AGREEMENT AND PLAN OF EXCHANGE

EXHIBIT 10.6

BY AND AMONG

ROYALE ENERGY HOLDINGS, INC.

AND

THE SHAREHOLDERS OF

OF

MATRIX OIL CORPORATION

[                              ]

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS		5
ARTICLE II AGREEMENT FOR EXCHANGE; CLOSING		20
Section 2.01	Exchange of Transferred Stock for the Exchange Consideration	20
Section 2.02	Aggregate Consideration from Parent	20
Section 2.03	Payment of Exchange Consideration	20
Section 2.04	No Fractional Shares	20
Section 2.05	Dissenting Shares	21
Section 2.06	Non-Survival of Representations and Warranties	21
ARTICLE III ESCROW; CLOSING		21
Section 3.01	Escrow Closing	21
Section 3.02	Delivery of Transferred Stock	22
Section 3.03	Exchange Closing	22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS		22
Section 4.01	Transferred Stock Ownership	22
Section 4.02	Authority	23
Section 4.03	No Conflicts; Consents	24
Section 4.04	Capitalization	24
Section 4.05	Subsidiaries	25
Section 4.06	Financial Statements	25
Section 4.07	Undisclosed Liabilities	26
Section 4.08	Absence of Certain Changes, Events and Conditions	26
Section 4.09	Material Contracts	26
Section 4.10	Properties and Assets	27
Section 4.11	Intellectual Property	29
Section 4.12	Reserved	30
Section 4.13	Reserved	30
Section 4.14	Reserved	30
Section 4.15	Insurance	30
Section 4.16	Legal Proceedings; Governmental Orders	31
Section 4.17	Compliance With Laws; Permits	31
Section 4.18	Environmental Laws	31
Section 4.19	Employee Benefit Matters	31
Section 4.20	Employment Matters	34
Section 4.21	Taxes	35
Section 4.22	Books and Records	37
Section 4.23	Related Party Transactions	37

Section 4.24	Brokers	37
Section 4.25	Legal Proceedings	38
Section 4.26	Proxy Statement	38
Section 4.27	No Other Representations or Warranties	38
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ROYALE AND THE PARENT		38
Section 5.01	Organization and Qualification of the Royale Parties	38
Section 5.02	Authority; Board Approval	39
Section 5.03	No Conflicts; Consents	40
Section 5.04	Capitalization	40
Section 5.05	No Prior Operations; No Subsidiaries	42
Section 5.06	SEC Reports; Financial Statements	42
Section 5.07	Undisclosed Liabilities	42
Section 5.08	Absence of Certain Changes, Events and Conditions	42
Section 5.09	Royale Material Contracts	43
Section 5.10	Properties and Assets	43
Section 5.11	Intellectual Property	46
Section 5.12	Insurance	47
Section 5.13	Legal Proceedings; Governmental Orders	47
Section 5.14	Compliance With Laws; Permits	47
Section 5.15	Environmental Laws	48
Section 5.16	Employee Benefit Matters	48
Section 5.17	Employment Matters	50
Section 5.18	Taxes	51
Section 5.19	Books and Records	53
Section 5.20	Related Party Transactions	53
Section 5.21	Brokers	53
Section 5.22	Legal Proceedings	53
Section 5.23	Registration Statement	54
Section 5.24	Opinion of Financial Advisor	54
Section 5.25	No Other Representations or Warranties	54
ARTICLE VI CERTAIN COVENANTS AND AGREEMENTS OF PARENT, ROYALE AND THE SHAREHOLDERS		54
Section 6.01	Conduct of Business Prior to the Closing	54
Section 6.02	Access to Information; Confidentiality; No-Shop	56
Section 6.03	Registration Statement; Approval by Royale’s Stockholders	57
Section 6.04	Approval of the Corporation and the Shareholders	58
Section 6.05	Certain Pre-Merger Actions of Royale Parties	59
Section 6.06	Notice of Certain Events	59

Section 6.07	Public Announcements	60
Section 6.08	Governmental Approvals and Consents	60
Section 6.09	Closing Conditions	62
Section 6.10	Subsequent Filings	62
Section 6.11	Stockholder Litigation	62
Section 6.12	Takeover Statutes	62
Section 6.13	Listing on National Securities Exchange	62
Section 6.14	Further Assurances	63
Section 6.15	Reserved.	63
Section 6.16	Certain Tax Matters	63
Section 6.17	Matrix Senior Indebtedness	64
Section 6.18	Consents to Transfer of Transferred Stock	64
Section 6.19	Shareholder Indebtedness and Receivables	65
Section 6.20	Release to be Effective upon Closing	65
ARTICLE VII TAX MATTERS		65
Section 7.01	Tax Covenants	65
Section 7.02	Termination of Existing Tax Sharing Agreements	66
Section 7.03	Tax Returns	66
Section 7.04	Straddle Period	67
Section 7.05	Contests	67
Section 7.06	Cooperation and Exchange of Information	67
ARTICLE VIII CONDITIONS TO CLOSING		68
Section 8.01	Conditions to Obligations of All Parties	68
Section 8.02	Conditions to Obligations of Royale and Parent	69
Section 8.03	Conditions to Obligations of Matrix	70
Section 8.04	Closing Deliverables	72
ARTICLE IX TERMINATION		74
Section 9.01	Termination	74
Section 9.02	Effect of Termination	76
ARTICLE X MISCELLANEOUS		76
Section 10.01	Expenses	76
Section 10.02	Notices	76
Section 10.03	Interpretation	77
Section 10.04	Headings	77
Section 10.05	Severability	77
Section 10.06	Entire Agreement	78
Section 10.07	Successors and Assigns	78

Section 10.08	Amendment and Modification; Waiver	78
Section 10.09	Governing Law; Submission to Jurisdiction; Waiver of Jury Trial	78
Section 10.10	Specific Performance	79
Section 10.11	Counterparts	79

 

This AGREEMENT AND PLAN OF EXCHANGE (this “Agreement”) made effective as of [                              ], by and among ROYALE ENERGY, INC., a California corporation (“Royale”), ROYALE ENERGY HOLDINGS, INC., a Delaware corporation (the “Parent”), and EACH OF THE UNDERSIGNED PERSONS (the “Shareholders”), who, collectively, are all of the holders of all outstanding shares of capital stock of MATRIX OIL CORPORATION, a California corporation (the “Corporation”).  Defined terms used herein have the respective meanings set forth in ARTICLE I.

WHEREAS, Parent and the Shareholders desire to provide for the transfer by the Shareholders to Parent of the outstanding shares of capital stock of the Corporation in exchange for common stock of Parent (the “Exchange”), with the Parent being the sole shareholder of the Corporation following the Exchange;

WHEREAS, the Exchange is one of several related transactions involving the assignment of capital stock of the Corporation to Parent in exchange for common stock of Parent (“Parent Common Stock”) as part of an overall plan to capitalize Parent; and for federal income tax purposes, it is intended that this Exchange and the other related exchange transactions with Parent shall qualify as exchanges under the provisions of Section 351 of the IRC;

WHEREAS, the parties to the Exchange desire to conclude the Exchange concurrently with and conditioned upon successful completion of certain other exchange transactions as well as successful completion of the merger of Matrix Merger Sub, Inc., a California corporation and a direct, wholly-owned Subsidiary of Parent (“Matrix Merger Sub”), with and into Matrix Oil Management Corporation, a California corporation (“Matrix”), with Matrix as the surviving corporation and a wholly-owned subsidiary of Parent (the “Matrix Merger”).

