Exhibit 10.1

 

EXECUTION VERSION

 

AGREEMENT
FOR PURCHASE AND SALE
OF ASSETS

 

BY AND BETWEEN

 

FOREST OIL CORPORATION

 

AND

 

FOREST OIL PERMIAN CORPORATION

 

As Seller,

 

AND

 

TEMPLAR ENERGY LLC

 

As Purchaser,

 

Dated as of October  3, 2013

 

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ARTICLE I PURCHASE AND SALE

1

 

 

 

Section 1.1

Purchase and Sale

1

 

Section 1.2

Assets

1

 

Section 1.3

Excluded Assets

4

 

 

 

 

ARTICLE II PURCHASE PRICE

5

 

 

 

Section 2.1

Purchase Price

5

 

Section 2.2

Performance Deposit

5

 

Section 2.3

Allocation of the Preliminary Purchase Price

5

 

Section 2.4

Adjustment to Purchase Price

5

 

Section 2.5

Payment and Calculation of Estimated Final Purchase Price; Payment at Closing

7

 

 

 

 

ARTICLE III ASSET INSPECTION AND TITLE EXAMINATION

8

 

 

 

Section 3.1

Access to Records and Properties of Seller

8

 

Section 3.2

On-Site Tests and Inspections

8

 

Section 3.3

Title Matters

9

 

Section 3.4

Defect Adjustments

11

 

Section 3.5

Casualty Loss

13

 

Section 3.6

Identification of Additional Defective Interests

14

 

Section 3.7

Termination Due to Title Matters and Conditions

14

 

Section 3.8

Title Benefits

15

 

 

 

 

ARTICLE IV SELLER’S REPRESENTATIONS AND WARRANTIES

15

 

 

 

Section 4.1

Organization, Standing and Power

15

 

Section 4.2

Authority and Enforceability

16

 

Section 4.3

Claims Affecting the Assets

16

 

Section 4.4

Claims Affecting the Sale

16

 

Section 4.5

No Demands

17

 

Section 4.6

Taxes

17

 

Section 4.7

Leases

17

 

Section 4.8

Non-Foreign Representation

18

 

Section 4.9

Commitments for Expenditures

18

 

Section 4.10

Absence of Changes

18

 

Section 4.11

Material Agreements

19

 

Section 4.12

Tax Partnerships

20

 

Section 4.13

Compliance with Law and Government Authorizations

20

 

Section 4.14

Environmental Matters

20

 

Section 4.15

Payments for Production; Calls on Production

21

 

Section 4.16

Well Status and Abandonments

22

 

Section 4.17

Bonds and Credit Support

22

 

Section 4.18

Suspense Funds

22

 

Section 4.19

Imbalances

22

 

Section 4.20

Insurance

22

 

Section 4.21

Royalties

22

 

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Section 4.22

Affiliate Transactions

22

 

Section 4.23

Bankruptcy

22

 

Section 4.24

Consents

23

 

Section 4.25

Preferential Rights to Purchase

23

 

 

 

 

ARTICLE V PURCHASER’S REPRESENTATIONS AND WARRANTIES

23

 

 

 

Section 5.1

Organization, Standing and Power

23

 

Section 5.2

Authority and Enforceability

23

 

Section 5.3

Suits Affecting the Sale

24

 

Section 5.4

Eligibility

24

 

Section 5.5

Financing

24

 

 

 

 

ARTICLE VI ASSUMPTION OF OBLIGATIONS AND INDEMNIFICATION

25

 

 

 

Section 6.1

Assumption of Certain Liabilities and Obligations by Purchaser

25

 

Section 6.2

Indemnification by Purchaser

26

 

Section 6.3

Indemnification by Seller

26

 

Section 6.4

Interpretation

27

 

Section 6.5

Notices

28

 

Section 6.6

Tax Treatment of Payments

29

 

 

 

 

ARTICLE VII SELLER’S OBLIGATIONS PRIOR TO CLOSING

29

 

 

 

Section 7.1

Interim Operations

29

 

Section 7.2

Operated Assets

31

 

 

 

 

ARTICLE VIII ADDITIONAL AGREEMENTS OF THE PARTIES

31

 

 

 

Section 8.1

Government Reviews and Filings

31

 

Section 8.2

Confidentiality

32

 

Section 8.3

Taxes

32

 

Section 8.4

Receipts and Credits

34

 

Section 8.5

Suspense Accounts

35

 

Section 8.6

Like-Kind Exchange

35

 

Section 8.7

Financing Cooperation

36

 

Section 8.8

No Negotiation

38

 

 

 

 

ARTICLE IX CONDITIONS TO CLOSING

38

 

 

 

Section 9.1

Seller’s Conditions

38

 

Section 9.2

Purchaser’s Conditions

39

 

 

 

 

ARTICLE X RIGHT OF TERMINATION AND ABANDONMENT

40

 

 

 

Section 10.1

Termination

40

 

Section 10.2

Liabilities Upon Termination

40

 

 

 

 

ARTICLE XI CLOSING MATTERS

42

 

 

 

Section 11.1

Time and Place of Closing

42

 

Section 11.2

Closing Obligations

42

 

 

 

 

ARTICLE XII POST-CLOSING OBLIGATIONS

43

 

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Section 12.1

Post-Closing Adjustments

43

 

Section 12.2

Files and Records

44

 

Section 12.3

Further Assurances

44

 

 

 

 

ARTICLE XIII ENVIRONMENTAL MATTERS

44

 

 

 

Section 13.1

Purchaser Acknowledgment Concerning Possible Contamination of the Assets

44

 

Section 13.2

Adverse Environmental Conditions

45

 

 

 

 

ARTICLE XIV MISCELLANEOUS

46

 

 

 

Section 14.1

Notices

46

 

Section 14.2

Binding Effect

47

 

Section 14.3

Counterparts

47

 

Section 14.4

Expenses

47

 

Section 14.5

Section Headings

47

 

Section 14.6

Entire Agreement

47

 

Section 14.7

Conditions

48

 

Section 14.8

Governing Law

48

 

Section 14.9

Assignment

49

 

Section 14.10

Public Announcements

49

 

Section 14.11

Notices After Closing

49

 

Section 14.12

Waiver of Compliance with Bulk Transfer Laws

49

 

Section 14.13

Waiver

50

 

Section 14.14

Rights of Third Parties

50

 

Section 14.15

Specific Performance

51

 

Section 14.16

No Recourse

51

 

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EXHIBITS AND SCHEDULES

 

Exhibits

 

Description of Properties

A-1

Wells

A-2

Agreements

A-3

Value Allocation

B

Inventory

B-1

Assigned Suits and Claims

C-1

Non-Assigned Suits and Claims

C-2

Gas Imbalances

D

Escrow Agreement

E

Assignment and Bill of Sale Form

F

 

Schedules

 

Excluded Assets

1.3

Claims Affecting the Sale

4.4

Commitments for Expenditures

4.9

Absence of Changes

4.10

Defaults Under Material Agreements

4.11(b)

Notices of Violations

4.13

Environmental Matters

4.14

Well Status and Abandonments

4.16

Bonds and Credit Support

4.17

Suspense Funds

4.18

Insurance

4.20

Royalties

4.21

Affiliate Transactions

4.22

Consents

4.24

Preferential Rights to Purchase

4.25

 

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AGREEMENT FOR
PURCHASE AND SALE OF ASSETS

 

This Agreement for Purchase and Sale of Assets (the “Agreement”), dated as of
October 3, 2013, (the “Execution Date”) is made and entered into by and among
Forest Oil Corporation, a New York corporation, and Forest Oil Permian
Corporation, a Delaware corporation (collectively “Seller”), and Templar Energy
LLC, a Delaware limited liability company (“Purchaser”).

 

RECITALS

 

A.                                    Seller desires to sell to Purchaser the
assets, properties and rights hereinafter described upon the terms and subject
to the conditions, exceptions and reservations hereinafter set forth; and

 

B.                                    Purchaser desires to purchase from Seller
such assets, properties and rights as hereinafter set forth upon the terms and
subject to the conditions, exceptions and reservations hereinafter set forth.

 

C.                                    In consideration of the premises and of
the mutual promises, representations, warranties, covenants, conditions and
agreements contained herein, Seller and Purchaser, intending to be legally bound
by the terms hereof, agree as follows:

 

ARTICLE  I

 

PURCHASE AND SALE

 

Section  1.1                                 Purchase and Sale.  Subject to the
provisions of this Agreement, Seller agrees to sell and convey at the Closing
(as defined in Section 11.1), and Purchaser agrees to purchase and accept at the
Closing, such conveyance to be effective for all purposes as of 7:00 a.m. at the
location of each of the respective Assets on October 1, 2013 (the “Effective
Time”), all of the following set forth in Section 1.2, less and except the
Excluded Assets (as hereinafter defined), which shall be herein referred to
collectively as the “Assets”.

 

Section  1.2                                 Assets.  The Assets shall mean the
following:

 

(a)                                 All right, title and interest of Seller in
and to all oil and gas leases, other similar leases, mineral interests,
royalties, and overriding royalties, whether producing or non-producing, as
described on Exhibit A-1 attached hereto whether such Asset is incorrectly
described or inadvertently omitted (the “Leases”), and any other oil, gas or
other mineral rights and interests of any type (including without limitation,
surface interests and fee lands) in, on or under or relating to the lands also
described on Exhibit A-1 (the “Land”), and including any and all right, title
and interest of Seller in and to hydrocarbons (including crude oil, natural gas,
casinghead gas, drip gasoline, natural gasoline, natural gas liquids,
condensate, and other hydrocarbons, whether gaseous or liquid) (collectively,
the “Hydrocarbons”) and other products produced in association therewith in, on
or under any of the foregoing, and all oil and gas wells, water wells, CO2 wells
and injection and disposal wells located on any of the foregoing, or used

 

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or useful in connection therewith, or on lands pooled or unitized therewith,
including, without limitation, the wells described in Exhibit A-2 attached
hereto and any wells inadvertently omitted therefrom (the “Wells”);

 

(b)                                 All right, title and interest of Seller in,
to and under or derived from all presently existing or proposed unitization,
pooling and communitization agreements, declarations and orders, and the
properties covered and the units created or to be created thereby (including,
but not limited to, (i) all units formed or to be formed under orders,
regulations, rules or other official actions of any federal, state or other
governmental agency having jurisdiction, and (ii) those described in Exhibit A-3
attached hereto) to the extent that they relate to or affect any of the
properties and interests of Seller described or referred to in subsection (a) of
this Section 1.2 (“Unit Agreements”), or the production of Hydrocarbons and
other products produced in association therewith attributable to said properties
and interests (together with the Leases and the Wells, the “Oil and Gas
Properties”);

 

(c)                                  Subject to any and all applicable consents
to assign and other limitations on Seller’s rights to assign as set forth in
Schedule 4.24 attached hereto, all right, title and interest of Seller in, to
and under or derived from all presently existing and effective oil, gas liquids,
condensate, casinghead gas and gas sales, purchase, exchange, gathering,
transportation and processing contracts, including those described in Exhibit
A-3 attached hereto, to the extent that they relate to any of the properties and
interests of Seller described or referred to in subsection (a) or (b) of this
Section 1.2 (“Product Sales and Transportation Agreements”), operating
agreements, joint venture agreements, farmout agreements, partnership
agreements, settlement agreements, gas balancing agreements, saltwater or water
disposal agreements, surface agreements, division and transfer orders, and all
other agreements and instruments described in Exhibit A-3, Schedule 4.22 or
Schedule 4.25 attached hereto or inadvertently omitted therefrom to the extent
that they relate to any of the properties and interests of Seller described or
referred to in subsection (a) or (b) of this Section 1.2 (“Operating
Agreements”);

 

(d)                                 All right, title and interest of Seller in
or to the inventory listed on Exhibit B-1 (the “Inventory”), together with all
personal property, fixtures, equipment leases, improvements, and other personal
property, whether real, personal, or mixed (including, but not limited to, well
equipment, wellheads, casing, tubing, tanks, rods, tank batteries, boilers,
buildings, pumps, motors, machinery, injection facilities, disposal facilities,
field separators and liquid extractors, compressors, pipelines, gathering
systems, docking facilities, air service facilities, helicopter facilities,
power lines, telephone and telegraph lines, roads, and field processing plants,
field offices and office furnishings related thereto, field office leases,
equipment leases, vehicles (except those listed on Schedule 1.3), trailers and
all other appurtenances thereunto belonging or attributable thereto, whether or
not inventoried), (the “Equipment”) and in and to all easements, permits,
licenses, servitudes, rights-of-way, and surface leases or other surface rights,
to the extent now being used or proposed to be used in connection with the
exploration, development, operation or maintenance of the properties and
interests described in subsections (a), (b) and (c) of this Section 1.2, or now
being used or proposed to be used in connection with the producing, treating,
processing, storing, gathering, transporting or marketing of

 

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Hydrocarbons and other products produced in association therewith attributable
to such properties or interests, and all contract rights (including rights under
leases to third parties) related thereto (the “Easements”) and in and to all
Hydrocarbons and other products produced from the properties described or
referred to in subsection (a) or (b) of this Section 1.2 having been placed into
storage or into pipelines as of the Effective Time;

 

(e)                                  All trade credits, all accounts, suspended
funds, receivables (including without limitation, from the results of audits,
judgments, or settlements), and all other proceeds, income or revenues
attributable to the Assets with respect to any period of time from and after the
Effective Time;

 

(f)                                   All of Seller’s right, title and interest
in and to any production imbalances relating to any of the Leases or otherwise
arising by virtue of the fact that Seller may not have taken or marketed its
full share or may have taken or marketed more than its share of Hydrocarbons and
other products produced in association therewith attributable to its ownership
prior to the Effective Time;

 

(g)                                  Subject to the provisions of Section 1.3,
all of Seller’s right, title and interest in and to all causes of action,
judgments, pending litigation, claims and demands set forth on Exhibit C-1;

 

(h)                                 All accounting records, whether in
electronic storage or on paper, related to the Assets, books and files relating
to any of the foregoing matters set forth in this Section 1.2 including, without
limitation, all production records, operating records, lease records, well
records, and division order records; prospect files; title records (including
abstracts of title, title opinions and memoranda, and title curative documents
related to the Leases and Wells); SPCC plans and other environmental records;
contracts, electric logs, core data, pressure data, decline curves, graphical
production curves, and a non-exclusive license to all geophysical and geological
data owned by Seller (collectively, the “Records”); provided, however, that the
Records shall not include payroll and personnel records, any geophysical and
interpretive data or reports, or any records that Seller is not contractually
permitted to assign (provided that Seller shall use commercially reasonable
efforts to seek such permission to assign, which efforts shall not require the
payment of any monetary amount or other concession by Seller); and provided,
further, that Seller shall be entitled to retain copies of all Records, or in
the case of accounting records, originals thereof, with copies of such
accounting records to be furnished to Purchaser;

 

(i)                                     To the extent transferable, all rights,
interests, and claims that Seller may have under any policy of insurance,
indemnity or surety bond, or any insurance or condemnation proceeds or
recoveries from any Third Party relating to property damage or casualty loss but
only to the extent such rights, interests and claims affect the value of the
Assets and relate to events occurring after the Effective Time and for which the
Seller is not obligated to indemnify Purchaser pursuant to Article VI; and

 

(j)                                    To the extent transferable, all claims,
whether in contract, in tort, or arising by operation of law, and whether
asserted or unasserted as of the Closing Date,

 

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that Seller may have against any person arising out of acts, omissions, or
events, or injury to or death of persons or loss or destruction of or damage to
property, relating in any way to the Assets that occurred after the Effective
Time and for which the Seller is not obligated to indemnify Purchaser pursuant
to Article VI.

 

Section  1.3                                 Excluded Assets.  Seller shall
reserve and retain all of the Excluded Assets.  “Excluded Assets” shall mean:

 

(a)                                 all of Seller’s corporate minute books,
accounting and financial records (except copies of financial and tax records
(other than income tax records) required by Purchaser for financial or tax
purposes specifically relating to the Assets), and other business records that
relate to Seller’s business generally (to the extent not primarily related to
the Assets);

 

(b)                                 all trade credits, all accounts, suspended
funds not otherwise specifically accounted for pursuant to Section 8.5 below,
receivables (including without limitation, from the results of audits,
judgments, or settlements), and all other proceeds, income or revenues
attributable to the Assets with respect to any period of time prior to the
Effective Time;

 

(c)                                  all rights and interests of Seller (A)
under any policy or agreement of insurance or indemnity, (B) under any bond or
(C) to any insurance or condemnation proceeds or awards arising, in each case,
from acts, omissions or events, or damage to or destruction of property
occurring prior to the Effective Time;

 

(d)                                 all Hydrocarbons produced and sold from the
Assets with respect to all periods prior to the Effective Time as determined in
accordance with Section 2.4;

 

(e)                                  all claims of Seller for refunds of or loss
carry forwards with respect to (A) production or any other taxes attributable to
any period prior to the Effective Time, (B) income or franchise taxes or (C) any
taxes attributable to the Excluded Assets;

 

(f)                                   all personal computers and associated
peripherals and all radio and telephone equipment;

 

(g)                                  all of Seller’s computer software, patents,
trade secrets, copyrights, names, trademarks, logos and other intellectual
property;

 

(h)                                 all documents and instruments of Seller
(other than title opinions relating to the Assets) that may be protected by an
attorney-client privilege;

 

(i)                                     all data that cannot be disclosed to
Purchaser as a result of confidentiality arrangements under agreements with
Third Parties; provided that Seller shall use commercially reasonable efforts to
seek such permission to disclose, which efforts shall not require the payment of
any monetary amount or other concession by Seller;

 

(j)                                    all hedging transactions and gains or
losses attributable to any hedging activities conducted by Seller, whether
occurring before or after the Effective Time;

 

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(k)                                 all correspondence, reports, analyses and
other documents relating to the transaction contemplated hereby prior to the
Effective Time, whether internal, with or produced by other prospective
purchasers or third parties in respect of such transaction, and

 

(l)                                     the assets and liabilities listed on
Schedule 1.3.

