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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
the
Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): January 11, 2024
Prairie
Operating Co.
(Exact
name of registrant as specified in its charter)
Delaware |
|
001-41895 |
|
98-0357690 |
(State
or other jurisdiction
of
incorporation) |
|
(Commission
File
Number) |
|
(IRS
Employer
Identification
No.) |
602
Sawyer Street, Suite 710
Houston,
TX |
|
77007 |
(Address
of principal executive offices) |
|
(Zip
Code) |
Registrant’s
telephone number, including area code: (713) 424-4247
N/A
(Former
Name or Former Address, If Changed Since Last Report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under
any of the following provisions (see General Instruction A.2. below):
☐ |
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
|
☐ |
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
|
☐ |
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
|
☐ |
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
None |
|
N/A |
|
N/A |
Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405)
or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2).
Emerging
Growth Company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item
1.01 Entry into a Material Definitive Agreement.
On
January 11, 2024, Prairie Operating Co. (the “Company”) entered into an asset purchase agreement (the “Purchase Agreement”),
by and among the Company, Nickel Road Development LLC, Nickel Road Operating LLC (“NRO”) and Prairie Operating Co., LLC,
to acquire the assets of NRO (the “Assets”) for total consideration of $94.5 million (the “Purchase Price”),
subject to certain closing price adjustments and other customary closing conditions (the “NRO Asset Purchase”). The Purchase
Price consists of $83.0 million in cash and $11.5 million in deferred cash payments. The Company deposited $9 million of the Purchase
Price into an escrow account on January 11, 2024 (the “Deposit”), which will be released to Seller upon the earlier of the
closing date and August 15, 2024 (the “Outside Date”). Portions of the Deposit are subject to earlier release under certain
circumstances if the closing has not occurred on or prior to June 17, 2024.
The
Purchase Agreement provides that the closing of the NRO Asset Purchase is subject to customary conditions precedent, including (i) the
accuracy of the representations and warranties of each party (subject to specified materiality standards), (ii) compliance by each party
in all material respects with their respective covenants, (iii) that no event of Force Majeure or Material Adverse Effect (in each case
as defined in the Purchase Agreement) shall have occurred, in each case the result of which is that the Company is unable to secure satisfactory
financing with respect to the Transaction (as defined in the Purchase Agreement), and (iv) the Registration Statement (as defined in
the Purchase Agreement) has been declared effective with the SEC on or before the Outside Date. The Purchase Agreement contains customary
title and environmental defect mechanisms with respect to the Assets, including purchase price adjustments and termination rights. The
Purchase Agreement may be terminated under circumstances as described in the Purchase Agreement, including (i) with the mutual written
consent of the Company and NRO, (ii) by the Company, upon the occurrence of an event of Force Majeure or Material Adverse Effect, in
each case the result of which is that Purchaser determines, in its reasonable discretion, that it is, or will be, unable to secure satisfactory
financing with respect to the Transaction, or (iii) in the event that the NRO Asset Purchase has not been consummated on or before the
Outside Date.
The
parties have made customary representations and warranties in the Purchase Agreement. The Purchase Agreement also contains customary
covenants and agreements, including covenants and agreements relating to (a) the conduct of NRO’s business during the period between
the execution of the Purchase Agreement and closing of the NRO Asset Purchase and (b) the efforts of the parties to cause the NRO Asset
Purchase to be completed, including actions which may be necessary to facilitate a satisfactory financing transaction by the Company.
The parties have agreed to indemnify each other for certain liabilities following the closing on the NRO Asset Purchase (as further set
forth in the Purchase Agreement), subject to the limitations set forth in the Purchase Agreement.
The
Assets and the operations of NRO include Oil and Gas Leases, Mineral Fee Interests, producing and disposal Wells, and Units, in each
case as defined in the Purchase Agreement and located in the DJ Basin in Weld County, Colorado, as well as appurtenant records and equipment
and other properties.
The
Company expects the NRO Asset Acquisition to close on or before the Outside Date, subject to customary closing conditions, with an economic
effective date of February 1, 2024. The Company expects to fund the transaction through a combination of public and / or private issuance
of common stock, cash on hand, and proceeds from existing warrant exercises. There can be no assurance that the NRO Asset Purchase will
be consummated at all or on the expected timing or that sufficient financing will be available on acceptable terms, or at all, or the
timing of any such financing.
The
foregoing description of the Purchase Agreement is a summary only, does not purport to be complete, and is qualified in its entirety
by reference to the Purchase Agreement, which is attached hereto as Exhibit 2.1 to this Current Report on Form 8-K on Form 8-K and is
incorporated by reference into this Item 1.01.
The
Purchase Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other
factual information about the Company, NRO or their respective subsidiaries or affiliates. The representations, warranties and covenants
contained in the Purchase Agreement were made solely for purposes of the Purchase Agreement and as of specific dates, were solely for
the benefit of the parties to the Purchase Agreement, may be subject to limitations agreed upon by the contracting parties, including
being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Purchase
Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting
parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Purchase Agreement and
should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state
of facts or conditions of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning
the subject matter of representations and warranties may change after the date of the Purchase Agreement, which subsequent information
may or may not be fully reflected in the Company’s public disclosures.
This
Current Report on Form 8-K contains statements that are “forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are based upon the Company’s
current expectations, but these statements are not guaranteed to occur. Investors should not place undue reliance upon forward-looking
statements. These statements relate to, among other things, the NRO Asset Purchase. No assurances can be given that the NRO Asset Purchase
will be completed when expected, on the terms described or at all. The forward-looking statements are subject to various risks and uncertainties,
many of which are beyond the Company’s control including, without limitation, general economic conditions, market conditions and
other factors, including those set forth in the Risk Factors section of the Company’s periodic reports and other documents filed
with the United States Securities and Exchange Commission (the “SEC”), including, without limitation, the Company’s
Annual Report on Form 10-K for the year ended December 31, 2022. Unless legally required, the Company disclaims any obligation to update
any forward-looking statements, whether as a result of new information, future events or otherwise. Copies are available on the SEC’s
website, www.sec.gov. The Company undertakes no obligation to update these statements after the date of this Current Report on
Form 8-K.
Item
7.01 Regulation FD Disclosure.
On
January 11, 2024, the Company issued a press release announcing the NRO Asset Purchase and posted an investor presentation regarding
the NRO Asset Purchase to the Investor Relations section of its website at www.prairieopco.com.
The
full text of the press release and a copy of the investor presentation are included as Exhibit 99.1 and Exhibit 99.2, respectively, and
are incorporated herein by reference into this Item 7.01.
In
accordance with General Instruction B.2 of Form 8-K, the information furnished pursuant to Item 7.01 and the press release and investor
presentation attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, shall not be deemed to be “filed” for purposes
of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities
of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act or the Exchange
Act, except as shall be expressly set forth by specific reference in such a filing.
Item
9.01 Financial Statements and Exhibits.
(d)
Exhibits
Exhibit
Number |
|
Description |
2.1† |
|
Asset Purchase Agreement, dated as of January 11, 2024, by and among Nickel Road Development LLC, Nickel Road Operating LLC, Prairie Operating Co. and Prairie Operating Co., LLC. |
99.1 |
|
Press Release, dated January 11, 2024. |
99.2 |
|
Investor Presentation, dated January 11, 2024. |
104 |
|
Cover
Page Interactive Data File (embedded within the Inline XBRL document). |
†
Certain exhibits and schedules to this Exhibit have been omitted in accordance with Item 601(b)(2) of Regulation S-K. The Company agrees
to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon its request.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
|
Prairie
Operating Co. |
Date:
January 12, 2024 |
|
|
|
By: |
/s/
Edward Kovalik |
|
|
Edward
Kovalik |
|
|
Chief
Executive Officer |
Exhibit 2.1
ASSET
PURCHASE AGREEMENT
BY
AND AMONG
NICKEL
ROAD DEVELOPMENT LLC,
AS
SELLER, AND
NICKEL
ROAD OPERATING LLC,
AS
NR OPERATOR,
AND
PRAIRIE
OPERATING CO.,
AS
PURCHASER, AND
PRAIRIE
OPERATING CO., LLC,
AS
PURCHASER OPERATOR
DATED
JANUARY 11, 2024
TABLE
OF CONTENTS
|
Page |
ARTICLE
I TERMS OF THE TRANSACTION |
1 |
Section
1.1 |
Agreement
to Purchase and Sell Assets |
1 |
Section
1.2 |
Purchase
Price |
3 |
Section
1.3 |
Adjustments
to the Cash Consideration |
5 |
Section
1.4 |
Payment
of the Adjusted Purchase Price |
10 |
|
|
|
ARTICLE
II CLOSING |
11 |
Section
2.1 |
Closing |
11 |
Section
2.2 |
Actions
at Closing |
11 |
|
|
|
ARTICLE
III REPRESENTATIONS AND WARRANTIES OF SELLER |
12 |
Section
3.1 |
Organization |
12 |
Section
3.2 |
Power
and Authority |
12 |
Section
3.3 |
Valid
and Binding Agreement |
13 |
Section
3.4 |
Non-Contravention |
13 |
Section
3.5 |
Approvals
and Consents |
13 |
Section
3.6 |
Pending
Litigation |
13 |
Section
3.7 |
Compliance
with Laws |
14 |
Section
3.8 |
Taxes |
14 |
Section
3.9 |
Contracts |
15 |
Section
3.10 |
Outstanding
Capital Commitments; Non-Consent Operations |
16 |
Section
3.11 |
Imbalances |
17 |
Section
3.12 |
Brokers |
17 |
Section
3.13 |
Environmental
Matters |
17 |
Section
3.14 |
Employee
and Labor Matters |
18 |
Section
3.15 |
Plugging
and Abandonment |
18 |
Section
3.16 |
Condemnation |
18 |
Section
3.17 |
Suspense
Funds |
18 |
Section
3.18 |
Special
Warranty of Title |
18 |
Section
3.19 |
Preferential
Purchase Rights and AMIs |
18 |
Section
3.20 |
Payments |
18 |
Section
3.21 |
Leases |
19 |
Section
3.22 |
Production
Sales Contracts |
19 |
Section
3.23 |
Wells
and Equipment |
19 |
Section
3.24 |
Bankruptcy |
19 |
Section
3.25 |
No
Liens |
19 |
Section
3.26 |
Continuous
Operating Activities |
19 |
Section
3.27 |
Insurance |
19 |
Section
3.28 |
Payout
Balances |
20 |
Section
3.29 |
Bonds
and Credit Support |
20 |
Section
3.30 |
Disclosures
of Material Facts |
20 |
|
|
|
ARTICLE
IV DISCLAIMERS |
20 |
Section
4.1 |
Limitation
of Representations and Warranties |
20 |
Section
4.2 |
Presence
of Wastes, NORM, Hazardous Materials |
21 |
Section
4.3 |
Certain
Disclaimers |
22 |
TABLE
OF CONTENTS
(cont’d)
|
Page |
ARTICLE
V REPRESENTATIONS AND WARRANTIES OF PURCHASER |
22 |
Section
5.1 |
Organization |
22 |
Section
5.2 |
Power
and Authority |
22 |
Section
5.3 |
Valid
and Binding Agreement |
23 |
Section
5.4 |
Non-Contravention |
23 |
Section
5.5 |
Approvals |
23 |
Section
5.6 |
Proceedings |
23 |
Section
5.7 |
Financing |
23 |
Section
5.8 |
Investment
Experience |
24 |
Section
5.9 |
Independent
Evaluation |
24 |
Section
5.10 |
Brokers |
24 |
Section
5.11 |
Disclosures
of Material Fact |
24 |
|
|
|
ARTICLE
VI CONDUCT OF SELLER PENDING CLOSING |
24 |
Section
6.1 |
Conduct
and Preservation of Business |
24 |
Section
6.2 |
Restrictions
on Certain Actions |
26 |
Section
6.3 |
Exclusive
Right to Purchase |
27 |
Section
6.4 |
Leasing
Restrictions |
27 |
Section
6.5 |
Financing
Statements |
27 |
|
|
|
ARTICLE
VII ADDITIONAL AGREEMENTS OF THE PARTIES |
28 |
Section
7.1 |
Access |
28 |
Section
7.2 |
Confidentiality
Agreement |
28 |
Section
7.3 |
Commercially
Reasonable Efforts |
28 |
Section
7.4 |
Taxes |
29 |
Section
7.5 |
Fees
and Expenses |
30 |
Section
7.6 |
Public
Announcements |
31 |
Section
7.7 |
Books
and Records |
31 |
Section
7.8 |
Logos
and Names |
31 |
Section
7.9 |
Form
9 |
31 |
Section
7.10 |
Suspense
Funds |
31 |
Section
7.11 |
Contract
Operations |
32 |
|
|
|
ARTICLE
VIII PURCHASER’S DUE DILIGENCE EXAMINATION |
32 |
Section
8.1 |
Seller’s
Title |
32 |
Section
8.2 |
Title
Due Diligence Examination |
33 |
Section
8.3 |
Notice
of Title Defects; Title Benefits; Title Defect Amount |
33 |
Section
8.4 |
Environmental
Due Diligence Examination |
36 |
Section
8.5 |
Notice
of Environmental Defects |
37 |
Section
8.6 |
Defect
Closing Mechanics |
38 |
Section
8.7 |
Option
to Cure Title Defects and Environmental Defects Post-Closing |
39 |
Section
8.8 |
Purchaser
Indemnification |
39 |
Section
8.9 |
Casualty
Loss Prior to Closing |
40 |
Section
8.10 |
Additional
Assets |
40 |
TABLE
OF CONTENTS
(cont’d)
|
Page |
ARTICLE
IX CONDITIONS TO OBLIGATIONS OF THE PARTIES |
41 |
Section
9.1 |
Conditions
to Obligations of Seller |
41 |
Section
9.2 |
Conditions
to Obligations of Purchaser |
41 |
|
|
|
ARTICLE
X TERMINATION AND RELEASE OF DEPOSIT |
42 |
Section
10.1 |
Termination |
42 |
Section
10.2 |
Effect
of Termination |
43 |
Section
10.3 |
Release
of Deposit to Seller |
44 |
|
|
|
ARTICLE
XI SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION |
46 |
Section
11.1 |
Survival |
46 |
Section
11.2 |
Indemnification
by Seller |
47 |
Section
11.3 |
Indemnification
by Purchaser |
48 |
Section
11.4 |
Indemnification
Proceedings |
49 |
Section
11.5 |
Indemnification
Generally |
49 |
Section
11.6 |
Exclusivity;
Waiver of Rescission |
50 |
Section
11.7 |
Limited
to Actual Damages |
50 |
Section
11.8 |
Express
Negligence |
50 |
Section
11.9 |
Tax
Treatment of Indemnification Payments |
50 |
Section
11.10 |
Limits
on Liability |
51 |
|
|
|
ARTICLE
XII MISCELLANEOUS |
51 |
Section
12.1 |
Dispute
Resolution |
51 |
Section
12.2 |
Notices |
54 |
Section
12.3 |
Entire
Agreement |
55 |
Section
12.4 |
Binding
Effect; Assignment; No Third Party Benefit |
55 |
Section
12.5 |
Severability |
56 |
Section
12.6 |
Governing
Law and Venue |
56 |
Section
12.7 |
Further
Assurances |
56 |
Section
12.8 |
Counterparts |
56 |
Section
12.9 |
Injunctive
Relief |
56 |
Section
12.10 |
Amendment |
56 |
Section
12.11 |
Waiver |
57 |
Section
12.12 |
Schedules
and Exhibits |
57 |
|
|
|
ARTICLE
XIII DEFINITIONS AND REFERENCES |
57 |
Section
13.1 |
Certain
Defined Terms |
57 |
Section
13.2 |
References
and Construction |
73 |
TABLE
OF CONTENTS
(cont’d)
Exhibits:
|
Exhibit
A-1 |
- |
Leases |
|
Exhibit
A-2 |
- |
Mineral
Fee Interests |
|
Exhibit
A-3 |
- |
Wells |
|
Exhibit
A-4 |
- |
Units |
|
Exhibit
B |
- |
Oil
and Gas Contracts |
|
Exhibit
C |
- |
Equipment |
|
Exhibit
D |
- |
Surface
Use Agreements |
|
Exhibit
E |
- |
Permits |
|
Exhibit
F |
- |
Non-Foreign
Certificate |
|
Exhibit
G |
- |
Nickel
Road Drilling Permits |
|
Exhibit
H |
- |
Escrow
Agreement |
|
Exhibit
I |
- |
Form
of Assignment and Bill of Sale |
|
Exhibit
J |
- |
Form
of Transition Services Agreement |
|
Exhibit
K |
- |
Leasing
Restrictions |
Schedules:
|
Schedule
1.2(d) |
- |
Allocated
Value |
|
Schedule
1.3(a)(i)(B) |
- |
Post-Effective
Date Costs |
|
Schedule
3.5 |
- |
Approvals |
|
Schedule
3.6 |
- |
Pending
Litigation |
|
Schedule
3.7 |
- |
Compliance
with Laws |
|
Schedule
3.8 |
- |
Taxes |
|
Schedule
3.9(a) |
- |
Contracts |
|
Schedule
3.9(c) |
- |
Contract
Breaches |
|
Schedule
3.10(a) |
- |
Outstanding
Capital Commitments |
|
Schedule
3.10(b) |
- |
Non-Consent
Operations |
|
Schedule
3.11 |
- |
Imbalances |
|
Schedule
3.13 |
- |
Environmental
Matters |
|
Schedule
3.15 |
- |
Plugging
and Abandonment |
|
Schedule
3.17 |
- |
Suspense
Funds |
|
Schedule
3.19 |
- |
Preferential
Purchase Rights |
|
Schedule
3.25 |
- |
Liens |
|
Schedule
3.26 |
- |
Continuous
Operating Activities |
|
Schedule
3.27 |
- |
Insurance |
|
Schedule
3.28 |
- |
Payout
Balances |
|
Schedule
3.29 |
- |
Bonds
and Credit Support |
|
Schedule
6.2 |
- |
Interim
Period Actions |
|
Schedule
XIII |
- |
Excluded
Assets |
ASSET
PURCHASE AGREEMENT
This
ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of January 11, 2024 (the “Execution
Date”), by and among Nickel Road Development LLC, a Delaware limited liability company (“Seller”), and Nickel
Road Operating LLC, a Delaware limited liability company (“NR Operator”), and Prairie Operating Co., a Delaware corporation
(“Purchaser”) and Prairie Operating Co., LLC, a Delaware limited liability company (“Purchaser Operator”).
Seller, NR Operator, Purchaser, and Purchaser Operator sometimes are referred to herein individually as a “Party”
and collectively as the “Parties”. Capitalized terms herein shall have the definitions assigned to them in the text
or as defined in Section 13.1 of this Agreement.
RECITALS:
WHEREAS,
Seller desires to sell and Purchaser desires to purchase those certain oil and gas properties, rights, and related assets defined and
described herein in the manner and upon the terms and conditions hereafter set forth (the “Transaction”).
AGREEMENT:
NOW
THEREFORE, in consideration of the mutual promises contained herein, the benefits to be derived by each Party hereunder, and other
good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the Parties agree as follows:
Article
I
TERMS OF THE TRANSACTION
Section
1.1 Agreement to Purchase and Sell Assets. Seller agrees to sell, and Purchaser agrees to purchase,
for the consideration hereinafter set forth the following interests and properties (less and except the Excluded Assets, as defined below)
(collectively, the “Properties”):
(a)
all right, title, interest and estate of Seller, real or personal, recorded or unrecorded, movable or immovable, tangible or intangible,
in and to (in each case, excluding the Excluded Assets): (i) all Oil and Gas Leases and other similar properties and interests covering
lands located in Weld County, Colorado, to the extent such Oil and Gas Leases are described on Exhibit A- 1 (the “Leases”),
(ii) all mineral fee interests covering lands located in Weld County, Colorado, to the extent such mineral fee interests are described
on Exhibit A- 2 (the “Mineral Fee Interests”), (iii) all oil, gas, water, disposal, injection, or other wells
located on the lands covered by such Leases or Mineral Fee Interests or on lands pooled, communitized, or unitized therewith, to the
extent such wells are described on Exhibit A-3 (the “Wells”), (iv) all lands that have been pooled, unitized,
or communitized with the lands covered by all or a part of any Lease or any Mineral Fee Interest, to the extent such lands are described
on Exhibit A-4 (the “Units” and collectively with the Leases, the Mineral Fee Interests, and the Wells, the
“Oil and Gas Properties”), and including all of Seller’s right, title, and interest in and to production from
any such Unit, whether such Unit production comes from Wells located on or off of a Lease or Mineral Fee Interest, and all tenements,
hereditaments, and appurtenances belonging to the Leases, Wells, and Units;
(b)
to the extent assignable and any consent required to assign the same has been obtained by Seller (which Seller shall use Commercially
Reasonable Efforts to obtain), any beneficial interests or rights held by Seller under or derived from all presently existing contracts,
agreements, and instruments by which the Oil and Gas Properties are bound as of the Execution Date and will be binding on Purchaser as
of the Closing Date, to the extent applicable to such Oil and Gas Properties, including, but not limited to: hydrocarbon or gas sale
agreements; production agreements; dedications; operating agreements; development agreements; exploration agreements; area of mutual
interest agreements; gathering agreements; gas balancing agreements; disposal agreements; agreements containing seismic licenses and
other rights to geological or geophysical data and information directly or indirectly related to the Leases or Mineral Fee Interests;
marketing agreements; transportation agreements; unitization, pooling, and communitization agreements; declarations and orders; partnership
or joint venture agreements; any agreement pursuant to which Seller has been granted a right of first refusal, a preemptive right of
purchase, or other option to acquire any Oil and Gas Property covering lands located in Weld County, Colorado; and farmin and farmout
agreements, including those agreements described on Exhibit B (collectively, the “Oil and Gas Contracts”);
(c)
all of Seller’s right, title, and interest in and to all wellhead equipment, pumping units, flowlines, pipelines, tanks, buildings,
injection facilities, saltwater disposal facilities, compression equipment and facilities, gathering systems, fixtures and equipment
and all other personal property, improvements, and fixtures used on or in connection with the ownership, operation or use of the Oil
and Gas Properties, including the equipment described on Exhibit C (the “Equipment”);
(d)
all easements, rights-of way, surface use agreements, surface fee interests, licenses , permits, servitudes, and other rights, benefits,
interests, and powers regarding the use or entry upon lands to the extent used in connection with the ownership or operation of the Oil
and Gas Properties, including those surface use agreements described on Exhibit D (the “Surface Use Agreements”);
(e)
all of Seller’s right, title, and interest in and to all Permits to the extent the same are assignable, including those Permits
described on Exhibit E;
(f)
all of Seller’s right, title, and interest in and to all intangible rights, inchoate rights, transferrable rights under warranties
made by prior owners, manufacturers, vendors and Third Parties, and rights accruing under any applicable statute of limitations or prescription,
to the extent relating to the Properties;
(g)
copies (in digital form, if available) of any records regarding policies of insurance, real property, equipment, materials and service
contracts, records, files, documents, reports, returns, filings, notices, information, and data (including production records, well records,
Asset Tax records, tariff, financial, audit, and tax data, lease files, and accounting records) and material communications, memoranda,
and other information (in physical or digital form), including all material documents supporting such reports, returns, filings, correspondence
and memoranda, to the extent such files are in Seller’s, NR Operator’s or its or their Affiliates possession, custody, or
control, and further to the extent Seller is contractually permitted to provide the same (provided, that any such documents that Seller
is not contractually permitted to provide in full to Purchaser shall be disclosed to Purchaser in writing), in each case whether stored
physically or electronically, to the extent related to any or all of the Properties, including: (i) land and title records (including
abstracts of title, title opinions and title curative documents, abstracts of title, title opinions, title files, ownership maps, lease
files, assignments, division orders, ownership reports, operating records and agreements, well files, financial, and accounting records
(including revenue and cost decks), geological, geophysical and engineering records); (ii) contract files; (iii) correspondence; (iv)
operations, drilling, environmental, production, Tax, and accounting records; (v) regulatory filings (including Permit applications and
filings); (vi) environmental records, files, data, and other materials and documentation; and (vii) facility and well files, but in each
case excluding any Excluded Records (the “Records”);
(h)
to the extent assignable, all geophysical and other seismic and related technical data and information related to the Oil and Gas Properties,
as made available by Seller to Purchaser; and
(i)
all Hydrocarbons in, on or under or that are produced from or are attributable to the Properties from and after the Effective Date, including
those held in storage or existing in stock tanks, pipelines and/or plants (including inventory and linefill) as of the Effective Date.
Section
1.2 Purchase Price.
(a)
In consideration of the sale of the Properties by Seller to Purchaser, Purchaser shall:
(i)
pay to Seller the sum of Eighty-Three Million Dollars ($83,000,000) in cash (the “Cash Consideration”); and
(ii)
subject to Section 1.2(b) below, pay to Seller the Spud Fees (as such term is defined below) in an amount equal to Eleven Million
Five Hundred Thousand Dollars ($11,500,000) (collectively, Section 1.2(a)(i)-(ii) being the “Purchase Price”).
(b)
The consideration set forth in Section 1.2(a)(i) shall be made at Closing (as such term is defined below). As to Section 1.2(a)(ii),
Purchaser will tender to Seller a $200,000 spud fee cash payment each time Purchaser completes the drilling portion of a horizontal well
on any existing Nickel Road Form 2 drilling permit as described on Exhibit G or on any Oil and Gas Property (each, a “Spud
Fee”). Each Spud Fee payment will be tendered to Seller within forty-five (45) calendar days following the completion of the
drilling portion of the then-existing horizontal well. Purchaser will tender to Seller the Spud Fee during the first twelve (12) months
following the Closing Date, until such time as the Spud Fee payments to Seller equal the aggregate sum of $11,500,000. In the event Purchaser
does not tender to Seller an aggregate Spud Fee payment of $11,500.000 within the twelve (12) months following the Closing Date, Purchaser
will pay to Seller the difference of $11,500,000 and the actual total amount of Spud Fees tendered to Seller in two (2) equal payments,
with the first such payment being made on the last Business Day of the fifteenth (15th) month following the Closing Date and the second
such payment being made on the last Business Day of the eighteenth (18th) month following the Closing Date.
(c)
The Purchase Price, including any adjustments to the Cash Consideration pursuant to Section 1.3, shall be the “Adjusted
Purchase Price”.
(d)
The Allocated Value, as reasonably agreed to by the Parties, for each of the applicable Properties is set forth on Schedule 1.2(d).
