "B"	40W	100.000%	79.3945850%
DEAN UNIT "B"	41	100.000%	79.3945850%
DEAN UNIT "B"	42	100.000%	79.3945850%
DEAN UNIT "B"	43	100.000%	79.3945850%
DEAN UNIT "B"	44W	100.000%	79.3945850%
DEAN UNIT "B"	45W	100.000%	79.3945850%
DEAN UNIT "B"	46W	100.000%	79.3945850%
DEAN UNIT "B"	47W	100.000%	79.3945850%
DEAN UNIT "B"	48W	100.000%	79.3945850%
DEAN UNIT "B"	49	100.000%	79.3945850%
DEAN UNIT "B"	50	100.000%	79.3945850%
DEAN UNIT "B"	51W	100.000%	79.3945850%
DEAN UNIT "B"	52	100.000%	79.3945850%
DEAN UNIT "B"	53	100.000%	79.3945850%
DEAN UNIT "B"	54W	100.000%	79.3945850%
DEAN UNIT "B"	55	100.000%	79.3945850%
DEAN UNIT "B"	56W	100.000%	79.3945850%

DEAN UNIT "B"	57	100.000%	79.3945850%
DEAN UNIT "B"	58W	100.000%	79.3945850%
DEAN UNIT "B"	59	100.000%	79.3945850%
DEAN UNIT "B"	60W	100.000%	79.3945850%
DEAN UNIT "B"	61	100.000%	79.3945850%
DEAN UNIT "B"	62W	100.000%	79.3945850%
DEAN UNIT "B"	63	100.000%	79.3945850%
DEAN UNIT "B"	64W	100.000%	79.3945850%
DEAN UNIT "B"	65	100.000%	79.3945850%
DEAN UNIT "B"	66	100.000%	79.3945850%
DEAN UNIT "B"	67W	100.000%	79.3945850%
DEAN UNIT "B"	68	100.000%	79.3945850%
DEAN UNIT "B"	69W	100.000%	79.3945850%
DEAN UNIT "B"	70	100.000%	79.3945850%
DEAN UNIT "B"	71W	100.000%	79.3945850%
DEAN UNIT "B"	72	100.000%	79.3945850%
DEAN UNIT "B"	73W	100.000%	79.3945850%
DEAN UNIT "B"	74	100.000%	79.3945850%
DEAN UNIT "B"	75W	100.000%	79.3945850%
DEAN UNIT "B"	76	100.000%	79.3945850%
DEAN UNIT "B"	77W	100.000%	79.3945850%
DEAN UNIT "B"	78	100.000%	79.3945850%
DEAN UNIT "B"	79W	100.000%	79.3945850%
DEAN UNIT "B"	80	100.000%	79.3945850%
DEAN UNIT "B"	81W	100.000%	79.3945850%
DEAN UNIT "B"	82	100.000%	79.3945850%
DEAN UNIT "B"	83	100.000%	79.3945850%
DEAN UNIT "B"	84	100.000%	79.3945850%
DEAN UNIT "B"	85W	100.000%	79.3945850%
DEAN UNIT "B"	86	100.000%	79.3945850%
DEAN UNIT "B"	87W	100.000%	79.3945850%
DEAN UNIT "B"	88	100.000%	79.3945850%
DEAN UNIT "B"	89W	100.000%	79.3945850%
DEAN UNIT "B"	90	100.000%	79.3945850%
DEAN UNIT "B"	91W	100.000%	79.3945850%
DEAN UNIT "B"	92	100.000%	79.3945850%
DEAN UNIT "B"	93W	100.000%	79.3945850%
DEAN UNIT "B"	94	100.000%	79.3945850%
DEAN UNIT "B"	95W	100.000%	79.3945850%
DEAN UNIT "B"	96	100.000%	79.3945850%
DEAN UNIT "B"	97W	100.000%	79.3945850%
DEAN UNIT "B"	98	100.000%	79.3945850%
DEAN UNIT "B"	99	100.000%	79.3945850%
DEAN UNIT "B"	100W	100.000%	79.3945850%
DEAN UNIT "B"	101W	100.000%	79.3945850%
DEAN UNIT "B"	102	100.000%	79.3945850%
DEAN UNIT "B"	103W	100.000%	79.3945850%