 

ARTICLE II

 

PURCHASE PRICE

 

Section 2.1                                    Purchase Price.  The aggregate
purchase price payable by Purchaser to Seller for the Assets shall be One
Billion Dollars ($1,000,000,000.00) (the “Preliminary Purchase Price”), subject
to adjustment as set forth in Section 2.4 below.

 

Section 2.2                                    Performance Deposit.  Upon
execution of this Agreement, Purchaser shall pay to Seller by wire transfer a
deposit in the amount of three percent (3%) of the Preliminary Purchase Price
(“Performance Deposit”), to be held in an escrow account (the “Escrow Account”)
pursuant to the terms of an escrow agreement in the form attached hereto as
Exhibit E (the “Escrow Agreement”) with Wells Fargo Bank, National Association
(the “Escrow Agent”) in accordance with this Agreement.  In the event that the
transactions contemplated by this Agreement are consummated, the Performance
Deposit shall be applied to the Preliminary Purchase Price as set forth in
Section 2.5(b) below.  In the event this Agreement is terminated, the
Performance Deposit plus interest earned thereon shall be applied in accordance
with the provisions of Article X.

 

Section 2.3                                    Allocation of the Preliminary
Purchase Price.  The Preliminary Purchase Price shall be allocated among the
Assets in accordance with the allocations set forth on Exhibits B and B-1.  Any
adjustments to the Preliminary Purchase Price under Section 2.4 shall
correspondingly (as appropriate) adjust the allocations set forth on Exhibits B
and B-1.

 

Section 2.4                                    Adjustment to Purchase Price. 
The Preliminary Purchase Price shall be adjusted as follows and the resulting
amount shall be herein called the “Final Purchase Price”:

 

(a)                                 The Preliminary Purchase Price shall be
adjusted upward by the following (on a cash basis and on a sales, not an
entitlement, method of accounting):

 

(i)                                     The amount of all capital expenditures
(net to Seller’s interest) and prepayments, cash calls, advance payments, gas
transportation, take or pay payments and similar payments incurred and paid by
Seller during the period from the Effective Time to the Closing Date
(“Adjustment Period”) in respect of the ownership and operation of the Assets
made in the ordinary course of business consistent with past practice;

 

(ii)                                  The amount of all operating costs incurred
by Seller in the ordinary course of business consistent with past practice
(excluding, for the avoidance of doubt, any amounts paid in connection with the
transactions contemplated by this Agreement, such as brokers’ fees) in respect
of the ownership and operation of the

 

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Assets during the Adjustment Period, including, without limitation, overhead for
the period between the Effective Time and the Closing Date based on the
applicable joint operating agreements, or, where no joint operating agreement is
applicable, an amount equal to $1,300 per month for each Well that produces in
any portion of such month;

 

(iii)                               The value (determined by the price most
recently paid immediately prior to the Effective Time) of all oil in storage
above the wellhead as of the Effective Time which is credited to the Assets,
less applicable production taxes, royalty and other burdens on the production
payable on such oil and subsequently paid by Seller or Purchaser, as applicable;
the amount of oil in storage as of the Effective Time to be based on gauge
reports and other accepted industry practices for purposes of the Estimated
Final Purchase Price described in Section 2.5, below, and adjusted as necessary
for the Final Settlement Statement described in Section 12.1, below, based on
actual sales thereof;

 

(iv)                              The amount of underproduced volumes of gas
attributable to Seller as of the Effective Time (but only to the extent of the
difference between the volumes shown on Exhibit D and the volumes resulting from
corrections to Exhibit D occurring prior to Closing Date for pre-Effective Time
volumes), multiplied by a price of $3.00/MMBtu for such production (net of
royalties and taxes) in each case to the extent provided by existing balancing
and other agreements affecting the Assets, and adjusted as necessary for the
Final Settlement Statement described in Section 12.1, below, resulting from
corrections received by either party for pre-Effective Time volumes; and

 

(v)                                 The amount of the aggregate Defect
Adjustment which is a net increase in the value of an Asset, as set forth in
Section 3.4(b).

 

(b)                                 The Preliminary Purchase Price shall be
adjusted downward by the following (on a cash basis and on a sales, not an
entitlement, method of accounting):

 

(i)                                     Amounts received by Seller for the sale
of oil, gas, liquids or other associated minerals produced during the Adjustment
Period (net of any production royalties, transportation costs, production tax,
severance tax, or sales tax, paid or due from Seller thereon) including monies
in suspense attributable to the Adjustment Period, and all other amounts
received by Seller relating to the ownership and operation of the Assets during
the Adjustment Period including, but not limited to, amounts attributable to
prepayments, cash calls, advance payments, gas transportation, take or pay
payments and similar payments;

 

(ii)                                  Amounts received by Seller for the sale,
salvage or other disposition, occurring in the ordinary course of business
during the Adjustment Period, of any property, equipment or rights included in
the Assets without Purchaser having received full payment therefor;

 

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(iii)                               All amounts otherwise received by Seller and
attributable to the ownership of the Assets during the Adjustment Period;

 

(iv)                              An amount equal to the Allocated Value of the
Assets with respect to which preferential purchase rights have been exercised in
accordance with Section 3.6;

 

(v)                                 The aggregate amount of any Conditions and
Defect Adjustments which are a net reduction in the value of an Asset, to the
extent such aggregate amount exceeds the deductible set forth in Section 3.4(b);

 

(vi)                              An amount equal to the value of any Casualty
Loss as defined in Section 3.5; and

 

(vii)                           The amount of overproduced volumes of gas
attributable to Seller as of the Effective Time (but only to the extent of the
difference between the volumes shown on Exhibit D and the volumes resulting from
corrections to Exhibit D occurring prior to Closing Date for pre-Effective Time
volumes), multiplied by a price of $3.00/MMBtu for such production (net of
royalties and taxes) in each case to the extent provided by existing balancing
and other agreements affecting the Assets, and adjusted as necessary for the
Final Settlement Statement described in Section 12.1, below, resulting from
corrections received by either party for pre-Effective Time volumes;

 

(viii)                        The amount of reductions in the Inventory; and

 

(ix)                              An amount equal to the Allocated Value of the
Assets with respect to which any Hard Consents have not been received in
accordance with Section 3.6.

 

(c)                                  It is Seller’s and Purchaser’s intent that
the adjustments under this Agreement to the Preliminary Purchase Price, and any
components of such adjustments, shall not be applied or computed in a manner
that results in duplicative effect.

 

Section 2.5                                    Payment and Calculation of
Estimated Final Purchase Price; Payment at Closing.

 

(a)                                 Seller shall prepare and deliver to
Purchaser, at least five “Business Days” (which term shall mean any day except a
Saturday, Sunday or other day on which commercial banks in New York, New York
are required or authorized by law to be closed) prior to the Closing Date,
Seller’s estimate of the Final Purchase Price to be paid at Closing, (such
estimated Final Purchase Price being herein referred to as the “Estimated Final
Purchase Price”), together with a statement setting forth Seller’s estimate of
the amount of each adjustment to the Preliminary Purchase Price to be made
pursuant to Section 2.4.  The parties shall negotiate in good faith and attempt
to agree on such estimated adjustments prior to Closing.  If the parties fail to
agree, the Estimated Final Purchase Price shall use the amounts in dispute
proposed by Seller in good faith.

 

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(b)                                 At Closing, Purchaser shall pay to Seller
the Estimated Final Purchase Price determined as set forth in Section 2.5(a)
less (i) an amount equal to the Performance Deposit, plus any interest thereon,
which shall be disbursed to Seller and applied to the Estimated Final Purchase
Price, and (ii) Ten Million Dollars ($10,000,000) of the Final Purchase Price,
which shall be paid into the Escrow Account, to cover Seller’s indemnification
obligations pursuant to Section 6.1(b) and Section 6.3.  The escrow funds held
in the Escrow Account in respect of Seller’s indemnification obligations will be
released to Seller on the first anniversary of the Closing Date in accordance
with the Escrow Agreement.  The Purchaser shall also deposit into the Escrow
Account amounts not paid to Seller in respect of unresolved title matters that
Seller has elected to attempt to cure post-Closing pursuant to Section 3.4(e). 
Such escrow funds in respect of title matters will be released from the Escrow
Account as provided in Section 3.4(e).

 

(c)                                  Purchaser shall be entitled to deduct and
withhold or cause to be deducted and withheld from amounts otherwise payable to
any person pursuant to this Agreement such amounts as it is required to deduct
and withhold with respect to such payments under any provision of federal state,
local or foreign tax law.  Any amounts so deducted and withheld and paid over or
deposited with the appropriate taxing authority will be treated for all purposes
of this Agreement as having been paid to the person in respect of which such
deduction and withholding was made.

 

ARTICLE III

 

ASSET INSPECTION AND TITLE EXAMINATION

 

Section 3.1                                    Access to Records and Properties
of Seller.  Between the date of this Agreement and Closing (the “Examination
Period”), Seller agrees, subject to Section 8.2, to give Purchaser and its
representatives full access at all reasonable times to the Assets and to the
Records for inspection and copying, including, but not limited to, electronic
copies, at Purchaser’s expense at Seller’s office in Denver, Colorado.  To the
extent records are kept or maintained by Seller in other locations, Seller
agrees to make same available at such other locations.

 

Section 3.2                                    On-Site Tests and Inspections. 
Seller shall permit or, in case of any third-party operated wells, use its
commercially reasonable efforts to cause the operator thereof to permit,
Purchaser’s authorized representatives to consult with Seller’s or third-party
operator’s agents and employees during reasonable business hours and to conduct,
at Purchaser’s sole risk and expense, on-site inspections, tests and inventories
of the Assets.  Purchasers environmental investigation of the Assets shall be
limited to conducting a Phase I Environmental Site Assessment in accordance with
the American Society for Testing and Materials (A.S.T.M.) Standard Practice
Environmental Site Assessments:  Phase I Environmental Site Assessment Process
(Publication Designation:  E1527-05) (“Site Assessment”), and, while on the Oil
and Gas Properties, at Seller’s discretion, shall be accompanied by Seller’s
representative.  Upon Seller’s request, Purchaser shall furnish to Seller, free
of cost to Seller, a copy of any written report prepared by or for Purchaser
related to any Site Assessment of the Assets as soon as reasonably possible
after Seller’s request.  Prior to Closing, all environmental reports prepared by
or for Purchaser shall be maintained in strict confidence by Purchaser and shall
be used by

 

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Purchaser solely in connection with the evaluation of the Assets or in any
dispute with Seller involving the Assets.  Except as provided in the preceding
sentence, if Closing does not occur, such reports shall not be disclosed to any
other party.  If Closing does not occur, the foregoing obligation of
confidentiality shall survive for two (2) years after the termination of this
Agreement.

 

Section 3.3                                    Title Matters.

 

(a)                                 For the sole purpose of determining the
existence of Title Defects prior to the Closing, Seller represents that it owns
Defensible Title (as defined in Section 3.3(b)) to the Leases except to the
extent affected by the litigation described on Exhibit C-2.

 

(b)                                 As used herein, the term “Defensible Title”
to the Assets shall mean such title of Seller that,:

 

(i)                                     is deducible of record either from the
records of the applicable county or parish clerk and recorder or, in the case of
federal leases, from the records of the applicable office of the Bureau of Land
Management, or in the case of state leases, from the records of the applicable
state land office, or from some combination of the foregoing official records;

 

(ii)                                  entitles Seller to receive not less than
the net revenue interest (indicated by the letters “NRI”) of Seller set forth in
Exhibit B of all Hydrocarbons produced, saved and marketed from the Oil and Gas
Properties throughout the life of such properties;

 

(iii)                               obligates Seller to bear costs and expenses
relating to the maintenance, development and operation of any Oil and Gas
Properties in an amount not greater than the working interest (indicated by the
letters “WI”) set forth in Exhibit B throughout the life of such properties
except to the extent such increase in working interest is accompanied by a
proportionate increase in net revenue interest; and

 

(iv)                              with respect to any undeveloped Leases,
entitles the Seller to not less than the Net Mineral Acres set forth in Exhibit
B for such Leases provided that there shall be no duplication of Title Defects
under Section 3.3(b)(iii) and this Section 3.3(b)(iv); and

 

(v)                                 is free and clear of encumbrances, liens and
defects other than the Permitted Encumbrances.

 

(c)                                  The term “Net Mineral Acre” as used herein
shall mean with respect to a Lease the (i) undivided interest of Seller in the
leasehold estate created by the applicable Lease multiplied by (ii) the number
of surface acres covered by the Lease multiplied by (iii) the lessor’s
percentage interest in the oil and gas mineral fee estate in the land covered by
the Lease.

 

(d)                                 The term “Permitted Encumbrances,” as used
herein, shall mean:

 

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(1)                                 lessors’ royalties, overriding royalties,
and division orders and sales contracts covering Hydrocarbons, reversionary
interests and similar burdens if and to the extent the net cumulative effect of
such burdens does not operate to reduce the net revenue interest at any time in
any property to less than the net revenue interest set forth in Exhibit B:

 

(2)                                 preferential rights to purchase and required
third-party consents to assignments and similar agreements with respect to which
prior to Closing;

 

i)                                         waivers or consents are obtained from
the appropriate parties,

 

ii)                                      the appropriate time period for
asserting such rights has expired without an exercise of such rights, or

 

iii)                                   arrangements can be made by Seller which
are acceptable to Purchaser in order for Purchaser to receive the same economic
and operational benefits as if all such waivers and consents had been obtained;

 

(3)                                 liens for taxes or assessments not yet due
or not yet delinquent or, if delinquent, that are not material and are being
contested in good faith in the normal course of business;

 

(4)                                 all rights to approve, required notices to,
filings with, or other actions by governmental or tribal entities in connection
with the sale or conveyance of the Assets if the same are customarily obtained
subsequent to such sale or conveyance;

 

(5)                                 rights of reassignment, to the extent any
exist as of the date of this Agreement, upon the surrender or expiration of any
lease;

 

(6)                                 easements, rights-of-way, servitudes,
permits, surface leases and other rights in respect of surface operations,
pipelines, or the like; conditions, covenants or other restrictions; and
easements for pipelines, railways and other easements and rights-of-way, on,
over or in respect of any of the Assets which individually, or in the aggregate,
do not materially adversely affect the ownership, operation, value or use of the
Assets, or any of them;

 

(7)                                 all other liens, charges, and encumbrances
(including, without limitation, liens of operators relating to obligations not
yet due or pursuant to which Seller is not in default) that do not reduce the
net revenue interest set forth in Exhibit B, and do not prevent the receipt of
proceeds of production therefrom, and do not increase the share of costs above
the working interest set forth in Exhibit B, and that are not such as materially
interfere with or detract from the operation, value or use of any of the
properties included within the Assets;

 

(8)                                 liens, if any, to be released at Closing in
a form acceptable to Purchaser;

 

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(9)                                 the terms and conditions of all Leases,
agreements, orders, pooling or unitization agreements or declarations included
in the Assets or to which the Assets are subject as long as same do not reduce
the net revenue interests for the Assets listed in Exhibit B or do not increase
the working interests for the interests set forth in Exhibit B;

 

(10)                          rights reserved to or vested in any municipality
or governmental, statutory or public authority to control or regulate any of the
Assets in any manner, and all applicable laws, rules and orders of governmental
authority; and

 

(11)                          Materialmen’s, mechanics’, repairmen’s,
employees’, contractors’, operators’ or other similar liens or charges arising
in the ordinary course of business incidental to construction, maintenance or
operation of the Assets

 

i)                                         if they have not been filed pursuant
to law,

 

ii)                                      if filed, they have not yet become due
and payable or payment is being withheld as provided by law and Seller either
indemnifies Purchaser or agrees to reduce the Preliminary Purchase Price for the
amount claimed, or

 

iii)                                   if their validity is being contested in
good faith by appropriate action provided that Seller either indemnifies
Purchaser or agrees to reduce the Preliminary Purchase Price for the amount
claimed.

 

(e)                                  The term “Title Defect” as used herein
shall mean any encumbrance, encroachment, irregularity, defect in or objection
to Seller’s title to the Oil and Gas Properties (excluding Permitted
Encumbrances) which would result in Seller not having Defensible Title as of the
Effective Time and as of the Defective Interest Notice Date or Purchaser not
having Defensible Title immediately after giving effect to the transactions
contemplated by this Agreement.

 

Section 3.4                                    Defect Adjustments.

 

(a)                                 “Defective Interest(s)” shall mean that
portion of the Assets (as determined in accordance with Section 3.4(c)) as to
which the representation stated in Section 3.3(a) is breached or that Purchaser
is otherwise entitled under Section 3.6 to treat as a Defective Interest, and of
which Seller has been given written notice by Purchaser not later than 5:00 P.M.
Denver time on the fifth Business Day before Closing (not counting the day of
Closing) or any later date specified in Section 3.6 for Defective Interests
described in that Section (“Defective Interest Notice Date”).  Such written
notice shall include:

 

(i)                                     a description of the Defective Interest,

 

(ii)                                  the basis for the defect that Purchaser
believes causes such Asset to be a Defective Interest,

 

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(iii)                               the Allocated Value of the affected Asset
calculated in accordance with Section 3.4(c), and

 

(iv)                              the amount by which Purchaser believes the
Allocated Value of the affected Asset has been reduced by the Defective
Interest; provided however, that any Title Defect (or individual Title Benefit,
as defined in Section 3.8) for which the Defect Adjustment, as determined in
Section 3.4(c), below, is less than fifty thousand dollars ($50,000) shall not
be a Defective Interest.  For purposes of determining Defect Adjustments
pursuant to this Agreement, and without waiver of Purchaser’s rights under the
conveyances of the Assets to be delivered at Closing, Purchaser shall be deemed
to have waived all Title Defects of which Seller has not been given written
notice by the Defective Interest Notice Date.  Prior to Closing, Seller shall
have the option, but not the obligation, to cure any Title Defect or other
breach of title warranty for which timely notice is given.  If Purchaser desires
to attempt to cure any Title Defect, Seller shall cooperate with Purchaser,
prior to the Closing Date, in endeavoring to cure any such Title Defect.