NOW, THEREFORE, in consideration of the premises and the representations, warranties and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:

ARTICLE I
Definitions

The following terms have the meanings specified or referred to in this ARTICLE I:

“Action” means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, civil, criminal, administrative, regulatory or otherwise, whether at law or in equity.

“Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Agreement” has the meaning set forth in the preamble.

“Ancillary Documents” means:

A.	The Debt Exchange Agreement with the holders of approximately $20,124,000.00 in aggregate principal amount of subordinated promissory notes issued by Matrix, Matrix Operator and the Matrix LPs in substantially the form attached as Exhibit A to the Merger Agreement;

B.	The Certificate of Designation of Series B Preferred Stock in substantially the form attached as Exhibit B to the Merger Agreement;

C.	The LP Exchange Agreement with the holders of all limited partnership interests of Matrix Investments L.P., a California limited partnership, in substantially the form attached as Exhibit C to the Merger Agreement (the “Matrix Investments LP Exchange Agreement”);

D.	The LP Exchange Agreement with the holders of all limited partnership interests of Matrix Las Cienegas Limited Partnership, a California limited partnership in substantially the form attached as Exhibit D to the Merger Agreement (the “Matrix Las Cienegas LP Exchange Agreement”);

E.	The LP Exchange Agreement with the holders of all limited partnership interests of Matrix Permian Investments, LP, a Texas limited partnership in substantially the form attached as Exhibit E to the Merger Agreement (the “Matrix Permian LP Exchange Agreement”);

F.	This Agreement;

G.	Employment Agreements between Parent and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇ Sheevel, all in a form reasonably acceptable to Royale and Matrix; and

H.	The Section 351 Plan in substantially the form attached hereto as Exhibit E.

“Applicable Effective Time” has the meaning set forth in Section 2.05.

“Audited Financial Statements” has the meaning set forth in Section 4.06.

“Balance Sheet” has the meaning set forth in Section 4.06.

“Balance Sheet Date” has the meaning set forth in Section 4.06.

“Board” means the board of directors of the Corporation.

“Business Day” means any day except Saturday, Sunday or any other day on which commercial banks located in California are authorized or required by Law to be closed for business.

“Capital Stock Consideration” means, collectively, the shares of Parent Common Stock to be issued as the Royale Merger Consideration, the Matrix Merger Consideration, the Matrix LP Exchange Consideration and the Exchange Consideration and the shares of the Series B Preferred Stock to be issued in connection with the Debt Exchange Consideration.

 “CCC” means the California Corporations Code.

“Closing” has the meaning set forth in Section 3.03.

“Closing Date” has the meaning set forth in Section 3.03.

“Contracts” means all contracts, leases, deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures and all other agreements, commitments and legally binding arrangements, whether written or oral.

“Contributions” has the meaning set forth in Section 6.16.

“Corporation” has the meaning set forth in the preamble.

“Corporation Benefit Plans” has the meaning set forth in Section 4.18.

“Corporation Insurance Policies” has the meaning set forth in Section 4.14.

“Corporation Charter Documents” means the documents by which the Corporation and its respective subsidiaries established their legal existence, were authorized to conduct business in their jurisdiction of organization or which govern their internal affairs, including, without limitation, any articles of incorporation, articles of association, operating agreement, partnership agreement, bylaws or similar documents.

“Corporation Material Adverse Effect” means any event, occurrence, fact, condition or change that is, or would reasonably be expected to become, individually or in the aggregate, materially adverse to (i) the business, results of operations, prospects, condition (financial or otherwise), or assets of the Corporation and its Subsidiaries, taken as a whole, or (ii) the ability of the Shareholders or the Corporation  to consummate the transactions contemplated hereby on a timely basis; provided, however, that, for the purposes of clause (i), a Corporation Material Adverse Effect shall not be deemed to include events, occurrences, facts, conditions or changes arising out of, relating to or resulting from: (a) changes generally affecting the economy, financial or securities markets; (b) the announcement of the transactions contemplated by this Agreement; (c) any outbreak or escalation of war or any act of terrorism; or (d) general conditions in the industry in which the Corporation and its Subsidiaries operate; provided further, however, that any event, change and effect referred to in clauses (a), (c) or (d) immediately above shall be taken into account in determining whether a Corporation Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that such event, change or effect has a disproportionate effect on the Corporation and its Subsidiaries, taken as a whole, compared to other participants in the industries in which the Corporation and its Subsidiaries conduct their businesses.

“Corporation Related Documents” has the meaning set forth in Section 4.02.

“Debt Exchange” means the exchange of approximately $20,124,000.00 aggregate principal amount of subordinated promissory notes issued by Matrix, the Corporation and the Matrix LPs by the holders thereof for shares of the Parent’s Series B Preferred Stock pursuant to terms of certain definitive exchange agreements providing for execution of such exchange concurrently with consummation of the Mergers.

“Debt Exchange Consideration” means each $10.00 of principal amount of subordinated promissory notes outstanding immediately prior to the Matrix Merger Effective Time shall be exchanged for one validly issued, fully paid and nonassessable share of Series B Preferred Stock of Parent.

“DGCL” means the Delaware General Corporation Law, as amended from time to time.

“Disclosure Schedules” means the Disclosure Schedules delivered by Matrix and Royale concurrently with the execution and delivery of this Agreement.

“DWI Business” means the business of Royale in connection with the sale of working interests by Royale in certain Royale Interests in order to finance the drilling and development costs of such Royale Interests.

“Employee Benefit Plan” is defined in Section 4.19(j)(i).

“Employee Pension Benefit Plan” is defined in Section 4.19(j)(i).

“Employee Welfare Benefit Plan” is defined in Section 4.19(j)(i).

“Encumbrance” means any charge, claim, community property interest, pledge, condition, equitable interest, lien (statutory or other), option, security interest, mortgage, easement, encroachment, right of way, right of first refusal, or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.

“Environmental Law” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, endangered or threatened species, human health or safety, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes, without limitation, the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as

amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.

“ERISA Affiliate” means, with respect to a Person, all employers (whether or not incorporated) that would be treated together with such Person or any of its Affiliates as a “single employer” within the meaning of Section 414 of the IRC.

“Escrow Agent” has the meaning set forth in Section 3.01.

“Escrow Closing” has the meaning set forth in Section 3.01.

“Exchange” has the meaning set forth in first recital of this Agreement.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Exchange Consideration” has the meaning set forth in Section 2.02.

 “Exchanges” means the Exchange and the Other Exchanges. The Exchanges are related transactions involving the assignment of property to Parent in exchange for common or preferred stock of Parent as part of an overall plan to capitalize Parent, and for federal income tax purposes, it is intended that the Mergers and the Exchanges shall qualify as exchanges under the provisions of Section 351 of the IRC.

“Financial Statements” has the meaning set forth in Section 4.06.