DEAN UNIT "B"	104	100.000%	79.3945850%
DEAN UNIT "B"	105W	100.000%	79.3945850%
DEAN UNIT "B"	106	100.000%	79.3945850%
DEAN UNIT "B"	107	100.000%	79.3945850%
DEAN UNIT "B"	108A	100.000%	79.3945850%
DEAN UNIT "B"	108	100.000%	79.3945850%
DEAN UNIT "B"	109W	100.000%	79.3945850%
DEAN UNIT "B"	110	100.000%	79.3945850%
DEAN UNIT "B"	111W	100.000%	79.3945850%
DEAN UNIT "B"	112	100.000%	79.3945850%
DEAN UNIT "B"	113	100.000%	79.3945850%
DEAN UNIT "B"	114	100.000%	79.3945850%
DEAN UNIT "B"	115W	100.000%	79.3945850%
DEAN UNIT "B"	116	100.000%	79.3945850%
DEAN UNIT "B"	117W	100.000%	79.3945850%
DEAN UNIT "B"	118	100.000%	79.3945850%
DEAN UNIT "B"	119	100.000%	79.3945850%
DEAN UNIT "B"	120W	100.000%	79.3945850%
DEAN UNIT "B"	121	100.000%	79.3945850%
DEAN UNIT "B"	122W	100.000%	79.3945850%
DEAN UNIT "B"	123	100.000%	79.3945850%
DEAN UNIT "B"	124W	100.000%	79.3945850%
DEAN UNIT "B"	125	100.000%	79.3945850%
DEAN UNIT "B"	126W	100.000%	79.3945850%
DEAN UNIT "B"	127	100.000%	79.3945850%
DEAN UNIT "B"	128W	100.000%	79.3945850%
DEAN UNIT "B"	129	100.000%	79.3945850%
DEAN UNIT "B"	130	100.000%	79.3945850%
DEAN UNIT "B"	131	100.000%	79.3945850%
DEAN UNIT "B"	132	100.000%	79.3945850%
DEAN UNIT "B"	133	100.000%	79.3945850%
DEAN UNIT "B"	134	100.000%	79.3945850%
DEAN UNIT "B"	135	100.000%	79.3945850%
DEAN UNIT "B"	136W	100.000%	79.3945850%
DEAN UNIT "B"	137	100.000%	79.3945850%
DEAN UNIT "B"	138W	100.000%	79.3945850%
DEAN UNIT "B"	139	100.000%	79.3945850%
DEAN UNIT "B"	140W	100.000%	79.3945850%
DEAN UNIT "B"	141	100.000%	79.3945850%
DEAN UNIT "B"	142W	100.000%	79.3945850%
DEAN UNIT "B"	143	100.000%	79.3945850%
DEAN UNIT "B"	144	100.000%	79.3945850%
DEAN UNIT "B"	145	100.000%	79.3945850%
DEAN UNIT "B"	146W	100.000%	79.3945850%
DEAN UNIT "B"	147W	100.000%	79.3945850%
DEAN UNIT "B"	148W	100.000%	79.3945850%
DEAN UNIT "B"	149	100.000%	79.3945850%

DEAN UNIT "B"	150	100.000%	79.3945850%
DEAN UNIT "B"	151W	100.000%	79.3945850%
DEAN UNIT "B"	152	100.000%	79.3945850%
DEAN UNIT "B"	153	100.000%	79.3945850%
DEAN UNIT "B"	154	100.000%	79.3945850%
DEAN UNIT "B"	155	100.000%	79.3945850%
DEAN UNIT "B"	157	100.000%	79.3945850%
DEAN UNIT "B"	158	100.000%	79.3945850%
DEAN UNIT "B"	159	100.000%	79.3945850%
DEAN UNIT "B"	160	100.000%	79.3945850%
DEAN UNIT "B"	161	100.000%	79.3945850%
DEAN UNIT "B"	162	100.000%	79.3945850%
DEAN UNIT "B"	163	100.000%	79.3945850%
DEAN UNIT "B"	164	100.000%	79.3945850%
DEAN UNIT "B"	165	100.000%	79.3945850%
DEAN UNIT "B"	166	100.000%	79.3945850%
DEAN UNIT "B"	167	100.000%	79.3945850%
DEAN UNIT "B"	168	100.000%	79.3945850%
DEAN UNIT "B"	170	100.000%	79.3945850%
DEAN UNIT "B"	171	100.000%	79.3945850%
DEAN UNIT "B"	172	100.000%	79.3945850%
DEAN UNIT "B"	173	100.000%	79.3945850%
DEAN UNIT "B"	174	100.000%	79.3945850%
DEAN UNIT "B"	175	100.000%	79.3945850%
DEAN UNIT "B"	176	100.000%	79.3945850%
DEAN UNIT "B"	177	100.000%	79.3945850%
DEAN UNIT "B"	178	100.000%	79.3945850%
DEAN UNIT "B"	179	100.000%	79.3945850%
DEAN UNIT "B"	180	100.000%	79.3945850%
DEAN UNIT "B"	181	100.000%	79.3945850%
DEAN UNIT "B"	182	100.000%	79.3945850%
DEAN UNIT "B"	183	100.000%	79.3945850%
DEAN UNIT "B"	184	100.000%	79.3945850%
DEAN UNIT "B"	185	100.000%	79.3945850%
DEAN UNIT "B"	186	100.000%	79.3945850%
DEAN UNIT "B"	187	100.000%	79.3945850%
DEAN UNIT "B"	188	100.000%	79.3945850%
DEAN UNIT "B"	189	100.000%	79.3945850%
DEAN UNIT "B"	190	100.000%	79.3945850%
DEAN UNIT "B"	191	100.000%	79.3945850%
DEAN UNIT "B"	192	100.000%	79.3945850%
DEAN UNIT "B"	193	100.000%	79.3945850%
DEAN UNIT "B"	194	100.000%	79.3945850%
DEAN UNIT "B"	195	100.000%	79.3945850%
DEAN UNIT "B"	196	100.000%	79.3945850%
DEAN UNIT "B"	197	100.000%	79.3945850%
DEAN UNIT "B"	198	100.000%	79.3945850%

