8-K

U.S. 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): October 28, 2011

NORTH AMERICAN ENERGY RESOURCES, INC.

(Exact Name of Registrant as Specified in Charter)

Nevada

(State or Other Jurisdiction of

Incorporation or Organization)

0-52522	98-0550352
(Commission File Number)	(I.R.S. Employer Identification No.)

228 St. Charles Avenue., Suite 724, New Orleans, Louisiana 70130

(Address of principal executive offices including zip code)

(504) 561-1151

(Registrant’s telephone number, including area code)

Forward Looking Statements

This Form 8-K and other reports filed by the Registrant from time to time with the Securities and Exchange Commission (collectively the Filings) contain or may contain forward looking statements and information that are based upon beliefs of, and information currently available to, the Registrants management as well as estimates and assumptions made by the Registrants management. When used in the filings the words anticipate, believe, estimate, expect, future, intend, plan or the negative of these terms and similar expressions as they relate to the Registrant or the Registrants management identify forward looking statements. Such statements reflect the current view of the Registrant with respect to future events and are subject to risks, uncertainties, assumptions and other factors (including the risks contained in the section of the Registrants Form 10-K entitled Risk Factors) relating to the Registrants industry, the Registrants operations and results of operations and any businesses that may be acquired by the Registrant. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

Although the Registrant believes that the expectations reflected in the forward looking statements are reasonable, the Registrant cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, the Registrant does not intend to update any of the forward-looking statements to conform these statements to actual results.

Item 2.01 Entry into a Material Definitive Agreement

The following discussion provides only a brief description of the applicable documents described below. The discussion is qualified in its entirety by the full text of the exhibits attached to this Current Report on Form 8-K.

On October 28, 2011, North American Energy Resources, Inc. (“NAEY”) and a private seller (“Seller”) entered into an asset purchase agreement (the “Asset Purchase Agreement”) for the acquisition by NAEY of certain onshore and offshore oil and gas fields of Seller (the “Assets”) for $175 Million in cash, subject to certain purchase price adjustments at closing. The Assets include about 110 producing wells in 34 fields with average net production of 12 million cubic feet per day (MMcf/d) of natural gas and 900 barrels per day of oil (BBl/d), or a total of 2,900 BOE/d. The Assets have Proven Reserves of approximately 15.5 Million BOE with additional Probable and Possible potential of over 10 Million BOE. The closing of the purchase and sale of the Assets is expected to occur upon the satisfaction or waiver of the conditions set forth in the Asset Purchase Agreement, but no later than December 31, 2011, and will have an effective date of June 1, 2011, unless Seller and NAEY mutually agree in writing to extend the closing date. Completion of the purchase is subject to preferential rights-to-purchase held by other working interest owners in a number of the Assets, as well as, several industry-standard closing conditions, including, without limitation, the completion by NAEY of satisfactory due diligence and the receipt of all necessary regulatory approvals. Additionally, NAEY’s ability to close the purchase is contingent on its ability to raise sufficient capital, and the failure to do so could result in termination of the purchase and sale agreement between NAEY and the Seller. NAEY intends to utilize a combination of debt and equity to fund the purchase.

Interim financing for due diligence expenses and operations is being funded pursuant to a $500,000 multiple advance bridge loan provided to NAEY by Clinton W. Coldren. In evidence of the loan, on November 3, 2011, NAEY issued to Clinton W. Coldren that certain 8% Convertible Note in the principal amount of $500,000.00. The Convertible Note has a term of one year and is convertible into shares of common stock of NAEY, in whole or in part at any time, at an initial conversion price equal to 130% of the volume-weighted average price of the common stock for the 50 trading days following October 31, 2011, subject to adjustment for distributions to shareholders, stock splits, reclassification of shares, and tender or exchange offers. NAEY does not have the right to prepay all or any portion of the Note prior to the Maturity Date.

Copies of the Asset Purchase Agreement and related press release, as well as the 8% Convertible Note, are attached as exhibits to this Current Report on Form 8-K.

Item 2.03 Creation of a Direct Financial Obligation.

The following discussion provides only a brief description of the applicable documents described below. The discussion is qualified in its entirety by the full text of the exhibits attached to this Current Report on Form 8-K.

On November 3, 2011, NAEY issued to Clinton W. Coldren an 8% Convertible Note in the principal amount of $500,000.00 (the “Note”). The Note evidences an unsecured, nonrecourse, multiple advance bridge loan by Clinton W. Coldren for the funding of due diligence expenses related to the Asset Purchase Agreement and ongoing operations. The Note is a short-term debt obligation with all outstanding principal and interest due in one payment on October 31, 2012 (the “Maturity Date”) and is convertible into shares of common stock of NAEY, in whole or in part at any time, at an initial conversion price equal to 130% of the volume-weighted average price of the common stock for the 50 trading days following October 31, 2011, subject to adjustment for distributions to shareholders, stock splits, reclassification of shares, and tender or exchange offers. NAEY does not have the right to prepay all or any portion of the Note prior to the Maturity Date.

A copy of the Note setting forth in greater detail the terms of conversion, repayment obligations, and acceleration provisions is attached as an exhibit to this Current Report on Form 8-K.

Item 9.01 Financial Statements and Exhibits

(c) Exhibits

The following exhibits are furnished as a part of this Current Report on Form 8-K:

10.2* Asset Purchase Agreement, executed October 28, 2011, by and among North American Energy Resources, Inc., and Seller.

10.3 8% Convertible Note dated November 3, 2011 issued by North American Energy Resources, Inc. in favor of Clinton W. Coldren.

99.1 Press Release issued by North American Energy Resources, Inc. on October 31, 2011.

99.2 Omitted Exhibits and Schedules to Asset Purchase Agreement

* An application has been submitted to the Securities and Exchange Commission for confidential treatment, pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, of portions of this exhibit. These portions have been omitted from this exhibit.

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.

NORTH AMERICAN ENERGY RESOURCES, INC.

By: /s Clinton W. Coldren

Clinton W. Coldren, Chief Executive Officer

DATE: November 3, 2011

¶ ASSET PURCHASE AND SALE AGREEMENT

Between

[CONFIDENTIAL TREATMENT REQUESTED]

and

[CONFIDENTIAL TREATMENT REQUESTED]

(collectively as “Seller”)

and

North American Energy Resources Inc.

(“Buyer”)

October 26, 2011

TABLE OF CONTENTS

Article 1	Certain Definitions	1
Section 1.1.	Certain Defined Terms	1
Article 2	Sale and Purchase of Assets	9
Section 2.1.	Assets To Be Sold	9
Section 2.2.	Excluded Assets	12
Article 3	Purchase Price	13
Section 3.1.	Purchase Price	13
Section 3.2.	Adjustment to Purchase Price	13
Section 3.3.	Preliminary Settlement Statement	15
Section 3.4.	Final Settlement Statement	16
Section 3.5.	Payment	16
Article 4	Representations and Warranties	16
Section 4.1.	Representations and Warranties of Seller	16
Section 4.2.	Scope and Accuracy of Representations of Seller	19
Section 4.3.	Representations and Warranties of Buyer	20
Article 5	Access to Information; Environmental Matters	21
Section 5.1.	Access	21
Section 5.2.	Environmental Defects	21
Section 5.3.	Environmental Reports and Third Party Reserve Report	22
Article 6	Title Adjustments	23
Section 6.1.	Title Warranty	23
Section 6.2.	Buyer’s Title Review	23
Section 6.3.	Determination of Title Defects	26
Section 6.4.	Seller Title Credit	26
Section 6.5.	Deferred Claims and Disputes	27
Section 6.6.	Title Reports; Opinions	28
Article 7	Certain Agreements of Seller and Buyer	28
Section 7.1.	Maintenance of Assets	28
Section 7.2.	Public Announcements; Confidential Information	28
Section 7.3.	Further Assurances	29
Section 7.4.	Records	29
Section 7.5.	Like-Kind Exchange	29
Section 7.6.	Intentionally Deleted	30
Section 7.7.	No Negotiations	30
Section 7.8.	Closing Conditions	30
Section 7.9.	Assumed Liabilities	30
Section 7.10.	Intentionally Deleted	30
Section 7.11.	Retained Obligations	30
Section 7.12.	Intentionally Deleted	30
Section 7.13.	Post Closing Cooperation	30
Article 8	Closing Conditions	30
Section 8.1.	Seller’s Closing Conditions	30
Section 8.2.	Buyer’s Closing Conditions	31
Article 9	Closing	32
Section 9.1.	Closing	32
Section 9.2.	Seller’s Closing Obligations	33
Section 9.3.	Buyer’s Closing Obligations	33
Article 10	Survival	33
Section 10.1.	Survival	33
Article 11	Limitations	33
Section 11.1.	Disclaimer of Warranties	33
Section 11.2.	Damages	34
Section 11.3.	Plugging and Abandonment Obligations	34
Article 12	Preference Rights and Consent Requirements	34
Section 12.1.	Rights and Requirements	34
Article 13	Indemnification	35
Section 13.1.	Indemnification by Seller	35
Section 13.2.	Indemnification by Buyer	36
Section 13.3.	Notification	36
Article 14	Termination; Remedies; Limitations	37
Section 14.1.	Termination	37
Section 14.2.	Remedies	38
Article 15	Miscellaneous	39
Section 15.1.	Counterparts; Effectiveness	39
Section 15.2.	Governing Law; Jurisdiction; Process	39
Section 15.3.	Entire Agreement	40
Section 15.4.	Expenses	40
Section 15.5.	Notices	40
Section 15.6.	Successors and Assigns	40
Section 15.7.	Amendments and Waivers	41
Section 15.8.	Attorneys’ Fees	41
Section 15.9.	Severability	41
Section 15.10.	Time of Essence	41
Section 15.11.	Arbitration	41

Exhibit A-1 Leases

Exhibit A-2 Wells

Exhibit A-3 Easements

Exhibit A-4 Contracts

Exhibit A-5 Automobiles and Moveable Trailers

Exhibit A-6 Claims Against Third Parties

Exhibit A-7 Deposits, Pre-Paid Expenses and Refunds

Exhibit B Purchase Price Allocation

Exhibit C Form of Assignment, Bill of Sale and Conveyance

Exhibit D Form of Non-Foreign Affidavit

Exhibit E – Castex Transaction

Schedule 3.2(b) (vii) Amounts Held in Suspense

Schedule 4.1(f) Preferential Rights and Consents to Assign

Schedule 4.1(h) Litigation and Claims

Schedule 4.1(k) AFEs and Cash Calls

Schedule 4.1(m) Subsequent Events

Schedule 4.1 (r) Gas Imbalances

Schedule 4.1(t) Payout Status for Existing Wells

Schedule 4.1(v) Encumbrances and Affiliated Interests

Schedule 14.1(v) [CONFIDENTIAL TREATMENT REQUESTED] Hedges

ASSET PURCHASE AND SALE AGREEMENT

This Asset Purchase and Sale Agreement (this “Agreement”), dated October 26, 2011, is by and between [CONFIDENTIAL TREATMENT REQUESTED], a [CONFIDENTIAL TREATMENT REQUESTED] (“[CONFIDENTIAL TREATMENT REQUESTED]”), the address for which is [CONFIDENTIAL TREATMENT REQUESTED], and [CONFIDENTIAL TREATMENT REQUESTED], a [CONFIDENTIAL TREATMENT REQUESTED] (“[CONFIDENTIAL TREATMENT REQUESTED]”), the address for which is [CONFIDENTIAL TREATMENT REQUESTED] ([CONFIDENTIAL TREATMENT REQUESTED] collectively referred to herein as “Seller”), and North American Energy Resources Inc., a Nevada Corporation, the address for which is 228 St. Charles Avenue, Suite 724, New Orleans, Louisiana 70130 (“Buyer”). Seller and Buyer are sometimes separately referred to as a “Party” and are sometimes collectively referred to as “Parties”.

WHEREAS, subject to the terms and conditions set forth in this Agreement, Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, the Assets, as defined herein.

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, Buyer and Seller agree as follows:

I.Certain Definitions

Certain Defined Terms.

The following terms shall have the definitions set forth below:

1.“Accounts Receivable” shall mean (a) all trade accounts receivable and other rights to payment from customers of Seller and the full benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or services rendered to customers of Seller, (b) all other accounts or notes receivable of Seller and the full benefit of all security for such accounts or notes and (c) any claim, remedy or other right related to any of the foregoing.

2.“Adjusted Purchase Price” shall be as defined in Section 3.1.

3.“Affiliates” shall mean, as to the party specified, any entity controlling, controlled by or under common control with such specified party. Control, controlling or controlled as used herein means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of another, whether through the ownership of voting securities, by contract or otherwise.

4.“Agreement” shall mean this Asset Purchase and Sale Agreement together with its attached Exhibits and Schedules and the operative conveyances and Closing documents, all of which are incorporated into this Agreement for all purposes and as fully as if set forth in the text of this Agreement.

5.“Assets” shall be as defined in Section 2.1.

6.“Assumed Liability or Liabilities” shall be as defined in Section 7.9.

7.“Business Day” shall mean any day which is not a Saturday, Sunday or legal holiday recognized in New Orleans, Louisiana.

8.“Castex Transaction” shall mean the transfer by and between Seller and Castex Enregy Development Fund, L.P. of certain assets, rights, contracts and liabilities all as more fully described on Exhibit E.

9.“Claim” or “Claims” means any and all claims, demands, suits, causes of action, losses, damages, liabilities, fines, penalties and costs (including attorneys’ fees and costs of litigation) which are brought by or owed to a Third Party.

10.“Claim Date” shall be defined in Section 13.1(a)(iv)(A).

11.“Claim Notice” shall be as defined in Section 13.3.

12.“Closing” shall be the consummation of the transaction contemplated by Article 9.

13.“Closing Date” shall mean December 31, 2011 or such earlier date mutually agreed upon by Buyer and Seller, subject to Seller’s election to delay the Closing pursuant to Section 6.2(c)(ii).

14.“Closing Documents” shall be as defined in Section 9.2.

15.“Code” shall mean the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

16.“Contracts” shall mean all contracts, commitments, agreements, and arrangements that relate to the Assets, including the production, storage, treatment, transportation, processing, purchase, sale, disposal or other disposition of Substances therefrom or in connection therewith and any and all amendments, ratifications or extensions of the foregoing, together with (a) all rights, privileges, and benefits of Seller thereunder arising on or after the Effective Date, (b) all rights of Seller thereunder to audit the records of any party thereto and to receive refunds of any nature thereunder, relating to periods after the Effective Date, (c) all claims for take-or-pay or other similar payments arising before or after the Effective Date that have not been disclosed in any Exhibit, and (d) rights to make claims and receive proceeds under any insurance policy held by or on behalf of Seller in connection with the Assets for any claim that arises from the Effective Date through the Closing Date in connection with the Assets.

17.“Defensible Title” shall mean, respectively as to each Lease, such title held by Seller that (i) entitles Seller to receive not less than the applicable Net Revenue Interest or Net Revenue Interests specified for such Lease or Well in Exhibit A-1 or A-2; (ii) obligates Seller to bear the costs and expenses attributable to the maintenance, development, and operation of such Lease in an amount not greater than the applicable Working Interest or Working Interests specified for such Lease or Well in Exhibit A-1 or A-2; and, (iii) except for Permitted Encumbrances, is free and clear of all liens and encumbrances.

18.“Deferred Adjustment Claim” shall be as defined in Section 6.5.

19.“Deferred Matters Date” shall be as defined in Section 6.5

20.“Effective Date” shall mean 12:01 am on June 1, 2011.

21.“Environmental Claim” shall mean any action or written notice threatening same by any Third Party alleging potential liability of Seller arising out of or resulting from any past or current, actual or alleged violation of, or liability under, or any remedial obligation under, any Environmental Law with respect to the Assets or as a result of an Environmental Condition with respect to the Assets.

22.“Environmental Condition” shall mean a condition or circumstance existing at or prior to the Effective Date (or prior to the Closing Date as a result of a breach by Seller of Section 8.1) with respect to the air, soil, subsurface, surface waters, groundwaters, and/or sediments that causes (i) an Asset or Seller not to be in compliance with any Environmental Law, including any permits issued thereunder, in all material respects, (ii) an Asset to be required to be remediated (or other corrective action taken with respect to such Asset) under any Environmental Law, or (iii) potential liability to a Third Party because of such condition or circumstance.

23.“Environmental Defect” shall mean an Environmental Condition or Environmental Claim with respect to the Assets for which Buyer's estimate of the expense or liability related to such Environmental Condition or Environmental Claim for Seller and all Third Parties that would share in the expense or liability in the aggregate exceeds $50,000.

24.“Environmental Defect Amount” shall mean, with respect to an Environmental Condition or Environmental Defect, Buyer's estimate of Buyer's cost of the Remediation of such Environmental Condition or Environmental Defect.

25.“Environmental Defect Notice” shall be as defined in Section 5.2(a).

26.“Environmental Defect Property” shall be as defined in Section 5.2(b).

27.“Environmental Laws” shall mean all Laws relating to (a) the control of any potential pollutant, or protection of the air, water, land, wetlands, natural resources, wildlife and endangered species, (b) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation, and (c) exposure to hazardous, toxic, radioactive or other substances alleged to be harmful. "Environmental Laws" shall include, but are not limited to, the Clean Air Act, the Clean Water Act, the Resource Conservation Recovery Act, the Superfund Amendments and Reauthorization Act, the Toxic Substances Control Act, the Safe Drinking Water Act, and CERCLA and shall also include all state, local and municipal Laws dealing with the subject matter of the above listed Federal statutes or promulgated by any governmental or quasigovernmental agency thereunder in order to carry out the purposes of any Federal, state, local or municipal Law.