(e)
As soon as reasonably practicable after the Final Settlement Statement becomes final and binding on the Parties under Section 1.3(c),
Purchaser shall deliver to Seller for its review and approval an allocation of the Adjusted Purchase Price and any other items that are
treated as consideration for U.S. federal income Tax purposes among the Properties in accordance with Section 1060 of the Code, and the
regulations thereunder, and to the extent permitted by applicable Tax law, in a manner consistent with the Allocated Values (the “Tax
Allocation”). Seller shall provide Purchaser with any comments to the Tax Allocation within thirty (30) days after the date
of receipt by Seller. If Seller does not deliver any written notice of objection to the Tax Allocation within such thirty (30)-day period,
the Tax Allocation shall be final, conclusive, and binding on the Parties. If a written notice of objection is timely delivered to Purchaser,
Seller and Purchaser will negotiate in good faith for a period of twenty (20) days to resolve such dispute (the “Allocation
Dispute Resolution Period”). If, during the Allocation Dispute Resolution Period, Seller and Purchaser resolve their differences
in writing as to any disputed amount, such resolution shall be deemed final and binding with respect to such amount for the purpose of
determining that component of the Tax Allocation. In the event that Seller and Purchaser do not resolve all of the items disputed in
the Tax Allocation prior to the end of the Allocation Dispute Resolution Period, all such unresolved disputed items shall be determined
by the Accounting Referee in accordance with the procedures of Section 1.3(c), mutatis mutandis. Any subsequent adjustments
to the Adjusted Purchase Price for U.S. federal income Tax purposes shall be allocated in a manner consistent with the Tax Allocation
as finally determined hereunder. Seller and Purchaser each agree to report, and to cause their respective affiliates to report, the federal,
state, and local income Tax consequences of the Transaction, and in particular to report the information required by Section 1060(b)
of the Code, and to jointly prepare Form 8594 (Asset Acquisition Statement under Section 1060 of the Code) as promptly as possible following
the date the Final Settlement Statement becomes final and binding on the Parties, in a manner consistent with the Tax Allocation as revised
to take into account subsequent adjustments to the Adjusted Purchase Price for U.S. federal income Tax purposes, and shall not take any
position inconsistent therewith upon examination of any Tax Return, in any refund claim, in any litigation, investigation or otherwise,
unless required to do so pursuant to a “determination” within the meaning of Section 1313(a) of the Code (or any similar
provision of applicable state, local or foreign law) or with the other Party’s prior consent; provided, however,
that no Party shall be unreasonably impeded in its ability and discretion to negotiate, compromise or settle any Tax audit, claim or
similar proceedings in connection with the Tax Allocation.
Section
1.3 Adjustments to the Cash Consideration.
(a) Adjustments to the Cash Consideration. The Cash Consideration shall
be adjusted, without duplication hereunder, as follows:
(i)
Upward Adjustments. The Cash Consideration shall be adjusted upward by the following amounts:
(A)
the Title Benefit Amount of any Title Benefits (including those resulting from the Contemplated Leasing Activities and Found Assets);
(B)
as necessary to give effect to the principles outlined in Section 1.3(a)(iii);
(C)
the amounts set forth on Schedule 1.3(a)(i)(B); and any other upward adjustments expressly provided for elsewhere as an upward
adjustment to the Cash Consideration in this Agreement or otherwise agreed upon in writing by the Parties;
(D)
the amount of all Asset Taxes allocable to Purchaser pursuant to Section 7.4 but paid or economically borne by Seller; and
(E)
as necessary, if Seller’s Interim Net Cash Flow is less than Sixteen Million Dollars ($16,000,000), then Sixteen Million Dollars
($16,000,000) less an amount equal to Seller’s Interim Net Cash Flow.
(ii)
Downward Adjustments. The Cash Consideration shall be adjusted downward by the following amounts:
(A)
the aggregate adjustments Purchaser is entitled to pursuant to Section 8.6 and Section 8.7 with respect to Title Defects
and Environmental Defects;
(B)
the amount of any Casualty Losses in accordance with Section 8.9;
(C)
the amount of all Asset Taxes allocable to Seller pursuant to Section 7.4 but paid or economically borne by Purchaser;
(D)
the aggregate amount of Unremitted Withheld Taxes set forth in the Unremitted Withheld Taxes Schedule, if and to the extent there are
any such Unremitted Withheld Taxes;
(E)
otherwise as necessary to give effect to the principles outlined in Section 1.3(a)(iii);
(F)
the amounts held by Seller in suspense accounts described in Section 3.17;
(G)
any other downward adjustments expressly provided for elsewhere as a downward adjustment to the Cash Consideration in this Agreement
or otherwise agreed upon in writing by the Parties; and
(H)
as necessary, if Seller’s Interim Net Cash Flow is greater than Sixteen Million Dollars ($16,000,000), then an amount equal to
Seller’s Interim Net Cash Flow less Sixteen Million Dollars ($16,000,000).
(iii)
Other Adjustments. Other adjustments shall be made to the Cash Consideration (without duplication of any other provision of this
Agreement) such that:
(A)
all expenses (including all drilling costs, all capital expenditures and all overhead charges under applicable operating agreements,
and all other overhead charges actually charged by Third Parties, but excluding Taxes), in each case (x) attributable to the Oil and
Gas Properties, but expressly excluding general and administrative expenses, applicable royalties, overriding royalties and other similar
burdens on production and any expenses or costs incurred in respect of curing or otherwise resolving Title Defects or Environmental Defects
or disputes related thereto) and (y) to the extent incurred and allocable to the period after the Effective Date in the ownership, maintenance
or operation of the Oil and Gas Properties, will, if paid by Seller, adjust the Cash Consideration upward or otherwise be borne by Purchaser
after Closing;
(B)
all expenses (including all drilling costs, all capital expenditures, all overhead charges actually charged to Third Parties, and all
applicable royalties and similar burdens on production, but excluding Taxes) incurred in connection with the Oil and Gas Properties prior
to the Effective Date will be borne by Seller;
(C)
all (I) proceeds (net of applicable royalties, overriding royalties and other similar burdens on production, but excluding Taxes) from
the sale of Hydrocarbons produced from or allocable to the Oil and Gas Properties after the Effective Date, and (II) other net proceeds
from the sales of equipment, materials or other real or personal property attributable to the Oil and Gas Properties after the Effective
Date shall in either case adjust the Cash Consideration downward if received by Seller or otherwise be for the account of Purchaser;
(D)
all proceeds (net of applicable royalties, overriding royalties and other similar burdens on production, but excluding Taxes) from the
sale of Hydrocarbons produced from or allocable to the Oil and Gas Properties prior to the Effective Date shall be for the account of
Seller;
(E)
the value of all Hydrocarbons attributable to the Oil and Gas Properties and stored in existing tanks, pipelines (as inventory but not
as line-fill) and vessels, to the bottom of the applicable flange, as of the Effective Date shall be credited to Seller. The value of
such Hydrocarbons shall be calculated at a price equal to the average price received by Seller from sales during the month of the month
prior to the Effective Date of comparable Hydrocarbons from each field from which such Hydrocarbons were produced, net of royalties,
overriding royalties and other burdens upon, measured by or payable out of such Hydrocarbon production, gravity adjustments, quality
bank adjustments, marketing costs (which include for purposes hereof, among other things, costs of gathering, treating, processing, compression
and transportation), but excluding Taxes;
(F)
To the extent that there is any Imbalance attributable to the Properties as of the Effective Date, if the net of such Imbalance is in
an over-delivery Imbalance (resulting in amounts owed by Third Parties to Seller), the Cash Consideration shall be adjusted upward by
Seller’s applicable average price per unit for sales of production during the calendar month in which the Effective Date occurs,
multiplied by the net over-delivery Imbalance attributable to the Assets in the appropriate units of measure consistent with such applicable
average sales price;
(G)
To the extent that there is any Imbalance attributable to the Properties as of the Effective Date, if the net of such Imbalance is in
an under-delivery Imbalance (resulting in amounts owed by Seller to Third Parties), the Cash Consideration shall be adjusted downward
by Seller’s applicable average price per unit for sales of production during the calendar month in which the Effective Date occurs,
multiplied by the net under-delivery Imbalance attributable to the Assets in the appropriate units of measure consistent with such applicable
average sales price; and
(H)
Asset Taxes shall be allocated in accordance with Section 7.4(c).
(b)
Preliminary Settlement Statement.
(i)
On or before the day that is ten (10) Business Days prior to the Closing Date, Seller shall prepare and submit to Purchaser a preliminary
settlement statement estimating the Adjusted Purchase Price. Such preliminary settlement statement will set forth, in reasonable detail,
Seller’s good faith computation of each adjustment to the Cash Consideration described in Section 1.3(a), together with
a calculation of the adjustments used to determine such amount, reasonable supporting documentation including but not limited to revenue
statements, line itemed operating costs for both capital expenditures and lease operating expenses, accrual statements for costs yet
to be paid, and the designation of Seller’s account(s) for the wire transfers of funds as required by Section 1.4(c). Subject
to Purchaser’s right to comment as set forth in Section 1.3(b)(ii) below, such calculation shall be utilized by the Parties
for purposes of payment of the Adjusted Purchase Price at Closing pursuant to Section 1.4.
(ii)
Purchaser shall have the right, but not the obligation, to review the proposed preliminary settlement statement submitted by Seller in
accordance with Section 1.3(b)(i) and may, on or before the day that is five (5) Business Days prior to the Closing Date, provide
comments and proposed revisions to Seller with respect to the Adjusted Purchase Price as set forth therein. In the event Purchaser provides
Seller with any comments and proposed revisions, Seller shall consider such comments and proposed revisions in good faith with respect
to the preparation of any revised preliminary settlement statement.
(c)
Final Settlement Statement.
(i)
On or before the day that is the later of (A) the date that is ninety (90) days after the Closing Date or (B) five (5) Business Days
after the final determination of all disputed Title Defects and Environmental Defects, if any, Purchaser shall prepare and deliver to
Seller a draft of the proposed final settlement statement. In addition to the Records and other information provided by Seller to Purchaser
in accordance with Section 7.7, Seller shall provide any additional information reasonably requested by Purchaser in order for
Purchaser to prepare and deliver to Seller the draft of the proposed final settlement statement. Such proposed final settlement statement
will set forth Purchaser’s good-faith estimate of the final Adjusted Purchase Price, reflecting each adjustment made to the Cash
Consideration in accordance with this Agreement, which shall be computed in accordance with the terms of this Agreement and include a
calculation of the adjustments used to determine such amount and reasonable supporting documentation (the “Final Settlement
Statement”).
(ii)
Purchaser shall, at Seller’s request, supply reasonable documentation available including but not limited to revenue statements,
line itemed operating costs for both capital expenditures and lease operating expenses, accrual statements for costs yet to be paid,
to support any credit, charge, receipt, or other item shown in the proposed Final Settlement Statement.
(iii)
Within fifteen (15) days after Seller’s receipt of the Final Settlement Statement, Seller shall deliver to Purchaser a written
report containing any proposed changes to the Final Settlement Statement and an explanation of any such proposed changes and the reasons
therefor (an “Accounting Dispute Notice”). Any changes not specified in an Accounting Dispute Notice shall be deemed
waived, and Purchaser’s determinations with respect to all such elements of the Final Settlement Statement that are not specifically
addressed in an Accounting Dispute Notice shall prevail. If Seller fails to timely deliver an Accounting Dispute Notice to Purchaser
containing changes that Seller propose to be made to the Final Settlement Statement, then the Final Settlement Statement, as delivered
by Purchaser, will be deemed to be correct and will be final and binding on the Parties and not subject to any further audit or arbitration.
(iv)
If Seller timely delivers an Accounting Dispute Notice to Purchaser and the Parties are unable to agree upon the Final Settlement Statement
within thirty (30) days after Purchaser’s receipt of such Accounting Dispute Notice (the “Request Date”), then
each of Seller and Purchaser shall nominate and commit one of its senior officers to meet at a mutually agreed time and place not later
than ten days after the Request Date to attempt to resolve any matters set forth in such Accounting Dispute Notice. Each of Seller and
Purchaser shall make available to the other Party’s senior officers each of their work papers and back-up materials used in preparing
their estimates of the Adjusted Purchase Price and the financial records of Seller related to the calculation thereof.
(v)
If such senior officers are unable to resolve all unresolved matters in the Accounting Dispute Notice within a period of fifteen (15)
days after the Request Date (any such unresolved matters, an “Accounting Dispute”), either Seller or Purchaser shall
have the right, by written notice to the other Party specifying in reasonable detail the basis for the Accounting Dispute, to have the
Accounting Dispute exclusively and finally resolved by arbitration by submission thereof to Opportune LLP or, if Opportune LLP is unable
or unwilling to perform the arbitration, a nationally recognized independent public accounting firm commonly considered as one of the
“Big 4” and reasonably acceptable to Seller and Purchaser (or such other public accounting firm acceptable to Seller
and Purchaser) (the “Accounting Referee”). If Seller and Purchaser are unable to mutually agree upon an Accounting
Referee, the Accounting Referee shall be selected by the Denver, Colorado office of the American Arbitration Association. The Accounting
Referee shall serve as the sole arbitrator of any such Accounting Dispute.
(vi)
The scope of the Accounting Referee’s engagement shall be limited to the resolution of the items described in the notice of the
Accounting Dispute given in accordance with the foregoing and the corresponding calculation of the adjustments pursuant to Section
1.3(a). The Accounting Referee may not award damages or penalties to any Party with respect to any matter.
(vii)
Each Party shall bear its own legal fees and other costs of resolving any Accounting Dispute. Seller and Purchaser shall each bear one-half
of the fees and expenses of the Accounting Referee.
(viii)
The Accounting Referee shall be instructed by the Parties to resolve the Accounting Dispute as soon as reasonably practicable in light
of the circumstances but in no event later than thirty (30) days following the submission of the Accounting Dispute to the Accounting
Referee.
(ix)
To the extent previously provided to the other Party, Purchaser and Seller shall make available to the Accounting Referee at reasonable
times and upon reasonable notice at any time during the pendency of any Accounting Dispute submitted thereto each of their work papers
and back-up materials used in preparing their calculations of the Adjusted Purchase Price set forth on the Final Settlement Statement
and any written statements in response thereto, and the financial records of Seller related to the calculation thereof, but expressly
excluding any attorney work product or any privileged information or communications.
(x)
Purchaser and Seller shall have the right to meet jointly with the Accounting Referee during this period and to present their respective
positions. The decision and award of the Accounting Referee shall be (A) set forth in writing, (B) binding upon the Parties as an award
under the Federal Arbitration Act, and (C) final, conclusive and non-appealable to the maximum extent permitted by Applicable Law. Judgment
on the decision and award of the Accounting Referee may be entered in a court of competent jurisdiction and enforced by any Party as
a final judgment of such court.
(xi)
In determining the proper amount of any adjustment to the Cash Consideration, the Accounting Referee shall not increase the Purchase
Price more than the increase proposed by Seller nor decrease the Cash Consideration more than the decrease proposed by Purchaser, as
applicable.
(xii)
Any amounts owed by a Party under the Final Settlement Statement shall be paid by the Party owing such amount to the owed Party within
ten (10) Business Days after final determination of such owed amounts and shall be delivered in United States currency by wire transfer
of immediately available funds to the account specified in writing by the owed Party.
Section
1.4 Payment of the Adjusted Purchase Price. The Adjusted Purchase Price shall be paid by Purchaser to Seller as follows:
(a)
Concurrently with the execution of this Agreement, Purchaser shall deposit by wire transfer in same day funds into an interest-bearing
escrow account at the Bank of Texas (the “Escrow Account”) established pursuant to the terms of an Escrow Agreement,
in substantially the form attached hereto as Exhibit H (the “Escrow Agreement”), Nine Million Dollars ($9,000,000)
as a performance deposit (together with all interest accrued thereon, the “Deposit”). The Deposit shall be held by
the Escrow Agent in accordance with the terms of the Escrow Agreement.
(b)
If the Closing occurs, each of Seller and Purchaser will execute and deliver to the Escrow Agent a joint instruction letter directing
the Escrow Agent to release the Deposit to Seller and the Deposit will be credited against the Purchase Price at Closing as provided
in Section 2.2(b)(i) below.
(c)
If the Closing does not occur prior to June 17, 2024, the Deposit will be either (i) released to Seller or returned to Purchaser pursuant
to Section 10.2, as applicable, or (ii) released to Seller in accordance with the provisions of Section 10.3. Each of Seller
and Purchaser will execute and deliver to the Escrow Agent a joint instruction letter directing the Escrow Agent to release the Deposit
in accordance with the terms of Section 10.2 or Section 10.3, as applicable.
(d)
All payments by Purchaser to Seller pursuant to this Section 1.4 shall be made in immediately available funds by confirmed wire
transfer to a bank account or accounts designated by Seller.
Article
II
CLOSING
Section
2.1 Closing. Subject to the satisfaction or, if permissible, waiver of the conditions to Closing set forth in Article
IX, the closing of the Transaction (the “Closing”) shall take place at the office of Norton Rose Fulbright US
LLP located at 1225 17th Street, Suite 3050, Denver, Colorado, at 1:00 p.m. (Mountain Time) on a date agreed to by the Parties
which must be no later than the Outside Date; provided, however, that if on such date the conditions in Article IX to be
satisfied prior to Closing have not yet been satisfied or waived in accordance with the terms of this Agreement, unless this Agreement
has been terminated pursuant to Article X, then the Closing shall occur five (5) Business Days after such conditions have been
satisfied or waived (other than, for the avoidance of doubt, such conditions that by their nature are to be satisfied at the Closing).
The date on which the Closing actually takes place shall be the “Closing Date”. All Closing transactions shall be
deemed to have occurred simultaneously.
Section
2.2 Actions at Closing. Subject to the satisfaction or, if permissible, waiver of the conditions
set forth in Article IX, at the Closing, the following documents must be delivered, and the following events must occur:
(a)
Seller will deliver (or cause to be delivered) to Purchaser:
(i)
a certificate executed by a duly authorized officer of Seller dated as of the Closing Date, representing and certifying on behalf of
Seller that the conditions described in Section 9.2(a) (with respect to Seller’s representations and warranties in Article
III) and Section 9.2(b) have been satisfied;
(ii)
a certificate executed by a duly authorized officer of Seller and NR Operator dated as of the Closing Date, representing and certifying
on behalf of Seller and NR Operator that the required regulatory filings described in Section 7.9 have occurred;
(iii)
(A) a certificate substantially in the form of Exhibit F certifying that Seller (or its regarded owner, if Seller is an entity
disregarded as separate from its owner) is not a “foreign person” within the meaning of Section 1445 of the Code, and (B)
a Colorado Form DR 1083 certifying that Seller is not subject to withholding pursuant to Colo. Rev. Stat. § 39-22-604.5;
(iv)
a release or other written instrument that is reasonably acceptable to Purchaser that effectuates a full and unconditional release of
all Liens encumbering the Properties and securing Seller’s or any of its Affiliates indebtedness for borrowed money, including
those created under those instruments described in Schedule 3.25;
(v)
an assignment executed and delivered by Seller of the Properties, which assignment shall be substantially in the form of the instrument
attached as Exhibit I (the “Assignment”);
(vi)
a counterpart of the Transition Services Agreement substantially in the form of Exhibit J duly executed by NR Operator; and
(vii)
such other documents, instruments, and agreements as Purchaser reasonably requests or as required to consummate the Transaction, executed
as appropriate or required.
(b)
Purchaser will deliver (or cause to be delivered):
(i)
to Seller, the Cash Consideration, as adjusted pursuant to Section 1.3(b), less the amount of the Deposit and in accordance
with Section 1.4 by wire transfer of immediately available funds in U.S. dollars to the account(s) specified by Seller;
(ii)
to Seller, a certificate executed by a duly authorized officer of Purchaser dated as of the Closing Date, representing and certifying
that the conditions set forth in Section 9.1(a) and Section 9.1(b) have been satisfied;
(iii)
a counterpart of the Transition Services Agreement substantially in the form of Exhibit J duly executed by Purchaser; and
(iv)
to Seller, such other documents, instruments, and agreements as Seller reasonably requests as required to consummate the Transaction,
executed as appropriate or required.
Article
III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller
hereby represents and warrants to Purchaser as of the Execution Date and as of the Closing Date that:
Section
3.1 Organization. Seller is duly organized, validly existing, and in good standing under the laws of the State of Delaware
and has all requisite limited liability company power and authority to carry on its business as now being conducted. Seller is duly qualified
or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing
of the Properties makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified
or licensed and in good standing would not result in or be reasonably be expected to have a Material Adverse Effect.
Section
3.2 Power and Authority. Seller has all requisite power and authority to execute, deliver, and perform this Agreement and
each other agreement, instrument, or document executed or to be executed by Seller in connection with the Transaction and to consummate
the Transaction, and to conduct its business generally in the manner currently conducted. The execution, delivery, and performance by
Seller of this Agreement and each other agreement, instrument, or document executed or to be executed by Seller in connection with the
Transaction, and the consummation by it of the Transaction, have been duly authorized by all necessary action of Seller.
Section
3.3 Valid and Binding Agreement. This Agreement has been duly executed and delivered by Seller and constitutes, and each other
agreement, instrument, or document executed or to be executed by Seller in connection with the Transaction has been, or when executed
will be, duly executed and delivered by Seller, and when executed and delivered will constitute, a valid and legally binding obligation
of Seller, enforceable against Seller in accordance with their respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium and similar Applicable Laws affecting or relating to the enforcement of creditors’ rights generally
and the application of general principles of equity (regardless of whether that enforceability is considered in a proceeding at law or
in equity).
Section
3.4 Non-Contravention. Neither the execution, delivery and performance by Seller of this Agreement and each other agreement,
instrument or document executed or to be executed by Seller in connection with the Transaction nor the consummation by it of the Transaction
do or will (a) conflict with or result in a violation of any provision of Seller’s Governing Documents, (b) conflict with in any
material respect or result in a material violation of any provision of, or constitute (with or without the giving of notice or the passage
of time or both) a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of
termination, cancellation or acceleration under, any bond, debenture, note, mortgage or indenture or any material contract, agreement,
or other instrument or obligation to which Seller is a party or by which Seller or any of the Properties may be bound, (c) result in
the creation or imposition of any Lien on any of the Properties, or (d) result in a material violation of any Applicable Law binding
upon Seller.
Section
3.5 Approvals and Consents.
(a)
Except as disclosed in Schedule 3.5, no consent, approval, order or authorization of, or declaration, filing or registration with,
any Governmental Entity or of any other Person is required to be obtained or made by either Seller in connection with (i) the execution,
delivery or performance by Seller of this Agreement, each other agreement, instrument or document executed or to be executed by Seller
in connection with the Transaction or the consummation by Seller of the Transaction and (ii) the continuing validity and effectiveness
immediately following Closing of any Seller’s Contract or Oil and Gas Contract except for such consents, approvals, orders, authorizations,
declarations, filings or registrations from Governmental Entities customarily obtained post-closing.
(b)
Except as disclosed in Schedule 3.5, there are no consents or restrictions on assignment of the Properties in connection with
the Transaction.
Section
3.6 Pending Litigation. Except for the Excluded Assets and as disclosed in Schedule 3.6, there are no Proceedings pending
(which have been served on Seller, an Affiliate of Seller, or an agent for service of process of Seller, or of which Seller has received
notice) or to Seller’s Knowledge threatened in writing, by or against, or affecting, Seller or any of the Properties. There are
no Proceedings pending (which have been served on Seller, an Affiliate of Seller, or an agent for service of process of Seller, or of
which Seller has received notice) or to Seller’s Knowledge threatened, in which Seller is or may be a party affecting the execution
and delivery by Seller of this Agreement or any other agreement, instrument, or document executed or to be executed by Seller in connection
with the Transaction or the consummation of the Transaction.
Section
3.7 Compliance with Laws. Except as disclosed in Schedule 3.7, Seller is in compliance in all material respects with
all Applicable Laws and in the three (3) year period immediately preceding the Execution Date, Seller has not received any notice from
any Governmental Entity or any other Person that Seller is in material violation of or has materially violated any Applicable Laws. Seller
has obtained and holds in effect all material federal, state, and local government or other applicable Permits reasonably necessary for
Seller to own, lease, or operate the Properties and to carry on its business as now conducted. Neither the execution and delivery of
this Agreement by Seller or each other agreement, instrument, or document executed or to be executed by Seller in connection with the
Transaction, nor the consummation by Seller of the Transaction will result in a violation or breach of or constitute (with or without
due notice or lapse of time or both) a default (or give rise to a right of termination or cancellation) of any such Permit. Notwithstanding
the foregoing, this Section 3.7 does not relate to (a) environmental matters (including compliance with Environmental Laws or
matters that would constitute Environmental Defects), which are addressed by Section 3.13, (b) Taxes, which are addressed by Section
3.8, or (c) employee matters, which are addressed by Section 3.14.
Section
3.8 Taxes. Except as disclosed in Schedule 3.8:
(a)
all material Tax Returns with respect to Taxes that are required to be filed by Seller with respect to the Properties have been duly
and timely filed with the appropriate Taxing Authority (after giving effect to any valid extensions of time in which to make such filings),
all such Tax Returns are true, complete and correct in all material respects, and all material Taxes due and payable by Seller with respect
to the Properties (whether or not shown or required to be shown on any Tax Return) have been fully and timely paid;
(b)
no Tax Return or Tax relating to the Properties is subject to any waiver or extension (which is currently in effect) of the time in which
any Tax Return may be filed or for which any Taxes may be assessed or collected by a Taxing Authority;
(c)
no audit, litigation, or other Proceeding with respect to any Tax or Tax Return relating to the Properties has been commenced or is presently
pending or, to Seller’s Knowledge, threatened;
(d)
there are no Liens for Taxes (other than Permitted Encumbrances) upon the Properties;
(e)
no written claim has been made by any Governmental Entity or Taxing Authority in a jurisdiction in which Seller does not file Tax Returns
that Seller is or may be subject to taxation or required to file Tax Returns in that jurisdiction; and
(f)
none of the Properties is subject to any Tax partnership agreement or provisions, or is otherwise treated, or required to be treated,
as held in an arrangement, requiring a partnership Income Tax return to be filed under Subchapter K of Chapter 1 of Subtitle A of the
Code or any similar state statute.
Notwithstanding
anything in this Agreement to the contrary, (i) the Tax Representations contained in this Section 3.8 constitute the sole representations
and warranties being made by Seller with respect to Taxes, (ii) nothing in this Section 3.8 shall be interpreted as a representation
regarding the amount or availability of any Tax attributes, and (iii) the Tax Representations in this Section 3.8 refer only to
activities prior to the Closing Date and shall not serve as representations or warranties regarding, or a guarantee of, nor can they
be relied upon with respect to, Taxes attributable to any Tax period (or portion thereof) beginning, or Tax positions taken after, the
Closing Date.
