Exhibit 10.1

 

Execution Version

 

 

PURCHASE AND SALE AGREEMENT

 

BY AND BETWEEN

 

WHITING OIL AND GAS CORPORATION

 

AS SELLER

 

AND

 

BREITBURN OPERATING L.P.

 

AS BUYER

 

EFFECTIVE AS OF APRIL 1, 2013

 

POSTLE AND NE HARDESTY FIELDS

 

TEXAS COUNTY, OKLAHOMA

 

 

 

 

TABLE OF CONTENTS

 

    Page       ARTICLE 1. DEFINITIONS AND REFERENCES 1       1.1 Certain Defined
Terms 1 1.2 References, Titles and Construction 7       ARTICLE 2. PURCHASE AND
SALE 8       2.1 Purchase and Sale 8 2.2 The Assets 8 2.3 Excluded Properties 11
2.4 Effective Time 13 2.5 1031 Exchange 13       ARTICLE 3. PURCHASE PRICE 13  
    3.1 Purchase Price 13 3.2 Deposit 13 3.3 Allocation of the Purchase Price 13
3.4 Adjustments to Purchase Price 14       ARTICLE 4. BUYER’S INSPECTION 16    
  4.1 Access to the Records 16 4.2 Disclaimer 17       ARTICLE 5. TITLE MATTERS
17       5.1 Definitions 17 5.2 Purchase Price Adjustments for Title Defects 21
5.3 Interest Additions 21 5.4 Dispute Resolution 22 5.5 Casualty Loss 22 5.6
Transfer Requirements and Preferential Rights 22 5.7 Personal Property and
Equipment 24       ARTICLE 6. ENVIRONMENTAL MATTERS 24       6.1 Physical Access
to the Assets 24 6.2 Release and Indemnity 24 6.3 Buyer’s Acknowledgment
Concerning Possible Contamination of the Assets 25 6.4 Assumed Environmental
Liabilities 25 6.5 Environmental Defects 25 6.6 Environmental Law 25      
ARTICLE 7. SELLER’S REPRESENTATIONS 26       7.1 Corporate Representations 26
7.2 Capitalization; Ownership; Organizational Documents 27 7.3 Authorization and
Enforceability 27

 

 

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7.4 Liability for Brokers’ Fees 27 7.5 No Bankruptcy 27 7.6 Litigation 27 7.7 No
Liens 27 7.8 Judgments 27 7.9 Compliance with Laws 28 7.10 Material Agreements
28 7.11 Governmental Permits 28 7.12 Hydrocarbon Sales Contracts 28 7.13
Property Costs 28 7.14 Transfer Requirements 28 7.15 Employee Matters 29 7.16
Taxes 29 7.17 Tax Partnerships 29 7.18 Preferential Rights 29 7.19 Disclosures
29       ARTICLE 8. BUYER’S REPRESENTATIONS 29       8.1 Corporate
Representations 29 8.2 Authorization and Enforceability 30 8.3 Liability for
Brokers’ Fees 30 8.4 Litigation 30 8.5 Financial Resources 30 8.6 Securities
Laws, Access to Data and Information 30 8.7 Buyer’s Evaluation 31       ARTICLE
9. COVENANTS AND AGREEMENTS 32       9.1 Covenants and Agreements of Seller 32
9.2 Covenants and Agreements of Buyer 37 9.3 Covenants and Agreements of the
Parties 39 9.4 Employee Matters 41       ARTICLE 10. TAX MATTERS 42       10.1
Certain Definitions 42 10.2 Apportionment of Asset Tax Liability 43 10.3
Calculation of Adjustments for Asset Tax Liabilities 44 10.4 Tax Reports and
Returns; Cooperation 44 10.5 Transfer Taxes 44 10.6 Income Taxes 45      
ARTICLE 11. CONDITIONS PRECEDENT TO CLOSING 45       11.1 Seller’s Conditions
Precedent 45 11.2 Buyer’s Conditions Precedent 46 11.3 Suspense Funds 46      
ARTICLE 12. RIGHT OF TERMINATION AND ABANDONMENT 47       12.1 Liabilities Upon
Termination 47

 

 

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ARTICLE 13. CLOSING 48       13.1 Date of Closing 48 13.2 Place of Closing 48
13.3 Closing Obligations 48       ARTICLE 14. POST-CLOSING OBLIGATIONS 50      
14.1 Post-Closing Adjustments 50 14.2 Records 50 14.3 Operations/Operations
After Closing 50 14.4 Further Assurances 50       ARTICLE 15. ASSUMPTION AND
RETENTION OF OBLIGATIONS AND INDEMNIFICATION 51       15.1 Buyer’s Assumption of
Liabilities and Obligations 51 15.2 Seller’s Retention of Liabilities and
Obligations 51 15.3 Invoices For Property Costs and Proceeds Received After the
Final Settlement Date 51 15.4 Indemnification 52 15.5 Procedure 54 15.6 Dispute
Resolution 55 15.7 No Insurance; Subrogation 55 15.8 Reservation as to
Non-Parties 55 15.9 Express Negligence 56       ARTICLE 16. MISCELLANEOUS 56    
  16.1 Expenses 56 16.2 Notices 56 16.3 Amendments/Waiver 57 16.4 Assignment 57
16.5 Press Releases and Public Announcements 57 16.6 Counterparts/Fax Signatures
57 16.7 Governing Law 57 16.8 Entire Agreement 57 16.9 Knowledge 57 16.10
Binding Effect 57 16.11 Survival 57 16.12 Limitation on Damages 58 16.13 No
Third-Party Beneficiaries 58

 

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EXHIBIT AND SCHEDULE LIST

 

EXHIBITS:       EXHIBIT A Leases EXHIBIT A-I Plant EXHIBIT A-II Hough Pipeline
EXHIBIT A-III Hardesty CO2 Pipeline EXHIBIT B Wells/Units/WI/NRI/Allocated
Values EXHIBIT C Material Agreements EXHIBIT D Seismic Data EXHIBIT E Libby
Ranch Agreements EXHIBIT F Form of Transportation Agreement EXHIBIT G Plant and
Field Office Buildings EXHIBIT H Form of Assignment, Bill of Sale and Conveyance
EXHIBIT I Form of Transition Services Agreement EXHIBIT J Form of CO2 Purchase
and Sale Agreement EXHIBIT K Form of Use and Occupancy Agreement     SCHEDULES:
      Schedule 2.3(m) Inventory Schedule 3.4(b) Cap Ex Budget Schedule 7.7 Liens
Schedule 7.12 Hydrocarbon Sales Contracts Schedule 7.14 Transfer Requirements
Schedule 9.1(b) Asset Workers Schedule 9.1(l) Insurance Schedule 9.2(b)
Instruments Schedule 9.2(d) Waiver Exceptions Schedule 9.2(e) NE Hardesty Field
Development Plan Schedule 16.9 Persons with Knowledge

 

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PURCHASE AND SALE AGREEMENT

 

This Purchase and Sale Agreement (this “Agreement”), dated June 22, 2013, is by
and between Whiting Oil and Gas Corporation, a Delaware corporation, 1700
Broadway, Suite 2300, Denver, Colorado 80290 (“Seller”) and BreitBurn Operating
L.P., a Delaware limited partnership, 515 South Flower Street, Suite 4800, Los
Angeles, California 90071 (“Buyer”). Seller and Buyer may be referred to
individually as a “Party” or collectively as the “Parties.”

 

RECITALS

 

Seller owns and desires to sell its interests in certain oil and gas properties
located in the Postle and NE Hardesty Fields, Texas County, Oklahoma, and
associated assets and rights in Oklahoma, Texas and New Mexico all as more
particularly described in Section 2.2 below.

 

Buyer has conducted and will conduct an independent investigation of the nature
and extent of the Assets (as hereinafter defined) and desires to purchase all of
Seller’s interest in the Assets pursuant to the terms of this Agreement. The
transaction contemplated by this Agreement may be referred to as the
“Transaction.”

 

AGREEMENT

 

In consideration of the mutual promises contained herein, $100 and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Buyer and Seller agree as follows:

 

ARTICLE 1.

DEFINITIONS AND REFERENCES

 

1.1           Certain Defined Terms. When used in this Agreement, the following
terms shall have the respective meanings assigned to them in this Section 1.1 or
in the subsections or other subdivisions referenced to below:

 

“Acquired Entities” has the meaning assigned to such term in Section 2.2(k).

 

“Action” means any action, suit, claim, audit, proceeding, investigation,
inquiry or condemnation by or before any Governmental Authority or any
arbitration proceeding.

 

“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly controls, is controlled by or is under common control with such
Person. For purposes of the immediately preceding sentence, the term “control”
(including, with correlative meanings, the terms “controlling,” “controlled by”
and “under common control with”), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise.

 

“Agreement” has the meaning assigned to such term in the first paragraph hereof.

 

 

 

 

“Allocated Value” has the meaning assigned to such term in Section 3.3.

 

“Annual Special Financial Statements” has the meaning assigned to such term in
Section 9.1(f)(i).

 

“Arbitrators” has the meaning assigned to such term in Section 15.6.

 

“Asset Taxes” has the meaning assigned to such term in Section 10.1(a).

 

“Asset Workers” has the meaning assigned to such term in Section 9.1(b)(iii).

 

“Assets” has the meaning assigned to such term in Section 2.2.

 

“Assumed Environmental Liabilities” has the meaning assigned to such term in
Section 6.4.

 

“Assumed Liabilities” has the meaning assigned to such term in Section 15.1.

 

“Audited Special Financial Statements” has the meaning assigned to such term in
Section 9.1(f)(iii).

 

“Buyer” has the meaning assigned to such term in the first paragraph hereof.

 

“Buyer Employer” has the meaning assigned to such term in Section 9.4(a).

 

“Buyer’s Representatives” has the meaning assigned to such term in Section 4.1.

 

“Cap Ex Budget” means the estimated budget for the Libby Ranch Project and other
capital projects as set forth on Schedule 3.4(b).

 

“Casualty Loss” has the meaning assigned to such term in Section 5.5(b).

 

“Celero PSA” has the meaning assigned to such term in Section 6.5.

 

“Chaparral” has the meaning assigned to such term in Section 9.2(e)(ii).

 

“Claim” has the meaning assigned to such term in Section 15.5(c).

 

“Claim Notice” has the meaning assigned to such term in Section 15.5(b).

 

“Closing” and “Closing Date” have the meanings assigned to such terms in Section
13.1.

 

“Closing Amount” has the meaning assigned to such term in Section 3.4(a).

 

“CO2 Purchase and Sale Agreement” has the meaning assigned to such term in
Section 9.1(e).

 

“Code” has the meaning assigned to such term in Section 2.5.

 

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“Confidentiality Agreement” has the meaning assigned to such term in Section
9.3(a).

 

“Conveyance” has the meaning assigned to such term in Section 13.3(a).

 

“Cure Period” has the meaning assigned to such term in Section 5.2(b)(ii).

 

“Defensible Title” has the meaning assigned to such term in Section 5.1(a).

 

“Deposit” has the meaning assigned to such term in Section 3.2.

 

“Designated Employees” has the meaning assigned to such term in Section 9.4(a).

 

“Disputes” has the meaning assigned to such term in Section 15.6.

 

“DOJ” has the meaning assigned to such term in Section 9.3(f).

 

“Effective Time” has the meaning assigned to such term in Section 2.4.

 

“Environmental Deductible” has the meaning assigned to such term in Section
6.4(a) of the Celero PSA as modified pursuant to Section 6.5(c).

 

“Environmental Defects” has the meaning assigned to such term in Section 6.1 of
the Celero PSA as modified pursuant to Section 6.5(b).

 

“Environmental Inspection” has the meaning assigned to such term in Section 6.1.

 

“Environmental Law” and “Environmental Laws” have the meanings assigned to such
terms in Section 6.6.

 

“ERISA” has the meaning assigned to such term in Section 7.15.

 

“Exchange Act” has the meaning assigned to such term in Section 9.1(f)(iii).

 

“Excluded Asset” has the meaning assigned to such term in Section 2.3.

 

“Exclusion Adjustment” has the meaning assigned to such term in Section 5.6(a).

 

“Facilities” means the Assets described in Sections 2.2(c), 2.2(g), 2.2(i) and
2.2(j).

 

“Final Purchase Price” has the meaning assigned to such term in Section 14.1(a).

 

“Final Settlement Date” has the meaning assigned to such term in Section
14.1(a).

 

“Final Settlement Statement” has the meaning assigned to such term in Section
14.1(a).

 

“FTC” has the meaning assigned to such term in Section 9.3(f).

 

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“Governmental Authority” means any national, state, local, native or tribal
government or any subdivision, agency, court, commission, department, board,
bureau, regulatory or administrative or other division or instrumentality
thereof.

 

“Hardesty CO2 Pipeline” has the meaning assigned to such term in Section 2.2(j).

 

“Hardesty Receivables” has the meaning assigned to such term in Section
9.2(e)(i).

 

“Hardesty Unit Agreement” has the meaning assigned to such term in Section
9.2(e)(i).

 

“Hough Pipeline” has the meaning assigned to such term in Section 2.2(i).

 

“HSR Act” has the meaning assigned to such term in Section 9.3(f).

 

“Hydrocarbons” has the meaning assigned to such term in Section 2.2(a).

 

“Income Taxes” has the meaning assigned to such term in Section 10.1(b).

 

“Indemnified Party” and “Indemnifying Party” have the meanings assigned to such
terms in Section 15.5(b).

 

“Information” has the meaning assigned to such term in Section 9.3(a).

 

“Instruments” has the meaning assigned to such term in Section 9.2(b).

 

“Interest Addition” has the meaning assigned to such term in Section 5.3.

 

“Interest Addition Value” has the meaning assigned to such term in Section 5.3.

 

“Interim Special Financial Statements” has the meaning assigned to such term in
Section 9.1(f)(i).

 

“JOA” has the meaning assigned to such term in Section 3.4(b).

 

“Knowledge” has the meaning assigned to such term in Section 16.9.

 

“Lands” has the meaning assigned to such term in Section 2.2(a).

 

“Laws” means any and all applicable statutes, laws, ordinances, regulations,
rules, rulings, orders, restrictions, requirements, writs, injunctions, decrees
or other official acts of or by any Governmental Authority.

 

“Leases” has the meaning assigned to such term in Section 2.2(a).

 

“Libby Lateral” has the meaning assigned to such term in Section 2.2(m).

 

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“Libby Ranch Project” means the Whiting Facilities as such term is defined in
that certain Agreement for the Construction, Ownership and operation of the
Libby Ranch Facilities dated as of June 27, 2012 between Seller and Reliant and
all rights under the agreements listed in Exhibit E.

 

“Lien” means any of the following: mortgage, lien (statutory or other), other
security agreement, arrangement or interest, hypothecation, pledge or other
deposit arrangement, assignment, charge, levy, executory seizure, attachment,
garnishment, encumbrance (including any easement, exception, reservation or
limitation, right of way, and the like), conditional sale, title retention,
voting agreement or other similar agreement, arrangement, device or restriction,
preemptive or similar right, the filing of any financial statement under the
Uniform Commercial Code or comparable Laws of any jurisdiction, or any option,
equity, claim (including any adverse claim to title) or right of or obligation
to any other Person of whatever kind and character.

 

“Like-Kind Exchange” has the meaning assigned to such term in Section 2.5.

 

“Limited Partnership” means Transpetco Pipeline Company, L.P.

 

“Losses” has the meaning assigned to such term in Section 15.4.

 

“Material Agreements” has the meaning assigned to such term in Section 7.10.

 

“Net Casualty Loss” has the meaning assigned to such term in Section 5.5(b).

 

“NORM” has the meaning assigned to such term in Section 6.3.

 

“Notice of Title Defects” has the meaning assigned to such term in Section
5.2(a).

 

“NRI” has the meaning assigned to such term in Section 5.1(a)(i).

 

“Oil and Gas Assets” has the meaning assigned to such term in Section 5.1(a)(i).

 

“Operator Fee” has the meaning assigned to such term in Section 3.4(b).

 

“Organizational Documents” means, with respect to any Person, the articles of
incorporation, certificate of incorporation, certificate of formation,
certificate of limited partnership, bylaws, limited liability company agreement,
operating agreement, partnership agreement, stockholders’ agreement and all
other similar documents, instruments or certificates executed, adopted or filed
in connection with the creation, formation or organization of such Person,
including any amendments or modifications thereto.

 

“Party” and “Parties” have the meanings assigned to such terms in the first
paragraph hereof.

 

“Permitted Encumbrances” has the meaning assigned to such term in Section
5.1(b).

 

“Person” means any individual or entity, including any corporation, limited
liability company, partnership (general or limited), joint venture, association,
joint stock company, trust, unincorporated organization or Governmental
Authority.

 

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“Plant” has the meaning assigned to such term in Section 2.2(c).

 

“Preferential Right” has the meaning assigned to such term in Section 5.6(b)(i).

 

“Preliminary Settlement Statement” has the meaning assigned to such term in
Section 3.4(a).

 

“Property Costs” has the meaning assigned to such term in Section 3.4(b).

 

“Purchase Price” has the meaning assigned to such term in Section 3.1.

 

“Reliant” means Reliant Exploration and Production LLC.

 

“QI” has the meaning assigned to such term in Section 2.5.

 

“Real Property Interests” means all necessary or useful fee property, easements,
rights of way, permits, servitudes, licenses, leasehold estates, any other
instruments creating an interest in real property, and similar rights related to
real property in connection with the Facilities.

 

“Records” has the meaning assigned to such term in Section 2.2(p).

 

“Retained Liabilities” has the meaning assigned to such term in Section 15.2.

 

“Section 1031 Assets” has the meaning assigned to such term in Section 2.5.

 

“Section 15.4(d) Matters” has the meaning assigned to such term in Section
15.4(d)(ii).

 

“Seller” has the meaning assigned to such term in the first paragraph hereof.

 

“Seller Taxes” has the meaning assigned to such term in Section 10.1(c).

 

“Seller’s Auditor” has the meaning assigned to such term in Section 9.1(f)(i).

 

“Seller’s Engineer” has the meaning assigned to such term in Section 9.1(f)(i).

 

“Special Financial Statements” has the meaning assigned to such term in Section
9.1(f)(i).

 

“Straddle Period” has the meaning assigned to such term in Section 10.1(d).

 

“Tax Return” has the meaning assigned to such term in Section 10.1(e).

 

“Taxes” has the meaning assigned to such term in Section 10.1(f).

 

“Team CO2 Acreage” has the meaning assigned to such term in Section 9.1(e).

 

“Team CO2 Pipeline” has the meaning assigned to such term in Section 9.1(e).

 

“Team CO2 Project” has the meaning assigned to such term in Section 9.1(e).

 

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“Title Deductible” has the meaning assigned to such term in Section 5.2(b)(i).

 

“Title Defect” has the meaning assigned to such term in Section 5.1(c).

 

“Title Defect Adjustment” has the meaning assigned to such term in Section
5.2(b)(i).

 

“Title Defect Date” has the meaning assigned to such terms in Section 5.2(a).

 

“Title Defect Value” has the meaning assigned to such term in Section 5.1(d).

 

“Title Threshold” has the meaning assigned to such term in Section 5.1(c).

 

“Transaction” has the meaning assigned to such term in the second paragraph of
the Recitals.

 

“Transfer Requirement” means any consent, approval, authorization or permit of,
or filing with or notification to, any Person which is required to be obtained,
made or complied with for or in connection with any sale, assignment or transfer
of any Asset or any interest therein other than those customarily obtained from
or made or complied with any Governmental Authority following the closing in
transactions of this nature.