 

(b)                                 Subject to Seller’s right to cure a
Defective Interest after Closing pursuant to Section 3.4(e), Defective Interests
and Title Benefits shall be conveyed to Purchaser hereunder, and the Preliminary
Purchase Price shall be reduced or increased, as the case may be, in accordance
with Section 2.4 by an amount determined in accordance with Section 3.4(c) for
such Defective Interests and Title Benefits (which net reduction or increase, as
applicable, shall be called a “Defect Adjustment”) unless, prior to the Closing,
the basis for treating such Assets as Defective Interests has been removed in a
manner satisfactory to Purchaser.  The foregoing notwithstanding, there shall be
no adjustment to the Preliminary Purchase Price for Defective Interests and
Conditions unless the total value of all Defective Interests, net of the total
value of all Title Benefits, plus all Conditions pursuant to Section 13.2(b)
exceeds two percent (2%) of the Preliminary Purchase Price and then only to the
extent that such total value of all Defective Interests, net of the total value
of all Title Benefits, and Conditions exceeds two percent (2%) of the
Preliminary Purchase Price.  If Seller and Purchaser cannot agree to the amount
of a Defect Adjustment for a specified Title Defect or Title Benefit, all
information relating to the Defective Interest or Title Benefit shall be
submitted to a title attorney chosen by mutual agreement of the parties, who
shall have a minimum of ten (10) years’ experience in examining oil and gas
titles, who shall, in good faith, determine the Defect Adjustment.

 

(c)                                  The value of each of the Leases and Wells
for purposes of determining Preliminary Purchase Price adjustments under this
Section 3.4 (the “Allocated Value”) shall be determined in accordance with
Exhibit B which Exhibit shall be mutually agreed upon by the parties.  The
amount of the Defect Adjustment for a Defective Interest or Title Benefit shall
be the Allocated Value thereof if the Defective Interest or Title Benefit
constitutes the entire property given an Allocated Value.  If the amount of a
Defect Adjustment cannot be determined directly because the Defective Interests
or Title Benefit constitute a property or interest included within, but not
totally comprising, the Assets to which an Allocated Value is given, Purchaser
and Seller shall proportionately reduce or increase, in the case of a Title
Benefit, the Allocated Value to reflect the present or

 

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potential impact of the Title Defect or Title Benefit.  The amount of any Defect
Adjustment shall reflect the anticipated reduction or increase of the Allocated
Value for the affected property caused by the breach of title warranty or Title
Benefit, taking into account the method for arriving at such reduced or
increased Allocated Value, the legal and practical effect of the Title Defect or
Title Benefit or other breach, the probability of adverse impact of the Title
Defect or breach of title warranty on the use and enjoyment of the property
interest affected, and the potential economic effect of the Title Defect or
breach of title warranty or Title Benefit over the life of the property
involved.

 

(d)                                 Notwithstanding any claimed Title Defect,
Purchaser shall have the right at any time up to the Closing Date to waive any
such claim, and purchase the affected property without reduction of the
Preliminary Purchase Price.

 

(e)                                  Prior to Closing, Seller may elect, in is
sole discretion, to attempt to cure any Title Defect on or before April 25, 2014
(the “Cure Period”).  If, prior to Closing, Seller elects to attempt to cure any
Title Defect, the amount of the corresponding Defect Adjustment shall be
deducted from the Preliminary Purchase Price and paid by Purchaser into the
Escrow Account.  If Seller and Purchaser mutually agree that the Title Defect
has been cured prior to the end of the Cure Period, then within two Business
Days after such determination, the parties shall jointly instruct the Escrow
Agent to pay the amount withheld in the Escrow Account with respect thereto to
Seller.  If at the end of the Cure Period, Seller has been unable to cure any
Title Defects (and there is no dispute as to whether or not said Title Defects
have been cured) the parties shall jointly instruct the Escrow Agent to pay the
amount withheld in the Escrow Account with respect thereto to Purchaser,
provided however, that in the event the Defect Adjustment attributable to such
Title Defect equals or exceeds the Allocated Value of the Assets affected
thereby, at the election of Seller, in its sole discretion, Purchaser shall
re-convey the Assets affected by such Title Defect to Seller, pursuant to an
assignment substantially in the form of Exhibit F.  If at the end of the Cure
Period, Purchaser and Seller are unable to agree whether there has been a
satisfactory resolution of a Title Defect, then such disagreement shall be
resolved as provided in Section 3.4(b).

 

Section 3.5                                    Casualty Loss.  If, prior to the
Closing, any portion of the Wells or related equipment is materially damaged or
destroyed or impaired by fire or other casualty or if a portion of the Assets is
taken or threatened to be taken in condemnation or under the right of eminent
domain, Purchaser may elect:

 

(a)                                 to require the withdrawal of such Assets
from this Agreement and reduce the Preliminary Purchase Price accordingly, or

 

(b)                                 to purchase such Assets notwithstanding any
such damage, destruction or impairment (without adjustment to the Preliminary
Purchase Price therefor), in which case, Seller shall, at the Closing, pay to
Purchaser all sums paid to Seller by third-parties (including insurance proceeds
relating thereto) and assign to Purchaser all sums to which Seller is entitled,
as the case may be, by reason of the damage, destruction, or impairment of such
Wells and the underlying Assets to be assigned to Purchaser and shall assign,
transfer and set over unto Purchaser all of the right, title and interest of
Seller in and to

 

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any unpaid awards or other payments from third-parties arising out of the
damage, destruction, or impairment of such Wells and the Assets to be assigned
to Purchaser.  Prior to the Closing, Seller shall not voluntarily compromise,
settle or adjust any amounts payable by reason of any damage, destruction or
impairment of such Wells and the underlying Assets without first obtaining the
written consent of Purchaser.

 

Section 3.6                                    Identification of Additional
Defective Interests.

 

(a)                                 If any preferential purchase right is
exercised prior to the Closing, Purchaser may require the withdrawal of such
Assets affected by the exercise of the preferential right from this Agreement
and reduce the Preliminary Purchase Price accordingly.  If Seller receives
notice of such exercise prior to Closing, Seller shall give Purchaser notice
thereof in accordance with Section 3.4(a) prior to the Closing, in which event
the property affected by such preferential purchase right shall be withdrawn
from this Agreement and the Preliminary Purchase Price reduced accordingly.  All
Assets that are subject to preferential rights to purchase that have not been
exercised prior to Closing shall be conveyed to Purchaser at Closing.  If Seller
or Purchaser receive notice of such exercise after the Closing, the party
receiving such notice shall promptly give notice to the other party, such
affected portion of the Assets shall not be treated as a Defective Interest, no
adjustment to the Preliminary Purchase Price shall be made, and Purchaser shall
convey the affected property interest to the holder of the preferential purchase
right upon receipt of the Allocated Value attributable thereto from such party.

 

(b)                                 If, prior to the Closing Date, Purchaser or
Seller become aware of any suit, action or other proceeding before any court or
government agency other than those listed in Exhibit C-2 that would result in
loss or impairment of Seller’s title to any portion of the Assets, or a portion
of the value thereof, Purchaser may elect to treat that portion of the Assets
affected thereby as a Defective Interest by giving Seller notice thereof in
accordance with Section 3.4(a) no later than the Closing Date, in which event
the procedures specified in Section 3.4 shall apply to the property affected by
such proceeding; provided however, the $50,000 threshold set forth in Section
3.4(a) and the 2% deductible set forth in Section 3.4(b) shall not apply to such
Defective Interests.

 

(c)                                  If with respect to any third-party consents
to assignment and similar agreements, one or more of the conditions set forth in
Section 3.3(d)(2) has not been met prior to the Closing, and the failure to
obtain such consent will invalidate the conveyance of the Assets affected
thereby (a “Hard Consent”), Purchaser may elect to require the withdrawal of
such Assets from this Agreement and reduce the Preliminary Purchase Price
accordingly.

 

Section 3.7                                    Termination Due to Title Matters
and Conditions.  If, prior to Closing, the aggregate amount of the value of (a)
all Defect Adjustments asserted in good faith under this Article III, (b) all
adjustments for Conditions pursuant to Section 13.2(b)(i) and 13.2(b)(ii), and
(c) all adjustments to the Preliminary Purchase Price resulting from Section 3.5
(Casualty Loss), Section 3.6(a) (Preferential Purchase Rights) and Section
3.6(c) (Hard Consents), equals or exceeds twelve and one-half percent (12.5%) of
the Preliminary Purchase Price, then either party, at its option exercised by
the giving of written notice to the other party not later than the

 

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Closing, may elect to terminate this Agreement, in which event Seller and
Purchaser shall be under no obligation to each other with regard to the purchase
and sale of any of the Assets, such termination to be without liability to
either party.  Failure of either party to give timely notice to the other party
of an election to terminate this Agreement pursuant to this Section 3.7 shall be
deemed an election not to terminate this Agreement.

 

Section 3.8                                    Title Benefits.

 

(a)                                 If a Party discovers any Title Benefit
affecting the Assets, it shall promptly notify the other Party in writing
thereof on or before the expiration of the Defective Interest Notice Date. 
Subject to Section 3.4(a), Seller shall be entitled to an upward adjustment to
the Preliminary Purchase Price pursuant to Section 2.4(a)(v) with respect to all
Title Benefits, in an amount determined in accordance with Section 3.4(c).  For
purposes of this Agreement, the term “Title Benefit” shall mean Seller’s Net
Revenue Interest in any Asset is greater than that set forth in Exhibit B or
Seller’s Working Interest in any Asset is less than that set forth in Exhibit B
(without a corresponding decrease in the Net Revenue Interest).  Any matters
that may otherwise constitute Title Benefits, but of which Purchaser has not
been specifically notified by Seller in accordance with the foregoing, shall be
deemed to have been waived by Seller for all purposes.

 

(b)                                 Subject to the threshold amounts set forth
in Section 3.4(b), the aggregate amount of undisputed Title Benefits shall be
netted against the aggregate amount of undisputed Defective Interests prior to
any adjustment of the Preliminary Purchase Price at Closing pursuant to Section
2.4.

 

(c)                                  If with respect to a Title Benefit the
Parties have not agreed on the amount of the upward Preliminary Purchase Price
adjustment or have not otherwise agreed on such amount prior to the Closing
Date, Seller or Purchaser shall have the right to elect to have such Preliminary
Purchase Price adjustment determined pursuant to Section 3.4(b).  If the amount
of such adjustment is not determined pursuant to this Agreement by the Closing,
the undisputed portion of the Preliminary Purchase Price with respect to the
Asset affected by such Title Benefit shall be paid by Purchaser at the Closing
and, subject to Section 3.4(b), upon determination of the amount of such
adjustment, any unpaid portion thereof shall be paid by Purchaser to Sellers or
shall be netted against the aggregate amount of any disputed Title Defect
Adjustments that also are determined after Closing.

 

ARTICLE IV

 

SELLER’S REPRESENTATIONS AND WARRANTIES

 

Seller hereby represents and warrants to Purchaser as follows as of the date
hereof and as of the Closing Date.  The term “Knowledge,” with respect to
Seller, means the actual knowledge of Cyrus Marter, Patrick McDonald, Glen
Mizenko, Sarah Peay, Timothy Savoy or Victor Wind.

 

Section 4.1                                    Organization, Standing and Power.
Forest Oil Corporation is a corporation duly organized, validly existing and in
good standing under the laws of the state of New York

 

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and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted.  Forest Oil
Permian Corporation is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.  Seller is duly qualified to carry
on its business in each state in which the failure to so qualify would have a
materially adverse effect upon its business or properties in such state.

 

Section 4.2                                    Authority and Enforceability. 
The execution and delivery by Seller of this Agreement, and the consummation of
the transactions contemplated hereby, have been duly and validly authorized by
all necessary corporate action, on the part of Seller.  This Agreement is the
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability and to
general equity principles.  Neither the execution and delivery by Seller of this
Agreement nor the consummation of the transactions contemplated hereby, nor
compliance by Seller with any of the provisions hereof, will

 

(a)                                 conflict with or result in a breach of any
provision of Seller’s certificate of incorporation or bylaws,

 

(b)                                 except with respect to third-party consents
or waivers required in connection with agreements and properties to be assigned
pursuant to this Agreement (it being understood that Seller will make reasonable
efforts to obtain such required consents or waivers) result in a material
default (with due notice or lapse of time or both) or give rise to any right of
termination, cancellation or acceleration under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license or agreement to which
Seller is a party or by which Seller or any of Seller’s properties or assets may
be bound or,

 

(c)                                  violate any order, writ, injunction,
judgment, decree, statute, rule or regulation applicable to any Seller, or any
Seller’s properties or assets, assuming receipt of all routine governmental
consents normally acquired after the consummation of transactions such as
transactions of the nature contemplated by this Agreement, or

 

(d)                                 result in the creation or imposition of any
encumbrance upon the Assets except for Permitted Encumbrances,

 

except, in any of (a)-(c), where any such foregoing effect would not be likely
to affect Purchaser’s ability to own, possess, control or enjoy the Assets.

 

Section 4.3                                    Claims Affecting the Assets. 
Except as disclosed on Exhibit C-1 or C-2, to Seller’s Knowledge there is no
suit, action, claim, investigation or inquiry by any person or entity or by any
administrative agency or governmental body and no legal, administrative or
arbitration proceeding pending, or to Seller’s Knowledge, threatened against or
affecting the Assets.

 

Section 4.4                                    Claims Affecting the Sale. 
Except as disclosed on Schedule 4.4, to Seller’s Knowledge there is no suit,
action, claim, investigation or inquiry by any person or

 

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entity or by any administrative agency or governmental body and no legal,
administrative or arbitration proceeding pending, or to Seller’s Knowledge,
threatened against Seller or any Affiliate of Seller which has affected or could
affect Seller’s ability to consummate the transactions contemplated by this
Agreement.  In this Agreement, “Affiliate” means any person or entity which
controls, is controlled by or is under common control with, the subject person
or entity.

 

Section 4.5                                    No Demands.  Except as disclosed
on Exhibit C-1 or C-2, Seller has received no notice of any claimed defaults,
offsets or cancellations from any lessors with respect to the Leases, and Seller
has no Knowledge of the existence of any default existing with respect to any of
the Leases or any express or implied term of any Lease.

 

Section 4.6                                    Taxes. All ad valorem, real
property, personal property, production, severance, excise and other taxes,
assessments, charges, duties, fees, levies, imposts or other similar charges
imposed by a governmental authority, including all income, franchise, profits,
capital gains, capital stock, transfer, gross receipts, sales, use, transfer,
service, occupation, windfall profits, premium, stamp, license, payroll,
employment, social security, unemployment, disability, environmental,
alternative minimum, add-on, value-added, and withholding taxes, and including
any deficiency assessments, additions to tax, interest and penalties due thereon
(“Taxes”), applicable to the ownership and operation of the Assets prior to the
Effective Time, in each case, if such Tax could result in a lien or other claim
against any of the Assets or Purchaser (“Applicable Taxes”), have been or will
be duly and timely paid.  All material reports, returns, elections, documents,
estimated tax filings, declarations or other filings provided to any
governmental authority relating to Applicable Taxes, including any attachments
or schedules thereto and amendments thereof (“Tax Returns”) required to be filed
by Seller with respect to the Assets or the business related thereto have been
timely filed.  There are no actions, arbitrations, audits, causes, complaints,
charges, hearings, inquiries, investigations, litigation, proceedings, reviews
or suits (whether civil, criminal, administrative, investigative, or informal)
commenced, brought, conducted, or heard by or before any governmental authority
or arbitrator (“Proceedings”), claims or notices of deficiency pending against
or threatened in writing against Seller with respect to the Assets or the
business related thereto in connection with any unpaid Tax.  To Seller’s
Knowledge no Tax Returns of Seller with respect to Applicable Taxes are under
audit or examination by any governmental authority.  There are no agreements or
waivers currently in effect that provide for an extension of time with respect
to the filing of any Tax Return by Seller with respect to Applicable Taxes, or
the assessment or collection of any Applicable Tax from Seller.  No written
claim has been made by any governmental authority in a jurisdiction where Seller
does not file a Tax Return or pay a Tax directly related to the Assets or the
business related thereto that it is or may be required to file such a Tax Return
or pay such a Tax (as the case may be) directly related to the Assets or the
business related thereto in that jurisdiction.

 

Section 4.7                                    Leases.  To the Knowledge of
Seller:

 

(a)                                 The Leases have been maintained according to
their terms, in compliance with the agreements to which the Leases are subject;
and

 

(b)                                 The Leases are presently in full force and
effect.

 

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Section 4.8                                    Non-Foreign Representation. 
Seller is not a non-resident alien, foreign corporation, foreign partnership,
foreign trust or foreign estate (as those terms are defined in Internal Revenue
Code of 1986, as amended (the “Code”), and the Treasury Regulations promulgated
thereunder), or a disregarded entity, the owner of which is any of the
foregoing.

 

Section 4.9                                    Commitments for Expenditures.
Schedule 4.9 lists the open and outstanding authority for expenditures (“AFEs”)
pertaining to the Seller Operated Assets of more than $100,000 each, and
pertaining to the Assets not operated by Seller of more than $100,000 each, net
to Seller’s interest.  Except as set forth on Schedule 4.9 there are no open or
outstanding AFEs of more than $100,000 each, net to Seller’s interest, which
Seller has received from a third party operator, but has not responded to.