Section
3.9 Contracts.
(a)
Schedule 3.9(a) sets forth a complete and accurate list of all Oil and Gas Contracts that are material to Seller’s business
or its ownership and operation of the Properties (but expressly excluding the Leases and the Permits) to which either Seller is a party
or bound or to which any of the Properties are subject as of the Execution Date and will be subject after the Closing Date (the “Seller
Contracts”), including:
(i)
any agreement requiring expenditures after the Execution Date in excess of One Hundred Thousand Dollars ($100,000.00) over the term of
such agreement (net to Seller’s interest), excluding the commitments described in Schedule 3.10(a), and such agreements
are set forth on Part I of Schedule 3.9(a);
(ii)
any contract with any Affiliate of Seller, and such agreements are set forth on Part II of Schedule 3.9(a);
(iii)
any agreements for the sale, exchange, gathering, marketing, processing and/or transportation of Hydrocarbons with a term exceeding thirty
(30) days, and such agreements are set forth on Part III of Schedule 3.9(a);
(iv)
any agreement of indemnification outside the ordinary course of business, and such agreements are set forth on Part IV of Schedule
3.9(a);
(v)
any production agreements or dedications, and such agreements are set forth on Part V of Schedule 3.9(a);
(vi)
any operating agreements, development agreements, or joint exploration agreements, including any farmin/farmout agreements, and such
agreements are set forth on Part VI of Schedule 3.9(a);
(vii)
partnership or joint venture agreements, and such agreements are set forth on Part VII of Schedule 3.9(a);
(viii)
any area of mutual interest agreements, and such agreements are set forth on Part VIII of Schedule 3.9(a);
(ix)
any gathering agreements, gas balancing agreements, or disposal agreements, and such agreements are set forth on Part IX of Schedule
3.9(a);
(x)
any agreements containing seismic licenses, Permits, and other rights to geological or geophysical data and information directly or indirectly
relating to the Leases, to the extent such agreements are assignable, and such agreements are set forth on Part X of Schedule 3.9(a);
(xi)
any unitization, pooling, and communitization agreements, including any declarations and orders, and such agreements are set forth on
Part XI of Schedule 3.9(a);
(xii)
any agreement pursuant to which Seller has granted any Person a right of first refusal, a preemptive right of purchase, or other option
to acquire any Oil and Gas Property, and such agreements are set forth on Part XII of Schedule 3.9(a); and
(xiii)
any agreement of indemnification in respect of the Oil and Gas Properties or the Oil and Gas Contracts, and such agreements are set forth
on Part XIII of Schedule 3.9(a);
(b)
Without limiting the requirements of Section 3.9(a), Seller has made, and, prior to the Closing Date, will continue to make, available
to Purchaser for inspection each Seller Contract and Oil and Gas Contract.
(c)
Seller is not in material breach or default under any Seller Contract or Oil and Gas Contract, and other than as set forth on Schedule
3.9(c), to Seller’s Knowledge, no other Person who is a party to any Seller Contract or Oil and Gas Contract is in breach or
default under such contract. To Seller’s Knowledge, no event has occurred, which after notice or lapse of time, or both, would
constitute a material default by Seller to any Seller Contract or Oil and Gas Contract.
Section
3.10 Outstanding Capital Commitments; Non-Consent Operations.
(a)
Except as set forth in Schedule 3.10(a), Seller has not made or entered into any commitments to incur expenditures in connection
with the ownership or operation of the Properties, other than routine expenses incurred in the normal and ordinary operation of the Properties.
All authorizations for expenditures and other binding commitments for the Oil and Gas Properties in excess of One Hundred Thousand Dollars
($100,000.00) (net to Seller’s interest) are set forth in Schedule 3.10(a).
(b)
Except as disclosed in Schedule 3.10(b), there are currently no operations in which Seller has elected not to participate, creating
non-consent status with respect to the Oil and Gas Properties.
Section
3.11 Imbalances. Schedule 3.11 sets forth all Imbalances, as of the date set forth on
such schedule (a) with respect to the Oil and Gas Properties operated by NR Operator, and (b) to Seller’s Knowledge, with respect
to all other Oil and Gas Properties.
Section
3.12 Brokers. No broker, investment banker, financial advisor or other Person is entitled to
any broker’s, finder’s, financial advisor’s or other similar fee or commission in connection with the Transaction based
upon arrangements made by or on behalf of Seller or its Affiliates and for which Purchaser may be or become liable.
Section
3.13 Environmental Matters. Except as disclosed in Schedule 3.13:
(a)
To Seller’s Knowledge, Seller’s business and the Properties are, and for the prior three (3) years, have been in compliance
in all material respects with Environmental Law;
(b)
Seller has not received nor, to Seller’s Knowledge, is the subject of, any material, threatened or actual, Claim, with respect
to: (i) the Release or threatened Release of Hazardous Materials or Release or threatened Release of Hydrocarbons into the environment
at, beneath, or on any property now or previously owned, operated, used or leased by Seller; (ii) the storage, management, or Release
of any Hazardous Material or Release of Hydrocarbons by Seller or for which Seller is responsible at any off-site location or property;
or (iii) the compliance of Seller’s business, or ownership, operation, lease, or use of the Properties, with Environmental Laws
or remediation required under Environmental Law and to Seller’s Knowledge there are no facts, circumstances, or conditions that
would provide a reasonable basis for the assertion of any material, threatened or actual, Claim, with respect to (i) through (iii);
(c)
to Seller’s Knowledge, there has been no Release of Hazardous Materials or Release of Hydrocarbons by any other Person at, on,
under, to, or from the Properties in amounts, form, or concentrations that would require investigation or remediation under Environmental
Law;
(d)
Seller has obtained, holds, and maintains in effect (including the timely filing of any renewals) all Permits necessary under Environmental
Law for the conduct of its business or the ownership, use, or operation of the Properties (the “Environmental Permits”);
(e)
Seller is not aware of any material costs or capital expenditures required in order to return the Properties to compliance with Environmental
Law or to maintain current compliance with Environmental Law or to meet any such additional requirements, if any, as may exist under
Environmental Law; and
(f)
Seller has provided true, complete, and correct copies of all reports, audits, assessments, sampling, notice of violation, enforcement
documents, studies, or other material documents relating to compliance of Seller and the Properties with Environmental Law or liabilities
under Environmental Law.
Section
3.14 Employee and Labor Matters. Seller does not have, and never has had, any employees.
Section
3.15 Plugging and Abandonment. Except as disclosed in Schedule 3.15, with regard to the
Oil and Gas Properties operated by Seller, and, to Seller’s Knowledge, with regard to the Oil and Gas Properties operated by Third
Parties:
(a)
there are no Wells that Seller currently is obligated by Applicable Law to plug and abandon;
(b)
there are no Wells in which Seller has an interest that are subject to exceptions to a requirement to plug and abandon issued by a Governmental
Entity having jurisdiction over the applicable lease;
(c)
there is no Well subject to penalties on allowables after the Effective Date on account of overproduction; and
(d)
there are no Wells in which Seller has an interest that have been plugged and abandoned but have not been plugged in accordance, in all
material respects, with all applicable requirements of each Governmental Entity having jurisdiction over the Oil and Gas Properties.
Section
3.16 Condemnation. There is no actual or, to Seller’s Knowledge, threatened, taking (whether
permanent, temporary, whole, or partial) of any part of the Oil and Gas Properties by reason of condemnation or the threat of condemnation.
Section
3.17 Suspense Funds. Schedule 3.17 lists (a) any funds held in suspense by Seller as of the date noted thereon, (b)
the account(s) in which such funds are being held and (c) to the extent known, the name or names of the Persons claiming such funds.
All funds or amounts that should be held in suspense by Seller are listed on Schedule 3.17.
Section
3.18 Special Warranty of Title. If Closing occurs, then effective as of the Closing Date, Seller
warrants Defensible Title to the Oil and Gas Properties against every Person whomsoever lawfully claiming or to claim the same or any
part thereof by, through or under Seller, but not otherwise, subject, however, to the Permitted Encumbrances.
Section
3.19 Preferential Purchase Rights and AMIs. Except as disclosed in Schedule 3.19, to Seller’s
Knowledge, there are no preferential purchase rights, rights of first refusal, change of control or other similar rights applicable to
the transfer of the Properties in connection with the Transaction. Additionally, none of the Properties are subject to or included in
any area of mutual interest agreements that would be binding on Purchaser following Closing.
Section
3.20 Payments.
(a)
All royalties, rentals, and other payments due under the Leases operated or marketed by NR Operator or its Affiliates have been properly
and timely paid or placed in suspense accounts, and all operating expenses and costs have been timely and properly paid.
(b)
To Seller’s Knowledge, all royalties, rentals, and other payments due under any Oil and Gas Property that is operated or marketed
by a Third Party have been properly and timely paid or placed in suspense accounts; and all operating expenses and costs have been timely
and properly paid.
Section
3.21 Leases. Seller is not in material breach or default under any Lease and Seller has not
received any written notice of breach or default under any Lease, which breach or default has not been fully cured or otherwise fully
resolved. To Seller’s Knowledge, there are no conditions or circumstances that reasonably could be expected to lead to claims by
lessors of termination or cancellation of Leases.
Section
3.22 Production Sales Contracts. No interest in the Properties is encumbered by any obligation under a sales contract, hedging
contract, take-or-pay clause, or any similar arrangement, to deliver Hydrocarbons produced from the Properties without receiving payment
at the time or subsequent to delivery, or to deliver Hydrocarbons in the future for which payment has already been received (e.g.,
a “forward” sale contract).
Section
3.23 Wells and Equipment.
(a)
To Seller’s Knowledge, all Wells and Equipment that are part of the Properties are in a state of repair adequate to maintain normal
operations in accordance with past practices, ordinary wear and tear excepted, and the Wells do not contain junk, fish, or other mechanical
obstructions that reasonably could materially impede or interfere with production, recompletions, or stimulations.
(b)
The Wells and the Equipment, constitute all of the assets, tangible and intangible, of any nature whatsoever, necessary to operate the
Properties in the manner presently operated by Seller.
Section
3.24 Bankruptcy. No bankruptcy, reorganization or receivership Proceedings are pending or being
contemplated by Seller or, to Seller’s Knowledge, threatened in writing against Seller or any Affiliate which controls Seller.
Section
3.25 No Liens. Except for those Liens set forth on Schedule 3.25, there are no Liens
securing indebtedness for borrowed money of Seller or any Affiliate of Seller affecting the Properties.
Section
3.26 Continuous Operating Activities. Schedule 3.26 sets forth all undeveloped Leases whose primary term will expire
within six (6) months of the Execution Date and any Lease that requires continuous drilling operations to be performed in order to maintain
such Lease in effect in accordance with its terms.
Section
3.27 Insurance. Schedule 3.27 sets forth a true and complete list of each insurance policy,
including primary and/or excess coverage, held by or for the benefit of Seller and providing coverage for or with respect to the ownership
or operation of the Oil and Gas Properties. Seller has not failed to give any notice or present any claim under any such policy in a
due and timely fashion and there are no outstanding claims under such policies.
Section
3.28 Payout Balances. Schedule 3.28 sets forth the status of any payout balance, as of the dates shown on Schedule
3.28, for each Well that is subject to a reversion or other adjustment at some level of cost recovery or payout.
Section
3.29 Bonds and Credit Support. Schedule 3.29 sets forth each bond, letter of credit, or other similar credit support
instruments maintained by Seller or NR Operator with any Governmental Entity or other Third Party with respect to Seller’s ownership
or operation of the Properties.
Section
3.30 Disclosures of Material Facts. No representation or warranty or other statement made by Seller or NR Operator or any
of its or their representatives (including with respect to any representation or warranty or other statement made in this Article
III, the Assignment or in any of the Exhibits and Schedules attached hereto or thereto, or in any certificate delivered in accordance
with this Agreement, or in any materials made available to Purchaser or its representatives or otherwise in connection with the Transaction)
contains any untrue statement of material fact or omits to state a known material fact necessary to make the statements in this Agreement,
in light of the circumstances in which they were made, not misleading.
Article
IV
DISCLAIMERS
Section
4.1 Limitation of Representations and Warranties.
(a)
EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN ARTICLE III (INCLUDING SPECIFICALLY THE REPRESENTATION AND WARRANTY SET
FORTH IN SECTION 3.30) OR THE ASSIGNMENT, SELLER WILL CONVEY TO PURCHASER THE PROPERTIES WITHOUT ANY EXPRESS, STATUTORY, OR IMPLIED
WARRANTY OR REPRESENTATION OF ANY KIND FROM SELLER OR ANY OF ITS AFFILIATES, INCLUDING WARRANTIES OR REPRESENTATIONS RELATING TO (A)
SELLER, (B) TITLE OF SELLER IN AND TO THE PROPERTIES, (C) THE CONDITION OF THE PROPERTIES, (D) ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY
OF THE PROPERTIES, (E) ANY IMPLIED OR EXPRESS WARRANTY OF THE FITNESS OF THE PROPERTIES FOR A PARTICULAR PURPOSE, (F) ANY IMPLIED OR
EXPRESS WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (G) ANY AND ALL OTHER IMPLIED WARRANTIES EXISTING UNDER APPLICABLE
LAW NOW IN EFFECT, OR (H) ANY IMPLIED OR EXPRESS WARRANTY REGARDING COMPLIANCE WITH ANY APPLICABLE ENVIRONMENTAL LAWS, THE RELEASE OF
MATERIALS INTO THE ENVIRONMENT, OR PROTECTION OF THE ENVIRONMENT OR HEALTH.
(b)
EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN ARTICLE III (INCLUDING SPECIFICALLY THE REPRESENTATION AND WARRANTY SET
FORTH IN SECTION 3.30) OR THE ASSIGNMENT, PURCHASER ACCEPTS THE PROPERTIES “AS IS, WHERE IS” AND “WITH ALL FAULTS”
AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR.
(c)
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN ARTICLE III (INCLUDING
SPECIFICALLY THE REPRESENTATION AND WARRANTY SET FORTH IN SECTION 3.30) OR THE ASSIGNMENT, NEITHER SELLER, NOR ITS CONSULTANTS,
REPRESENTATIVES, OR AGENTS MAKES ANY REPRESENTATION OR WARRANTY AS TO (A) THE AMOUNT, VALUE, QUALITY, QUANTITY, VOLUME, OR DELIVERABILITY
OF ANY OIL, GAS, OR OTHER MINERALS OR RESERVES IN, UNDER, OR ATTRIBUTABLE TO THE OIL AND GAS PROPERTIES, (B) THE PHYSICAL, OPERATING,
REGULATORY COMPLIANCE, SAFETY, OR ENVIRONMENTAL CONDITION OF THE PROPERTIES, (C) THE GEOLOGICAL OR ENGINEERING CONDITION OF THE OIL AND
GAS PROPERTIES OR ANY VALUE THEREOF OR (D) THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA, INFORMATION, OR RECORDS FURNISHED
TO PURCHASER IN CONNECTION WITH SELLER OR THE PROPERTIES.
Section
4.2 Presence of Wastes, NORM, Hazardous Materials. PURCHASER ACKNOWLEDGES THAT THE PROPERTIES HAVE BEEN USED TO EXPLORE FOR, DEVELOP
AND PRODUCE HYDROCARBONS, AND THAT SPILLS OF WASTES, HYDROCARBONS, PRODUCED WATER, HAZARDOUS MATERIALS AND OTHER MATERIALS MAY HAVE OCCURRED
THEREON. ADDITIONALLY, THE PROPERTIES, INCLUDING PRODUCTION EQUIPMENT, MAY CONTAIN HAZARDOUS MATERIALS OR NORM. NORM MAY AFFIX OR ATTACH
ITSELF TO THE INSIDE OF WELLS, MATERIALS AND EQUIPMENT AS SCALE OR IN OTHER FORMS, AND NORM-CONTAINING MATERIAL MAY HAVE BEEN BURIED
OR OTHERWISE DISPOSED OF ON THE PROPERTIES. A HEALTH HAZARD MAY EXIST IN CONNECTION WITH THE PROPERTIES BY REASON THEREOF. SPECIAL PROCEDURES
MAY BE REQUIRED FOR REMEDIATING, REMOVING, TRANSPORTING AND DISPOSING OF NORM, HAZARDOUS MATERIALS AND OTHER MATERIALS FROM THE PROPERTY.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT OR ANY OTHER INSTRUMENT DELIVERED HEREUNDER, WITH RESPECT TO THE PROPERTIES
ACTUALLY ACQUIRED BY PURCHASER HEREUNDER, SELLER DOES NOT MAKE, AND SELLER EXPRESSLY DISCLAIMS, AND PURCHASER WAIVES ANY REPRESENTATION
OR WARRANTY, EXPRESS OR IMPLIED, ORAL OR WRITTEN, WITH RESPECT TO THE PRESENCE OR ABSENCE OF NORM IN OR ON THE ASSETS IN QUANTITIES TYPICAL
FOR OILFIELD OPERATIONS IN THE AREA WHERE THE PROPERTIES ARE LOCATED. PURCHASER ASSUMES FROM AND AFTER CLOSING ALL LIABILITY FOR THE
ASSESSMENT, REMEDIATION, REMOVAL, TRANSPORTATION AND DISPOSAL OF THESE MATERIALS AND ANY ASSOCIATED ACTIVITIES IN ACCORDANCE WITH APPLICABLE
LAWS. THE FOREGOING SHALL NOT MODIFY OR LIMIT SELLER’S INDEMNITY OBLIGATIONS UNDER SECTION 11.2 OR PURCHASER’S RIGHTS,
IF ANY, WITH RESPECT TO ANY CLAIM FOR ANY BREACH OF SELLER’S REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLE III OR
WITH RESPECT TO ANY CLAIM UNDER ARTICLE VIII.
Section
4.3 Certain Disclaimers. EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THIS AGREEMENT (INCLUDING SPECIFICALLY THE REPRESENTATION
AND WARRANTY SET FORTH IN SECTION 3.30), SELLER SHALL NOT HAVE ANY LIABILITY IN CONNECTION WITH, AND HAS NOT MADE AND WILL NOT
MAKE (AND HEREBY DISCLAIMS), ANY REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, ENVIRONMENTAL
DEFECTS, ENVIRONMENTAL LIABILITIES, THE RELEASE OF HAZARDOUS MATERIALS, HYDROCARBONS OR NORM INTO THE ENVIRONMENT OR THE PROTECTION OF
HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF THE PROPERTIES, AND NOTHING IN THIS
AGREEMENT OR OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR WARRANTY, AND PURCHASER SHALL BE DEEMED TO BE TAKING THE PROPERTIES
“AS IS, WHERE IS” FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION. PURCHASER SHALL HAVE INSPECTED, OR WAIVED
(AND UPON CLOSING SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT, THE PROPERTIES FOR ALL PURPOSES, AND SATISFIED ITSELF AS TO THEIR
PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING CONDITIONS SPECIFICALLY RELATING TO THE PRESENCE, RELEASE,
OR DISPOSAL OF HAZARDOUS MATERIALS, SOLID WASTES, OTHER MAN-MADE FIBERS, AND NORM. PURCHASER IS RELYING SOLELY UPON THE TERMS OF THIS
AGREEMENT AND ITS OWN INSPECTION OF THE PROPERTIES. AS OF CLOSING, PURCHASER HAS MADE ALL SUCH REVIEWS AND INSPECTIONS OF THE PROPERTIES
AND THE RECORDS AS PURCHASER HAS DEEMED NECESSARY OR APPROPRIATE TO CONSUMMATE THE TRANSACTION.
Article
V
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
Purchaser
hereby represents to Seller as of the Execution Date and as of the Closing Date that:
Section
5.1 Organization. Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of
its formation. Purchaser is duly qualified or licensed to do business and in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties make such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would not prevent or materially delay the consummation of
the Transaction.
Section
5.2 Power and Authority. Purchaser has all requisite power and authority to execute, deliver, and perform this Agreement and
each other agreement, instrument, or document executed or to be executed by Purchaser in connection with the Transaction and to consummate
the Transaction. The execution, delivery, and performance by Purchaser of this Agreement and each other agreement, instrument, or document
executed or to be executed by Purchaser in connection with the Transaction, and the consummation by it of the Transaction, have been
duly authorized by all necessary action of Purchaser.
Section
5.3 Valid and Binding Agreement. This Agreement has been duly executed and delivered by Purchaser and constitutes, and each
other agreement, instrument, or document executed or to be executed by Purchaser in connection with the Transaction has been, or when
executed will be, duly executed and delivered by Purchaser, and constitutes, or when executed and delivered will constitute, a valid
and legally binding obligation of Purchaser, enforceable against it in accordance with their respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, moratorium and similar Applicable Laws affecting or relating to the enforcement
of creditors’ rights generally and the application of general principles of equity (regardless of whether that enforceability is
considered in a proceeding at law or in equity).
Section
5.4 Non-Contravention. Neither the execution, delivery, and performance by Purchaser of this Agreement and each other agreement,
instrument, or document executed or to be executed by Purchaser in connection with the Transaction nor the consummation by it of the
Transaction do and will (a) conflict with or result in a violation of any provision of Purchaser’s Governing Documents, (b) conflict
with or result in a violation of any provision of, or constitute (with or without the giving of notice or the passage of time or both)
a default under, or give rise (with or without the giving of notice or the passage of time or both) to any right of termination, cancellation,
or acceleration under, any bond, debenture, note, mortgage or indenture or any material contract, agreement or other instrument or obligation
to which Purchaser is a party or by which Purchaser or any of Purchaser’s properties may be bound, except for such conflicts, violations,
defaults or rights which would not reasonably be expected to result in a Material Adverse Effect on the execution and delivery of this
Agreement by Purchaser or any other agreement, instrument or document executed or to be executed by Purchaser in connection with the
Transaction or the consummation of the Transaction by Purchaser, or (c) violate any Applicable Law binding upon Purchaser.
Section
5.5 Approvals. Except as may apply to the Registration Statement, no consent, approval, order, or authorization of, or declaration,
filing, or registration with, any Governmental Entity or of any other Third Party is required to be obtained or made by Purchaser in
connection with the execution, delivery, or performance by Purchaser of this Agreement, each other agreement, instrument, or document
executed or to be executed by Purchaser in connection with the Transaction or the consummation by it of the Transaction.
Section
5.6 Proceedings. To Purchaser’s Knowledge, there are no Proceedings pending or threatened against Purchaser, which would
be reasonably likely to result in a Material Adverse Effect on the execution and delivery of this Agreement by Purchaser or the consummation
of the Transaction by Purchaser.
Section
5.7 Financing. Purchaser has, or will have by Closing, sufficient cash in immediately available funds with which to pay the
cash component of the Purchase Price and otherwise will be able to consummate the Transaction and perform its obligations under this
Agreement. Following the Closing, Purchaser will have, or will have access to, sufficient funds to satisfy any payment obligations to
Seller hereunder. Purchaser will not file the Registration Statement until an Underwriter has been internally authorized to be lead underwriter
on the Registration Statement and is identified as such on the initial Registration Statement submission to the SEC, unless such condition
is waived by Seller, in Seller’s reasonable discretion.
Section
5.8 Investment Experience. Purchaser is sophisticated in the evaluation, purchase, ownership, and operation of oil and gas
properties and acknowledges that it can bear the economic risk of its investment in the Properties and has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Properties.
Section
5.9 Independent Evaluation. Purchaser is an experienced and knowledgeable investor in the oil and gas business and the business
of owning and operating oil, gas, and mineral properties. Purchaser has had access to the Properties, the officers, consultants and other
Representatives of Seller, and the books, records, and files of Seller relating to the Properties. In making the decision to enter into
this Agreement and to consummate the Transaction, Purchaser has relied on (a) the basis of its own independent due diligence investigation
of the Properties, and (b) the representations and warranties made by Seller in this Agreement and the instruments and agreements delivered
hereunder, respectively, and (c) Purchaser’s own expertise and legal, land, tax, reservoir engineering, and other professional
counsel concerning the Transaction, the Properties, and the value thereof.
Section
5.10 Brokers. No broker, investment banker, financial advisor or other Person is entitled to any broker’s, finder’s,
financial advisor’s or other similar fee or commission in connection with the Transaction based upon arrangements made by or on
behalf of Purchaser that Seller would be liable for.
Section
5.11 Disclosures of Material Fact. No representation or warranty or other statement made by Purchaser or Purchaser Operator
or any of its or their representatives (including with respect to any representation or warranty or other statement made in this Article
V, or in any certificate delivered in accordance with this Agreement, or in any materials made available to Seller or its representatives
or otherwise in connection with the Transaction) contains any untrue statement of material fact or omits to state a known material fact
necessary to make the statements in this Agreement, in light of the circumstances in which they were made, not misleading.
Article
VI
CONDUCT OF SELLER PENDING CLOSING
Seller
covenants and agrees with Purchaser as follows:
Section
6.1 Conduct and Preservation of Business. Except as expressly provided in this Agreement or with prior written consent from
Purchaser, in Purchaser’s reasonable discretion, following good faith discussions between the Parties, with due regard for the
preservation and maintenance of the Oil and Gas Properties, and in light of Seller’s normal operating practices and knowledge of
and experience with the Oil and Gas Properties, from the Execution Date to the Closing, Seller shall, or shall cause NR Operator to,
in each case with respect to the Properties:
(a)
conduct operations in accordance with Seller’s or NR Operator’s, as applicable, ordinary course of business, consistent with
past practice and in compliance with all Applicable Laws and contractual obligations; provided, that as it pertains to the Elder West
wells, Seller shall maintain the NR Operating choke management program presented to Purchaser which strictly prohibits any premature
opening of the chokes and; provided, further, that any proposed deviation from such choke management program shall be notified by Seller
to Purchaser and no deviations shall be allowed without Purchaser’s prior written consent;
(b)
preserve, maintain, keep, and protect the Properties, including undertaking any continuous development operations required under any
Lease during the period from the Execution Date until the Closing in order to prevent such Lease from terminating during such period
on account of failing to perform such operations;
(c)
negotiate and document the acquisition of any additional oil and gas leases or mineral fee interests, in each case only to the extent
that such additional oil and gas leases or mineral fee interests cover any interests located within the Units, as described on Exhibit
A-4, from the period beginning on the Execution Date and ending on April 16, 2024 (such activities, the “Contemplated Leasing
Activities”); provided, that (i) any definitive acquisition documents must be approved in writing by Purchaser, in its
sole discretion, or its representatives prior to execution and, (ii) any additional oil and gas leases or mineral fee interests approved
by Purchaser and executed by Seller as part of the Contemplated Leasing Activities shall be included as a “Lease” or a “Mineral
Fee Interest”, as applicable, for the purposes of this Agreement and the Transaction and shall be added by Seller to the appropriate
Schedule; provided, further, that Purchaser shall not be responsible for any costs or expenses with respect to the Contemplated Leasing
Activities that (x) are not approved by Purchaser in writing, or (y) represent or are attributable to Seller or its Affiliates general
and administrative expenses or other internal overhead costs of Seller or its Affiliates;
(d)
timely pay all undisputed costs and expenses (including royalties) with respect to the Properties;
(e)
maintain insurance upon all of the Properties in such amounts and of such kinds comparable to that in effect on the Execution Date;
(f)
maintain all material Permits, approvals, bonds, and guaranties affecting the Properties;
(g)
to the extent within Seller’s Knowledge and otherwise not disclosed in any Schedule attached hereto or otherwise received in writing
by Seller or NR Operator, promptly provide Purchaser with written notice of (i) any proposal from a Third Party to engage in any material
transaction (e.g., a farmout, pooling, etc.) with respect to the Oil and Gas Properties; (ii) any proposals of operations with respect
to the Oil and Gas Properties; (iii) any breach, termination, or repudiation by any party to any Seller Contract or Oil and Gas Contract;
and (iv) Proceeding with respect to the Properties;
(h)
promptly notify Purchaser of any material emergency or other material change in or affecting the Properties;
(i)
take such actions necessary, if any, to effectuate NR Operator’s resignation as operator of the Oil and Gas Properties and to support
and effectuate Purchaser Operator’s designation as operator under the joint operating agreements set forth on Part VI of Schedule
3.9(a) and provide, or cause to be provided, prompt written notice of such actions to Purchaser;
(j)
submit, as necessary or desirable, regulatory filings to applicable Governmental Entities on behalf of Purchaser that enable continuous
operations to occur immediately after the Closing Date;
(k)
provide Purchaser with regular and timely operational updates, which shall be in Seller’s reasonable discretion and shall not unduly
interfere with Seller’s operations; and
(l)
provide such assistance and support to Purchaser and its representatives as reasonably is necessary in connection with Purchaser’s
preparation, filing, preparation of amendments and responses to comment letters, obtaining SEC clearance, and effectiveness of the Registration
Statement and related disclosures and pro forma financial statements contained therein.