 

“Transfer Taxes” has the meaning assigned to such term in Section 10.5.

 

“Transferred Employees” has the meaning assigned to such term in Section 9.4(a).

 

“Transition Services Agreement” has the meaning assigned to such term in Section
13.3(l).

 

“Transpetco CO2 Pipeline” means that certain CO2 transmission pipeline
consisting of approximately 120 miles of 12-inch pipe extending from the
vicinity of the Bravo Dome Field in Harding County, New Mexico to the Postle
Field in Texas County, Oklahoma.

 

“Units” has the meaning assigned to such term in Section 2.2(d).

 

“Wells” has the meaning assigned to such term in Section 2.2(b).

 

“Whiting Designated Costs” has the meaning assigned to such term in Section
3.4(b).

 

“WI” has the meaning assigned to such term in Section 5.1(a)(i).

 

“WTGP” has the meaning assigned to such term in Section 2.2(k).

 

“WTLP” has the meaning assigned to such term in Section 2.2(k).

 

1.2           References, Titles and Construction. All references in this
Agreement to articles, sections, subsections and other subdivisions refer to
corresponding articles, sections, subsections and other subdivisions of this
Agreement unless expressly provided otherwise.

 

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(a)          Titles appearing at the beginning of any of such subdivisions are
for convenience only and shall not constitute part of such subdivisions and
shall be disregarded in construing the language contained in such subdivisions.

 

(b)          The words “this Agreement”, “this instrument”, “herein”, “hereof”,
“hereby”, “hereunder” and words of similar import refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited.

 

(c)          Words in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise requires. Pronouns in masculine,
feminine and neuter genders shall be construed to include any other gender.

 

(d)          Unless the context otherwise requires or unless otherwise provided
herein, the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments or restatements of such agreement,
instrument or document, provided that nothing contained in this subsection shall
be construed to authorize such renewal, extension, modification, amendment or
restatement.

 

(e)          Examples shall not be construed to limit, expressly or by
implication, the matter they illustrate.

 

(f)          The word “or” is not intended to be exclusive and the word
“includes” and its derivatives mean “includes, but is not limited to” and
corresponding derivative expressions.

 

(g)          No consideration shall be given to the fact or presumption that one
party had a greater or lesser hand in drafting this Agreement.

 

(h)          All references herein to “$” or “dollars” shall refer to U.S.
Dollars.

 

(i)          Each Exhibit and Schedule attached to this Agreement is
incorporated herein by reference for all purposes, and references to this
Agreement shall also include such Exhibit or Schedule unless the context in
which used shall otherwise require.

 

ARTICLE 2.

PURCHASE AND SALE

 

2.1           Purchase and Sale. Seller agrees to sell and Buyer agrees to
purchase all of Seller’s right, title and interest in the Assets, all pursuant
to the terms of this Agreement.

 

2.2           The Assets. As used herein, the term “Assets” refers to the
following:

 

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(a)          The oil, gas and/or mineral leases, rights-of-way and other
agreements and instruments specifically described in Exhibit A or otherwise
owned by Seller in Texas County, Oklahoma even if not specifically described in
Exhibit A including any ratifications or amendments of such leases,
rights-of-way and other agreements and instruments (the “Leases”), the surface
fee or other interests in lands described in Exhibit A or otherwise owned by
Seller in Texas County, Oklahoma even if not described in Exhibit A (the
“Lands”) and the oil, gas, natural gas liquids, condensate, casinghead gas and
other liquids or gaseous hydrocarbons attributable to the Leases or Lands and
carbon dioxide purchased by Seller (“Hydrocarbons”), including all oil, gas
and/or other mineral leases, leasehold estates and interests, all surface fee,
mineral, royalty, overriding royalty, production payment, reversionary, net
profits, contractual leasehold and other similar rights, estates and interests
in the Leases or Lands, together with all the property and rights incident
thereto, including all rights in any pooled, unitized or communitized acreage by
virtue of the Lands or Leases being a part thereof and all Hydrocarbons produced
from and after the Effective Time from the pool or unit allocated to any such
Lands or Leases;

 

(b)          All oil and gas wells and other well bores, whether abandoned, not
abandoned, plugged or unplugged, including the oil and gas wells specifically
described in Exhibit B, together with all other Hydrocarbon wells and all water,
injection (including CO2 injection) and disposal wells presently on the Lands or
on lands pooled, unitized or communitized therewith, whether or not described in
Exhibit B (the “Wells”);

 

(c)          All personal property, equipment, fixtures, plants, facilities,
pipelines, improvements, surface leases, permits, rights-of-way, licenses,
easements and other surface rights located on the Lands used for the production
(including enhanced recovery thereof), gathering, treatment, processing,
storing, transportation, sale or disposal of Hydrocarbons or water produced from
the properties and interests described in Sections 2.2(a) and 2.2(b), including
that facility known as the Dry Trail CO2 Recovery Plant near the town of Hough
in the N1/2 NE1/4 of Section 14, Township 5 North, Range 13 East, of Texas
County, Oklahoma together with the major equipment related thereto as described
in Exhibit A-I (the “Plant”);

 

(d)          All presently existing and valid unitization, pooling and
communitization agreements, declarations and orders, and the units created
thereby (the “Units”) and all other such agreements relating to the properties
and interests described in Sections 2.2(a) through 2.2(c) and to the production
of Hydrocarbons, if any, attributable to said properties and interests;

 

(e)          All Material Agreements and any other agreements entered into in
the ordinary course of business that are not material to the ownership or
operation of the Assets, which relate and only insofar as they relate, to the
properties and interests described in Sections 2.2(a) through 2.2(d), including
those described in Exhibit C;

 

(f)          All transferable geophysical, geological and seismic records, data
and information pertaining to the properties and interests described in Sections
2.2(a) through 2.2(c), including the data referenced in Exhibit D; provided that
Buyer agrees to take such data “as is, where is” without any representation or
warranty, express, implied or statutory, and excluding from the foregoing those
records, data and information, subject to unaffiliated third party contractual
restrictions on disclosure or transfer (provided that Seller shall use all
commercially reasonable efforts to obtain, at Buyer’s cost, any necessary
waivers of such restrictions on disclosure or transfer);

 

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(g)          All Plant and field office buildings located in Texas County,
Oklahoma as described on Exhibit G and any furniture and fixtures related
thereto, and all other immovable property, fixtures and structures, all
permanent facilities, improvements, SCADA hardware and software (including the
software used in Seller’s injection pattern review) and telecommunication
equipment, and other equipment; in each case, located in the Plant and field
offices;

 

(h)          All Hydrocarbons classified as oil produced from the Wells which
are in the storage tanks on or near the Lands at the Effective Time and for
which Seller was paid as a Purchase Price adjustment pursuant to Section
3.4(c)(ii);

 

(i)          That certain crude oil pipeline known as the Hough Pipeline
consisting of approximately 51 miles of 8-inch pipe extending from Hough Station
in Texas County, Oklahoma to Beaver Station in Ochiltree County, Texas together
with all associated transmission pipelines consisting of various diameter pipes
(collectively, the “Hough Pipeline”), including all associated gathering lines,
pumping, metering, tankage, communication facilities and other equipment and
together with all real property, easements, and rights-of-way associated with
the Hough Pipeline as listed on Exhibit A-II as well as all maps, permits,
agreements, files, accounting records and data in Seller’s possession relating
to the Hough Pipeline, including accounting records showing cost of
construction, capitalized improvements, depreciation rates and accumulated
depreciation, transportation receipts and deliveries by shipper, product
inventory, and workpapers supporting Seller’s preparation of its FERC Form No. 6
in Seller’s possession; such maps, permits, agreements, files, accounting
records and data relating to the Hough Pipeline shall include the period prior
to the Effective Date;

 

(j)          That certain CO2 transmission pipeline lateral known as the
Hardesty CO2 Pipeline located in Texas County, Oklahoma consisting of
approximately 32 miles of 6-inch pipe extending from the Postle Field to the NE
Hardesty Field (the “Hardesty CO2 Pipeline”), including all associated
compression, metering, storage, communication facilities and other equipment and
together with all real property, easements, and rights-of-way associated with
the Hardesty CO2 Pipeline as listed on Exhibit A-III as well as all maps,
permits, agreements, files, accounting records and data in Seller’s possession
relating to the Hardesty CO2 Pipeline, including accounting records showing cost
of construction, capitalized improvements, depreciation rates and accumulated
depreciation, transportation receipts and deliveries by shipper, and product
inventory; such maps, permits, agreements, files, accounting records and data
shall include the period prior to the Effective Date;

 

(k)          All membership interests in each of Whiting Transpetco GP, LLC
(“WTGP”) and Whiting Transpetco LP, LLC (“WTLP” and together with WTGP, the
“Acquired Entities”);

 

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(l)          All Hydrocarbons classified as crude oil line fill owned by Seller
in the Hough Pipeline and natural gas liquid line fill owned by Seller in the
Dry Trails Midstream Energy pipeline and the ONEOK pipeline associated with the
Plant and all CO2 determined to be line fill owned by Seller in the Transpetco
CO2 Pipeline or the Hardesty CO2 Pipeline and for which Seller was paid a
Purchase Price adjustment pursuant to Section 3.4(c)(iv) and (v);

 

(m)          The Libby Ranch Project, including rights to build a CO2
transmission pipeline in Harding and Union Counties, New Mexico consisting of
approximately 24 miles of pipe extending from the Libby Ranch Field to the
Transpetco CO2 Pipeline (subject to Seller’s reservation of the right to utilize
capacity of such pipeline greater than 80 MMCF per day for Seller’s own account
and to designate delivery points thereon, such reservation and designation to be
set forth in a Transportation Agreement in the form of Exhibit F to be entered
into at the Closing) and an associated compression station and electrical
substation (the “Libby Lateral”) together with the agreements listed in Exhibit
E as well as including all real property, easements, and rights-of-way obtained
by Seller in connection with the Libby Ranch Project as listed on Exhibit A as
well as all maps, permits, applications, files, accounting records and data in
Seller’s possession relating to the Libby Ranch Project, including accounting
records showing all costs expended relating to the project; such maps, permits,
applications, files, accounting records and data shall include the period prior
to the Effective Date;

 

(n)          A non-exclusive, perpetual, royalty-free license to utilize
Seller’s proprietary engineering software program described as the “Production
Forecast Tool”;

 

(o)          Copies of all Excel spreadsheets used to perform revenue, expense
and production allocations; and

 

(p)          The files, records and data relating to the items described in
Sections 2.2(a) through 2.2(o) maintained by Seller, including all agreement
files, lease files, land files, well files, well logs and other well data, maps,
division order files, abstracts, title files, title opinions, production files,
ad valorem property and production or severance tax files, technical,
engineering and maintenance files, operations, environmental, safety and other
similar information, but excluding from the foregoing those files, records and
data subject to the unaffiliated third party contractual restrictions on
disclosure or transfer (provided that Seller shall use all commercially
reasonable efforts to obtain, at Buyer’s cost, any necessary waivers of such
restrictions on disclosure or transfer) and all accounting records for periods
prior to and after the Effective Time (the “Records”).

 

2.3           Excluded Properties. The Assets do not include, and there is
hereby expressly excepted and excluded therefrom and reserved to Seller the
following (the “Excluded Assets”):

 

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(a)          except as set forth in Sections 2.2(h) and 2.2(l), all rights and
choses in action, arising, occurring or existing in favor of Seller prior to the
Effective Time or arising out of the operation of or production from the Assets
prior to the Effective Time (including any and all contract rights, claims,
revenues, recoupment rights, recovery rights, accounting adjustments,
mispayments, erroneous payments or other claims of any nature in favor of Seller
and relating and accruing to any time period prior to the Effective Time, but
not including any contract rights or claims for indemnity in favor of Seller
against Seller’s predecessors-in-title to the Assets);

 

(b)          all corporate, financial, tax and legal (other than title) records
of Seller other than the Records;

 

(c)          all contracts of insurance;

 

(d)          except as described in Sections 2.2(h) and 2.2(l), all Hydrocarbon
production from or attributable to the Assets with respect to all periods prior
to the Effective Time and all proceeds attributable thereto;

 

(e)          any refund of costs, taxes or expenses borne by Seller attributable
to the period prior to the Effective Time;

 

(f)          except with respect to assets described in Sections 2.2(h) and
2.2(l), any other right or interest in and to the Assets to the extent
attributable to the period prior to the Effective Time;

 

(g)          copies at Seller’s expense, including electronic copies (but not
the originals), of all Records;

 

(h)          except with respect to assets described in Sections 2.2(h) and
2.2(l), all deposits, cash, checks and funds attributable to Seller’s interests
in the Assets with respect to any period of time prior to the Effective Time;

 

(i)          all business computers, computer or communications software or,
except as described in Sections 2.2(n) and 2.2(o), intellectual property
(including tapes, data and program documentation and all tangible manifestations
and technical information relating thereto) owned, licensed or used by Seller,
in each case, in its Midland, Texas office, and (ii) Seller’s Aries licenses and
related equipment;

 

(j)          except as described in Sections 2.2(n) and 2.2(o), any programs
created or owned by Seller even if such property has been furnished to Buyer;

 

(k)          any logo, service mark, copyright, trade name or trademark of or
associated with Seller or any Affiliate of Seller or any business of Seller or
of any Affiliate of Seller;

 

(l)          any and all leased vehicles; and

 

(m)          inventory held for use in respect of the Leases, Wells and Plant
located offsite of the Lands or identified on Schedule 2.3(m) (other than
material transfers when charged to any of the Assets).

 

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2.4           Effective Time. As used in this Agreement, “Effective Time” shall
mean April 1, 2013 at 12:01 a.m., Central Time.

 

2.5           1031 Exchange. Seller reserves the right, at or prior to Closing,
to assign its rights under this Agreement with respect to all or a portion of
the Purchase Price, and that portion of the Assets associated therewith
(“Section 1031 Assets”), to a Qualified Intermediary (“QI”) (as that term is
defined in Section 1.1031(k)-1(g)(4)(v) of the Treasury Regulations) to
accomplish the Transaction, in whole or in part, in a manner that will comply
with the requirements of a like-kind exchange (“Like-Kind Exchange”) pursuant to
Section 1031 of the Internal Revenue Code of 1986, as amended (“Code”). If
Seller so elects, Seller may assign its rights under this Agreement to the
Section 1031 Assets to the QI. Buyer hereby (i) consents to Seller’s assignment
of its rights in this Agreement with respect to the Section 1031 Assets, and
(ii) if such an assignment is made, agrees to pay all or a portion of the
Purchase Price into the qualified trust account at Closing as directed in
writing by Seller. Seller and Buyer acknowledge and agree that a whole or
partial assignment of this Agreement to a QI shall not release either Party from
any of its respective liabilities and obligations to each other or expand any
such respective liabilities or obligations under this Agreement. Neither Party
represents to the other that any particular tax treatment will be given to
either Party as a result of the Like-Kind Exchange. The Party not participating
in the Like-Kind Exchange shall not be obligated to pay any additional costs or
incur any additional obligations in its sale of the Assets if such costs are the
result of the other Party’s Like-Kind Exchange, and the Party participating in
the Like-Kind Exchange shall hold harmless and indemnify the other Party from
and against all claims, losses and liabilities (including reasonable attorneys’
fees, court costs and related expenses), if any, resulting from such a Like-Kind
Exchange.

 

Notwithstanding any provision of this Agreement, “Assets” shall include all
assets and inventory (i) comprising part of the Libby Ranch Project or (ii)
purchased for, or intended for use with respect to, the Libby Ranch Project.

 

ARTICLE 3.

PURCHASE PRICE

 

3.1           Purchase Price. The purchase price (the “Purchase Price”) for the
Assets shall be Eight Hundred Fifty-Nine Million Eight Hundred Thousand Dollars
($859,800,000). At Closing, Buyer shall pay Seller the Purchase Price, as
adjusted pursuant to Section 3.4.

 

3.2           Deposit. Contemporaneously with the execution of this Agreement,
Buyer will deposit by wire transfer 10% of the unadjusted Purchase Price set
forth in Section 3.1 (the “Deposit”) with Seller. The Deposit shall be credited
to the Purchase Price at Closing or, if this Agreement is terminated, shall be
distributed by Seller pursuant to Article 12.

 

3.3           Allocation of the Purchase Price. Buyer has allocated the Purchase
Price among the Assets as set forth on Exhibit B. These allocations will be used
as otherwise provided in this Agreement. The value so allocated to a particular
Asset is referred to as the “Allocated Value” for that Asset.

 

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3.4           Adjustments to Purchase Price. All adjustments to the Purchase
Price shall be made (i) according to the factors described in this Section 3.4,
(ii) in accordance with generally accepted accounting principles as consistently
applied in the oil and gas industry, and (iii) without duplication:

 

(a)          Settlement Statements. The Purchase Price shall be adjusted at
Closing pursuant to a “Preliminary Settlement Statement” prepared by Seller and,
submitted to Buyer not less than five (5) business days prior to Closing for
Buyer’s comment and agreement. If Buyer and Seller are unable to agree upon this
Preliminary Settlement Statement and such disagreement concerns amounts totaling
less than 1% of the unadjusted Purchase Price, Seller’s estimate shall be used
at Closing and the Parties shall resolve such disagreement after Closing
pursuant to Sections 14.1 and 15.6. If Buyer and Seller are unable to agree upon
this Preliminary Settlement Statement and such disagreement concerns amounts
totaling equal to or more than 1% of the unadjusted Purchase Price, then the
Parties shall mutually agree upon an estimate to be used at Closing and resolve
their disagreement after Closing pursuant to Sections 14.1 and 15.6. The
Preliminary Settlement Statement shall set forth the Closing Amount and all
adjustments to the Purchase Price and associated calculations. The term “Closing
Amount” means the Purchase Price, adjusted as provided in this Section 3.4 using
reasonable estimates of amounts paid or received before Closing if actual
numbers are not available. After Closing, the Purchase Price shall be adjusted
pursuant to the Final Settlement Statement delivered pursuant to Section 14.1.

 

(b)          Property Costs. For the purposes of this Agreement, the term
“Property Costs” shall mean all capital expenses incurred and paid in compliance
with Sections 9.1(a) through 9.1(c) (including the expenses set forth in the Cap
Ex Budget, except for the Whiting Designated Costs), insurance costs, expenses
associated with the purchase and transportation of CO2 paid to third parties,
and other expenses owed to third parties incurred in the ordinary course of
business, Seller’s share of joint interest billings, office overhead for
properties without a joint operating agreement (“JOA”), or where Seller is the
operator in an amount equal to fifty thousand dollars ($50,000) per month
through the Closing Date (proportionately reduced for partial months, “Operator
Fee”), lease operating expenses, lease rental and maintenance costs, royalties,
overriding royalties, leasehold payments, Asset Taxes (as defined and
apportioned as of the Effective Time pursuant to Article 10), drilling expenses,
workover expenses, material transfers when charged to any of the Assets,
geological, geophysical and any other exploration or development expenditures
chargeable under applicable operating agreements or other third party agreements
consistent with the standards established by the Council of Petroleum Accountant
Societies of North America; in each case, that are attributable to the
development, maintenance and operation of the Assets during the period in
question; provided, however, that Property Costs shall not include Income Taxes
or inventory expenses (other than material transfers when charged to any of the
Assets). Notwithstanding anything to the contrary in this Agreement, Seller
shall be solely responsible for and shall pay $12,100,000 in 2013 for capital
expenses when incurred in 2013 in respect of the Libby Ranch Project (in
addition to the $1,003,323 purchase price decrease in Section 3.4(d)(viii)),
regardless of whether such amount was paid or incurred before or after the
Effective Time or the Closing Date, and Buyer shall have no obligation to
reimburse Seller for any such expenses (the “Whiting Designated Costs”).