28.“Environmental Liabilities” shall mean any and all costs (including costs of Remediation), damages, settlements, expenses, penalties, fines, taxes, prejudgment and post-judgment interest, court costs and attorneys' fees incurred or imposed (i) pursuant to any order, notice of responsibility, directive (including requirements embodied in Environmental Laws), injunction, judgment or similar act (including settlements) by any Governmental Authority to the extent arising out of or under Environmental Laws or (ii) pursuant to any Environmental Claim by a Governmental Authority or other Third Party.

29.“Environmental Matters” shall mean (i) any order, notice of responsibility, directive (including requirements embodied in Environmental Laws), injunction, judgment or similar act (including settlements) by any Governmental Authority arising out of or under any Environmental Laws or (ii) pursuant to any Environmental Claim by a Governmental Authority or other Third Party.

30.“Examination Period” shall mean that period of time commencing upon execution of this Agreement and which will terminate at 5:00 p.m., Central Time, five (5) Business Days prior to the Closing.

31.“Excluded Assets” shall be as defined in Section 2.2.

32.“Governmental Authority” shall mean (i) the United States of America, (ii) any state, county, municipality or other governmental subdivision within the United States of America, and (iii) any court or any governmental department, commission, board, bureau, agency or other instrumentality of the United States of America or of any state, county, municipality or other governmental subdivision within the United States of America.

33.“Hazardous Materials” shall mean any explosives, radioactive materials, asbestos material, urea formaldehyde, hydrocarbon contaminants, underground tanks, pollutants, contaminants, hazardous, corrosive or toxic substances, special waste or waste of any kind, including compounds known as chlorobiophenyls and any material or substance the storage, manufacture, disposal, treatment, generation, use, transport, mediation or release into the environment of which is prohibited, controlled, regulated or licensed under Environmental Laws, including, but not limited to, (i) all "hazardous substances" as that term is defined in Section 101(14) of the Comprehensive Environmental Response, Compensation and Liability Act, as amended, and (ii) petroleum and petroleum products.

34.“Intellectual Property Assets” shall mean all Assets consisting of intellectual property owned or licensed (as licensor or licensee) by Seller in which Seller has a proprietary interest, including all: (i) Seller’s name, all assumed fictional business names, trade names, registered and unregistered trademarks, service marks and applications (collectively, “Marks”); (ii) all patents, patent applications and inventions and discoveries that may be patentable, if any (collectively, “Patents”); (iii)all registered and unregistered copyrights in both published works and unpublished works, if any (collectively, “Copyrights”); (iv) all rights in mask works; (v) all know-how, trade secrets, confidential or proprietary information, customer lists, Software, technical information, data, process technology, plans, drawings and blue prints, if any (collectively, “Trade Secrets”); and (vi) all rights in internet web sites and internet domain names presently used by Seller (collectively “Net Names”).

35.“Law” shall mean any applicable statute, law (including common law), ordinance, regulation, rule, ruling, order, writ, injunction, decree or other official act of or by any Governmental Authority.

36.“Liabilities” shall mean (i) any liability or obligation of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, (ii) the Plugging and Abandonment Obligations, and (iii) any and all debts, losses, liabilities, duties, claims, taxes, costs and expenses (including, without limitation, any attorneys’ fees and any and all expenses whatsoever incurred in connection therewith), absolute or contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown arising out of or attributable to the exploration, development, ownership, use, construction, maintenance or operation of any of the Assets, including, without limitation, any and all Environmental Liabilities arising out of or attributable to any Environmental Matter.

37.“Loss” or “Losses” shall be as defined in Section 13.1(a).

38.“Material Adverse Effect” shall mean an adverse effect on the value of the Assets of $500,000 or more, but excluding any effect resulting from any change in economic, industry or market conditions (whether general or regional in nature or limited to any area where any Assets are located) or from any change in Law or regulatory policy after the Effective Date.

39.“Net Revenue Interest” shall mean an interest (expressed as a percentage or decimal fraction) in and to all oil and gas produced and saved from or attributable to a Lease.

40.“Offsite Environmental Matter” shall mean any Environmental Condition resulting from Hazardous Materials originating from the Assets that have been transported for disposal, reclamation or recycling from the Assets during the ownership of the Assets by Seller and prior to the Effective Date (or prior to the Closing Date as a result of a breach by Seller of Section 8.1) to properties owned by third parties.

41.“Permitted Encumbrances” shall mean any of the following matters:

(1)Lessors’ royalties, overriding royalties, reversionary interests and similar burdens of record on or deductions from the proceeds of production that do not operate to reduce the net revenue interest of the Seller in production from any Well or Lease below the before and after payout interests as set forth in Exhibit A-1 or A-2 with respect to such Well or Lease;

(2)Sales contracts as reflected on Exhibit A-4;

(3)Any preferential rights to purchase and required third-party consents and similar agreements burdening any of the Assets;

(4)Liens for Taxes not yet delinquent;

(5)Materialman’s, mechanic’s, repairman’s, employee’s, contractor’s, operator’s, and other similar liens or charges arising in the ordinary course of business (i) if they have not been filed pursuant to Law, (ii) if filed, they have not yet become due and payable or payment is being withheld as provided by Law, or (iii) if their validity is being contested in good faith by appropriate action;

(6)Easements, rights-of-way, servitudes, permits, surface leases and other rights in respect of surface operations;

(7)All other liens, charges, encumbrances, contracts, agreements, instruments, obligations, defects and irregularities affecting the Assets which do not interfere materially with the operation, value or use of any Asset, were entered into in the ordinary course of business, and do not operate to reduce the net revenue interest of the Seller in production from any Well or Lease below the before and after payout interests as set forth on Exhibit A-1 or A-2 with respect to such Well or Lease;

(8)All rights reserved to or vested in any Governmental Authority to control or regulate any of the Assets of the Seller in any manner, and all applicable laws, rules and orders of any Governmental Authority;

(9)Any encumbrance on or affecting the Assets that is discharged at or prior to Closing;

(10)Any Title Defects that Buyer may have expressly waived in writing;

(11)The terms and conditions of existing contracts as shown on Exhibit A-4 with respect to the Assets, including but not limited to, any and all operating agreements, which do not operate to reduce the net revenue interest of Seller in production from any Well or Lease below the before and after payout interests as set forth on Exhibit A-1 or A-2 with respect to such Well or Lease;

(12)The joint operating agreements, units agreements, preferential rights to purchase properties, and other agreements more fully described on Exhibit A-4;

(13)Rights of reassignment contained in any Leases providing for reassignment upon the surrender or expiration of any Lease;

(14)The litigation listed in Schedule 4.1(h);

(15)The “[CONFIDENTIAL TREATMENT REQUESTED]” listed in Schedule 4.1(v); and

(16)The “[CONFIDENTIAL TREATMENT REQUESTED] ORRIs” listed in Schedule 4.1(v);

provided however, that none of the foregoing shall be deemed to negate, modify or limit any other express provisions of this Agreement.

42.“Plugging and Abandonment Obligations” shall mean any and all Liabilities arising out of or attributable to the plugging and abandonment or any obligation to plug or abandon any Well, flow lines or facilities located on the Assets as of the Effective Date.

43.“Preference Right” or “Preference Rights” shall mean any right or agreement that enables or may enable any third party to purchase or acquire any Asset or any interest therein or portion thereof as a result of or in connection with the sale to Buyer of such Asset.

44.“Purchase Price” shall be as defined in Section 3.1.

45.“Records” shall mean any and all of Seller’s books, records, contracts, agreements, abstracts of title, title opinions, title files, ownership maps, lease files, assignments, division orders, third party reserve reports, and other documents and reports relating to the Assets, including without limitation the following:

(1)Seismic data and subsurface structural interpretations;

(2)Maps (including cross sections) depicting geologic or reservoir properties such as gross or net pay thickness, faulting, porosity, permeability, gas saturation, reservoir boundaries or similarly relevant subsurface information;

(3)Well information, including drilling records, well logs, well files, and production records;

(4)Copies of records, made at Buyer’s expense, concerning past payment of excise taxes, property taxes, severance taxes, ad valorem taxes, franchise taxes, production taxes and any other taxes assessed against or related to real and personal property and production activities associated with the Assets; but, excluding state and federal income taxes paid by Seller or its affiliates;

(5)Copies of accounting information, invoices and other records,made at Buyer’s expense, concerning field expenses, payments made to royalty owners, lessors, contractors and other third parties and concerning payments/proceeds received from working interest owners, purchasers of production and any other third parties;

(6)Any and all information concerning environmental matters including studies, reports, testing and sampling results, inspections, correspondence with contractors, government agencies or any other third parties, and any other information related to the environmental condition of the Assets or operations thereon; and

(7)Copies of any and all information and records, made at Buyer’s expense, related to regulatory matters of any kind involving federal, state or local governmental agencies such as (but not limited to) permits, applications for agency action, enforcement proceedings, rulemaking and any similar regulatory activities.

46.“Remediation” shall mean, with respect to an Environmental Condition, the implementation and completion of any actions required under Environmental Laws to correct or remove such Environmental Condition.

47.“Representatives” shall be defined as in Section 7.2(a).

48.“Royalty Loss” shall be as defined in Section 13.1(a)(iv)(B).

49. “Seller Knowledge” shall mean the actual knowledge of [CONFIDENTIAL TREATMENT REQUESTED], [CONFIDENTIAL TREATMENT REQUESTED] and/or [CONFIDENTIAL TREATMENT REQUESTED].

50.“Substances” shall mean all severed crude oil, natural gas, casinghead gas, drip gasoline, natural gasoline, petroleum, natural gas liquids, condensate, products, liquids and other hydrocarbons and other minerals or materials of every kind and description produced from the Assets.

51.“Surface Contracts” shall mean all leases, easements, privileges, right-of-way agreements, licenses or other agreements relating to the use or ownership of surface and subsurface properties and structures that are used or held for use in connection with the exploration, production or development of Substances from the Assets.

52.“Survival Period” shall be as defined in Section 10.1.

53.“Tangible Personal Property” shall mean all machinery, equipment, tools, furniture, office equipment, computer hardware, supplies, materials, vehicles and other items of tangible personal property of every kind owned or leased by Seller (wherever located and whether or not carried on Seller’s books), together with any express or implied warranty by the manufacturers or sellers or lessors of any item or component part thereof, and all maintenance records and other documents relating.

54.“Taxes” shall mean any federal, state, local or foreign gross receipts, license, excise, severance, franchise, real property, personal property, sales, use, alternative or add-on minimum, estimated tax or other tax of any kind whatsoever, including any interest, fines, penalty or other like assessment or addition thereto, whether disputed or not, including such item for which a liability arises as a transferee or successor-in-interest.

55."Third Party" shall mean any individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, limited liability company, joint venture or other entity, or a Government Authority or any trustee, receiver, custodian or similar official except for Buyer.

56.“Title Defect” shall mean any condition described in Section 6.2 (d).

57.“Title Defect Amount” shall be as defined in Section 6.2(d).

58.“Title Defect Deductible” shall be as defined in Section 6.2(d).

59.“Title Defect Notice” shall be as defined in Section 6.2(a).

60.“Title Defect Property” shall be as defined in Section 6.2(c).

61.“Transfer Requirement” shall mean any consent, approval, authorization or permit of, or filing with or notification to, any third party which is required to be obtained, made or complied with for or in connection with the sale of the Assets to Buyer as contemplated by this Agreement.

62.“Well” or “Unit” means each well (whether producing, plugged and abandoned, shut-in, injection or water supply), well completion, multiple well completion, unit or other subdivision of property described in Exhibit A-2 or owned in connection with the Leases.

63.“Working Interest” shall mean the percentage of costs and expenses attributable to the maintenance, development and operation of a Well or Unit.

II.Sale and Purchase of Assets

Assets To Be Sold.

On and subject to the terms and conditions of this Agreement, at the Closing, but effective as of the Effective Date, Seller shall sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase and acquire from Seller, all of Seller’s right, title and interest in and to the following (but excluding the Excluded Assets):

(1)Lease(s). Subject to the Castex Transaction, all of Seller’s right, title, and interest in each lease, or portion thereof, and other interests in oil and gas described in Exhibit A-1, which include without limitation the Castex Assets, (each a “Lease” and collectively the “Leases”) and all rights, privileges and obligations appurtenant to each Lease, including without limitation record title interest, operating rights, working interest, overriding royalty interests, carried interests, net profits interests, and any other interests of a similar nature; and

(2)Associated Interests. Subject to the Castex Transaction, all of Seller’s rights and obligations in any unit in which a Lease is included, or arising from any cooperative agreement, well slot use agreement, platform ownership agreement or construction and operating agreement and any agreement similar to the foregoing, to the extent that these rights arise from and are associated with a Lease or other Asset, including without limitation, all rights derived from any operating agreement, unit agreement or other agreement or from any declaration or order of any governmental body (the “Associated Interests”); and

(3)Wells Subject to the Castex Transaction, all of Seller’s right, title and interest in all wells located on a Lease (or lands unitized with a Lease), or otherwise situated (the “Wells”), including without limitation (i) all oil, gas or condensate wells and wellbore(s) (whether producing, not producing or temporarily or permanently abandoned) and (ii) all water source, water injection and other injection and disposal wells and systems, and including but not limited to those listed on Exhibit A-2; and

(4)Platforms, Pipelines, and Facilities. Subject to the Castex Transaction, all of Seller’s right, title and interest in all platforms, facilities, gathering systems, equipment, fixtures, inventory, spare parts, tools and other personal property (but excluding personal computers and peripheral computer equipment and telecommunications equipment unless purchased for the joint account under a joint operating account applicable to a Lease), but only if (i) located on a Lease, or lands unitized therewith and used or dedicated exclusively to operations on a Lease or lands unitized therewith, or (ii) located on the Assets (the “Platforms, Pipelines & Facilities”); and

(5)Easements. Subject to the Castex Transaction, all of Seller’s right, title and interest in all easements, rights of way, licenses, permits, servitudes, surface leases and similar interests exclusively applicable to or exclusively used in operating a Lease, the Assets, or the Wells, Platforms, Pipelines and Facilities described above, including but not limited to those listed on Exhibit A-3 (the “Easements”); and

(6)Contract Rights. Subject to the Castex Transaction, all of Seller’s right, title and interest in the contracts and contractual rights, insurance policies, obligations and interests, to the extent assignable or transferable, insofar as relating to any Lease, and those other contracts and contractual rights, insurance policies, obligations and leases, including any contracts relating to the Castex Assets, related to any of the Assets and identified on Exhibit A-4 hereto (the “Contract Rights”) to the extent arising on or after the Effective Date; and

(7)Castex Assets. All of Seller’s right, title and interest in and to all of the property and non-cash assets of every kind and description, wherever located, and acquired by Seller in the closing of the Castex Transaction (“Castex Assets”), if any; and

(8)Tangible Personal Property. All Tangible Personal Property, including, without limitation each automotive vehicle and trailer listed on Exhibit A-5; and

(9)Accounts Receivable. All Accounts Receivable related to (a), (b), (c), (d), (e), (f) and (g) to the extent arising on or after the Effective Date; and

(10)Post-Effective Date Insurance Benefits. All insurance benefits, including rights and proceeds, arising from or relating to the Assets or the Assumed Liabilities on or after the Effective Date, unless expended in accordance with this Agreement; and

(11)Post-Effective Date Third Party Claims. All claims of Seller against third parties relating to the Assets arising on or after the Effective Date, whether choate or inchoate, known or unknown, contingent or noncontingent, including all such claims listed in Exhibit A-6; and

(12)Post-Effective Date Deposits and Prepaid Expenses. All rights of Seller relating to deposits and prepaid expenses paid by Buyer, and claims for refunds and rights to offset in respect thereof that arise or are created after the Effective Date and relating to the Assets, other than those listed on Exhibit A-7; and

(13)Business Records. Originals, photocopies or other images of all lease files, land files, well files, well information, well data bases, production records, monthly platform product and/or producer imbalance statements and supporting documentation as available, division order files, abstracts, title opinions and contract files, petrophysical studies and support data, geological and geophysical data (excluding core samples) in Seller’s possession insofar as they directly relate to a Lease or lands unitized therewith or other interests included in the Assets and, to the extent available, originals, photocopies or other images of operating procedures and policies, safety procedures and policies, emergency response plans, emergency spill response plans, operation manuals, plant drawings or equipment and processes, mechanical integrity procedures and records, analysis and records, inspections, records of governmental filings in Seller’s possession insofar as they directly relate to wells, platforms, pipelines, & facilities conveyed as part of the Assets (but excluding any internal valuations, price forecasts, interpretive data or documentation, privileged or confidential information, information or records that are subject to any Third Party license or secrecy agreement that may restrict Seller’s ability to disclose or transfer such information or records, or documents that relate solely to any Retained Obligation). Where the electronic version of the relevant well data desired by Buyer is held by a Third Party vendor, Buyer will be solely responsible for the cost to obtain same from the vendor; provided, Seller shall use its commercially reasonable efforts to assist Buyer;

(14)Seismic. Originals, photocopies or other images (electoronic or orthewise) of all proprietary geophysical, geological and/or seismic data and maps in the possession of Seller or Seller’s parent [CONFIDENTIAL TREATMENT REQUESTED], in electronic format if available, insofar as they directly relate to a Lease or lands unitized therewith or other interests included in the Assets, including without limitation, all processing, reprocessing and derivative products and all rights therein. Where the relevant data desired by Buyer is held by a Third Party vendor, Buyer shall have the right to obtain a copy of said relevant data from the Third Party vendor to the extent that Buyer can demonstrate that it has a license or other right to the underlying data set or derivations derived therefrom on which the reprocessing is based, and that transfer of such reprocessing will not violate the terms of Seller’s license agreement or to the extent that they may be lawfully assigned or licensed by Seller to Buyer;

(15)Environmental Records. Originals, photocopies, or other images (electronic or otherwise) of all environmental records, permits, licenses, assessments, investigations, audits, remedial or corrective actions, or analysis associated with, relating to, or regarding the Assets. Such records include, but are not limited to, any documents regarding compliance with Environmental Laws and any correspondence to or from any federal, state, or local regulatory agencies regarding the same;

All of the property and assets to be transferred to Buyer hereunder are herein referred to collectively as the “Assets.”