Section
6.2 Restrictions on Certain Actions. Without limiting the generality of the foregoing and except (a) for actions taken in
connection with emergency situations, (b) as expressly provided in this Agreement, (c) as required by Applicable Law, (d) any obligation
Seller must perform or take to comply with any Oil and Gas Contract, Lease, or Permit referred to on any Exhibit or Schedule hereto,
(e) for the Contemplated Leasing Activities, or (f) as disclosed in Schedule 6.2, prior to the Closing, Seller shall not, and
Seller shall ensure that NR Operator does not, take, consent to, or allow any of the following actions, without the prior written consent
of Purchaser (which consent shall not be unreasonably withheld, conditioned, or delayed):
(a)
sell, lease, transfer, farmout or otherwise dispose of or pledge or encumber, directly or indirectly, any Properties, except for (i)
sales of Hydrocarbons in the ordinary course of business, or (ii) sales of inventory and excess or obsolete assets in the ordinary course
of business or personal property in the ordinary course of business that is either replaced by equivalent property or normally consumed
in the operation of Seller’s business;
(b)
enter into any lease, contract, agreement, commitment, arrangement, or transaction, or otherwise enter into any agreement to enter into
any lease, contract, agreement, commitment, arrangement, or transaction, in each case that would be a Seller Contract or an Oil and Gas
Contract had such lease, contract, agreement, commitment, arrangement, or transaction been entered into on or as of the Execution Date;
(c)
amend, modify, terminate, or change in any material respect any Lease, Seller Contract or Oil and Gas Contract, except as necessary to
cure any Title Defect in accordance with this Agreement upon prior notice of any such action to Purchaser and Purchaser’s consent
to such action;;
(d)
propose or accept a proposal by a Person that would have been required to be disclosed to Purchaser on Schedule 3.10(a);
(e)
elect, or be deemed to have elected, to not participate or be non-consenting in any operation affecting the Properties;
(f)
settle, or offer or propose to settle, any Proceeding that relates to the Properties or the Transaction;
(g)
except as expressly contemplated herein, Seller shall not take any action to resign as operator of the Properties; or
(h)
commit, authorize, propose, or agree in writing or otherwise to take, any of the actions described in this Section 6.2.
Section
6.3 Exclusive Right to Purchase. From and after the Execution Date until the earlier of the Closing Date or an earlier termination
of this Agreement pursuant to Section 10.1(a), (the “Termination Date”), which Termination Date may be extended
by the written agreement of the Parties, Seller agrees that it shall not, and shall not permit any of its officers, owners, employees,
subsidiaries, affiliates, representatives, agents, or anyone else acting on its behalf and at its direction (collectively “Representatives”)
to, directly or indirectly solicit, entertain or encourage inquiries or proposals or participate or engage in any negotiations or discussions
with third parties concerning an acquisition or purchase, directly or indirectly, of the Assets that would be competitive with or comparable
to the transactions described herein (including through a farmout, sublease, the sale of any equity interests, a merger transaction or
other business combination that would effectively transfer such assets to a Third Party, in whole or in part) (an “Alternate
Transaction”), or enter into any agreement, letter of intent, memorandum of understanding, agreement in principle, or other
agreement constituting or directly related to, or which is reasonably likely to lead to, an Alternate Transaction or any proposal for
an Alternate Transaction. Further, Seller will instruct its Representatives to refrain from engaging in any of the activities described
in the preceding sentence and will be responsible for any violation by its Representatives of the foregoing restrictions. Either Party
may waive any of its rights hereunder by providing written notice of such waiver of the other Party.
Section
6.4 Leasing Restrictions. For a period of twelve (12) months beginning on the Closing Date, Seller shall not, and shall not
permit any of its officers, or any their agents, or anyone acting, directly or indirectly, on their behalf or at their direction or control,
to enter into any lease, contract, agreement, commitment, arrangement, or transaction, in each case to own or operate, directly or indirectly,
any oil and gas leases, units or well or any other similar properties and interests covering the lands identified on Exhibit K,
without the prior written consent of Purchaser, in Purchaser’s sole discretion.
Section
6.5 Financing Statements. The Parties shall each provide, as required or appropriate in connection with the preparation and
processing of the Registration Statement, audited 2023 year-end financials on or before March 4, 2024 and, if necessary, completed and
reviewed first quarter 2024 financials on or before May 31, 2024. For the avoidance of doubt, for the purposes of this Section 6.5
the term “Parties” specifically includes both Seller and NR Operator. In addition to and inclusive of the foregoing,
Seller shall provide relevant data, information, statements, and financials, that are not yet complete or reviewed, in a timely manner,
and on an ongoing basis, if and as needed to assist in the preparation of the Registration Statement and shall do so in reasonable consultation
with Purchaser.
Article
VII
ADDITIONAL AGREEMENTS OF THE PARTIES
Section
7.1 Access. Subject to the terms of the Confidentiality Agreement and Article VIII, between the date of the Letter
of Intent and the Closing Date, Seller will give Purchaser and Purchaser’s authorized Representatives reasonable access (including
access via a virtual data room) to Seller’s Office, accounting and financial books, Records, files and other similar documents
and materials to the extent in Seller’s possession, custody or control, and will make available appropriate natural persons to
answer inquiries from Purchaser. To the extent allowed by Applicable Law, Seller shall provide Purchaser with access to any administrative
or regulatory filings with or submissions to any applicable Governmental Entity, including any material communication with such Governmental
Entity.
Section
7.2 Confidentiality Agreement. The Confidentiality Agreement, except to the extent provided therein or modified herein (including
pursuant to Section 7.6), will remain in full force and effect; provided, however, that upon Closing, except to
the extent otherwise stated therein, the Confidentiality Agreement shall automatically terminate and shall be void for all purposes and
of no further force or effect, except with respect to the Excluded Assets.
Section
7.3 Commercially Reasonable Efforts. Prior to Closing, each Party agrees that it will not voluntarily undertake any course
of action inconsistent with the provisions or intent of this Agreement and will use its Commercially Reasonable Efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things reasonably necessary, proper, or advisable under Applicable Laws to
consummate the Transaction, including:
(a)
Seller shall use Commercially Reasonable Efforts to provide notifications and requests for consent with respect to the transfer requirements
set forth on Schedule 3.5 promptly after the Execution Date.
(b)
The Parties shall use Commercially Reasonable Efforts to cooperate to obtain any consents, approvals, orders, authorizations, waivers,
declarations, filings, or registrations of or with any Governmental Entity or other Third Party that are required in connection with
the consummation of the Transaction or curing any Title Defect;
(c)
the Parties will use their respective Commercially Reasonable Efforts to cooperate with each other to cause to be lifted or rescinded
any injunction or restraining order or other order adversely affecting the ability of the Parties to consummate the Transaction;
(d)
the Parties will use their respective Commercially Reasonable Efforts to defend, and to cooperate with each other in defending, all Proceedings
challenging this Agreement or the consummation of the Transaction; and
(e)
the Parties will execute any additional instruments necessary to consummate the Transaction or cure any Title Defect.
Section
7.4 Taxes.
(a)
All Transfer Taxes shall be borne by Purchaser. All Tax Returns with respect to Transfer Taxes shall be timely filed by the Party responsible
for such filing under applicable law. Seller shall be responsible for filing all Form 1099s relating to the Properties with respect to
the period or portion thereof ending on the Closing Date. Purchaser and Seller shall reasonably cooperate in good faith to minimize,
to the extent permissible under applicable law, the amount of any Transfer Taxes.
(b)
Sellers shall retain responsibility for, and shall bear, all Asset Taxes for (i) any period ending prior to the Effective Date and (ii)
the portion of any Straddle Period ending immediately prior to the Effective Date. All Asset Taxes arising on or after the Effective
Date (including the portion of any Straddle Period beginning at the Effective Date) shall be allocated to and borne by Purchaser. For
purposes of determining the allocations described in this Section 7.4(c), (A) Asset Taxes that are attributable to the severance
or production of Hydrocarbons (other than Asset Taxes described in clause (C) below) shall be allocated based on severance or
production occurring before the Effective Date (which shall be Seller’s responsibility) and from and after the Effective Date (which
shall be Purchaser’s responsibility); (B) Asset Taxes that are based upon or related to sales or receipts or imposed on a transactional
basis (other than such Asset Taxes described in clause (A) or clause (C)) shall be allocated based on transactions giving
rise to such Asset Taxes occurring before the Effective Date (which shall be Sellers’ responsibility) and from and after the Effective
Time (which shall be Purchaser’s responsibility); and (C) Asset Taxes that are ad valorem, property or other Asset Taxes imposed
on a periodic basis with respect to a Straddle Period shall be allocated pro rata per day between the portion of the Straddle Period
ending immediately prior to the Effective Date (which shall be Seller’s responsibility) and the portion of the Straddle Period
beginning at the Effective Date (which shall be Purchaser’s responsibility). Based on the best current information available as
of the preparation of the Preliminary Settlement Statement and Final Settlement Statement, the allocation to Seller or Purchaser or the
proration of Asset Taxes shall be made between the Parties as an adjustment to the Preliminary Settlement Statement and Final Settlement
Statement. For purposes of the preceding sentence, any exemption, deduction, credit or other item that is calculated on an annual basis
shall be allocated pro rata per day between the portion of the Straddle Period ending immediately prior to the Effective Date and the
portion of the Straddle Period beginning at the Effective Date.
(c)
To the extent the actual amount of any Asset Taxes described in this Section 7.4 is not determinable at Closing or the date the
Final Settlement Statement becomes final and binding on the Parties under Section 1.3(c), Purchaser and Seller shall utilize the
most recent information available in estimating the amount of such Asset Taxes for purposes of Section 1.3.
(d)
Except as required by applicable laws, (i) Seller shall be responsible for timely remitting all (A) Asset Taxes (excluding ad valorem
and property Taxes) due prior to the Closing Date and (B) Asset Taxes that are ad valorem and property Taxes with respect to the 2023
Colorado Oil and Gas Property Taxes (measured by 2022 production and payable in 2024) (ii) Purchaser shall be responsible for timely
remitting all (A) Asset Taxes (excluding ad valorem and property Taxes) due on or after the Closing Date with respect to periods beginning
prior to the Effective Date and (B) all Asset Taxes that are ad valorem and property Taxes with respect to the 2024 Colorado Oil and
Gas Property Taxes (measured by 2023 production and payable in 2025) and the 2025 Colorado Oil and Gas Property Taxes (measured by 2024
production and payable in 2026) that pertain to the sale of Hydrocarbons produced from or allocable to the Oil and Gas Properties before
the Effective Date shall be for the account of Seller, and the 2025 Colorado Oil and Gas Property Taxes that pertain to the sale Hydrocarbons
produced from or allocable to the Oil and Gas Properties on or after the Effective Date shall be for the account of Purchaser, (iii)
Seller shall prepare and timely file any Tax Return for Asset Taxes required to be paid by Sellers pursuant to clause (i) above
and (iv) Purchaser shall prepare and timely file any Tax Return for Asset Taxes required to be paid by Purchaser pursuant to clause
(ii) above. The Parties agree that (y) this Section 7.4(d) is intended to solely address the timing and manner in which certain
Tax Returns for Asset Taxes are filed and the Asset Taxes shown thereon are paid to the applicable Taxing Authority, and (z) nothing
in this Section 7.4(d) shall be interpreted as altering the manner in which Asset Taxes are allocated to and economically borne
by the Parties (other than any penalties, interest, or additions to tax attributable to any Party’s breach of its obligations under
this Section 7.4(d) which shall be borne by the breaching Party).
(e)
Purchaser and Seller agree to furnish or cause to be furnished to the other, upon request, as promptly as practicable, such information
and assistance relating to Taxes attributable to the Properties, including access to books and records, as is reasonably necessary for
the filing of all Tax Returns attributable to the Properties by Purchaser or Seller, the making of any election relating to Taxes attributable
to the Properties, the preparation for any audit by any Taxing Authority and the prosecution or defense of any Claim, suit or Proceeding
relating to any Tax attributable to the Properties. The Parties agree to retain all books and records with respect to Tax matters pertinent
to the Properties relating to any Tax period beginning before the Closing Date until sixty (60) days after the expiration of the statute
of limitations of the respective Tax periods (taking into account any extensions thereof) and to abide by all record retention agreements
entered into with any Taxing Authority.
(f)
Seller shall be entitled to any and all refunds of Asset Taxes allocated to Seller pursuant to Section 7.4, and Purchaser shall
be entitled to any and all refunds of Asset Taxes allocated to Purchaser pursuant to Section 7.4. If a Party or any of its affiliates
receives a refund of Asset Taxes to which the other Party is entitled pursuant to this Section 7.4(f), the first Party shall promptly
pay such amount to the other Party, net of any reasonable costs or expenses (including Taxes) incurred by the first Party in procuring
such refund.
Section
7.5 Fees and Expenses. Except as expressly provided herein (including in Article X or Article XI), all fees
and expenses incurred in connection with this Agreement by Seller will be borne by and paid by Seller, regardless of whether or not the
Transaction is consummated. All expenses incurred in connection with this Agreement by Purchaser will be borne by and paid by Purchaser,
regardless of whether or not the Transaction is consummated.
Section
7.6 Public Announcements. No Party shall make any press release or other public announcement regarding the existence of this
Agreement, the contents hereof or the Transaction without the prior written consent of the other Party; provided, however,
that any Party may make such a public announcement to the extent (a) necessary for a Party to perform this Agreement (including disclosures
to Governmental Entities or other Third Party holding preferential purchase rights, rights of consent or other rights that may be applicable
to the Transaction, as reasonably necessary to provide notices, seek waivers, amendments or termination of such rights, or seek such
consents) or (b) required (upon advice of counsel) by applicable securities or other Applicable Laws or regulations or the applicable
rules of any stock exchange having jurisdiction over the Parties or their respective Affiliates. In the case of the disclosures described
under subsections (a) and (b) of this Section 7.6, each Party shall use its best efforts to consult with the other
Party regarding the contents of any such release or announcement prior to making such release or announcement.
Section
7.7 Books and Records. At or promptly after Closing (but in any event, no later than fifteen (15) Business Days after Closing),
Seller shall deliver to the possession and control of Purchaser copies of all Records; provided, however, that if any of
the Records, including, but not limited to, tax, revenue, and income Records, are not completed in the course of Seller’s normal
business operations within such time period, Seller shall diligently complete such Records and shall provide such Records to Purchaser
promptly upon completion.
Section
7.8 Logos and Names. Within thirty (30) days after Purchaser is designated as operator of record by the ECMC in place of Seller,
Purchaser will remove or cause to be removed the names and marks used by Seller and NR Operator, including all variations and derivatives
thereof, and logos relating thereto, from the Properties.
Section
7.9 Form 9. At least thirty (30) days prior to the Closing Date, but no later than February 21, 2024, each of NR Operator
and Purchaser Operator shall execute and NR Operator shall file with the ECMC, in accordance with Rule 218, a Form 9 – Intent,
to transfer the Oil and Gas Properties and Permits to Purchaser Operator at Closing. Promptly after Closing, each of NR Operator and
Purchaser Operator shall execute and Purchaser Operator shall file with the ECMC, in accordance with Rule 218, a Form 9 – Subsequent.
To the extent permitted by Applicable Law, Seller and NR Operator shall provide Purchaser and Purchaser Operator with all submissions,
filings, and material correspondence with and to the ECMC and any other Governmental Entity with respect to this Transaction, including
Form 9 filings. Seller and NR Operator shall provide assistance and support as reasonably necessary for Purchaser Operator to be approved
as the operator of the Oil and Gas Properties by the ECMC.
Section
7.10 Suspense Funds. Upon the Closing, Purchaser shall assume the obligation to properly and timely distribute all amounts
held in any suspense accounts described in Section 3.17 and included on Schedule 3.17, to the extent same resulted in a
downward adjustment to the Cash Consideration in accordance with Section 1.3(a)(ii)(E) to the persons who are entitled to receive
payment of same, if any.
Section
7.11 Contract Operations.
(a)
From Closing, until Purchaser Operator has been approved as the operator of the Oil and Gas Properties by the ECMC, the Parties agree
that Purchaser Operator shall have the right to operate the Oil and Gas Properties as the contract operator for NR Operator. Seller and
NR Operator shall provide assistance and support as reasonably necessary for Purchaser Operator to be approved as the operator of the
Oil and Gas Properties by the ECMC.
(b)
The Parties acknowledge and agree that regardless of the timing of the ECMC’s approval of the Form 9 – Transfer of Operatorship,
the transfer to Purchaser of all regulatory and environmental liabilities related to the Properties, except those items required to be
completed by Seller as part of the Transfer of Operatorship process pursuant to Rule 218, shall occur on, and be in full force and effect
as of, the Closing Date. Purchaser shall be designated as the Responsible Party as of the Closing Date and, except to the extent Purchaser
or the Purchaser Indemnitees are entitled to indemnification under Section 11.2 or with respect to any Environmental Defect that
Seller has elected to be cured after Closing in accordance with Section 8.7, Seller shall have no liability with respect to any
such regulatory and environmental liabilities, and Purchaser shall fully indemnify, defend and hold harmless the Seller Indemnitees,
from and against any and all Damages asserted against, resulting to, imposed upon or incurred by Seller Indemnitees, directly or indirectly,
by reason of or resulting from the ownership and operation of the Properties and any regulatory or environmental liabilities related
to the Properties after the Closing Date.
(c)
In the event that the ECMC does not approve Form 9 – Transfer of Operatorship by the date which is ninety (90) days after the Closing
Date, the Parties shall negotiate in good faith and enter into a customary and mutually acceptable Contract Operating Agreement.
Article
VIII
PURCHASER’S DUE DILIGENCE EXAMINATION
Section
8.1 Seller’s Title. Except as set forth in Section 3.18 or in the Assignment executed and delivered by the Parties
pursuant to Section 2.2, and without limiting Purchaser’s remedies for Title Defects set forth in this Article VIII
or Purchaser’s remedies set forth in Article X with respect to a breach of Seller’s representations or warranties
or with respect to the aggregate amount of uncured Title Defects, Seller makes no warranty or representation, express, implied, statutory
or otherwise, with respect to Seller’s title to any of the Properties, and Purchaser hereby acknowledges and agrees that, subject
to the limitations provided herein, Purchaser’s sole remedy under this Agreement for any defect of title, including any Title Defect,
with respect to any of the Properties, (a) on or before the expiration of the Examination Period, shall be as set forth in this Article
VIII or Article X and (b) from and after the expiration of the Examination Period (without duplication), shall be as set forth
in Article X or Article XI solely with respect to a breach of Seller’s representation and warranty set forth in Section
3.18 or Purchaser’s rights with respect to unsatisfied Closing conditions set forth in Section 9.2(a); provided,
however, that Purchaser further acknowledges and agrees that Purchaser shall not be entitled to protection under Section 3.18
for any defect in title alleged as a Title Defect under this Article VIII.
Section
8.2 Title Due Diligence Examination.
(a)
Until 5:00 p.m. (local time in Denver, Colorado) on the date that is forty-five (45) calendar days after the Execution Date (the “Examination
Period”), Seller shall afford to Purchaser and its authorized Representatives reasonable access, during normal business hours,
to the office, personnel and books and records of Seller to the extent reasonably necessary for Purchaser to conduct a title examination
(as it may in its sole discretion choose to conduct with respect to the Oil and Gas Properties) (“Purchaser’s Title Review”);
provided, however, that such title examination shall be upon reasonable notice to Seller and shall not unreasonably disrupt
the personnel or operations of Seller or impede the efforts of Seller to comply with its other obligations under this Agreement. Such
books and records shall include all abstracts of title, title opinions, title files, ownership maps, lease files, assignments, division
orders, ownership reports, operating records and agreements, well files, financial and accounting records (including revenue and cost
decks), geological, geophysical and engineering records (each in accordance with any applicable license agreements), and any other documents
or information reasonably requested by Purchaser, in each case insofar as such books and records may now be in existence and in the possession
of Seller, excluding, however, any books and records that Seller is prohibited by Applicable Law or Third-Party confidentiality restrictions
from disclosing.
(b)
Prior to Closing, Purchaser shall not contact any of the customers or suppliers of Seller or its working interest co-owners or operators,
in connection with the Transaction, whether in person or by telephone, mail or other means of communication, without the specific prior
authorization of Seller.
(c)
Purchaser’s Title Review shall be conducted at Purchaser’s sole cost, risk and expense and any conclusions made from any
examination done by Purchaser shall result from Purchaser’s own independent review and judgment.
Section
8.3 Notice of Title Defects; Title Benefits; Title Defect Amount.
(a)
To assert a claim of a Title Defect, Purchaser must deliver written notice to Seller no later than the expiration of the Examination
Period (a “Title Defect Notice”). To be effective, a Title Defect Notice must be in writing and be received by Seller
prior to the expiration of the Examination Period and must include: (i) a description of the Title Defect that is reasonably sufficient
for Seller to determine the basis of the alleged Title Defect (including any alleged variance in the Net Revenue Interest), (ii) the
specific Oil and Gas Property affected by such Title Defect (the “Title Defect Property”), (iii) the Allocated Value
of each Title Defect Property, (iv) Purchaser’s proposed Title Defect Amount with respect to such Title Defect as determined by
Purchaser in good faith, and (v) all documents upon which Purchaser relies for its assertion of a Title Defect, including, at a minimum,
supporting documents or other materials or information reasonably necessary for Seller (as well as any title attorney or examiner hired
by Seller) to verify the existence of the alleged Title Defect.
(b)
Any matters that may otherwise constitute Title Defects or defects in Seller’s title to the Oil and Gas Properties, but of which
Seller has not been specifically notified by Purchaser pursuant to a Title Defect Notice delivered to Seller prior to the expiration
of the Examination Period, shall be deemed to have been waived by Purchaser for all purposes. For the avoidance of doubt, this Section
8.3(b) shall not affect or modify Seller’s special warranty of title set forth in Section 3.18 or in the Assignment,
Purchaser’s rights to indemnification under Section 11.2 with respect to any breach of Seller’s special warranty of
title, or Purchaser’s rights to terminate this Agreement under Section 10.1 or to not close this Transaction on account
of the failure of a Closing condition as provided in Section 9.2(a).
(c)
Purchaser shall use its Commercially Reasonable Efforts to provide Seller, on or before the end of each calendar week during the Examination
Period, notice of all alleged Title Defects reported to Purchaser by any of Purchaser’s employees, title attorneys, landmen, or
other title examiners conducting Purchaser’s Title Review during the preceding calendar week, which notice may be preliminary in
nature and supplemented prior to the expiration of the Examination Period; provided, however, that any failure to provide
any such preliminary notice shall not prejudice Purchaser’s right to assert such Title Defect in the Defect Notice or otherwise
affect Purchaser’s rights or obligations hereunder.
(d)
Upon receipt of a timely delivered Title Defect Notice from Purchaser, Seller may, in addition to the other remedies set forth in this
Article VIII, attempt to cure, at Seller’s sole cost and expense, such Title Defect at any time prior to the date that is
five (5) Business Days prior to the Closing.
(e)
To assert a claim of a Title Benefit, Seller must deliver written notice to Purchaser prior to the expiration of the Examination Period,
or with respect to the Contemplated Leasing Activities, not less than forty-five (45) days prior to the Closing Date (a “Title
Benefit Notice”). To be effective, a Title Benefit Notice must be in writing and be received by the Purchaser prior to the
expiration of the Examination Period, or with respect to the Contemplated Leasing Activities, not less than forty-five (45) days prior
to the Closing Date and must include: (i) a description of the Title Benefit that is reasonably sufficient for the Purchaser to determine
the basis of the alleged Title Benefit (including any alleged variance in the Net Revenue Interest), (ii) the specific Oil and Gas Property
affected by such Title Benefit (the “Title Benefit Property”), (iii) the Allocated Value of each Title Benefit Property,
(iv) Seller’s proposed Title Benefit Amount with respect to such Title Benefit as determined by Seller in good faith, and (v) all
documents upon which Seller rely for the assertion of a Title Benefit, including, at a minimum, supporting documents reasonably necessary
for the Purchaser (as well as any title attorney or examiner hired by the Purchaser) to verify the existence of the alleged Title Benefit.
(f)
Any matters that may otherwise constitute Title Benefits but of which the Purchaser has not been specifically notified by Seller pursuant
to a Title Benefit Notice delivered to the Purchaser prior to the expiration of the Examination Period, or with respect to the Contemplated
Leasing Activities, not less than forty-five (45) days prior to the Closing Date, as provided in Section 6.1(a), shall be deemed
to have been waived by Seller for all purposes.
(g)
The “Title Defect Amount” means, with respect to a Title Defect Property, the amount by which the Allocated Value
of a Title Defect Property is reduced as a result of the existence of one or more Title Defects, which amount shall be determined as
follows:
(i)
if Purchaser and Seller agree on the Title Defect Amount, then that amount shall be the Title Defect Amount for that Title Defect;
(ii)
if the Title Defect is a Lien which 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 Seller’s interest in the affected Title Defect Property;
(iii)
if the Title Defect represents a discrepancy whereby the Net Revenue Interest for such Well or Unit is less than the Net Revenue Interest
stated in Exhibit A-3 for such Well or in Exhibit A-4 for such Unit but for which there is a proportionate decrease in
the Working Interest in respect of such Well or Unit, then such Title Defect Amount will be the Allocated Value of such Well or Unit,
multiplied by a fraction, the numerator of which is the Net Revenue Interest decrease and the denominator of which is the Net
Revenue Interest stated in Exhibit A-3 for such Well or in Exhibit A-4 for such Unit;
(iv)
If the Title Defect represents a difference between (A) the Net Mineral Acres for any affected Lease and (B) the Net Mineral Acres for
such Lease stated in Exhibit A-1, then the Title Defect Amount shall be the product obtained by multiplying the difference between
such Net Mineral Acre amounts by the per-acre value based on the Allocated Value applicable to such affected Lease;
(v)
if the Title Defect represents an encumbrance, defect, burden, Lien or other matter not described in Section 8.3(g)(i) through
Section 8.3(g)(iv), then the Title Defect Amount shall be determined by taking into account the Allocated Value of the Title Defect
Property, the portion of the Title Defect Property affected by the Title Defect, the legal effect of the Title Defect, the potential
economic effect of the Title Defect over the life of the Title Defect Property, the values placed upon the Title Defect by Purchaser
and Seller and such other factors as are necessary to make a proper evaluation;
(vi)
the Title Defect Amount of a Title Defect shall be determined without duplication of any costs or losses included in another Title Defect
Amount hereunder; and
(vii)
notwithstanding anything in this Agreement to the contrary, in no event shall a Title Defect Amount exceed the Allocated Value of the
affected Title Defect Property.