 

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(c)          Upward Adjustments. The Purchase Price shall be adjusted upward by
the following without duplication:

 

(i)          An amount equal to all Property Costs incurred and paid by Seller
that are attributable to the period after the Effective Time, and all (A)
Property Costs that may be incurred prior to the Effective Time but for which
said equipment or materials will be delivered, or services provided (including
the reworking of any wells), after the Effective Time to the extent incurred and
paid by Seller and (B) until Closing, the Operator Fee, and all overhead and
other overhead type income owed to Seller as operator under applicable COPAS
procedures relating to the Assets, but not paid by any third party or included
in Property Costs;

 

(ii)         An amount equal to the value (net of royalties and other burdens
and applicable Asset Taxes) of Seller’s share of all oil in storage tanks at the
Effective Time to be calculated as follows: The value shall be the product of
(A) the volume in each storage tank (attributable to Seller’s interest) as of
the Effective Time as shown by the actual gauging reports, less any volumes
below the load line, multiplied by (B) the price actually received for
production under the applicable marketing contract for the Hydrocarbons sold, or
if not sold, the price that would be received for the Hydrocarbons as if they
had been sold in the month of March 2013; provided, however, that the adjustment
contemplated by this subsection (ii) shall be made only to the extent that
Seller does not receive and retain the proceeds, or portion thereof,
attributable to the pre-Effective Time merchantable oil in the storage tanks;

 

(iii)        An amount equal to the sum of all Interest Addition adjustments
pursuant to Section 5.3;

 

(iv)        The value of any CO2 line fill owned by Seller in respect of the
Transpetco CO2 Pipeline in an amount equal to $148,486;

 

(v)         The value of any natural gas liquid line fill owned by Seller in
respect of the Dry Trails Midstream Energy pipeline and the ONEOK pipeline
associated with the Plant in an amount equal to $615,913; and

 

(vi)        An amount equal to any cash settlement paid by Seller attributable
to the swaps set forth in Section 9.1(d).

 

(d)          Downward Adjustments. The Purchase Price shall be adjusted downward
by the following without duplication:

 

(i)          Proceeds received and retained by Seller (net of applicable Asset
Taxes and royalties and other burdens) that are attributable to production from
the Assets or to the sale of any of the Assets after the Effective Time;

 

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(ii)         The amount of all Property Costs that remain unpaid by Seller and
will be paid by Buyer, or that have been paid by Buyer that are attributable to
the period prior to the Effective Time;

 

(iii)        An amount equal to the sum of all adjustments to the Purchase Price
for Environmental Defects and Title Defects but only for the excess of
Environmental Defects over the Environmental Deductible and the Title Defects
over the Title Deductible and all on the terms and conditions set forth in
Article 5 and Sections 6.5 and 9.2(d);

 

(iv)        An amount equal to the sum of all Exclusion Adjustments;

 

(v)         An amount equal to the sum of all Net Casualty Losses;

 

(vi)        An amount equal to the Deposit;

 

(vii)       An amount equal to all proceeds from sales of Hydrocarbons relating
to the Assets and payable to owners of working interests, royalties, overriding
royalties and other similar interests (in each case) that are held in suspense
or escrow by Seller as of the Closing as set forth in the written report
provided to Buyer by Seller as of the date of this Agreement;

 

(viii)      An amount equal to $1,003,323, covering the cost of pipe required to
increase the capacity of the CO2 transmission pipeline described in Section
2.2(m) to change the Libby Lateral pipeline diameter from 8 inches to 10 inches;
and

 

(ix)         An amount equal to any cash settlement received by Seller
attributable to the swaps set forth in Section 9.1(d).

 

(e)          Tax Adjustments. To adjust the Purchase Price for the apportionment
of Asset Taxes, the Parties agree to adjust the Purchase Price, downward or
upward, as appropriate, pursuant to the applicable provisions of Article 10.

 

ARTICLE 4.

BUYER’S INSPECTION

 

4.1           Access to the Records. Prior to Closing and subject to Sections
9.3(a) and 9.3(b), Seller will make the Records available to Buyer and Buyer’s
agents, representatives, advisors, attorneys, underwriters and other parties
providing services to Buyer in connection with its potential acquisition of the
Assets (collectively, “Buyer’s Representatives”) for inspection, copying, and
review, all at Buyer’s expense, at Seller’s offices to permit Buyer to perform
its due diligence review. Subject to the consent and cooperation of third
parties, Seller will assist Buyer in Buyer’s efforts to obtain, at Buyer’s
expense, such additional information from such parties as Buyer may reasonably
desire. Buyer may inspect the Records and such additional information only to
the extent it may do so without violating any obligation of confidence or
contractual commitment of Seller to a third party or disclose privileged
information (including personnel records); provided that the forgoing limitation
shall not apply to any title opinions.

 

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4.2           Disclaimer. EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES
UNDER THIS AGREEMENT AND THE SPECIAL WARRANTY IN THE CONVEYANCE, (a) BUYER
RECOGNIZES AND AGREES THAT ALL MATERIALS, DOCUMENTS, AND OTHER INFORMATION MADE
AVAILABLE TO IT IN CONNECTION WITH THE TRANSACTION CONTEMPLATED HEREBY, WHETHER
MADE AVAILABLE PURSUANT TO THIS SECTION OR OTHERWISE, ARE MADE AVAILABLE TO IT
AS AN ACCOMMODATION, AND WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER
EXPRESS, IMPLIED OR STATUTORY, AS TO THE ACCURACY AND COMPLETENESS OF SUCH
MATERIALS, DOCUMENTS, AND OTHER INFORMATION; (b) BUYER EXPRESSLY AGREES THAT ANY
RELIANCE UPON OR CONCLUSIONS DRAWN THEREFROM SHALL BE AT BUYER’S RISK TO THE
MAXIMUM EXTENT PERMITTED BY LAWS AND SHALL NOT GIVE RISE TO ANY LIABILITY OF OR
AGAINST SELLER EXCEPT AS PROVIDED HEREIN; AND (c) EXCEPT AS EXPRESSLY PROVIDED
HEREIN, BUYER HEREBY WAIVES AND RELEASES ANY CLAIMS ARISING UNDER THIS
AGREEMENT, COMMON LAW OR ANY STATUTE ARISING OUT OF ANY MATERIALS, DOCUMENTS OR
INFORMATION PROVIDED BY SELLER TO BUYER.

 

ARTICLE 5.

TITLE MATTERS

 

5.1           Definitions.

 

(a)          Defensible Title. The term “Defensible Title” means such title:

 

(i)          to each of the Leases, the Wells and the Units, and the Lands
associated therewith (the “Oil and Gas Assets”), that, subject to and except for
Permitted Encumbrances: (A) entitles Seller to receive a share of the
Hydrocarbons produced, saved and marketed from the Oil and Gas Asset throughout
the entire productive life of such Oil and Gas Asset, after satisfaction of all
royalties, overriding royalties, nonparticipating royalties, net profits
interests or other similar burdens on or measured by production of Hydrocarbons
(“NRI”), of not less than the NRI set forth on Exhibit B for the formation or
interval of such Oil and Gas Asset indicated on Exhibit B; (B) obligates Seller
to bear a percentage of the costs and expenses for the maintenance, development,
operation and the production of Hydrocarbons produced, saved and marketed from
the formation or interval of the Oil and Gas Asset indicated on Exhibit B
throughout the entire productive life of such Oil and Gas Asset (“WI”) in an
amount not greater than the WI set forth in Exhibit B without a corresponding
proportionate increase in NRI; and (C) is free and clear of all Liens on or
against title to the Assets. If a formation or interval in a Well is not listed
on Exhibit B, then the deemed Allocated Value for such formation or interval in
such Well is zero; and

 

(ii)         with respect to (A) the Real Property Interests, that Seller owns
good and indefeasible title and (B) the pipelines and personal property, that
Seller owns good, valid and sufficient title, in each case, to the interest of
the grantee, lessee, assignee or party of similar status free and clear of all
Liens other than Permitted Encumbrances.

 

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(b)          Permitted Encumbrances. The term “Permitted Encumbrances” shall
mean:

 

(i)          the terms and provisions of an instrument or document creating
lessors’ royalties, and existing overriding royalties, net profits interests,
production payments, reversionary interests and similar burdens (payable or in
suspense) if the net cumulative effect of such burdens does not operate to
reduce the NRI or increase the WI set forth on Exhibit B;

 

(ii)         division orders and sales contracts terminable without penalty upon
no more than thirty (30) days’ notice to the purchaser;

 

(iii)        encumbrances relating to the Assets that arise under operating
agreements to secure payment of amounts not yet delinquent and are of a type and
nature customary in the oil and gas industry;

 

(iv)        all rights reserved to or vested in any Governmental Authority to
control or regulate any of the Assets in any manner and all Laws;

 

(v)         the terms and conditions of the Leases that would not operate to
reduce the NRI or increase the WI set forth on Exhibit B;

 

(vi)        such defects or irregularities in the title to the Assets that are
not such as to materially interfere with the operation, value or use of the
Assets (or a portion thereof) affected thereby and that would be considered not
material in accordance with customary industry standards, and in no case that
would operate to reduce the NRI or increase the WI set forth on Exhibit B;

 

(vii)       Liens for Taxes, Tax assessments not yet due, and Taxes, if
delinquent, that are being contested in good faith in the normal course of
business;

 

(viii)      all rights to consent by, required notices to, filings with, or
other actions by federal, state, local or foreign Governmental Authorities, in
connection with the conveyance of the applicable Asset if the same are
customarily obtained after such conveyance;

 

(ix)         rights of reassignment upon the surrender or expiration of any
Lease;

 

(x)          easements, rights-of-way, servitudes, permits, surface leases,
surface use restrictions, and other rights with respect to surface operations,
on, over or in respect of any of the Assets or any restriction on access thereto
that could not reasonably be expected to materially interfere with the
operation, value or use of the affected Asset;

 

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(xi)         Liens affecting the Assets not specified in this Section 5.1(b)
that shall be removed or released prior to Closing and with respect to which
evidence thereof reasonably satisfactory to Buyer has been furnished to Buyer
prior to Closing;

 

(xii)        materialmen’s, mechanics’, operators’ or other similar Liens
arising in the ordinary course of business incidental to operation of the Assets
(A) but only to the extent such Liens have not been filed pursuant to Laws and
the time for filing such Liens has expired, (B) if filed, such Liens have not
yet become due and payable or payment is being withheld as provided by Laws, or
(C) if their validity is being contested in good faith by appropriate action;

 

(xiii)       consents to assignment and similar contractual provisions affecting
an Asset with respect to which (A) waivers or consents are obtained from the
appropriate parties for the transaction contemplated hereby prior to Closing
(subject to the provisions of Section 5.6(a)) or (B) the appropriate time period
for asserting such rights has expired without an exercise of such rights;

 

(xiv)      preferential rights to purchase and similar contractual provisions
affecting an Asset with respect to which (A) waivers are obtained from the
appropriate parties for the transaction contemplated hereby prior to Closing or
(B) the appropriate time period for asserting such rights has expired without an
exercise of such rights; and

 

(xv)       the Material Agreements listed on Exhibit C to the extent that they
are ordinary and customary to the oil, gas and other mineral exploration,
development, processing or extraction business and would not operate to reduce
the NRI or increase the WI set forth on Exhibit B.

 

(c)          Title Defect. The term “Title Defect” means either (A) any Lien
that renders Seller’s title to any Asset less than Defensible Title and reduces
the Allocated Value of the affected Asset by more than $75,000 (with such amount
being the “Title Threshold”), or (B) Seller’s breach of a Material Agreement
resulting in Seller having less than Defensible Title and that has an adverse
effect on the value or economic benefit of an Asset of more than the Title
Threshold. Notwithstanding the foregoing, the following shall not be considered
Title Defects:

 

(i)          defects in the early chain of title, consisting of the failure to
recite marital status in a document or omissions of successors of heirship or
estate proceedings, unless Buyer provides reasonable written evidence that such
failure or omission has resulted in another party claiming title to the relevant
Oil and Gas Asset;

 

(ii)         defects based on a lack of information in Seller’s files;

 

(iii)        defects or irregularities resulting from or related to probate
proceedings or the lack thereof, which defects or irregularities have been
outstanding 2 years;

 

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(iv)        defects arising out of lack of survey;

 

(v)         defects based on failure to record Leases issued by the BLM or any
state, or any assignments of record title or operating rights in such Leases, in
the real property or other county records of the county in which such Oil and
Gas Asset is located; provided that such Leases or assignments are properly
filed with the applicable federal or state office;

 

(vi)        defects arising out of lack of corporate or other entity
authorization unless the action could result in another party claiming title to
the Asset; and

 

(vii)       defects that are defensible by possession under applicable statutes
of limitation for adverse possession or for prescription.

 

(d)          Title Defect Value. “Title Defect Value” means the amount by which
the Title Defect exceeds the Title Threshold. In determining the Title Defect
Value, the Parties intend to include only that portion of the Asset affected by
the Title Defect. The Title Defect Value may not exceed the Allocated Value of
the Asset and shall be determined by the Parties in good faith taking into
account all relevant factors, including the following:

 

(i)          If the Title Defect is a Lien on the Asset, the Title Defect Value
shall be the cost of removing such Lien.

 

(ii)         If the Title Defect is an actual reduction in NRI without a change
in the WI, the Title Defect Value shall be the Allocated Value for the
particular Oil and Gas Asset, reduced by a fraction, the numerator of which is
the NRI on Exhibit B for such Oil and Gas Asset minus the actual NRI and the
denominator of which is the NRI on Exhibit B for such Oil and Gas Asset.

 

(iii)        If the Title Defect does not fall into (i) or (ii) immediately
above, then the Title Defect Value shall be determined by the Parties in good
faith, taking into account all relevant factors, including the following:

 

(1)         The Allocated Value of any affected Asset; and

 

(2)         The economic effect of the Title Defect on the affected Asset or the
operation of the Assets as a whole.

 

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5.2           Purchase Price Adjustments for Title Defects.

 

(a)          Notices of Title Defects. Buyer shall give Seller each written
“Notice of Title Defects” as soon as reasonably possible but no later than May
24, 2013 at 5:00 p.m., Central Time (the “Title Defect Date”). Each such notice
must be in writing and (i) name the affected Asset; (ii) and, to the extent then
reasonably known, (A) describe each Title Defect with respect to the affected
Asset; (iii) describe the basis for each Title Defect set forth in such notice;
(iv) attach or refer to any supporting documentation; (v) state the Allocated
Value (if any) of the affected Asset; (vi) state Buyer’s good faith estimate of
the Title Defect Value which shall serve as Buyer’s proposal to adjust the
Purchase Price; and (vii) the computations upon which Buyer’s belief is based.
Buyer’s sole and exclusive rights and remedies with respect to any matter that
constitutes a Title Defect shall be those set forth in this Article 5, Section
11.2(c) and in the Conveyance, and Buyer shall not be entitled to any other
indemnification or any other remedy with respect thereto.

 

(b)          Defect Adjustments.

 

(i)          If an Asset is affected by a Title Defect, the Purchase Price will
be reduced under Section 3.4 and as set forth below, unless (A) Seller cures the
Title Defect to Buyer’s reasonable satisfaction prior to Closing; (B) Buyer
agrees to waive the relevant Title Defect; or (C) Seller elects on or before
Closing to cure such Title Defect no later than ninety (90) days after Closing.
The Purchase Price shall be adjusted for Title Defects only to the extent that
the aggregate of all Title Defect Values net of the Interest Additions Values
(subject to the threshold and deductible described in Section 5.3) for all of
the Assets exceeds Seven Million Five Hundred Thousand Dollars ($7,500,000)
(such amount being a deductible, not a threshold, the “Title Deductible”) and
then only for the amount exceeding Seven Million Five Hundred Thousand Dollars
($7,500,000) (with the amount of such adjustment being the “Title Defect
Adjustment”).

 

(ii)         If Seller elects to cure the relevant Title Defect during the
period of ninety (90) days after Closing (the “Cure Period”), Seller shall
assign the affected Asset to Buyer at Closing and the Purchase Price will not be
reduced at Closing for such Title Defect. If Seller cures all of the relevant
Title Defects to Buyer’s reasonable satisfaction during the Cure Period, then
there shall be no adjustment to the Purchase Price. Subject to the Title
Deductible, if Seller does not cure all Title Defects to Buyer’s reasonable
satisfaction within the Cure Period, the Purchase Price shall be adjusted by an
amount equal to the Title Defect Value attributable to the applicable Title
Defect, such adjustment to be made on the Final Settlement Statement.

 

5.3           Interest Additions. Promptly on discovery, but on or before the
Title Defect Date, either Party shall in good faith notify the other of any
interest that such Party discovers that is known to otherwise be an Oil and Gas
Asset hereunder but for the failure to describe it in detail, including any
interest that entitles Seller to receive more than the NRI or obligates Seller
to bear costs and expenses in an amount less than the WI without a proportionate
change in NRI, and that would have an Allocated Value in excess of the Title
Threshold or increases the Allocated Value of the affected Oil and Gas Asset by
more than the Title Threshold, with such interest being an “Interest Addition”.
Buyer acknowledges and agrees to comply with the affirmative obligation set
forth in the preceding sentence. Seller shall promptly provide Buyer thereafter
with the value of the Interest Addition or the amount by which Seller believes
the Allocated Value of the Oil and Gas Asset has been increased by the Interest
Addition (“Interest Addition Value”) and the associated computations. The
Parties shall determine the Interest Addition Value in good faith taking into
account all relevant factors. The Purchase Price shall be increased for Interest
Additions only to the extent that the aggregate of all Interest Additions
exceeds the Title Deductible.

 

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5.4           Dispute Resolution. The Parties agree to resolve disputes
concerning title matters pursuant to the arbitration procedure set forth in
Section 15.6.

 

5.5           Casualty Loss.

 

(a)          Assumed Risk. Notwithstanding anything herein contained to the
contrary, any diminution in value of the Assets from and after the Effective
Time that results from production of Hydrocarbons through normal depletion, a
decrease in the estimated recoverable reserves or market value thereof or from
mechanical failure that arises in the ordinary course of operating oil and gas
wells (including watering out of any well, the loss of an injector well,
collapsed casing or sand infiltration of any well) and the depreciation of
personal property due to ordinary wear and tear; in each case, with respect to
the Assets, shall not be treated as a Casualty Loss or other Loss for which
Seller indemnifies Buyer or otherwise has responsibility for hereunder.

 

(b)          Loss. Prior to Closing, if a portion of the Assets is destroyed by
fire or other casualty, or is taken or threatened to be taken in condemnation or
under the right of eminent domain (with such event being a “Casualty Loss”),
Buyer shall purchase the Asset at Closing for the Allocated Value of the Asset
reduced, by the estimated cost to repair or replace such Asset (with equipment
of similar utility) (the reduction being the “Net Casualty Loss”). Seller, at
its sole option, may elect to cure such Casualty Loss. If Seller elects to
promptly cure such Casualty Loss, Seller may replace any personal property that
is the subject of a Casualty Loss with equipment of similar grade and utility.
If Seller cures the Casualty Loss to Buyer’s reasonable satisfaction within
ninety (90) days after Closing, Buyer shall purchase the affected Asset at
Closing without any Purchase Price adjustment for such Casualty Loss.