Excluded Assets.

Notwithstanding anything to the contrary contained in Section 2.1, or elsewhere in this Agreement, the following assets of Seller (collectively the “Excluded Assets”) are not part of the sale and purchase contemplated hereunder and are excluded from the Assets and shall remain the property of Seller after Closing:

(1)Office Property. All of Seller’s right, title and interest in and to the leased premises in [CONFIDENTIAL TREATMENT REQUESTED], [CONFIDENTIAL TREATMENT REQUESTED] and [CONFIDENTIAL TREATMENT REQUESTED], [CONFIDENTIAL TREATMENT REQUESTED], together with all other equipment, improvements and facilities located on or appurtenant to said leased premises (collectively, the “Office Property”); and

(2)Other Seller Leases. All oil and gas leases, or portions thereof, and all other interests in oil and gas and associated properties not specifically described in Exhibits A-1, A-2 or A-3.

(3)Intellectual Property Assets. All of the intangible rights and property of Seller, including Intellectual Property Assets, going concern value, goodwill, telephone, telecopy and e-mail addresses and listings; and

(4)Castex Interest. All of Seller’s right, title and interest in (i) the property and non-cash assets to be transferred by Seller to Castex Energy Development Fund, L.P. in the closing of the Castex Transaction; and (ii) all cash proceeds received by Seller or to which Seller may be entitled pursuant to the Castex Transaction.

(5)all claims of Seller against third parties relating to the Assets arising prior the Effective Date, whether choate or inchoate, known or unknown, contingent or noncontingent, including, but not limited to, all such claims listed in Exhibit A-6;

(6)all rights of Seller relating to deposits and prepaid expenses paid by Seller, claims for refunds and rights to offset in respect thereof relating to the Assets prior to the Effective Date, including, but not limited to, all such claims listed in Exhibit A-7;

(7)confidential and proprietary documents and information relating to Seller’s attempts to sell the Assets prior to the Effective Date, if any, including the names of prospective purchasers, bids or offers made by third parties, analyses by Seller of any offer to purchase the Assets prior to the Effective Date, correspondence or other communications with third parties concerning the potential sale of the Assets or any part thereof pior to the Effective Date, and any correspondence, documents or communications relating to the transaction contemplated by this Agreement, except those between Seller and Buyer or to the extent previously provided to Buyer.

III.Purchase Price

Purchase Price.

The purchase price for the sale and conveyance of the Assets to Buyer is ONE HUNDRED SEVENTY FIVE MILLION United States Dollars ($175,000,000.00) (the “Purchase Price”) payable in cash at the Closing, adjusted in accordance with the terms of this Agreement. The “Adjusted Purchase Price” shall be the Purchase Price, as adjusted pursuant to Section 3.2.

Adjustment to Purchase Price.

At Closing, the Purchase Price shall be adjusted as follows and the resulting amount shall be referred to herein as the “Adjusted Purchase Price”:

(1)The Purchase Price shall be adjusted upward by the following:

(a)The amount of (A) all actual reasonable and customary operating expenditures or prepaid expenses attributable to the Assets, paid by or on behalf of Seller in connection with the operation of the Assets and which are, according to generally accepted accounting principles, attributable to the period of time between the Effective Date and the Closing Date and (B) all capital expenditures paid by or on behalf of Seller in connection with the Assets during the period of time between the Effective Date and the Closing Date. Such expenditures and expenses shall include, without limitation, royalties, rentals and other charges; taxes prorated to Buyer pursuant to the provisions of Section 3.2(c) that have been paid by Seller; and expenses payable to a third person under applicable joint operating agreements, including, without limitation, overhead charges and royalty disbursement fees payable to operator, or similar payments to third party operators, or, in the absence of any joint operating agreement, those items customarily billed under such an agreement.

(b)The value, net of applicable severance and production taxes, of (a) all Substances upstream of the applicable sales point as of the Effective Date at the realized price for such hydrocarbons at the time of sale in the area, adjusted for grade and gravity, and (b) to the extent measurable or calculable the value of Oil and other liquid hydrocarbons in treating equipment, separation equipment and tanks below pipeline connections as of the Effective Date.

(c)Seller Title Credits pursuant to Section 6.4.

(d)An amount equal to the value of the underproduction as of the Effective Date under any operating agreement, gas balancing and storage agreement, gas processing or dehydration agreement or similar agreement at a price of US $4.00 per MMBTU of natural gas.

(e)Any other amounts agreed upon by Seller and Buyer in writing.

(2)The Purchase Price shall be adjusted downward by the following:

(a)Any applicable Environmental Defect Amounts pursuant to Section 5.2.

(b)Any applicable Title Defect Amounts pursuant to Section 6.2.

(c)The gross proceeds actually received by Seller from the sale of Substances for the period of time between the Effective Date and Closing Date, net of applicable severance and production taxes.

(d)An amount equal to all taxes prorated to Seller pursuant to the provisions of Section 3.2(c) that have not been paid by Seller.

(e)An amount equal to the value of the overproduction as of the Effective Date under any operating agreement, gas balancing and storage agreement, gas processing or dehydration agreement or similar agreement at a price of US $4.00 per MMBTU of natural gas.

(f)Any other amounts agreed upon by Seller and Buyer in writing.

(g)Any amounts held in suspense related to the Assets as shown on Schedule 3.1. (b) (vii) which suspense amounts and any obligations associated therewith shall be assumed by Buyer.

(3)All ad valorem, property, production, severance and similar taxes and assessments (but not including income taxes) based upon or measured by the ownership of the Assets, the production of hydrocarbons, or the receipt of proceeds therefrom shall be prorated on a daily basis between Buyer and Seller as of the Effective Date. Such proration shall, where possible, be computed based upon the tax rate and values applicable to the tax period in question; otherwise, the amount of the proration shall be computed based upon such taxes assessed against the applicable portion of the Assets for the immediately preceding tax period just ended. When Buyer receives the actual tax statements for the Assets from the appropriate taxing authorities, Buyer shall deliver to Seller a copy of such statements, together with the amount, if any, by which Seller's proration exceeds the proration that would have been made had actual tax statements been used to calculate Seller's proration. If the proration for Seller that would have been made using actual tax statements exceeds that made at Closing, Seller shall pay to Buyer such difference within five days of receipt of such statement.

(4)To the extent an upward adjustment to the Purchase Price is made for Substances pursuant to Section 3.2(a), all merchantable oil and natural gas liquid hydrocarbons stored in tanks and vessels on the Assets as of the Effective Date shall be owned by Buyer, and Buyer shall be entitled to the proceeds for its net revenue interest share of such oil and natural gas liquid hydrocarbons when sold. These proceeds shall be settled in the Final Accounting Settlement described below. To the extent not measurable or calculable, the Oil and other liquid hydrocarbons in treating equipment, separation equipment and tanks below pipeline connections as of the Effective Date shall not be considered to be merchantable and shall become the property of Buyer. All revenues attributable to the operation of the Assets prior to the Effective Date shall be owned by and for the account of Seller. Seller shall be entitled to all operating revenues and related accounts receivable arising in the ordinary course of business attributable to the Assets and shall be responsible for all operating expenses, capital expenditures and accounts payable arising in the ordinary course of business attributable to the Assets, in each case to the extent they relate to the time prior to the Effective Date. Buyer shall be entitled to all operating revenues and related accounts receivable arising in the ordinary course of business attributable to the Assets and shall be responsible for the payment of all operating expenses, capital expenditures and accounts payable arising in the ordinary course of business attributable to the Assets, in each case to the extent they relate to time after the Effective Date.

Preliminary Settlement Statement.

Seller shall prepare in good faith and deliver to Buyer, at least five (5) Business Days prior to the Closing Date, Seller’s estimate of the Adjusted Purchase Price to be paid at Closing, together with a statement setting forth Seller’s estimate of the amount of each adjustment to the Purchase Price to be made pursuant to Section 3.2 (the “Preliminary Settlement Statement”). The parties shall negotiate in good faith and attempt to agree on such estimated adjustments prior to Closing. In the event any estimated adjustment amounts are not agreed upon prior to Closing, the Adjusted Purchase Price for purposes of Closing shall be calculated based on generally accepted accounting principles in the oil and gas industry, Seller’s and Buyer’s agreed upon estimated adjustments, and Seller’s good faith estimation of any disputed amounts, subject to adjustment in the Final Settlement Statement referred to in Section 3.4.

Final Settlement Statement.

As soon as practicable after Closing, but in no event later than one-hundred-twenty (120) days after Closing, Seller shall prepare in good faith and deliver to Buyer, in accordance with this Agreement and generally accepted accounting principles in the oil and gas industry, a statement (“Final Settlement Statement”) setting forth each adjustment finally determined as of Closing and showing the calculation of such adjustments. Within forty five (45) days after receipt of the Final Settlement Statement, Buyer shall deliver to Seller a written report containing any changes that Buyer proposes be made in good faith. Within ten (10) days after receipt of Buyer's proposed changes to the Final Settlement Statement, Seller shall respond to Buyer' proposed changes in writing. The parties will thereafter work together in good faith to resolve any remaining questions between the parties with respect to the amounts due pursuant to the Final Settlement Statement with the goal of resolving any such questions no later than one hundred fifty (150) days after Closing. Once agreed to by the parties in writing, the Final Settlement Statement shall not be subject to further adjustment by either party. If the parties cannot agree on the Final Settlement Statement by the date which is one hundred fifty (150) days after Closing, then they will initiate arbitration pursuant to Section 15.11.

Payment.

Within ten (10) Business Days after the agreement of Seller and Buyer on the Final Settlement Statement or after the decision of the arbitrator, Buyer or Seller, as the case may be, shall promptly make a cash payment to the other equal to the sums as may be found to be due in the Final Settlement Statement. Upon the payment of any amounts due pursuant to the Final Settlement Statement, neither Seller nor Buyer shall have any further claims based on the division of ownership or division of expenses set forth in Section 3.2 above.

IV.Representations and Warranties

Representations and Warranties of Seller.

Seller represents and warrants to Buyer as follows:

(1)Organization and Qualification. Seller is a limited [CONFIDENTIAL TREATMENT REQUESTED], validly existing and in good standing under the laws of the [CONFIDENTIAL TREATMENT REQUESTED] and is duly qualified to carry on its business and is in good standing under the laws of the [CONFIDENTIAL TREATMENT REQUESTED].

(2)Power and Authority. Seller has all requisite power and authority to carry on its respective business as presently conducted, and to enter into this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement and the transactions contemplated herein have been duly and validly authorized by all requisite action on the part of Seller.

(3)Due Execution. This Agreement has been duly executed and delivered on behalf of Seller, and all documents and instruments required hereunder to be executed and delivered by Seller at or prior to Closing shall have been duly executed and delivered.

(4)Enforceability. This Agreement constitutes a valid and binding agreement of Seller, enforceable against Seller in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application with respect to creditors, (ii) general principles of equity, and (iii) the power of a court to deny enforcement of remedies generally based upon public policy.

(5)No Conflict or Violation. Neither the execution and delivery of this Agreement nor the consummation of the transactions and performance of the terms and conditions contemplated hereby by Seller will (i) conflict with or result in a violation or breach of any provision of the certificate of incorporation, bylaws or other similar governing documents of Seller or any agreement, indenture or other instrument under which Seller is bound; or (ii) violate or conflict with any law applicable to Seller or the properties or Assets of Seller.

(6)Preference Rights and Consents to Assignment. Except as set forth on Schedule 4.1(f) and other than with respect to consents or other approvals required from Governmental Bodies, the Assets are not subject to any Preferential Rights to Purchase or Consents to Assignment.

(7)Compliance With Laws. To Seller’s Knowledge, neither Seller, nor the Assets is in material violation of any federal, state, or local law, ordinance, statue, rule or regulation or any other requirement of any governmental or regulatory body, court or arbitrator applicable to the exploration, construction, development, ownership, use, maintenance or operation of the Assets.

(8)Litigation and Claims. To Seller’s Knowledge, except as shown on Schedule 4.1(h) hereto, (i) there is no action, suit, claim or legal, administrative or arbitral proceeding or investigation (whether or not the defense thereof are covered by insurance) pending or, to the knowledge of Seller, threatened against any of the Assets and (ii) no notice from any governmental authority or any other person (including employees) has been received by Seller (A) claiming any violation or repudiation of the Assets or any violation of any law, rule, regulation, ordinance, order, decision or decree of any governmental authority (including, without limitation, any such law, rule, regulation, ordinance, order, decision or decree concerning the conservation of natural resources) or (B) requiring, or calling attention to the need for, any Remediation with or related to the Assets.

(9)Intentionally Deleted.

(10)Taxes; Production Burdens, Expenses. To Seller’s Knowledge and while owned by Seller, all Taxes levied, assessed or imposed upon or against the Assets have been duly and timely paid. None of the Assets are part of a partnership, for Federal income tax purposes, that does not have a valid election in effect under Section 754 of the Code. To Seller’s Knowledge and while owned by Seller, all rentals, royalties, excess royalty, overriding royalty interests and other payments due under or with respect to the Assets have been duly and timely paid. To Seller’s Knowledge and while owned by Seller, all expenses payable under the terms of the Contracts have been properly and timely paid except for such expenses as are being currently paid prior to delinquency in the ordinary course of business.

(11)AFEs and Cash Calls. With respect to the joint, unit or other operating agreements relating to the Assets, except as set forth in Schedule 4.1(k), there are no outstanding cash calls or payments under authorities for expenditures for payments relating to the Assets which are due or which Seller has committed to make which have not been made.

(12)Permits and Licenses. With respect to Assets for which Seller is the operator, Seller (i) has acquired all material permits, licenses, approvals and consents from appropriate governmental bodies, authorities and agencies to conduct operations on the Assets in compliance with applicable laws, rules, regulations, ordinances and orders, and (ii) is in material compliance with all such permits, licenses, approvals and consents.

(13)Subsequent Events. Except as set forth in Schedule 4.1(m), since the Effective Date, to the knowledge of Seller, there has not been any sale or other disposition of any of the Assets except in the ordinary course of business having a value of less than $25,000.

(14)Advisors’ and Brokers’ Fees. Seller has not retained any advisor or broker in respect of the transactions contemplated by this Agreement.

(15)Bankruptcy. There are no bankruptcy or reorganization proceedings pending against, being contemplated by, or, to the knowledge of Seller, threatened against Seller.

(16)Contracts. Exhibit A-4 sets forth a list of the following material contracts, agreements, and commitments to which any of the Assets will be bound after the Closing Date: (a) any agreement with any affiliate of Seller; (b) any agreement of Seller for the sale, exchange or other disposition of Substances produced from the Assets that is not cancelable without penalty on not more than thirty (30) days prior written notice; (c) any agreement of Seller to sell, lease, farmout or otherwise dispose of any of its interests in any of the Assets other than conventional rights of reassignment; (d) any unit or joint operating agreements, participation agreements, pooling agreements or agreements with respect to areas of mutual interest affecting any of the Leases or other Assets; (e) any agreement that requires Seller to expend more than $25,000 in any year in connection with the Assets (other than equipment leases); (f) any agreement pertaining to the transportation of Substances; (g) any option to purchase or call on the Substances; (h) any hedging agreement, swap agreement, cap agreement, collar agreement or other similar financial agreements designed to protect against or profit from fluctuations in energy prices; and (i) any lease, title retention agreement, or security interest affecting any of the Assets.

(17)Status of Contracts. To the knowledge of Seller, all of the Contracts, Surface Contracts and other obligations of Seller that relate to the Properties are in full force and effect. Neither Seller nor, to the knowledge of Seller, any other party to the Contracts or Surface Contracts (i) is in breach of or default, or with the lapse of time or the giving of notice, or both, would be in breach or default, with respect to any of its obligations thereunder or (ii) has given or threatened to give notice of any default under or inquiry into any possible default under, or action to alter, terminate, rescind or procure a judicial reformation of any Contract or Surface Contract.

(18)Gas Imbalances, Prepayments. Except as shown on Schedule 4.1(r), there are no imbalances affecting the Assets that would require Buyer to deliver any oil or gas without receiving full payment therefor, nor has Seller received any prepayments or other payments which would require Buyer to deliver any oil or gas without receiving full payment therefor.

(19)Intentionally Deleted.

(20)Payout Status. Schedule 4.1(t) reflects the status of payout for each currently existing Well that is subject to a payout calculation under any Leases or Contracts. Payout status shown on Schedule 4.1(t) shall be updated by Seller through the Closing Date as part of Final Accounting Settlement activities.

(21)Intentionally Deleted.