“GAAP” means has the meaning set forth in Section 5.06.

“Governing Documents” means, with respect to any business entity, all documents by which such entity established its legal existence, was authorized to conduct business in its jurisdiction of organization or which govern its internal affairs, including, without limitation, its articles of incorporation, articles of organization, limited partnership agreement, operating agreement, limited liability company agreement, bylaws and any other governing document, as applicable, of such entity.

“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“Hazardous Materials” means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation, and polychlorinated biphenyls.

“HSR Act” means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended.

“Hydrocarbons” means oil, natural gas, condensate, liquefied natural gas, NGL and other liquids or gaseous hydrocarbons or other substances (including minerals) produced or associated therewith, combinations or constituents thereof and extractions therefrom.

“Indebtedness” means, with respect to a Person and without duplication, all (a) indebtedness for borrowed money; (b) obligations for the deferred purchase price of property or services, (c) long or short-term obligations evidenced by notes, bonds, debentures or other similar instruments; (d) obligations under any interest rate, currency swap or other hedging agreement or arrangement; (e) capital lease obligations; (f) reimbursement obligations under any letter of credit, banker’s acceptance or similar credit transactions; (g) guarantees made by such Person on behalf of any third party in respect of obligations of the kind referred to in the foregoing clauses (a) through (f); and (h) any unpaid interest, prepayment penalties, premiums, costs and fees that would arise or become due as a result of the prepayment of any of the obligations referred to in the foregoing clauses (a) through (g).

“Independent Accountant” has the meaning set forth in Section 7.03.

 “Intellectual Property” means all intellectual property and all rights, interests and protections that are associated with, similar to, or required for the exercise of, any of the foregoing, however arising, pursuant to the Laws of any jurisdiction throughout the world, whether registered or unregistered, including any and all: (a) trademarks, service marks, trade names, brand names, logos, trade dress, design rights and other similar designations of source, sponsorship, association or origin, together with the goodwill connected with the use of and symbolized by, and all registrations, applications and renewals for, any of the foregoing; (b) internet domain names, whether or not trademarks, registered in any top-level domain by any authorized private registrar or Governmental Authority, web addresses, web pages, websites and related content, accounts with Twitter, Facebook and other social media companies and the content found thereon and related thereto, and URLs; (c) works of authorship, expressions, designs and design registrations, whether or not copyrightable, including copyrights, author, performer, moral and neighboring rights, and all registrations, applications for registration and renewals of such copyrights; (d) inventions, discoveries, trade secrets, business and technical information and know-how, databases, data collections and other confidential and proprietary information and all rights therein; (e) patents (including all reissues,

divisionals, provisionals, continuations and continuations-in-part, re-examinations, renewals, substitutions and extensions thereof), patent applications, and other patent rights and any other Governmental Authority-issued indicia of invention ownership (including inventor’s certificates, ▇▇▇▇▇ patents and patent utility models); and (f) software and firmware, including data files, source code, object code, application programming interfaces, architecture, files, records, schematics, computerized databases and other related specifications and documentation.

“Interim Balance Sheet” has the meaning set forth in Section 4.06.

“Interim Balance Sheet Date” has the meaning set forth in Section 4.06.

“Interim Financial Statements” has the meaning set forth in Section 4.06.

“IRC” means the U.S. Internal Revenue Code of 1986, as amended.

“Knowledge” means, (i) when used with respect to Matrix, the actual or constructive knowledge of any director or executive officer of Matrix, after reasonable inquiry with any Person directly reporting to any such director or executive officer, (ii) when used with respect to Royale, the actual or constructive knowledge of any director or executive officer of Royale, after reasonable inquiry with any Person directly reporting to any such director or executive officer and (iii) when used with respect to the Corporation, the actual or constructive knowledge of any director or executive officer of the Corporation, after reasonable inquiry with any Person directly reporting to any such director or executive officer.

“Law” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.

“Letter of Intent” has the meaning set forth in Section 6.02(b).

“Letter of Transmittal” has the meaning set forth in Section 8.04

“Liabilities” has the meaning set forth in Section 4.07.

“LP Exchange” means the exchange of all limited partnership interests in the respective Matrix LPs for shares of common stock of Parent concurrently with the consummation of the Matrix Merger.

“LP Exchange Agreement” means the applicable agreement and plan of exchange concerning the exchange of all limited partnership interests of the specified Matrix LP for shares of common stock of Parent concurrently with the consummation of the Matrix Merger.

“Material Contract” means, with respect to a Person, any of the following:

A.	Any Contract that requires future expenditures by such Person in excess of $100,000 in any twelve (12) month period, or that provide for payments to such Person in excess of $100,000;

B.

Each Contract for Leased Real Property and each Contract or other right pursuant to which such Person uses or possesses any Personal Property (other than Personal Property owned by such Person), in each case that provide for aggregate payments by or to such Person in excess of $100,000 during any twelve (12) month period, provided that any such Contracts related to the Matrix Interests (with respect to Matrix) or the Royale Interests (with respect to Royale) need not be listed on the applicable Disclosure Schedule;

C.

Each Contract pursuant to which such Person licenses or uses any Intellectual Property (other than standard licenses for non-custom, commercially available off-the-shelf software, for which the annual amounts owed by such Person do not exceed $5,000 individually), in each case that provide for aggregate payments by such Person in excess of $100,000 during any twelve (12) month period;

D.

Any Contract relating to Indebtedness for borrowed money, any outstanding reimbursement obligation of such Person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such Person or granting a lien on any of such Person’s assets to any Person, in each case in excess of $100,000, other than (i) accounts receivable and payable, and (ii) loans to direct or indirect wholly owned Subsidiaries of such Person;

E.	Any Contract creating or guaranteeing any surety bond in favor of such Person or supporting any of its Contracts or customers, together with a list of each such outstanding surety bond and the amount thereof, in each case in excess of $100,000;

F.

Any Contract with any 5% stockholder, director or executive officer of such Person, or any member of his or her immediate family, or any Affiliate of any of such Persons, including any Contract providing for the furnishing of services by, rental of real or personal property from or otherwise requiring payments to or for the benefit of any such Person;

G.

Any Contract containing any covenant (x) materially limiting the right of such Person to engage in any line of business, make use of any Intellectual Property or compete with any Person in any line of business; (y) granting any exclusive distribution or supply rights; or (z) otherwise restricting, in any material respect, such Person from freely engaging in the business of selling, distributing or manufacturing any products or services;

H.

Any Contract granting an option or first refusal, first offer or similar preferential right to purchase or acquire any of such Person’s assets to any other Person (other than the purchase of inventory pursuant to customer contracts entered into in the ordinary course of business consistent with past practice), in each case that provide for aggregate payments by or to such Person in excess of $100,000 during any twelve (12) month period;

I.	Any Contract pursuant to which payments are required or acceleration of benefits is required upon a change of control of such Person or similar event, in each case that provide for aggregate payments by or to such Person in excess of $100,000 during any twelve (12) month period;

J.

Any Contract that is material to such Person or any of its assets and that requires the consent or waiver of a third party prior to such Person consummating the transactions contemplated hereby, in each case that provide for aggregate payments by or to such Person in excess of $100,000 during any twelve (12) month period; or

K.	Any Contract that constitutes a partnership or joint venture agreement (excluding any tax partnership).

“Matrix” has the meaning set forth in the recitals.