 

5.6           Transfer Requirements and Preferential Rights. Seller shall use
its best efforts to satisfy all Transfer Requirements and give notices required
in connection with Preferential Rights prior to Closing. If Buyer discovers
other Assets affected by a Transfer Requirements or Preferential Right during
the course of Buyer’s due diligence activities, Buyer shall notify Seller
promptly and Seller shall use its best efforts to satisfy such Transfer
Requirements or obtain waivers and give the notices required in connection with
such Preferential Rights prior to Closing.

 

(a)          Transfer Requirements. Except for Transfer Requirements which are
customarily obtained post-Closing, and those Transfer Requirements the failure
of which to satisfy would not invalidate the conveyance of any Asset or result
in a termination of a Lease hereunder or other Asset or give the lessor or other
counterparty the right to so terminate, if a Transfer Requirement to assign any
Lease or other Asset has not been satisfied as of the Closing, then (i) the
portion of the Assets for which such Transfer Requirement has not been satisfied
shall not be conveyed at the Closing, (ii) the Allocated Value relating to that
Asset shall not be paid to Seller, and (iii) Seller shall use its best efforts
to satisfy such Transfer Requirement as promptly as possible following Closing.
If such Transfer Requirement has been satisfied as of the Final Settlement Date,
Seller shall convey the affected Asset to Buyer effective as of the Effective
Time and Buyer shall pay Seller the Allocated Value relating to the affected
Asset subject to adjustments contemplated by Section 3.4, reduced by the amount
of any net proceeds from the affected Asset attributable to the period of time
after the Effective Time, with Seller retaining such proceeds less Property
Costs attributable to the period of time after the Effective Time. If such
Transfer Requirement has not been satisfied as of the Final Settlement Date, the
affected Asset shall be deemed to be an “Excluded Asset” and Seller shall retain
such Asset and the Purchase Price shall be reduced by an amount equal to the
Allocated Value of the particular Asset (with such adjustment being an
“Exclusion Adjustment”). Buyer shall reasonably cooperate with Seller in
satisfying any Transfer Requirement, but Buyer shall not be required to expend
funds or make any other type of financial commitments as a condition of
satisfying such Transfer Requirement; subject to adjustments contemplated by
Section 3.4.

 

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(b)          Preferential Purchase Rights.

 

(i)          If any preferential right to purchase any portion of the Assets
(“Preferential Right”) is exercised and consummated prior to the Closing Date,
that portion of the Assets affected by such Preferential Right shall be excluded
from the Assets and the Purchase Price shall be adjusted downward by an amount
equal to the Exclusion Adjustment(s) of such affected Assets.

 

(ii)         If by Closing, the time for the exercise of such Preferential Right
has not expired and Seller has not received notice of an intent not to exercise
or a waiver of the Preferential Right, that portion of the Assets affected by
such Preferential Right shall be excluded from the Assets and retained by Seller
at Closing, and the Purchase Price shall be reduced by the Exclusion
Adjustment(s) and the provisions of Section 5.6(b)(iii) shall apply.

 

(iii)        As to any affected Assets retained by Seller at Closing pursuant to
Section 5.6(b)(ii), following Closing, if a Preferential Right is not
consummated within the time frame specified in the Preferential Right, or if the
time frame for exercise of the Preferential Right expires without exercise after
the Closing, then, subject to the terms and conditions set forth in this
Agreement, Seller shall prepare, execute and deliver a conveyance of the
applicable Assets to Buyer, such conveyance to be effective as of the Effective
Time and in the form and substance of the Conveyance, and Buyer shall deposit by
wire transfer with Seller an amount equal to the Exclusion Adjustment(s) of the
applicable Assets.

 

(c)          Exclusive Remedy. The rights and remedies set forth in this Section
5.6 and Article 11 are the exclusive remedies under this Agreement for exercised
Preferential Rights and Transfer Restrictions applicable to the Assets. The
rights and remedies granted each Party in this Article and the special warranty
in the Conveyance, together with any indemnification set forth in Article 15 and
the rights of each Party not to Close or terminate pursuant to Article 11, are
the exclusive rights and remedies against the other Party related to any Title
Defect or other title matters.

 

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5.7           Personal Property and Equipment. Seller expressly disclaims and
negates any representation and warranty as to the condition of any personal
property, equipment, fixtures and items of movable property comprising any part
of the Assets, including (i) any implied or express warranty of merchantability,
(ii) any implied or express warranty of fitness for a particular purpose, (iii)
any implied or express warranty of conformity to models or samples of materials,
(iv) any rights of assignee under applicable statutes to claim diminution of
consideration, and (v) any claim by Buyer for damages because of defects,
whether known or unknown, it being expressly understood by Buyer that said
personal property, fixtures, equipment and items, subject to Section 5.5(b), are
being conveyed to Buyer “as is, where is,” with all faults and in their present
condition and state of repair. Buyer shall have inspected, or waived (and upon
Closing shall be deemed to have waived) its right to inspect, the Assets for all
purposes and satisfied itself as to their physical and environmental condition.

 

ARTICLE 6.

ENVIRONMENTAL MATTERS

 

6.1           Physical Access to the Assets. Prior to signing this Agreement,
Seller granted to Buyer physical access to the Assets to allow Buyer to conduct,
at Buyer’s sole risk and expense, a non-intrusive, on-site surface inspection of
the Assets and an inspection of Seller’s files covering environmental matters
(the “Environmental Inspection”). If Buyer or its agents prepared an
environmental assessment of any of the Assets, Buyer agrees to keep such
assessment confidential and to furnish copies thereof to Seller. Such
information shall be held confidential but may be disclosed to Buyer or Buyer’s
Affiliates, attorneys, officers, employees, consultants and lenders and their
respective advisors and used in Buyer’s evaluation of Seller’s properties.
Furthermore, Buyer’s obligations of confidentiality shall not apply to
information (i) required to be disclosed by legal process or Laws, including
securities Laws or stock exchange rules or regulations, (ii) available to the
public, (iii) already in the possession of or known to Buyer as of the date of
the Environmental Inspection or developed by Buyer independently of the
Environmental Inspection, or (iv) acquired from third parties not known by Buyer
to have confidentiality obligations to Seller, provided that Buyer agrees to
inquire of such third parties if such third party has an obligation of
confidence to Seller.

 

6.2           Release and Indemnity. IN CONNECTION WITH GRANTING SUCH PHYSICAL
ACCESS TO THE ASSETS, BUYER REPRESENTS THAT IT IS ADEQUATELY INSURED AND WAIVES,
RELEASES AND AGREES TO INDEMNIFY SELLER, AND ITS RESPECTIVE DIRECTORS, OWNERS,
MEMBERS, PARTNERS, OFFICERS, SHAREHOLDERS, EMPLOYEES, AGENTS AND REPRESENTATIVES
AGAINST ALL CLAIMS ARISING AS A RESULT OF ANY ACTIVITIES OF BUYER OR BUYER’S
REPRESENTATIVES OR AFFILIATES IN CONDUCTING ITS ON-SITE INSPECTIONS AND
ENVIRONMENTAL ASSESSMENTS OF THE ASSETS (INCLUDING THOSE ACTIVITIES CONDUCTED IN
ANY OFFICE OR FACILITY OF SELLER), WHETHER OR NOT SUCH CLAIMS, INJURIES OR
DAMAGES ARISE IN WHOLE OR IN PART OF OUT SELLER’S NEGLIGENCE, EXCEPT FOR
INJURIES OR DAMAGES CAUSED BY SELLER’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
THIS WAIVER, RELEASE AND INDEMNITY BY BUYER SHALL SURVIVE TERMINATION OF THIS
AGREEMENT.

 

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6.3           Buyer’s Acknowledgment Concerning Possible Contamination of the
Assets. Buyer is aware that the Assets have been used for exploration,
development, production and transportation of Hydrocarbons and that there may be
petroleum, produced water, wastes, or other materials located on or under the
Assets or associated with the Assets. Equipment and sites included in the Assets
may contain asbestos, hazardous substances, or naturally occurring radioactive
materials (“NORM”). NORM may affix or attach itself to the inside of Wells,
materials, and equipment as scale, or in other forms; the Wells, materials, and
equipment located on the Assets or included in the Assets may contain NORM and
other wastes or hazardous substances; and NORM-containing material and other
wastes or hazardous substances may have been buried, come in contact with the
soil, or otherwise been disposed of on the Assets. Special procedures may be
required for the remediation, removal, transportation, or disposal of wastes,
asbestos, hazardous substances, and NORM from the Assets.

 

6.4           Assumed Environmental Liabilities. Upon Closing, except for item
(ix) of Retained Liabilities and subject to Section 6.5 and Seller’s
indemnification obligations in Section 15.4(a), Buyer agrees to assume and pay,
perform, fulfill and discharge and release Seller from all Losses relating to
environmental conditions in, on or under the Assets attributable to the period
of time before and after the Effective Time, including any and all liability for
(i) the assessment, remediation, removal, transportation and disposal of wastes,
asbestos, hazardous substances and NORM, (ii) compliance with Environmental Laws
in respect of the environmental condition of the Assets as of the Effective
Time, and (iii) the obligation to plug and abandon the Wells and reclamation of
existing well sites on the Lands and other facilities or pipelines related to
the Assets (collectively, the “Assumed Environmental Liabilities”).

 

6.5           Environmental Defects. Reference is hereby made to that certain
Purchase and Sale Agreement between Celero Energy, LP and Seller dated effective
as of July 1, 2005, a copy of which Seller has provided to Buyer prior to the
execution of this Agreement (the “Celero PSA”). Capitalized terms used in
Article 6 of the Celero PSA but not defined in this Agreement shall have the
meaning given them in the Celero PSA. The Parties agree that Buyer and Seller
shall have the rights and obligations with respect to environmental matters
relating to the Assets under Article 6 of the Celero PSA, as if Buyer and Seller
were the buyer and seller under, and the Assets were assets under, the Celero
PSA, mutatis mutandis; provided, however, that (a) references in Article 6 of
the Celero PSA to August 1, 2005 shall be references to May 24, 2013, (b) the
reference in the definition of “Environmental Defect” in Section 6.1 of the
Celero PSA to $50,000 shall be a reference to $75,000 and (c) references in
Section 6.4 of the Celero PSA to $5,000,000 shall be references to $7,500,000.

 

6.6           Environmental Law. “Environmental Law” means any and all Laws or
other legally enforceable requirements (including common law) issued by any
Governmental Authority in effect on or before the Closing Date (collectively,
“Environmental Laws”) regulating or imposing liability or standards of conduct
concerning protection of the environment or human health and safety or the
release or disposal of waste materials.

 

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ARTICLE 7.

SELLER’S REPRESENTATIONS

 

The Parties’ agreement with respect to title matters and environmental matters
is set forth in Articles 5 and 6, respectively, and the provisions of those
Articles set forth Seller’s representations, if any, with respect to title
matters and environmental matters. Except for title matters and environmental
matters, Seller makes the following representations and warranties as of the
execution of this Agreement and as of the Closing Date (other than those set
forth in Sections 7.1 through 7.4 and 7.14 through 7.17) for purposes of serving
as conditions to Closing only:

 

7.1           Corporate Representations.

 

(a)          Seller is a corporation, duly organized, validly existing and in
good standing under the Laws of the State of Delaware and is duly qualified to
carry on its business in the States of New Mexico, Oklahoma and Texas. WTGP is a
limited liability company, duly organized, validly existing and in good standing
under the Laws of the State of Delaware. WTLP is a limited liability company,
duly organized, validly existing and in good standing under the Laws of the
State of Delaware.

 

(b)          Seller has all requisite power and authority to own the Assets, to
carry on its business as presently conducted, to execute, deliver, and perform
this Agreement and each other agreement, instrument, or document executed or to
be executed by Seller in connection with the Transaction to which it is a party
and to consummate the Transaction. The execution, delivery, and performance by
Seller of this Agreement and each other agreement, instrument, or document
executed or to be executed by Seller in connection with the Transaction to which
it is a party, and the consummation by it of the Transaction and the
transactions contemplated thereby, have been duly authorized by all necessary
corporate action of Seller.

 

(c)          The execution and delivery of this Agreement does not, and the
fulfillment of and compliance with the terms and conditions hereof will not, (i)
create a Lien on the Assets, (ii) violate, conflict with or constitute a default
or an event that, with notice or lapse of time or both, would be a default,
breach or violation under any provision of Seller’s or either of the Acquired
Entities’ governing documents or any material lease, contract, agreement,
instrument or obligation to which Seller or either of the Acquired Entities is a
party or by which Seller, either of the Acquired Entities or the Assets are
bound, or, (iii) violate, conflict with or constitute a breach of any Laws.

 

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7.2           Capitalization; Ownership; Organizational Documents. All of the
Acquired Entities’ issued and outstanding member interests are owned by Seller.
All of the Acquired Entities’ issued and outstanding member interests were duly
authorized and validly issued and are fully paid and nonassessable. Except for
the Acquired Entities’ ownership interests in the Limited Partnership, neither
Acquired Entity owns any equity interests or other securities in any other
Person or any other assets whatsoever. During Seller’s ownership of the Acquired
Entities, the Acquired Entities have not engaged in any business except for the
ownership of interests in the Limited Partnership. Except for the rights created
pursuant to this Agreement, there are no outstanding options, warrants,
convertible securities or other rights, agreements, arrangements or commitments
of any kind relating to the right to subscribe for or purchase member or other
equity interests in either of the Acquired Entities or obligating either of the
Acquired Entities to issue or sell any member or other equity interests in
either of the Acquired Entities. There are no outstanding contractual
obligations of either of the Acquired Entities to repurchase, redeem or
otherwise acquire any member or other equity interests in either of the Acquired
Entities or to provide funds to, or make any investment in, any Person other
than the Limited Partnership. True and complete copies of the Organizational
Documents of the Acquired Entities have been provided to Buyer prior to the date
hereof.

 

7.3           Authorization and Enforceability. This Agreement, the Conveyance
and each other agreement, instrument or document executed or to be executed by
Seller in connection with the Transaction to which it is a party constitutes, or
when executed and delivered will constitute, Seller’s legal, valid and binding
obligation, enforceable in accordance with their respective terms, subject,
however, to the effects of bankruptcy, insolvency, reorganization, moratorium
and other Laws for the protection of creditors and equitable principles which
may limit the availability of certain equitable remedies (such as specific
performance) in certain instances.

 

7.4           Liability for Brokers’ Fees. Neither Seller nor any Acquired
Entity has incurred any liability, contingent or otherwise, for brokers’ or
finders’ fees relating to the Transaction for which Buyer or any Acquired Entity
shall have any responsibility whatsoever.

 

7.5           No Bankruptcy. There are no bankruptcy proceedings pending, being
contemplated by Seller or any Acquired Entity or, to the knowledge of Seller,
threatened against Seller or any Acquired Entity by any third party.

 

7.6           Litigation. Neither Seller nor any Acquired Entity has received a
written claim, charge, audit, investigation or demand notice that has not been
resolved and that would adversely affect any of the Assets. There are no Actions
pending or, to Seller’s knowledge, threatened against Seller or any Acquired
Entity or with respect to any of the Assets, before any arbitration authority or
Governmental Authority that relate to any of the Assets, or that would affect
Seller’s ability to execute and deliver this Agreement or to consummate the
Transaction.

 

7.7           No Liens. Except as set forth on Schedule 7.7 and for Permitted
Encumbrances, there are no (i) judgments, transcripts of judgments or court
actions, adjudicated or pending against or involving Seller or any Acquired
Entity, (ii) Liens against or involving Seller or any Acquired Entity or the
Assets other than those that will be released at or before Closing, (iii)
notices of unredeemed tax sales or unpaid taxes or special assessments due or
delinquent filed against Seller’s or any Acquired Entity’s interest in the
Assets, or (iv) assignments of leasehold from Seller or any Acquired Entity to
other parties not reflected in the materials examined which would operate to
reduce the NRI or increase the WI set forth on Exhibit B.

 

7.8           Judgments. There are no unsatisfied or continuing judgments,
orders, decrees, directives or injunctions issued by an arbitration authority or
Governmental Authority outstanding against Seller or any Acquired Entity with
respect to the Assets that would be reasonably expected to impair Seller’s
ability to enter into this Agreement or consummate the Transaction.

 

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7.9           Compliance with Laws. To Seller’s knowledge, the Assets have been
owned and operated by Seller in all material respects in compliance with all
Laws.

 

7.10         Material Agreements. To Seller’s knowledge, except for the Leases
and other agreements listed on Exhibit A, Seller has identified on Exhibit C a
list of all agreements to which Seller or any Acquired Entity is a party or by
which the Assets are bound that are material to the ownership or operation of
the Assets (the “Material Agreements”). Except as noted on Exhibit C, to
Seller’s knowledge:

 

(a)          the Material Agreements are in full force and effect in all
material respects;

 

(b)          Seller is not in material default with respect to any Material
Agreement nor is any counterparty thereunder in material default; and

 

(c)          Seller has made all of Seller’s payments due and owing under the
Material Agreements in a timely manner before the same became delinquent.

 

Buyer and Seller agree and acknowledge that Leases are not Material Agreements.

 

7.11         Governmental Permits. To Seller’s knowledge, Seller has all
governmental licenses, filings and permits (including permits, licenses,
approval registrations, notifications, exemptions and any other authorizations
pursuant to Laws) necessary or appropriate to own and operate the Assets as
presently being owned and operated. To Seller’s knowledge, such licenses,
filings and permits are in full force and effect and Seller has not received
written notice of any violations in respect of any such licenses or permits that
remains uncured.

 

7.12         Hydrocarbon Sales Contracts. To Seller’s knowledge, Seller has
listed all Hydrocarbon Sales Contracts on Schedule 7.12. Except for payments
that are not material, to Seller’s knowledge, proceeds from the sale of oil,
condensate, and gas from the Assets are being received by Seller in a timely
manner. To Seller’s knowledge, Seller is not having deliveries of gas from any
Asset subject to a Hydrocarbon Sales Contract curtailed substantially below such
property’s delivery capacity.

 

7.13         Property Costs. To Seller’s knowledge, Seller has paid all Property
Costs attributable to the period of time prior to the Effective Time and during
Seller’s ownership of the Assets as such Property Costs become due, and such
Property Costs are being paid in a timely manner before the same become
delinquent, except for any such Property Costs as are being disputed in good
faith by Seller in a timely manner.

 

7.14         Transfer Requirements. Except as set forth on Schedule 7.14, there
are no Transfer Requirements.

 

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7.15         Employee Matters. The Acquired Entities do not have, and have never
had, any employees. The Asset Workers are not subject to a collective bargaining
agreement or represented by any labor union. The Acquired Entities do not
sponsor, maintain or contribute to, and have never sponsored, maintained or
contributed to, any “employee benefit plan,” as such term is defined in section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), or any other plan, policy, agreement, arrangement, program or
practice providing compensation or benefits to any employee or other individual.

 

7.16         Taxes. With respect to the Limited Partnership, to the knowledge of
Seller:

 

(a)          All Taxes owed by (i) the Acquired Entities and (ii) the Limited
Partnership, that are or have become due have been paid in full;

 

(b)          All Tax Returns required to be filed by or with respect to the
Acquired Entities or the Limited Partnership have been duly and timely filed,
and each such Tax Return is true, correct and complete in all material respects;

 

(c)          There are no Liens on any of the Assets, the assets of the Acquired
Entities or the assets of the Limited Partnership currently existing, pending
or, to the knowledge of Seller, threatened, with respect to Taxes, except for
statutory Liens for current period Taxes not yet due and payable; and

 

(d)          Each of the Acquired Entities is, and since its inception has at
all times been, an entity disregarded as separate from Seller for U.S. federal
income tax purposes.