Section
8.4 Environmental Due Diligence Examination.
(a)
During the Examination Period, Seller shall afford to Purchaser and its authorized Representatives (including an environmental consultant
reasonably acceptable to Seller (“Purchaser’s Environmental Consultant”)) reasonable access, during normal business
hours, to the Oil and Gas Properties operated by Seller to the extent necessary for Purchaser (or Purchaser’s Environmental Consultant)
to undertake a Phase I environmental site assessment performed pursuant to ASTM Standard E1527 and such additional environmental compliance
and permitting assessments as Purchaser reasonably elects to conduct, including, but not limited to, an inspection of the Oil and Gas
Properties on or near the Closing Date, provided Purchaser gives prior notice to Seller of any such desired assessments and further gives
Seller a description of the nature and scope of the desired assessment (“Purchaser’s Environmental Review”).
In conducting the Purchaser’s Environmental Review, without Seller’s prior written approval, neither Purchaser nor Purchaser’s
Environmental Consultant may operate any equipment or conduct any testing or sampling of soil, groundwater, or other materials (including
any testing or sampling for Hazardous Materials, Hydrocarbons or NORM). If the results of Purchaser’s Environmental Review documented
in a written report issued by a qualified third party environmental consultant indicate the need for a Phase II assessment, and if Seller
does not provide written approval to conduct such Phase II assessment within ten (10) days of the date on which Purchaser notifies Seller
in writing that it desires to perform a Phase II assessment, including testing or sampling of soil, groundwater or other materials, then
upon written notice to Seller prior to Closing, Purchaser may exclude the affected Oil and Property from this transaction and the Purchase
Price will be reduced by the Allocated Value of such Oil and Gas Property.
(b)
No less than three (3) Business Days prior to the proposed commencement date of Purchaser’s Environmental Review, Purchaser shall
furnish Seller with an outline of the proposed scope of such review, including the locations of such activities. No Person, other than
Purchaser’s Environmental Consultant and Purchaser’s employees may conduct Purchaser’s Environmental Review. Seller
shall have the right to have Representatives present to observe Purchaser’s Environmental Review conducted in the Seller’s
Office or on the Oil and Gas Properties. Notwithstanding anything herein to the contrary, Purchaser shall not have access to, and shall
not be permitted to conduct any environmental due diligence of, any Oil and Gas Properties not operated by Seller to which Seller does
not have the authority to grant access for such due diligence.
(c)
Purchaser agrees to conduct Purchaser’s Environmental Review in a manner so as not to unduly interfere with the business operations
of Seller and in compliance with all Applicable Laws. Purchaser shall abide by Seller’s safety rules, regulations and operating
policies while conducting Purchaser’s Environmental Review and, to the extent required by Seller, execute and deliver any reasonable
access agreement of Seller. Purchaser shall exercise due care with respect to Seller’s properties and their condition. The cost
and expense of Purchaser’s Environmental Review, if any, shall be borne solely by Purchaser.
(d)
Prior to the Closing, unless otherwise required by Applicable Law, Purchaser shall (and shall cause Purchaser’s Environmental Consultant,
if applicable, to) treat confidentially any matters revealed by Purchaser’s Environmental Review and any reports or data generated
from such review (the “Environmental Information”), and Purchaser shall not (and shall cause Purchaser’s Environmental
Consultant, if applicable, to not) disclose any Environmental Information to any Governmental Entity or other Third Party without the
prior written consent of Seller, unless Purchaser is required to do so pursuant to Environmental Law, in which case Purchaser shall provide
notice of any such disclosure to Seller unless, in the opinion of Purchaser’s counsel, Purchaser is legally prohibited from providing
such notice. Prior to the Closing, unless otherwise required by Applicable Law, Purchaser may use the Environmental Information only
in connection with the Transaction. If Purchaser, Purchaser’s Environmental Consultant, if applicable, or any Person to whom Purchaser
has provided any Environmental Information, becomes legally compelled to disclose any of the Environmental Information, Purchaser, to
the extent legally permitted, shall provide Seller with prompt notice and Seller, at Seller’s expense, may file any protective
order, or seek any other remedy, as it deems appropriate under the circumstances. Upon Seller’s written request to Purchaser, Purchaser
shall provide copies of the Environmental Information to Seller without charge.
Section
8.5 Notice of Environmental Defects.
(a)
To assert a claim of an Environmental Defect, Purchaser must deliver written notice to Seller promptly after the discovery thereof, but
in no event later than the expiration of the Examination Period (an “Environmental Defect Notice”). To be effective,
an Environmental Defect Notice must be in writing and be received by Seller prior to the expiration of the Examination Period and must
include: (i) a description of the matter constituting the alleged Environmental Defect in reasonable detail, including (A) if applicable,
a site plan showing the location of all sampling events, boring logs and other field notes describing the sampling methods utilized and
the field conditions observed, (B) the written conclusion of Purchaser’s Environmental Consultant, if applicable, that an Environmental
Defect is believed to exist, which conclusion shall be reasonably substantiated by the factual data gathered in Purchaser’s Environmental
Review, and (C) if feasible and applicable, a separate reasonably specific citation of the provisions of the Environmental Laws alleged
to be violated and the related facts that substantiate such violation; (ii) the identity of the specific Property affected by such alleged
Environmental Defect (the “Environmental Defect Property”), (iii) the procedures, if applicable, recommended to correct,
eliminate or pay the Environmental Defect, together with any related recommendations from Purchaser’s Environmental Consultant,
if applicable; and (iv) Purchaser’s good faith estimate of the Environmental Defect Value, including the basis for such estimate.
(b)
Any matters that may otherwise constitute Environmental Defects, but of which Seller have not been specifically notified by Purchaser
pursuant to a valid Environmental Defect Notice delivered to Seller prior to the expiration of the Examination Period, together with
any environmental matter that does not constitute an Environmental Defect, shall be deemed to have been waived by Purchaser for purposes
of this Section 8.5; provided that nothing in this Section 8.5(c) shall impact or modify Seller’s special warranty
of title set forth in Section 3.18 or in the Assignment, Purchaser’s rights to indemnification under Section 11.2
with respect to any breach of Seller’s special warranty of title, or Purchaser’s rights to terminate this Agreement under
Section 10.1 or to not close this Transaction on account of the failure of a Closing condition as provided in Section 9.2(a).
(c)
Upon receipt of a timely delivered Environmental Defect Notice from Purchaser, Seller may, in addition to the other remedies set forth
in this Article VIII, attempt to cure, at Seller’s sole cost and expense, such Environmental Defect at any time prior to
the Closing.
Section
8.6 Defect Closing Mechanics.
(a)
Notwithstanding anything herein to the contrary, if, by the date that is five (5) Business Days prior to the Closing Date, Seller does
not cure a Title Defect for which a Title Defect Notice has been timely and otherwise validly delivered or an Environmental Defect for
which an Environmental Defect Notice has been timely and otherwise validly delivered, Seller shall have the option, by notice in writing
to Purchaser on or before the Closing, to:
(i)
retain the Property affected by such Title Defect or Environmental Defect, in which event such Property shall become an Excluded Asset
and the Purchase Price shall be reduced by the Allocated Value of the affected Property;
(ii)
transfer to Purchaser the Property affected by such Title Defect or Environmental Defect in accordance with the terms and conditions
of this Agreement and, subject to Section 8.6(b), reduce the Purchase Price by the relevant Title Defect Amount or Environmental
Defect Value;
(iii)
attempt to cure such defect in accordance with Section 8.7(a), in which case the Adjusted Purchase Price paid at Closing shall
be reduced by an amount equal to the Title Defect Amount or Environmental Defect Value for the applicable Property until finally resolved
on the Final Settlement Statement; or
(iv)
dispute such defect pursuant to the provisions of Section 12.1, in which case the Adjusted Purchase Price paid at Closing shall
be reduced by an amount equal to Purchasers’ good faith estimate of the Title Defect Amount or Environmental Defect Value for the
applicable Property, and such amount will be paid by Purchaser at Closing and until finally resolved on the Final Settlement Statement.
(b)
Notwithstanding anything to the contrary contained in this Agreement, no adjustment of the Cash Consideration shall be made for Title
Defects for which Title Defect Notices have been timely and otherwise validly delivered or Environmental Defects for which Environmental
Defect Notices have been timely and otherwise validly delivered, unless:
(i)
the Title Defect Amount of such individual Title Defect exceeds Eighty Thousand Dollars ($80,000.00) or the Environmental Defect Value
of such individual Environmental Defect exceeds One Hundred Thousand Dollars ($100,000.00); and
(ii)
the aggregate of all Title Defect Amounts as determined in accordance with this Agreement, which exceed Eighty Thousand Dollars ($80,000.00)
and all Environmental Defect Values, as determined in accordance with this Agreement, which exceed One Hundred Thousand Dollars ($100,000.00)
equals or exceeds an amount equal to the Defect Deductible, in which event only the amount of such Title Defect Amounts and Environmental
Defect Values in excess of the Defect Deductible shall be considered for purposes of this Agreement;
provided,
however, that if the matter giving rise to a Title Defect results in a breach of Section 3.18, then such Title Defect shall
not be subject to the limitation set forth in clause (i) of this Section 8.6(b) or the Defect Deductible set forth in clause (ii)
of this Section 8.6(b).
Section
8.7 Option to Cure Title Defects and Environmental Defects Post-Closing.
(a)
Notwithstanding anything herein to the contrary, if Seller is not able to cure a Title Defect or Environmental Defect on or prior to
Closing, Seller may, by notice in writing to Purchaser on or before Closing, attempt to cure such Title Defect or Environmental Defect
after the Closing at Seller’s sole cost and expense (with any such Title Defect or Environmental Defect being called a “Post-Closing
Defect”); provided, however, that Purchaser shall have the right to elect to cure such Post-Closing Defect by
delivering to Seller written notice thereof on or before Closing.
(b)
With respect to those Post-Closing Defects that Purchaser has not elected to cure after Closing, Purchaser will act in good faith and
reasonably cooperate with Seller after Closing to cure any Post-Closing Defects. If, at the end of the ninety (90) day period commencing
on the Closing Date (the “Cure Period”), Seller has been unable to cure a Post-Closing Defect (and there is no dispute
as to whether or not it has been cured), an adjustment to the Purchase Price based upon the applicable Allocated Value shall be reflected
on the Final Settlement Statement. If, at the end of the Cure Period, the Parties are unable to agree whether there has been a satisfactory
resolution of a Post-Closing Defect, then such disagreement shall be resolved as provided in Section 12.1.
Section
8.8 Purchaser Indemnification. IN CONNECTION WITH THE CONDUCT OF ITS DUE DILIGENCE INVESTIGATION OF THE PROPERTIES AND IN CONSIDERATION
OF SELLER’S COVENANTS UNDER SECTION 7.1, PURCHASER HEREBY AGREES TO INDEMNIFY AND DEFEND AND HOLD HARMLESS SELLER AND THE
SELLER INDEMNITEES FROM AND AGAINST ANY AND ALL CLAIMS ARISING FROM PURCHASER’S ENVIRONMENTAL REVIEW OR PURCHASER’S INSPECTING
AND OBSERVING THE PROPERTIES. THE FOREGOING INDEMNITY INCLUDES, AND THE PARTIES INTEND IT TO INCLUDE, AN INDEMNIFICATION OF THE INDEMNIFIED
PARTIES FROM AND AGAINST CLAIMS ARISING OUT OF OR RESULTING, IN WHOLE OR PART, FROM THE SOLE, JOINT, COMPARATIVE, OR CONCURRENT NEGLIGENCE
OR STRICT LIABILITY OF ANY OF SELLER OR THE SELLER INDEMNITEES EXCEPTING ANY AND ALL CLAIMS ARISING OUT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SELLER OR ANY SELLER INDEMNITEE. IT IS PROVIDED, HOWEVER, THAT PURCHASER SHALL NOT BE LIABLE, AND SHALL NOT INDEMNIFY SELLER
OR ANY SELLER INDEMNITEE, FOR ANY CLAIMS ARISING FROM THE MERE DISCOVERY OF PREEXISTING ENVIRONMENTAL DEFECTS FOUND BY PURCHASER DURING
PURCHASERS’ DUE DILIGENCE INSPECTIONS.
Section
8.9 Casualty Loss Prior to Closing.
(a)
If, after the Execution Date but prior to Closing, any portion of the Properties is damaged or destroyed by a fire or other casualty
or is taken in condemnation or under right of eminent domain (each a “Casualty Loss”), then Seller will notify Purchaser
promptly after Seller learns of such event.
(b)
Subject to Section 10.1(f), Purchaser will nevertheless be required to close, and Seller shall, at its sole election, elect to:
(i)
reduce the Purchase Price by an amount agreed upon in writing by Seller and Purchaser as being a reasonable estimate of such Casualty
Loss, which amount shall not exceed the Allocated Value of the applicable Property,
(ii)
agree with Purchaser to cause the Properties affected by any Casualty Loss to be repaired or restored, at Seller’s sole cost, as
promptly as reasonably practicable (which work may extend after the Closing Date only with Purchaser’s prior written consent, which
consent shall not be unreasonably withheld, conditioned, or delayed); or
(iii)
transfer to Purchaser such insurance proceeds, claims, awards, and other payments arising out of such Casualty Loss; provided,
however, that such amounts cover the cost of repair and restoration in full.
(c)
If Seller elects to proceed under Section 8.9(b)(i) and the Parties fail to agree by the Closing Date on the reduction to the
Purchase Price (which agreement the Parties shall use good faith efforts to reach), then the Purchase Price at Closing in respect of
Casualty Losses will be decreased by Seller’s good-faith estimate of the value associated with such Casualty Loss, and either Party
may submit the dispute for resolution in accordance with Section 12.1.
Section
8.10 Additional Assets.
Until
the Closing Date, if it is discovered by either Party that Seller or any Affiliate of Seller owns or holds any right, title or interest
in any properties located in Weld County, State of Colorado (the “Found Assets”), then such Party shall promptly notify
the other Party of any such Found Assets. Seller shall then offer to sell and transfer any such Found Assets to Purchaser, and Purchaser
will have the option to purchase any such Found Assets, at a price equal to the net mineral acre price allocated to the Properties if
such Found Asset is an undeveloped Oil and Gas Lease or at a price mutually agreed to by the Parties with respect to any other type of
property, and otherwise on the terms and conditions set forth herein as if such Found Asset is a Property, which option shall be exercised,
if at all, by Purchaser by delivering written notice thereof to Seller on or before Closing.
Article
IX
CONDITIONS TO OBLIGATIONS OF THE PARTIES
Section
9.1 Conditions to Obligations of Seller. The obligations of Seller to consummate the Transaction shall be subject to the fulfillment
on or prior to the Closing Date of each of the following conditions:
(a)
Each of the representations and warranties of Purchaser set forth in Article V shall be true and correct in all material respects
on and as of the Closing Date, except for Purchaser’s Fundamental Representations that shall be true and correct as of the Execution
Date and the Closing Date, except for such representations and warranties that are qualified by materiality, Material Adverse Effect,
or material adverse effect, which representations and warranties shall be true and correct in all respects, except to the extent that
any such representation or warranty is made as of a specified date, in which case such representation or warranty shall have been true
and correct as of such specified date.
(b)
Purchaser shall have performed and complied with, in all material respects, all covenants and agreements required by this Agreement to
be performed or complied with by it on or prior to the Closing Date.
(c)
No Proceeding (excluding any Proceeding initiated by Seller or any of its Affiliates) shall, on the Closing Date, be pending or threatened
seeking to restrain, prohibit or obtain damages or other relief in connection with this Agreement or the consummation of the Transaction.
(d)
No order, writ, injunction, or decree shall have been entered and be in effect by any court or any Governmental Entity of competent jurisdiction,
and no Applicable Law shall have been promulgated or enacted and be in effect, that on a temporary or permanent basis restrains, enjoins,
or invalidates the Transaction.
(e)
Seller shall have received all agreements, instruments, and documents which are required under Section 2.2(b) to be executed or
delivered by Purchaser prior to or in connection with the Closing.
Section
9.2 Conditions to Obligations of Purchaser. The obligations of Purchaser to consummate the Transaction shall be subject to
the fulfillment on or prior to the Closing Date of each of the following conditions:
(a)
Each of the representations and warranties of Seller set forth in Article III shall be true and correct in all material respects
on and as of the Closing Date, except for Seller’s Fundamental Representations that shall be true and correct as of the Execution
Date and the Closing Date, except such representations and warranties that are qualified by materiality, Material Adverse Effect, or
material adverse effect, which representations and warranties shall be true and correct in all respects, except to the extent that any
such representation or warranty is made as of a specified date, in which case such representation or warranty shall have been true and
correct as of such specified date.
(b)
Seller shall have performed and complied with, in all material respects, all covenants and agreements required by this Agreement to be
performed or complied with by Seller on or prior to the Closing Date.
(c)
No Proceeding (excluding any Proceeding initiated by Purchaser or any of its Affiliates) shall, on the Closing Date, be pending or threatened
seeking to restrain, prohibit, or obtain damages or other relief in connection with this Agreement or the consummation of the Transaction.
(d)
No order, writ, injunction, or decree shall have been entered and be in effect by any court or any Governmental Entity of competent jurisdiction,
and no Applicable Law shall have been promulgated or enacted and be in effect, that on a temporary or permanent basis restrains, enjoins,
or invalidates the Transaction.
(e)
No event of Force Majeure or Material Adverse Effect shall have occurred, in each case the result of which is that Purchaser is unable
to secure satisfactory financing with respect to the Transaction. For the avoidance of doubt, if Purchaser is unable to secure satisfactory
financing with respect to the Transaction for any reason other than the occurrence of an event of Force Majeure or Material Adverse Effect
as set forth in this Section 9.2(e), then (i) Purchaser may not claim that this condition has not been fulfilled or satisfied
and (ii) in the event all conditions of Section 10.2(c) are met, Seller shall receive the entirety of the Deposit for the sole
account and use of Seller in accordance with Section 10.2(c).
(f)
The Registration Statement has been declared effective with the SEC on or before the Outside Date.
(g)
Purchaser shall have received all agreements, instruments, and documents which are required under Section 2.2(a) to be executed
or delivered by Seller or any other Person to Purchaser prior to or in connection with the Closing.
Article
X
TERMINATION AND RELEASE OF DEPOSIT
Section
10.1 Termination. This Agreement may be terminated, and the Transaction abandoned at any time prior to the Closing in
the following manner:
(a)
by mutual written consent of Seller and Purchaser;
(b)
by Seller, if the Closing shall not have occurred by the Outside Date, unless such failure to close is due to a material breach of this
Agreement by Seller;
(c)
by Purchaser, if the Closing shall not have occurred by the Outside Date, unless such failure to close is due to a material breach of
this Agreement by Purchaser;
(d)
by Seller, if Purchaser does not deliver the Deposit to the Escrow Account on the Execution Date;
(e)
by either Seller or Purchaser, if there is any specific statute, rule, or regulation that makes consummation of the Transaction illegal
or otherwise prohibited or a Governmental Entity has issued an order, decree or ruling or taken any other action permanently restraining,
enjoining, or otherwise prohibiting the consummation of the Transaction, and such order, decree, ruling, or other action has become final
and non-appealable;
(f)
by Purchaser, if Seller breaches its obligations set forth in Section 6.1(1) and such breach is not remedied within five (5) days’
notice from Purchaser;
(g)
by either Seller or Purchaser, if the aggregate amount by which the Purchase Price will be reduced on account of uncured or disputed
Title Defects and Environmental Defects, plus the aggregate amount reasonably estimated for all Casualty Losses, exceeds ten per cent
(10%) of the unadjusted Purchase Price;
(h)
any change in Applicable Law that has or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;
(i)
by either Seller or Purchaser, if the other Party materially breaches its covenants, obligations, or agreements as set forth in this
Agreement and such material breach is not remedied within five (5) days’ notice from the non-breaching Party; or
(j)
by Purchaser, upon the occurrence of an event of Force Majeure or Material Adverse Effect, in each case the result of which is that Purchaser
determines, in its reasonable discretion, that it is, or will be, unable to secure satisfactory financing with respect to the Transaction.
Section
10.2 Effect of Termination.
(a)
In the event of the termination of this Agreement pursuant to Section 10.1 by Seller, on the one hand, or Purchaser, on the other,
written notice thereof shall forthwith be given to the other Party specifying the provision hereof pursuant to which such termination
is made, and this Agreement shall become void and have no effect, except that the agreements contained in Section 7.2, Section
7.5, Section 7.6, Section 8.4(d) and Section 8.8, this Article X, Article XII and Article XIII
shall survive the termination hereof.
(b)
In the event that (i) all conditions precedent to the obligations of Seller set forth in Section 9.1 have been satisfied (or waived
by Seller), and (ii) the Closing has not occurred as a result of (1) the failure of Seller to materially perform, when required, any
of Seller’s covenants or obligations to consummate the Transaction at Closing (specifically including its obligations set forth
in Section 6.1(1)), or (2) the occurrence of an event of Force Majeure or Material Adverse Effect, in each case the result of
which is that Purchaser determines, in its reasonable discretion, that it is, or will be, unable to secure satisfactory financing with
respect to the Transaction, then, upon the satisfaction of the conditions set forth in subparts (i) and (ii) of this Section
10.2(b), Purchaser shall have the right, at the written election of Purchaser, to (A) terminate this Agreement and Purchaser shall
receive the entirety of the Deposit for the sole account and use of Purchaser, or, in the alternative, (B) seek specific performance
of this Agreement, and such elected remedy shall be Purchaser’s sole and exclusive remedy. In the event Purchaser elects to terminate
this Agreement pursuant to Section 10.2(b)(A), then within two (2) Business Days after the date when Purchaser’s election
to terminate this Agreement becomes effective, Seller and Purchaser shall execute and deliver to the Escrow Agent a joint instruction
letter directing the Escrow Agent to release the Deposit to Purchaser. For the avoidance of doubt, Purchaser shall not be entitled to
receive the Deposit in the event Purchaser seeks specific performance under this Section 10.2(b).
(c)
In the event that (i) all conditions precedent to the obligations of Purchaser set forth in Section 9.2 have been satisfied (or
waived by Purchaser), and (ii) the Closing hereunder has not occurred as a result of the failure of Purchaser to materially perform,
when required, any of Purchaser’s covenants or obligations hereunder to consummate the Transaction at Closing, then, upon the satisfaction
of the conditions set forth in subparts (i) and (ii) of this Section 10.2(c), Seller shall receive the entirety
of the Deposit for the sole account and use of Seller and Seller’s retention of the Deposit shall constitute liquidated damages
hereunder, which remedy shall be the sole and exclusive remedy available to Seller for any such failure of Purchaser. In the event Seller
becomes entitled to receive the Deposit pursuant to this Section 10.2(c), then within two (2) Business Days after the date when
Seller becomes entitled to receive such Deposit, Seller and Purchaser shall execute and deliver to the Escrow Agent a joint instruction
letter directing the Escrow Agent to release the Deposit to Seller. Seller and Purchaser acknowledge and agree that (A) Seller’s
actual damages upon the event of such a termination are difficult to ascertain with any certainty, (B) the Deposit is a reasonable estimate
by the Parties of such actual damages of Seller and (C) such liquidated damages do not constitute a penalty. THE PARTIES HEREBY ACKNOWLEDGE
THAT THE EXTENT OF DAMAGES TO SELLER OCCASIONED BY THE FAILURE OF THE TRANSACTION TO BE CONSUMMATED WOULD BE IMPOSSIBLE OR EXTREMELY
DIFFICULT TO ASCERTAIN AND THAT THE AMOUNT OF THE DEPOSIT IS A FAIR AND REASONABLE ESTIMATE OF SUCH DAMAGES UNDER THE CIRCUMSTANCES AND
DOES NOT CONSTITUTE A PENALTY; provided, however, that the termination of this Agreement shall not relieve any Party
from any obligation or liability for such Party’s actual fraud.
(d)
In the event that this Agreement is terminated under this Article X and Seller is not entitled to the Deposit under Section
10.2(c), then Purchaser shall be entitled to receive the entirety of the Deposit for its own account. Within two (2) Business Days
after each the effective date of such termination, Seller and Purchaser shall execute and deliver to the Escrow Agent a joint instruction
letter directing the Escrow Agent to release the applicable Deposit Release Amount to Purchaser.
Section
10.3 Release of Deposit to Seller.
(a)
Without limiting the effect of the provisions in Section 10.2 above, in the event (1) the Closing has not occurred in accordance
with the terms of this Agreement prior to June 17, 2024, and such delay has not occurred as a result of the failure of Seller to materially
perform, when required, any of Seller’s covenants or obligations hereunder to consummate the Transaction at Closing, (2) all conditions
precedent to the obligations of Seller set forth in Section 9.1 have been satisfied or (waived by Seller), and (3) there has been
no occurrence of an event of Force Majeure or Material Adverse Effect, in each case the result of which is that Purchaser determines,
in its reasonable discretion, that it is, or will be, unable to secure satisfactory financing with respect to the Transaction, then the
Parties agree that the Deposit shall be subject to release (each a “Deposit Release”) as follows:
(i)
On June 17, 2024 (the “First Deposit Payment Date”), Three Million Dollars ($3,000,000) (a “Deposit Release
Amount”) shall be released from the Escrow Account for the sole account and use of Seller;
(ii)
On July 15, 2024, another Deposit Release Amount shall be released from the Escrow Account for the sole account and use of Seller; and
(iii)
On August 12, 2024 (the “Final Deposit Payment Date”), another Deposit Release Amount shall be released from the Escrow
Account for the sole account and use of Seller.
(b)
The remaining amount in the Escrow Account following each of Deposit Release set forth in (a) above shall be referred to as the “Remaining
Deposit”.
(c)
Each Deposit Release provided for in (a) above shall be subject to the condition that, at the time of each Deposit Release, (i) Seller
has not failed to materially perform, when required, any of Seller’s covenants or obligations to consummate the Transaction at
Closing (specifically including its obligations set forth in Section 6.1(1)) and (ii) there has been no occurrence of an event
of Force Majeure or Material Adverse Effect, in each case the result of which is that Purchaser determines, in its reasonable discretion,
that it is, or will be, unable to secure satisfactory financing with respect to the Transaction.