(22)No Encumbrances. Except as described on Schedule 4.1(v), and subject to Section 6.2, Seller has title to the Assets free and clear of all liens, pledges, encumbrances, security interests and adverse claims. Except as set forth on Schedule 4.1(v), there are no overriding royalties, production payments, net profit interests or other revenue burdens on Seller’s interest in the Leases, created by, through or under Seller, its subsidiaries or Affiliates.

(23)Royalties, Rentals and Other Lease Payments. All royalties, rentals and other lease payments are fully paid and up to date with no claims on account thereof pending, or threatened to the knowledge of Seller, its employees, or representatives, with royalty obligations due following the effective date of the Closing on account of any production prior to the effective date of the Closing to remain the obligation of Sellers.

B.Scope and Accuracy of Representations of Seller.

(1)Information About the Assets. EXCEPT AS SET FORTH IN THIS AGREEMENT AND THE CLOSING DOCUMENTS, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, STATUTORY OR IMPLIED, AS TO: (i) THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY DATA, INFORMATION OR RECORDS FURNISHED TO BUYER IN CONNECTION WITH THE ASSETS OR OTHERWISE CONSTITUTING A PORTION OF THE ASSETS, INCLUDING WITHOUT LIMITATION, SEISMIC DATA AND SELLER’S INTERPRETATION AND OTHER ANALYSIS THEREOF; (ii) THE PRESENCE, QUALITY AND QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE ASSETS; (iii) THE ABILITY OF THE ASSETS TO PRODUCE HYDROCARBONS, INCLUDING WITHOUT LIMITATION PRODUCTION RATES, DECLINE RATES AND RECOMPLETION OPPORTUNITIES; (iv) THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS OR PROFITS, IF ANY, TO BE DERIVED FROM THE ASSETS; (v) THE ENVIRONMENTAL CONDITION OF THE ASSETS; (vi) ANY PROJECTIONS AS TO EVENTS THAT COULD OR COULD NOT OCCUR WITH RESPECT TO THE ASSETS; AND (vii) THE TAX ATTRIBUTES OF ANY ASSETS. OTHER THAN AS EXPRESSLY SET FORTH IN THIS AGREEMENT, SELLER MAKES NO REPRESENTATION OR WARRANTY AS TO THE ACCURACY OR COMPLETENESS OF ANY INFORMATION OR MATERIALS FURNISHED TO BUYER.

Representations and Warranties of Buyer.

Buyer represents and warrants to Seller as follows:

(1)Organization and Qualification. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Nevada, and is duly qualified to carry on its business and in good standing under the laws of the State of Louisiana.

(2)Authority. Buyer has all requisite power and authority to carry on its business as presently conducted and to enter into this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement and the transactions contemplated hereby have been duly and validly authorized by all requisite action on the part of Buyer.

(3)Enforceability. This Agreement constitutes a valid and binding agreement of Buyer, enforceable against Buyer, in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application with respect to creditors, (ii) general principles of equity, and (iii) the power of a court to deny enforcement of remedies generally based upon public policy.

(4)No Conflict or Violation. Neither the execution and delivery of this Agreement nor the consummation of the transactions and performance of the terms and conditions contemplated hereby by Buyer will (i) conflict with or result in a violation or breach of any provision of the certificate of incorporation, bylaws or other similar governing documents of Buyer or any material agreement, indenture or other instrument under which Buyer is bound, or (ii) violate or conflict with any law applicable to Buyer or the properties or assets of Buyer.

(5)Actions. There is no action pending or, to the knowledge of Buyer, threatened against Buyer, which would prevent Buyer from consummating and performing the transactions contemplated by this Agreement.

(6)Advisors’ and Brokers’ Fees. Pritchard Capital Partners, LLC (“Pritchard”) has acted for or on behalf of Buyer in connection with this Agreement and the transactions contemplated by this Agreement. No broker or finder is entitled to any brokerage or finder’s fee, or to any commission, based in any way on agreements, arrangements, or understandings made by or on behalf of Buyer for which Seller has or will have any liabilities or obligations (contingent or otherwise).

(7)Independent Investigation. Buyer has, or by Closing will have, made its own independent investigation, analysis and evaluation of the Assets (including Buyer’s own estimate and appraisal of the extent and value of Seller’s oil and gas reserves attributable to the Assets and an independent assessment and appraisal of the environmental risks and liabilities associated with the acquisition of the Assets).

V.Access to Information; Environmental Matters

Access.

Commencing on the date this Agreement is executed by both Buyer and Seller and continuing until the Closing Date, Seller will permit Buyer and its representatives, including but not limited to Pritchard, to (a) have access to Seller’s most recent unaudited reserve report information as it relates to the Assets, so as to facilitate Buyer’s development of a third party reserve report, (b) have access, at reasonable times, in Seller’s office and in a manner so as not to interfere unduly with the business operations of Seller, to the Records insofar as Seller may do so without (i) violating any legal obligation, or (ii) waiving any attorney/client privilege, and (c) conduct, at reasonable times and at Buyer’s sole risk, cost and expense, an inspection of the Assets, including conducting an environmental “Phase 1” inspection. If any additional inspections are required by Pritchard or Buyer’s lender, Buyer may request Seller to agree to such additional inspections, but Seller shall have the right to refuse such request for any reason or no reason. Provided, however, if Seller refuses such request, Buyer may terminate this Agreement. Seller or its representatives shall have the right to be present during any inspection of the Assets and shall have the right, at their option and expense, to split samples with Buyer. Buyer does hereby indemnify and hold harmless, release and agree to defend Seller from and against any and all losses, costs, damages, obligations, claims, liabilities, expenses and causes of action for personal injuries or property damage to the extent arising from Buyer’s inspection of the Assets, including, without limitation, reasonable attorneys’ fees and expenses, regardless of the form of claim and whether at common law, strict liability negligence or under any statute or regulation. The indemnification set forth in the preceding sentence shall be subject to the notice and other provisions set forth in Section 13.3. However, such indemnification shall not extend to any Environmental Defect discovered in the course of such inspections and testings, shall expire upon the Closing and shall not in any way affect or limit Seller’s liabilities or responsibilities with respect to any Environmental Defect or Excluded Liability.

B.Environmental Defects.

(1)Buyer’s Assertions of Environmental Defects. Prior to the expiration of the Examination Period, but in a timely manner after determination, Buyer shall notify Seller in writing (the “Environmental Defect Notice”) of any matters which, in Buyer’s reasonable opinion, constitute Environmental Defects. Buyer’s written notice must include: (i) a description of each Asset (or portion thereof) that is affected by the alleged Environmental Defect; (ii) a description of the alleged Environmental Defect and the facts and circumstances giving rise thereto, including the evidence compiled by Buyer which supports the existence of such alleged Environmental Defect; and (iii) a calculation of the Environmental Defect Amount (itemized in reasonable detail) that Buyer asserts is attributable to such Environmental Defect.

(2)Seller’s Rights and Elections. If Buyer timely notifies Seller in writing of any Environmental Defect as required by Section 5.2(a), Seller shall have the right to then dispute the existence of such Environmental Defect and/or the alleged Environmental Defect Amount asserted with respect thereto in accordance with the provisions of Section 6.5 of this Agreement. In addition, Seller, at its option, may elect, at or prior to the Closing, one of the following options with respect to the Asset or portion thereof (the “Environmental Defect Property”):

(a)leave such Environmental Defect Property in the Assets and assume responsibility for the Remediation of such Environmental Defect; or

(b)leave such Environmental Defect Property in the Assets and reduce the Purchase Price by the Environmental Defect Amount with respect to such Environmental Defect.

If Seller elects the option set forth in clause (ii) above, Seller shall have no further obligation to Buyer to perform the Remediation of such Environmental Defect. If Seller elects the option set forth in clause (i) above, (A) Seller shall promptly following the Closing Date, but in any event within ninety (90) calendar days of the Closing Date, perform or have performed such Remediation in compliance with all Environmental Laws, the provisions of any applicable Lease, Contract and Surface Contract, and to the reasonable satisfaction of Buyer, (B) the Purchase Price shall be subject to reduction by the amount of all Environmental Defect Amounts for such Environmental Defect Properties, and (C) Seller shall have access to the Environmental Defect Property after the Closing Date to implement and complete such Remediation in accordance with this Section. If Seller performs such Remediation in accordance with the requirements of this Agreement, then Buyer shall promptly pay Seller the Environmental Defect Amount with respect to the Environmental Defect Property for which the Remediation has been performed, but not exceeding the aggregate amount of the reductions in the Purchase Price which Buyer received as a result of such Environmental Defect Property. Seller will be deemed to have adequately completed the Remediation required in the immediately preceding paragraph (a) when Seller shall have received (A) Buyer's written acknowledgement (which shall not be unreasonably withheld) that to Buyer's knowledge such Remediation has been performed in accordance with the requirements of this Agreement, (B) to the extent express approval from the lessor is required under any applicable Lease, such approval and (C) one of the following, as applicable:

(i) upon receipt of a certificate or approval from the applicable state or federal authority that the Remediation has been implemented to the extent necessary to comply with existing regulatory requirements; or

(ii) upon receipt of a certificate from a licensed professional engineer acceptable to Buyer if the approval or certification specified in (i) above cannot be obtained because provision for such approval or certification is not provided under federal or state law.

Environmental Reports and Third Party Reserve Report.

Should the Closing not occur and should Seller not be in default hereof and to the extent transferable, Buyer shall provide Seller with copies, of any and all environmental reports and the third party reserve report created by Buyer or its Representatives within a reasonable amount of time after the termination of this Agreement.

VI.Title Adjustments

Title Warranty.

Seller warrants Defensible Title to the Assets from and against all persons claiming by through or under Seller, but not otherwise.

B.Buyer’s Title Review.

(1)Buyer’s Assertion of Title Defects. At any time prior to the expiration of the Examination Period , but in a timely manner after determination, Buyer shall have the right to furnish Seller written notice meeting the requirements of this Section 6.2(a) (a “Title Defects Notice”) setting forth any matters which, in Buyer’s reasonable opinion, constitute Title Defects and which Buyer asserts as a Title Defect with respect to any of the Assets pursuant to this Article 6. For all purposes of this Agreement, subject to the title warranty set forth in Section 6.1 and in the Conveyance, Assignment and Bill of Sale referred to in Section 9.2(a), Buyer shall be deemed to have waived any Title Defect which Buyer fails to assert as a Title Defect in a Title Defect Notice given to Seller on or before the expiration of the Examination Period. To be effective, Buyer’s Title Defect Notice of a Title Defect must include (i) a brief description of the matter constituting the asserted Title Defect, (ii) the claimed Title Defect Amount attributable thereto, and (iii) a copy of the evidence compiled by Buyer which supports the existence of such alleged Title Defect.

(2)Purchase Price Allocations. The Purchase Price has been allocated to the Assets in accordance with the respective values set forth in Exhibit B attached hereto. Such allocations shall be used in determining Title Defect Amounts pursuant to Section 6.2(d) hereof and in accordance with the principles of Section 1060 of the Code and the Treasury Regulations.  Such allocations shall be used in determining Title Defect Amounts pursuant to Section 6.2(d) hereof and as the basis for reporting asset values and other items for purposes of all federal, state, and local tax returns, including without limitation Internal Revenue Service Form 8594.  Buyer and Seller agree that neither they nor their Affiliates will take positions inconsistent with such allocations in notices to Governmental Authorities, in audit or other proceedings with respect to Taxes, in notices to holders of Preference Rights, or in other documents or notices relating to the transactions contemplated by this Agreement.

(3)Seller’s Right and Opportunity to Cure. If Buyer timely gives Seller Title Defect Notice(s) of one or more Title Defects, Seller shall have the right to then dispute the existence of such Title Defect and/or the alleged Title Defect Amount asserted with respect thereto in accordance with the provisions of Section 6.5 of this Agreement. In addition, the following terms and conditions shall apply with respect to any Title Defect asserted by Buyer in a timely Title Defect Notice:

(a)Seller shall have until two (2) Business Days prior to the Closing Date, at their cost and expense, if they so elect but without obligation, to cure all or a portion of such asserted Title Defects. Any asserted Title Defects which are waived in writing by Buyer within such time shall be deemed “Permitted Encumbrances” hereunder. Subject to Sections 6.2(c)(ii) and 6.2(c)(iii) and Seller’s right to dispute the existence of a Title Defect and/or the Title Defect Amount asserted with respect thereto under Section 6.5, if Seller within such time fails to cure any Title Defect of which Buyer has given timely written notice as required above, and Buyer has not and does not waive in writing same on or before the day immediately preceding the Closing Date, the Assets affected by such uncured and unwaived Title Defect shall be a “Title Defect Property.”

(b)If Buyer furnishes to Seller timely Title Defect Notice(s) of one or more Title Defects and the same are not waived in writing or cured as provided in Section 6.2(c)(i), Seller may elect to delay the Closing for a period of up to thirty (30) calendar days to afford Seller the opportunity, if they so elect, to attempt to cure any of the properly asserted Title Defects prior to the Closing. Subject to Section 6.2(c)(iii) and Seller’s right to dispute the existence of a Title Defect and/or the Title Defect Amount asserted with respect thereto under Section 6.5, if Seller within such time period fails or refuse to cure any Title Defect Notice and Buyer has not waived in writing and does not waive in writing the same before the delayed Closing, the Asset affected by such uncured and unwaived Title Defect shall be a “Title Defect Property.”

(c)If Buyer furnishes to Seller timely Title Defect Notice(s) of one or more Title Defects and the same are not waived in writing or cured as provided in Section 6.2(c)(i) or Section 6.2(c)(ii), as applicable, Seller may elect to close the transactions contemplated hereby and retain the right to cure any such Title Defects after Closing (whether or not Seller elects to delay Closing pursuant to Section 6.2(c)(ii) above). In such event, the Purchase Price shall be reduced pursuant to Section 6.2(d) by the amount of all Title Defect Amounts for the Title Defects for which Seller has made such election. Seller shall have ninety (90) calendar days after the Closing Date (as may be delayed pursuant to Section 6.2(c)(ii) above) in which to attempt to cure any such Title Defect. If Seller cures any such Title Defect, then without duplication (a) to the extent the Purchase Price was reduced in connection with such cured Title Defect, then Buyer shall promptly pay Seller the Title Defect Amount with respect to the Title Defect that is so cured, but not exceeding the aggregate amount of the reductions in the Purchase Price which Buyer received as a result of such Title Defect and (b) to the extent all or a portion of the Title Defect Deductible was applied as a credit against the Title Defect Amount attributable to such cured Title Defect, then the unused portion of Title Defect Deductible shall be increased by the Title Defect Amount attributable to such cured Title Defect. Seller's election to retain the right to cure a Title Defect after Closing under this Section 6.2(c)(iii) shall not waive Seller’s right to dispute the existence of a Title Defect and/or the Title Defect Amount asserted with respect thereto under Section 6.5.

(4)Buyer’s Title Adjustments. As Buyer’s sole and exclusive remedy prior to Closing with respect to Title Defects, Buyer shall be entitled to reduce the Purchase Price by the amount, if any, by which the aggregate amount of Title Defect Amounts with respect to all Title Defect Properties exceeds the Title Defect Deductible. "Title Defect Deductible" shall mean Two Hundred Fifty Thousand Dollars ($250,000). “Title Defect Amount” shall mean, with respect to a Title Defect Property, the amount by which the value of such Title Defect Property is impaired as a result of the existence of one or more uncured and unwaived Title Defects, which amount shall be determined as follows and subject to the following conditions:

(a)If the Title Defect results from Seller having a lesser Net Revenue Interest in such Title Defect Property than the Net Revenue Interest specified therefor in Exhibit A-1 or Exhibit A-2 the Title Defect Amount shall be equal to the product obtained by multiplying the portion of the Purchase Price allocated to such Title Defect Property in Exhibit B by a fraction, the numerator of which is the reduction in the Net Revenue Interest and the denominator of which is the Net Revenue Interest specified for such Title Defect Property in Exhibit A-1 or Exhibit A-2.

(b)If the Title Defect results from Seller having a greater Working Interest in a Title Defect Property than the Working Interest specified therefor in Exhibit A-1 or Exhibit A-2, the Title Defect Amount shall be equal to the product obtained by multiplying the portion of the Purchase Price allocated to such Title Defect Property in Exhibit B by a fraction, the numerator of which is the increase in the Working Interest and the denominator of which is the Working Interest specified for such Title Defect Property in Exhibit A-1” or Exhibit A-2.

(c)If the Title Defect results from the existence of a lien, mortgage or similar encumbrance, the Title Defect Amount shall be an amount sufficient to discharge such lien, mortgage or encumbrance.

(d)If the Title Defect results from any matter not described in paragraphs (i), (ii) or (iii) above, the Title Defect Amount shall be an amount equal to the difference between the value of the Title Defect Property affected by such Title Defect with such Title Defect and the value of such Title Defect Property without such Title Defect (taking into account the portion of the Purchase Price allocated in Exhibit B to such Title Defect Property).

(e)The Title Defect Amount attributable to a Title Defect Property shall not exceed the portion of the Purchase Price allocated to such Title Defect Property in Exhibit B.

(f)No Title Defect Amount shall be allowed on account of and to the extent that an increase in Seller’s Working Interest in an Asset has the effect of proportionately increasing Seller’s Net Revenue Interest in such Asset.

(g)Notwithstanding the foregoing, if the Title Defect Amount determined pursuant to the foregoing with respect to a Title Defect Property is $25,000 or less, then the Title Defect Amount with respect to such Title Defect Property shall be deemed zero.

Determination of Title Defects.