 

7.17         Tax Partnerships. Except for the Limited Partnership, none of the
Assets, the assets of the Acquired Entities or the assets of the Limited
Partnership is subject to any Tax partnership agreement or is otherwise treated
as held in an arrangement requiring a partnership income Tax Return to be filed
under Subchapter K of Chapter 1 of Subtitle A of the Code.

 

7.18         Preferential Rights. None of the Assets is subject to any
Preferential Right.

 

7.19         Disclosures. The matters set forth on any of the Exhibits attached
hereto are not necessarily matters that Seller is required to disclose or
matters that would constitute a breach of any representation or warranty had
such matters not been disclosed.

 

ARTICLE 8.

BUYER’S REPRESENTATIONS

 

Buyer makes the following representations and warranties to Seller as of the
execution of this Agreement and as of Closing:

 

8.1           Corporate Representations.

 

(a)          Buyer is a limited partnership, duly organized, validly existing
and in good standing under the Laws of the State of Delaware and at Closing will
be duly qualified to carry on its business in the States of New Mexico, Oklahoma
and Texas.

 

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(b)          Buyer will have all requisite power and authority to own the Assets
at Closing, to carry on its business as presently conducted and to execute,
deliver, and perform this Agreement and each other agreement, instrument, or
document executed or to be executed by Buyer in connection with the Transaction
to which it is a party and to consummate the Transaction. The execution,
delivery, and performance by Buyer of this Agreement and each other agreement,
instrument, or document executed or to be executed by Buyer in connection with
the Transaction to which it is a party, and the consummation by it of the
Transaction and thereby, have been duly authorized by all necessary partnership
action of Buyer.

 

(c)          The execution and delivery of this Agreement does not, and the
fulfillment of and compliance with the terms and conditions hereof will not (i)
violate, conflict with or constitute a default or an event that, with notice or
lapse of time or both, would be a default, breach or violation under any
provision of Buyer’s governing documents or any material lease, contract,
agreement, instrument or obligation to which Buyer is a party or by which Buyer
is bound, or (ii) violate, conflict with or constitute a breach of any Laws.

 

8.2           Authorization and Enforceability. The execution, delivery and
performance of this Agreement and the Transaction have been duly and validly
authorized by all requisite action on behalf of Buyer. This Agreement and each
other agreement, instrument, or document executed or to be executed by Buyer in
connection with the Transaction to which it is a party constitutes, or when
executed and delivered will constitute, Buyer’s legal, valid and binding
obligation, enforceable in accordance with their respective terms, subject,
however, to the effects of bankruptcy, insolvency, reorganization, moratorium
and similar Laws for the protection of creditors and equitable principles which
may limit the availability of certain equitable remedies (such as specific
performance) in certain instances.

 

8.3           Liability for Brokers’ Fees. Buyer has not incurred any liability,
contingent or otherwise, for brokers’ or finders’ fees relating to the
Transaction for which Seller shall have any responsibility whatsoever.

 

8.4           Litigation. There is no Action by any person, entity or
Governmental Authority pending or, to Buyer’s knowledge, threatened against it
before any Governmental Authority that impedes or is likely to impede Buyer’s
ability to consummate the Transaction and to assume the liabilities to be
assumed by Buyer under this Agreement, including the Assumed Liabilities.

 

8.5           Financial Resources. Buyer has or will have as of the Closing Date
the financial resources available to close the Transaction.

 

8.6           Securities Laws, Access to Data and Information. Buyer is familiar
with the Assets and it is a knowledgeable, experienced and sophisticated
investor in the oil and gas business. Buyer understands and accepts the risks
and absence of liquidity inherent in ownership of the Assets. Buyer acknowledges
that the Assets are or may be deemed to be “securities” under the Securities Act
of 1933, as amended, and certain applicable state securities or Blue Sky Laws
and that resales thereof may therefore be subject to the registration
requirements of such acts. The Assets are being acquired solely for Buyer’s own
account for the purpose of investment and not with a view to resale,
distribution or granting a participation therein.

 

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8.7           Buyer’s Evaluation.

 

(a)          Records. Buyer is experienced and knowledgeable in the oil and gas
business and is aware of its risks. Buyer acknowledges that Seller is making
available to it the Records and the opportunity to examine, to the extent it
deems necessary in its sole discretion, all real property, personal property and
equipment associated with the Assets. Except for the representations of Seller
contained in this Agreement and the special warranty in the Conveyance, Buyer
acknowledges and agrees that Seller has not made any representations or
warranties, express or implied, written or oral, as to the accuracy or
completeness of the Records or any other information relating to the Assets
furnished or to be furnished to Buyer or its representatives by or on behalf of
Seller, including any estimate with respect to the value of the Assets,
estimates of when “payout” will occur for a particular Asset, estimates or any
projections as to reserves and/or events that could or could not occur, future
operating expenses, future workover expenses and future cash flow.

 

(b)          Independent Evaluation. In entering into this Agreement, Buyer
acknowledges and affirms that it has relied and will rely solely on the terms of
this Agreement and the Exhibits and Schedules to this Agreement and the
Conveyance and upon its independent analysis, evaluation and investigation of,
and judgment with respect to, the business, economic, legal, tax or other
consequences of the Transaction including its own estimate and appraisal of the
extent and value of the petroleum, natural gas and other reserves of the Assets,
the value of the Assets and future operation, maintenance and development costs
associated with the Assets. Buyer owns and operates other oil and gas properties
and is aware of the geologic factors and risks associated with operating oil and
gas wells. Accordingly, Buyer assumes the risk of the downhole condition of the
Wells. Except as expressly provided in this Agreement, the Conveyance and the
Transition Services Agreement, Seller shall not have any liability to Buyer or
its Affiliates, agents, representatives or employees resulting from any use,
authorized or unauthorized, of the Records or other information relating to the
Assets provided by or on behalf of Seller.

 

(c)          Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT AND THE
CONVEYANCE, THE ASSETS ARE TO BE SOLD AND ACCEPTED BY BUYER AT CLOSING “AS IS,
WHERE IS AND WITH ALL FAULTS” AND SELLER MAKES NO WARRANTY OR REPRESENTATION OF
ANY KIND OR NATURE, EXPRESS OR IMPLIED, IN FACT OR BY LAW, WITH RESPECT TO THE
ORIGIN, QUALITY, CONDITION OR SAFETY OF ANY EQUIPMENT OR OTHER PERSONAL
PROPERTY, TITLE TO PERSONAL OR MIXED PROPERTY, TITLE TO REAL PROPERTY,
COMPLIANCE WITH GOVERNMENTAL REGULATIONS OR LAWS, MERCHANTABILITY, FITNESS FOR
ANY PARTICULAR PURPOSES, CONDITION, QUANTITY, VALUE OR EXISTENCE OF RESERVES OF
OIL, GAS OR OTHER MINERALS PRODUCIBLE OR RECOVERABLE FROM THE LEASES, UNITS OR
WELLS, OR OTHERWISE. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT AND THE
CONVEYANCE, ALL WELLS, PERSONAL OR MIXED PROPERTY, DATA, RECORDS, MACHINERY,
EQUIPMENT AND FACILITIES COMPRISING THE ASSETS OR SITUATED THEREON OR
APPURTENANT THERETO, ARE TO BE CONVEYED BY SELLER AND ACCEPTED BY BUYER
PRECISELY AND ONLY “AS IS, WHERE IS” AND WITHOUT RECOURSE AGAINST SELLER.

 

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(d)          Acknowledgement. Buyer acknowledges that the Assets have been used
for oil and gas drilling and producing operations, transportation or gathering
operations, related oil field operations and possibly the storage and disposal
of waste material incidental to or occurring in connection with such operation,
and that physical changes in land may have occurred as a result of such uses and
that Buyer has entered into this Agreement on the basis of Buyer’s own
investigation or right to investigate, the physical condition of the Assets.
Except as otherwise expressly set forth in this Agreement and the Conveyance,
Buyer is acquiring the Assets precisely and only in an “as is, where is”
condition and assumes the risk that adverse physical conditions including the
presence of unknown abandoned or unproductive oil wells, gas wells, equipment,
pits, landfills, flowlines, pipelines, water wells, injection wells and sumps
which may or may not have been revealed by Buyer’s investigation, are located
thereon or therein, and whether known or unknown to Buyer as of Closing.

 

ARTICLE 9.

COVENANTS AND AGREEMENTS

 

9.1           Covenants and Agreements of Seller. Seller covenants and agrees
with Buyer as follows:

 

(a)          Operations Prior to Closing. From the date of execution hereof to
the Closing, in addition to the requirements set forth in Section 9.1(c), Seller
will operate the Assets in the ordinary course of business and consistent with
past practices, or where Seller is not the operator of an Asset, will continue
its actions as a non-operator in the ordinary course of its business. From the
date of execution of this Agreement to the Closing Date, and subject to
adjustment as provided in Section 3, Seller shall pay or cause to be paid its
proportionate shares of all Property Costs incurred in connection with the
ownership or operations of the Assets in compliance with Sections 9.1(a) through
9.1(c). Seller will keep Buyer timely informed of all matters it considers in
good faith to be material developments affecting any of the Assets. Seller will
continue to execute the capital plan as set forth in the Cap Ex Budget. Without
expanding any obligations which Seller may have to Buyer, it is expressly agreed
that Seller shall never have any liability to Buyer for the obligations under
this Section 9.1(a) with respect to Seller’s acting as an operator of an Asset
greater than that which it might have as the operator to a non-operator under
the applicable operating agreement (or, in the absence of such an agreement,
under the AAPL 610 (1989 Version) form Operating Agreement), IT BEING RECOGNIZED
THAT, UNDER SUCH AGREEMENTS AND SUCH FORM, THE OPERATOR IS NOT RESPONSIBLE FOR
ITS OWN NEGLIGENCE, AND HAS NO RESPONSIBILITY OTHER THAN FOR GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.

 

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(b)          Restriction on Operations. From the date of execution hereof to the
Closing, Seller will promptly inform Buyer of all requests for commitments to
expend funds in excess of $100,000 with respect to the Assets, other than
current activities for drilling, completions, recompletions, refracs or other
well service units and to the extent necessary to execute the Libby Ranch
Project and other capital projects as estimated in the Cap Ex Budget. From the
date of execution hereof to the Closing and without the prior written consent of
Buyer, subject to the Cap Ex Budget in respect of which Buyer is deemed to
consent, Seller shall not:

 

(i)          commit to or incur any expenditures in excess of $100,000 (net to
Seller’s interest) with respect to any part of the Assets, except for emergency
events requiring immediate action to protect life or preserve the Assets;

 

(ii)         make any nonconsent elections with respect to operations affecting
the Assets;

 

(iii)        increase the base salary or benefits payable, or enter into any
collective bargaining agreement or other labor contract applicable, to any of
Seller’s or Seller’s Affiliates’ employees directly involved with providing
services with respect to the Assets, all of whom as of the date of this
Agreement are listed on Schedule 9.1(b) (such individuals, and any other
individuals employed by Seller or its Affiliates after the date of this
Agreement to provide Services (as such term is defined in the Transition
Services Agreement), collectively the “Asset Workers”);

 

(iv)        abandon any Well or release (or permit to terminate), except as
necessary to comply with governmental regulations, or modify or reduce its
rights under all or any portion of any of the Leases, unless the cost to abandon
such Well is projected to cost less than $35,000;

 

(v)         modify or terminate any of the Material Agreements or waive or
relinquish any right thereunder or enter into any agreement that, if in
existence as of the execution date hereof, would be a Material Agreement;

 

(vi)        agree to any renegotiated price, take or other terms under existing
gas purchase agreements which are not terminable within thirty (30) days’
notice;

 

(vii)       agree to any credit or prepayment arrangement that would reduce the
share of gas deliverable with respect to the Assets following the Effective
Time;

 

(viii)      enter into any agreement or instrument for the sale, treatment, or
transportation of production from the Assets (except for sales agreements
terminable on no more than thirty (30) days’ notice);

 

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(ix)         encumber, sell or otherwise dispose of any of the Assets, other
than personal property that is replaced by equivalent property or consumed in
the normal operation of the Assets, or is equipment which was worthless or not
usable consistent with its manufactured and intended use or for Hydrocarbons
produced from the Assets; and

 

(x)          except where necessary to prevent the termination of a Lease or
Material Agreement governing Seller’s interest in the Assets, propose (A) the
drilling of any additional wells, (B) the deepening, plugging back or reworking
of any Well, (C) the conducting of any other operations which require consent
under the applicable operating agreement, or (D) the conducting of any other
operations other than the normal operation of the existing Wells on the Assets.

 

(c)          Capital Expenditure Program. In addition to the covenants set forth
in Sections 9.1(a) and 9.1(b) and subject to Section 3.4, Seller agrees to
continue to execute the development program for the Libby Ranch Project from the
date of execution hereof to the Closing.

 

(d)          Oil Price Protection. Prior to Closing, Seller shall provide oil
price protection in the form of swaps with a financial counterparty in respect
of the time periods, volumes and prices set forth below:

 

Commodity  Period   Swap Volume
(Bbl/d)   NYMEX
Swap Price  Crude Oil   4/1/13 – 12/31/13    6,100   $98.50  Crude Oil   1/1/14
– 12/31/14    5,500   $94.75  Crude Oil   1/1/15 – 12/31/15    5,000   $94.75 
Crude Oil   1/1/16 –  3/31/16    4,400   $93.50 

 

The foregoing swaps shall be novated to Buyer at Closing in form and substance
reasonably satisfactory to Buyer, with Buyer bearing all costs of novation.

 

(e)          Team CO2 Supply. Seller owns certain CO2 leasehold rights to the
Santa Rosa formation in Harding County, New Mexico north of the Libby Ranch
Project as described in Section 2.2(m) (the “Team CO2 Acreage”). It is Seller’s
intent to develop the Team CO2 Acreage, produce CO2 from wells drilled thereon
and transport such CO2 from a pipeline and infrastructure (the “Team CO2
Pipeline”) to the vicinity of the Libby Lateral pipeline (the “Team CO2
Project”). At Closing, the Parties will enter into the Product Sale and Purchase
Agreement in the form of Exhibit J (the “CO2 Purchase and Sale Agreement”).

 

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(f)          Audited Financial Statements.

 

(i)          Seller shall prepare, at the sole cost and expense of Buyer, and
deliver at least five days prior to Closing, statements of revenues and direct
operating expenses and notes thereto related to the Assets (A) as of and for the
three years ended December 31, 2012 (the “Annual Special Financial Statements”)
and (B) as of and for the three months ended March 31, 2012 and 2013, or, if the
Closing shall occur on or after June 30, 2013, as of and for the six months
ended June 30, 2012 and 2013 (the “Interim Special Financial Statements,” and
collectively with the Annual Special Financial Statements, the “Special
Financial Statements”), including any notes required to be prepared in
accordance with Financial Accounting Standards Board ASC Topic 932 – “Extractive
Activities – Oil and Gas”, in such form that the Annual Special Financial
Statements can be audited by Seller’s external audit firm (“Seller’s Auditor”)
and reviewed as may be required by Seller’s external independent petroleum
reserve engineering firm (“Seller’s Engineer”). The Parties acknowledge that the
Special Financial Statements are the only financial statements that are
available or practicable to prepare with respect to the Assets. Seller shall
cooperate with and permit Buyer to review and/or reasonably participate in the
preparation of the Special Financial Statements and shall provide Buyer and its
representatives with reasonable access during normal business hours to Seller’s
personnel who engage in the preparation of the Special Financial Statements.

 

(ii)         Seller shall use reasonable efforts to execute and deliver, or
cause to be executed and delivered, to Seller’s Auditor such representation
letters, in form and substance customary for representation letters provided to
external audit firms by Seller (if the financial statements are subject of an
audit or are the subject of a review pursuant to Statement of Accounting
Standards 100 (Interim Financial Information)), as may be reasonably requested
by Seller’s Auditor, with respect to the Special Financial Statements. Buyer
shall indemnify, defend and hold harmless Seller, each Affiliate of Seller and
each of its and their respective directors, officers, employees and agents and
each of the successors and assigns of any of the forgoing from and against any
and all damages, losses, liabilities, obligations, penalties, judgments,
settlements, claims, payments, fines, interest, costs and expenses (including
the costs and expenses of any and all demands, charges or Actions of any nature
and demands, assessments, judgments, settlements and compromises relating
thereto and the costs and expenses of attorneys’, accountants’, consultants’ and
other fees and expenses incurred in the investigation or defense thereof or the
enforcement of rights hereunder) arising out of, by reason of or otherwise with
regard to the execution, delivery or any other action related to the preparation
or provision by Seller, or the use or filing with the SEC by Buyer, of (A) any
representation letter delivered by Seller to Seller’s Auditor, (B) the Special
Financial Statements, and (C) the Annual Special Financial Statements. Buyer
shall execute and deliver, or cause to be executed and delivered, a customary
representation letter to Seller’s Auditor, if reasonably requested, and Buyer’s
existing outside auditors shall execute and deliver, or cause to be executed and
delivered, a customary representation letter to Seller’s Auditor, if reasonably
requested.

 

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(iii)        Seller will engage Seller’s Auditor to perform, at the sole cost
and expense of Buyer, an audit of the Annual Special Financial Statements and
Seller shall use reasonable efforts to cause, at the sole cost and expense of
Buyer, Seller’s Auditor to issue unqualified opinions to Buyer with respect to
the Annual Special Financial Statements (the Annual Special Financial Statements
and related audit opinions being hereinafter referred to as the “Audited Special
Financial Statements”), and provide its written consent for the use of the audit
reports with respect to the Audited Special Financial Statements in reports,
registration statements, or other documents filed by Buyer or any of its
affiliates under the Securities Act or the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and the rules and regulations thereunder, as
needed. Seller will engage Seller’s Engineer, at the sole cost and expense of
Buyer, as may be required in connection with the preparation of the Annual
Special Financial Statements. Buyer shall reimburse Seller as soon as practical
and in any event within five business days of a request from Seller to do so,
for all fees and expenses charged by Seller’s Auditor and Seller’s Engineer in
connection with any action taken pursuant to this Section 9.1(f). Buyer shall
take all reasonable action as may be necessary to facilitate the completion of
such audit and delivery of the Audited Special Financial Statements and the
delivery of the Interim Special Financial Statements, to Buyer or any of its
affiliates as soon as reasonably practicable, but not later than five days prior
to the Closing Date.

 

(g)          Notification of Claims. Seller shall promptly notify Buyer of any
Action and any cause of Action that relates to the Assets or that might, in
Seller’s reasonable judgment, result in impairment or loss of Seller’s title to
any portion of the Assets or the value thereof or that might hinder or impede
the operation of the Leases arising or threatened prior to the Closing.

 

(h)          Existing Relationships. Prior to the Closing, Seller shall not
introduce any new method of management, operation or accounting with respect to
the Assets and shall use all reasonable efforts to preserve its relationships
with customers, suppliers, distributors, contractors, operators, non-operators,
royalty owners, and others having business dealings with it in connection with
the Assets.

 

(i)          Consents. For the purposes of obtaining the written consents
required in this Section 9.1, Buyer designates the person set forth in Section
16.2. Such consents may be obtained in writing by overnight courier or given by
telecopy or facsimile transmission.

 

(j)          No Mortgages. Seller shall deliver releases of any mortgages or
financing statements in respect of Liens on the Assets at Closing, in form and
substance satisfactory to Buyer.

 

(k)          No Negotiation. Until the Closing or the earlier termination of
this Agreement, Seller will not, and will cause its Affiliates, investment
advisors and other representatives not to, (i) solicit, directly or indirectly,
any offer to acquire any of the Assets, or (ii) enter into any negotiations
with, or enter into any agreement that provides for acquisition of the Assets,
or any portion thereof, by a Person other than Buyer.