(d)
If, during the period beginning on the First Deposit Payment Date and ending on the Final Deposit Payment Date, either (i) Seller fails
to materially perform, when required, any of Seller’s covenants or obligations to consummate the Transaction at Closing (specifically
including its obligations set forth in Section 6.1(1)) or (ii) there is an occurrence of an event of Force Majeure or Material
Adverse Effect, in each case the result of which is that Purchaser determines, in its reasonable discretion, that it is, or will be,
unable to secure satisfactory financing with respect to the Transaction, then the Parties agree that Purchaser may terminate this Agreement
upon written notice to Seller and Seller shall not be entitled to any additional Deposit Releases after the date of such written notice
and Purchaser shall be entitled to receive the Remaining Deposit. The Parties acknowledge and agree that in no event will Seller be required
to reimburse or repay any Deposit Release Amount that has been released to Seller in accordance with the terms of this Section 10.3.
(e)
Within two (2) Business Days after each applicable date set forth in (a) above, Seller and Purchaser shall execute and deliver to the
Escrow Agent a joint instruction letter directing the Escrow Agent to release the applicable Deposit Release Amount to Seller.
Article
XI
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS; INDEMNIFICATION
Section
11.1 Survival.
(a)
The period after the Closing Date for which a representation, warranty or covenant of any Party survives is herein called the “Survival
Period” and each such Survival Period shall be as follows:
(i)
One (1) year after the Closing Date with respect to Seller’s representations and warranties contained in Article III that
constitute Seller Non-Fundamental Representations, except for the Tax Representations and Section 3.18;
(ii)
One (1) year after the Closing Date with respect to Seller’s covenants and agreements to be performed on or prior to the Closing,
other than pursuant to Section 7.4;
(iii)
Until fully performed with respect to Seller’s covenants and agreements to be performed after the Closing, other than pursuant
to Section 7.4;
(iv)
Three (3) years after the Closing Date with respect to Seller’s representations and warranties contained in Article III
that are Fundamental Representations;
(v)
Three (3) years after the Closing Date with respect to Purchaser’s representations and warranties contained in Article V
that are Fundamental Representations and one (1) year after the Closing Date with respect to all of Purchaser’s other representations
and warranties contained in Article V;
(vi)
One (1) year after the Closing Date with respect to Purchaser’s covenants and agreements to be performed prior to the Closing,
other than pursuant to Section 7.4;
(vii)
Until fully performed with respect to Purchaser’s covenants and agreements to be performed after the Closing, other than pursuant
to Section 7.4;
(viii)
Three (3) years after the Closing Date with respect to Seller’s representations and warranties contained in Section 3.18;
and
(ix)
Sixty (60) days after the expiration of the applicable statute of limitations with respect to the covenants and agreements in Section
7.4 or with respect to the Tax Representations.
(b)
Notwithstanding the foregoing, in the event the Parties enter into a Contract Operating Agreement pursuant to Section 7.11(c)
of this Agreement, such Contract Operating Agreement shall survive the termination of this Agreement and shall terminate pursuant to
its terms.
(c)
No Party shall have any indemnification obligation pursuant to this Article XI or otherwise in respect of any representation,
warranty or covenant unless it shall have received from the Party seeking indemnification a written notice of the existence of the claim
for or in respect of which indemnification in respect of such representation, warranty or covenant is being sought on or prior to the
expiration of the Survival Period applicable to such representation, warranty or covenant. Such notice shall set forth with reasonable
specificity (i) the basis under this Agreement, (ii) the facts actually known to the delivering Party that form the basis of such claim
and (iii) the delivering Party’s good faith estimate of the amount of such claim (which estimate shall not be conclusive of the
final amount of such claim) and an explanation of the calculation of such estimate, including a statement of any significant assumptions
employed therein.
Section
11.2 Indemnification by Seller. Subject to the terms and conditions of this Article XI, after Closing, Seller shall indemnify,
defend and hold harmless Purchaser and its Affiliates, officers, directors, employees, agents and successors and assigns (“Purchaser
Indemnitees”) from and against the amount of any and all actual losses, Claims, actions, causes of action, demands, assessments,
damages, liabilities, judgments, settlements, penalties, costs and expenses (including reasonable attorneys’ fees and expenses),
of any nature whatsoever (collectively, “Damages”) related to, arising out of, attributable to or resulting from:
(a)
any breach by Seller of its representations and warranties contained in Article III;
(b)
any breach by Seller of its covenants and agreements contained in this Agreement;
(c)
the Excluded Assets;
(d)
any Seller Taxes;
(e)
Third Party claims for property damage or personal injury relating to the operation Properties prior to the Closing Date;
(f)
the matters or items set forth in Schedule 3.6;
(g)
failure to pay or improper calculation, allocation, marketing, payment, or reporting of royalties, shut-in royalties, overriding royalties,
working interest amounts and other royalties, and similar burdens on production with respect to the Properties and attributable to periods
before the Effective Date;
(h)
civil, criminal, and administrative fines and penalties or criminal sanctions imposed as a result of or arising from Seller’s or
its Affiliate’s ownership, use, or operation of the Properties before the Closing Date;
(i)
any indebtedness for borrowed money by Seller incurred prior to or outstanding as of the Closing Date;
(j)
any proceeds of production held by Seller as of the Closing Date in suspense, owed by Seller in suspense, or owed by or to Third Parties
(whether positive or negative, and including funds held in suspense for unleased interests and penalties and interest) attributable to
the Properties or any interest pooled, unitized, or communitized therewith, in each case to the extent not set forth on Schedule 3.17;
(k)
offsite waste disposal with respect to the Properties by Seller or its Affiliates prior to the Closing Date in violation of any Environmental
Laws or Environmental Permits;
(l)
any Post-Closing Defect that Purchaser has not elected to cure; and
(m)
any claims made by any employee under WARN, ERISA, or under any CBA.
provided,
however, that Seller’s indemnification obligations for Purchaser’s Damages under this Section 11.2 shall (x)
be limited by the terms of Section 11.10, and (y) if applicable, terminate upon the termination of the applicable Survival Period
related thereto, except for any Claims and Damages for which Seller received written notice prior to the expiration of the applicable
Survival Period.
Section
11.3 Indemnification by Purchaser. Subject to the terms and conditions of this Article XI, after Closing, Purchaser
shall indemnify, defend and hold harmless Seller, its Affiliates and their respective officers, directors, employees, agents and successors
and assigns (“Seller Indemnitees”) from and against any and all Damages, asserted against, resulting to, imposed upon
or incurred by Seller Indemnitees, directly or indirectly, by reason of or resulting from any breach by Purchaser of its representations,
warranties and covenants contained in this Agreement; provided, however, that Purchasers’ indemnification obligations
for Damages under this Section 11.3 shall if applicable, terminate upon the termination of the applicable Survival Period related thereto,
except for any Claims and Damages for which Purchasers received written notice prior to the expiration of the applicable Survival Period.
Section
11.4 Indemnification Proceedings. In the event any Claim for which a Party (an “Indemnifying
Party”) would be liable to another Party (an “Indemnified Party”) under Section 11.2, Section
11.3 or Section 8.8 is asserted against or sought to be collected from an Indemnified Party by a Third Party, the
Indemnified Party shall with reasonable promptness notify the Indemnifying Party of such Claim, but the failure to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations under this Article XI, except to the extent
the Indemnifying Party demonstrates that the defense of such Claim is materially prejudiced thereby. The Indemnifying Party shall
have thirty (30) days from receipt of the above notice from the Indemnified Party (the “Notice Period”) to notify
the Indemnified Party whether or not the Indemnifying Party desires, at the Indemnifying Party’s sole cost and expense, to
defend the Indemnified Party against such Claim; provided, however, that the Indemnified Party is hereby authorized
prior to and during the Notice Period to file any motion, answer or other pleading that it shall deem necessary or appropriate to
protect its interest or those of the Indemnifying Party and not prejudicial to the Indemnifying Party. If the Indemnifying Party
elects to assume the defense of any such Claim, the Indemnified Party shall have the right to employ separate counsel at its own
expense and to participate in the defense thereof. If the Indemnifying Party elects not to assume the defense of such Claim (or
fails to give notice to the Indemnified Party during the Notice Period), the Indemnified Party shall be entitled to assume the
defense of such Claim with counsel of its own choice, at the expense of the Indemnifying Party. If the Claim is asserted against
both the Indemnifying Party and the Indemnified Party and based on the advice of counsel reasonably satisfactory to the Indemnifying
Party it is determined that there is a conflict of interest which renders it inappropriate for the same counsel to represent both
the Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be responsible for paying for separate counsel for
the Indemnified Party; provided, however, that the Indemnifying Party shall not be responsible for paying for more
than one separate firm of attorneys to represent all of the Indemnified Parties, regardless of the number of Indemnified Parties. If
the Indemnifying Party elects to assume the defense of any Claim under this Section 11.4, (a) no compromise or settlement
thereof may be effected by the Indemnifying Party without the Indemnified Party’s written consent (which shall not be
unreasonably withheld) unless the sole relief provided is monetary damages that are paid in full by the Indemnifying Party and such
compromise or settlement does not include or constitute an obligation, restriction or admission of fault being imposed on the
Indemnified Party and (b) the Indemnifying Party shall have no liability with respect to any compromise or settlement thereof
effected without its written consent (which shall not be unreasonably withheld). Notwithstanding anything in this Section
11.4 to the contrary, the control of any Claim resulting in a Tax Contest or other Claim, assertion, event or proceeding in
respect of Taxes (including, but not limited to, any Claim in respect of a breach of the Tax Representations, a breach or violation
of or failure to fully perform any covenant, agreement, or obligation under Section 7.4 or any Claim related to Seller Taxes
under Section 11.2(d) shall be governed exclusively by Section 7.4 hereof.
Section
11.5 Indemnification Generally. Any indemnification payment required to be made pursuant to this Agreement shall be
reduced by any insurance proceeds or other proceeds from any Third Party received by the Indemnified Party or any of its Affiliates with
respect to the item giving rise to the indemnification payment. The Indemnified Party shall use Commercially Reasonable Efforts to pursue
any available insurance or other Third-Party indemnification Claims in respect of any Damages for which indemnification is sought under
this Agreement; provided that (a) such pursuit shall not interfere with the ability of a Party to make a Claim hereunder and (b) no Party
shall be required to incur any costs, expenses or obligations in connection with any such pursuit for which such Party is not entitled
to full indemnity and reimbursement hereunder for such costs, expenses and obligations. For the avoidance of doubt, the expiration of
any representation, warranty, covenant, or obligation does not affect the Indemnified Party’s right to claim indemnification with
respect to any breach thereof if the Indemnified Party has submitted a claim for indemnification in accordance with the provisions of
this Section 11 prior to such expiration.
Section
11.6 Exclusivity; Waiver of Rescission.
(a)
Except for any Title Defects and Environmental Defects and Casualty Losses or disputes related thereto which remain unresolved as of
Closing, or any disputes which arise prior to Closing or with respect to actual fraud, the Parties agree that after Closing, the only
relief and remedy available to a Party in relation to any breach, default or nonperformance of any representation, warranty, covenant
or agreement made or entered into by a Party pursuant to this Agreement or any certificate, instrument or document delivered pursuant
hereto shall be the recovery of Damages, and only to the extent properly claimable hereunder and subject to the terms and provisions
of this Article XI. Notwithstanding the foregoing, the Parties agree that nothing in this Agreement shall impose any limit or
impediment on any Party from making a Claim against the other or others based on their intentional fraud, gross negligence, or intentional
and willful misconduct.
(b)
Seller and Purchaser acknowledge that, following the Closing, the payment of money, as limited by the terms of this Agreement, shall
be adequate compensation for breach of any representation, warranty, covenant, or agreement contained herein or for any other Claim arising
in connection with or with respect to the Transaction. As the payment of money shall be adequate compensation, following the Closing,
Purchaser and Seller waive any right to rescind this Agreement or the Transaction.
Section
11.7 Limited to Actual Damages. EXCEPT WITH RESPECT TO ACTUAL FRAUD, THE OBLIGATIONS OF THE PARTIES FOR INDEMNIFICATION PURSUANT
TO THIS ARTICLE XI SHALL BE LIMITED TO ACTUAL DAMAGES AND SHALL NOT INCLUDE INCIDENTAL, CONSEQUENTIAL, INDIRECT, PUNITIVE, OR
EXEMPLARY DAMAGES (INCLUDING ANY LOST PROFITS, LOST SALES, BUSINESS INTERRUPTION OR LOST BUSINESS OPPORTUNITIES); provided that any
incidental, consequential, indirect, punitive or exemplary Damages (including any lost profits, lost sales, business interruption or
lost business opportunities) recovered by a Third Party against a party entitled to indemnity pursuant to this Article XI shall
be included in the Damages recoverable or allocated hereunder to such indemnity. Notwithstanding the foregoing, nothing herein shall
limit the right of any Party to specific performance.
Section
11.8 Express Negligence. IT IS THE EXPRESS INTENTION OF THE PARTIES THAT EACH PARTY TO BE INDEMNIFIED PURSUANT TO
THIS ARTICLE XI SHALL BE INDEMNIFIED AND HELD HARMLESS FROM AND AGAINST ALL DAMAGES AS TO WHICH INDEMNITY IS PROVIDED FOR UNDER
THIS ARTICLE XI, NOTWITHSTANDING THAT ANY SUCH DAMAGES ARISE OUT OF OR RESULT FROM THE ORDINARY, STRICT, SOLE, OR CONTRIBUTORY
NEGLIGENCE OF SUCH PARTY AND REGARDLESS OF WHETHER ANY OTHER PARTY (INCLUDING THE OTHER PARTIES TO THIS AGREEMENT) IS OR IS NOT ALSO
NEGLIGENT.
Section
11.9 Tax Treatment of Indemnification Payments. Except as otherwise required by Applicable Law, the Parties shall treat
any indemnification payment made hereunder as an adjustment to the Cash Consideration for U.S. federal and applicable state and local
income tax purposes.
Section
11.10 Limits on Liability. In the event that Closing occurs:
(a)
Notwithstanding anything herein to the contrary:
(i)
Seller shall have no obligation or liability under Section 11.2(a) with respect to inaccuracies or breaches of Seller Non-Fundamental
Representations with respect to any Damages suffered by Purchaser Indemnitees that individually do not exceed One Hundred Thousand Dollars
($100,000.00);
(ii)
Seller shall have no obligation or liability under Section 11.2(a) with respect to inaccuracies or breaches of Seller Non-Fundamental
Representations (excluding those contained in Section 3.18 and Section 3.19, which are subject to the applicable provisions
of Article VIII), unless and until the aggregate amount of Damages suffered by the Purchaser Indemnitees exceeds Two Million Seven
Hundred Thousand Dollars ($2,700,000.00) (the “Indemnity Deductible”); provided, however, that once
the amount of Damages suffered by Purchaser Indemnitees with respect to inaccuracies or breaches of such Seller Non-Fundamental Representations
exceeds the Indemnity Deductible, Seller shall be obligated to indemnify Purchaser only for such Damages in excess of the Indemnity Deductible,
it being understood that the Indemnity Deductible represents a deductible and not a threshold;
(iii)
Seller shall have no obligation or liability under Section 11.2(a), for Damages suffered by the Purchaser Indemnitees with respect
to inaccuracies or breaches of Seller Non-Fundamental Representations (excluding those contained in Section 3.18 and Section
3.19, which are subject to the applicable provisions of Article VIII) in the aggregate in excess of twenty percent (20%) of
the unadjusted Purchase Price; and
(iv)
Seller shall have no obligation or liabilities under Section 11.2(a) with respect to any Damages suffered by Purchaser Indemnitees
that in the aggregate exceed one hundred percent (100%) of the unadjusted Purchase Price.
(b)
No Party shall have any obligations hereunder to indemnify any Person for any Damages to the extent the amount of such Damages was taken
into account as an adjustment to the Cash Consideration under Section 1.3; provided, however, that nothing in this
Section 11.10 shall relieve any Party from any obligation or liability for such Party’s actual fraud.
Article
XII
MISCELLANEOUS
Section
12.1 Dispute Resolution.
(a)
Each Party shall have the right to submit Claims or other matters in question arising out of (i) any disputed Title Defects, Title Defect
Amounts, Title Benefits, or Title Benefit Amount to the Title Expert and (ii) any disputed Environmental Defects or Environmental Defect
Values shall be submitted to a nationally recognized independent environmental consulting firm mutually acceptable to both Seller and
Purchaser or absent such agreement during the ten (10)-day period, in accordance with the Rules (the “Environmental Expert”
and, with the Title Expert, each an “Independent Expert”).
(b)
Disputed Title Defects and Environmental Defects to be resolved by an Independent Expert shall be resolved in accordance with mutually
agreed procedures and rules and failing such agreement, in accordance with the Rules. The Independent Expert shall be instructed by the
Parties to resolve such disputes as soon as reasonably practicable in light of the circumstances. The decision and award of the Independent
Expert shall be binding upon the Parties as an award under the Federal Arbitration Act and final and non-appealable to the maximum extent
permitted by Applicable Law, and judgment thereon may be entered in a court of competent jurisdiction and enforced by any Party as a
final judgment of such court. In making a determination, the applicable Independent Expert shall be bound by the rules set forth in Article
VIII and may consider such other matters as in the opinion of the applicable Independent Expert are necessary or helpful to make
a proper determination. Additionally, the applicable Independent Expert may consult with and engage any disinterested person to advise
the arbitrator, including title attorneys from other states and petroleum engineers. The applicable Independent Expert shall act as an
expert for the limited purpose of determining the specific dispute related to the Title Defect or Environmental Defect, as applicable,
submitted by any Party and may not award damages or penalties to any Party with respect to any matter. Seller and Purchaser shall each
bear their own legal fees and other costs of presenting its case. Purchaser shall bear one-half of the fees, costs and expenses of the
applicable Independent Expert, and Seller shall be responsible for the remaining one-half of the fees, costs, and expenses of the applicable
Independent Expert. However, the Independent Expert shall have the right, but not the obligation, to award reasonable legal fees and
interest (but not any other damages or penalties) incurred by a Party in connection with such arbitration.
(c)
Any dispute that is not governed by the foregoing provisions of this Section 12.1 shall be settled exclusively and finally by
arbitration in accordance with this Section 12.1(c).
(i)
Such arbitration shall be conducted pursuant to the Federal Arbitration Act, except as expressly provided otherwise in this Agreement.
The validity, construction, and interpretation of this Section 12.1(c), and all procedural aspects of the arbitration conducted
pursuant hereto, including the determination of the issues that are subject to arbitration (i.e., arbitrability), the scope of the arbitrable
issues, allegations of “fraud in the inducement” to enter into this Agreement or this arbitration provision, allegations
of waiver, laches, delay or other defenses to arbitrability, and the rules governing the conduct of the arbitration (including the time
for filing an answer, the time for the filing of counterclaims, the times for amending the pleadings, the specificity of the pleadings,
the extent and scope of discovery, the issuance of subpoenas, the times for the designation of experts, whether the arbitration is to
be stayed pending resolution of related litigation involving Third Parties, the receipt of evidence and the like), shall be decided by
the arbitrators. The arbitration shall be conducted pursuant to the Commercial Arbitration Rules of the American Arbitration Association
(the “Rules”) but shall not be administered by or under the auspices of the American Arbitration Association, except
as expressly provided otherwise in this Agreement. The arbitration proceedings shall be subject to any optional rules contained in the
Rules for emergency measures and, in the case of any disputed Environmental Defects or Title Defects with respect to amounts in excess
of One Million Dollars ($1,000,000.00), optional rules for large and complex cases.
(ii)
The arbitrators shall permit and facilitate such discovery as they determine is appropriate in the circumstances, taking into account
the needs of the Parties and the desirability of making discovery expeditious and cost-effective. Such discovery may include pre-hearing
depositions, including depositions of witnesses who will not appear personally to testify if there is a demonstrated need therefor. The
arbitrators may issue orders to protect the confidentiality of proprietary information, trade secrets and other sensitive information
disclosed in discovery.
(iii)
All arbitration proceedings hereunder shall be conducted in Denver, Colorado, or such other mutually agreeable location.
(iv)
All arbitration proceedings hereunder shall be before a panel of three arbitrators appointed in accordance with the Rules consisting
of persons (which can include lawyers) having at least ten (10) years of experience in or relating to the oil and gas industry.
(v)
In deciding the substance of the dispute, the arbitrators shall refer to the substantive laws of the State of Colorado for guidance (excluding
choice-of-law principles that might call for the application of the laws of another jurisdiction). Matters relating to arbitration shall
be governed by this Section 12.1 and the Federal Arbitration Act.
(vi)
The Parties shall request the arbitrators to conduct a hearing as soon as reasonably practicable after appointment of the third arbitrator,
and to render a final decision completely disposing of the dispute that is the subject of such proceedings as soon as reasonably practicable
after the final hearing. The Parties shall instruct the arbitrators to impose time limitations they consider reasonable for each phase
of such proceeding, including, without limitation, limits on the time allotted to each Party for the presentation of its case and rebuttal.
The arbitrators shall actively manage the proceedings as they deem best so as to make the proceedings fair, expeditious, economical,
and less burdensome than litigation. To provide for speed and efficiency, the arbitrators may: (A) limit the time allotted to each Party
for presentation of its case; and (B) exclude testimony and other evidence they deem irrelevant or cumulative.
(vii)
Except to the extent expressly provided under this Agreement to the contrary, the Parties expressly agree that the arbitrators shall
have absolutely no authority to award consequential, incidental, special, treble, exemplary or punitive damages of any type under any
circumstances regardless of whether such damages may be available under Colorado law, or any other Applicable Law, or under the Federal
Arbitration Act or the Rules.
(viii)
The Parties shall request that final decision of the arbitrators be in writing, be as brief as possible, set forth the reasons for such
final decision, and if the arbitrators award monetary damages to any Party, contain a certification by the arbitrators that they have
not included any incidental, special, treble, exemplary or punitive damages. To the fullest extent permitted by law, the arbitration
proceeding, and the arbitrators’ decision and award shall be maintained in confidence by the Parties and the Parties shall instruct
the arbitrators to likewise maintain such matters in confidence.
(ix)
The fees and expenses of the arbitrators shall be borne equally by Seller and Purchaser, but the decision of the arbitrators may include
such award of the arbitrators’ fees and expenses and of other costs and attorneys’ fees as the arbitrators determine appropriate
(provided that such award of costs and fees may not exceed the amount of such costs and fees incurred by the losing party in the arbitration).
(x)
The decision and award of the arbitrators shall be binding upon the Parties and final and non-appealable to the maximum extent permitted
by law, and judgment thereon may be entered in a court of competent jurisdiction and enforced by any Party as a final judgment of such
court.
Section
12.2 Notices. All notices, requests, demands, and other communications required or permitted to be given or made hereunder
by any Party shall be in writing and shall be deemed to have been duly given or made (a) when delivered personally by hand, (b) one (1)
Business Day after the day sent by an internationally recognized overnight courier (with written confirmation of receipt), or (c) on
the date sent if sent by electronic mail (provided, however, that notice given my electronic mail shall not be effective unless either
(i) the recipient confirms receipt by other than automatic means or (ii) a duplicate copy of such electronic mail notice is promptly
given by one of the other methods described in this Section 12.2), in each case to the Parties at the following addresses (or at such
other addresses or email address as is specified by any Party by providing notice to the other Parties pursuant to this provision):
If
to Seller:
Nickel
Road Operating LLC
3773
Cherry Creek North Drive, Suite 670
Denver,
Colorado 80209
Attention:
Andrew Haney
Email:
andrew.haney@nickelroadoperating.com
With
a copy (which shall not constitute notice) to:
The
Cassidy Building
407
Throckmorton Street, Suite 560
Fort
Worth, Texas 76102
Attention:
Frank Lamsens
Email:
flamsens@vortus.com
With
a copy (which shall not constitute notice) to:
Jack
R. Luellen
Buchalter
1624
Market Street, Suite 400
Denver,
Colorado 80202-2457
Email:
jluellen@buchalter.com
If
to Purchaser:
Prairie
Operating Co.
602
Sawyer Street, Suite 710
Houston,
Texas 77007
Attn:
Gary Hanna
Email:
GH@prairieopco.com
With
a copy (which shall not constitute notice) to:
Prairie
Operating Co.
50
S Steele Street
Suite
330
Denver,
Colorado 80209
Attn:
Daniel T. Sweeney, Esq.
Email:
ds@prairieopco.com
With
a copy (which shall not constitute notice) to:
Norton
Rose Fulbright
1301
McKinney
Suite
5100
Houston,
Texas 77010
Attn:
Craig S. Vogelsang, Esq.
Email:
craig.vogelsang@nortonrosefulbright.com
Section
12.3 Entire Agreement. This Agreement, together with the Exhibits and Schedules attached hereto and other documents
delivered pursuant hereto and the Confidentiality Agreement, constitute the entire agreement between the Parties with respect to the
subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the Parties with respect to
the subject matter hereof.
Section
12.4 Binding Effect; Assignment; No Third Party Benefit. This Agreement shall be binding upon and inure to the benefit
of the Parties and their respective heirs, legal representatives, successors and permitted assigns. Except as otherwise expressly provided
in this Agreement, neither this Agreement nor any of the rights, interest or obligations hereunder shall be assigned by any of the Parties
without the prior written consent of the other Parties. Except as provided in Section 8.8 and Article XI, nothing in this Agreement,
express or implied, is intended to or shall confer upon any Person other than the Parties, and their respective heirs, legal representatives,
successors and permitted assigns, any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.
Section
12.5 Severability. If any provision of this Agreement is held to be unenforceable, this Agreement shall be considered
divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Agreement
shall remain in full force and effect; provided, however, that if any such provision may be made enforceable by limitation thereof, then
such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by Applicable Law.
Section
12.6 Governing Law and Venue. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS. VENUE FOR ALL MATTERS RELATING TO OR ARISING
FROM THIS AGREEMENT SHALL BE IN THE STATE AND FEDERAL COURTS LOCATED IN THE CITY OF HOUSTON AND THE COUNTY OF HARRIS, STATE OF TEXAS.
THE PARTIES EACH CONSENT TO THE VENUE PROVISIONS HEREIN AND IRREVOCABLY WAIVE ANY ASSERTION THAT ANY CLAIMS IT HAS OR MAY HAVE TO CONTEST
SUCH VENUE BASED ON PERSONAL JURISDICTION OR FORUM NON CONVENIENS.
Section
12.7 Further Assurances. From time to time following the Closing, at the request of any Party and without further consideration,
the other Party or Parties shall execute and deliver to such requesting Party such instruments and documents and take such other action
(but without incurring any material financial obligation) as such requesting Party may reasonably request in order to consummate more
fully and effectively the Transaction, including with respect to the preparation of the Final Settlement Statement in accordance with
Section 1.3(c).