 

Section 4.10                             Absence of Changes. Except as set forth
on Schedule 4.10, since December 31, 2012:

 

(a)                                 the Assets for which Seller serves as
Operator (the “Seller Operated Assets”), and, to Seller’s Knowledge, the Assets
not operated by Seller have been operated in and have not been engaged in any
transaction outside of the ordinary course of business consistent with past
practice;

 

(b)                                 none of the Assets have been mortgaged,
pledged or subjected to any encumbrance (other than Permitted Encumbrances and
encumbrances that will be released at or prior to the Closing);

 

(c)                                  there has not been any Material Adverse
Effect with respect to the Assets;

 

(d)                                 there has been no settlement or waiver of
any claims or rights with respect to the ownership, operation and use of the
Assets that would adversely affect in any material respect the ownership,
operation or use of the Assets in the aggregate; and

 

(e)                                  neither Seller nor any of its Affiliates
have agreed or committed to do any of the foregoing.

 

For the purposes of this Agreement, “Material Adverse Effect” means (a) with
respect to the Assets, any fact, circumstance, change, effect or event that,
individually or in the aggregate with any other facts, circumstances, changes,
effects or events, is or has been, or would reasonably be expected to be or have
been, materially adverse to the ownership, use, condition (financial or
otherwise) or operations (including results of operation), of or related to the
Assets, taken as a whole, or (b) with respect to Seller, any fact, circumstance,
change, effect or event that, individually or in the aggregate with any other
facts, circumstances, changes, effects or events, materially impedes, or would
reasonably be expected to materially impede, the ability of Seller to consummate
the transactions contemplated by this Agreement, and to perform its obligations
hereunder and thereunder; excluding, in each case, any such fact, circumstance,
change, effect or event resulting from or related to (i) changes or conditions
affecting the oil and gas industry or gas gathering industry generally
(including changes in commodity prices and the depletion of reserves), (ii)
changes in economic (including credit markets), regulatory or political
conditions generally, (iii) changes in Law or the interpretation or enforcement
thereof, (iv) conditions caused by acts of terrorism or war (whether or not
declared) or any man-made disaster

 

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or acts of God, (v) any decrease or curtailment in transportation volumes on the
Assets that are not related to any breach of any agreement by Seller or its
Affiliates; or (vi) conditions or effects resulting from the announcement of the
existence of this Agreement; except in the case of clauses (i)-(iv), to the
extent disproportionately affecting the ownership, operation or use of the
Assets as compared with other persons or businesses in the oil and gas
exploration and production industry.

 

Section 4.11                             Material Agreements.

 

(a)                                 Exhibit A-3, Schedule 4.22, and Schedule
4.25 lists all of the following types of contracts, agreements or other
arrangements related to the Oil and Gas Properties (“Contracts”) in effect as of
the Execution Date (the “Material Agreements”):

 

(1)                                 any Contract between such Seller, on the one
hand, and any Affiliate of such Seller, on the other hand;

 

(2)                                 any Contract for (A) the sale, exchange, or
other disposition of Hydrocarbons produced from or attributable to the Assets or
(B) the purchase, sale, processing, transportation or other disposal of any such
Hydrocarbons, in each case, that is not cancelable without penalty or other
payment on not more than 30 days’ prior written notice, other than terms of
joint operating agreements or gas balancing agreements which permit an operator
or other co-owner to take or market production of a non-taking co-owner;

 

(3)                                 any Contract requiring Seller to sell,
lease, farm-out, or otherwise dispose of any interest in any of the Assets after
the Effective Time, other than non-consent penalties for non-participation in
operations under joint operating agreements or conventional rights of
reassignment arising in connection with Seller’s surrender or release of any of
the Subject Interests;

 

(4)                                 any Contract that creates any area of mutual
interest or similar provision with respect to the Assets or contains any
material restrictions on the ability of Seller to compete with any other Person;

 

(5)                                 any Contract, other than customary oilfield
service contracts entered into by Seller in the ordinary course, that can
reasonably be expected to result in aggregate payments by, or revenues to Seller
of more than $250,000 with respect to the Seller Operated Assets, or $250,000,
net to Seller’s interest, with respect to the Assets not operated by Seller,
during the current fiscal year or any subsequent year during the term of such
Contract;

 

(6)                                 any Contract that is an agreement for
indebtedness for borrowed money;

 

(7)                                 any Contract that is a drilling contract,
unitization agreement, unit operating agreement, joint operating agreement,
exploration agreement, development agreement, participation agreement, joint
venture agreement or similar agreement;

 

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(8)                                 any Contract that constitutes a lease under
which such Seller is the lessor or the lessee of personal property which lease
(A) cannot be terminated by such Person without penalty upon 60 days or less
notice and (B) involves an annual base rental of more than $250,000, net to
Seller’s interest; and

 

(9)                                 any Contract that contains any rights
allowing a third party to participate in any sales of any of the Assets that are
triggered by or applicable to the transactions contemplated by this Agreement.

 

(b)                                 Except as otherwise set forth on Schedule
4.11(b), Seller is not in default in any material respect under any Material
Agreement and, to Seller’s Knowledge, no other party to any Material Agreement
is in default in any material respect thereunder.  To Seller’s Knowledge, no
event has occurred that, with notice, lapse of time or both, would constitute a
default in any material respect under any Material Agreement.

 

(c)                                  All agreements for the purchase and sale of
Hydrocarbons from the Assets are set forth on Exhibit A-3.

 

Section 4.12                             Tax Partnerships.  None of the Assets
are held by or are subject to any arrangement between Seller and any other
Persons, whether owning undivided interests therein or otherwise, that is
treated as or constitutes a partnership for purposes of Subchapter K of Chapter
1 of Subtitle A of the Code (a “Tax Partnership”).

 

Section 4.13                             Compliance with Law and Government
Authorizations.

 

(a)                                 Seller (if Seller is the operator) or, to
Seller’s Knowledge, the operator of the Assets has, obtained and is maintaining
all material Governmental Authorizations that are presently necessary or
required by it to own and operate the Assets as they are presently owned and
operated.  For purposes of this Agreement “Governmental Authorizations” means
any federal, state or local governmental license, permit, franchise, order,
exemption, variance, waiver, authorization or certificate, or any application
therefor.

 

(b)                                 Except as provided on Schedule 4.13, no
written notice of violation of Law or a Governmental Authorization has been
received by Seller from a Governmental Authority with respect to the Assets.

 

(c)                                  To Seller’s Knowledge, the Assets are being
operated in compliance in all material respects with all applicable any statute,
law, principle of common law, rule, regulation, judgment, order, ordinance,
requirement, code, writ, injunction, or decree of any governmental entity having
jurisdiction over such Assets (“Laws”).  Notwithstanding the foregoing, this
Section 4.13 does not relate to any Tax matters, which are exclusively addressed
in Section 4.6, or Environmental Laws, which are exclusively addressed in
Section 4.14.

 

Section 4.14                             Environmental Matters.  Except as
referenced in Schedule 4.14,

 

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(a)                                 Seller (if Seller is the operator) or, to
Seller’s knowledge, the operator of the Assets has, obtained and is maintaining
all material Governmental Authorizations that are presently necessary or
required by it to own and operate the Assets as the Assets are presently owned
and operated.

 

(b)                                 Seller or, to Seller’s Knowledge, the
operator of the Assets has not entered into any agreements, orders, decrees,
judgments, license or permit conditions, or other directives of any governmental
entity in existence as of the Execution Date based on any prior material
violations of Environmental Laws that materially impairs the future ownership or
use of any of the Assets or that currently requires any remediation as to any of
the Assets.

 

(c)                                  The Seller Operated Assets and, to Seller’s
Knowledge, the Assets not operated by Seller, are being operated in compliance
in all material respects with all Environmental Laws.

 

(d)                                 As of the Execution Date, neither Seller nor
any of its Affiliates has received written communication from any governmental
entity of any Condition concerning any Asset that (1) interferes with or
prevents compliance by Seller or the Assets with any Environmental Law or the
terms of any Governmental Authorization relating to Environmental Laws, or (2)
gives rise to or results in any common Law or other liability of Seller to any
Person.  For purposes of this Agreement, “Condition” means any circumstance,
status or defect that, with notice to the governmental entity with jurisdiction,
that meets the criteria set forth in Section 13.2(a).

 

(e)                                  There are no proceedings pending or
threatened against Seller with respect to operation of the Seller Operated
Assets, or to Seller’s Knowledge, against the operator of any Assets not
operated by Seller, in each case, in which any violation of any Environmental
Law is alleged or any environmental liability is asserted.

 

(f)                                   Seller has provided or made available to
Purchaser all internal and external environmental audits, assessments, reports,
studies, documents, and correspondence on environmental matters and compliance
with Environmental Laws relating to the operation of the Assets that are in the
possession or control of or otherwise available to Seller.  To the Knowledge of
Seller, there are no other environmental reports, assessments, audits, studies
or documents with respect to the operation of the Assets.

 

Section 4.15                             Payments for Production; Calls on
Production.

 

(a)                                 With respect to the Seller Operated Assets,
Seller has not, and with respect to the Assets not operated by Seller, to
Seller’s Knowledge, Seller has not:  (1) received any advance, “take-or-pay” or
other similar payments under production sales Contracts applicable to the Assets
that entitle the purchasers to “make up” or otherwise receive deliveries of
Hydrocarbons without paying at such time the contract price therefor; or (2)
other than in accordance with gas balancing arrangements and non-consent
provisions in Contracts, received any advance payment or other similar payment
to deliver any Hydrocarbons produced from, or attributable to, the Assets, or
proceeds from the sale

 

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thereof, at some future time, without receiving payment therefor at or after the
time of delivery.

 

(b)                                 No Person has any call upon, option to
purchase or similar rights with respect to any Hydrocarbon production from the
Seller Operated Assets, except as may be provided in the Material Agreements
listed on Exhibit A-3.

 

Section 4.16                             Well Status and Abandonments.  Except
as referenced on Schedule 4.16,

 

(a)                                 all Wells operated by Seller that have been
permanently abandoned were abandoned in accordance in all material respects with
all applicable Laws and to Seller’s Knowledge all wells operated by third
parties that have been permanently abandoned were abandoned in accordance in all
material respects with all applicable Laws; and

 

(b)                                 Seller has not received any written notices
from any applicable Governmental Authorities that:  (1) any such permanently
abandoned Wells were not abandoned in accordance with all applicable Laws; or
(2) there are any Wells for which permanent abandonment is presently required
for material compliance with applicable Laws.

 

Section 4.17                             Bonds and Credit Support.  Except as
referenced on Schedule 4.17, there are no bonds, letters of credit and other
similar credit support instruments maintained by Seller or its Affiliates with
respect to Seller’s ownership and operation of the Assets.

 

Section 4.18                             Suspense Funds.  Except as set forth in
Schedule 4.18, as of the date set forth on such Schedule, Seller does not hold
any third party funds in suspense with respect to production of Hydrocarbons
from any of the Assets other than amounts less than the statutory minimum amount
that Seller is permitted to accumulate prior to payment.

 

Section 4.19                             Imbalances.  Exhibit D sets forth all
material Imbalances associated with the Assets as of the Effective Time.

 

Section 4.20                             Insurance.  Schedule 4.20 lists each
material insurance policy maintained by such Seller that relates or provides
coverage to the Assets (the “Policies”).  Except as set forth on Schedule 4.20,
there are no claims pending with respect to any Policies.

 

Section 4.21                             Royalties.  Except as disclosed on
Schedule 4.21 and for such items that are not yet due or are being held in
suspense as permitted pursuant to applicable Law, to Seller’s Knowledge, Seller
has paid, in all material respects, all royalties, overriding royalties and
other burdens on production due by such Seller with respect to the Assets.

 

Section 4.22                             Affiliate Transactions.  Except as
disclosed on Schedule 4.22, there are no transactions affecting any of the
Assets between Seller and any Affiliate of Seller that will be binding on the
Purchaser or the Assets after Closing.

 

Section 4.23                             Bankruptcy.  There are no bankruptcy,
reorganization or arrangement proceedings pending, contemplated by or, to the
Knowledge of Seller, threatened against Seller nor would the consummation of the
transactions contemplated by this Agreement cause grounds

 

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for, cause or permit, or could reasonably be expected to cause grounds for,
cause or permit, any bankruptcy, reorganization or arrangement proceeding,
whether voluntary or involuntary, by or against Seller.

 

Section 4.24                             Consents.  Except as set forth on
Schedule 4.24 and for consents normally and customarily obtained after Closing,
no consent, approval or authorization of any applicable Governmental Entity or
other third party is required to be obtained in connection with the consummation
of the transactions contemplated by this Agreement by Seller.

 

Section 4.25                             Preferential Rights to Purchase.  All
preferential rights to purchase to which the Assets are subject are listed on
Schedule 4.25.

 

ARTICLE V

 

PURCHASER’S REPRESENTATIONS AND WARRANTIES

 

Purchaser hereby makes the following representations and warranties to Seller as
of the date hereof and as of the Closing Date.  The term “Knowledge” with
respect to Purchaser, means the actual knowledge of David Le Norman, Charles
Mullens and Curtis Colby.

 

Section 5.1                                    Organization, Standing and
Power.  Purchaser is a Delaware limited liability company duly organized,
validly existing and in good standing under the laws of the state of Delaware
and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.  Purchaser is
duly qualified to carry on its business in each state where the failure to so
qualify would have a materially adverse effect on Purchaser’s business or
properties in such state.

 

Section 5.2                                    Authority and Enforceability. 
The execution and delivery by Purchaser of this Agreement, and the consummation
of the transactions contemplated hereby, have been duly and validly authorized
by all necessary corporate action on the part of Purchaser.  This Agreement is
the valid and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
and to general equity principles.  Neither the execution and delivery by
Purchaser of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by Purchaser with any of the provisions
hereof, will

 

(a)                                 conflict with or result in a breach of any
provision of its certificate of formation or operating agreement,

 

(b)                                 result in a material default (with due
notice or lapse of time or both) or give rise to any right of termination,
cancellation or acceleration under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license or agreement to which Purchaser is
a party or by which it or any of its properties or assets may be bound or

 

(c)                                  violate any order, writ, injunction,
judgment, decree, statute, rule or regulation applicable to Purchaser, or any of
its properties or assets, assuming receipt of

 

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all routine governmental consents normally acquired after the consummation of
transactions such as transactions of the nature contemplated by this Agreement.

 

Section 5.3                                    Independent Evaluation. 
Purchaser is knowledgeable and experienced in the evaluation, acquisition and
operation of oil and gas properties.  Except as set forth in this Agreement,
Purchaser acknowledges that Seller has made no representations or warranties as
to the accuracy or completeness of such information, and, in entering into and
performing this Agreement, Purchaser has relied and will rely solely upon its
independent investigation of, and upon its own knowledge and experience and that
of its advisors’ with respect to, the Assets and their value.

 

Section 5.4                                    Suits Affecting the Sale.  There
is no suit, action, claim, investigation or inquiry by any person or entity or
by any administrative agency or governmental body and no legal, administrative
or arbitration proceeding pending or, to Purchaser’s Knowledge, threatened
against Purchaser or any Affiliate of Purchaser which has affected or could
materially affect Purchaser’s ability to consummate the transactions
contemplated by this Agreement.

 

Section 5.5                                    Eligibility.  The Purchaser is
eligible under all applicable Laws to own the Assets, including, without
limitation, the Leases.

 

Section 5.6                                    Financing.  Purchaser has
delivered to Seller true and complete, fully-executed copies of the debt and
equity commitment letters, dated as of October 3, 2013 among Purchaser;
Citigroup Global Markets Inc., Citibank, N.A., Citicorp USA, Inc., Citicorp
North America, Inc. and/or any of their affiliates; Bank of America, N.A.;
Merrill Lynch, Pierce Fenner & Smith Incorporated; Barclays Bank PLC; Morgan
Stanley Senior Funding, Inc.; and Natixis, New York Branch and including all
exhibits, schedules, annexes and amendments to such agreements in effect as of
the date hereof (the “Commitment Letters”), pursuant to which and subject to the
terms and conditions thereof each of the parties thereto (other than Purchaser),
has severally agreed and committed to provide the debt financing set forth
therein (“Debt Financing”) and Purchaser has received a commitment in respect of
the equity financing set forth therein (“Equity Financing,” and together with
the Debt Financing, collectively the “Financing”).  The Commitment Letters have
not been amended, restated or otherwise modified or waived prior to the
Execution Date and the respective commitments contained in the Commitment
Letters have not been withdrawn, modified or rescinded in any respect prior to
the date hereof.  As of the date hereof, the Commitment Letters are in full
force and effect and constitute the legal, valid and binding obligation of each
of Purchaser and the other parties thereto, except as such enforcement may be
limited by laws affecting the enforcement of creditors’ rights generally or by
general equitable principles.  There are no conditions precedent to the funding
of the full amount of the Financing, other than as expressly set forth in the
Commitment Letters.  There are no other agreements, side letters or arrangements
that would permit the parties to the Commitment Letters to reduce the amount of
the Financing or that would otherwise affect the availability of the Financing. 
The Commitment Letters provide Purchaser with binding financial commitments
that, when funded at Closing, provide it with sufficient funds to pay the Final
Purchase Price and to pay any other amounts required to be paid by it in
connection with the consummation of the transactions contemplated by this
Agreement.  As of the date hereof, (A) no event has occurred that would
constitute a breach or default (or an event that with notice or lapse of time or
both would constitute a default), in each case, on the part of Purchaser under
the

 

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Commitment Letters or, to the Knowledge of Purchaser, any other party to the
Commitment Letters and (B) Purchaser has no reason to believe that the
conditions to the Financing will not be satisfied or that the Financing will not
be available to Purchaser on the Closing Date.  Purchaser has fully paid all
fees required to be paid prior to the date hereof pursuant to the Commitment
Letters and will pay any additional fees required to be paid pursuant to the
Commitment Letters.

 

ARTICLE VI

 

ASSUMPTION OF OBLIGATIONS AND INDEMNIFICATION

 

Section 6.1                                    Assumption of Certain Liabilities
and Obligations by Purchaser.