DEAN UNIT "B"	199	100.000%	79.3945850%
LEAGUE 91 PROJECT	101W	100.000%	75.6808370%
LEAGUE 91 PROJECT	104	100.000%	75.6808370%
LEAGUE 91 PROJECT	105	100.000%	75.6808370%
LEAGUE 91 PROJECT	107	100.000%	75.6808370%
LEAGUE 91 PROJECT	108W	100.000%	75.6808370%
LEAGUE 91 PROJECT	112	100.000%	75.6808370%
LEAGUE 91 PROJECT	113W	100.000%	75.6808370%
LEAGUE 91 PROJECT	119W	100.000%	75.6808370%
LEAGUE 91 PROJECT	120	100.000%	75.6808370%
LEAGUE 91 PROJECT	123W	100.000%	75.6808370%
LEAGUE 91 PROJECT	201W	100.000%	75.6808370%
LEAGUE 91 PROJECT	205	100.000%	75.6808370%
LEAGUE 91 PROJECT	207	100.000%	75.6808370%
LEAGUE 91 PROJECT	208	100.000%	75.6808370%
LEAGUE 91 PROJECT	209	100.000%	75.6808370%
LEAGUE 91 PROJECT	301W	100.000%	75.6808370%
LEAGUE 91 PROJECT	302	100.000%	75.6808370%
LEAGUE 91 PROJECT	303	100.000%	75.6808370%
LEAGUE 91 PROJECT	304W	100.000%	75.6808370%
LEAGUE 91 PROJECT	305	100.000%	75.6808370%
LEAGUE 91 PROJECT	306W	100.000%	75.6808370%
LEAGUE 91 PROJECT	313	100.000%	75.6808370%
LEAGUE 91 PROJECT	401	100.000%	75.6808370%
LEAGUE 91 PROJECT	403	100.000%	75.6808370%
LEAGUE 91 PROJECT	1031	100.000%	75.6808370%
LEAGUE 91 PROJECT	3012W	100.000%	75.6808370%
LEAGUE 91 PROJECT	4012	100.000%	75.6808370%
LEAGUE 91 PROJECT	4013	100.000%	75.6808370%
STARNES	1	96.875%	72.6562500%
STARNES	2	96.875%	72.6562500%
STARNES	3	96.875%	72.6562500%
STARNES, C. R.	1	96.875%	77.5000000%
STARNES, C. R.	1R	96.875%	77.5000000%
STARNES, C. R.	2	96.875%	77.5000000%
STARNES, C. R.	3	96.875%	77.5000000%
STARNES, C. R.	4	96.875%	77.5000000%
STARNES, C. R.	4R	96.875%	77.5000000%
STARNES, C. R.	5	96.875%	77.5000000%
STARNES, C. R.	6	96.875%	77.5000000%
STARNES, C. R.	7	96.875%	77.5000000%
STARNES, C. R.	8 (1)	96.875%	77.5000000%
STARNES, C. R.	9 (3)	96.875%	77.5000000%
STARNES, C. R.	10 (4)	96.875%	77.5000000%
CUNNINGHAM, L. P.	1	96.754%	73.2037738%
CUNNINGHAM "B"	2	96.754%	73.2037738%
CUNNINGHAM, L. P. A	3	96.754%	73.2037738%

CUNNINGHAM	4	96.754%	73.2037738%
CUNNINGHAM	5H	96.754%	72.9317994%
STARNES RANCH "29"	1	96.875%	74.1093750%
STARNES RANCH '34'	1	96.875%	73.6959609%
STARNES RANCH "34"	2	96.875%	73.6959609%
STARNES RANCH "34"	3H	96.875%	73.6959609%
STARNES RANCH "34"	4H	96.875%	73.6959609%
STARNES RANCH "35"	1	96.875%	73.3326797%
STARNES RANCH "35"	2	96.875%	73.3326797%

Attached to and made a part of that certain Contribution and Sale Agreement dated as of July 12, 2017, by and between Lubbock Energy Partners LLC, as LEP, and Energy Hunter Resources, Inc., as EHR.

FORM OF ASSIGNMENT

 

STATE OF TEXAS	§
	§
COUNTY OF COCHRAN	§

	ASSIGNOR:
	LUBBOCK ENERGY PARTNERS LLC
	By:
	Name:
	Title:

	ASSIGNEE:
	ENERGY HUNTER RESOURCES, INC.
	By:
	Name:
	Title:

THE STATE OF TEXAS			§
			§
COUNTY OF			§

	Notary Public in and for the State of Texas

THE STATE OF TEXAS			§
			§
COUNTY OF			§

	Notary Public in and for the State of Texas