Section
12.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which for all purposes shall be deemed
an original, and all of which shall constitute, collectively, one instrument. It is not necessary that each Party execute the same counterpart
so long as identical counterparts are executed by each such Party. This Agreement may be validly executed and delivered by electronic
transmission.
Section
12.9 Injunctive Relief. The Parties acknowledge and agree that irreparable damage would occur in the event any of the
provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly
agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and
shall be entitled to enforce specifically the provisions of this Agreement, in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the Parties may be entitled under this Agreement or at law or in equity.
Section
12.10 Amendment. This Agreement may not be amended except by an instrument in writing signed by or on behalf of all
the Parties.
Section
12.11 Waiver. Any Party may: (a) waive any inaccuracies in the representations and warranties of the other Parties contained
herein or in any document, certificate or writing delivered pursuant hereto, or (b) waive compliance by the other Parties with any of
the other agreements or fulfillment of any conditions to its own obligations contained herein. Any agreement on the part of a Party to
any such waiver shall be valid only if set forth in writing. No failure or delay by a Party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power, or privilege.
Section
12.12 Schedules and Exhibits. The inclusion of any information (including Dollar amounts) in any section of the Schedules or
Exhibits attached hereto shall not be deemed to be an admission or acknowledgment by Seller that such information is required to be listed
on such Schedule or Exhibit or is material to or outside the ordinary course of business of Seller. The information contained in this
Agreement, the Exhibits, and the Schedules hereto is disclosed solely for purposes of this Agreement, and no information contained herein
or therein shall be deemed to be an admission by either Party to any Third Party of any matter whatsoever (including, without limitation,
any violation of a legal requirement or breach of contract or that a matter does or may have a Material Adverse Effect). Matters may
be disclosed on a Schedule or Exhibit to this Agreement for purposes of information only. Matters disclosed in each Schedule or Exhibit
shall qualify the representation and warranty in which such Schedule is referenced and any other representation and warranty to which
the matters disclosed reasonably relate.
Article
XIII
DEFINITIONS AND REFERENCES
Section
13.1 Certain Defined Terms. When used in this Agreement, the following terms shall have the respective meanings assigned to
them in this Section 13.1 or in the section, subsections or other subdivisions referred to below:
“Accounting
Dispute” has the meaning set forth in Section 1.3(c)(v).
“Accounting
Dispute Notice” has the meaning set forth in Section 1.3(c)(iii).
“Accounting
Referee” has the meaning set forth in Section 1.3(c)(v).
“Adjusted
Purchase Price” has the meaning set forth in Section 1.2(c).
“Affiliate”
means, as to any specified Person, any other Person, directly or indirectly, controlling or controlled by or under common control
with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person
means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative
to the foregoing; provided, however, that neither Vortus Investment Advisors, LLC, a fund formed by Vortus Investment Advisors,
LLC for the purpose of making investments, nor any portfolio company of any such fund other than Seller, shall be considered an Affiliate
of Seller.
“Agreement”
means this Asset Purchase Agreement, as hereafter amended or modified in accordance with the terms hereof.
“Allocated
Value” means, with respect to each Oil and Gas Property, the portion of the unadjusted Purchase Price allocated to such Oil
and Gas Property as set forth on Schedule 1.2(d).
“Allocation
Dispute Resolution Period” has the meaning set forth in Section 1.2(e).
“Alternate
Transaction” has the meaning set forth in Section 6.3.
“Applicable
Law” means any statute, law, principle of common law, rule, regulation, judgment, order, ordinance, requirement, code, writ,
moratorium, injunction, or decree of any Governmental Entity.
“Asset
Taxes” means ad valorem, property, excise, severance, production, sales, use, real or personal property, transfer and similar
Taxes based upon the acquisition, operation or ownership of the Properties, the production of Hydrocarbons therefrom or the receipt of
proceeds therefrom, but excluding, for the avoidance of doubt, Income Taxes and Transfer Taxes.
“Assignment”
has the meaning set forth in Section 2.2(a)(v).
“Big
4” has the meaning set forth in Section 1.3(c)(v).
“Business
Day” means a day other than a Saturday, Sunday or day on which commercial banks in Denver, Colorado are authorized or required
to be closed for business.
“Cash
Consideration” has the meaning set forth in Section 1.2(a)(i).
“Casualty
Loss” has the meaning set forth in Section 8.9(a).
“CERCLA”
means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq., as amended.
“Claim”
means any and all Proceedings, claims, or demands.
“Closing”
has the meaning set forth in Section 2.1.
“Closing
Date” has the meaning set forth in Section 2.1.
“Code”
means the Internal Revenue Code of 1986, or any successor statute thereto, as amended.
“Commercially
Reasonable Efforts” means a Party’s commercially reasonable efforts in accordance with reasonable commercial practice
but shall not require any Party to incur any cost or expenditure, assume, incur, or agree to any obligation, restriction or admission
of fault being imposed on such Party which, but for this Agreement, it would not otherwise be contractually or legally obligated to incur,
assume or agree.
“Confidentiality
Agreement” means that certain Confidentiality Agreement dated as of July 26, 2023, by and between Seller and Prairie Operating
Company, LLC, as amended in that certain First Amendment to Confidentiality Agreement dated September 12, 2023 and that Second Amendment
to Confidentiality Agreement dated January 6, 2024.
“Contemplated
Leasing Activities” has the meaning set forth in Section 6.1(c).
“Cure
Period” has the meaning set forth in Section 8.7(b).
“Damages”
has the meaning set forth in Section 11.2.
“Defect
Deductible” means an amount equal to the sum of (a) Two Million Seven Hundred Thousand Dollars ($2,700,000) and (b) the aggregate
amount of the Title Benefit Amounts for all Title Benefits, provided, that if the Title Benefit Amount for any Title Benefit fails to
exceed Eighty Thousand Dollars ($80,000), then such Title Benefit Amount shall be disregarded and shall not increase the Defect Deductible.
“Defensible
Title” means, as of the Effective Date and the Closing Date, such ownership by Seller that, although not constituting perfect,
merchantable, or marketable title, is such that, subject to and except for Permitted Encumbrances:
(a)
with respect to each Well shown on Exhibit A-3 or Unit shown on Exhibit A-4 (after satisfaction of all royalties, overriding
royalties, nonparticipating royalties, net profits interests or other similar burdens on or measured by production of Hydrocarbons),
entitles Seller to receive not less than the interest set forth in Exhibit A as Seller’s Net Revenue Interest of all Hydrocarbons
produced, saved and marketed from such Well or Unit as to the depths identified in Exhibit A-3 or Exhibit A-4, as applicable,
without reduction of such interest throughout the productive life of such Well or Unit, except (i) as specifically set forth in Exhibit
A, (ii) decreases in connection with those operations permitted hereunder in which Seller is permitted hereunder to be a non-consenting
party after the Execution Date, (iii) to the extent caused after the Execution Date by continuous development and partial termination
provisions contained in the Leases comprising such Oil and Gas Property, (iv) decreases required to allow other working interest owners
to make up past underproduction or pipelines to make up past under-deliveries for which a downward adjustment to the Cash Consideration
has been made in accordance with Section 1.3, (v) decreases resulting from reversionary interests, carried interests, or horizontal
or vertical severances contained in the Leases comprising such Oil and Gas Property, (vi) to the extent resulting from changes in proration
units after the Execution Date; provided, that such changes are not a result of any action of Seller or its representatives, (vii) to
the extent resulting from changes or adjustments that result from the establishment of units, changes in existing units or the participating
areas therein; provided, that such changes are not a result of any action of Seller or its representatives, or (viii) to the extent resulting
from the entry into pooling, communitization, or unitization agreements after the Execution Date to the extent such entry complies with
Sections 6.1 and 6.2;
(b)
with respect to each Well shown on Exhibit A-3 or Unit shown on Exhibit A-4, obligates Seller to bear not greater than
the interest set forth in Exhibit A-3 or Exhibit A-4, as applicable, as Seller’s Working Interest of the costs and
expenses relating to the maintenance, development and operation of such Well or Unit as to the depths identified in Exhibit A-3
or Exhibit A-4, as applicable, without increase throughout the productive life of such Well or Unit, except (i) as specifically
set forth in Exhibit A-3 or Exhibit A-4, as applicable, (ii) to the extent any such increase is accompanied by a proportionate
increase in the applicable Net Revenue Interest, (iii) increases resulting from contribution requirements with respect to defaulting
parties under applicable operating, unit, pooling, pre-pooling or similar agreements, (iv) to the extent resulting from changes in proration
units; provided, that such changes are not a result of any action of Seller or its representatives, (v) to the extent resulting from
changes or adjustments that result from the establishment of units, changes in existing units (or the participating areas therein); provided,
that such changes are not a result of any action of Seller or its representatives, or (vi) to the extent resulting from the entry into
pooling, communitization, or unitization agreements after the Execution Date to the extent such entry complies with Sections 6.1
and 6.2;
(c)
with respect to each Lease shown on Exhibit A-1, entitles Seller to the Net Mineral Acres set forth in Exhibit A-1 with
respect to such Lease; and
(d)
with respect to each Lease shown on Exhibit A-1 and each Well shown on Exhibit A- 3 and Unit shown on Exhibit A-4,
is free and clear of all Liens and defects in title.
“Deposit”
has the meaning set forth in Section 1.4(a).
“Deposit
Release” has the meaning set forth in Section 10.3(a).
“Deposit
Release Amount” has the meaning set forth in Section 10.3(a)(i).
“Dollars”
or “$” means U.S. Dollars.
“ECMC”
means the Colorado Energy and Carbon Management Commission.
“Effective
Date” means 7:00 a.m. (Mountain Time) on February 1, 2024.
“Environmental
Defect” means, with respect to any given Property, (a) a violation of applicable Environmental Laws in effect as of the Execution
Date, attributable to the use, ownership or operation of such Property, (b) a condition on or affecting such Property that violates an
Environmental Law, or (c) a condition on or otherwise affecting or arising from such Property with respect to which cleanup, remediation,
removal, or remedial, response or corrective action is required under Environmental Law.
“Environmental
Defect Notice” has the meaning set forth in Section 8.5(a).
“Environmental
Defect Property” has the meaning set forth in Section 8.5(a).
“Environmental
Defect Value” means, (a) the reasonably estimated costs and expenses to correct an Environmental Defect in the most cost-effective
manner reasonably available, consistent with Environmental Laws, or (b) the amount of Environmental Liabilities reasonably believed will
be incurred or required to be paid by Seller with respect thereto.
“Environmental
Expert” has the meaning set forth in Section 12.1(a).
“Environmental
Information” has the meaning set forth in Section 8.4(d).
“Environmental
Laws” means, as the same have been amended as of the Execution Date, all Applicable Laws relating to pollution, the protection,
restoration of the environment or, as such relates to Hazardous Materials, Hydrocarbons or NORM, occupational health and safety, natural
resources including flora and fauna, or natural resource damages, including any such law relating to the generation, manufacture, treatment,
storage, disposal, use, handling, transportation or Release of any Hazardous Materials, Release of Hydrocarbons, or to exposure to Hazardous
Materials, Hydrocarbons or NORM, including CERCLA, the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., the Federal
Water Pollution Control Act, 33 U.S.C. § 1251 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. § 5101 et seq., the Toxic Substances Control Act, 15 U.S.C. §§ 2601 through 2629, the Oil
Pollution Act, 33 U.S.C. § 2701 et seq., the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq.
and the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j and all similar state or local acts.
“Environmental
Liabilities” means any and all obligations and liabilities arising from, based on, or attributable to any violations of any
Environmental Law, adverse health effects from exposure to Hazardous Materials, Hydrocarbons or NORM, Releases of Hazardous Materials,
or Release of Hydrocarbons at, on, in, under, affecting or relating to the Properties or the use, operation or ownership of the Properties,
incurred or imposed (a) pursuant to any order, notice of responsibility (including requirements embodied in Environmental Laws), injunction,
judgment or similar act (including settlements) by any Governmental Entity or court of competent jurisdiction to the extent arising out
of any violation of, or remedial obligation under, any Environmental Laws that are attributable to the ownership or operation of the
Properties or (b) pursuant to any Proceeding by a Governmental Entity or any other Person for personal injury, property damage, damage
to natural resources, remediation or response costs to the extent arising out of any violation of, or any remediation obligation under,
any Environmental Laws that are attributable to the ownership or operation of the Properties.
“Environmental
Permits” has the meaning set forth in Section 3.13(d).
“Equipment”
has the meaning set forth in Section 1.1(c).
“Escrow
Account” has the meaning set forth in Section 1.4(a).
“Escrow
Agent” means the Bank of Texas, or such agent as the Parties mutually agree in writing.
“Escrow
Agreement” has the meaning set forth in Section 1.4(a).
“Examination
Period” has the meaning set forth in Section 8.2(a).
“Excluded
Assets” means (a) the Excluded Records, and (b) those assets set forth in on Schedule XIII.
“Excluded
Records” means (a) all corporate, partnership, limited liability company, financial, Income Tax and legal records of Seller
that relate to Seller’s business generally, (b) all books, records and files that relate to the Excluded Assets, (c) legal records
and legal files of Seller, work product of Seller’s legal counsel, and records protected by attorney-client privilege, but excluding
Leases, Applicable Contracts and title opinions; (d) reserve studies, estimates and evaluations, interpretations of seismic data, engineering
studies and forecasts, and economic studies; (e) copies of records stored for archival and/or back up purposes; (f) any internal valuations,
price forecasts, and interpretative data or documentation; and (g) any books, records, data, files, contracts, agreements, permits, authorizations,
immunities, easements, and similar instruments (i) restricted from transfer or disclosure by their respective terms or third-party agreements,
and the necessary consents are not obtained pursuant to this Agreement or (ii) the transfer or disclosure of which is subject to the
payment of a fee or other consideration, and for which no required consent has been received or for which Purchaser has not agreed in
writing to pay the fee or provide such other consideration.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended.
“Execution
Date” has the meaning set forth in the Preamble of this Agreement.
“Final
Deposit Release Date” has the meaning set forth in Section 10.3(a)(iii).
“Final
Settlement Statement” has the meaning set forth in Section 1.3(c)(i).
“First
Deposit Release Date” has the meaning set forth in Section 10.3(a)(i).
“Found
Assets” has the meaning set forth in Section 8.10.
“Force
Majeure” means any unforeseeable circumstance which is beyond the control of a Party, or any unavoidable event, even if foreseeable,
as a result of which such Party is unable to perform its obligations, in whole or in part, under this Agreement. Such circumstances include,
but are not limited to: (a) acts of God; (b) flood, fire, earthquake or explosion; (c) current or future war, invasion, hostilities (whether
war is declared or not), terrorist threats or acts, riots, or other civil unrest; (d) actions, embargoes, or blockades in effect on or
after the Execution Date; (e) declared national or regional emergency; or (f) epidemic, pandemic or similar outbreak or infection.
“Fundamental
Representations” means (a) those representations and warranties of Seller set forth in Section 3.1, Section 3.2,
Section 3.3, Section 3.4, and Section 3.12; and (b) those representations and warranties of Purchaser set forth
in Section 5.1, Section 5.2, Section 5.3, Section 5.4, and Section 5.10.
“GAAP”
means generally accepted accounting principles in the United States of America from time to time, applied on a consistent basis throughout
the periods involved.
“Governing
Documents” means, when used with respect to an entity, the documents governing the formation and operation of such entity,
including (a) in the instance of a corporation, the certificate of incorporation and bylaws of such corporation, (b) in the instance
of a partnership, the partnership agreement, and (c) in the instance of a limited liability company, the certificate of formation and
limited liability company agreement.
“Governmental
Entity” means any court or tribunal in any jurisdiction (domestic or foreign) or any federal, state, tribe, county, municipal
or other governmental or quasi-governmental body, agency, authority, department, commission, board, bureau, or instrumentality (domestic
or foreign), including, but not limited to, the SEC.
“Hazardous
Materials” means any pollutants, contaminants, toxic or hazardous substances, materials, wastes, constituents, compounds, or
chemicals that are regulated by, or may form the basis of liability under any Environmental Laws, including asbestos-containing materials,
poly-chlorinated bi-phenyls, or per- or poly-fluoroalkyl substances (but excluding any Hydrocarbons or NORM).
“Hydrocarbons”
means oil, gas, condensate, casinghead gas, other liquid or gaseous hydrocarbons or any combination thereof, and all products and substances
extracted, separated, processed, and produced therefrom.
“Imbalance”
means over-production, under-production, over-deliveries, under-deliveries, or make-up obligations with respect to Hydrocarbons produced
from or allocated to the Wells and the Leases and participating mineral interests, regardless of whether such over-production, under-production,
over-deliveries, under-deliveries, or make-up obligations arise at the wellhead, pipeline, gathering system, transportation system, processing
plant, or other location, including any imbalances under gas balancing or similar agreements, imbalances under production handling agreements,
imbalances under processing agreements, imbalances under the Leases and participating mineral interests, and imbalances under gathering
or transportation agreements.
“Income
Taxes” means any income, capital gains, franchise or similar Taxes based upon, measured by, or calculated with respect to net
income, profits, capital, or similar measures (or multiple bases, including corporate, franchise, business and occupation, business license,
or similar Taxes, if net income, profits, capital, or a similar measure is one of the bases on which such Tax is based, measured, or
calculated), but excluding ad valorem, property, excise, severance, production, sales, use, real or personal property, transfer and other
similar Taxes.
“Indemnified
Party” has the meaning set forth in Section 11.4.
“Indemnifying
Party” has the meaning set forth in Section 11.4.
“Independent
Expert” has the meaning set forth in Section 12.1(a).
“Knowledge”
means all information actually known, and all information that such individual should have known after reasonable investigation and inquiry,
to (a) with respect to Seller: Andrew Haney, Dana Johnson, Kit Tincher and Jon Bloomfield, and (b) with respect to Purchaser: Edward
Kovalik, Gary Hanna, Craig Owen, David Baumbach, and Wobbe Ploegsma.
“Leases”
has the meaning set forth in Section 1.1(a).
“Letter
of Intent” means that Non-Binding Letter of Intent entered into by and between the Parties dated September 12, 2023.
“Lien”
means any lien, mortgage, security interest, pledge, charge, option, or encumbrance of any kind (but does not include any rentals, royalties,
overriding royalties, excess royalties, minimum royalties, shut-in royalties, net profits interests, bonuses, production payments and
other burdens upon, measured by, or payable out of production of Hydrocarbons).
“Material
Adverse Effect” means any change, development, or effect (individually or in the aggregate), whether foreseeable or unforeseeable,
which, when taken as a whole, is, or is reasonably likely to be, materially adverse (a) to the business, assets, value, results of operations
or condition (financial or otherwise) of any Party, the Properties, or the assets or properties of such Party, or (b) to the ability
of a Party to perform on a timely basis any material obligation under this Agreement or any agreement, instrument or document entered
into or delivered in connection herewith; provided, however, that changes, developments or effects relating to (x) the
economy in general (including any effects on the economy arising as a result of acts of terrorism), (y) changes in Hydrocarbon commodity
prices or other changes affecting the U.S. oil and gas industry generally, or (z) the announcement of the Transaction, shall not be deemed
to constitute a Material Adverse Effect and shall not be considered in determining whether a Material Adverse Effect has occurred, and
further provided, however, that notwithstanding anything to the contrary above, neither the failure of the SEC to act in
a timely fashion nor Purchaser’s inability to satisfy its obligations under Section 5.7 shall constitute a Material Adverse
Effect.
“Mineral
Fee Interests” has the meaning set forth in Section 1.1(a).
“Net
Mineral Acre” means, as computed separately with respect to each Lease, (a) the number of gross acres in the lands covered
by such Lease, multiplied by (b) the undivided percentage interest in oil, gas and other minerals covered by such Lease in such lands,
multiplied by (c) the applicable Seller’s WI in such Lease, provided that if clause (b) and/or (c) of this definition vary as to
different areas of such lands (including depths) covered by such Lease, a separate calculation shall be done for each such area as if
it were a separate Lease.
“Net
Revenue Interest” or “NRI” means an interest (expressed as a percentage, decimal or fraction) in and to
all Hydrocarbons produced, saved and sold from or attributable to an Oil and Gas Property, after giving effect to all lessor royalties,
non-participating royalties, overriding royalties, production payments, Third-Party lessee’s royalties, carried interests, net
profits interests, reversionary interests and other similar burdens upon, measured by or payable out of production therefrom.
“NORM”
means naturally occurring radioactive material.
“Notice
Period” has the meaning set forth in Section 11.4.
“NR
Operator” has the meaning set forth in the Preamble of this Agreement.
“Oil
and Gas Contracts” has the meaning set forth in Section 1.1(b).
“Oil
and Gas Leases” means oil, gas or mineral leases, subleases, leasehold estates, operating rights and other rights authorizing
the owner thereof to explore or drill for and produce Hydrocarbons and other minerals, contractual rights to acquire any such of the
foregoing interest which have been earned by performance or acquired by force pooling, and fee mineral, royalty and overriding royalty
interest, net profits interest, carried interests, reversionary interests, farmout rights, options, production payments and other interest
payable out of Hydrocarbon production, in each case, in which Seller has an interest.
“Oil
and Gas Property” has the meaning set forth in Section 1.1(a).
“Outside
Date” means 11:59 p.m. (Mountain Time) on August 15, 2024.
“Party”
and “Parties” have the meanings set forth in the Preamble of this Agreement.
“Permits”
means licenses, permits, franchises, registrations, certificates, consents, approvals, variances, exemptions, and other authorizations
of or from Governmental Entities, including those necessary for the use, ownership, and operation of the Properties.
“Permitted
Encumbrances” means:
(a) Liens
for Taxes which are not yet delinquent or, if delinquent, which are being contested in good faith by appropriate Proceedings identified
on Schedule 3.8;
(b) normal
and customary Liens of co-owners under operating agreements, unitization agreements, communitization agreements and pooling orders, or
created by operation of Applicable Law relating to the Oil and Gas Properties, which obligations are not yet due and pursuant to which
Seller is not in default and which Liens do not operate, individually or in the aggregate, to reduce Seller’s Net Revenue Interest
in any Oil and Gas Property at any time during the productive life thereof to less than the interest shown on Exhibit A-1, Exhibit
A-2, Exhibit A- 3, or Exhibit A- 4, as applicable;
(c) materialman’s,
mechanic’s, repairman’s, employee’s, contractor’s, operator’s, vendor’s, carrier’s, warehousemen’s,
workmen’s, construction 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 Law, but excluding, for the avoidance of doubt, any obligations relating
to Taxes), or if delinquent, being contested in good faith by appropriate proceedings;
(d) royalties,
overriding royalties, net profits interests, production payments and other burdens on production which do not reduce Seller’s Net
Revenue Interest in any of the Oil and Gas Properties at any time during the productive life thereof to less than the interest shown
on Exhibit A-1, Exhibit A-2, Exhibit A- 3, or Exhibit A- 4, as applicable;
(e) Liens
in the ordinary course of business consisting of minor defects and irregularities in title or other restrictions (whether created by
or arising out of joint operating agreements, farm-out agreements, Leases and assignments, contracts for purchases or sales of Hydrocarbons
or similar agreements, or otherwise in the ordinary course of business) that, because of statutory cure periods, marketable title acts,
statutes of limitations periods and other similar reasons, have not affected or interrupted and are not reasonably expected to affect
or interrupt, the claimed ownership of Seller to the Oil and Gas Properties or the receipt of production revenues from the Oil and Gas
Properties affected thereby, and which do not operate, individually or in the aggregate, to (x) reduce Seller’s Net Revenue Interest
in any Oil and Gas Property at any time during the productive life thereof to less than the interest shown on Exhibit A-1, Exhibit
A-2, Exhibit A- 3, or Exhibit A- 4, as applicable or (y) interfere in any material respect with the use, ownership
or operation of the Properties;
(f) all
rights to consent by, required notices to, filings with, or other actions by Governmental Entities required in connection with this Transaction
that are customarily obtained or made subsequent to such sale or conveyance;
(g) rights
reserved to or vested in any Governmental Entity to control or regulate Oil and Gas Properties or interests therein, and all Applicable
Laws and any moratorium, prohibition, or restriction on fracing or other operations;
(h) defects
identified on any Schedule or Exhibit in this Agreement (including the Proceedings set forth on Schedule 3.6);
(i) preferential
rights to purchase to the extent such rights either are not triggered by the consummation of the Transaction or have been waived in writing
or by the passage of time by the holder thereof following proper notice to the holder thereof;
(j) consent
to transfer requirements of any Person, but only to the extent same either (i) are not triggered by the consummation of the Transaction,
or (ii) have been (or, prior to Closing, will be) waived in writing or by the passage of time by the holder thereof;
(k) conventional
rights of reassignment normally actuated by an intent to abandon or release a lease and requiring notice to the holders of such rights;
(l) rights
of a common owner of any interest in rights-of-way, permits, or easements held by Seller and such common owner as tenants-in-common or
through common ownership;
(m) easements,
conditions, covenants, restrictions, servitudes, surface leases, rights-of-way, plat restrictions, permits and other rights in respect
of surface operations, facilities, roads, alleys, highways, pipelines, grazing, logging, canals, ditches, reservoirs, transmission lines,
transportation lines, distribution lines, telephone lines, power lines, railways and similar matters, in each case that do not materially
interfere with the use, ownership or operation of the Properties;
(n) any
Imbalances set forth on Schedule 3.11;
(o) any
Title Defect or Environmental Defect that does not meet the threshold for an adjustment of the Purchase Price pursuant to Section
8.6(b);
(p) any
Title Defect or Environmental Defect waived or deemed to have been waived by Purchaser pursuant to Section 8.3(b);
(q) calls
on Hydrocarbon production under any contract that has been made available by Seller to Purchaser;
(r) defects
affecting ownership interests in any geologic formation other than the Niobrara and Codell formations;
(s) defects
based solely on a lack of information in Seller’s files or references to a document if such document is not in Seller’s files,
unless Purchaser provides evidence that the lack thereof has resulted in another Person’s actual and superior claim of title to
the Property;
(t) defects
or irregularities arising out of lack of appropriate authorization such as failure to demonstrate of record proper authority for execution
by any Person on behalf of a corporation, limited liability company, partnership, trust, or other entity, unless Purchaser provides evidence
that the lack of such authorization results in another Person’s competing claim of title to any Oil and Gas Property;
(u) defects
or irregularities that have been cured or remedied by the applicable statutes of limitation or statutes for prescription;
(v) defects
or irregularities in the chain of title consisting of the failure to recite marital status in documents; misspelling of names or use
of commonly associated nicknames; omissions of heirship or probate proceedings unless Purchaser provides evidence that the lack thereof
has resulted in another Person’s actual and superior claim of title to the Property, or the recording of instruments purporting
to affect the title to any Oil and Gas Property by a stranger to the title;
(w) defects
arising out of a lack of survey or lack of metes and bounds descriptions, unless a survey is expressly required by Applicable Law;
(x) defects
arising from any change in Applicable Law after the Execution Date;
(y) encumbrances
created under deeds of trust, mortgages, and similar instruments by the lessor under a Lease covering the lessor’s surface and
mineral interests in the land covered thereby that would customarily be accepted by a reasonably prudent operator in taking or purchasing
such Leases and for which the lessee would not customarily seek a subordination of such encumbrance to the oil and gas leasehold estate
prior to conducting drilling activities on the Lease;
(z) encumbrances
created under deeds of trust, mortgages, and similar instruments by the grantor under a right-of-way that would customarily be accepted
by a reasonably prudent operator in taking or purchasing such rights-of-way;
(aa) minor
defects or irregularities in title which for the applicable statute of limitations period have not delayed or prevented Seller (or Seller’s
predecessor, if owned by Seller for less than two (2) years) from receiving its Net Revenue Interest share of the proceeds of production
and have not caused Seller to bear a share of expenses and costs greater than its Working Interest share from each Well;
(bb) defects
or irregularities resulting from or related to the lack of an assignment to Seller of any Oil and Gas Property that Seller earned pursuant
to an Oil and Gas Contract, but that has not yet been assigned to Seller; provided such Oil and Gas Property is assigned to Seller prior
to the end of the Examination Period;
(cc) the
terms, conditions, restrictions, exceptions, reservations, limitations and other matters contained in any applicable Leases, Seller Contracts
or Oil and Gas Contracts, if the net cumulative effect of such burdens does not (i) operate to reduce Seller’s Net Revenue Interest
in any Oil and Gas Property at any time during the productive life thereof below the Net Revenue Interest for such Oil and Gas Property
listed on Exhibit A-1, Exhibit A-2, or Exhibit A-3, or Exhibit A-4, as applicable or (ii) operate to increase Seller’s
Working Interest in an Oil and Gas Property at any time during the productive life thereof to more than the Working Interest for such
Oil and Gas Property as listed on Exhibit A-1, Exhibit A-2, or Exhibit A-3, or Exhibit A-4, as applicable (unless
there is a corresponding increase in the Net Revenue Interest);
(dd) defects
arising from the failure of Exhibit A to reflect any leased or any unleased mineral interest where the owner thereof was treated
as a nonparticipating co-tenant during the drilling of any well;
(ee) defects
due to lack of rights-of-way for third party gathering and transportation pipelines or facilities; and
(ff) defects
of which Purchaser had actual Knowledge prior to the execution date of the Confidentiality Agreement.