 

(a)                                 If the Closing occurs and subject to
Section 6.1(b) and Section 6.3, Purchaser shall assume and pay, perform, fulfill
and discharge all Liabilities relating to (i) the ownership and operation of the
Assets on or after the Effective Time including, but not limited to, any
obligation for make-up gas according to the terms and conditions of the
applicable Product Sales and Transportation Agreements and Operating Agreements;
all obligations to properly plug and abandon all wells, pipelines and other
facilities now or thereafter located on the Leases and to restore the surface of
the Leases and the Lands, excluding Conditions for which Seller has indemnified
Purchaser hereunder, in accordance with applicable lease or other agreements and
Laws, (ii) the obligation to plug and abandon all Wells located on the Lands and
reclaim all well sites located on the Lands, regardless of whether any such
obligation to plug and abandon is attributable to periods of time prior to or
after the Effective Time, (iii) the matters set forth on Exhibit C-1, and
(iv) after the expiration of the Survival Period, Liabilities related to or
arising under Environmental Law with respect to the ownership or operation of
the Assets before the Effective Time, but only to the extent not asserted
pursuant to Section 6.3 before the expiration of the Survival Period
(collectively, the “Assumed Liabilities”), provided however, that the Assumed
Liabilities shall not include any Retained Liabilities.  Purchaser agrees to
execute and deliver any specific assumption agreements, bonds, applications, or
financial assurances, if any, required to effectuate the assumption of the
Assumed Liabilities.

 

(b)                                 Notwithstanding anything to the contrary in
this Agreement, Purchaser is not assuming any Liabilities of Seller or any of
its Affiliates, and Seller and their Affiliates shall retain sole responsibility
for and shall defend, indemnify and hold harmless Purchaser for all Liabilities
(including those related to Environmental Laws) resulting from, relating to or
arising out of (i) the ownership, use, operation or condition of the Assets
prior to the Effective Time (except to the extent Liabilities relating to the
obligation to plug and abandon Wells are assumed pursuant to
Section 6.1(a)(ii) and to the extent Liabilities under Environmental Laws are
assumed after the Survival Period pursuant to Section 6.1(a)(iv)), (ii) the
Excluded Assets, (iii) any Taxes of any Person within Sellers’s group, whether
by reason of Treasury Regulations section 1.1502-6 or otherwise, including any
Taxes relating to, pertaining to, or arising out of the Assets or the business
related thereto with respect to income and other Taxes for periods or portions
thereof ending on or prior to the Effective Time, including any Taxes arising in

 

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connection with the consummation of the transactions contemplated hereby, and
(iv) any personal injury or death occurring or attributable to the Assets prior
to the Effective Time (except to the extent Liabilities under Environmental Laws
are assumed pursuant to Section 6.1(a)(iv) after the expiration of the Survival
Period) (collectively, the “Retained Liabilities”).

 

(c)                                  “Liability” or “Liabilities” means any
indebtedness, commitment, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation, contingency, responsibility, or other
liability, in each case, whether fixed or unfixed, asserted or unasserted, due
or to become due, accrued or unaccrued, or absolute, contingent or otherwise.

 

Section 6.2                                    Indemnification by Purchaser.  If
the Closing occurs, Purchaser agrees to release, indemnify, defend and hold
harmless Seller, its directors, officers, employees, agents, representatives,
successors, and assigns, from and against any and all suits, judgments, damages,
claims, liabilities, Losses, costs and expenses (including court costs and
reasonable attorney’s fees):

 

(a)                                 that are attributable to the Assumed
Liabilities, regardless of whether Seller, its agents and representatives were
wholly or partially negligent or otherwise at fault, or

 

(b)                                 that arise out of any breach by Purchaser of
any representation, warranty, covenant or agreement hereunder.

 

Section 6.3                                    Indemnification by Seller.  If
the Closing occurs, Seller agrees, for a period of twelve (12) months after the
Closing Date (the “Survival Period”), to release, indemnify, defend and hold
harmless Purchaser from and against any and all suits, judgments, damages,
claims, liabilities, Losses, costs and expenses (including, without limitation,
court costs and reasonable attorneys’ fees):

 

(a)                                 that are attributable to any Liabilities
relating to Environmental Laws, with respect to the use, ownership or operation
of the Assets during periods of time prior to the Effective Time, regardless of
whether Purchaser was wholly or partially negligent or otherwise at fault;

 

(b)                                 that arise out of any breach by Seller of
any representation, warranty, or covenant hereunder.

 

provided, however, that such indemnity, defense and hold harmless obligations
shall not apply to (i) any amount that was taken into account as an adjustment
to the Preliminary Purchase Price pursuant to the provisions hereof, (ii) any
liability of Purchaser to Seller under the provisions of this Agreement, and
(iii) any amount in excess of twenty percent (20%) of the Preliminary Purchase
Price; provided further that the foregoing limitation set forth in subsection
(iii) in the immediately preceding clause of this sentence shall not apply in
respect of any breach of representation or warranty set forth in Section 4.1,
Section 4.2 or Section 4.23 or any fraud or  willful misconduct; and provided
further that Seller’s indemnity obligation with respect to any tax matter and
the special warranty of title contained in the conveyances to be provided at

 

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Closing shall extend until ninety (90) days after the applicable statute of
limitations period for such matter .

 

Section 6.4                                    Interpretation.  The provisions
of each of the foregoing Sections 6.1, 6.2 and 6.3 and Section 8.3(d) shall be
interpreted as follows:

 

(a)                                 The indemnity provided for by each of such
Sections shall extend to any, commitment, guaranty, endorsement, claim, loss,
damage, deficiency, cost, expense, obligation, contingency, responsibility, or
other liability, in each case, whether fixed or unfixed, asserted or unasserted,
due or to become due, accrued or unaccrued, or absolute, contingent or otherwise
(“Loss”), incurred or suffered by the indemnified party, including reasonable
fees and expenses of attorneys, technical experts and expert witnesses
reasonably incident to matters indemnified against, but excluding however, any
special, consequential, punitive or exemplary damages, or loss of profits
incurred by a Party hereto.

 

(b)                                 The indemnity provided for in Section 6.3
with respect to a breach or failure of a special warranty of title for an
individual Asset contained in the conveyance to be delivered at Closing shall be
limited in amount to the Allocated Value for each such Asset, reduced by the
value of production from such Asset actually received by Purchaser (to the
extent such production received is not subject to any repayment or offset), net
of expenses incurred for such Asset by the Purchaser, for which a special
warranty of title was breached or failed, but only in proportion to and to the
extent of such breach or failure.  After the Defective Interest Notice Date
(prior to which the adjustment provisions of Section 3.4 also shall be in
effect) and subject to the provisions of Section 3.6, the indemnity provided for
herein shall be the sole and exclusive remedy, as between the parties hereto,
for a breach or failure of a warranty or representation of title.  The
adjustment provisions for breaches of title representations and warranties as
set forth in Section 3.4 are applicable only as to breaches of title
representations and warranties for which notice has been given on or prior to
the Defective Interest Notice Date subject to the provisions of Section 3.6. 
Subject to Section 3.6, after the Defective Interest Notice Date, the exclusive
applicable representations and warranties of title shall be the special warranty
of title by, through and under Seller, contained in the conveyances delivered
pursuant hereto, and not otherwise.

 

(c)                                  For the purposes of determining the damages
incurred or suffered in respect of, any Loss for any breach or inaccuracy of any
covenant, representation or warranty in this Agreement (but not for the purpose
of determining whether such covenant, representation or warranty has been
breached), such determination shall disregard any use of “material,”
“materiality,” “Material Adverse Effect” or other words or phrases of similar
import contained in the applicable representation, warranty or covenant.

 

(d)                                 The amount of each payment claimed by an
indemnified party to be owing pursuant to Sections 6.1,  6.2 or 6.3, together
with a list identifying to the extent reasonably possible each separate item of
Loss for which payment is so claimed, shall be set forth by such party in a
statement delivered to the indemnifying party or parties, as the

 

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case may be, setting forth the basis of such claim and shall be paid by such
indemnifying party or parties, as the case may be, as and to the extent required
herein with thirty (30) days after receipt of such statement. Any indemnity,
defense and hold harmless obligations pursuant to Sections 6.1(b) and 6.3 shall
first be met by distributions to the Purchaser, as set forth in
Section 1.3(b) of the Escrow Agreement, from the Ten Million Dollars in escrow
funds deposited in accordance with Section 2.5(b).

 

(e)                                  Except as set forth in Section 8.3,
Section 8.4, and Article X of this Agreement, and as may be permitted under the
conveyances delivered hereunder, the remedies set forth in this Article VI shall
be the sole and exclusive remedies of Seller and Purchaser for any breach of a
representation, warranty or covenant, or otherwise.

 

Section 6.5                                    Notices.

 

(a)                                 Within sixty (60) days after notification to
an indemnified party with respect to any claim or legal action or other matter
that may or could result in a Loss for which indemnification may be sought under
Article VI, but in any event in time sufficient for the indemnifying party to
contest any action, claim or proceeding that has become the subject of
proceedings before any court or tribunal, such indemnified party shall give
written notice of such claim, legal action or other matter to the indemnifying
party and, at the request of such indemnifying party, shall furnish the
indemnifying party or its counsel with copies of all pleadings and other
information with respect to such claim, legal action or other matter and shall,
at the election of the indemnifying party made within sixty (60) days after
receipt of such notice, permit the indemnifying party to assume control of such
claim, legal action or other matter (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 and reasonably
acceptable to the indemnified party.  In the event of such an election by the
indemnifying party,

 

(i)                                     any expense incurred by the indemnified
party thereafter for investigation or defense of the matter shall be borne by
the indemnifying party, and (ii)

 

(ii)                                  the indemnified party shall give all
reasonable information and assistance, other than pecuniary, that the
indemnifying party shall deem reasonably necessary to the proper defense of such
claim, legal action, or other matter.

 

If Seller is the indemnifying party pursuant to Sections 6.1(b) or 6.3,
Purchaser has the right to deliver a written claim against the Ten Million
Dollars in escrow funds deposited in accordance with Section 2.5(b) pursuant to
and in accordance with Section 1.3(b) of the Escrow Agreement to Escrow Agent.

 

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In the absence of such an election, the indemnified party will use its
commercially reasonable efforts to defend any claim, legal action or other
matter to which such other party’s indemnifications under this Article VI
applies.

 

(b)                                 Failure to provide timely notice pursuant to
subsection (a) of this Section 6.5 shall not deprive the party seeking
indemnification of its right to indemnifications pursuant to this Article VI,
although such party shall be liable for any damages occasioned by its delay in
affording the party entitled to notice with such notice and shall not be
entitled to indemnifications for any costs incurred during the period of such
delay that could reasonably have been avoided by the indemnifying party if
timely notice had been given.

 

Section 6.6                                    Tax Treatment of Payments.  Any
payments made to any party pursuant to this Article VI or Section 8.3(d) shall
constitute an adjustment to the purchase price of the Assets for Tax purposes
and shall be treated as such by Purchaser and Seller on their Tax Returns to the
extent permitted by Law.

 

ARTICLE VII

 

SELLER’S OBLIGATIONS PRIOR TO CLOSING

 

Section 7.1                                    Interim Operations.

 

(a)                                 From the date hereof until the Closing Date,
Seller shall (or, with respect to Assets that are not Seller Operated Assets,
shall use its commercially reasonable efforts to cause the operator of such
Assets in which it owns working interests to):

 

(i)                                     not abandon any Well on any Lease
capable of commercial production, or release or abandon all or any part of the
Assets capable of commercial production, or release or abandon all or any
portion of the Leases without Purchaser’s written consent;

 

(ii)                                  not cause the Assets to be developed,
maintained or operated in a manner materially inconsistent with prior operation;

 

(iii)                               not commence or agree to participate in any
operation on the Seller Operated Assets anticipated to cost in excess of one
hundred thousand and NO/100 Dollars ($100,000.00) per operation, or any
operation on the Assets not operated by Seller anticipated to cost in excess of
one hundred thousand and NO/100 Dollars ($100,000) per operation, net to
Seller’s interest, without Purchaser’s written consent (except emergency
operations, operations required under presently existing contractual
obligations, and operations undertaken to avoid any penalty provision of any
applicable agreement or order);

 

(iv)                              not create any lien, security interest or
other encumbrance with respect to the Assets (except for Permitted
Encumbrances), or, without Purchaser’s written consent, enter into any agreement
for the sale, disposition or encumbrance of any of the Assets, or dedicate,
sell, encumber or dispose of any

 

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oil and gas production, except in the ordinary course of business on a contract
which is terminable on not more than thirty (30) days’ notice except production
sold under a contract listed on Exhibit A-3;

 

(v)                                 not agree to any alterations in the
contracts included in or relating to a material portion of the Assets or enter
into any material new contracts relating to the Assets (other than contracts
terminable on not more than thirty (30) days’ notice) without Purchaser’s
written consent;

 

(vi)                              maintain in force all insurance policies
covering the Assets;

 

(vii)                           maintain the Leases in full force and effect and
comply with all express or implied covenants contained therein (provided that
this covenant shall not be deemed to expand Seller’s title warranties beyond
those expressly contained in this Agreement);

 

(viii)                        furnish Purchaser with copies of all AFEs in
excess of one hundred thousand dollars ($100,000.00), net to Seller’s interest,
received or issued by Seller prior to the Closing;

 

(ix)                              not liquidate, dissolve, recapitalize or
otherwise wind up its business in any respect as it relates to or affecting the
Assets;

 

(x)                                 not change its accounting methods, policies
or practices, in each case as it relates to the Assets, except as required by
applicable law;

 

(xi)                              not cancel or waive any claims or rights of
material value;

 

(xii)                           not commence, settle or propose to settle any
Proceedings related to the Assets;

 

(xiii)                        not take any action, or fail to take any action,
which action or failure to act will or could reasonably be expected to lead to
the termination or material modification of any permits necessary to operate the
Assets as presently conducted;

 

(xiv)                       not agree, whether in writing or otherwise, to take
or omit to take any action inconsistent with the foregoing.

 

(b)                                 Notwithstanding anything to the contrary in
this Agreement, from and after the date of this Agreement, until Closing, Seller
shall:

 

(i)                                     provide Purchaser with access (or, where
Seller is not an operator, use its commercially reasonable efforts to arrange
for access) to the Assets for inspection thereof at the sole cost, risk and
expense of Purchaser;

 

(ii)                                  use reasonable efforts to obtain any and
all necessary consents, waivers (including waiver of preferential purchase
rights), permissions and

 

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approvals of third parties or governmental authorities in connection with the
sale and transfer of the Assets other than approvals of federal lease
assignments to Purchaser;

 

(iii)                               cause to be filed all reports required to be
filed by Seller with governmental authorities relating to the Assets;

 

(iv)                              provide prompt notice to Purchaser of any
notice received by Seller of a default, claim, obligation or suit which affects
any of the Assets; and

 

(v)                                 promptly notify Purchaser of any event,
condition, or occurrence which results in any of the representations and
warranties made herein to be untrue.; and

 

(vi)                              carry on its business, in the ordinary course,
substantially as presently conducted and substantially consistent with past
practice and use commercially reasonable efforts to maintain and preserve intact
the business organization and the value of the Assets and to maintain the books
of account and Records in the ordinary course of business.

 

Section 7.2                                    Operated Assets.  Seller makes no
representations or warranties to Purchaser as to transferability or
assignability of operatorship of any Seller Operated Assets.  Rights and
obligations associated with operatorship of such Seller Operated Assets are
governed by operating and similar agreements covering the Assets and will be
decided in accordance with the terms of such agreements.  However, Seller will
use its reasonable best efforts to assist Purchaser in its efforts to succeed
Seller as operator of any Seller Operated Assets in accordance with the terms of
the applicable operating agreements.  For the all Seller Operated Assets, Seller
shall execute and deliver to Purchaser and Purchaser shall promptly file the
appropriate forms with the applicable regulatory agency transferring
operatorship of the Seller Operated Assets to Purchaser, to the extent permitted
or approved pursuant to the applicable operating agreement.

 

ARTICLE VIII

 

ADDITIONAL AGREEMENTS OF THE PARTIES

 

Section 8.1                                    Government Reviews and Filings. 
Both prior to and after the Closing, as appropriate, each of Seller and the
Purchaser shall in a timely manner

 

(a)                                 make required filings with, prepare
applications to and conduct negotiations with each governmental agency as to
which such filings, applications or negotiations are necessary or appropriate
for the consummation of the transactions contemplated hereby, and

 

(b)                                 provide such information as each may
reasonably request to make such filings, prepare such applications and conduct
such negotiations.  Seller shall cooperate with and assist Purchaser in pursuing
such filings, applications and negotiations, and Purchaser shall cooperate with
and assist Seller with respect to such filings, applications and negotiations. 
Each party shall be responsible for and shall make any governmental

 

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filings occasioned by the ownership or structure of such party.  If either
Seller or Purchaser determines that the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 is applicable to this transaction, then both parties shall promptly
file with the Federal Trade Commission and the Department of Justice the
required notifications, reports and supplemental information to comply in all
respects of the requirements of the Act.  Purchaser shall promptly pay to the
appropriate government agency all filing fees required of “acquiring persons” as
determined by the Act.  Notwithstanding anything to the contrary herein
contained, Closing shall not occur unless in the reasonable opinion of Seller’s
and Purchaser’s counsel, it can occur without violation of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the rules and regulations of the Federal
Trade Commission and the Department of Justice thereunder.

 

Section 8.2                                    Confidentiality.  Until
completion of the Closing (and without limitation in the event Closing should
not occur for any reason), except as required by law, Purchaser and its
officers, agents and representatives shall continue to be bound by the
Confidentiality Agreement between the parties dated July 24, 2013.

 

Section 8.3                                    Taxes.

 

(a)                                 Each party shall provide the other party
with reasonable information which may be required by the other party for the
purpose of preparing Tax Returns and responding to any Proceeding by any taxing
jurisdiction.  Each party shall cooperate with all reasonable requests of the
other party made in connection with contesting the imposition of Taxes. 
Notwithstanding anything to the contrary in this Agreement neither party shall
be required at any time to disclose to the other party any income Tax Returns or
other confidential tax information.