An Asset shall not be deemed to have a “Title Defect” if the following statements are true in all material respects with respect to such Asset as of the Closing Date:

(a)Seller has Defensible Title thereto.

(b)All rentals, Pugh clause payments, shut-in gas payments and other similar payments (other than royalties, overriding royalties and other similar payments on production) due with respect to such Asset have been properly and timely paid.

(c)Seller is not in default under the terms of any Leases, farmout agreements, Surface Contracts or other Contracts in any way related to such Asset which could (a) prevent Seller from receiving the proceeds of production attributable to Seller’s interest therein, or (b) result in cancellation of Seller’s interest therein.

Notwithstanding any other provision in this Agreement to the contrary, the following matters shall not be asserted as, and shall not constitute, Title Defects:

defects in the chain of title such as minor name discrepancies, the mere failure to recite marital status in a document, or omissions of successions of heirship proceedings, unless Buyer provides affirmative evidence that such failure or omission results in another party’s superior claim of title to the relevant Asset portion thereof;

(2)defects arising out of lack of survey; and

(3)defects arising out of a lack of corporate authorization, unless Buyer provides affirmative evidence that such lack of authorization results in another party’s superior claim of title to the relevant Assets or portion thereof.

Seller Title Credit.

A “Seller Title Credit” shall mean, with respect to an Asset, the amount by which the value of such Asset is enhanced by virtue of (a) Seller having a greater Net Revenue Interest in such Asset than the Net Revenue Interest specified therefor in Exhibit A-2; or (b) Seller having a lesser Working Interest in such Asset than the Working Interest specified therefor in Exhibit A-2 without a corresponding decrease in the Net Revenue Interest in such Asset from the Net Revenue Interest specified therefore in Exhibit A-2.

Seller Title Credits will first be applied dollar for dollar against any Title Defect Amounts without consideration of any Title Defect Deductible. After such application, any remaining Seller Title Credits shall be the basis for a Purchase Price adjustment as provided in Section 3.3(a).

Deferred Claims and Disputes.

In the event that Buyer and Seller have not agreed upon (i) the existence of one or more Title Defects or Seller Title Credits or one or more adjustments, credits or offsets claimed by Buyer or Seller pursuant to and in accordance with the requirements of this Article 6, or (ii) the existence of one or more Environmental Defects, any Remediation, Environmental Defect Amount or plan therefor, or one or more adjustments, credits or offsets claimed by Buyer or Seller pursuant to Section 5.2, any such dispute or claim (a “Deferred Adjustment Claim”) shall be settled pursuant to this Section 6.5 and, except as provided in Section 8.2(f), shall not prevent or delay Closing.

With respect to each potential Deferred Adjustment Claim, on or before two (2) business days prior to Closing, Buyer and Seller shall deliver to the other a written notice describing each such potential Deferred Adjustment Claim, the amount in dispute and a statement setting forth the facts and circumstances that support such party’s position with respect to such Deferred Adjustment Claim. At Closing, the Purchase Price shall be reduced by Buyer's estimate of the Deferred Adjustment Claim, but in no event shall Buyer’s estimate be greater than the Allocated Value of the affected Asset. On or prior to the thirtieth (30th) consecutive calendar day following the Closing Date (the “Deferred Matters Date”), Seller and Buyer shall attempt in good faith to reach agreement on the Deferred Adjustment Claims and, ultimately, to resolve by written agreement all disputes regarding the Deferred Adjustment Claims. Any Deferred Adjustment Claims which are not so resolved on or before the Deferred Matters Date may be submitted by either party to final and binding arbitration in accordance with Section 15.11 hereof. The amount of any increase in the Purchase Price to which Seller becomes entitled by agreement of the parties or under the final and binding written decision of the Tribunal shall be promptly paid by Buyer to Seller.

Title Reports; Opinions.

At the end of the Examination Period Buyer shall provide Seller with copies of any and all title reports or title opinions created by Buyer or its representatives relating to the Assets.

VII.Certain Agreements of Seller and Buyer

Maintenance of Assets.

From the Effective Date until Closing, Seller agrees that it shall:

(1)Use best efforts to (i) maintain and keep the Assets in full force and effect; (ii) fulfill all contractual or other covenants, obligations and conditions imposed upon Seller with respect to the Assets, including, but not limited to, payment of royalties, delay rentals, shut-in gas royalties and any and all other required payments; and (iii) preserve relationships with all third parties having business dealings with respect to the Assets.

(2)To the extent such operations have a value of $100,000 or more, Seller shall provide written notice to Buyer of Seller’s intent to drill new wells or to rework, complete, plug back, deepen, plug or abandon any Well on the Leases. Without Buyer’s consent, Seller may drill, rework, plug back, deepen, plug or abandon any Well on the Leases or conduct any other operation in the ordinary course of business without the consent of Buyer.

(3)Make or give all notifications, filings, consents or approvals, from, to or with all governmental authorities, and take all other actions reasonably requested by Buyer, necessary for, and cooperate with Buyer in obtaining, the issuance, assignment or transfer, as the case may be, by each such authority of such permits (including environmental permits) as may be necessary for Buyer to own and operate the Assets following the consummation of the transactions contemplated in this Agreement.

(4)Maintain in effect insurance providing the same type coverage, in the same amounts with the same deductibles as the insurance maintained in effect by Seller or its affiliates on the date of this Agreement.

(5)To the extent known by Seller prior to Closing, notify Buyer of any destruction, damage, or loss of any Assets (after giving effect to any insurance coverage with regard thereto) reasonably likely to have a Material Adverse Effect.

B.Public Announcements; Confidential Information.

(1)Except as may be legally required of Buyer, any public announcement, press release or similar public statement or publicity with respect to this Agreement or the transactions contemplated hereby will be issued, if at all, at such time and in such manner as Seller and Buyer mutually determines. Neither Seller nor any of its officers, employees, representatives, lenders, insurers, investors, consultants, counsel and advisors (“Representatives”) shall disclose to any person any information about this Agreement or the transactions contemplated hereby, including the status of any discussions or negotiations, the execution of any documents (including this Agreement) or any of the terms of the transactions contemplated hereby or the related documents (including this Agreement) without the prior written consent of Buyer except (i) as permitted under this Agreement, or (ii) for disclosures made to Representatives, or (iii) as required to obtain any consents to assignment related to the Assets, or (iv) as required to provide any applicable preferential rights notices related to the Assets.

(2)Buyer agrees to maintain all information made available to it by Seller confidential and to cause its Representatives to maintain all information made available to them pursuant to this Agreement confidential; provided, that, (i) Buyer shall not have to maintain the confidentiality of any information which (A) is or becomes publicly known through no act or omission of Buyer or its Representatives, (B) was known to the Buyer prior to the Buyer receiving the information pursuant to this agreement, (C) was obtained by Buyer from a third party where Buyer had no actual knowledge that the delivery of such information violated the terms of any non-disclosure agreement entered into with Seller, (D) is independently developed by the Buyer, (E) is required to facilitate any equity or debt offering ncessary to fund the Purchase Price or (F) Buyer has a legal duty to disclose; and (ii) if the Closing occurs, then Buyer shall not be obligated to maintain any such information confidential. In any event, Buyer shall not disclose the identity of Seller in any announcement, press release, or any similar statement or document.

Further Assurances.

Seller and Buyer each agree that, from time to time after the Closing Date and upon reasonable request, they will execute and deliver such further instruments, and take or cause to take, such other action, as may be necessary to carry out their respective obligations under this Agreement.

Records.

Buyer agrees to maintain the Records until the seventh (7th) anniversary of the Closing Date , or, if any of the Records pertain to any claim or dispute pending on the seventh (7th) anniversary of the Closing Date, Buyer shall maintain any of the Records designated by Seller until such claim or dispute is finally resolved and the time for all appeals has been exhausted. Buyer shall provide Seller and its representatives reasonable access at reasonable times to and the right to copy all or any portion of the Records.

Like-Kind Exchange.

Seller shall have the right, at its option, to dispose of the Assets, or any portion thereof, through a transaction that is structured to qualify as a like-kind exchange of property within the meaning of Section 1031 of the Code. Buyer agrees to cooperate with Seller in effecting a qualifying like-kind exchange through a trust, escrow, or other means as determined by Seller. Seller shall have the right to assign its rights, but not its obligations, under this Agreement, in whole or in part, to a “qualified intermediary” (as defined under the Code) or as otherwise necessary or appropriate to effectuate a like-kind exchange and Buyer agrees to recognize said qualified intermediary. Seller represents that any such like-kind exchange will not violate any agreements to which Seller is subject. Buyer does not represent to Seller that any particular tax treatment will be given to Seller as a result of any such like-kind exchange. Seller will be responsible for all costs and obligations directly or indirectly associated with Seller’s election to accomplish a like-kind exchange. If Seller elects to consummate the sale as a like-kind exchange, Seller agrees to hold harmless and indemnify Buyer from and against all claims, losses and liabilities, if any, resulting from the like-kind exchange.

F.Intentionally Deleted.

No Negotiations.

Other than as required to complete the Castex Transaction, during the period beginning on the date hereof and ending on the earlier of Closing or the termination of this Agreement pursuant to Section 14, but in no event later than December 31^st, 2011, Seller will not (a) approve or undertake any transaction involving all or any portion of the Assets which would prevent Buyer from acquiring the Assets (a "Restricted Transaction"), or (b) enter into, participate, initiate, encourage, or solicit any inquiries, discussions, offers or proposals by any Third Party with respect to, or participate in, facilitate, or encourage, any effort or attempt by any Third Party to do or seek, any Restricted Transaction.

Closing Conditions.

Seller shall cause all the representations and warranties of Seller contained in this Agreement to be true and correct on and as of the Closing Date.

Assumed Liabilities.

At Closing, Buyer shall assume all costs, obligations and Liabilities of Seller that relate to the Assets other than the Retained Obligations (the "Assumed Liabilities"). The transfer of the Assets pursuant to this Agreement shall not include the assumption of any Liability related to the Assets unless Buyer expressly assumes that Liability pursuant to this Section 7.9.

Intentionally Deleted.

Retained Obligations.

Provided that the Closing occurs, Seller shall retain all obligations and Liabilities related to the Excluded Assets. To the extent relating to the Assets and arising during Seller’s ownership of the Assets and prior to the Effective Time, Seller shall retain (a) all obligations and liabilities of Seller for the payment or improper payment of royalties, rentals and other similar payments under the Leases relating to the Assets accruing prior to the Effective Time; (b) all obligations of Seller under the Contracts for (i) overhead charges, (ii) costs and expenses incurred for goods and services provided in connection with the Assets, and (iii) other payment obligations that accrue and become due prior to the Effective Time; (d) all liability of Seller to third parties for personal injury or death as a result of the operation of the Assets; (e) ad valorem, property, severance and similar taxes; and (f) all litigation existing as of the Closing Date (collectively, the “Retained Obligations”).

L.Intentionally Deleted.

Post Closing Cooperation.

For six (6) months after the Closing, Seller will use its reasonable efforts to make available to Buyer the following individuals for purposes of assisting Buyer in the transition of the management and operation of the Assets: (a) [CONFIDENTIAL TREATMENT REQUESTED], (b) [CONFIDENTIAL TREATMENT REQUESTED], and (c) [CONFIDENTIAL TREATMENT REQUESTED]. In connection with such post-Closing cooperation contemplated by this Section 7.13, Buyer shall reimburse Seller for any out of pocket expenses.

VIII.Closing Conditions

Seller’s Closing Conditions.

The obligation of Seller to proceed with the Closing contemplated hereby is subject, at the option of Seller, to the satisfaction on or prior to the Closing Date of all of the following conditions:

(1)Representations, Warranties and Covenants. The (i) representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date, and (ii) covenants and agreements of Buyer to be performed on or before the Closing Date in accordance with this Agreement shall have been duly performed in all material respects.

(2)Closing Timing. The Closing shall have occurred by the Closing Date or would have occurred by the Closing Date but for a failure of Seller.

(3)No Action. On the Closing Date, no suit, action or other proceeding (excluding any such matter initiated by Seller) shall be pending or threatened before any court or governmental agency or body of competent jurisdiction seeking to enjoin or restrain the consummation of the Closing or recover damages from Seller resulting therefrom.

(4)Adjustments. The sum of (i) the reductions in the Purchase Price on account of the aggregate (net) amount of all Environmental Defect Amounts and Title Defect Amounts and (ii) the aggregate amount of Environmental Defect Amounts and Title Defect Amounts claimed by Buyer with respect to unresolved Deferred Adjustment Claims shall not exceed ten million dollars (US $10,000,000.00).

(5)Buyer Financing. On or before December 15, 2011, Buyer shall provide a letter from Prichard to Seller stating that Pritchard is reasonably confident that Buyer will be able to close a PIPE equity offering on or before December 31, 2011 in an amount that, when combined with any debt being raised by the Buyer, will be sufficient to close this transaction. In addition, on or before December 15, 2011, (i) Pritchard and/or Buyer shall provide evidence that at least 95% of the equity proceeds for the Purchase Price are committed to Buyer, and (ii) Buyer will provide a commitment letter from a financial institution in the business of lending money to oil and gas companies evidencing any debt portion of the proceeds to be used at Closing. Notwithstanding anything else in this agreement, if Buyer does not deliver the above two documents to the sole satisfaction of Seller on or before December 15, 2011, Seller may terminate this agreement and Buyer shall have no recourse against Seller including but not limited to specific performance or actual or punitive damages.

(6)Preference Rights and Consents to Assignment. The Preference Rights shall have been waived, or the time to elect such Preference Rights shall have elapsed prior to Closing. All non-government Consents to Assignment shall be obtained prior to Closing.

Buyer’s Closing Conditions.

The obligations of Buyer to proceed with the Closing contemplated hereby is subject, at the option of Buyer, to the satisfaction on or prior to the Closing Date of all of the following conditions:

(1)Representations, Warranties and Covenants. (1) The representations and warranties of Seller contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date as though made as of the Closing Date; and (2) the covenants and agreements of Seller to be performed on or before the Closing Date in accordance with this Agreement shall have been duly performed in all material respects.

(2)Closing Timing. The Closing shall have occurred by the Closing Date or would have occurred by the Closing Date but for a failure of Buyer.

(3)Closing Documents. On or prior to the Closing Date, Seller shall have delivered, or be standing ready to deliver at the Closing, all Closing Documents.

(4)No Action. On the Closing Date, no suit, action or other proceeding (excluding any such matter initiated by Buyer) shall be pending or threatened before any court or governmental agency or body of competent jurisdiction seeking to enjoin or restrain the consummation of the Closing or recover damages from Buyer or resulting therefrom.

(5)Adjustments. The sum of (i) the reductions in the Purchase Price on account of the aggregate (net) amount of all Environmental Defect Amounts and Title Defect Amounts, and (ii) the aggregate amount of Environmental Defect Amounts and the Title Defect Amounts claimed by Buyer with respect to unresolved Deferred Adjustment Claims shall not exceed ten million dollars (US $10,000,000.00).

(6)Preference Rights and Consents to Assignment. The Preference Rights shall have been wavied, or the time to elect under such Preference Rights shall have elapsed, prior to Closing. All non-governmental Consents to Assignment shall be obtained prior to Closing.

(7)Funds. Buyer shall have successfully completed an equity offering structured as a Private Investment in Public Equity ("PIPE") under Rule 144A that is sufficient to provide Buyer with the funds required to pay the Purchase Price.

(8)Subsequent Events. There has not been any:

(a)destruction, damage to, or loss of any Assets that (after giving effect to any insurance coverage with regard thereto) is reasonably likely to have a Material Adverse Effect; or

(b)sale or other disposition of any of the Assets except in the ordinary course of business having a value of less than $25,000.

IX.Closing

Closing.

The Closing shall be held on the Closing Date at 10:00 a.m., Central Time, at the office of Seller in [CONFIDENTIAL TREATMENT REQUESTED], [CONFIDENTIAL TREATMENT REQUESTED], or at such other time or place as Seller and Buyer may otherwise agree in writing.

Seller’s Closing Obligations.

At Closing, Seller shall execute and deliver, or cause to be executed and delivered, to Buyer the following (the "Closing Documents"):

(1)an Assignment, Bill of Sale and Conveyance, substantially in the form attached hereto as Exhibit C, for each parish in which the Assets are located; and

(2)a non-foreign affidavit in the form of Exhibit D, as such affidavit is referred to in Section 1445(b)(2) of the Code, dated as of the Closing Date, executed by Seller; and

(3)a transition services operating agreement shall be finalized before Closing

In addition, within seven (7) days of the Closing Date Seller shall deliver the Records to Buyer at Seller's office located at [CONFIDENTIAL TREATMENT REQUESTED], [CONFIDENTIAL TREATMENT REQUESTED], [CONFIDENTIAL TREATMENT REQUESTED], [CONFIDENTIAL TREATMENT REQUESTED] [CONFIDENTIAL TREATMENT REQUESTED]. Except for the Records, Seller shall deliver possession to Buyer of all Assets in Seller's possession on the Closing Date.

Buyer’s Closing Obligations.

At Closing, Buyer shall deliver, or cause to be delivered, the Adjusted Purchase Price to Seller in immediately available funds to Seller’s bank account or bank accounts, as designated by Seller’s written notice delivered to Buyer not less than two (2) Business Days prior to Closing.

X.Survival

Survival.