 

(l)          Insurance. Seller will maintain through the Closing Date, with
respect to the Assets, the insurance coverage described on Schedule 9.1(l).

 

(m)          Permits. Seller shall use reasonable best efforts to cause all
permits, licenses, approval registrations and other authorizations pursuant to
Laws relating to the Assets to be transferred to Buyer. Seller shall not be
obligated to expend any funds in obtaining such transfers other than fees and
expenses of Seller’s counsel, and if Seller incurs any expenses (other than fees
and expenses of Seller’s counsel) in connection with such transfers on Buyer’s
behalf, then Buyer, at Seller’s option, will prepay or immediately reimburse
Seller after Seller incurs such expenses.

 

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(n)          Noncompetition. For a period of fifteen (15) years after the
Closing Date, unless Buyer provides written approval in advance, Seller shall
not, and shall cause its Affiliates not to, directly or indirectly enter into
any agreement with Reliant or its Affiliates, or their successors and assigns,
with respect to acquiring an interest in (i) the drilling of any CO2 wells on,
or (ii) any CO2 leases owned by Reliant or its Affiliates as of the Effective
Time with respect to Reliant’s leasehold of 27,760 net acres in Harding County,
New Mexico.

 

(o)          Prior to Closing, for organizational purposes, Buyer may request
Seller to assign one or more Material Contracts to one of the Acquired Entities
and upon such request Seller shall so assign such Material Contracts prior to
Closing.

 

9.2           Covenants and Agreements of Buyer. Buyer covenants and agrees with
Seller as follows:

 

(a)          Entity Status. Buyer shall maintain its limited partnership status
from the date hereof until the Closing Date and the Final Settlement Date, and
use all reasonable efforts to assure that as of the Closing Date and the Final
Settlement Date it will not be under any material legal or contractual
restriction that would prohibit or delay the timely consummation of the
Transaction.

 

(b)          Replacement Bonds and Instruments. At Closing, Buyer shall provide
replacement instruments for each bond or similar contingent obligation given by
Seller securing its, or its contract operator’s, obligations relating to the
Assets, set forth on Schedule 9.2(b) (collectively, the “Instruments”). As soon
as practical after Closing, Buyer (with reasonable assistance of Seller as
requested by Buyer) shall use its commercially reasonable efforts to obtain the
release of the Assets and/or Seller from the Instruments.

 

(c)          Change of Name. Buyer undertakes and agrees that promptly after the
Closing (but no later than August 31, 2013), it will take all actions necessary
to change the name of the Acquired Entities to delete the use of the name
“Whiting” and/or any derivative thereof.

 

(d)          NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, provided
that this Section 9.2(d) shall not apply to the special warranty in the
Conveyance or the matters set forth on Schedule 9.2(d), Buyer has performed its
title and environmental due diligence and as of the date of this Agreement,
Buyer has satisfied itself and, subject to Sections 15.2 and 15.4(a), accepted
the environmental condition of the Assets, and Buyer agrees that there are no
Title Defects or Environmental Defects nor to Buyer’s knowledge any facts or
information that could give rise to such defects. Accordingly, Buyer hereby
waives its rights to assert any Title Defect and Environmental Defect except
those Title Defects or Environmental Defects (i) which Buyer can show arose
after the execution of this Agreement and before the Title Defect Date and (ii)
which are presented to Seller by proper notice as provided herein prior to
Closing.

 

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(e)          Hardesty Receivables.

 

(i)          Buyer acknowledges that Seller has $3,127,124 of accounts
receivable as of March 31, 2013 relating to capital expenditures made with
respect to the NE Hardesty Field as of the Effective Time (the “Hardesty
Receivables”). Buyer shall collect and recover from revenues of the NE Hardesty
Field in accordance with the Plan of Unitization for the NE Hardesty Unit, dated
February 5, 1971, by and between Anadarko Production Company and Petroleum,
Inc., et al, as amended (the “Hardesty Unit Agreement”), the Hardesty
Receivables and shall pay to Seller an amount equal to such Hardesty Receivables
collected during a month plus accrued interest as provided for in the Hardesty
Unit Agreement within five business days after the end of such month. For
purposes of determining whether any of the Hardesty Receivables are collected by
Buyer, all payments of Hardesty Receivables received by Buyer after the Closing
shall be applied so as to retire accounts receivable relating to the NE Hardesty
Field in chronological order based upon the period of time such accounts
receivable have existed on the books of Seller and/or Buyer, as the case may be.

 

(ii)         Subject to completion of the Libby Ranch Project delivery of CO2
volumes contemplated thereby, Buyer agrees to execute the development plan for
the NE Hardesty Field set forth on Schedule 9.2(e). Subject to the occurrence of
the Closing, Buyer agrees to purchase the interests of Chaparral Energy, LLC
(“Chaparral”) in the NE Hardesty Field on the terms set forth in that certain
letter dated June 21, 2013 from Whiting Petroleum Corporation to Chaparral
pursuant to a definitive agreement in a form reasonably acceptable to Buyer and
Seller.

 

(f)          Libby Lateral Reassignment. Buyer shall have the option, upon at
least 60 days prior written notice to Seller, to elect to reassign the Libby
Lateral to Seller at any time between January 1, 2023 and December 31, 2028
without further consideration to be paid by Seller; provided that Seller shall
assume all liabilities directly relating to the Libby Lateral, including
environmental and abandonment liabilities. If Buyer so elects, then Buyer and
Seller shall execute documentation conveying the Libby Lateral on an “as is,
where is” basis with no representation or warranty other than a special warranty
from Buyer on real property and other than for the terms in this Section 9.2(f),
on terms reasonably satisfactory to Buyer and Seller to document such
assignment.

 

(g)          Insurance. Buyer will maintain from the Closing Date through the
Termination Date (as defined in the Transition Services Agreement) insurance
coverage with respect to the Assets of types and in amounts consistent with
industry standards.

 

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9.3           Covenants and Agreements of the Parties. The Parties covenant and
agree as follows:

 

(a)          Confidentiality. If the Transaction closes on the Closing Date or
such later date as agreed to by the Parties, the provisions of this Section
supersede and replace the terms and conditions of that certain Confidentiality
Agreement dated December 20, 2012 between Seller and BreitBurn Management
Company, LLC (the “Confidentiality Agreement”). All data and information,
whether written, electronic or oral, obtained from Seller in connection with the
Transaction, including the Records, whether obtained by Buyer before or after
the execution of this Agreement, and data and information generated by Buyer in
connection with the Transaction (collectively, the “Information”), is deemed by
the Parties to be confidential and proprietary to Seller until the Closing.
Until the Closing, except as permitted by Section 16.5 or as required by Laws or
stock exchange rule or regulation, Buyer and its officers, agents and
representatives will hold in strict confidence all Information, except any
Information which: (i) at the time of disclosure to Buyer by Seller is in the
public domain; (ii) after disclosure to Buyer by Seller becomes part of the
public domain by publication or otherwise, except by breach of this commitment
by Buyer; (iii) was rightfully in Buyer’s possession at the time of disclosure
to Buyer by Seller; (iv) Buyer rightfully receives from third parties free of
any obligation of confidence; or (v) is developed independently by Buyer without
the Information.

 

(b)          Return of Information. If the Transaction does not close on the
Closing Date, or such later date as agreed to by the Parties, the
Confidentiality Agreement shall remain in effect pursuant to the provisions
thereof, including Paragraph 9 of the Confidentiality Agreement regarding
recovery of the Information in possession of the parties thereto obtained
pursuant to any provision of this Agreement, which Information is at the time of
termination required to be held in confidence pursuant to Section 9.3(a), and
the Parties shall not utilize or permit utilization of the Information to
compete with each other. The terms of Sections 9.3(a), 9.3(b) and 9.3(c) shall
survive termination of this Agreement.

 

(c)          Injunctive Relief. Buyer agrees that Seller will not have an
adequate remedy of Laws if Buyer violates any of the terms of Sections 9.3(a)
and/or 9.3(b). In such event, Seller will have the right, in addition to any
other it may have, to obtain injunctive relief to restrain any breach or
threaten breach of the terms of Sections 9.3(a) and/or 9.3(b), or to obtain
specific enforcement of such terms.

 

(d)          Cure Period for Breach. If any Party believes any other Party has
breached the terms of this Agreement, the Party who believes the breach has
occurred shall give written notice to the breaching Party of the nature of the
breach and give the breaching Party 48 hours to cure. Notwithstanding the
foregoing, this Section 9.3(d) shall not apply to breach of the Parties’
obligations at Closing and shall not operate to delay Closing.

 

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(e)          Notice of Breach. If either Seller or Buyer has knowledge that the
other Party breached a representation or warranty under this Agreement, that
Party shall promptly inform the other Party of such breach so that it may
attempt to remedy or cure such breach prior to Closing.

 

(f)          Regulatory Matters. Each of Seller and Buyer shall (i) make or
cause to be made an appropriate filing of a Notification and Report Form
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the “HSR Act”) with respect to the transactions contemplated hereby as promptly
as practicable, but in no event later than five (5) business days, after the
date of this Agreement, and Seller and Buyer shall each bear their own costs and
expenses incurred in connection with such filings, provided that Buyer shall pay
any filing fees in connection therewith, and (ii) use its commercially
reasonable efforts to respond at the earliest practicable date to any requests
for additional information made by the Antitrust Division of the Department of
Justice (the “DOJ”), the Federal Trade Commission (the “FTC”) or any other
Governmental Authority, to take all actions necessary to cause the waiting
periods under the HSR Act and any other Laws to terminate or expire at the
earliest possible date, to resist in good faith, at each of their respective
cost and expense, any assertion that the transactions contemplated hereby
constitute a violation of Laws, and to eliminate every impediment under any Laws
that may be asserted by any Governmental Authority so as to enable the Closing
to occur as soon as reasonably possible, all to the end of expediting
consummation of the Transaction. In connection with this Section 9.3(f), the
Parties shall, to the extent permitted by Laws, (i) cooperate in all respects
with each other in connection with any filing, submission, investigation or
inquiry, (ii) promptly inform the other Party of any communication received by
such Party from, or given by such Party to, the DOJ or the FTC or any other
Governmental Authority and of any material communication received or given in
connection with any proceeding by a private party, in each case, regarding the
Transaction, (iii) have the right to review in advance, and to the extent
practicable each shall consult the other on, any filing made with, or written
materials to be submitted to, the DOJ, FTC or any other Governmental Authority
or, in connection with any proceeding by a private party, any other person, in
connection with the Transaction, and (iv) consult with each other in advance of
any meeting, discussion, telephone call or conference with the DOJ, the FTC or
any other Governmental Authority or, in connection with any proceeding by a
private party, with any other Person, and to the extent not expressly prohibited
by the DOJ, the FTC or any other Governmental Authority or person, give the
other Party the opportunity to attend and participate in such meetings and
conferences, in each case, regarding the Transaction.

 

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9.4           Employee Matters.

 

(a)          Beginning on the date of the execution of this Agreement, Seller
shall make available to Buyer all of the Asset Workers to discuss potential
employment with Buyer or an Affiliate of Buyer on or after the Closing Date as
provided below (such entity that makes any employment offers pursuant to this
Section 9.4(a) is herein referred to as the “Buyer Employer”). Buyer shall
provide Seller, in writing, not later than five (5) days prior to the Closing
Date, a list of those Asset Workers to whom a Buyer Employer intends to make
offers of employment (collectively, the “Designated Employees”). The date as of
which employment with a Buyer Employer is to begin in accordance with all such
offers shall be the termination date of the Transition Services Agreement. The
Buyer Employer’s determination as to which Asset Workers shall be Designated
Employees, and the proposed terms of employment offered by the Buyer Employer,
shall be within the sole discretion of the Buyer Employer; provided, however,
that its election and determination shall be made in accordance with all Laws.
The Buyer Employer shall have no obligation under this Agreement to employ any
of the Asset Workers. Those Designated Employees who accept the Buyer Employer’s
employment offers and become active employees of the Buyer Employer pursuant to
the preceding provisions of this paragraph are referred to herein as the
“Transferred Employees.” Seller will provide incentives, the scope and nature of
which shall be determined by Seller in its sole discretion, to all Designated
Employees to accept Buyer Employer offers to become Transferred Employees.
Seller shall not take any action described in Section 9.1(b)(iii) with respect
to any Asset Worker between the Closing Date and the termination date of the
Transition Services Agreement.

 

(b)          Neither Seller nor any of Seller’s Affiliates shall, unless acting
in accordance with Buyer’s prior written consent, solicit, encourage or induce
any Designated Employee to reject an employment offer from a Buyer Employer or
solicit, encourage or induce any such Designated Employee to continue in the
employment of Seller or any of Seller’s Affiliates from and after the
termination date of the Transition Services Agreement. Notwithstanding the
foregoing, Buyer acknowledges and agrees that five Asset Workers residing in the
Midland office will have the option to elect to accept employment with Buyer or
to continue employment with Seller. For a period of one (1) year following the
termination date of the Transition Services Agreement, Seller shall not, and
shall cause its Affiliates not to, directly or indirectly, solicit for
employment any Transferred Employee, unless (in each case prior to any such
solicitation) such Transferred Employee is no longer employed by the Buyer
Employer or any of its Affiliates; provided, however, that Seller shall not be
precluded from hiring any employee whose employment has been terminated by the
Buyer Employer and its Affiliates prior to commencement of employment
discussions between Seller and such employee, and Seller shall not be considered
in breach of this clause if Seller places general advertisements for employees
and hires a Transferred Employee as a result of such advertisement, so long as
such advertisement was not specifically directed at such Transferred Employee.
Seller acknowledges that the purpose of this covenant is to enable the Buyer
Employer and its Affiliates to maintain a stable workforce in order to remain in
the business associated with the Assets, and that it would disrupt, damage,
impair and interfere with such business if Seller were to engage in the
solicitation prohibited hereby.

 

(c)          As soon as reasonably practicable after the termination date of the
Transition Services Agreement, Seller shall provide to Buyer a list of all
Transferred Employees’ length of service used under the employee benefit plans
or policies of Seller or its Affiliates as of such date.

 

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(d)          The provisions of this Section 9.4 are solely for the benefit of
the Parties and nothing in this Section 9.4, express or implied, shall confer
upon any Asset Worker, or legal representative or beneficiary thereof, any
rights or remedies, including any right to employment or continued employment
for any specified period, or compensation or benefits of any nature or kind
whatsoever under this Agreement. Nothing in this Section 9.4, express or
implied, shall be (i) deemed an amendment of any employee benefit plan providing
benefits to any Asset Worker, or (ii) construed to prevent Seller or any of its
Affiliates or Buyer or any of its Affiliates from terminating or modifying to
any extent or in any respect any employee benefit plan that Buyer or any of its
Affiliates may establish or maintain.

 

ARTICLE 10.

TAX MATTERS

 

10.1         Certain Definitions.

 

(a)          “Asset Taxes” shall mean ad valorem, property, excise, severance,
production, sales, use and similar Taxes (including any interest, fine, penalty
or additions to such Tax imposed by a Governmental Authority) assessed against
the Assets (or the assets of the Acquired Entities) or based upon or measured by
the ownership of the Assets (or the assets of the Acquired Entities) or the
production of Hydrocarbons or the receipt of proceeds therefrom, but excluding,
for the avoidance of doubt, (i) Income Taxes and (ii) Transfer Taxes.

 

(b)          “Income Taxes” shall mean (i) all Taxes based upon, measured by, or
calculated with respect to gross, modified gross or net income, gross or net
receipts or profits (including franchise Taxes and any capital gains,
alternative minimum, and net worth Taxes, but excluding ad valorem, property,
excise, severance, production, sales, use, real or personal property transfer or
other similar Taxes), (ii) Taxes based upon, measured by, or calculated with
respect to multiple bases (including corporate franchise, doing business or
occupation Taxes) if one or more of the bases upon which such Tax may be based
upon, measured by, or calculated with respect to is included in clause (i)
above, or (iii) withholding Taxes measured with reference to or as a substitute
for any Tax included in clauses (i) or (ii) above, including, in each case Tax
is referenced in this Section 10.1(b), any interest, fine, penalty or additions
to such Tax imposed by a Governmental Authority.

 

(c)          “Seller Taxes” shall mean (i) Income Taxes imposed by any Laws on
Seller or any of its Affiliates, or any combined, unitary, or consolidated group
of which any of the foregoing is or was a member, (ii) Asset Taxes allocable to
Seller pursuant to Section 10.2 (taking into account, and without duplication
of, (A) such Asset Taxes effectively born by Seller as a result of Purchase
Price adjustments made pursuant to Section 3.4 and/or Section 14.1 and (B) any
payments made from one Party to the other in respect of Asset Taxes pursuant to
the penultimate sentence of Section 10.3), (iii) any Taxes imposed on or with
respect to the ownership or operation of the Excluded Assets, if any, and (iv)
any and all other Taxes imposed on or with respect to the ownership or operation
of the Assets for any tax period (or portion thereof) ending before the
Effective Time.

 

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(d)          “Straddle Period” shall mean any tax period beginning before and
ending after the Effective Time.

 

(e)          “Tax Return” means any return, declaration, report, information,
return or statement relating to Taxes, including any schedule or attachment
thereto and any amendment thereof.

 

(f)          “Taxes” shall mean (i) all taxes, assessments, fees, unclaimed
property and escheat obligations, and other chargers of any kind whatsoever
imposed by any Governmental Authority, including any federal, state, local and
foreign income, gross receipts, capital gains, franchise, ad valorem, property,
production, excise, net proceeds, severance, sales, use, stamp, withholding,
employment, alternative or add-on minimum, and estimated taxes and (ii) any
interest, fine, penalty or additions to tax imposed by a Governmental Authority
in connection with any item described in clause (i).

 

10.2         Apportionment of Asset Tax Liability.

 

(a)          Seller shall be allocated and bear all Asset Taxes attributable to
(i) any tax period (or portion thereof) ending prior to the Effective Time and
(ii) the portion of any Straddle Period ending prior to the Effective Time.
Buyer shall be allocated and bear all Asset Taxes attributable to (A) any tax
period (or portion thereof) beginning on or after the Effective Time and (B) the
portion of any Straddle Period beginning on the Effective Time.

 

(b)          For purposes of determining the allocations described in Section
10.2(a), (i) Asset Taxes that are attributable to or based upon the severance or
production of Hydrocarbons shall be allocated to the period (or portion thereof)
in which the severance or production giving rise to such Asset Taxes occurred,
(ii) Asset Taxes that are based upon or related to income or receipts or imposed
on a transactional basis (other than such Asset Taxes described in clause (i)),
shall be allocated to the period (or portion thereof) in which the transaction
giving rise to such Asset Taxes occurred, and (iii) Asset Taxes that are ad
valorem, property or similar Asset Taxes imposed on a periodic basis pertaining
to a Straddle Period shall be allocated between the portion of such Straddle
Period ending prior to the Effective Time and the portion of such Straddle
Period beginning on or after the Effective Time by prorating each such Asset Tax
based on the number of days in the applicable Straddle Period that occur before
the day on which the Effective Time occurs, on the one hand, and the number of
days in such Straddle Period that occur on and after the day on which the
Effective Time occurs, on the other hand. For purposes of clause (iii) of the
preceding sentence, the period for such Asset Taxes shall begin on the date on
which ownership of the applicable Assets (or assets of the Acquired Entities)
gives rise to liability for the particular Asset Tax and shall end on the day
before the next such date.