 

(b)                                 Seller and Purchaser shall report the
information required by Section 1060 of the Code (or any corresponding state or
local income tax statute), in a manner consistent with

 

(i)                                     the allocations set forth on Exhibit B
and B-1, as adjusted pursuant to this Agreement and

 

(ii)                                  the requirements of such Section 1060.

 

(c)                                  All ad valorem taxes, real property taxes,
personal property taxes and similar Taxes (“Property Taxes”) attributable to the
Assets with respect to the tax period in which the Effective Time occurs shall
be apportioned between Seller and Purchaser as of the Effective Time, based on
the number of days in the tax period before and after the Effective Time.  All
production, severance and other taxes based on production volumes (“Production
Taxes”) shall be apportioned between Seller and Purchaser as of the Effective
Time based on the volumes produced from the Assets before and after the
Effective Time.  With respect to the Assets operated by Seller, only, the owner
of record on the assessment date shall file or cause to be filed all required
reports and returns incident to the Property Taxes and Production Taxes and
shall pay or cause to be paid to the taxing authorities all Property Taxes and
Production Taxes relating to the tax period

 

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in which the Effective Time occurs.  If Seller is the owner of record on the
assessment date, then Purchaser shall pay to Seller Purchaser’s pro rata portion
of Property Taxes and Production Taxes within 30 days after receipt of Seller’s
invoice and proof of payment therefor, except to the extent taken into account
as an adjustment to the Preliminary Purchase Price pursuant to Section 2.4.  If
Purchaser is the owner of record as of the assessment date then Seller shall pay
to Purchaser Seller’s pro rata portion of Property Taxes and Production Taxes
within 30 days after receipt of Purchaser’s invoice and proof of payment
therefor.  Each party shall promptly provide the other party with copies of all
reports and returns received for Property Taxes and Production Taxes
attributable to non-operated Assets with respect to the tax periods for which
the other party is fully or partially liable.  Purchaser or Seller as applicable
shall promptly pay to the operator of the non-operated Assets the amount of tax
owing for the tax periods for which such reports or returns have been received
and shall invoice Seller for or Purchaser, as applicable, for such other party’s
pro rata share, if any, of such tax.  Seller or Purchaser, as applicable, shall
pay such invoice within 30 days of receipt thereof and proof of payment from the
other party.

 

(d)                                 Subject to the provisions of Section 8.3(e),
and except as provided below, Seller shall indemnify Purchaser for all
liabilities that are assessed against Purchaser for foreign, federal, state,
local or Indian Tribal Taxes in respect of the ownership or operation of the
Assets prior to the Effective Time, together with penalties and interest thereon
(provided such penalties and interest do not result from the negligence, late
filing, fraud or acts of misfeasance or malfeasance of Purchaser); provided,
however, that such indemnity shall not apply to such Taxes to the extent (but
only to the extent) such Taxes are included in the determination of the Final
Purchase Price, and provided, further, however, that Seller shall be entitled to
all refunds or rebates of Taxes paid in respect of the ownership or operation of
the Assets prior to the Effective Time that may be received by Seller or
Purchaser.  Subject to the provisions of Section 8.3(e), and except as provided
below, Purchaser shall indemnify Seller for all liabilities which are assessed
against Seller for foreign, federal, state, local or Indian Tribal taxes (other
than margin or income taxes)Taxes, together with penalties and interest thereon
(provided such penalties and interest do not result from the negligence, late
filing, fraud or acts of misfeasance or malfeasance of Seller), to the extent
such liabilities relate to the ownership or operation of the Assets from and
after the Effective Time; provided, however, that such indemnity shall not apply
to such Taxes to the extent (but only to the extent) such Taxes are included in
the determination of the Final Purchase Price, and provided further, however,
that Purchaser shall be entitled to all refunds or rebates of Taxes attributable
to the Assets on or after the Effective Time that may be received by Seller or
Purchaser.  Seller acknowledges and agrees that Seller shall be treated as the
owner of the Assets for income Tax purposes up to and including the time of
Closing.  Purchaser acknowledges and agrees that Purchaser shall be treated as
the owner of the Assets after the Closing.  Seller shall be liable for its own
income Taxes attributable to income derived from the Assets, including the gain
on the sale of the Assets, through the time of the Closing.  Purchaser shall be
liable for its own income Taxes attributable to income derived from the Assets
after the Closing.

 

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(e)                                  In order for Seller or Purchaser
(“Claimant”) to make a claim against the other (“Indemnitor”) under this
Section 8.3, Claimant shall give prompt notice to Indemnitor of any liability
for which Claimant would claim indemnification under this Section 8.3, which
notice shall include the circumstances surrounding such liability.  Indemnitor
shall then have the right but not the obligation, to contest such liability at
its sole cost and expense by giving written notice to Claimant of such election
within 15 days after Indemnitor receives Claimant’s notice.  Should Indemnitor
fail to notify Claimant within such 15-day period, Indemnitor shall be deemed to
have elected not to contest such liability.  Should Indemnitor elect (or be
deemed to have elected) not to contest such liability, Indemnitor shall pay the
full amount due under Section 8.3(d) in respect of such liability to Claimant in
cash within 30 days after Indemnitor elects (or is deemed to have elected) not
to contest such liability.  Except as specifically provided in this Section 8.3
with respect to certain tax issues which must be combined or joined with other
tax issues, if Indemnitor elects to contest any such liability, Claimant shall
give Indemnitor full authority to defend, adjust, compromise or settle such
liability and any Proceeding in which Indemnitor contests such liability, in the
name of Claimant or otherwise as Indemnitor shall elect. In any administrative
or legal Proceeding, Indemnitor shall employ counsel selected by it and
reasonably acceptable to Claimant.  With respect to tax issues incident to any
such liability that must be combined or joined with one or more other tax issues
which Claimant desires to contest, Claimant and Indemnitor shall cooperate
fully, and control of any administrative legal proceeding shall rest with the
party having the greater ultimate liability (including liability under
Section 8.3(d) for the taxes in dispute).  The party in control of any
Proceeding pursuant to this Section 8.3(e) may not adjust, compromise or settle
Taxes which are contested by or on behalf of the other party without the consent
of the other party.  With respect to any liability contested by Indemnitor under
the terms of this Section 8.3(e), Indemnitor shall pay the full amount due under
Section 8.3(d) in respect of such liability to Claimant in cash within 30 days
after the liability is finally determined either by settlement or pursuant to
the final unappealable judgment of a court of competent jurisdiction, or such
earlier time as may be required by applicable law.

 

(f)                                   Purchaser shall pay and be liable for all
sales taxes occasioned by the sale of the Assets and all documentary, transfer,
filing, licensing, and recording fees required in connection with the
processing, filing, licensing or recording of any assignments, titles, or bills
of sale.

 

Section 8.4                                    Receipts and Credits.  Following
Closing subject to the terms hereof and except to the extent same have already
been taken into account as an adjustment to the Preliminary Purchase Price, all
monies, proceeds, receipts, credits and income attributable to the ownership and
operation of the Assets (a) for all periods of time from and subsequent to the
Effective Time, shall be the sole property and entitlement of Purchaser, and to
the extent received by Seller, Seller shall within 10 Business Days after such
receipt, fully disclose, account for and transmit same to Purchaser and (b) for
all periods of time prior to the Effective Time, shall be the sole property and
entitlement of Seller and, to the extent received by Purchaser, Purchaser shall
fully disclose, account for and transmit same to Seller within 10 Business
Days.  Subject to the terms hereof and except to the extent same have already
been taken into account as an adjustment to the Preliminary Purchase Price, all
costs, expenses, disbursements, obligations

 

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and liabilities attributable to the Assets (i) for periods of time prior to the
Effective Time, regardless of when due or payable, shall be the sole obligation
of Seller and Seller shall promptly pay, or if paid by Purchaser, promptly
reimburse Purchaser for and hold Purchaser harmless from and against same and
(ii) for periods of time from and subsequent to the Effective Time, regardless
of when due or payable, shall be the sole obligation of Purchaser and Purchaser
shall promptly pay, or if paid by Seller, promptly reimburse Seller for and hold
Seller harmless from and against same.

 

Section 8.5                                    Suspense Accounts.  At the
Closing, Seller agrees to retain (but provide information regarding all of
Seller’s payable accounts holding monies in suspense attributable to the Assets
relating to the periods of time prior to the Effective Time and to transfer to
Purchase (pursuant to a downward adjustment to the Purchase Price) monies in
suspense attributable to the Assets relating to the period on or after the
Effective Time.  Seller agrees to apply such monies attributable to the period
prior to the Effective Time in a manner consistent with prudent oil and gas
business practices and to indemnify Purchaser against any claim relating to the
failure to pay such funds after the Closing.  Purchaser agrees to take and apply
such monies attributable to the period of time on and after the Effective Time
in a manner consistent with prudent oil and gas business practices and to
indemnify Seller against any claim relating to the failure to pay such funds
after the Closing.

 

Section 8.6                                    Like-Kind Exchange.  Seller and
Purchaser hereby agree that this transaction may be completed as a like-kind
exchange and that each party will assist in completing the sale as a like-kind
exchange.  As a like-kind exchange, Seller and Purchaser agree that Purchaser,
in lieu of the purchase of the Assets from Seller for the consideration provided
herein, shall have the right at any time prior to Closing to assign all or a
portion of its rights under this Agreement to a Qualified Intermediary (as that
term is defined in Section 1.1031(k)-1(g)(4)(v) of the Treasury Regulations) or
an Exchange Accommodation Titleholder (as that term is defined in Rev. Proc.
2000-37, 2000-2 C.B. 308) in order to accomplish the transaction in a manner
that will comply, either in whole or in part, with the requirements of a
like-kind exchange pursuant to Section 1031 of the Code.  Likewise, Seller shall
have the right at any time prior to Closing to assign all or a portion of its
rights under this Agreement to a Qualified Intermediary for the same purpose. 
In the event either party assigns its rights under this Agreement pursuant to
this Section 8.6, such party agrees to notify the other party in writing of such
assignment at or before Closing.  If Seller assigns its rights under this
Agreement for this purpose, Purchaser agrees to (i) consent to Seller’s
assignment of its rights in this Agreement in the form reasonably requested by
the Qualified Intermediary, and (ii) pay the portion of the Estimated Final
Purchase Price attributable to the Assets into a qualified escrow or qualified
trust account at Closing as directed in writing.  If Purchaser assigns its
rights under this Agreement for this purpose, Seller agrees to (i) consent to
Purchaser’s assignment of its rights in this Agreement in the form reasonably
requested by Purchaser’s Qualified Intermediary or Exchange Accommodation
Titleholder, (ii) refund to Purchaser the Performance Deposit previously
deposited by Purchaser pursuant to this Agreement upon the Qualified
Intermediary’s or Exchange Accommodation Titleholder’s payment to Seller of a
replacement Performance Deposit in the same amount, (iii) accept the Estimated
Final Purchase Price (as may be adjusted under the terms of this Agreement) for
the Assets from the account designated by Purchaser’s Qualified Intermediary or
Exchange Accommodation Titleholder at Closing, and (iv) at Closing, convey and
assign directly to Purchaser or Purchaser’s Exchange Accommodation Titleholder

 

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(as directed in writing) the Assets which are the subject of this Agreement upon
satisfaction of the other conditions to Closing and other terms and conditions
hereof.  Seller and Purchaser acknowledge and agree that any assignment of this
Agreement shall not increase the costs, expenses or liabilities of a party as a
result of the other party’s assignment of this Agreement to a Qualified
Intermediary or Exchange Accommodation Titleholder, shall not release either
party from any of their respective liabilities and obligations to each other
under this Agreement, and that neither party represents to the other that any
particular tax treatment will be given to either party as a result thereof.

 

Section 8.7                                    Financing Cooperation.

 

(a)                                 Purchaser shall use its commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
obtain the Debt Financing on the terms and conditions described in the Debt
Commitment Letter, including using commercially reasonable efforts to
(i) maintain in effect the Debt Commitment Letter, (ii) negotiate definitive
agreements with respect to the Debt Financing on terms and conditions
contemplated by the Debt Commitment Letter (any such agreements, the “Financing
Definitive Agreements”), (iii) satisfy on a timely basis all conditions
applicable to the Debt Financing in the Debt Commitment Letter or the Financing
Definitive Agreements that are within its control and comply with all
obligations thereunder or (iv) consummate the Debt Financing at or prior to the
Closing.  In the event that all conditions to the Debt Commitment Letter or the
Financing Definitive Agreements have been satisfied or, upon funding will be
satisfied, Purchaser shall use its commercially reasonable efforts to cause the
lenders and the other Persons providing such Debt Financing to fund on the
Closing Date the Debt Financing required to consummate the transactions
contemplated by this Agreement.  Purchaser shall have the right from time to
time to amend, replace, supplement or otherwise modify or waive any of its
rights under the Debt Commitment Letter with respect to the Debt Financing or
the Financing Definitive Agreements or substitute other debt or equity financing
for all or any portion of the Debt Financing from the same or alternative
financing sources; provided, that any such amendment, replacement, supplement or
other modification to or waiver of any provision of such Debt Commitment Letter
or such Financing Definitive Agreements that amends the Debt Financing or
substitutes any other financing source for all or any portion of the Debt
Financing shall not expand upon the conditions precedent or contingencies to the
funding on the Closing Date of the Debt Financing as set forth in the applicable
Debt Commitment Letter or the Financing Definitive Agreements in a manner that
would prevent, impede or materially delay the consummation of the transactions
contemplated by this Agreement.  If any portion of the Debt Financing becomes
unavailable or Purchaser becomes aware of any event or circumstance that makes
any portion of the Debt Financing unavailable, in each case, on the terms and
conditions contemplated in the Debt Commitment Letter or the Financing
Definitive Agreements, Purchaser shall use its commercially reasonable efforts
to arrange and obtain alternative debt financing from the same or alternative
financial institutions in an amount sufficient to consummate the transactions
contemplated by this Agreement, upon terms and conditions no less favorable, in
the aggregate, to Purchaser (as determined in the reasonable judgment of
Purchaser) than those in the Debt Commitment Letter or the Financing Definitive

 

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Agreements as promptly as practicable following the occurrence of such event. 
Purchaser shall give Seller prompt oral and written notice of any breach by any
party to the Debt Commitment Letter or the Financing Definitive Agreements, of
any condition not likely to be satisfied and of any termination of the Debt
Commitment Letter or the Financing Definitive Agreements.  Purchaser shall keep
Seller informed on a reasonably current basis of the status of its efforts to
consummate the Financing.

 

(b)                                 At the sole cost of Purchaser, Seller shall
and shall cause its Affiliates to provide, and shall use its commercially
reasonable efforts to cause each of their respective officers, employees and
advisors and other representatives to provide, all cooperation reasonably
requested by Purchaser in connection with the Financing or any alternate debt
financing or debt securities issuance in connection with the financing of the
transactions contemplated by this Agreement (collectively the “Financing
Arrangements”), including (i) providing to Purchaser and the lenders and other
financial institutions and investors that are or may become parties to the
Financing Arrangements and to any underwriters, initial purchasers or placement
agents in connection with the Financing Arrangements (the “Financing Parties”)
(A) the information required by the Debt Commitment Letter and (B) any other
financial and other information relating to Seller or the Assets that is
customary for such financing or reasonably necessary for the completion of the
Financing by the Financing Parties, including information regarding the
business, operations, financial projections and prospects of the Assets that is
customary for such financing or reasonably necessary for the completion of the
Financing by the Financing Parties, (ii) participating and causing senior
management of Seller to participate in a reasonable number of meetings
(including customary one-on-one meetings) with any Financing Parties and other
presentations, road shows, drafting sessions, due diligence sessions (including
accounting due diligence sessions) and sessions with rating agencies and
prospective Financing Parties; (iii) assisting with the preparation of materials
for rating agency presentations, bank information memoranda (including the
delivery of customary authorization and representation letters, including with
respect to the presence or absence of material non-public information and the
accuracy of the information contained therein); (iv) using commercially
reasonable efforts to obtain legal opinions, surveys and title insurance
(including non-imputation title policy endorsements and affidavits reasonably
required by the title company) as reasonably requested by Purchaser and to
obtain such consents, approvals, authorizations and instruments as reasonably
requested by Purchaser in connection with the Debt Financing and collateral
arrangements, including lien releases and instruments of termination or
discharge; (v) taking all actions reasonably necessary to permit the Financing
Parties to evaluate the Assets; and (vi) providing all documentation and other
information about Seller and the Assets as is reasonably requested by the
Financing Parties relating to applicable “know your customer” and anti-money
laundering rules and regulations, including the PATRIOT Act.

 

(c)                                  In the event that the Commitment Letters or
the Financing Definitive Agreements are amended, replaced, supplemented or
otherwise modified, including as a result of obtaining alternative financing in
accordance with Section 8.7(a), or if Purchaser substitutes other financing for
all or a portion of the Financing, each of Purchaser and Seller shall comply
with its covenants in Section 8.7(a) and Section 8.7(b) with respect to

 

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the Commitment Letters and the Financing Definitive Agreements, as so amended,
replaced, supplemented or otherwise modified and with respect to such other
financing to the same extent that Purchaser and Seller would have been obligated
to comply with respect to the Financing and the provisions in this Section 8.7
relating to the Commitment Letters and the Financing Definitive Agreements, and
the Financing shall be deemed to refer to the Commitment Letters and the
Financing Definitive Agreements as so amended, replaced, supplemented or
otherwise modified and to such other financing, as applicable.

 

Section 8.8                                    No Negotiation.  During the
period of time from the execution of this Agreement to the Closing Date (or
earlier termination of this Agreement), Seller shall not (i) negotiate,
undertake, authorize, recommend, propose or enter into an agreement for the
purchase or disposition of any material amount of the Assets, or (ii) solicit or
initiate negotiations or submissions of proposals or offers in respect to
purchase or disposition of any material amount of the Assets, in each case
except in accordance with the transactions contemplated by this Agreement.