All representations, warranties, covenants and agreements made herein and in the Closing Documents shall survive for one (1) year following the Closing Date; provided that (a) the warranties of title contained in this Agreement and the Closing Documents shall survive the Closing indefinitely, and (b) the indemnity and hold harmless obligations under this Agreement and the Closing Documents, including without limitation those obligations under Sections 5.1, and under Article 13, and Seller's and Buyer's obligations under Sections 7.2, 7.3, 7.4, 7.8 and Article 15 shall survive the Closing for one (1) year or for the shorter period of time, if any, specified in each such provision. Unless asserted in writing prior to applicable date limitation stipulated in the preceding sentence, such representation, warranty, covenant or agreement shall not form the basis for or give rise to any claim, demand, cause of action, counterclaim, defense, damage, obligation or liability which is asserted, claimed, made or filed following such applicable date limitation. The survival periods set forth in this Section 10.1 shall be referred to herein as the respective “Survival Period” for each particular category described in this paragraph.

XI.Limitations

Disclaimer of Warranties.

IT IS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT SELLER IS NOT MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, BEYOND THOSE REPRESENTATIONS OR WARRANTIES EXPRESSLY GIVEN IN THIS AGREEMENT AND THE CLOSING DOCUMENTS, AND IT IS UNDERSTOOD THAT, SUBJECT TO SUCH EXPRESS REPRESENTATIONS AND WARRANTIES, BUYER TAKES THE ASSETS “AS IS” AND “WHERE IS.” WITHOUT LIMITING THE GENERALITY OF THE IMMEDIATELY PRECEDING SENTENCE, EXCEPT AS PROVIDED IN THIS AGREEMENT AND THE CLOSING DOCUMENTS, SELLER HEREBY (i) EXPRESSLY DISCLAIMS AND NEGATES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE, RELATING TO THE CONDITION OF THE ASSETS (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR OF CONFORMITY TO MODELS OR SAMPLES OF MATERIAL, OR THE PRESENCE OR ABSENCE OF ANY HAZARDOUS MATERIAL IN OR ON, OR DISPOSED OF OR DISCHARGED FROM, THE ASSETS), and (ii) NEGATES ANY RIGHTS OF BUYER UNDER STATUTES TO CLAIM DIMINUTION OF CONSIDERATION AND ANY CLAIMS BY BUYER FOR DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN.

Damages.

NOTWITHSTANDING ANYTHING CONTAINED TO THE CONTRARY IN ANY OTHER PROVISION OF THIS AGREEMENT, SELLER AND BUYER AGREE THAT THE RECOVERY OF ANY DAMAGES SUFFERED OR INCURRED AS A RESULT OF ANY BREACH BY EITHER PARTY OF ANY OF ITS REPRESENTATIONS, WARRANTIES OR OBLIGATIONS UNDER THIS AGREEMENT SHALL BE LIMITED TO THE RIGHTS PROVIDED IN SECTION 14.2 AND SHALL EXPRESSLY EXCLUDE ANY INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES.

Plugging and Abandonment Obligations.

EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, IT IS EXPRESSLY AGREED FOR ALL PURPOSES OF THIS AGREEMENT THAT (i) THE PLUGGING AND ABANDONMENT OBLIGATIONS SHALL NOT CONSTITUTE ENVIRONMENTAL CONDITIONS, ENVIRONMENTAL CLAIMS, OFFSITE ENVIRONMENTAL MATTERS, ENVIRONMENTAL LIABILITIES, ENVIRONMENTAL DEFECTS, OR ENVIRONMENTAL MATTERS, (ii) SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE PLUGGING AND ABANDONMENT OBLIGATIONS, and (iii) SELLER SHALL HAVE NO LIABILITIES OR OBLIGATIONS WITH RESPECT TO THE PLUGGING AND ABANDONMENT OBLIGATIONS UPON AND AFTER CLOSING.

XII.Preference Rights and Consent Requirements

Rights and Requirements.

For any portion of the Assets for which a Third Party holds a preferential right to purchase or a Third Party non-governmental consent to assignment is required, the same will be handled prior to Closing. Seller shall within twenty (20) days after signing this Agreement notify the holder of the preferential right to purchase or the consent right of the execution of this Agreement and request waiver of the preferential right to purchase and consent to the transfer of the applicable Asset. Seller shall use all commercially reasonable efforts to obtain the relevant waivers and consents.

If a Preference Right is exercised prior to Closing, the Purchase Price shall be adjusted downward by an amount equal to the Allocated Value for the affected Asset set forth on Exhibit B and such Asset shall be deleted from this Agreement

XIII.Indemnification

A.Indemnification by Seller.

(1)For a period of time not to exceed the longer of the Survival Period or the time expressly set forth in this Section 13.1, upon Closing, Seller shall to the fullest extent permitted by law, release, defend, indemnify and hold harmless Buyer, its Affiliates and their respective directors, officers, employees, agents and other representatives from and against the following:

(a)All claims, demands, liabilities, judgments, losses and reasonable costs, expenses and attorneys’ fees (individually a “Loss” and collectively, the “Losses”) arising from the breach by Seller of any representation, warranty, covenant or agreement set forth in this Agreement that survives Closing;

(b)All Losses arising from the breach by Seller of any covenant set forth in this Agreement; and

(c)All Losses arising from the Retained Obligations;

(d)Notwithstanding the above, the following limitations shall apply to Seller’s indemnification obligations:

(A) Except for a Royalty Loss referred to in Section 13.1(a)(iv)(B) and a Retained Obligation Loss referred to in Section 13.1(a)(iv)(C), Seller shall not be obligated to indemnify Buyer for any Loss unless Buyer has delivered a written notice of such Loss within one year after Closing (the “Claim Date”). Any Loss for which Seller does not receive written notice by the Claim Date before the end of one year after Closing, except for a Royalty Loss and a Retained Obligation Loss, shall be deemed to be an Assumed Liability.

(B) Seller shall be obligated to indemnify Buyer for an indefinite period of time after Closing for any Loss related to the improper payment of, or the failure to pay, royalties (a “Royalty Loss”).

(C) Seller shall be obligated to indemnify Buyer for a period of four (4) years after Closing for any Loss related to the Retained Obligations (a “Retained Obligation Loss”).

(D) Seller’s indemnification obligations shall not cover Losses relating to (a) the Plugging and Abandonment obligations, or (b) Title Defects which shall be governed by Article 6 hereof.

(E) Buyer acknowledges and agrees that the claim procedures set forth in Articles 5 and 6, the indemnification provisions in this Article 13 and the termination rights in Article 14, shall be the exclusive remedies of Buyer with respect to the transactions contemplated by this Agreement.

B.Indemnification by Buyer.

Subject to the Survival Period, upon Closing, or after the Claim Date, as the case may be, Buyer shall to the fullest extent permitted by law, release, defend, indemnify, and hold harmless Seller, its Affiliates and their respective directors, officers, employees, agents and other representatives from and against the following:

(1)All Losses arising from the breach by Buyer of any representation, warranty, covenant or agreement set forth in this Agreement that survives Closing;

(2)All Losses arising from the breach by Buyer of any covenant set forth in this Agreement; and

(3)All Losses arising from the Assumed Liabilities and the ownership and operation of the Assets after Closing.

The provisions of this Section 13.2 shall in no way relieve Seller of Seller's obligations under Articles 5 and 6 to cure Title Defects or Environmental Defects.

Notification.

As soon as reasonably practical after obtaining knowledge thereof, an indemnified party shall notify the indemnify party of any claim or demand which the indemnified party has determined has given or could give rise to a claim for indemnification under this Article 13. Such notice (the "Claim Notice") shall specify the agreement, representation or warranty with respect to which the claim is made, the facts giving rise to the claim and the alleged basis for the claim, and the amount (to the extent then determinable) of liability for which indemnity is asserted. In the event any action, suit or proceeding is brought with respect to which a party may be liable under this Article 13, such party may assume the defense of the action, suit or proceeding (including all settlement negotiations and arbitration, trial, appeal, or other proceeding) with counsel selected by the indemnifying party and reasonably satisfactory to the indemnified party. If the indemnifying party does not notify the indemnified party by the date which is the earlier to occur of (a) the date response is due in any litigation matter or (b) three (3) calendar months after receipt of the Claim Notice that the indemnifying party elects to undertake the defense thereof, the indemnified party has the right to defend, at the expense of the indemnifying party, the Claim with counsel of its own choosing, subject to the right of the indemnifying party to assume the defense of any Claim at any time prior to settlement or final determination thereof. An indemnified party shall have the right to be represented by its own counsel at its own expense in any such action, suit or proceedings, and if an indemnified party is named as the defendant in any action, suit or proceedings, it shall be entitled to have its own counsel and defend such action, suit or proceeding with respect to itself at its own expense. Notwithstanding the foregoing provisions of this Section 13.3, neither party shall, without the other party’s written consent, settle, compromise, confess judgment or permit judgment by default in any action, suit or proceeding if such action would create or attach any liability or obligation to the other party. The parties agree to make available to each other, and to their respective counsel and accountants, all information and documents reasonably available to them which relate to any action, suit or proceeding, and the parties agree to render to each other such assistance as they may reasonably require of each other in order to ensure the proper and adequate defense of any such action, suit or proceeding.

XIV.Termination; Remedies; Limitations

A.Termination.

(1)Termination of Agreement. This Agreement and the transactions contemplated hereby may be terminated at any time at or prior to the Closing Date:

(a)by mutual written consent of Seller and Buyer;

(b)by Seller if any condition specified in Section 8.1 has not been satisfied on or before Closing Date and shall not have been waived by Seller; or

(c)by Buyer if any condition specified in Section 8.2 has not been satisfied on or before Closing Date and shall not have been waived by Buyer; and

(d)by Buyer, if it determines that the PIPE equity offering planned and referred to in 8.2(g) will not be successful to raise the funds necessary to the pay the Purchase Price.

(e)by Seller, if at Closing the aggregate cost of Seller to terminate the hedge contracts described in Schedule 14.1(v) is equal to or greater than two million dollars ($2,000,000.00). Provided, however, in lieu of termination, Buyer may elect to either (1) assume Seller’s hedge position (to the extent allowed under Seller’s current hedge contracts) and adjust the Purchase Price downward by $2,000,000; or (2) request Seller to terminate its hedge contracts and the Purchase Price will be increased by an amount equal to the amount required to terminate the hedge contracts minus $2,000,000.

(f)by Seller, if on or before December 15, 2011, if Buyer has not provided evidence pursuant to Section 8.1(e).

(g)By Buyer, if Buyer terminates pursuant to Section 5.1 because Seller does not agree to allow additional environmental testing.

(2)Effect of Termination. In the event of termination of this Agreement by Seller, on the one hand, or Buyer, on the other hand, pursuant to Section 14.1(a), written notice thereof shall forthwith be given by the terminating party or parties to the other party or parties hereto, and this Agreement shall thereupon terminate; provided, however, that following such termination Buyer and Seller will continue to be bound by their respective obligations set forth in Section 7.2. If this Agreement is terminated as provided herein all filing, applications and other submissions made to any governmental authority shall, to the extent practicable, be withdrawn from the governmental authority to which they were made.

B.Remedies.

(1)Seller’s Remedies. Subject to the rights of termination provided by Article 14, if Closing does not occur because of the failure by Buyer to satisfy the conditions to Closing or the Closing obligations, as the case may be, on account of breaches of any of the representations and warranties made by Buyer in this Agreement, or the failure to comply with the covenants or other obligations of Buyer set forth herein, Seller’s sole and exclusive remedy against Buyer shall be the right to enforce specific performance of this Agreement. If Closing does occur, Seller shall have all rights and remedies available at law or in equity against Buyer. No single or partial exercise of any such right precludes any other or further exercise thereof or the exercise of any other right. The remedies provided in this Agreement and the Closing Documents are the exclusive remedies of Seller and all other remedies are waived by Seller.

(2)Buyer’s Remedies. Subject to the rights of termmination provided by Article 14, if Closing does not occur because of the failure of Seller to satisfy the conditions to Closing or the Closing obligations, as the case may be, on account of breaches of any of the representations and warranties made by Seller in this Agreement, or the failure by Seller to comply with the covenants or other obligations of Seller set forth herein, Buyer’s sole and exclusive remedy against Seller shall be the right to enforce specific performance. If Closing does occur, Buyer shall have all rights and remedies available at law or in equity against Seller. No single or partial exercise of any such right precludes any other or further exercise thereof or the exercise of any other right. The remedies provided in this Agreement and the Closing Documents are the exclusive remedies of Buyer and all other remedies waived by Buyer. Notwithstanding anything to the contrary in this Agreement, if Buyer is not ready, willing and able for Closing to occur on or before December 31^st, 2011, this Agreement will terminate and neither Party shall have any recourse against the other Party regardless of any breaches of any of the representations and warranties made by Seller in this Agreement, or the failure by Seller to comply with the covenants or other obligations of Seller set forth herein.

XV.Miscellaneous

Counterparts; Effectiveness.

This Agreement and any document or other instrument delivered hereunder may be executed in counterparts, each of which shall be deemed an original instrument, but which together shall constitute but one and the same instrument. Any counterpart of this Agreement or any document or other instrument delivered hereunder may be delivered by facsimile. Any facsimile signature shall be replaced with an original signature as promptly as practical.

B.Governing Law; Jurisdiction; Process.

(1)THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW RULES THAT WOULD DIRECT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

(2)SUBJECT TO THE ARBITRATION AGREEMENT SET FORTH IN SECTION 15.11, BUYER AND SELLER CONSENT TO PERSONAL JURISDICTION IN ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS AGREEMENT IN ANY COURT, FEDERAL OR STATE, WITHIN THE CITY OF HOUSTON, COUNTY OF HARRIS, TEXAS, HAVING SUBJECT MATTER JURISDICTION AND WITH RESPECT TO ANY SUCH CLAIM, BUYER AND SELLER IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY CLAIM, OR ANY OBJECTION THAT BUYER OR SELLER MAY NOW OR HEREAFTER HAVE, THAT VENUE OR JURISDICTION IS NOT PROPER WITH RESPECT TO ANY SUCH LEGAL ACTION, SUIT OR PROCEEDING BROUGHT IN SUCH COURT IN THE CITY OF HOUSTON, COUNTY OF HARRIS, TEXAS, INCLUDING ANY CLAIM THAT SUCH LEGAL ACTION, SUIT OR PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND ANY CLAIM THAT BUYER OR SELLER ARE NOT SUBJECT TO PERSONAL JURISDICTION OR SERVICE OF PROCESS IN SUCH CITY OF HOUSTON, COUNTY OF HARRIS, FORUM.

Entire Agreement.

This Agreement and the Appendices, Schedules and Exhibits hereto and thereto contain the entire agreement between the parties with respect to the subject matter hereof and there are no agreements, understandings, representations or warranties between the parties other than those set forth or referred to herein.

Expenses.

Buyer shall be responsible for all recording, filing or registration fees and transfer taxes or fees for any assignment or conveyance delivered to Buyer under or pursuant to this Agreement. All other costs and expenses incurred by either party hereto in connection with all things required to be done by it hereunder, including attorneys’ fees, accountant fees and the expense of environmental and title examination, shall be borne by the party incurring same.

Notices.

All notices hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered personally, sent by documented overnight delivery service or, to the extent receipt is confirmed, by United States mail, telecopy, telefax or other electronic transmission service to the appropriate address or number as set forth below.

To Seller:

[CONFIDENTIAL TREATMENT REQUESTED]

[CONFIDENTIAL TREATMENT REQUESTED]

[CONFIDENTIAL TREATMENT REQUESTED]

Attn: [CONFIDENTIAL TREATMENT REQUESTED]

Telephone: [CONFIDENTIAL TREATMENT REQUESTED]

Facsimile: [CONFIDENTIAL TREATMENT REQUESTED]

and

[CONFIDENTIAL TREATMENT REQUESTED]

[CONFIDENTIAL TREATMENT REQUESTED]

[CONFIDENTIAL TREATMENT REQUESTED]

Attn: [CONFIDENTIAL TREATMENT REQUESTED]

Telephone: [CONFIDENTIAL TREATMENT REQUESTED]

Facsimilie: [CONFIDENTIAL TREATMENT REQUESTED]

To Buyer:

North American Energy Resources Inc.

228 St. Charles Avenue, Suite 724

New Orleans, Louisiana 70130

Attn: Mr. Clinton W. Coldren

Telephone: (504) 561 - 1151

Facsimile: (504) 561 - 1153

Or at such other address and to the attention of such other person as a party may designate by written notice to the other party.

Successors and Assigns.

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Until Closing, this Agreement may not be assigned by any party hereto except with the prior written consent of the other party and any such assignment shall be void and of no force or effect.

Amendments and Waivers.

This Agreement may not be modified or amended except by an instrument in writing signed by both parties. Any party hereto may, only by an instrument in writing, waive compliance by another party with any term or provision of this Agreement on the part of such other party hereto to be performed or complied with. The waiver by any party hereto of a breach of any term or provision of this Agreement shall not be construed as a waiver of any subsequent breach.

Attorneys’ Fees.

The prevailing party in any legal or other proceeding brought under or to enforce this Agreement shall be additionally entitled to recover court costs, reasonable costs of arbitration (subject to Section 15.11) and reasonable attorneys’ fees from the nonprevailing party.

Severability.

If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any adverse manner to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

Time of Essence.

Time is of the essence in this Agreement. If the date specified in this Agreement for giving any notice or taking any action is not a Business Day, then the date for giving such notice or taking such action shall be the next day which is a Business Day.

Arbitration.