 

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10.3         Calculation of Adjustments for Asset Tax Liabilities. Consistent
with Section 10.2, and based on the best current information available as of
Closing or the time the Final Settlement Statement is finalized, as applicable,
the proration of applicable Asset Taxes shall be made between the Parties as an
adjustment to the Purchase Price pursuant to Section 3.4 and thereafter further
adjusted, as applicable, pursuant to Section 14.1. If estimates are used for
purposes of adjusting the Purchase Price for an Asset Tax pursuant to Section
3.4 and Section 14.1, upon the later determination of the actual amount of such
Asset Tax, timely payments will be made from Seller to Buyer or from Buyer to
Seller, as applicable, to the extent necessary to cause each of Sellers and
Buyer to bear the amount of such Asset Tax that is allocable to it under Section
10.2. Notwithstanding any provision of this Agreement to the contrary, Section
15.3 shall not apply with respect to Asset Taxes, and Asset Taxes shall not be
treated as Property Costs for purposes of Section 15.3.

 

10.4         Tax Reports and Returns; Cooperation.

 

(a)          For the tax period in which the Effective Time occurs, Seller
agrees to immediately forward to Buyer any such tax reports and returns received
by Seller after Closing and provide Buyer with appropriate information in
Seller’s possession which is necessary for Buyer to file any required tax
reports and returns related to the Assets. Buyer agrees to file all Tax Returns
and reports for Asset Taxes applicable to the Assets that are required to be
filed after the Closing, and pay all required Asset Taxes payable with respect
to the Assets subject to the provisions of Sections 10.2 and 15.4. If Seller has
withheld any monies for third parties for Taxes with respect to the Assets,
Seller shall remit such monies to Buyer upon the earlier of five days prior to
the due date of any such remittance or within three months of Closing, and Buyer
shall then assume the responsibility and liability for the payment of such Taxes
for and on behalf of such third parties solely up to the amount of monies
received by Buyer from Seller with respect to such Taxes.

 

(b)          The Parties shall cooperate fully, as and to the extent reasonably
requested by the other Party, in connection with the filing of Tax Returns and
any Action with respect to Taxes relating to the Assets. Such cooperation shall
include the retention and (upon another Party’s request) the provision of
records and information that are relevant to any such Tax Return or Action and
making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided under this Agreement.
Seller and Buyer agree to retain all books and records with respect to Tax
matters pertinent to the Assets relating to any taxable period beginning before
the Closing Date until the expiration of the statute of limitations of the
respective taxable periods and to abide by all record retention agreements
entered into with any Governmental Authority.

 

10.5         Transfer Taxes. Buyer shall be liable for and shall indemnify
Seller for, any sales and use taxes, conveyance, transfer and recording fees and
mortgage stamps, real estate transfer taxes or stamps or similar Taxes
(excluding for the avoidance of doubt Income Taxes) that may be imposed on the
transfer of the Assets pursuant to this Agreement (“Transfer Taxes”). However,
if required by Laws, Buyer shall, in accordance with Laws, calculate and Seller
will remit any Transfer Taxes that are required to be paid as a result of the
transfer of the Assets to Buyer and Buyer shall promptly reimburse Seller
therefor. If Seller receives notice that any Transfer Taxes are due, Seller
shall promptly forward such notice to Buyer for handling. Buyer shall timely
remit all Transfer Taxes to the appropriate Governmental Authority. Buyer and
Seller shall reasonably cooperate in good faith to minimize, to the extent
permissible under Laws, the amount of any Transfer Taxes.

 

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10.6         Income Taxes. Notwithstanding any provision in this Agreement to
the contrary, no adjustments pursuant to Section 3.4, Section 14.1 or Section
15.3 shall be made to the Purchase Price with respect to Income Taxes.

 

ARTICLE 11.

CONDITIONS PRECEDENT TO CLOSING

 

11.1         Seller’s Conditions Precedent. The obligations of Seller at the
Closing are subject, at the option of Seller, to the satisfaction or waiver at
or prior to the Closing of the following conditions precedent:

 

(a)          Except for representations and warranties already qualified by
“material” or “materiality” in which case such representations and warranties
must be true and accurate in all respects when made and at Closing when serving
as a condition to Closing, all representations and warranties of Buyer contained
in this Agreement are true in all material respects (considering the Transaction
as a whole) at and as of the Closing in accordance with their terms as if such
representations and warranties were remade at and as of the Closing, and except
for covenants and agreements qualified by “material” or “materiality” in which
case such covenants and agreements must be performed and complied with in all
respects by Buyer prior to or at the Closing, Buyer has performed and complied
with all covenants and agreements required by this Agreement to be performed and
complied with by Buyer prior to or at the Closing in all material respects, and
Buyer shall deliver a certificate to Seller confirming the foregoing;

 

(b)          No order has been entered by any Governmental Authority having
jurisdiction over the Parties or the subject matter of this Agreement that
restrains or prohibits the Transaction and that remains in effect at the time of
Closing;

 

(c)          The aggregate of Purchase Price adjustments for Title Defects,
Environmental Defects and Assets excluded under Section 6.5 do not exceed 10% of
the unadjusted Purchase Price;

 

(d)          The waiting period (and any extension thereof) applicable to the
transactions contemplated hereby under the HSR Act shall have expired or earlier
been terminated; and

 

(e)          Buyer shall have delivered, or be standing ready to deliver at
Closing, all agreements, instruments and other documents or items required to be
delivered by Buyer pursuant to Section 13.3.

 

If the above conditions are not met or waived, or if the Closing has not
occurred by August 31, 2013 other than by fault of Seller; in each case, this
Agreement may be terminated at the option of Seller, by notice to Buyer. Article
12 shall govern said termination.

 

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11.2         Buyer’s Conditions Precedent. The obligations of Buyer at the
Closing are subject, at the option of Buyer, to the satisfaction or waiver at or
prior to the Closing of the following conditions precedent:

 

(a)          Except for the representations and warranties already qualified by
“material” or “materiality”, which representations and warranties must be true
and accurate in all respects when made and at Closing when serving as a
condition to Closing, all representations and warranties of Seller contained in
this Agreement are true in all material respects (considering the Transaction as
a whole) at and as of Closing in accordance with their terms as if such
representations and warranties were remade at and as of Closing, and except for
covenants and agreements qualified by “material” or “materiality” in which case
such covenants and agreements must be performed and complied with in all
respects by Seller prior to or at the Closing, Seller has performed and complied
with all covenants and agreements required by this Agreement to be performed and
complied with by Seller prior to or at the Closing in all material respects, and
Seller shall deliver a certificate to Buyer confirming the foregoing;

 

(b)          No order has been entered by any court or Governmental Authority
having jurisdiction over the Parties or the subject matter of this Agreement
that restrains or prohibits the Transaction and that remains in effect at the
time of Closing;

 

(c)          The aggregate of Purchase Price adjustments for Title Defects,
Environmental Defects and Assets excluded under Section 6.5 do not exceed 10% of
the unadjusted Purchase Price;

 

(d)          The waiting period (and any extension thereof) applicable to the
transactions contemplated hereby under the HSR Act shall have expired or earlier
been terminated; and

 

(e)          Seller shall have delivered, or be standing ready to deliver at
Closing, all agreements, instruments and other documents or items required to be
delivered by Seller pursuant to Section 13.3.

 

If the above conditions are not met or waived, or if the Closing has not
occurred by August 31, 2013 other than by fault of Buyer; in each case, this
Agreement may be terminated at the option of Buyer, by notice to Seller. Article
12 shall govern said termination.

 

11.3         Suspense Funds. By way of a Purchase Price adjustment pursuant to
Section 3.4(d)(vii), Seller shall be deemed to have delivered to Buyer at
Closing all proceeds from production attributable to the Assets which are held
in suspense as of the Closing Date. Buyer shall be responsible for the
distribution of such suspended proceeds and agrees to indemnify, defend and hold
harmless Seller from and against any claims, liabilities and losses to the
extent of such suspended proceeds.

 

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ARTICLE 12.

RIGHT OF TERMINATION AND ABANDONMENT

 

12.1         Liabilities Upon Termination.

 

(a)          Buyer’s Breach. If Closing does not occur because Buyer wrongfully
fails to tender performance at Closing or otherwise breaches this Agreement
prior to Closing, and Seller is ready to close, Seller shall retain the Deposit
and any related interest as liquidated damages. Buyer’s failure to close shall
not be considered wrongful if Buyer has terminated this Agreement as of right
under Article 11. The remedy set forth herein shall be Seller’s sole and
exclusive remedy for Buyer’s wrongful failure to close hereunder and Seller
expressly waives any and all other remedies, legal and equitable, that it
otherwise may have had for Buyer’s wrongful failure to Close.

 

(b)          Seller’s Breach. If Closing does not occur because Seller
wrongfully fails to tender performance at Closing or otherwise breaches this
Agreement prior to Closing, and Buyer is ready to close, Seller shall return the
Deposit, together with interest thereon at two percent (2%) per annum, to Buyer
immediately after the determination that the Closing will not occur. Buyer and
Seller agree that Buyer’s sole remedy in such event (in addition to the return
of the Deposit plus interest) shall be an action for specific performance. In
reliance on the foregoing agreement, Buyer waives all legal and equitable
remedies for Seller’s breach of this Agreement, except for return of the Deposit
plus interest and specific performance, which if Buyer elects to pursue, Buyer
must file an action for specific performance within fourteen (14) days of the
determination that the Closing will not occur and Buyer must pursue said remedy
of specific performance as its sole and exclusive remedy (in addition to the
return of the Deposit plus interest) in lieu of all other legal and equitable
remedies. Seller’s failure to close shall not be considered wrongful if Seller
has terminated this Agreement as of right under Article 11. In the event Seller
contests Buyer’s pursuit of specific performance as provided above, Buyer’s
waiver of all legal and equitable remedies shall be deemed ineffective, and
Buyer may pursue all rights and remedies available to it at law or in equity.

 

(c)          Termination Pursuant to Article 11. If Buyer or Seller terminates
this Agreement pursuant to Article 11 as a result of the conditions precedent
set forth in Sections 11.2 or 11.1 (as applicable) not being met in the absence
of a breach by the other Party, neither Buyer nor Seller shall have any
liability to the other Party for termination of this Agreement, and Seller shall
return the Deposit, together with interest thereon at two percent (2%) per
annum, to Buyer immediately after the determination that the Closing will not
occur. If Buyer or Seller terminates this Agreement pursuant to Article 11 and
asserts that a breach of this Agreement has occurred, the notice of termination
shall include a statement describing the nature of the alleged breach together
with supporting documentation.

 

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ARTICLE 13.

CLOSING

 

13.1         Date of Closing. The “Closing” of the Transaction shall be held on
the later to occur of (a) the fifteenth (15th) business day after execution of
this Agreement or (b) two business days after the conditions set forth in
Section 11.1 and Section 11.2 are satisfied, or on such other date as Buyer and
Seller may agree in writing. The date the Closing actually occurs is called the
“Closing Date.”

 

13.2         Place of Closing. The Closing shall be held at the offices of
Seller, 1700 Broadway, Suite 2300 in Denver, Colorado at 10:00 a.m., Mountain
Time, or at such other time and place as Buyer and Seller may agree in writing.

 

13.3         Closing Obligations. At Closing, the following events shall occur,
each being a condition precedent to the others and each being deemed to have
occurred simultaneously with the others:

 

(a)          Seller shall execute, acknowledge and deliver to Buyer, an
Assignment, Bill of Sale and Conveyance in the form attached as Exhibit H (the
“Conveyance”), in sufficient counterparts for recording in each county where the
Assets are located, conveying the Assets to Buyer as of the Effective Time, with
(i) a special warranty of the real property title by, through and under Seller
and its Affiliates but not otherwise and (ii) with all personal property and
fixtures conveyed “AS IS, WHERE IS,” with no warranties whatsoever, express,
implied or statutory.

 

(b)          Seller shall execute, acknowledge and deliver to Buyer an
assignment on the required governmental forms or any other appropriate forms and
any deeds necessary to convey the Assets to Buyer.

 

(c)          Seller and Buyer shall execute and deliver the Preliminary
Settlement Statement if agreed upon.

 

(d)          Buyer shall deliver the Closing Amount, to the account at the bank
designated by Seller in written instructions delivered to Buyer not less than
two (2) business days prior to Closing, by wire transfer in immediately
available funds, or by such other method as agreed to by the Parties.

 

(e)          Seller shall execute and deliver to Buyer an affidavit of
non-foreign status and no requirement for withholding under Section 1445 of the
Code.

 

(f)          Buyer shall execute and deliver to Seller the certificate described
in Section 11.1(a), dated as of the Closing Date.

 

(g)          Seller shall execute and deliver to Buyer the certificate described
in Section 11.2(a), dated as of the Closing Date.

 

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(h)          Buyer shall provide evidence that it has provided replacement
Instruments as set forth in Section 9.2(b).

 

(i)          Seller shall deliver an adequate number for recording of original,
properly executed and acknowledged releases of any mortgages affecting the
Assets and any other Liens affecting the Assets except for Permitted
Encumbrances, in form and substance satisfactory to Buyer.

 

(j)          Buyer and Seller shall execute all documents necessary to transfer
operations on the Seller operated Assets to Buyer or Buyer’s designated
operator.

 

(k)          Buyer and Seller shall execute the CO2 Purchase and Sale Agreement.

 

(l)          Seller and Buyer shall execute and deliver the Transition Services
Agreement substantially in the form set forth on Exhibit I (the “Transition
Services Agreement”).

 

(m)          Seller and Buyer shall execute and deliver the Transportation
Agreement substantially in the form set forth on Exhibit F.

 

(n)          Seller and the other parties thereto shall execute and deliver a
novation agreement in form and substance reasonably satisfactory to Buyer and
sufficient to novate the swaps as set forth in Section 9.1(d) to Buyer.

 

(o)          Seller shall execute and deliver conveyances of the interests in
WTGP and WTLP to Buyer.

 

(p)          Seller and Buyer shall execute and deliver the Use and Occupancy
Agreement substantially in the form set forth on Exhibit K.

 

(q)          Seller shall deliver evidence reasonably satisfactory to Buyer that
the following have been terminated: (i) that certain Product Sale and Purchase
Contract between Seller, on behalf of the Postle Field Unit Owners, and Seller,
effective June 1, 2013; and (ii) that certain Product Sale and Purchase Contract
between Seller, on behalf of the Postle Field Unit Owners, and Seller, effective
September 1, 2013.

 

(r)          Seller and Buyer shall take such other actions and deliver such
other documents as are contemplated by this Agreement.

 

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ARTICLE 14.

POST-CLOSING OBLIGATIONS

 

14.1         Post-Closing Adjustments.

 

(a)          Final Settlement Statement. As soon as practicable after the
Closing, but in no event later than ninety (90) days after Closing, Seller will
prepare and deliver to Buyer, in accordance with customary industry accounting
practices, a settlement statement (the “Final Settlement Statement”) setting
forth each adjustment or payment pursuant to Section 3.4 that was not finally
determined as of the Closing and showing the calculation of such adjustment and
the resulting final purchase price (the “Final Purchase Price”). As soon as
practicable after receipt of the Final Settlement Statement, but in no event
later than sixty (60) days after receipt of Seller’s proposed Final Settlement
Statement, Buyer shall deliver to Seller a written report containing any changes
that Buyer proposes to make to the Final Settlement Statement. Buyer’s failure
to deliver to Seller a written report detailing proposed changes to the Final
Settlement Statement by that date shall be deemed an acceptance by Buyer of the
Final Settlement Statement as submitted by Seller. The Parties shall attempt to
agree with respect to the changes proposed by Buyer, if any, no later than
thirty (30) days after receipt by Seller of Buyer’s proposed changes. The date
upon which such agreement is reached or upon which the Final Purchase Price is
established shall be herein called the “Final Settlement Date.” If the Final
Purchase Price is more than the Closing Amount, Buyer shall pay Seller the
amount of such difference. If the Final Purchase Price is less than the Closing
Amount, Seller shall pay to Buyer the amount of such difference. Any payment by
Buyer or Seller, as the case may be, shall be made by wire transfer of
immediately available funds within five (5) days of the Final Settlement Date.
Any adjustments requiring additional payment by either Buyer or Seller shall
also be made in the same manner.

 

(b)          Dispute Resolution. If the Parties are unable to resolve a dispute
as to the Final Purchase Price by thirty (30) days after Seller’s receipt of
Buyer’s proposed changes, the Parties shall submit the dispute to binding
arbitration to be conducted pursuant to Section 15.6.

 

14.2         Records. Seller shall deliver the Records to Buyer no later than
the twentieth business day after expiration of the Transition Services
Agreement. Seller may retain copies of the Records and Seller shall have the
right to review and copy the Records during standard business hours upon
reasonable notice for so long as Buyer retains the Records. Buyer agrees that
the Records will be maintained in compliance with all Laws governing document
retention. Buyer will not destroy or otherwise dispose of Records for a period
of four (4) years after Closing, unless Buyer first gives Seller reasonable
notice and an opportunity to copy the Records to be destroyed.

 

14.3         Operations/Operations After Closing. Seller agrees to transfer
possession of the Assets to Buyer at the Closing. All operations in respect of
the Assets performed by Seller after the Closing Date shall be pursuant to the
Transition Services Agreement.

 

14.4         Further Assurances. From time to time after Closing, Seller and
Buyer shall each execute, acknowledge and deliver to the other such further
instruments and take such other action as may be reasonably requested in order
to accomplish more effectively the purposes of the Transaction, including, if
requested by Buyer, the conveyance or assignment of any Asset that is generally
described in Article 2 and would have otherwise been conveyed to Buyer except
for the fact that it was not specifically listed on the Exhibits.

 

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ARTICLE 15.

ASSUMPTION AND RETENTION OF OBLIGATIONS AND INDEMNIFICATION

 

15.1         Buyer’s Assumption of Liabilities and Obligations. Upon Closing,
and except for Retained Liabilities and subject to Sections 15.3 and 15.4, Buyer
shall assume and pay, perform, fulfill and discharge all claims, costs,
expenses, liabilities and obligations of Seller to the extent accruing or
relating to the owning, developing, exploring, operating or maintaining of the
Assets or the producing, transporting and marketing of Hydrocarbons from the
Assets for the periods before and after the Effective Time, including (i) the
Material Agreements, (ii) the Assumed Environmental Liabilities, (iii) the
obligation to plug and abandon, or replug and re-abandon, all wells located on
the Lands and reclaim all well sites located on the Lands regardless of when the
obligations arose, (iv) the make-up and balancing obligations for gas from the
Wells, (v) the royalty and Tax liabilities not expressly retained by Seller in
Section 15.2 below and Buyer’s expenses related to the Transaction, and (vi) the
obligations set forth in Section 11.3 (collectively, the “Assumed Liabilities”).