“Matrix Board” means the board of directors of Matrix.

“Matrix Common Stock” means the common stock, no par value per share, of Matrix, including all shares common stock into which outstanding shares of Matrix’s preferred stock are convertible and which are issuable upon exercise outstanding warrants and options to purchase Matrix’s common stock.

“Matrix Consolidated Entities” has the meaning set forth in Section 4.06.

“Matrix Disclosure Schedules” means the Disclosure Schedules submitted by or on behalf of the Shareholders regarding the Corporation and the other Matrix Consolidated Entities (if applicable) in connection with this Agreement.

“Matrix Interests” means, with respect to Matrix and its Subsidiaries and the Matrix LPs (a) direct and indirect interests in and rights with respect to Hydrocarbons and related properties and assets of any kind and nature, direct or indirect, including working and leasehold interests and operating rights and royalties, overriding royalties, production payments, net profit interests, carried interests, and other non-working interests and non-operating interests in the oil, gas and mineral fee or leasehold estate; (b) all  rights with respect to Hydrocarbons or revenues therefrom; (c) all Contracts in connection therewith and the leasehold estates created thereby and the lands covered by the Contracts relating to the Hydrocarbons or included in units with which such Contracts may have been pooled or united; (d) surface interests, fee interests, reversionary interests, reservations and concessions; (e) all easements, surface use agreements, rights of way, licenses and permits, in each case, in connection with leases, the drilling of ▇▇▇▇▇ or the processing, storage, disposition, transportation or sale of Hydrocarbons, (f) all interests in machinery, equipment (including ▇▇▇▇▇, well equipment and machinery), oil and gas production, gathering, transmission, treating, processing and storage facilities (including tanks, tank batteries, pipelines, flow lines, gathering systems and metering equipment) pumps, water plants, electric plants, gasoline and gas

platforms, processing plans, compressor stations, separation plants, refineries, testing and monitoring equipment, in each case, in connection with any leases, the drilling of ▇▇▇▇▇ or the production, gathering, processing, storage, disposition, transportation or sale of Hydrocarbons, and (g) all other interests of any kind or character associated with, appurtenant to, or necessary for the operation of any of the foregoing.

“Matrix Investments LP Exchange Agreement” has the meaning set forth in the definition of “Ancillary Documents”.

“Matrix Las Cienegas LP Exchange Agreement” has the meaning set forth in the definition of “Ancillary Documents”.

“Matrix LP Exchange Consideration” means the aggregate number of shares of Parent Common Stock the Matrix LP Holders will receive pursuant to the LP Exchange Agreements.

 “Matrix LP Holders” means the holders of all limited partnership interests of the Matrix LPs.

“Matrix LPs” means, collectively, Matrix Investments L.P., a California limited partnership, Matrix Las Cienegas Limited Partnership, a California limited partnership, and Matrix Permian Investments, LP, a Texas limited partnership.

“Matrix Merger” has the meaning set forth in the recitals.

“Matrix Merger Consideration” means the number of shares of Parent Common Stock into which Matrix common stock converts in connection with the Matrix Merger determined in accordance with the Merger Agreement.

“Matrix Merger Effective Time” means the time the Matrix Merger shall become effective as such certificates of merger have been duly filed with the Secretary of State of the State of California and the Secretary of State of the State of Delaware, respectively, or at such later date or time as may be agreed by Matrix and Royale in writing and specified in the respective certificates of merger in accordance with the requirements of the CCC and DGCL.

“Matrix Merger Sub” has the meaning set forth in the recitals.

“Matrix Merger Sub Shares” has the meaning set forth in Section 5.04(d).

“Matrix Permian LP Exchange Agreement” has the meaning set forth in the definition of “Ancillary Documents”.

 “Matrix Pipeline” has the meaning set forth in Section 4.06.

“Matrix Royalty” has the meaning set forth in Section 4.06.

“Matrix Senior Indebtedness” has the meaning set forth in Section 6.17.

“Matrix Shares” means shares of capital stock of Matrix Oil Management Corporation, a California corporation.

“Matrix Stockholder” means a holder of Matrix Common Stock.

“Mergers” means, collectively, the Matrix Merger and the Royale Merger.

“Merger Agreement” means the Agreement and Plan of Merger dated as of [______], 2016, among the Royale Parties and Matrix.

“Other Exchanges” means (i) the exchange of Parent Common Stock for (A) all limited partnership interests of Matrix Las Cienegas Limited Partnership pursuant to the Matrix Las Cienegas LP Exchange Agreement, (B) all limited partnership interests of Matrix Permian Investments, LP pursuant to the Matrix Permian LP Exchange Agreement, (C) all limited partnership interests of Matrix Investments L.P. pursuant to the Matrix Investments LP Exchange Agreement, and (ii) the exchange of all Series B Preferred Stock for all subordinated notes of Matrix, the Corporation and the Matrix LPs. The Other Exchanges are all of the Exchanges other than the Exchange (which concerns Parent and the Corporation).

“Other Exchange Approvals” means the Requisite Exchange Approvals other than those required for the Exchange.

“Outside Date” has the meaning set forth in Section 9.01.

“Parent” has the meaning set forth in the preamble.

“Parent Common Stock” has the meaning set forth in the recitals.

“Parent Shares” means shares of capital stock of Royale Energy Holdings, Inc., a Delaware corporation.

“Parent Stockholder” means a holder of Parent Common Stock or Series B Preferred Stock.

“Percentage Interest” means, at any time, the percentage of the aggregate Transferred Stock held by any holder as determined by the Corporation in accordance with the Corporation Charter Documents.

“Permitted Liens” means (a) statutory liens for current Taxes or other governmental charges not yet due and payable or the amount or validity of which is being contested in good faith (provided appropriate reserves required pursuant to GAAP have been made in respect thereof), (b) mechanics’, carriers’, workers’, repairers’ and similar statutory liens arising or incurred in the ordinary course of business for amounts which are not delinquent or which are being contested by appropriate proceedings (provided appropriate reserves required pursuant to GAAP have been made in respect thereof), (c) zoning, entitlement, building and other land use regulations imposed by Governmental Entities having jurisdiction over such Person’s owned or leased real property, which are not violated by the current use and operation of such real property, (d) covenants, conditions, restrictions, easements and other similar non-monetary matters of record affecting title to such Person’s owned or leased real property, which do not materially impair the occupancy or use of such real property for the purposes for which it is currently used in connection with such Person’s

businesses, (e) any right of way or easement related to public roads and highways, which do not materially impair the occupancy or use of such real property for the purposes for which it is currently used in connection with such Person’s businesses, (f) liens securing capital lease obligations, equipment leases or other purchase money Indebtedness, provided that the obligations secured by such lien are secured only by the property leased or purchased under such capital lease, equipment lease or purchase money Indebtedness and such obligations are not increased in amount, (g) liens to operators and non-operators under joint operating agreements, unitization and pooling agreements arising in the ordinary course of the business to secure amounts owing, which amounts are not yet due or are being contested in good faith by appropriate proceedings, provided that such reserve as may be required by GAAP shall have been made therefor and that, despite the existence of such reserves, to the extent that any such liens relate to the Matrix Interests, with respect to Matrix, or the Royale Interests, with respect to Royale, such liens would not be reasonably be expected to materially impair the use of, or proceeds derived from, such Matrix Interests or Royale Interests, as applicable, (h) Production Burdens, and (i) liens arising under workers’ compensation, unemployment insurance, social security, retirement and similar legislation.