Any dispute, controversy, or claim (a “Dispute”) arising out of or in connection with this Agreement shall be referred to and determined by a binding arbitration, as the sole and exclusive means of dispute resolution of the parties as to the Dispute, conducted in accordance with the American Arbitration Association (“AAA”) arbitration rules for commercial disputes (the “Rules”), which are deemed to be incorporated by reference, except that in the event of any conflict between those Rules and the arbitration provisions set forth below, the provisions set forth below shall govern and control. The arbitral tribunal (“Tribunal”) shall apply the law referred to in Section 15.2 in resolving the Dispute. The Tribunal shall be composed of three (3) arbitrators, with Buyer and Seller each appointing one arbitrator within thirty (30) days of a party invoking such Party's right to arbitration, and the two (2) arbitrators so appointed within thirty (30) days of their both being appointed appointing the third arbitrator who shall act as a Chairman of the Tribunal. Should any arbitrator fail to be appointed as aforesaid, then such arbitrator shall be appointed by the AAA in accordance with the Rules. All arbitrators must be neutral parties who have never been officers, directors or employees of the Parties or any of their Affiliates, must have not less than ten (10) years experience in the oil and gas industry, and must have a formal financial/accounting, engineering or legal education. The arbitration shall be held in Houston, Texas, and the proceedings shall be conducted and concluded as soon as reasonably practicable, based upon the schedule established by the Tribunal, but in any event the decision of the Tribunal shall be rendered within ninety (90) days following the selection of the Chairman of the Tribunal. The decision of the Tribunal shall be final and binding upon the parties. Judgment upon the award rendered by the Tribunal may be entered in, and enforced by, any court of competent jurisdiction. If the arbitration involves the Final Settlement Statement, the parties shall each bear their own expenses including attorneys’ fees and share the fees of the Chairman of the Tribunal. The Tribunal shall not have the authority to grant or award indirect or consequential damages, punitive damages or exemplary damages.

IN WITNESS WHEREOF, this Agreement has been signed by or on behalf of each of the parties as of the day first above written.

SELLER:

[CONFIDENTIAL TREATMENT REQUESTED]

By: ____________________________

Name: [CONFIDENTIAL TREATMENT REQUESTED]

Its: [CONFIDENTIAL TREATMENT REQUESTED]

[CONFIDENTIAL TREATMENT REQUESTED]

By: ____________________________

Name: [CONFIDENTIAL TREATMENT REQUESTED]

Its: [CONFIDENTIAL TREATMENT REQUESTED]

BUYER:

NORTH AMERICAN ENERGY RESOURCES INC.

By: ______________________________

Name: Clinton W. Coldren

Its: Chief Executive Officer

EX-10

Ex. 10.3

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY APPLICABLE STATE SECURITIES LAW AND THIS NOTE, AND THE UNDERLYING SHARES OF STOCK, MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER THE ACT OR SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER.

NORTH AMERICAN ENERGY RESOURCES, INC.

$500,000.00 November 3, 2011

8.0% CONVERTIBLE NOTE

THIS NOTE is a duly authorized and issued note of North American Energy Resources, Inc., a Nevada corporation, having a principal place of business at 228 St. Charles Avenue, Suite 724, New Orleans, Louisiana 70130 (the “COMPANY”), designated as its 8.0% Convertible Note, due October 31, 2012, in the principal amount of FIVE HUNDRED THOUSAND DOLLARS AND 00/100 ($500,000.00) (the “NOTE”).

FOR VALUE RECEIVED, the Company promises to pay to the order of CLINTON W. COLDREN, or his registered assigns, (the “Holder”) in lawful money of the United States of America, the principal sum of FIVE HUNDRED THOUSAND DOLLARS AND 00/100 ($500,000.00) on October 31, 2012 (the “Maturity Date”), or such other or lesser amounts as may be reflected from time to time on the books and records of Holder as evidencing the aggregate unpaid principal balance of loan advances made to Company from time to time as provided below, together with simple interest assessed at the rate of 8.0% per annum, with interest being assessed on the unpaid balance of this Note as outstanding from time to time. Interest shall be calculated on the basis of a 360-day year comprised of twelve 30-day months and shall accrue daily commencing on the Original Issue Date (as defined in Section 5) until payment in full of the principal sum, together with all accrued and unpaid interest and other amounts which may become due hereunder, has been made. In the event that the principal amount of this Note is not paid in full when such amount becomes due and payable, interest at the rate of 8.0% per annum shall continue to accrue on the balance of any unpaid principal until such balance is paid.

This Note contemplates multiple loan advances to be made in accordance with the terms contained herein. Once the total amount of principal has been advanced under this Note, Company will not be entitled to further loan advances. The following party is authorized, as provided in this paragraph, to request advances under this Note, until Holder receives from Company, at Holder’s address shown below written notice of revocation of such authority: Alan Massara. Each request for an advance must be in writing signed by the authorized party. Company agrees to be liable for all sums advanced in accordance with the instructions of an authorized person. The unpaid principal balance owing on this Note at any time shall be evidenced by endorsements on this Note. Holder shall have no obligation to make advances under this Note if: (a) there is an Event of Default under the terms of this Note or a default under any other agreement that Company has with Holder, including any agreement made in connection with the signing of this Note; or (b) Company ceases doing business or is insolvent.

The total amount of principal and interest outstanding under this Note may not be prepaid in whole or in part without Holder’s consent.

This Note is subject to the following additional provisions:

1.SECTION 1

2.EVENTS OF DEFAULT

(a) “EVENT OF DEFAULT,” wherever used herein, means any one of the following events (whatever the reason or whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

(i) any default in the payment of the principal of or interest on in respect of this Note as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) provided such default is not cured by the Company within ten (10) days after the due date thereof;

(ii) the Company or any of its subsidiaries shall commence, or there shall be commenced against the Company or any such subsidiary a case under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary thereof or there is commenced against the Company or any subsidiary thereof any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 90 days; or the Company or any subsidiary thereof is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 90 days; or the Company or any subsidiary thereof makes a general assignment for the benefit of creditors; or the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any subsidiary thereof shall call a meeting of its creditors with a view to arranging an adjustment or restructuring of its debts; or the Company or any subsidiary thereof shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary thereof for the purpose of effecting any of the foregoing;

(iii) the Company shall default in any of its obligations under any other note or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company in an amount exceeding $250,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; or

(iv) the Company shall fail for any reason to deliver certificates to Holder prior to the fifth business Day (as defined in Section 5) after a Conversion Date pursuant to and in accordance with Section 2(b) or the Company shall provide notice to the Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversions of any portion of its Note in accordance with the terms hereof.

(b) If any Event of Default occurs and is continuing, the full principal amount of this Note, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder’s election and by notice in writing to the Company, immediately due and payable in cash.

3.SECTION 2

4.CONVERSION

(a) (i) CONVERSION GENERALLY. The outstanding principal and interest of this Note shall be convertible into shares of Common Stock at the option of the Holder, in whole or in part at any time beginning on the Original Issue Date. The Holder shall effect conversions at its option by delivering to the Company the form of conversion notice attached hereto as EXHIBIT A (a “HOLDER CONVERSION NOTICE”), specifying therein the principal amount of this Note to be converted and containing a schedule in the form of SCHEDULE 1 to the Holder Conversion Notice (as amended on each Conversion Date, as defined hereafter, the “CONVERSION SCHEDULE”) reflecting the remaining principal amount of this Note and all accrued and unpaid interest thereof subsequent to the conversion at issue. The Conversion Date shall mean the date each conversion will be deemed to have been effected, which shall be as of the close of business on the day on which the related Holder Conversion Notice was received by the Company. Each Holder Conversion Notice, once given, shall be irrevocable. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Note plus all accrued and unpaid interest thereon in an amount equal to the applicable conversion, which shall be evidenced by entries set forth in the Conversion Schedule. The Holder and the Company shall maintain records showing the principal amount converted and the date of such conversions. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note may be less than the amount stated on the face hereof.

(ii) NUMBER OF UNDERLYING SHARES ISSUABLE UPON CONVERSION. This Note is convertible into fully paid and nonassessable shares of Common Stock at an initial conversion price equal to 130% of the volume-weighted average price (“VWAP”) of the Common Stock for the 50 trading days following October 31 2011 (the “CONVERSION PRICE”), subject to adjustment as described in this Section 2 (the “CONVERSION RATIO”). Holder may convert any portion of the principal amount of this Note into that number of fully paid and nonassessable shares of Common Stock obtained dividing the principal amount of the Note by the Conversion Ratio.

(iii) EFFECT OF REGISTRATION STATEMENT. Notwithstanding the above, should prior to December 31, 2011, the Company completes the previously announced Gulf Coast acquisition and in connection therewith files a registration statement covering the shares of Common Stock underlying the Note, then the Note shall convert on the 23rd trading day following effectiveness of the registration statement into shares of Common Stock at a price equal to 90% of the VWAP of the Common Shares for the 20 trading days following effectiveness of such registration statement

(b) (i) DELIVERY OF STOCK CERTIFICATES. Prior to the fifth Business Day after any Conversion Date, the Company will issue and deliver to the Holder a certificate or certificates representing the number of shares of Common Stock being acquired upon the conversion of this Note (together with the cash payment, if any, in lieu of fractional shares).

(ii) FRACTIONAL SHARES. No fractional shares of Common Stock shall be issued as a result of conversion, but in lieu thereof, the Company shall pay to the Holder a cash adjustment in an amount equal to the same fraction of the Conversion Price on the date for conversion.

(c) RESTRICTED SECURITIES. The shares of Common Stock received in conversion of the Note are restricted securities and are subject to the appropriate legend and restrictions on transfer.

(d) SATISFACTION OF OBLIGATION. The Company’s delivery upon conversion of the fixed number of shares of Common Stock into which the Note is convertible (together with the cash payment, if any, in lieu of fractional shares) shall be deemed to satisfy the Company’s obligation to pay the principal amount at maturity of the portion of Note so converted and any unpaid interest accrued on such Note at the time of such conversion.

(e) CONVERSION RATIO ADJUSTMENTS. The Conversion Ratio shall be subject to adjustment without duplication from time to time as follows:

(i) In case the Company shall, while any portion of the Note is outstanding, (i) pay a dividend or make a distribution with respect to its Common Stock in shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock, (iii) combine its outstanding shares of Common Stock into a smaller number of shares, or (iv) issue by reclassification of its shares of Common Stock any shares of capital stock of the Company, then the Conversion Ratio in effect immediately prior to such action shall be adjusted so that Holder shall be entitled to receive the number of shares of capital stock of the Company which he would have owned immediately following such action had the Note been converted immediately prior thereto. An adjustment made pursuant to this Section 2(e)(i) shall become effective immediately after the record date in the case of a dividend or other distribution and shall become effective immediately after the effective date in case of a subdivision, combination or reclassification (or immediately after the record date if a record date shall have been established for such event). If, as a result of an adjustment made pursuant to this Section 2(e)(i), the Holder shall become entitled to receive shares of two or more classes or series of capital stock of the Company, the Board of Directors (whose determination shall be conclusive) shall reasonably determine the allocation of the adjusted Conversion Ratio between or among shares of such classes or series of capital stock.

(ii) In case the Company shall, while the Note is outstanding, issue rights or warrants to all holders of its Common Stock entitling them (for a period expiring within 45 days after the record date mentioned in this Section 2(e)(ii)) to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price (as defined in Section 5) per share of Common Stock on such record date, then the Conversion Ratio for the Note shall be adjusted so that the same shall equal the ratio determined by multiplying the Conversion Ratio in effect immediately prior to the date of issuance of such rights or warrants by a fraction of which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of additional shares of Common Stock offered for subscription or purchase, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants plus the number of shares which the aggregate offering price of the total number of shares so offered for subscription or purchase would purchase at such Current Market Price. Such adjustment shall become effective immediately after the record date for the determination of shareholders entitled to receive such rights or warrants. For the purposes of this Section 2(e)(ii), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company. The Company shall not issue any rights or warrants in respect of the shares of Common Stock held in the treasury of the Company. In case any rights or warrants referred to in this Section 2(e)(ii) in respect of which an adjustment shall have been made shall expire unexercised within 45 days after the same shall have been distributed or issued by the Company, the Conversion Ratio shall be readjusted at the time of such expiration to the Conversion Ratio that would have been in effect if no adjustment had been made on account of the distribution or issuance of such expired rights or warrants.

(iii) Subject to the last sentence of this Section 2(e)(iii), in case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness, shares of any class or series of capital stock, cash or assets (including securities, but excluding any rights or warrants referred to in Section 2(e)(ii), any divided or distribution paid exclusively in cash and any divided or distribution referred to in Section 2(e)(i)), then the Conversion Ratio shall be increased so that the same shall equal the ratio determined by multiplying the Conversion Ratio in effect immediately prior to the effectiveness of the Conversion Ratio increase contemplated by this Section 2(e)(iii) by a fraction of which the numerator shall be the Current Market Price per share of Common Stock on the date fixed for the payment of such distribution (the “REFERENCE DATE”), and of which the denominator shall be, the Current Market Price per share of the Common Stock on the Reference Date less the fair market value (as determined in good faith by the Board of Directors), on the Reference Date, of the portion of the evidences of indebtedness, shares of capital stock, cash and assets so distributed applicable to one share of Common Stock, such increase to become effective immediately prior to the opening of business on the day following the Reference Date. In the event that such dividend or distribution is not so paid or made, the Conversion Ratio shall again be adjusted to be the Conversion Ratio which would then be in effect if such dividend or distribution had not occurred. If the Board of Directors determines the fair market value of any distribution for purposes of this Section 2(e)(iii) by reference to the actual or when issued trading market for any securities comprising such distribution, it must in doing so consider the prices in such market over the same period used in computing the Current Market Price per share of Common Stock. For purposes of this Section 2(e)(iii), any dividend or distribution that includes shares of Common Stock or rights or warrants to subscribe for or purchase shares of Common Stock shall be deemed instead to be (1) a dividend or distribution of the evidences of indebtedness, shares of capital stock, cash or assets other than such shares of Common Stock or such rights or warrants (making any Conversion Ratio increase required by this Section 2(e)(iii)) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights or warrants (making any further Conversion Ratio increase required by Section 2(e)(i) or 2(e)(ii)), except (A) the Reference Date of such dividend or distribution as defined in this Section 2(e)(iii) shall be substituted as (a) “the record date in the case of a dividend or other distribution,” and (b) “the record date for the determination of shareholders entitled to receive such rights or warrants,” and (c) “the date fixed for such determination” within the meaning of Sections 2(e)(k) and 2(e)(ii), and (B) any shares of Common Stock included in such dividend or distribution shall not be deemed outstanding for purposes of computing any adjustment of the Conversion Ratio in Section 2(e)(i).

(iv) In case the Company shall pay or make a dividend or other distribution on its Common Stock exclusively in cash (excluding all cash dividends paid out of the retained earnings of the Company), then the Conversion Ratio shall be increased so that the same shall equal the ratio determined by multiplying the Conversion Ratio in effect immediately prior to the effectiveness of the Conversion Ratio increase contemplated by this Section 2(e)(iv) by a fraction of which the numerator shall be the Current Market Price per share of the Common Stock, and of which the denominator shall be the Current Market Price per share of Common Stock on the date fixed for the payment of such distribution less the amount of cash so distributed and not excluded as provided applicable to one share of Common Stock on the date fixed for the payment of such distribution, such increase to become effective immediately prior to the opening of business on the day following the date fixed for the payment of such distribution; provided, however, that in the event the portion of the cash so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price per share of the Common Stock on the record date mentioned above, in lieu of the foregoing adjustment, adequate provision shall be made so that Holder shall have the right to receive upon conversion the amount of cash Holder would have received had Holder converted this Note immediately prior to the record date for the distribution of the cash. In the event that each dividend or distribution is not paid or made, the Conversion Ratio shall again be adjusted to be the Conversion Ratio which would then be in effect if such record date had not been fixed.

(v) In case a tender or exchange offer (other than an odd-lot offer) made by the Company or any subsidiary of the Company for all or any portion of the Common Stock shall expire and such tender or exchange offer shall involve the payment by the Company or such subsidiary of consideration per share of Common Stock having a fair market value (as determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) at the last time (the “EXPIRATION TIME”) tenders or exchanges may be made pursuant to such tender or exchange offer (as it shall have been amended) that exceeds 110% of the Current Market Price per share of Common Stock on the Business Day next succeeding the Expiration Time, then the Conversion Ratio shall be increased so that the same shall equal the ratio determined by multiplying the Conversion Ratio in effect immediately prior to the effectiveness of the Conversion Ration increase contemplated by this Section 2(e)(v) by a fraction of which the numerator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to shareholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the “Purchased Shares”), and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) at the Expiration Time and the Current Market Price per share of Common Stock on the Business Day next succeeding the Expiration Time, and of which the denominator shall be the number of shares of Common Stock outstanding (including any Purchased Shares) at the Expiration Time multiplied by the Current Market Price per share of Common Stock on the Business Day next succeeding the Expiration Time, such increase to become effective immediately prior to the opening of business on the day following the Expiration Time.

(vi) The Company may make such reasonable increases in the Conversion Ratio, in addition to those required by Sections 2(e)(i) through (v), as it reasonably considers to be advisable to avoid or diminish any income tax to holders of Common Stock or rights to purchase Common Stock resulting from any dividend or distribution of stock (or rights to acquire stock) or from any event treated as such for income tax purposes.

(vii) No adjustment in the Conversion Ratio shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Ratio; provided, however, that any adjustments which by reason of this Section 2(e)(vii) are not required to be made shall be carried forward and taken into account in determining whether any subsequent adjustment shall be required. The adjusted Conversion Ratio will be rounded to two decimal places.