 

ARTICLE IX

 

CONDITIONS TO CLOSING

 

Section 9.1                                    Seller’s Conditions.  The
obligations of Seller at the Closing are subject, at the option of Seller, to
the satisfaction at or prior to the Closing of each of the following conditions.

 

(a)                                 All representations and warranties of
Purchaser contained in this Agreement shall be true in all material respects at
and as of the Closing as if such representations and warranties were made at and
as of the Closing without giving effect to the words “material” contained in
such representations and warranties, except where the failure of such
representations and warranties to be so true and correct would not reasonably be
expected to impair Purchaser’s ability to consummate the transactions
contemplated by this Agreement, and Purchaser shall have performed and satisfied
all agreements in all material respects required by this Agreement to be
performed and satisfied by Purchaser at or prior to the Closing.

 

(b)                                 Seller shall have received a certificate
dated as of the Closing, executed by the President or any Vice President of
Purchaser, to the effect that the statements in Section 9.1(a) are true in all
material respects at and as of the Closing.

 

(c)                                  Purchaser shall have delivered (or be
ready, willing and able to deliver at Closing) the documents and other items
required to be delivered by Purchaser pursuant to Section 11.2.

 

(d)                                 No order shall have been entered by any
court or governmental agency having jurisdiction over the parties or the subject
matter of this contract that restrains or prohibits the purchase and sale
contemplated by this Agreement and which remains in effect at the time of
Closing, except:

 

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(i)                                     any order affecting a matter with
respect to which Seller has been adequately indemnified by Purchaser or

 

(ii)                                  any order affecting only a portion of the
Assets, which portion of the Assets could be treated as a Casualty Loss in
accordance with Section 3.5.

 

(e)                                  Seller shall have been provided with such
documentation or other assurance as Seller deems reasonably necessary that
Purchaser has obtained, or executed the required applications to obtain, all
bonds, permits, or approvals as may be required for owning or operating the
Assets; or as may be reasonably necessary to comply with Purchaser’s assumption
of obligations as described in Section 6.1, hereof.

 

Section 9.2                                    Purchaser’s Conditions.  The
obligations of Purchaser at the Closing are subject, at the option of Purchaser,
to the satisfaction at or prior to the Closing of each of the following
conditions:

 

(a)                                 All representations and warranties of Seller
contained in this Agreement (other than in respect of Section 4.1, Section 4.2
and Section 4.10(c)) shall be true in all material respects at and as of the
Closing as if such representations and warranties were made at and as of the
Closing without giving effect to the words “material” contained in such
representations and warranties, except where the failure of such representations
and warranties to be so true and correct would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, and all
representations and warranties in Section 4.1, Section 4.2 and
Section 4.10(c) shall each be true and correct in all respects as of the Closing
as if such representations and warranties were made at and as of the Closing,
and Seller shall have performed and satisfied all agreements in all material
respects required by this Agreement to be performed and satisfied by Seller at
or prior to the Closing.

 

(b)                                 Purchaser shall have received a certificate
dated as of the Closing, executed by the President or any Vice President of
Seller, to the effect that

 

(i)                                     the statements in Section 9.2(a) are
true in all material respects at and as of the Closing, and

 

(ii)                                  the covenants and agreements contained in
Article VII have been performed in all material respects.

 

(c)                                  Seller shall have delivered (or be ready,
willing and able to deliver at Closing) the documents and other items required
to be delivered by Seller pursuant to Section 11.2.

 

(d)                                 No order shall have been entered by any
court or governmental agency having jurisdiction over the parties or the subject
matter of this contract that restrains or prohibits the purchase and sale
contemplated by this Agreement and which remains in effect at the time of
closing, except:

 

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(i)                                     any order affecting a matter with
respect to which Purchaser has been adequately indemnified by Seller, as
determined by Purchaser in its sole discretion, or

 

(ii)                                  any order affecting only a portion of the
Assets, which portion of the Assets could be treated as Casualty Loss in
accordance with Section 3.5.

 

(e)                                  The Closing Date is on or after
November 25, 2013.

 

ARTICLE X

 

RIGHT OF TERMINATION AND ABANDONMENT

 

Section 10.1                             Termination.  This Agreement and the
transactions contemplated hereby may be terminated in the following instances:

 

(a)                                 by Seller if all conditions set forth in
Section 9.2 are satisfied or waived as of the Closing Date (other than those
conditions that by their terms are to be satisfied at the Closing; provided,
that such conditions would be satisfied if the Closing were to occur on the date
of termination of this Agreement) but Purchaser shall have failed to consummate
the transaction on or prior to the Closing Date set forth in Section 11.1;

 

(b)                                 by Purchaser if the conditions set forth in
Section 9.1 are satisfied or waived as of the Closing Date (other than those
conditions that by their terms are to be satisfied at the Closing; provided,
that such conditions would be satisfied if the Closing were to occur on the date
of termination of this Agreement) but Seller shall have failed to consummate the
transaction contemplated by this Agreement on or prior to the Closing Date set
forth in Section 11.1;

 

(c)                                  by Seller if, through no fault of Seller,
the Closing does not occur on or before December 31, 2013 (including because the
conditions set forth in Section 9.1(d) or Section 9.2(d) have not been waived or
satisfied);

 

(d)                                 by Purchaser if, through no fault of
Purchaser, the Closing does not occur on or before December 31, 2013 (including
because the conditions set forth in Section 9.1(d) or Section 9.2(d) have not
been waived or satisfied);

 

(e)                                  by either party as provided in Section 3.7;
or

 

(f)                                   at any time by the mutual written
agreement of Purchaser and Seller and in accordance with any other express
provisions of this Agreement.

 

Section 10.2                             Liabilities Upon Termination.

 

(a)                                 Upon termination of this Agreement by Seller
pursuant to an express right to do so set forth herein, Seller shall be free to
enjoy immediately all rights of ownership of the Assets and to sell, transfer,
encumber and otherwise dispose of the Assets to any party without any
restriction under this Agreement.

 

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(b)                                 If (i) Purchaser terminates this Agreement
pursuant to Section 10.1(b) or 10.1(e), (ii) Purchaser terminates this Agreement
pursuant to Section 10.1(d) and at such time all conditions set forth in
Section 9.2 have not been satisfied or waived (other than those conditions that
by their terms are to be satisfied at the Closing; provided that such conditions
would not be satisfied if the Closing were to occur on the date of termination
of the Agreement), (iii) Seller terminates this Agreement pursuant to
Section 10.1(c) because the conditions set forth in Section 9.1(d) or
Section 9.2(d) have not been waived or satisfied, or (iv) the Parties terminate
this Agreement pursuant to Section 10.1(f), then Seller will promptly (but in no
event more than two Business Days after such termination) cause the Escrow Agent
to remit the Performance Deposit and any interest thereon by wire transfer of
immediately available funds to an account designated by Purchaser.  If Seller or
Purchaser terminate this Agreement for any other reason, then Seller will be
entitled to retain the Performance Deposit and the Escrow Agent shall be
instructed to forward the Performance Deposit and any interest thereon by wire
transfer of immediately available funds to an account designated by Seller no
later than two Business Days following the date of termination.  Seller agrees
that, notwithstanding anything to the contrary in this Agreement, Seller’s right
to (i) terminate this Agreement pursuant to Section 10.1(a) and receive the
Performance Deposit or (ii) prior to termination (but not after termination) of
this Agreement, to seek specific performance but only in the circumstances set
forth in Section 14.15, shall be the sole and exclusive remedies of Seller and
their Affiliates against Purchaser, the Financing Parties or any of their
respective former, current or future general or limited partners, stockholders,
managers, members, directors, officers, Affiliates, affiliated (or commonly
advised) funds, representatives, agents, assignees and successors of any of the
foregoing (each of the foregoing, other than Purchaser, a “Related Party”); and
if the Closing does not occur for any reason, in no event will Seller or any of
its Affiliates seek to recover any other money damages or seek any other remedy
based on a claim in Law or equity whether in contract, tort or otherwise from or
against Purchaser or any Related Party with respect to, (A) any Damages suffered
as a result of the failure of the transactions contemplated by this Agreement to
be consummated, (B) the termination of this Agreement, (C) any liabilities or
obligations arising under or relating to this Agreement or (D) any breach,
termination or failure of or under this Agreement or any inaccuracy of any
representation or warranty contained in this Agreement or in the Financing
Commitments, and upon payment of such amounts, if due, by or on behalf of
Purchaser, none of Purchaser or any Related Party shall have any further
liability or obligation relating to or arising out of this Agreement, the
transactions contemplated by this Agreement or the Financing Commitments in Law
or equity whether in contract, tort or otherwise.  For the avoidance of doubt,
in the event the Closing does not occur, in no event shall Purchaser or the
Financing Parties be subject to (nor shall Seller or any of its Affiliates seek
to recover) monetary damages in excess of the Performance Deposit.  In no event
shall Seller or any of their Affiliates seek to recover monetary damages from
any Related Party.  For the purposes of this Agreement, “Damages” means all
Proceedings, claims, demands, awards, damages, penalties, fines, costs,
liabilities, losses, expenses, and fees (whether criminal, civil, commercial or
related to claims for personal injury or death or property damage and whether
accrued or unaccrued or liquidated or unliquidated), including court costs and
reasonable attorneys’ and experts’ fees and expenses and “Proceedings” means

 

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any action, arbitration, audit, cause, complaint, charge, hearing, inquiry,
investigation, litigation, proceeding, review or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before any Governmental Authority or arbitrator.

 

(c)                                  The parties hereto acknowledge and agree
that the agreements contained in this Section 10.2 are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
the parties hereto would not enter into this Agreement.  The parties hereto
further acknowledge that the receipt of the Performance Deposit by Seller
specified in Section 10.2(b) is not a penalty, but is liquidated damages in a
reasonable amount that will compensate Seller in the circumstances in which such
amount is payable for the efforts and resources expended and the opportunities
foregone while negotiating this Agreement and in reliance on this Agreement and
on the expectation of the consummation of the transactions contemplated hereby,
which amount would otherwise be impossible to calculate with precision.

 

ARTICLE XI

 

CLOSING MATTERS

 

Section 11.1                             Time and Place of Closing.

 

(a)                                 The purchase by Purchaser and the sale by
Seller of the Assets, as contemplated by this Agreement (the “Closing”), shall,
unless otherwise agreed to in writing by Purchaser and Seller, take place at the
offices of Seller.  The time of the Closing shall be at 10:00 a.m., local time,
on November 25, 2013, or such other date as Purchaser and Seller may mutually
determine.

 

(b)                                 The date on which the Closing occurs is
referred to herein as the “Closing Date.”

 

Section 11.2                             Closing Obligations.  At the 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 Purchaser

 

(i)                                     a General Assignment and Bill of Sale of
the Assets in the form of Exhibit F attached hereto,

 

(ii)                                  assignments, bills of sale and conveyances
(in sufficient counterparts to facilitate recording) substantially in the form
of Exhibit F (the “Conveyance”) together with any transfer forms to be filed
with governmental and tribal agencies conveying the Oil and Gas Interests
effective as of the Effective Time to Purchaser,

 

(iii)                               if requested by Purchaser, letters in lieu
of transfer orders in a form acceptable to both parties,

 

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(iv)                              deeds, assignments, bills of sale and any
other specialized instruments of transfer necessary to convey to or perfect in
Purchaser the Assets other than the Oil and Gas Interests,

 

(v)                                 an executed statement described in Treasury
Regulation § 1.1445-2(b)(2) certifying that Seller is not a foreign person
within the meaning of the Code, and

 

(vi)                              the Escrow Agreement;

 

(b)                                 Seller and Purchaser shall execute and
deliver a preliminary settlement statement (the “Preliminary Settlement
Statement”) prepared by Seller that shall set forth the Estimated Final Purchase
Price together with the calculations of all adjustments using for such
adjustments the best information available;

 

(c)                                  Purchaser shall deliver to Seller the
Estimated Final Purchase Price and to the Escrow Agent the amount of the escrow
funds pursuant to Section 2.5(b), in each case, by wire transfer in immediately
available funds;

 

(d)                                 Seller shall deliver to Purchaser possession
of the Assets (including shipping the Records to Purchaser at Purchaser’s cost);

 

(e)                                  Seller shall deliver to the Purchaser the
certificate referred to in Section 9.2(b);

 

(f)                                   Purchaser shall deliver to Seller the
certificate referred to in Section 9.1(b);

 

(g)                                  Purchaser shall assume the obligation to
disburse all royalty, overriding royalty and other payments due under or with
respect to the Leases to the extent Seller was responsible for such payments
prior to the Closing;

 

(h)                                 Purchaser shall deliver to Seller the
executed Escrow Agreement; and

 

(i)                                     Seller and Purchaser shall execute and
deliver all other documents or agreements called for herein.

 

ARTICLE XII

 

POST-CLOSING OBLIGATIONS

 

Section 12.1                             Post-Closing Adjustments.  As soon as
practicable after the Closing, but in no event later than one hundred eighty
(180) days thereafter, Seller shall prepare and deliver to Purchaser a final
settlement statement (the “Final Settlement Statement”) setting forth each
adjustment or payment that was not finally determined as of the Closing and
showing the calculation of such adjustments and the resulting Final Purchase
Price.  Seller shall make its workpapers and other information available to
Purchaser to review in order to confirm the adjustments shown on Seller’s
draft.  As soon as practicable after receipt of the Final Settlement

 

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Statement, but in no event later than sixty (60) days thereafter, Purchaser
shall deliver to Seller a written report containing any changes that Purchaser
proposes to make to the Final Settlement Statement.  Any failure by Purchaser to
deliver to Seller the written report detailing Purchaser’s proposed changes to
the Final Settlement Statement within sixty (60) days following Purchaser’s
receipt of the Final Settlement Statement shall be deemed an acceptance by
Purchaser of the Final Settlement Statement as submitted by Seller.  The parties
shall agree with respect to the changes proposed by Purchaser, if any, no later
than sixty (60) days after Seller receives from Purchaser the written report
described above containing Purchaser’s proposed changes.  If the Purchaser and
the Seller cannot then agree upon the Final Settlement Statement, the
determination of the amount of the Final Settlement Statement shall be submitted
to a mutually agreed firm of independent public accountants (the “Accounting
Firm”).  The determination by the Accounting Firm shall be conclusive and
binding on the parties hereto and shall be enforceable against any party hereto
in any court of competent jurisdiction.  Any costs and expenses incurred by the
Accounting Firm pursuant to this Section 12.1 shall be borne by the Seller and
the Purchaser equally.  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.”  In the event

 

(a)                                 the Final Purchase Price is more than the
Estimated Final Purchase Price, Purchaser shall pay to Seller the amount of such
difference, or

 

(b)                                 the Final Purchase Price is less than the
Estimated Final Purchase Price, Seller shall pay to Purchaser the amount of such
difference, in either event by wire transfer in immediately available funds. 
Payment by Purchaser or Seller, as the case may be, shall be within five
(5) days of the Final Settlement Date.

 

Section 12.2                             Files and Records.  Within thirty (30)
Business Days following the Closing Date, Seller shall deliver to Purchaser at
Purchaser’s expense the Records, to the extent not previously delivered.  For a
period of seven (7) years after the Closing Date, Purchaser shall maintain the
Records, and Seller shall have access thereto during normal business hours upon
advance written notice to Purchaser to audit the same in connection with
federal, state or local regulatory or tax matters, resolution of existing
disputes or contract compliance matters affecting Seller.

 

Section 12.3                             Further Assurances.  From time to time
after Closing, Seller and Purchaser shall execute, acknowledge and deliver to
the other such further instruments, and take such other action as may be
reasonably requested in order more effectively to assure to said party all of
the respective properties, rights, titles, interests and estates intended to be
assigned and delivered in consummation of the transactions contemplated by this
Agreement.

 

ARTICLE XIII

 

ENVIRONMENTAL MATTERS

 

Section 13.1                             Purchaser Acknowledgment Concerning
Possible Contamination of the Assets.  Purchaser is aware that the Assets have
been used for exploration, development, and production of oil and gas and that
there may be petroleum, produced water, wastes, or other

 

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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.

 

Pursuant to Section 6.1(a)(iv) but subject to Section 6.3, Purchaser will assume
liability for the assessment, remediation, removal, transportation, and disposal
of wastes, asbestos, and hazardous substances, (including produced water,
drilling fluids, NORM, and other wastes) from the Assets, whether present before
or after the Effective Time, and associated activities and will conduct these
activities in accordance with applicable federal, state, and local laws,
including statutes, regulations, orders, ordinances, and common law, currently
enacted or enacted in the future and relating to protection of public health,
welfare, and the environment, including those laws relating to storage,
handling, and use of chemicals and other hazardous materials; those relating to
the generation, processing, treatment, storage, transport, disposal, cleanup,
remediation, or other management of waste materials or hazardous substances of
any kind; and those relating to the protection of environmentally sensitive or
protected areas (“Environmental Laws”).

 

Section 13.2                             Adverse Environmental Conditions.

 

(a)                                 Purchaser will have until 5:00 P.M. Denver
time on the fifth day prior to the Closing (not counting the day of Closing) to
notify Seller of any Condition of the Assets that Purchaser finds unacceptable
and provide evidence of the same to Seller.  A Condition must meet all the
following criteria:

 

(i)                                     The environmental condition is required
to be remediated at the Effective Time under the Environmental Laws in effect at
the Effective Time.

 

(ii)                                  The total of the cost to remediate each
environmental condition identified by Purchaser to levels required by the
Environmental Laws in effect at the Effective Time is reasonably estimated by
Purchaser’s environmental professional to be more than fifty thousand dollars
($50,000) (net to Seller’s interest).  Environmental conditions may not be
aggregated by type or category among more than one well or facility for purposes
of meeting this de minimis threshold of $50,000.