“Permits” means all permits, licenses, franchises, approvals, authorizations, registrations, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Authorities.

“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

“Pre-Closing Taxes” means Taxes of Matrix for any pre-closing Tax period.

“Production Burden” means all royalty interests, overriding royalty interests, production payments, net profit interests or other similar interests that constitute a burden on, and are measure by or are payable out of, the production of Hydrocarbons or the proceeds realized from the sale or other disposition thereof.

“Property Interests” means, with respect to Matrix and its Subsidiaries and the Matrix LPs (a) direct and indirect interests in and rights with respect to Hydrocarbons and related properties and assets of any kind and nature, direct or indirect, including working and leasehold interests and operating rights and royalties, overriding royalties, production payments, net profit interests, carried interests, and other non-working interests and non-operating interests in the oil, gas and mineral fee or leasehold estate; (b) all  rights with respect to Hydrocarbons or revenues therefrom; (c) all Contracts in connection therewith and the leasehold estates created thereby and the lands covered by the Contracts relating to the Hydrocarbons or included in units with which such Contracts may have been pooled or united; (d) surface interests, fee interests, reversionary interests, reservations and concessions; (e) all easements, surface use agreements, rights of way, licenses and permits, in each case, in connection with leases, the drilling of ▇▇▇▇▇ or the processing, storage, disposition, transportation or sale of Hydrocarbons, (f) all interests in machinery, equipment (including ▇▇▇▇▇, well equipment and machinery), oil and gas production, gathering, transmission, treating, processing and storage facilities (including tanks, tank batteries, pipelines, flow lines, gathering systems and metering equipment) pumps, water plants, electric plants, gasoline and gas

platforms, processing plans, compressor stations, separation plants, refineries, testing and monitoring equipment, in each case, in connection with any leases, the drilling of ▇▇▇▇▇ or the production, gathering, processing, storage, disposition, transportation or sale of Hydrocarbons, and (g) all other interests of any kind or character associated with, appurtenant to, or necessary for the operation of any of the foregoing.

“Proxy Statement/Prospectus” means the filing with the SEC of Royale’s proxy statement relating to a special meeting of the Royale shareholders to consider and vote on this Agreement and the transactions contemplated in the Merger Agreement.

“Registration Statement” means a registration statement on Form S-4 under the Securities Act filed by Royale on behalf of Parent, with respect to the transactions contemplated in the Merger Agreement.

“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

“Requisite Exchange Approvals” mean, in the case of consummation of the Merger, receipt of the Requisite Matrix Vote, and with respect to the Exchanges, all consents, approvals or waivers required from the Matrix LP Holders, the Shareholders, the respective general partners of each Matrix LP and the holders of subordinated notes of Matrix, the Corporation and the Matrix LPs, to consummate each of the respective Exchanges.

“Requisite Matrix Vote” has the meaning set forth in Section 4.02(a).

“Requisite Royale Vote” has the meaning set forth in Section 5.02(a).

“Requisite Shareholders’ Consent” has the meaning set forth in Section 6.04.

 “Right of Way” is defined in Section 4.10.

“Royale” has the meaning set forth in the preamble.

“Royale Benefit Plans” has the meaning set forth in Section 5.16.

“Royale Charter Documents” means the Governing Documents of each of the Royale Parties, respectively.

“Royale Common Stock” means the common stock, no par value per share, of Royale, including all shares of common stock into which outstanding shares of Royale’s preferred stock are convertible and which are issuable upon exercise outstanding warrants and options to purchase Royale’s common stock.

“Royale Convertible Notes” has the meaning set forth in Section 8.03.

“Royale Disclosure Schedules” means the Disclosure Schedules submitted by or on behalf of the Royale and Parent regarding the Royale Parties in connection with this Agreement.

“Royale Financial Statements” has the meaning set forth in Section 5.06.

“Royale Insurance Policies” has the meaning set forth in Section 5.12.

“Royale Intellectual Property” means all Intellectual Property that is owned or held for use by Royale.

“Royale Interests” means, with respect to Royale and its Subsidiaries (a) direct and indirect interests in and rights with respect to Hydrocarbons and related properties and assets of any kind and nature, direct or indirect, including working and leasehold interests and operating rights and royalties, overriding royalties, production payments, net profit interests, carried interests, and other non-working interests and non-operating interests in the oil, gas and mineral fee or leasehold estate; (b) all rights with respect to Hydrocarbons or revenues therefrom; (c) all Contracts in connection therewith and the leasehold estates created thereby and the lands covered by the Contracts relating to the Hydrocarbons or included in units with which such Contracts may have been pooled or united; (d) surface interests, fee interests, reversionary interests, reservations and concessions; (e) all easements, surface use agreements, rights of way, licenses and permits, in each case, in connection with leases, the drilling of ▇▇▇▇▇ or the processing, storage, disposition, transportation or sale of Hydrocarbons, (f) all interests in machinery, equipment (including ▇▇▇▇▇, well equipment and machinery), oil and gas production, gathering, transmission, treating, processing and storage facilities (including tanks, tank batteries, pipelines, flow lines, gathering systems and metering equipment) pumps, water plants, electric plants, gasoline and gas platforms, processing plans, compressor stations, separation plants, refineries, testing and monitoring equipment, in each case, in connection with any leases, the drilling of ▇▇▇▇▇ or the production, gathering, processing, storage, disposition, transportation or sale of Hydrocarbons, and (g) all other interests of any kind or character associated with, appurtenant to, or necessary for the operation of any of the foregoing.

“Royale IP Registrations” means all Royale Intellectual Property that is subject to any issuance registration, application or other filing by, to or with any Governmental Authority or authorized private registrar in any jurisdiction, including registered trademarks, domain names and copyrights, issued and reissued patents and pending applications for any of the foregoing.

“Royale Material Adverse Effect” means any event, occurrence, fact, condition or change that is, or would reasonably be expected to become, individually or in the aggregate, materially adverse to (i) the business, results of operations, prospects, condition (financial or otherwise), or assets of  the Royale Parties, taken as a whole, or (ii) the ability of the Royale Parties to consummate the transactions contemplated hereby on a timely basis; provided, however, that, for the purposes of clause (i), a Royale Material Adverse Effect shall not be deemed to include events, occurrences, facts, conditions or changes arising out of, relating to or resulting from: (a) changes generally affecting the economy, financial or securities markets; (b) the announcement of the transactions contemplated by this Agreement; (c) any outbreak or escalation of war or any act of terrorism; (d) changes in the price or trading volume of Royale Common Stock; or (e) general conditions in the industry in which the Royale Parties operate; provided further, however, that any event, change and effect referred to in clauses (a), (c) or (d) immediately above shall be taken into account in determining whether a Royale Material Adverse Effect has occurred or would reasonably be expected to occur to the extent that such event, change or effect has a disproportionate effect on the Royale Parties, taken as a whole, compared to other participants in the industries in which Royale Parties conduct their businesses.