(viii) If any action would require adjustment of the Conversion Ratio pursuant to more than one of the provisions described above, only one adjustment shall be made and such adjustment shall be the amount of adjustment that has the highest absolute value to the Holder.

(f) RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE OF ASSETS. In the event that the Company shall be a party to any transaction, including without limitation (a) any recapitalization or reclassification of the Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination of the Common Stock), (b) any consolidation of the Company with, or merger of the Company into any other Person, any merger of another Person into the Company (other than a merger which does not result in a reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company), (c) any sale, transfer or lease of all or substantially all of the assets of the Company, or (d) any compulsory share exchange, in each case pursuant to which the Common Stock is converted into the right to receive other securities, cash or other property, then lawful provision shall be made as part of the terms of such transaction whereby the Holder shall have the right thereafter to convert this Note only into the kind and amount of securities, cash or other property receivable upon consummation of such transaction by a holder of the number of shares of Common Stock of the Company into which this Note could have been converted immediately prior to such transaction.

The Company or the Person formed by such consolidation or resulting from such merger or which acquired such assets or which acquires the shares of the Company, as the case may be, shall make provision in its certificate or articles of incorporation or other constituent document to establish such right. Such certificate or articles of incorporation or other constituent document shall provide for adjustments which, for events subsequent to the effective date of such certificate or articles of incorporation or other constitution document, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 2(f). The above provisions shall similarly apply to successive transactions of the foregoing types.

(g) NOTICE OF ADJUSTMENTS OF CONVERSION RATIO. Whenever the Conversion Ratio is adjusted as herein provided, the Company shall compute the adjusted Conversion Ratio and shall prepare a notice signed by the Chairman of the Board, President or Executive or Senior Vice President of the Company setting forth the adjusted Conversion Ratio and such notice shall as soon as practicable be mailed by the Company to Holder the last addresses as they appear upon the Note register of the Company.

(h) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Note, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of the Note; and if at any time the number of authorized but unissued shares shall not be sufficient to effect the conversion of the entire outstanding principal amount of the Notes, the Company will use its best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.

5.SECTION 3

Piggyback Registrations

(a) The Company shall notify Holder in writing at least thirty (30) days prior to the filing of any registration statement under the Securities Act for purposes of a public offering of securities of the Company (including, but not limited to, registration statements relating to secondary offerings of securities of the Company, but excluding registration statements relating to employee benefit plans or with respect to corporate reorganizations or other transactions under Rule 145 of the Securities Act) and will afford Holder an opportunity to include in such registration statement all or part of such Registrable Securities held by Holder. Within fifteen (15) days after the above-described notice from the Company, Holder shall notify the Company in writing. Such notice shall state the intended method of disposition of the Registrable Securities by Holder. If Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

(b) If the registration statement under which the Company gives notice under this Section 3 is for an underwritten offering, the Company shall so advise the Holder in the above-described notice. In such event, the right of Holder to be included in a registration pursuant to this Section 3 shall be conditioned upon Holder's participation in such underwriting and the inclusion of Holder's Registrable Securities in the underwriting to the extent provided herein. Holder shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company. Notwithstanding any other provision of the Note, if the underwriter determines in good faith that marketing factors require a limitation of the number of shares to be underwritten, the number of shares that may be included in the underwriting shall be allocated, first, to the Company; second, to Holder on a pro rata basis based on the total number of Registrable Securities held by the Holder; and third, to any member of the Company (other than a Holder) on a pro rata basis. No such reduction shall (i) reduce the securities being offered by the Company for its own account to be included in the registration and underwriting, or (ii) reduce the amount of securities of the selling Holder included in the registration below thirty percent (30%) of the total amount of securities included in such registration, unless such offering is the Initial Offering and such registration does not include shares of any other selling members, in which event any or all of the Registrable Securities of the Holder may be excluded in accordance with the immediately preceding sentence.

(c) The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 3 prior to the effectiveness of such registration whether or not Holder has elected to include securities in such registration. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 3 hereof.

(d) All registration expenses incurred in connection with any registration, qualification or compliance pursuant to Section 3 shall be borne by the Company.

(e) Whenever required to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:

(i) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use all reasonable efforts to cause such registration statement to become effective, and, upon the request of the Holder, keep such registration statement effective for up to ninety (90) days or, if earlier, until the Holder has completed the distribution related thereto.

(ii) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

(iii) Furnish to the Holder such number of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by Holder.

(iv) Use all reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holder, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

(v) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of such offering. Holder, if participating in such underwriting, shall also enter into and perform its obligations under such an agreement.

(vi) Notify Holder when a prospectus is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing.

(vii) Furnish, at the request of the Holder, on the date that such Registrable Securities are delivered to the underwriters for sale, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (a) an opinion, dated as of such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering and reasonably satisfactory to a majority in interest of the Holder requesting registration, addressed to the underwriters, if any, and to the Holder requesting registration of Registrable Securities and (b) a letter dated as of such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering and reasonably satisfactory to the Holder, addressed to the underwriters, if any, and if permitted by applicable accounting standards, to the Holder.

(viii) Cause all such Registrable Securities registered pursuant hereto to be listed on each securities exchange or quoted on each quotation system on which similar securities issued by the Company are then listed or quoted.

(ix) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereto and a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration.

(f) Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 3.

(g) The Company shall not be required to submit any registration statement to the Commission pursuant to Section 3 if Holder has not furnished to the Company such information regarding itself, the Registrable Securities held by Holder and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities; provided, however, that the Company may eliminate the shares proposed to be sold by Holder from registration pursuant to Section 3 if Holder has not provided such information, to the reasonable satisfaction of the Company, within twenty (20) days of having received written notice of a request for such information from the Company.

(h) The Company shall have no obligation with respect to any registration requested pursuant to Section 3 if the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company's obligation to initiate such registration as specified in Section 3. Where a registration requested pursuant to Section 3 is not completed because the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number of shares or the anticipated aggregate offering price required to originally trigger the Company's obligation to initiate such registration, the request to initiate such registration shall not count against the number of requests permitted to be made pursuant to Section 3. Where a registration requested pursuant to Section 3 is completed even though the number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration is less than the number of shares or the anticipated aggregate offering price required to originally trigger the Company's obligation to initiate such registration, the request initiate such registration shall count against the number of requests permitted to be made pursuant to Section 3.

(i) In the event any Registrable Securities are included in a registration statement under Sections 3 :

(i) The Company will indemnify and hold harmless Holder, the partners, officers, directors and legal counsel of Holder, any underwriter (as defined in the Securities Act) for Holder and each person, if any, who controls Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation") by the Company: (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law in connection with the offering covered by such registration statement; and the Company will reimburse each Holder, partner, officer, director, legal counsel, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided however, that the indemnity agreement contained herein shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by Holder, partner, officer, director, legal counsel, underwriter or controlling person of Holder.

(ii) Holder will, if Registrable Securities held by Holder are included in the securities as to which such registration qualifications or compliance is being effected, indemnify and hold harmless the Company, each of its directors, its officers, and legal counsel and each person, if any, who controls the Company within the meaning of the Securities Act, any underwriter and any other Holder selling securities under such registration statement or any of such other Holder's partners, directors or officers or any person who controls Holder, against any losses, claims, damages or liabilities (joint or several) to which the Company or any such director, officer, controlling person, underwriter or other Holder, or partner, director, officer or controlling person of such other Holder may become subject under the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by Holder under an instrument duly executed by Holder and stated to be specifically for use in connection with such registration; and each Holder will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, legal counsel, controlling person, underwriter or other Holder, or partner, officer, director, legal counsel or controlling person of such other Holder in connection with investigating or defending any such loss, claim, damage, liability or action if it is judicially determined that there was such a Violation; provided, however, that the indemnity agreement contained in this Section shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided further, that in no event shall any indemnity under this Section exceed the net proceeds from the offering received by Holder.

(iii) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section.

(iv) If the indemnification provided for in this Section is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the net proceeds from the offering received by Holder.

(v) The obligations of the Company and Holder under this Section shall survive completion of any offering of Registrable Securities in a registration statement and the termination of this Note. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

6.SECTION 4

7.LIMITATION ON TRANSACTIONS

If there shall have occurred and be continuing any Event of Default, then (a) the Company shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock (other than (A) dividends or distributions in Common Stock of the Company, or any declaration of a non-cash dividend in connection with the implementation of a shareholder rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto, (B) purchases of common stock of the Company related to the rights under any of the Company’s benefit plans for its directors, officers or employees, or (C) as a result of a reclassification of its capital stock for another class of its capital stock); (b) the Company shall not make any payment of interest, principal or premium, if any, or repay, repurchase or redeem any debt securities issued by the Company which rank pari passu with or junior to the Note or make any guarantee payment with respect to any guarantee by the Company of the debt securities of any subsidiary of the Company if such guarantee ranks pari passu with or junior to the Note; and (c) the Company shall not redeem, purchase or acquire less than all of the outstanding Note.

8.SECTION 5

9.DEFINITIONS

For the purposes hereof, the following terms shall have the following meanings:

“BUSINESS DAY” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions in the State of Louisiana are authorized or required by law or other government action to close.

“COMMON STOCK” means the common stock, $0.0001 par value per share, of the Company and stock of any other class into which such shares may hereafter have been reclassified or changed.

“CURRENT MARKET PRICE” shall mean the last reported price at an exchange or the bid price in an over the counter market to buy a share of Common Stock

“ORIGINAL ISSUE DATE” shall mean November 3, 2011.

“PERSON” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.

“UNDERLYING SHARES” means the shares of Common Stock issuable upon conversion of Notes or as payment of interest in accordance with the terms hereof.

10.SECTION 6

Any and all notices or other communications or deliveries to be provided by the Holder, including, without limitation, any Holder Conversion Notice, shall be in writing and delivered personally, by facsimile, send by a nationally recognized overnight courier service or sent by certified or registered mail, postage prepaid, addressed to the Company, at 228 St. Charles Avenue, Suite 724, New Orleans, Louisiana 70130, facsimile No.: (504) 561-1153, attention Alan Massara, or such other address or facsimile number as the Company may specify for such purposes by notice to the Holders delivered in accordance with this Section 6. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service or sent by certified or registered mail, postage prepaid, addressed to the Holder at the facsimile telephone number or address of such Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section 6 prior to 5:00 p.m. (Central time), (b) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section 6 later than 5:00 p.m. (Central time) on any date and earlier than 11:59 p.m. (Central time) on such date, (c) four days after deposit in the United States mail, (d) the Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (e) upon actual receipt by the party to whom such notice is required to be given.

11.SECTION 7

This Note shall not entitle the Holder to any of the rights of a shareholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of shareholders or any other proceedings of the Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

12.SECTION 8

If this Note shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new Note for the principal amount of this Note so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Note, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company.

13.SECTION 9

This Note shall be governed by and construed in accordance with the laws of the State of Louisiana without giving effect to conflicts of laws thereof. The Company and the Holder hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Louisiana, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or that such suit, action or proceeding is improper. The Company hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by receiving a copy thereof sent to the Company at the address in effect for notices to it under this instrument and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.

14.SECTION 10

Any waiver by the Company or the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Company or the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver must be in writing.

15.SECTION 11

Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.

16.SECTION 12

So long as this Note remains outstanding, the Company will furnish to the Holder copies of the Company’s audited financial statements within 120 days of the end of each fiscal year.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.

NORTH AMERICAN ENERGY RESOURCES, INC.

BY:       /s Alan Massara                                    

Alan Massara                                       

President                                              

Attest:

/s Clint Coldren

Secretary

EXHIBIT A

17.NOTICE OF HOLDER CONVERSION

The undersigned hereby elects to convert the principal amount of Note set forth below into shares of common stock, $______ par value per share (the “Common Stock”), of North American Energy Resources, Inc. (the “Company”) according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any. Conversion calculations:

______________________________________

Date to Effect Conversion

_______________________________________

Principal Amount of Notes to be Converted

_______________________________________

Number of Shares of Common Stock to be Issued

_______________________________________

Applicable Conversion Price

_______________________________________

Signature

_______________________________________

Name

_______________________________________

Address

SCHEDULE 1

18.CONVERSION SCHEDULE

8.0% Convertible Notes in the aggregate principal amount of $_______ issued by NORTH AMERICAN ENERGY RESOURCES, INC. This Conversion schedule reflects conversions made under Section 2(a)(i) of the above referenced Notes.

Dated:______________________________

DATE OF CONVERSION AMOUNT OF CONVERSION AGGREGATE PRINCIPAL AMOUNT REMAINING SUBSEQUENT TO CONVERSION COMPANY ATTEST

EX-99

Ex. 99.1

Press Release

North American Energy Resources Announces Agreement to Purchase Oil and Gas Assets

New Orleans, LA (Businesswire) October 31, 2011. North American Energy Resources, Inc. (OTC: NAEY.PK) today announced that it has agreed to purchase a number of onshore and offshore oil and gas fields from a private seller for $175 Million in cash, subject to certain purchase price adjustments at closing. The assets include about 108 producing wells in 34 fields with average net production of 12 million cubic feet per day (MMcf/d) of natural gas and 900 barrels per day of oil (BBl/d), or a total of 2,900 BOE/d. The assets have Proven Reserves of approximately 14.5 Million BOE (as calculated by a third party reservoir engineering firm) with additional internally identified Probable and Possible potential of over 5 Million BOE. With only 30% of these reserves currently producing, substantial potential exists to dramatically increase production volumes. The effective date of the purchase is June 1, 2011, and the purchase, if completed, is scheduled to close on or before December 31, 2011.

Clinton W. Coldren, Chairman and CEO, commented, “We have been evaluating a number of acquisition opportunities. Our initial focus has primarily been on Gulf Coast properties with existing production, upside drilling, and redevelopment potential. This acquisition meets all of our criteria and is a great first step in the execution of our growth plans. Our technical team is optimistic about exploiting the significant remaining potential associated with the properties we are purchasing, as well as, identifying new higher impact exploration opportunities.”  Alan G. Massara, President and CFO, said, “We are committed to building shareholder value, and this is clearly a transformational purchase for North American. While we work to optimize the profitability of this acquisition, we will continue to seek complementary properties in the Gulf Coast and other productive basins.”

Completion of the purchase is subject to preferential rights-to-purchase held by other working interest owners in a number of the properties, as well as, several industry-standard closing conditions, including, without limitation, the completion by North American of satisfactory due diligence and the receipt of all necessary regulatory approvals. Additionally, North American’s ability to close the purchase is contingent on its ability to raise sufficient capital, and the failure to do so could result in termination of the purchase and sale agreement between North American and the private seller. There is no deposit, break-up or other termination fee payable under the purchase and sale agreement. North American intends to utilize a combination of debt and equity to fund the purchase. Interim financing for due diligence expenses and operations is being funded pursuant to a $500,000 bridge loan provided by Clinton W. Coldren. The loan is convertible into shares of common stock and has a term of one year.

About North American Energy Resources, Inc.

North American Energy Resources, Inc. (OTC: NAEY.PK) is an independent oil and natural gas company engaged in the acquisition, exploration and development of oil and natural gas properties and the production of oil and natural gas. The Company's operations are currently in Oklahoma in the upstream segment of the oil and gas industry. The Company also has an interest in a pipeline located in its area of operations, which is currently shut-in but could be used for gathering its gas and the gas production of other producers.

Forward-Looking Statements

All statements included in this release relating to future plans, projects, events or conditions and all other statements, other than statements of historical fact included in this release, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based upon current expectations and are subject to a number of risks, uncertainties and assumptions, including changes in long-term oil and gas prices, or other market conditions affecting the oil and gas industry, reservoir performance, the outcome of commercial negotiations, and changes in technical or operating conditions, among others, that could cause actual results, including acquisition plans, project plans and related expenditures, and resource recoveries to differ materially from those described in the forward-looking statements. North American Energy Resources, Inc. assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law. Additional information concerning potential factors that could affect future financial results are set forth in the Company's Annual Report on Form 10-K for the year ended April 30, 2011 and the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 2011.

Contact Information

Clinton Coldren or Alan Massara (504) 561-1151.

EX-99

Ex. 99.2

OMITTED EXHIBITS AND SCHEDULES

TO ASSET PURCHASE AGREEMENT

In accordance with the instructions to Item 601, the following exhibits and schedules were omitted from Exhibit 10.02 Asset Purchase Agreement. North American Energy Resources, Inc. agrees to furnish supplementally a copy of any omitted exhibit and schedule listed below to the Commission upon request.

·Exhibit A-2 Wells

·Exhibit A-3 Easements

·Exhibit A-4 Contracts

·Exhibit A-5 Automobiles and Moveable Trailers

·Exhibit A-6 Claims Against Third Parties

·Exhibit A-7 Deposits, Pre-Paid Expenses and Refunds

·Exhibit B Purchase Price Allocation

·Exhibit C Form of Assignment, Bill of Sale and Conveyance

·Exhibit D Form of Non-Foreign Affidavit

·Exhibit E - Castex Transaction

·Schedule 3.2(b) (vii) Amounts Held in Suspense

·Schedule 4.1(f) Preferential Rights and Consents to Assign

·Schedule 4.1(h) Litigation and Claims

·Schedule 4.1(k) AFEs and Cash Calls

·Schedule 4.1(m) Subsequent Events

·Schedule 4.1 (r) Gas Imbalances

·Schedule 4.1(t) Payout Status for Existing Wells

·Schedule 4.1(v) Encumbrances and Affiliated Interests

·Schedule 14.1(v) Hedges

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