 

15.2         Seller’s Retention of Liabilities and Obligations. Upon Closing and
subject to Sections 11.3, 15.3 and 15.4, Seller retains all claims, costs,
expenses, liabilities and obligations accruing (collectively, “Liabilities”) or
relating to (i) Seller’s expenses related to the Transaction, (ii) the
employment and the termination of employment of any employee of Seller or its
Affiliates and the employment and the termination of employment of any Asset
Worker, in each case attributable to the period of time on and prior to the
later of: (A) the Closing Date; or (B) if an Asset Worker, the later of the
termination date of the Transition Services Agreement or, if such Asset Worker
is a Transferred Employee, the date that such Transferred Employee becomes
employed by the Buyer Employer, (iii) royalty liabilities arising from
production during Seller’s ownership of the Assets (including royalty
liabilities based on claims of unjust enrichment, breach of fiduciary duties,
conversion, actual and constructive fraud and other tort claims), (iv) hedging
arrangements (except for the swaps referenced in Section 9.1(d)), (v) debt
instruments of Seller or its Affiliates, (vi) ownership, operation or use of the
Excluded Assets, (vii) any fraud or willful misconduct of Seller or its
Affiliates, (viii) Seller Taxes, (ix) any employee benefit plan or other
compensation arrangement sponsored, maintained or contributed to by Seller, any
of its Affiliates or any entity, trade or business treated as a single employer
or part of the same controlled group with Seller under Section 414 of the Code
or Sections 4001(a)(14) or 4001(b)(1) of ERISA, (x) offsite disposal of
hazardous substances (including Hydrocarbons), (xi) audits attributable to
pre-Effective Time periods under joint operating agreements, unit operating
agreements or similar agreements and (xii) any other matters covered by Seller’s
insurance. Seller’s retention in this Section (other than the retention
described in items (i), (ii), (v), (vi), (viii) and (ix) above) is limited to
such Liabilities attributable to the period of time during Seller’s ownership
prior to the Closing Date (the Liabilities retained by Seller are collectively
the “Retained Liabilities”).

 

15.3         Invoices For Property Costs and Proceeds Received After the Final
Settlement Date. After the Final Settlement Date, those proceeds attributable to
the Assets received by a Party or invoices received for or Property Costs paid
by one Party for or on behalf of the other Party with respect to the Assets
which were not already included in the Final Settlement Statement, shall be
settled as follows:

 

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(a)          Proceeds. Proceeds received by Buyer with respect to sales of
Hydrocarbons produced prior to the Effective Time shall be remitted or forwarded
to Seller. Proceeds received by Seller with respect to sales of Hydrocarbons
produced after the Effective Time shall be forwarded to Buyer.

 

(b)          Property Costs. Invoices for Property Costs received by Buyer that
relate to operations on the Assets prior to the Effective Time shall be
forwarded to Seller by Buyer, or if already paid by Buyer, invoiced by Buyer to
Seller. Invoices for Property Costs received by Seller that relate to operations
on the Assets after the Effective Time shall be forwarded to Buyer by Seller, or
if already paid by Seller, invoiced by Seller to Buyer.

 

(c)          Duration. The provisions of this Section 15.3 shall apply until
December 31, 2013, after which time, assuming Seller has complied in all
material respects with its obligations under this Section 15.3 prior to such
time, except to the extent Seller has an indemnification obligation under
Section 15.4(a), Buyer specifically agrees to assume, pay, become liable for and
release Seller from all obligations and liabilities for Property Costs related
to the Assets attributable to the periods of time both before and after the
Effective Time and all such liabilities and obligations shall become part of the
Assumed Liabilities.

 

15.4         Indemnification. “Losses” shall mean any actual losses, costs,
expenses (including court costs, reasonable fees and expenses of attorneys,
technical experts and expert witnesses and the cost of investigation),
liabilities, damages, Actions, and sanctions of every kind and character
(including civil fines) arising from, related to or reasonably incident to
matters indemnified against; excluding however, any special, consequential,
punitive or exemplary damages, diminution of value of an Asset or loss of
profits incurred by a Party hereto; except to the extent constituting part of a
third party claim.

 

After the Closing, the Parties shall indemnify each other as follows:

 

(a)          Seller’s Indemnification of Buyer. Seller assumes all risk,
liability, obligation and Losses in connection with, and shall defend,
indemnify, and save and hold harmless Buyer, its Affiliates and their respective
members, officers, owners, partners and directors, from and against all Losses
which arise from or in connection with (i) the Retained Liabilities, (ii) any
matter for which Seller has agreed to indemnify Buyer under this Agreement,
(iii) any breach by Seller of any covenant or obligation under any other
provision of this Agreement, and (iv) Seller’s breach of its representations and
warranties in this Agreement.

 

(b)          Buyer’s Indemnification of Seller. Except for matters for which
Seller has an indemnification obligation under Section 15.4(a), subject to
subsection (d) below, Buyer assumes all risk, liability, obligation and Losses
in connection with, and shall defend, indemnify, and save and hold harmless
Seller, its members, officers, owners, partners and directors, from and against
all Losses which arise from or in connection with (i) the Assumed Liabilities,
(ii) any matter for which Buyer has agreed to indemnify Seller under any other
provision of this Agreement, (iii) any breach by Buyer of any covenant or
obligation under this Agreement, and (iv) Buyer’s breach of its representations
and warranties in this Agreement.

 

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(c)          Release. Buyer shall be deemed to have released Seller at the
Closing from any Losses for which Buyer has agreed to indemnify Seller
hereunder, and Seller shall be deemed to have released Buyer at the Closing from
any Losses for which Seller has agreed to indemnify Buyer hereunder.

 

(d)          Limitation on Indemnity and other Obligations.

 

(i)          Time. Seller’s obligation under this Agreement for a breach by
Seller of any covenants or obligations under this Agreement (other than those
set forth in Section 5.6, Section 9.1(m), Section 9.1(n), Section 9.4, Article
10, Article 14, Section 15.3, this Section 15.4, Section 15.5 or Section 15.6 or
as provided in Section 16.1) shall not survive Closing and Buyer hereby releases
Seller from all such Claims or Losses relating thereto. Buyer must make a claim
for indemnity from Seller for breaches of Seller’s representations and
warranties within the applicable survival period for the representation and
warranty. Seller’s indemnity obligations under this Agreement for the Retained
Liabilities shall survive indefinitely. Buyer’s and Seller’s sole and exclusive
remedy for any Claim or Loss relating to or arising from this Agreement shall be
the indemnity provided in Section 15.4(a) and 15.4(b), respectively. Seller
shall have no obligation to indemnify Buyer under this Agreement for, and Buyer
releases Seller from, all indemnity claims not properly and timely raised as set
forth herein, including all environmental matters and matters which if asserted
could have constituted Environmental Defects.

 

(ii)         Thresholds, Deductibles. For any Losses covered by Sections
15.4(a)(iii) or 15.4(a)(iv) (excluding Losses with respect to breach of the
representations and warranties in Sections 7.1 through 7.4 and 7.15 through 7.17
or the covenants in Section 9.1(n), Section 9.4, Article 10, Article 14, Section
15.3 or this Section 15.4 (as it relates to any of the foregoing)) (the “Section
15.4(d) Matters”), Seller’s indemnity obligation shall only arise to the extent
that the aggregate of all valid claims exceeding a threshold of $100,000 Loss
per event exceeds $5,000,000 (such amount being a deductible, not a threshold)
and then only for the amount such Losses exceeding the $100,000 per Loss
threshold exceed $5,000,000. For the purposes of determining whether this
deductible has been exceeded, all valid claims for any Losses that are incurred
exceeding a threshold of $100,000 Loss per event shall be aggregated. In
addition, in no event shall Seller be obligated under this Agreement to
indemnify Buyer (except under Section 15.2) for an aggregate amount in excess of
Fifty Million Dollars ($50,000,000).

 

(iii)        Title Defects, Environmental Defects. With respect to Title Defects
and Environmental Defects, the thresholds and deductibles set forth in Article 5
and Section 6.5 shall apply exclusively and Section 15.4 is not applicable.

 

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(iv)        Special Warranty of Title. With respect to Seller’s special warranty
of title given in the Conveyance, Seller’s indemnity obligation shall be limited
to the Allocated Value of the particular Asset.

 

15.5         Procedure. The indemnifications contained in Section 15.4 shall be
implemented as follows:

 

(a)          Coverage. Such indemnity shall extend to all Losses suffered or
incurred by the indemnified Person.

 

(b)          Claim Notice. The Person seeking indemnification under the terms of
this Agreement (“Indemnified Party”) shall submit a written “Claim Notice” to
the other Party (“Indemnifying Party”) which shall provide to the extent then
reasonably known by such indemnified Person: (i) the amount of each payment
claimed by an Indemnified Party to be owing and (ii) the basis for such claim,
with supporting documentation. The amount claimed shall be paid by the
Indemnifying Party to the extent required herein within thirty (30) days after
receipt of the Claim Notice, or after the amount of such payment has been
finally established pursuant to Section 15.6, whichever last occurs.

 

(c)          Information. If the Indemnified Party receives notice of a claim or
legal action that may result in a Loss for which indemnification may be sought
under this Article 15 (a “Claim”), the Indemnified Party shall endeavor to give
written notice of such Claim to the Indemnifying Party as soon as is
practicable. If the Indemnifying Party or its counsel so requests, the
Indemnified Party shall furnish the Indemnifying Party with copies of all
pleadings and other information with respect to such Claim. At the election of
the Indemnifying Party made within sixty (60) days after receipt of such notice,
the Indemnified Party shall permit the Indemnifying Party to assume control of
such Claim (to the extent only that such Claim, legal action or other matter
relates to a Loss for which the Indemnifying Party is liable), including the
determination of all appropriate actions, the negotiation of settlements on
behalf of the Indemnified Party, and the conduct of litigation through attorneys
of the Indemnifying Party’s choice; provided, however, that any settlement of
the Claim by the Indemnifying Party may not result in any liability or cost to
the Indemnified Party without its prior written consent, not to be unreasonably
withheld. If the Indemnifying Party elects to assume control, (i) any expense
incurred by the Indemnified Party thereafter for investigation or defense of the
matter shall be borne by the Indemnified Party, and (ii) the Indemnified Party
shall give all reasonable information and assistance, other than pecuniary, that
the Indemnifying Party shall deem necessary to the proper defense of such Claim.
In the absence of such an election, the Indemnified Party will use its best
efforts to defend, at the Indemnifying Party’s expense, any claim, legal action
or other matter to which such other Party’s indemnification under this Article
15 applies until the Indemnifying Party assumes such defense. If the
Indemnifying Party fails to assume such defense within the time period provided
above or fails to diligently defend such defense, the Indemnified Party may
settle the Claim, in its reasonable discretion, at the Indemnifying Party’s
expense (subject to it being agreed or determined pursuant to Section 15.6 that
the Indemnifying Party has an indemnification obligation with respect thereto).
If such a Claim requires immediate action, both the Indemnified Party and the
Indemnifying Party will cooperate in good faith to take appropriate action so as
not to jeopardize defense of such Claim or either Party’s position with respect
to such Claim.

 

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15.6         Dispute Resolution. The Parties agree to resolve all “Disputes”
concerning this Agreement pursuant to the provisions of this section, such
Disputes to include (i) the existence and scope of a Title Defect or Interest
Addition, (ii) the Title Defect Value of that portion of the Asset affected by a
Title Defect, (iii) the Interest Addition Value, (iv) the adequacy of Seller’s
Title Defect curative materials, (v) the existence of an Environmental Defect,
(vi) the Environmental Defect Value (as defined in the Celero PSA), (vii) the
adequacy of any remediation actions taken with respect to an Environmental
Defect, (viii) disputes concerning a Claim or amount to be paid by an
Indemnifying Party, or (ix) disputes concerning the Preliminary Settlement
Statement or the Final Settlement Statement as provided in Section 3.4(a) and
Section 14.1(a), respectively. The Parties agree to submit all Disputes to
binding arbitration in Denver, Colorado such arbitration to be conducted as
follows: the arbitration proceeding shall be submitted by the Parties to a panel
of three independent and impartial arbitrators with knowledge or experience in
the oil and gas industry, one selected by each of the Parties within thirty days
after said written notice and a third selected by the first two arbitrators
(each an “Arbitrator,” and collectively the “Arbitrators”). The third
Arbitrator, selected by the first two Arbitrators, shall be a person having
substantial experience and recognized expertise in oil and gas industry. The
arbitration shall be conducted according to procedures established by agreement
of the Parties or the arbitration panel. At the hearing, the Parties shall
present such evidence and witnesses as they may choose, with or without counsel.
Adherence to formal rules of evidence shall not be required, but the arbitration
panel shall consider any evidence and testimony that it determines to be
relevant, in accordance with procedures that it determines to be appropriate.
Any award entered in the arbitration shall be made by a written opinion stating
the reasons and basis for the award made and any payment due pursuant to the
arbitration shall be made within fifteen (15) days of the Arbitrators’ decision.
The final decision may be filed in a court of competent jurisdiction and may be
enforced by Buyer or Seller as a final judgment of such court. Each Party shall
bear its own costs and expenses of the arbitration, provided, however, that the
costs of employing the Arbitrators shall be borne 50% by the Seller and 50% by
the Buyer. IN ENTERING INTO THIS SECTION 15.6, THE PARTIES ACKNOWLEDGE THAT THEY
ARE VOLUNTARILY AND KNOWINGLY WAIVING THEIR RIGHTS TO JURY TRIAL.

 

15.7         No Insurance; Subrogation. The indemnifications provided in this
Article 15 shall not be construed as a form of insurance. Buyer and Seller
hereby waive for themselves, their respective successors or assigns, including
any insurers, any rights to subrogation for Losses for which each of them is
respectively liable or against which each respectively indemnifies the other,
and, if required by applicable policies, Buyer and Seller shall obtain waiver of
such subrogation from their respective insurers.

 

15.8         Reservation as to Non-Parties. Nothing herein is intended to limit
or otherwise waive any recourse Buyer or Seller may have against any non-Party
for any obligations or liabilities that may be incurred with respect to the
Assets.

 

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15.9         Express Negligence. THE FOREGOING ASSUMPTIONS AND INDEMNIFICATIONS
SHALL APPLY WHETHER OR NOT SUCH DUTIES, OBLIGATIONS OR LIABILITIES, OR SUCH
CLAIMS ARISE OUT OF (i) NEGLIGENCE (INCLUDING SOLE NEGLIGENCE, SINGLE
NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR PASSIVE NEGLIGENCE, BUT EXPRESSLY
NOT INCLUDING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF ANY INDEMNIFIED PARTY,
OR (ii) STRICT LIABILITY.

 

ARTICLE 16.

MISCELLANEOUS

 

16.1         Expenses. Except as otherwise specifically provided, all fees,
costs and expenses incurred by Buyer or Seller in negotiating this Agreement or
in consummating the Transaction shall be paid by the Party incurring the same,
including engineering, land, title, legal and accounting fees, costs and
expenses.

 

16.2         Notices. All notices and communications required or permitted under
this Agreement shall be in writing and addressed as set forth below. Any
communication or delivery hereunder shall be deemed to have been made and the
receiving Party charged with notice (i) if personally delivered, when received,
(ii) if sent by telecopy or facsimile transmission or electronic mail, when
received, (iii) if mailed, three (3) business days after mailing, certified
mail, return receipt requested, or (iv) if sent by overnight courier, one
business day after sending. All notices shall be addressed as follows:

 

  If to Seller: Whiting Oil and Gas Corporation     1700 Broadway, Suite 2300  
  Denver, CO  80292     Attention:  Bruce R. DeBoer     Telephone: 303-390-4909
    Fax: 303-490-4910     E-mail: bruced@whiting.com         If to Buyer:
BreitBurn Operating L.P.     515 South Flower Street, Suite 4800     Los
Angeles, CA  90071     Attention: Greg Brown     Telephone: (213) 225-0294    
Fax:  213-225-5916     E-mail:  gbrown@breitburn.com

 

Any Party may, by written notice so delivered to the other Parties, change the
address or individual to which delivery shall thereafter be made.

 

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16.3         Amendments/Waiver. This Agreement may not be amended nor any rights
hereunder waived except by an instrument in writing signed by the Party to be
charged with such amendment or waiver and delivered by such Party to the Party
claiming the benefit of such amendment or waiver.

 

16.4         Assignment. Neither Party shall assign all or a portion of its
rights and obligations under this Agreement without the written consent of the
other Party, which consent shall not be unreasonably withheld.

 

16.5         Press Releases and Public Announcements. Neither Party shall issue
any press release or make any public announcement relating to the Transaction
prior to the Closing without the prior written approval of the other Party;
provided, however, that either Party may make any public disclosure it believes
in good faith is required by Laws or any listing or trading agreement concerning
its or its parent’s publicly-traded securities. Notwithstanding the foregoing,
either Party or its parent shall be permitted in the context of public or
private financing or otherwise to disclose the details of and information
regarding the Transaction to securities regulators and stock exchanges, its
advisors (including underwriters and their counsel), financial institutions,
potential investors, and their respective advisors, and the investing public,
whether by way of prospectus, information memorandum, filing with securities
regulatory authorities or otherwise.

 

16.6         Counterparts/Fax Signatures. Buyer and Seller may execute this
Agreement in counterparts, each of which shall be deemed an original instrument,
but which together shall constitute but one and the same instrument. The Parties
agree that facsimile signatures are binding.

 

16.7         Governing Law. This Agreement and the Transaction and any
arbitration or dispute resolution conducted pursuant hereto shall be construed
in accordance with, and governed by, the Laws of the State of Texas.

 

16.8         Entire Agreement. This Agreement and the Exhibits and Schedules
attached hereto and the Confidentiality Agreement constitute the entire
understanding between the Parties with respect to the subject matter hereof,
superseding all written or oral negotiations and discussions, and prior
agreements and understandings relating to such subject matter.

 

16.9         Knowledge. The “knowledge” of a Party shall mean, for purposes of
this Agreement, the actual knowledge as to each of Seller and Buyer, only of the
persons listed on Schedule 16.9.

 

16.10         Binding Effect. This Agreement shall be binding upon, and shall
inure to the benefit of, the Parties and their respective successors and
permitted assigns.

 

16.11         Survival. The representations set forth in Sections 7.1 through
7.4, Sections 8.1 through 8.3 and Sections 8.6 and 8.7 shall survive
indefinitely. The representations set forth in Sections 7.15 through 7.17 shall
survive for 60 days after the expiration of the applicable statute of
limitations, including any extension thereof, with respect to the particular
matter that is the subject matter thereof. The remaining representations and
warranties set forth in this Agreement shall not survive the Closing. A claim
for a breach of a surviving representation or warranty must be made on or before
the expiration of the applicable survival period. Delivery of the Conveyance at
the Closing will not constitute a merger of this Agreement with such Conveyance.

 

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16.12         Limitation on Damages. Notwithstanding anything contained to the
contrary in any other provision of this Agreement, Seller and Buyer agree that,
except for the liquidated damages specifically provided for in Section 12.1, the
recovery by either Party of any damages suffered or incurred by it as a result
of any breach by the other Party of any of its representations, warranties or
obligations under this Agreement shall be limited to the actual damages suffered
or incurred by the non-breaching Party (and the Indemnified Persons to which
such obligations may extend under the terms hereof) as a result of the breach by
the breaching Party of its representations, warranties or obligations hereunder
and in no event shall the breaching Party be liable to the non-breaching Party
or any Indemnified Person for any consequential, special, exemplary or punitive
damages, diminution of value of an Asset or loss of profits suffered or incurred
by the non-breaching Party or any Indemnified Person as a result of the breach
by the breaching Party of any of its representations, warranties or obligations
hereunder; except to the extent constituting part of a third party claim.

 

16.13         No Third-Party Beneficiaries. Except as expressly provided in
Article 15, this Agreement is intended to benefit only the Parties hereto and
their respective permitted successors and assigns and there are no other third
party beneficiaries to this Agreement.

 

REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK

 

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The Parties have executed this Agreement as of the date first above written.

 

  SELLER:       Whiting Oil and Gas Corporation         By: /s/ James J. Volker
    James J. Volker     Chairman and Chief Executive Officer         BUYER:    
  BreitBurn Operating L.P.         By: BreitBurn Operating GP, LLC,     its
General Partner         By: /s/ Halbert S. Washburn     Halbert S. Washburn    
Chief Executive Officer

 

Signature Page to Purchase and Sale Agreement