“Royale Merger” means Royale Merger Sub shall be merged with and into Royale with Royale as the surviving corporation and a wholly-owned Subsidiary of Parent.

“Royale Merger Consideration” means the number of shares of Parent Common Stock into which Royale Common Stock converts in connection with the Royale Merger determined in accordance with the Merger Agreement.

 “Royale Merger Effective Time” means the time the Royale Merger shall become effective as such certificates of merger have been duly filed with the Secretary of State of the State of California and the Secretary of State of the State of Delaware, respectively, or at such later date or time as may be agreed by Matrix and Royale in writing and specified in the respective certificates of merger in accordance with the requirements of the CCC and DGCL.

“Royale Merger Sub” means Royale Merger Sub, Inc., a California corporation and direct, wholly-owned Subsidiary of Parent.

“Royale Merger Sub Shares” has the meaning set forth in Section 5.04(c).

“Royale Parties” means Royale, Parent, Royale Merger Sub, Inc., a California corporation and a direct, wholly-owned Subsidiary of Parent and Matrix Merger Sub, Inc., a California corporation and a direct, wholly-owned Subsidiary of Parent, together with each of their respective Subsidiaries.

“Royale Preferred Stock” means the Series AA Convertible Preferred Stock of Royale.

“Royale Shares” means shares of capital stock of Royale Energy, Inc. a California corporation.

“Royale Stockholder” means a holder of Royale Common Stock or Royale Preferred Stock.

“Royale Stockholders Meeting” has the meaning set forth in Section 6.03(d).

“SEC” has the meaning set forth in Section 6.03.

“SEC Reports” has the meaning set forth in Section 5.06.

“Securities Act” means the Securities Act of 1933, as amended.

“Section 351 Plan” means the Section 351 Plan of Merger and Exchange in the form attached hereto as Exhibit E.

“Series B Preferred Stock” means Series B 3.5% Convertible Preferred Stock of Parent.

“Shares” means Royale Shares or Matrix Shares or shares of capital stock of any Constituent Corporation as the context may require.

“Shareholder Related Document” has the meaning set forth in Section 4.02.

“Shareholder Representative” has the meaning set forth in Section 7.03.

“Shareholders” has the meaning set forth in the preamble.

 “Stockholder” means a Matrix Stockholder, a Royale Stockholder or a Parent Stockholder, as the context shall require.

“Straddle Period” has the meaning set forth in Section 7.04.

“Subsidiary” means, when used with respect to any party, any corporation or other organization, whether incorporated or unincorporated, a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by any one or more of its subsidiaries, or by such party and one or more of its subsidiaries.

“Tax Claim” has the meaning set forth in Section 7.05.

“Taxes” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.

“Tax Return” means any return, declaration, report, claim for refund, information return or statement or other document relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“TBOC” means the Texas Business Organizations Code, as amended from time to time.

“Transferred Stock” has the meaning set forth in Section 2.01.

“Union” has the meaning set forth in Section 4.19(b).

ARTICLE II
Agreement For Exchange; Closing

ARTICLE III
Escrow; Closing

Agent to release the escrowed documents from escrow to the parties designated to receive such documents under the Escrow Agreement, and Parent shall pay and deliver the Exchange Consideration to the Shareholders as prescribed in this Agreement.

ARTICLE IV
Representations And Warranties Of The Shareholders

Each Shareholder separately, and with respect only to his matters and circumstances, hereby represents and warrants to Royale and the Parent that the following statements are true and correct.

Corporation Related Document to which the Corporation is or will be a party has been duly executed and delivered by the Corporation (assuming due authorization, execution and delivery by each other party thereto), such Corporation Related Document will constitute a legal and binding obligation of the Corporation enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at Law or in equity).

notice to, any Governmental Authority is required by or with respect to the Corporation or any Shareholder in connection with the execution, delivery and performance of this Agreement, the Corporation Related Documents and the Shareholder Related Documents, or in connection with the consummation of the transactions contemplated hereby and thereby.

impairments that have not had and would not reasonably be expected to have a Corporation Material Adverse Effect.  All pipelines owned or operated by the Corporation are subject to Rights of Way, there are no encroachments or other encumbrances on the Rights of Way that materially affect the use thereof and there are no gaps (including any gap arising as a result of any breach by the Corporation, the Matrix LPs, Matrix or any of its Subsidiaries of the terms of any Rights of Way) in the Rights of Way other than gaps that would not have and would not reasonably be expected to have a Corporation Material Adverse Effect.

a Corporation Material Adverse Effect. None of the Interests of the Corporation or its Subsidiaries is subject to any preferential purchase, consent or similar right that would become operative as a result of the Transactions, except for any such preferential purchase, consent or similar rights that would not reasonably be expected to have a Corporation Material Adverse Effect.  Except as set forth on Section 4.10(e) of Disclosure Schedules, none of the Property Interests are subject to any Tax partnership agreement or provisions requiring a partnership income Tax Return.

understanding, whether written or oral, with any trade union, works council or other employee representative body or any number or category of its employees that would prevent, restrict or impede the implementation of any layoff, redundancy, severance or similar program within its or their respective workforces (or any part of them).

(i) To the Knowledge of the Corporation, there have been no “prohibited transaction,” as such term is defined in Section 406 of ERISA or Section 4975 of the IRC, with respect to any such Corporation Benefit Plan that would subject the Corporation or any ERISA Affiliate to a tax or penalty imposed pursuant to Section 4975 of the IRC or Section 502(c), (i) or (l) of ERISA.

(ii) Neither the Corporation nor, to the Knowledge of the Corporation, any ERISA Affiliate (by way of indemnification, directly or otherwise) has any liability or penalty under Sections 4976 through 4980 of the IRC or Title I of ERISA with respect to any Corporation Benefit Plan.

(iii) No action, suit, proceeding, hearing or investigation with respect to the administration or the investment of the assets of any Corporation Benefit Plan (other than routine claims for benefits) is pending or, to the Knowledge of the Corporation, threatened, and to the Knowledge of the Corporation, there is no basis for any such action, suit, proceeding, hearing or investigation, except, in each case, as would not reasonably be expected to have a Corporation Material Adverse Effect.

(iv) Neither the execution and delivery of this Agreement or any other Transaction Document to which the Corporation is a party nor the Matrix Merger will (i) result in any payment (including severance, unemployment compensation, golden parachute, bonus or otherwise) becoming due to any officer, director or employee of the Corporation; (ii) materially increase any benefits otherwise payable by the Corporation; or (iii) result in the acceleration of the time of payment or vesting of any such benefits.

(v) No Corporation Benefit Plan is funded with or allows for payments or distributions in any employer security of the Corporation, including, but not limited to, employer securities as defined in Section 407(d)(1) of ERISA, or employer real property as defined in Section 407(d)(2) or ERISA.