 

(b)                                 If it determines that a Condition may exist
with respect to an Asset, Purchaser will have until 5:00 P.M. on the third day
prior to the Closing Date (not including the day of Closing) to elect any of the
following:

 

(i)                                     adjust the Allocated Value for such
Asset by a mutually acceptable amount reflecting Seller’s proportionate share,
based on its working interest, of

 

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the cost reasonably estimated to remediate such Condition affecting the Asset to
the level required by the Environmental Laws in effect at the Effective Time,
not to exceed the Allocated Value of the property, and adjust the Preliminary
Purchase Price in accordance with Section 2.4(b)(v);

 

(ii)                                  enter into an agreement, with the consent
of Seller, whereby Seller agrees to indemnify the Purchaser for the Condition
not to exceed the Allocated Value of the Asset, or the cost of the remediation,
whichever is greater (in which case the time periods set forth in Section 6.3
for termination of Seller’s indemnification shall not apply as to such
Condition); or

 

(iii)                               decline to purchase such Asset.

 

(c)                                  The foregoing notwithstanding, there shall
be no adjustment to the Preliminary Purchase Price unless the total value of all
Conditions plus all Defective Interests, net of the total value of all Title
Benefits, exceeds two percent (2%) of the Preliminary Purchase Price and then
only to the extent that such total value of all Conditions plus all Defective
Interests, net of the total value of all Title Benefits, exceeds two percent
(2%) of the Preliminary Purchase Price.

 

ARTICLE XIV

 

MISCELLANEOUS

 

Section 14.1                             Notices.  All communications required
or permitted under this Agreement shall be in writing and any communication or
delivery hereunder shall be deemed to have been duly made if actually delivered
or if mailed by registered or certified mail, postage prepaid, or if sent by
overnight courier service, charges prepaid, or if sent by telecopy or facsimile
machine, or other electronic communication device shall be deemed received on
the date on which such notice is received by the addressee as evidenced by the
confirmation of receipt of the applicable delivery mode, addressed to the party
being notified as set forth below.  Any party may, by written notice so
delivered to the other, change the address to which delivery shall thereafter be
made.  Notices to Seller and Purchaser shall be made at the addresses set forth
below:

 

(a)                                 If to Seller, to:

 

Forest Oil Corporation

707 17th Street, Suite 3600
Denver, CO  80202
FAX:  (303) 812-1445
ATTN:  General Counsel

 

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(b)                                 If to Purchaser, to:

 

Templar Energy LLC

c/o Le Norman Operating LLC
4727 Gaillardia Parkway, Suite 200
Oklahoma City, OK  73142
FAX:  (405) 241-1820
ATTN:  David D.  Le Norman

 

All notices shall be deemed given at the time of receipt by the party to which
such notice is addressed.

 

Section 14.2                             Binding Effect.  This Agreement shall
bind and inure to the benefit of the parties hereto and their respective heirs,
successors and permitted assigns.

 

Section 14.3                             Counterparts.  This Agreement may be
executed in any number of counterparts, which taken together shall constitute
one and the same instrument and each of which shall be considered an original
for all purposes.  The exchange of copies of this Agreement and of signature
pages by facsimile or by electronic image scan transmission in .pdf shall
constitute effective execution and delivery of this Agreement as to the parties
and may be used in lieu of the original Agreement for all purposes.

 

Section 14.4                             Expenses.  All expenses incurred by
Seller in connection with or related to the authorization, preparation or
execution of this Agreement, the conveyances and the Schedules hereto, and all
other matters related to the Closing, including without limitation, all fees and
expenses of counsel, engineers, accountants and financial advisors employed by
Seller shall be borne solely and entirely by Seller; and all such expenses
incurred by Purchaser shall be borne solely and entirely by Purchaser.

 

Section 14.5                             Section Headings.  The Section headings
contained in this Agreement are for convenient reference only and shall not in
any way affect the meaning or interpretation of this Agreement.

 

Section 14.6                             Entire Agreement.  This Agreement, the
documents to be executed hereunder, and the Schedules attached hereto constitute
the entire agreement between the parties hereto pertaining to the subject matter
hereof and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written of the parties pertaining to the subject
matter hereof, and there are no warranties, representations or other agreements
between the parties in connection with the subject matter hereof except as
specifically set forth herein or in documents delivered pursuant hereto.  No
supplement, amendment, alteration, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the parties hereto,
provided that notwithstanding anything to the contrary in this Agreement,
Section 10.2 (Liabilities Upon Termination), Section 14.6 (Entire Agreement),
Section 14.8 (Governing Law), Section 14.14 (Rights of Third Parties) and
Section 14.16 (No Recourse) (and the related definitions of this Agreement
solely to the extent an amendment or modification thereof would serve to modify
the substance or provisions of such Sections in any material and adverse
respect) may not be amended, modified or supplemented in a manner that is
materially adverse to the

 

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Financing Parties, without the prior written consent of the Financing Parties,
which shall not be unreasonably withheld, conditioned or delayed.  All of the
Schedules referred to in this Agreement are hereby incorporated in this
Agreement by reference and constitute a part of this Agreement.

 

Section 14.7                             Conditions.  The inclusion in this
Agreement of conditions to Seller’s and Purchaser’s obligations at Closing shall
not, in and of itself, constitute a covenant of either Seller or Purchaser to
satisfy the conditions to the other party’s obligations at Closing.

 

Section 14.8                             Governing Law.

 

(a)                                 THE VALIDITY OF THE VARIOUS CONVEYANCES
AFFECTING THE TITLE TO REAL PROPERTY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE JURISDICTION IN WHICH SUCH PROPERTY IS SITUATED.

 

(b)                                 This Agreement and any claim, controversy or
dispute arising under or related to this Agreement or the transactions
contemplated hereby or the rights, duties and relationship of the parties hereto
shall be governed by and construed and enforced in accordance with the Laws of
the State of New York, without regard to the Laws that might be applicable under
conflicts of laws principles.

 

(c)                                  Subject to the immediately following
sentence, the parties hereto agree that the appropriate, exclusive and
convenient forum for any disputes between any of the parties hereto arising out
of this Agreement or the transactions contemplated hereby shall be in the
federal courts located in Harris County, Texas (or, if federal jurisdiction is
not available, the state courts located in Harris County, Texas) and each of the
parties hereto irrevocably submits to the jurisdiction of such courts solely in
respect of any Proceeding arising out of or related to this Agreement. 
Notwithstanding anything to the contrary in this Agreement, the parties hereto
agree that the appropriate, exclusive and convenient forum for any disputes
between any of the parties hereto (or between one or more parties hereto and one
or more Financing Parties) arising out of this Agreement in respect of the
Commitment Letters, the Financing or Section 8.7, Section 8.8, Section 10.2,
Section 14.8, Section 14.15 or Section 14.16 shall be the Supreme Court of the
State of New York, County of New York, or, if under applicable Law exclusive
jurisdiction is vested in the Federal courts, the United States District Court
for the Southern District of New York (and appellate courts thereof), and no
party hereto will bring or support any action, cause of action, claim,
cross-claim or third party claim of any kind or description, whether in law or
in equity, against the Financing Parties in any way relating to this Agreement
or the transactions contemplated hereby, including any dispute arising out of or
relating in any way to the Commitment Letters or the performance thereof, in any
other court. Each of the parties hereto (i) irrevocably submits to the exclusive
jurisdiction of each such court in any such dispute, controversy, claim or
action, (ii) waives any objection it may now or hereafter have to venue or to an
inconvenient forum, (iii) agrees that all such disputes, controversies, claims
and actions shall be heard and determined only in such courts and (iv) agrees
not to bring any dispute, controversy, claim or action arising out of or
relating to this Agreement or any documents contemplated hereby or any of the

 

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transactions contemplated hereunder, including the Debt Commitment Letter, in
any other court.  The parties hereto further agree, to the extent permitted by
Law, that a final and nonappealable judgment against a party hereto in any
action or Proceeding contemplated above shall be conclusive and may be enforced
in any other jurisdiction within or outside the United States by suit on the
judgment, a certified or exemplified copy of which shall be conclusive evidence
of the fact and amount of such judgment.

 

(d)                                 To the extent that any party hereto or any
of its Affiliates has or hereafter may acquire any immunity from jurisdiction of
any court or from any legal process (whether through service or notice,
attachment prior to judgment, attachment in aid of execution, execution or
otherwise) with respect to itself or its property, such Party (on its own behalf
and on behalf of its Affiliates) hereby irrevocably (i) waives such immunity in
respect of its obligations with respect to this Agreement and (ii) submits to
the personal jurisdiction of any court described in Section 14.8(b).

 

(e)                                  EACH OF THE PARTIES TO THIS AGREEMENT
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, INCLUDING ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THE FINANCING OR COMMITMENT LETTER OR THE TRANSACTIONS
CONTEMPLATED THEREBY.

 

Section 14.9                             Assignment.  Neither Party may assign
all or any portion of its respective rights or delegate any portion of its
respective duties hereunder without the prior written consent of the other
Party, provided that Purchaser may assign all or part of its interest in this
agreement to one or more Affiliates thereof, provided further that no such
assignment will relieve Purchaser from its obligations hereunder.

 

Section 14.10                      Public Announcements.  Prior to making any
public announcement or statement with respect to the transactions contemplated
by this Agreement, the party desiring to make such public announcement or
statement shall consult with the other party hereto and attempt to obtain
approval of the other party or parties hereto to the text of a public
announcement or statement to be made solely by Seller or Purchaser, as the case
may be; provided, however, if Seller or Purchaser is required by law to make
such public announcement or statement, then the same may be made without the
approval of the other party; provided further, however, neither party may
identify the other party by name in any such announcement or statement or filing
with the Securities and Exchange Commission without the other party’s prior
written consent.

 

Section 14.11                      Notices After Closing.  Each of the parties
hereto shall notify the others of its receipt, after the Closing Date, of any
instrument, notification or other documents affecting the Assets while owned by
such other party or parties.

 

Section 14.12                      Waiver of Compliance with Bulk Transfer
Laws.  Purchaser waives compliance with any applicable bulk transfer laws
relating to the transactions contemplated by this Agreement.

 

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Section 14.13                      Waiver.  The parties agree that to the extent
required by applicable law, rule or order to be operative the disclaimers of
certain warranties contained in this Section and in the conveyancing documents
to be delivered pursuant to this Agreement are “conspicuous” disclaimers for the
purposes of any such applicable law, rule or order. Except as expressly set
forth in this Agreement, SELLER EXPRESSLY DISCLAIMS AND NEGATES ANY WARRANTY AS
TO THE CONDITION OF ANY PERSONAL PROPERTY, EQUIPMENT, FIXTURES AND ITEMS OF
MOVABLE PROPERTY COMPRISING ANY PART OF THE ASSETS, INCLUDING:

 

(a)                                 ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY;

 

(b)                                 ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE;

 

(c)                                  ANY IMPLIED OR EXPRESS WARRANTY OF
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS,

 

(d)                                 ANY RIGHTS OF PURCHASER UNDER APPLICABLE
STATUTES TO CLAIM DIMINUTION OF CONSIDERATION, AND

 

(e)                                  ANY CLAIM BY PURCHASER FOR DAMAGE BECAUSE
OF DEFECTS, WHETHER KNOWN OR UNKNOWN, IT BEING EXPRESSLY UNDERSTOOD BY PURCHASER
THAT SAID PERSONAL PROPERTY, FIXTURES, EQUIPMENT, AND ITEMS ARE BEING CONVEYED
TO PURCHASER “AS IS,” “WHERE IS,” WITH ALL FAULTS, AND IN THEIR PRESENT
CONDITION AND STATE OF REPAIR AND THAT PURCHASER WILL MAKE, PRIOR TO CLOSING,
SUCH INSPECTIONS THEREOF AS PURCHASER DEEMS APPROPRIATE.  Except as otherwise
expressly set forth herein, Seller also expressly disclaims and negates any
implied or express warranty as to the accuracy of any of the information
furnished with respect to the existence or extent of reserves or the value of
the Assets based thereon or the condition or state of repair of any of the
Assets (it being understood that all estimates of quantities of oil and gas
reserves on which Purchaser has relied or is relying have been derived by
individual evaluation of Purchaser).  Purchaser EXPRESSLY WAIVES THE PROVISIONS
OF CHAPTER XVII, SUBCHAPTER E, SECTION 17.41 THROUGH 17.63, INCLUSIVE (OTHER
THAN SECTION 17.555, WHICH IS NOT WAIVED), VERNON’S TEXAS CODE ANNOTATED,
BUSINESS AND COMMERCE CODE (the “Deceptive Trade Practices Act”).

 

Section 14.14                      Rights of Third Parties. Except to the extent
set forth below, notwithstanding anything contained in this Agreement to the
contrary, nothing in this Agreement, expressed or implied, is intended to confer
upon any Person other than the parties hereto or their successors and permitted
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement; provided that (i) a party hereto and its respective successors
and permitted assigns will have the right to enforce the provisions of this
Agreement on its own behalf (but shall not be obligated to do so), (ii) the
Related Parties are intended third-

 

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party beneficiaries of Section 10.2(b) and (iii) the Financing Parties are
intended third-party beneficiaries of Section 10.2, Section 14.8, Section 14.6,
Section 14.14 and Section 14.16.

 

Section 14.15                      Specific Performance.  The parties hereto
agree that irreparable damage would occur in the event that any provisions of
this Agreement were not performed by each other party in accordance with their
terms or were otherwise breached by such party.  It is accordingly agreed that
the parties hereto shall each be entitled to specific performance of the terms
hereof, including an injunction or injunctions to prevent breaches of this
Agreement by the other party and to enforce specifically the terms and
provisions of this Agreement (and the parties hereto hereby waive any
requirement for securing or posting of any bond in connection with such remedy),
this being in addition to any other remedy to which a party hereto may be
entitled at law or in equity.  Each party hereto further agrees not to assert
that a remedy of specific performance is unenforceable, invalid, contrary to Law
or inequitable for any reason, nor to assert that a remedy of monetary damages
would provide an adequate remedy.  In the event that the Closing does not occur,
under no circumstances shall the aggregate amount of any monetary damages
recovered by Seller or their Affiliates hereunder, in lieu of specific
performance or otherwise, together with any portion of the Performance Deposit
received by Seller pursuant to Section 10.2(b) exceed in the aggregate the
amount of the Performance Deposit.  Notwithstanding the foregoing, (a) Seller
shall be entitled to seek specific performance of Purchaser’s obligation to
cause the Equity Financing to be funded to fund the Final Purchase Price and to
consummate the transactions contemplated by this Agreement only in the event
that (i) all conditions in Section 9.2 have been satisfied (other than those
conditions that by their terms or nature are to be satisfied at the Closing),
(ii) Purchaser fails to complete the Closing by the date the Closing is required
to have occurred pursuant to Section 11.1(a), (iii) the Debt Financing provided
for by the Commitment Letters (or, if alternative debt financing is being used
in accordance with Section 8.3(a), pursuant to the commitments with respect
thereto) has been funded or will be funded at the Closing if the Equity
Financing is funded at Closing, and (iv) Seller has confirmed that if specific
performance is granted and the Equity Financing and Debt Financing are funded,
then Closing will occur, and (b) Seller shall be entitled to seek specific
performance of Purchaser’s obligations pursuant to Section 8.7 (Financing
Cooperation). Purchaser shall be entitled to seek specific performance of
Seller’s obligation to consummate the transactions contemplated by this
Agreement only in the event that (i) all conditions in Section 9.1 have been
satisfied (other than those conditions that by their terms or nature are to be
satisfied at the Closing), (ii) Seller fails to complete the Closing by the date
the Closing is required to have occurred pursuant to Section 11.1(a), and
(iii) Purchaser has confirmed that if specific performance is granted, then
Closing will occur.  In the event Seller seeks, but is not granted, specific
performance, the Seller shall be entitled to terminate the Agreement and retain
the Performance Deposit under the circumstances set forth in Section 10.2.

 

Section 14.16                      No Recourse.  This Agreement may only be
enforced against, and any claims or causes of action that may be based upon,
arise out of or relate to this Agreement, or the negotiation, execution or
performance of this Agreement may only be made against the entities that are
expressly identified as the parties hereto, and no other person (including the
Financing Parties) shall have any liability for any obligations or liabilities
of the parties to this Agreement or for any claim (whether in tort, contract or
otherwise) based on, in respect of, or by reason of, the transactions
contemplated hereby or in respect of any oral representations made or alleged to
be made in connection herewith; provided, however that the foregoing shall not
limit Purchaser’s

 

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rights against the Financing Parties in respect of the Commitment Letters.
Without limiting the rights of Seller against Purchaser expressly set forth
herein, in no event if Closing does not occur when required pursuant to
Section 11.1(a) shall Seller, or any of its Affiliates, and Seller agrees not to
and to cause their Affiliates not to, seek to enforce this Agreement against,
make any claims for breach of this Agreement against, or seek to recover
monetary damages from, Purchaser or any Affiliate of Purchaser, in each case,
other than receipt of the Performance Deposit by the Seller or the remedy of
specific performance under the circumstances set forth in Section 14.15.

 

The signature page follows

 

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IN WITNESS WHEREOF, the parties have executed this Agreement on the Execution
Date, but effective as of the Effective Date.

 

SELLER:

FOREST OIL CORPORATION

 

 

 

 

 

By:

/s/ Victor A. Wind

 

 

Victor A. Wind

 

 

Executive Vice President and

 

 

Chief Financial Officer

 

 

 

 

 

FOREST OIL PERMIAN CORPORATION

 

 

 

 

 

By:

/s/ Victor A. Wind

 

 

Victor A. Wind

 

 

Vice President

 

 

 

 

PURCHASER

TEMPLAR ENERGY LLC

 

 

 

 

 

By:

/s/ David D. Le Norman

 

 

David D. Le Norman

 

 

President and CEO

 

[signature page to Agreement for Purchase and Sale of Assets]

 

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