“Person”
means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, enterprise,
unincorporated organization, other entity, or Governmental Entity.
“Post-Closing
Defect” has the meaning set forth in Section 8.7(a).
“Proceedings”
means all proceedings, actions, suits, audits, investigations, and inquiries by or before any arbitrator or Governmental Entity.
“Properties”
has the meaning set forth in Section 1.1.
“Purchase
Price” has the meaning set forth in Section 1.2(a)(ii).
“Purchaser”
has the meaning set forth in the Preamble of this Agreement.
“Purchaser
Indemnitees” has the meaning set forth in Section 11.2.
“Purchaser
Operator” has the meaning set forth in the Preamble of this Agreement.
“Purchaser’s
Environmental Consultant” has the meaning set forth in Section 8.4(a).
“Purchaser’s
Environmental Review” has the meaning set forth in Section 8.4(a).
“Purchaser’s
Title Review” has the meaning set forth in Section 8.2(a).
“Records”
has the meaning set forth in Section 1.1(g).
“Registration
Statement” means any registration statement for a primary issuance of securities by Purchaser (which, for the avoidance of
doubt, may be a registration statement on Form S-1 or a “shelf” registration statement on Form S-3 if Purchaser is eligible
to use such registration statement) to be filed with the SEC by Purchaser following the execution of this Agreement in connection with
a primary offering of equity securities of the Company pursuant to a Registration Statement, or any other public or private capital raising
transaction pursued by Purchaser prior to the Closing Date in order to fund the Cash Consideration.
“Release”
means any discharge, emission, spilling, leaking, pumping, pouring, injecting, dumping, burying, leaching, migrating, abandoning, or
disposing into or through the environment of any Hazardous Material into or upon any soil, sediment, subsurface strata, surface water,
groundwater, or drinking water supply.
“Release
of Hydrocarbons” means any discharge, emission, spilling, leaking, pumping, pouring, injecting, dumping, burying, leaching,
migrating, abandoning, or disposing into or through the environment of any Hydrocarbons into or upon any soil, sediment, subsurface strata,
surface water, groundwater, or drinking water supply that triggers any reporting obligations to any Governmental Entity under Applicable
Law.
“Remaining
Deposit” has the meaning set forth in Section 10.3(b).
“Request
Date” has the meaning set forth in Section 1.3(c)(iv).
“Representatives”
has the meaning set forth in Section 6.3.
“Responsible
Party” means the “Operator of Record” (as defined in the Act) who conducts an oil and gas operation in a
manner which is in contravention of any then-applicable provision of the Oil and Gas Conservation Act of the State of Colorado (the “Act”),
or of any rule, regulation, or order of the ECMC, or of any permit, that threatens to cause, or actually causes, a significant adverse
environmental impact to any air, water, soil, or biological resource. “Responsible Party” includes any person who
disposes of any other waste by mixing it with exploration and production waste so as to threaten to cause, or actually cause, a significant
adverse environmental impact to any air, water, soil, or biological resource.
“Rule
218” means Rule 218 of Section 2 Colorado Code of Regulations Section 404-1-218.
“Rules”
has the meaning set forth in Section 12.1(c)(i).
“SEC”
means the Securities and Exchange Commission.
“Securities
Act” means the Securities Act of 1933, as amended.
“Seller”
has the meaning set forth in the Preamble of this Agreement.
“Seller
Contracts” has the meaning set forth in Section 3.9(a).
“Seller
Indemnitees” has the meaning set forth in Section 11.3.
“Seller
Non-Fundamental Representations” means each of Seller’s representations and warranties set forth in Article III
that are not Fundamental Representations.
“Seller
Taxes” means (a) all Income Taxes imposed by any applicable laws on Seller, any of Seller’s direct or indirect owners
or Affiliates, or any combined, unitary, or consolidated group of which any of the foregoing is or was a member, (b) Asset Taxes allocable
to Seller pursuant to Section 7.4(b) (taking into account, and without duplication of, such Asset Taxes effectively borne by Seller
as a result of (i) the adjustments to the Purchase Price made pursuant to Section 1.3(a)(i)(C) and (ii) any payments made from
one Party to the other in respect of Asset Taxes pursuant to Section 7.4(c)) (c) any Taxes imposed on or with respect to the ownership
or operation of the Excluded Assets or that are attributable to any asset or business of Seller that is not part of the Properties and
(d) any and all Taxes (other than the Taxes described in clauses (a), (b) and (c) of this definition) imposed on
or with respect to the acquisition, ownership or operation of the Properties, the production of Hydrocarbons therefrom or the receipt
of proceeds therefrom for any Tax period (or portion of any Straddle Period) ending before the Effective Time.
“Seller’s
Interim Net Cash Flow” means during the period from October 1, 2023, to the Effective Date, the amount of all proceeds from
the sale of Hydrocarbons produced from or allocable to the Oil and Gas Properties (net of applicable royalties, overriding royalties
and other similar burdens on production and net of the Asset Taxes allocable to Seller’s interest) less all expenses (which, for
purposes of this definition mean all capital expenditures as set forth on Schedule 3.10(a), lease operating expenses, and all
overhead charges under applicable operating agreements, all other overhead charges actually charged by Third Parties, but excluding Taxes
and general and administrative expenses) to the extent incurred in the ownership, maintenance, or operation of the Oil and Gas Properties.
“Seller’s
Office” means Seller’s office located in Denver, Colorado, as may be moved or changed from time to time.
“Spud
Fee” has the meaning set forth in Section 1.2(b).
“Straddle
Period” means any Tax period that begins before and ends after the Effective Date.
“Survival
Period” has the meaning set forth in Section 11.1(a).
“Tax”
or “Taxes” means (a) any and all federal, state, provincial, local, foreign and other taxes, unclaimed property and
escheat obligations, levies, fees, imposts, duties, assessments and other governmental charges in the nature of a tax imposed by any
Governmental Entity or Taxing Authority, including income, profits, franchise, alternative or add-on minimum, gross receipts, environmental,
registration, withholding, employment, social security, disability, occupation, ad valorem, property, value added, capital gains, sales,
goods and services, use, real or personal property, capital stock, license, branch, payroll, estimated, unemployment, severance, compensation,
utility, stamp, premium, windfall profits, transfer, gains, production and excise taxes, (b) any interest, penalties, fines or additions
to tax imposed by a Governmental Entity or Taxing Authority in connection with any item described in clause (a), and (c) any liability
in respect of any item described in clauses (a) or (b) above, that arises by reason of a contract, assumption, transferee
or successor liability, operation of Law (including by reason of participation in a consolidated, combined or unitary Tax Return) or
otherwise.
“Tax
Allocation” has the meaning set forth in Section 1.2(e).
“Tax
Representations” means each of Seller’s representations and warranties set forth in Section 3.8 (and the affirmation
thereof set forth in the certificate delivered at the Closing by Seller).
“Tax
Return” means any return (including any information return), report, statement, schedule, notice, form or other document or
information (including any attachment thereto and any amendment thereof) filed with or submitted to or required to be filed with or submitted
to, any Governmental Entity or Taxing Authority in connection with the determination, assessment, collection or payment of any Tax or
in connection with the administration, implementation or enforcement of or compliance with any legal requirement relating to any Tax.
“Taxing
Authority” means any Person who has the authority to assess or collect any Tax.
“Termination
Date” has the meaning set forth in Section 6.3.
“Third
Party” means any Person other than a Party or an Affiliate of a Party (including any Governmental Entity).
“Title
Benefit” means any right, circumstance, or condition that operates to (i) increase the Net Revenue Interest of Seller in any
Oil and Gas Property, without causing a greater than proportionate increase in any of Seller’s Working Interest above that shown
in Exhibit A-1, Exhibit A-2, Exhibit A-3, or Exhibit A-4, as applicable, or (ii) decrease the Working Interest
of Seller in any Oil and Gas Property below that shown on Exhibit A-1, Exhibit A-2, Exhibit A-3, or Exhibit A-4,
as applicable, without causing a decrease in Seller’s Net Revenue Interest.
“Title
Benefit Amount” means the upward adjustment to the Cash Consideration resulting from a Title Benefit identified and noticed
by Seller pursuant to Section 8.3(e), in an amount agreed upon by the Parties, each acting in good faith.
“Title
Benefit Notice” has the meaning set forth in Section 8.3(e).
“Title
Benefit Property” has the meaning set forth in Section 8.3(e).
“Title
Defect” means any particular defect in or failure of Seller’s ownership of any Oil and Gas Property that causes Seller
not to have Defensible Title to such Oil and Gas Property.
“Title
Defect Amount” has the meaning set forth in Section 8.3(g).
“Title
Defect Notice” has the meaning set forth in Section 8.3(a).
“Title
Defect Property” has the meaning set forth in Section 8.3(a).
“Title
Expert” means a title attorney working with or for Tyson Gurney & Hovey LLC, 1801 Broadway, Suite #531, Denver, Colorado,
80202, with at least ten (10) years’ experience in oil and gas titles in the State of Colorado, or if no such attorney is able
or willing to participate as Title Expert then an independent title attorney meeting the same experience requirements, as selected by
mutual agreement of Purchaser and Seller or absent such agreement within a ten (10)-day period, in accordance with the Rules.
“Transaction”
has the meaning set forth in the Recitals of this Agreement.
“Transfer
Taxes” means all sales, use, transfer, stamp, registration, documentary, recording, and similar Taxes (but excluding Income
Taxes) arising out of or incurred in connection with the transfer of the Properties to Purchaser.
“Transition
Services Agreement” means a Transition Services Agreement reasonably acceptable to Seller and Purchaser to be entered into
at Closing by Nickel Road Operating LLC and Purchaser.
“Underwriter”
means a nationally recognized, top-tier investment bank with expertise and experience in primary securities offerings in the upstream
oil and gas sector.
“Units”
has the meaning set forth in Section 1.1(a).
“U.S.”
means the United States of America.
“Wells”
has the meaning set forth in Section 1.1(a).
“Working
Interest” or “WI” means the percentage of costs and expenses attributable to the exploration, maintenance,
development and operation of an Oil and Gas Property, but without regard to the effect of any royalties, overriding royalties, production
payments, net profits interests and other similar burdens upon, measured by, or payable out of production therefrom.
Section
13.2 References and Construction.
(a) All
references in this Agreement to articles, sections, subsections, and other subdivisions refer to corresponding articles, sections, subsections
and other subdivisions of this Agreement unless expressly provided otherwise.
(b) Titles
appearing at the beginning of any 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.
(c) The
words “this Agreement,” “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.
(d) Words
in the singular form shall be construed to include the plural and vice versa unless the context otherwise requires. Pronouns in masculine,
feminine and neuter genders shall be construed to include any other gender.
(e) Examples
shall not be construed to limit, expressly or by implication, the matter they illustrate.
(f) Unless
the context otherwise requires or unless otherwise provided herein, the terms defined in this Agreement which refer to a particular agreement,
instrument or document also refer to and include all renewals, extensions, modifications, amendments or restatements of such agreement,
instrument, or document, provided that nothing contained in this subsection shall be construed to authorize such renewal, extension,
modification, amendment or restatement.
(g) The
word “or” is not intended to be exclusive and the word “includes”, and its derivatives means “includes,
but is not limited to” and corresponding derivative expressions.
(h) References
to “written” or “in writing” include in electronic form.
(i) A
reference to any Person includes such Person’s successors and permitted assigns.
(j) When
calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement,
the date that is the reference date in calculating such period shall be excluded and if the last day of such period is not a Business
Day, the period shall end on the next succeeding Business Day.
(k) No
consideration shall be given to the fact or presumption that one Party had a greater or lesser hand in drafting this Agreement, and the
Parties specifically acknowledge that the Allocated Values set forth on Schedule 1.2(d) have been agreed among them, and no consideration
shall be given to the fact or presumption that one Party had a greater or lesser hand in calculating them.
[Remainder
of Page Intentionally Left Blank; Signature Pages Follow]
Executed,
as of the Execution Date, by:
|
SELLER: |
|
|
|
|
NICKEL
ROAD DEVELOPMENT LLC |
|
|
|
|
By:
|
/s/
Andrew Haney |
|
Name: |
Andrew
Haney |
|
Title: |
Co-President |
|
|
|
|
NR
OPERATOR: |
|
|
|
|
NICKEL
ROAD OPERATING LLC |
|
|
|
|
By:
|
/s/
Andrew Haney |
|
Name: |
Andrew
Haney |
|
Title: |
Co-President |
[Signature
Page to Asset Purchase Agreement]
Executed,
as of the Execution Date, by:
|
PURCHASER: |
|
|
|
|
PRAIRIE
OPERATING CO. |
|
|
|
|
By:
|
/s/
Edward Kovalik |
|
Name: |
Edward
Kovalik |
|
Title: |
Chief
Executive Officer |
|
|
|
|
PRAIRIE
OPERATING CO., LLC |
|
|
|
|
By:
|
/s/
Edward Kovalik |
|
Name: |
Edward
Kovalik |
|
Title: |
Chief
Executive Officer |
[Signature
Page to Asset Purchase Agreement]
Exhibit
A-1
Leases
[Attached.]
Exhibit
A-2
Mineral
Fee Interests
[Attached.]
Exhibit
A-3
Wells
[Attached.]
Exhibit
A-4
Units
[Attached.]
Exhibit
B
Oil
and Gas Contracts
[Attached.]
Exhibit
C
Equipment
[Attached.]
Exhibit
D
Surface
Use Agreements
[Attached.]
Exhibit
E
Permits
[Attached.]
Exhibit
F
Non-foreign
Certificate
[Attached.]
Exhibit
G
Nickel
Road Drilling Permits
[Attached.]
Exhibit
H
Escrow
Agreement
[Attached.]
Exhibit
I
Form
of Assignment and Bill of Sale
[Attached.]
Exhibit
J
Form
of Transition Services Agreement
[Attached.]
Exhibit
K
Leasing
Restrictions
[Attached.]
Exhibit
99.1
Prairie
Operating Announces Acquisition of Producing E&P Assets
Transaction
Expected to be Immediately Accretive to Key Financial Metrics
Adds
3,370 Boepd, Proven PV10 of over $250MM, and 62 Permitted PUDs to Existing Denver Julesburg (“DJ”) Basin Portfolio
HOUSTON,
TX, January 11, 2024 (GLOBE NEWSWIRE) — Prairie Operating Co. (Nasdaq: PROP; the “Company” or “Prairie”)
today announced it has entered into a definitive agreement to acquire the assets of Nickel Road Operating LLC (“NRO”) for
a total consideration of $94.5 million, subject to certain closing price adjustments and other customary closing conditions. The total
consideration consists of $83 million in cash and $11.5 million in deferred cash payments. The effective date of the transaction is February
1, 2024.
The
acquisition is expected to be accretive to Prairie’s shareholders across key financial metrics including production, reserves,
and free cash flow. Furthermore, the addition of NRO’s assets strategically expands Prairie’s core operating area, increases
inventory of high rate-of-return drilling locations, and provides additional flexibility to the 2024 drill schedule. The transaction
adds over 5,500 net leasehold acres and 62 fully permitted proven undeveloped (“PUD”) drilling locations. The 84% liquids
weighted assets produce approximately 3,370 net Boepd and add third-party engineered proven reserves estimated at 22.2 MMboe and $254
million in PV10 value, according to an independent, third-party reserve report by Cawley, Gillespie & Associates, Inc. (“CG&A”)
using SEC pricing as of December 31, 2023.
NRO’s
assets and operations are located near Prairie’s existing DJ Basin operations in largely rural Weld County, Colorado. The permitted
PUDs are expected to payout in approximately 1 year from the onset of production and are economic in a low commodity price environment,
with operational break-evens below $30/bbl WTI. (1) In addition, existing infrastructure provides takeaway capacity and opportunities
to improve efficiencies.
“This
acquisition increases and strengthens our overall position within a top-tier U.S. shale basin and aligns with our strategy of creating
value through accretive acquisitions,” stated Ed Kovalik, Chairman and Chief Executive Officer of the Company. “Furthermore,
the transaction positions us to accelerate our development program within free cash flow, supporting the Company’s stated goal
of debt-free, long-term growth.”
Gary
Hanna, President of the Company, added, “Today’s announcement underscores our commitment and ability to create value for
our shareholders through accretive acquisitions. Today’s target rich environment gives us ample opportunity to continue executing
our acquisition strategy. These assets strategically enhance our existing operations, enabling us to capitalize on operational efficiencies
in the DJ Basin.”
Strategic
Drivers & Asset Overview: (1)
|
● |
3,370
net Boepd (84% liquids) flowing from 26 operated horizontal wells |
|
● |
5,500
net contiguous acres across four lateral targets |
|
● |
90%
held by production (“HBP”) |
|
● |
94%
working interest in seven operated Drilling and Spacing Units (“DSUs”) 74% net revenue interest |
|
● |
Adds
62 permitted PUDs |
|
● |
Free
cash flow expected to support full field development program |
|
● |
No
exposure to federal leases |
|
● |
Key
infrastructure in place to support development plan |
Financial
Highlights: (1)
|
● |
Expected
to be immediately accretive to key financial metrics, including production, reserves, and cash flow |
|
● |
Adds
22.2 MMboe and $254 million in 1P PV10 value |
|
● |
Adds
5.3 MMboe and $104 million in PDP PV10 value |
|
● |
Cash
flow from PDP operations expected to be ~$40 million over the next twelve months |
|
● |
Average
IRRs of 75% and discounted ROI of 1.9x |
|
● |
Net
payout after approximately 1 year of production per well |
|
● |
Development
Break-even below $30/bbl WTI |
Transaction
Metrics: (1)
Based
on an effective date of February 1, 2024, and existing production of approximately 3,370 Boepd, the transaction metrics are as follows:
|
● |
PV15
of Proved Developed Producing (“PDP”) reserves |
|
● |
Implied
multiple of 2.3x NTM cash flow |
|
● |
$28,000
per net flowing Boe |
|
● |
$17,000
per net acre |
|
● |
$4.25
per Boe of 1P reserves of 22.2 MMboe, as determined by CG&A. Including approximately $182 million of net undiscounted future
development capital results in a recycle ratio of approximately 3.6x times. |
A
summary of reserves and values as of December 31, 2023 and as determined by CG&A follows.
Reserve Category | |
Formation | |
Well Count | | |
Net Oil (mbo) | | |
Net Gas (mmcf) | | |
Net NGL (mbngl) | | |
Net Equiv. (mboe) | | |
PV10 ($000s) | |
PDP | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Codell | |
| 7 | | |
| 746 | | |
| 1,145 | | |
| 189 | | |
| 1,125 | | |
| 26,582 | |
| |
Niobrara | |
| 19 | | |
| 1,909 | | |
| 6,733 | | |
| 1,160 | | |
| 4,191 | | |
| 77,313 | |
| |
Total | |
| 26 | | |
| 2,655 | | |
| 7,878 | | |
| 1,349 | | |
| 5,317 | | |
| 103,895 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
PUD | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
Codell | |
| 19 | | |
| 2,697 | | |
| 4,379 | | |
| 715 | | |
| 4,142 | | |
| 42,269 | |
| |
Niobrara | |
| 43 | | |
| 6,141 | | |
| 19,483 | | |
| 3,392 | | |
| 12,780 | | |
| 107,252 | |
| |
Total | |
| 62 | | |
| 8,838 | | |
| 23,862 | | |
| 4,107 | | |
| 16,922 | | |
| 149,521 | |
| |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
TOTAL PROVED | |
| |
| 88 | | |
| 11,493 | | |
| 31,740 | | |
| 5,456 | | |
| 22,239 | | |
| 253,416 | |
Note:
PV10 is a non-GAAP financial measure. See the “Non-GAAP Financial Measure” section below.
|
(1) |
Based on CG&A reserve report using SEC pricing
as of December 31, 2023, and NRO provided lease operating statements and corporate financial statements |
Additional
Information
A
company presentation describing the acquisition can be found on the Company’s website (www.prairieopco.com). The transaction
is currently expected to close in the first half of 2024. The Company expects to fund the transaction through a combination of public
and / or private issuance of common stock, cash on hand, and proceeds from existing warrant exercises.
Non-GAAP
Financial Measures
PV10
is derived from the Standardized Measure of Discounted Future Net Cash Flows (“Standardized Measure”), which is the most
directly comparable GAAP financial measure for proved reserves. PV10 is a computation of the Standardized Measure on a pre-tax basis.
PV10 is equal to the Standardized Measure at the applicable date, before deducting future income taxes discounted at 10 percent. We believe
that the presentation of PV10 is relevant and useful to our investors as supplemental disclosure to the Standardized Measure, or after-tax
amount, because it presents the discounted future net cash flows attributable to our reserves before considering future corporate income
taxes and our current tax structure. While the standardized measure is dependent on the unique tax situation of each company, PV10 is
based on prices and discount factors that are consistent for all companies.
About
Prairie Operating Co.
Prairie
Operating Co. is a publicly-traded company engaged in the development, exploration, and production of oil, natural gas, and natural gas
liquids with operations focused on unconventional oil and natural gas reservoirs located in Colorado focused on the Niobrara and Codell
formations. The company also owns crypto miner computer assets, complementary to its energy assets. The Company is dedicated to developing
affordable, reliable energy to meet the world’s growing demand while continuing to protect the environment. To learn more, visit
www.prairieopco.com.
Forward-Looking
Statements
The
information included herein and in any oral statements made in connection herewith include “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements, other than statements of present or historical fact included herein, are forward-looking statements. When used herein,
including any oral statements made in connection herewith, the words “could,” “should,” “will,” “may,”
“believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,”
the negative of such terms and other similar expressions are intended to identify forward-looking statements, although not all forward-looking
statements contain such identifying words. These forward-looking statements are based on the Company’s current expectations and
assumptions about future events and are based on currently available information as to the outcome and timing of future events. Statements
concerning oil and gas reserves also may be deemed to be forward looking statements in that they reflect estimates based on certain assumptions
that the resources involved can be economically exploited. Except as otherwise required by applicable law, the Company disclaims any
duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events
or circumstances after the date hereof. The Company cautions you that these forward-looking statements are subject to risks and uncertainties,
most of which are difficult to predict and many of which are beyond the control of the Company. These risks include, but are not limited
to, the ultimate outcome of the acquisition of NRO by the Company; the Company’s ability to consummate the proposed transaction
with NRO; the Company’s ability to finance the proposed transaction with NRO; the possibility that the Company may be unable to
achieve expected free cash flow accretion, production levels, drilling, operational efficiencies and other anticipated benefits within
the expected time-frames or at all and to successfully integrate NRO’s operations with those of the Company; that such integration
may be more difficult, time-consuming or costly than expected; that operating costs, customer loss and business disruption may be greater
than expected following the proposed transaction or the public announcement of the proposed transaction; uncertainties inherent in estimating
quantities of oil, natural gas and NGL reserves and projecting future rates of production and the amount and timing of development expenditures;
commodity price and cost volatility and inflation; general economic, financial, legal, political, and business conditions and changes
in domestic and foreign markets; the risks related to the growth of the Company’s business; and the effects of competition on the
Company’s future business. Should one or more of the risks or uncertainties described herein and in any oral statements made in
connection therewith occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those
expressed in any forward-looking statements. There may be additional risks not currently known by the Company or that the Company currently
believes are immaterial that could cause actual results to differ from those contained in the forward-looking statements. Additional
information concerning these and other factors that may impact the Company’s expectations can be found in the Company’s periodic
filings with the Securities and Exchange Commission (the “SEC”), including the Company’s Annual Report on Form 10-K
filed with the SEC on March 31, 2023, and any subsequently filed Quarterly Report and Current Report on Form 8-K. The Company’s
SEC filings are available publicly on the SEC’s website at www.sec.gov.
Reserve
Information
The
Company obtained the reserve report information referenced herein from CG&A with respect to the reserves of NRO. The reserves were
calculated in accordance with SEC guidelines using the price of $76.97 per barrel for oil, $2.252 per MCF for gas, and $20.619 per barrel
for NGL. The base rates of oil of $78.22 bbl and gas of $2.637 per million British Thermal Units (MMBtu) were based upon WTI-Cushing
spot prices (EIA) during 2023 and upon Henry Hub spot prices (Platts Gas Daily) during 2023, respectively. The reserve classifications
and the economic considerations applied in the reserve report conform to the criteria set forth in the 2018 Petroleum Resources Management
System (PRMS) approved by the Society of Petroleum Engineers (SPE). All reserve estimates represent CG&A’s best judgment based
on data available at the time of preparation of the reserve report, and CG&A’s assumptions as to future economic and regulatory
conditions. It should be realized that the reserves are actually recovered, the revenue derived from, and the actual cost incurred could
be more or less than the estimated amounts.
Investor
Relations Contact:
Wobbe
Ploegsma
wp@prairieopco.com
832.274.3449
Exhibit
99.2
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