(i) “Employee Benefit Plan” means, with respect to any Person, the following, whether written or oral:  (A) any nonqualified deferred compensation or retirement plan or arrangement that is an Employee Pension Benefit Plan, (B) any qualified defined contribution retirement plan or arrangement that is an Employee Pension Benefit Plan, (C) any qualified defined benefit retirement plan or arrangement that is an Employee Pension Benefit Plan, (D) any Employee Welfare Benefit Plan or fringe benefit plan or program, or (E) any profit sharing, bonus, stock option, stock purchase, severance or incentive plan, agreement or arrangement that is sponsored, maintained or contributed to by such Person or any ERISA Affiliate of such Person for the benefit of the employees, former employees, independent contractors or agents of such Person or any ERISA Affiliate or has been so sponsored, maintained or contributed to at any time prior to the Closing Date.

(ii) “Employee Pension Benefit Plan” has the meaning set forth in Section 3(2) of ERISA.

(iii) “Employee Welfare Benefit Plan” has the meaning set forth in Section 3(1) of ERISA.

as independent contractors under all applicable Laws, except as would not reasonably be expected to have a Corporation Material Adverse Effect. All employees of the Corporation classified as exempt under the Fair Labor Standards Act and state and local wage and hour laws are properly classified, except as would not reasonably be expected to have a Corporation Material Adverse Effect. Except as set forth in Section 4.20(c) of the Disclosure Schedules, there are no Actions against the Corporation pending, or to the Corporation’s Knowledge, threatened to be brought or filed, by or with any Governmental Authority or arbitrator in connection with the employment of any current or former applicant, employee, consultant or independent contractor of the Corporation, including, without limitation, any claim relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay, wage and hours or any other employment-related matter arising under applicable Laws.

(i) the taxable years of the Corporation as to which the applicable statutes of limitations on the assessment and collection of Taxes have not expired;

(ii) those years for which examinations by the taxing authorities have been completed; and

(iii) those taxable years for which examinations by taxing authorities are presently being conducted.

(i) any change in a method of accounting under Section 481 of the IRC (or any comparable provision of state, local or foreign Tax Laws), or use of an improper method of accounting, for a taxable period ending on or prior to the Closing Date;

(ii) an installment sale or open transaction occurring on or prior to the Closing Date;

(iii) a prepaid amount received on or before the Closing Date;

(iv) any closing agreement under Section 7121 of the IRC, or similar provision of state, local or foreign Law; or

(v) any election under Section 108(i) of the IRC.

ARTICLE V
Representations and Warranties of Royale and the Parent

Except as set forth in the correspondingly numbered Section of the Royale Disclosure Schedules, Royale and Parent, jointly and severally represent and warrant to the Shareholders that the statements contained in this are true and correct as of the date hereof.

(i) To the Knowledge of each Royale Party, there have been no “prohibited transaction,” as such term is defined in Section 406 of ERISA or Section 4975 of the IRC, with respect to any such Royale Benefit Plan that would subject any Royale Party or ERISA Affiliate to a tax or penalty imposed pursuant to Section 4975 of the IRC or Section 502(c), (i) or (l) of ERISA.

(ii) No Royale Party nor, to the Knowledge of any Royale Party, any ERISA Affiliate (by way of indemnification, directly or otherwise) has any liability or penalty under Sections 4976 through 4980 of the IRC or Title I of ERISA with respect to any Royale Benefit Plan.

(iii) No action, suit, proceeding, hearing or investigation with respect to the administration or the investment of the assets of any Royale Benefit Plan (other than routine claims for benefits) is pending or, to the Knowledge of any Royale Party, threatened, and to the Knowledge of any Royale Party, there is no basis for any such action, suit, proceeding, hearing or investigation, except, in each case, as would not reasonably be expected to have a Royale Material Adverse Effect.

(i) the taxable years of  Royale as to which the applicable statutes of limitations on the assessment and collection of Taxes have not expired;

(ii) those years for which examinations by the taxing authorities have been completed; and

(iii) those taxable years for which examinations by taxing authorities are presently being conducted.

(i) any change in a method of accounting under Section 481 of the IRC (or any comparable provision of state, local or foreign Tax Laws), or use of an improper method of accounting, for a taxable period ending on or prior to the Closing Date;

(ii) an installment sale or open transaction occurring on or prior to the Closing Date;

(iii) a prepaid amount received on or before the Closing Date;

(iv) any closing agreement under Section 7121 of the IRC, or similar provision of state, local or foreign Law; or

(v) any election under Section 108(i) of the IRC.

ARTICLE VI
Certain Covenants and Agreements of Parent, Royale and the Shareholders

The Corporation and the Shareholders further agree with Parent and Royale, and Royale and Parent further agree with the Corporation and the Shareholders, that from the date hereof through the Closing Date:

(i) any fact, circumstance, event or action the existence, occurrence or taking of which (A) has had, or could reasonably be expected to have, individually or in the aggregate, a Corporation Material Adverse Effect, (B) has resulted in, or could reasonably be expected to result in, any representation or warranty made by the Shareholders hereunder not being true and correct, or (C) has resulted in, or could reasonably be expected to result in, the failure of any of the conditions set forth in Section 8.01 or 8.02 to be satisfied;

(ii) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

(iii) any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; and

(iv) any Actions commenced or, to Matrix’s Knowledge, threatened against, relating to or involving or otherwise affecting Matrix that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to would have been required to have been disclosed pursuant to Section 4.16 or that relates to the consummation of the transactions contemplated by this Agreement.

(i) any fact, circumstance, event or action the existence, occurrence or taking of which (A) has had, or could reasonably be expected to have, individually or in the aggregate, a Royale Material Adverse Effect, (B) has resulted in, or could reasonably be expected to result in, any representation or warranty made by any of the Royale Parties hereunder not being true and correct, or (C) has resulted in, or could reasonably be expected to result in, the failure of any of the conditions set forth in Section 8.01 or 8.03 to be satisfied;

(ii) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

(iii) any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; and

(iv) any Actions commenced or, to the Knowledge of any of the Royale Parties, is threatened against, relating to or involving or otherwise affecting any of the Royale Parties that, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 5.13 or that relates to the consummation of the transactions contemplated by this Agreement.

(i) respond to any inquiries by any Governmental Authority regarding antitrust or other matters with respect to the transactions contemplated by this Agreement or any Ancillary Document;

(ii) avoid the imposition of any order or the taking of any action that would restrain, alter or enjoin the transactions contemplated by this Agreement or any Ancillary Document; and

(iii) in the event any Governmental Order adversely affecting the ability of the parties to consummate the transactions contemplated by this Agreement or any Ancillary Document has been issued, to have such Governmental Order vacated or lifted.

(i) the Matrix Stockholders as the owners of the Matrix Common Stock surrendered by them in the Matrix Merger through the close of the day on which the Matrix Merger Effective Time occurs;

(ii) the Royale Stockholders as the owners of the Royale Shares surrendered by them in the Royale Merger through the close of the day on which the Royale Merger Effective Time occurs;

(iii) the Matrix LP Holders as the owners of their respective limited partnership interests in the Matrix LPs surrendered by them in the LP Exchanges through the close of the Closing Date for the applicable LP Exchange Agreement;

(iv) the Shareholders as the owners of the shares of capital stock of the Corporation surrendered by them in the Exchange through the close of the Closing Date;

(v) each Matrix LP as terminating pursuant to Section 708 of the IRC as of the close of the Closing Date for the applicable LP Exchange Agreement, and

(vi) the Corporation as an S corporation through the close of the Closing Date (on which date its taxable year shall end ), and as a C corporation eligible to join in filing a consolidated federal income tax return with Parent commencing at the beginning of the day following the Closing Date.

The obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:

(i) a certificate, dated the Closing Date and signed by a duly authorized officer of the Corporation that each of the conditions set forth in Section 8.02(a) and Section 8.02(b) have been satisfied;

(ii) a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of the Corporation certifying (1) all resolutions adopted by the Board authorizing the execution, delivery and performance of this Agreement by the Corporation, and consummation of the transactions contemplated hereby, (2) that each of the Shareholders has executed and delivered the Requisite Shareholders’ Consent, (3) that all resolutions of the Board and all authorizations provided by each Shareholder in connection with the Requisite Shareholders’ Consent are in full force and effect without modification or amendment;

(iii) stock certificates representing all of the outstanding Transferred Stock and properly executed and completed Letters of Transmittal with respect thereto, in the form attached to Exhibit D (“Letters of Transmittal”), shall be delivered by the Shareholders to the Escrow Agent.  In addition, the Shareholders shall execute and deliver to Royale, and shall cause the Corporation to execute and deliver to Royale, the documents, certificates, opinions, instruments and agreements required to be executed and delivered by the Corporation or its Shareholders at the Closing as contemplated hereby or as may be reasonably requested by the Parent and shall deliver or cause to be delivered the documents and evidence required under this Agreement.

(iv) a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of the Corporation certifying the names and signatures of the officers of the Corporation authorized to sign this Agreement, the Corporation Related Documents and the other documents to be delivered hereunder and thereunder;

(v) a good standing certificate (or its equivalent) from the secretary of state or similar Governmental Authority of the jurisdiction under the Laws in which the Royale Parties are organized;

(vi) the Section 351 Plan;

(vii) certificates of non-foreign status delivered by each Shareholder of the Corporation under Section 1445 of the IRC; and

(viii) such other documents or instruments as Royale reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.

(i) instructions to Royale’s transfer agent to issue and deliver to the Shareholders the Exchange Consideration to be issued as provided in ARTICLE II;

(ii) instructions to Royale’s transfer agent to issue and deliver to the holders of convertible debt of Matrix the Debt Exchange Consideration;

(iii) evidence that the Matrix Senior Indebtedness shall have been assumed by Parent or paid off as of the Closing Date in accordance with Section 6.17;

(iv) a certificate, dated the Closing Date and signed by a duly authorized officer of each Royale Party, that each of the conditions set forth in Section 8.03(a) and Section 8.03(b) have been satisfied;

(v) a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of the Royale Parties certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors of the Royale Parties authorizing the execution, delivery and performance of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby;

(vi) a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of the Royale Parties certifying the names and signatures of the officers of the Royale Parties authorized to sign this Agreement, the Ancillary Documents and the other documents to be delivered hereunder and thereunder;

(vii) evidence of the establishment of a new Subsidiary and the transfer of all of the assets related to the DWI Business of Royale (including assets held in trust for its investors);

(viii) the Section 351 Plan;

(ix) employment agreements executed by Parent and each of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇,  ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇ Sheevel, all in a form reasonably acceptable to Royale and Matrix;

(x) certificates or other evidence reasonably satisfactory to the Corporation confirming that none of the Royale Stockholders owning more than 5% of the number of shares of Royale Common Stock outstanding immediately before the Royale Merger is a “foreign person” within the meaning of Treasury Regulation § 1445-2(b); and

(xi) such other documents or instruments as the Corporation reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.

This Agreement may be terminated at any time prior to the Closing:

(i) no Royale Party is then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by the Corporation pursuant to this Agreement that would give rise to the failure of any of the conditions specified in ARTICLE VIII and such breach, inaccuracy or failure has not been cured by the Corporation within 30 days of the Corporation’s receipt of written notice of such breach from Royale; or

(ii) any of the conditions set forth in Section 8.01 or Section 8.02 shall not have been fulfilled by March 31, 2017  (the “Outside Date”), or if it becomes impossible or extremely unlikely for any such conditions to be fulfilled by the Outside Date, unless such failure shall be due to the failure of the Royale Parties to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;

(i) the Corporation is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by any Royale Party pursuant to this Agreement that would give rise to the failure of any of the conditions specified in ARTICLE VIII and such breach, inaccuracy or failure has not been cured by such Royale Party within 30 days of Royale’s receipt of written notice of such breach from the Corporation; or

(ii) any of the conditions set forth in Section 8.01 or Section 8.03 shall not have been fulfilled by the Outside Date, or if it becomes impossible or extremely unlikely for any such conditions to be fulfilled by the Outside Date, unless such failure shall be due to the failure of the Corporation to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing; or

(i) the Merger has not been consummated on or before the Outside Date; provided, that the right to terminate this agreement pursuant to this subsection shall not be available to any party whose breach of any representation, warranty, covenant or agreement set forth in this Agreement has been the cause of, or resulted in, the failure of the Closing to be consummated on or before the Outside Date.

(ii) there shall be any Law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited or any Governmental Authority shall have issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable;

(iii) this Agreement has been submitted to the Stockholders of Royale for adoption at a duly convened Royale Stockholders Meeting and the Requisite Royale Vote shall not have been obtained at such meeting (including any adjournment or postponement thereof) or by such written consent;

(iv) this Agreement has been submitted to the Stockholders of Matrix for adoption at a duly convened Matrix Stockholders Meeting (or as a written consent in lieu of such meeting) and the Requisite Matrix Vote shall not have been obtained at such meeting (including any adjournment or postponement thereof); or

(v) this Agreement has been submitted to the Shareholders of the Corporation for adoption and the Requisite Shareholders’ Consent shall not have been obtained at such meeting (including any adjournment or postponement thereof) or by a written consent.

ANY SUCH COURT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, this Agreement and Plan of Exchange has been duly executed and delivered effective as of the date first hereinabove written.

PARENT:


Royale Energy Holdings, Inc.

By_____________________

Name:

Title:

ROYALE:

Royale Energy, Inc.

By__________________________________

Name:

Title:

CORPORATION:

Matrix Oil Corporation

By:_________________________________

Name:

Title:

SHAREHOLDERS:




By:___________________________________

Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇

By:___________________________________

Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇

SHAREHOLDERS (CONT.):

By:___________________________________

Name:  ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇

By:___________________________________

Name: ▇▇▇▇▇▇ ▇▇▇▇▇

LIST OF SHAREHOLDERS

EXCHANGE CONSIDERATION

[Exchange Consideration: Number of shares of Parent Common Stock = Number of Royale shares outstanding on Merger Effective Date x Matrix Group Allocation of Matrix Oil Corporation] [To be completed when Agreement is executed.]

ESCROW AGREEMENT

[To be prepared when Agreement is executed.]

LETTER OF TRANSMITTAL

[To be prepared when Agreement is executed.]

SECTION 351 PLAN OF MERGER AND EXCHANGE

(See attached.)