Exhibit 10.2
 

PURCHASE AND SALE AGREEMENT

between
Bayswater Exploration & Production, LLC,
Bayswater Blenheim Holdings, LLC, and
Bayswater Blenheim Holdings II, LLC,
as Sellers,

and

Synergy Resources Corporation,

as Buyer

Dated October 29, 2014

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TABLE OF CONTENTS

 
 
 
PAGE
ARTICLE 1 DEFINED TERMS 
1
 
1.1
General Definitions
1
 
1.2
Amendment of Defined Instruments
7
 
 
 
 
ARTICLE 2 PURCHASE AND SALE 
7
 
2.1
Purchase and Sale
7
 
2.2
Assets
7
 
2.3
Excluded and Reserved Assets
8
 
2.4
Effective Time
10
 
 
 
 
ARTICLE 3 PURCHASE PRICE
10
 
3.1
Purchase Price
10
 
3.2
Adjustments to Purchase Price
11
 
3.3
Allocated Values
13
 
3.4
Valuation
13
 
 
 
 
ARTICLE 4 DUE DILIGENCE INSPECTION
13
 
4.1
Due Diligence
13
 
4.2
Records
13
 
4.3
No Representation or Warranty
13
 
 
 
 
ARTICLE 5 TITLE MATTERS
14
 
5.1
Defensible Title
14
 
5.2
Permitted Encumbrances
15
 
5.3
Notice of Title Defects
18
 
5.4
Defect Adjustments and Deductibles; Interest Additions
19
 
5.5
Post-Closing Cure of Title Defects
20
 
5.6
Post-Closing Determination of Title Defects
21
 
5.7
Changes in Product Prices; Wells or Other Events
21
 
5.8
Consents
22
 
5.9
Preferential Purchase Rights
23
 
5.10
Casualty Loss
23
 
 
 
 
ARTICLE 6 ENVIRONMENTAL MATTERS  24
 
6.1
NORM and Asbestos
24
  6.2 Environmental Assessment 24   6.3 Adjustments for Environmental Defects 24
  6.4 “As Is, Where Is” Purchase 26   ARTICLE 7 SELLERS’ REPRESENTATIONS AND
WARRANTIES  26   7.1 Existence 26   7.2 Power and Authority 26   7.3
Authorization 26   7.4 Execution and Delivery 26   7.5 Foreign Person 27

 
 
 
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7.6
Bankruptcy
27
 
7.7
Liabilities for Brokers’ Fees
27
 
7.8
Liens
27
 
7.9
Taxes
27
 
7.10
Litigation and Claims
27
 
7.11
Compliance with Laws
27
 
7.12
Governmental Licenses
28
 
7.13
No Notice of Violation from Governmental Agencies
28
 
7.14
Material Agreements; Notice of Defaults
28
 
7.15
Production Sales Contracts
29
 
7.16
Current Plugging Obligations
29
 
7.17
Imbalances
29
 
7.18
Suspense Accounts
29
 
7.19
Preferential Purchase Rights
29
 
7.20
AFEs
29
 
7.21
Investment Representations
29
 
 
 
 
ARTICLE 8 BUYER’S REPRESENTATIONS AND WARRANTIES
30
 
8.1
Existence
30
 
8.2
Power and Authority
30
 
8.3
Authorization
30
 
8.4
Execution and Delivery
31
 
8.5
Bankruptcy
31
 
8.6
Liabilities for Brokers’ Fees
31
 
8.7
Litigation and Claims
31
 
8.8
Independent Evaluation
31
 
8.9
Qualification
32
 
8.10
Financial Resources
32
 
8.11
NYSE MKT Listing
32
 
8.12
Issuance of Stock Consideration
32
 
8.13
Issuance of Stock Consideration
32
 
8.14
Capitalization
32
 
8.15
Regulatory Matters; Reports
33
 
8.16
Financial Statements
33
  8.17 Undisclosed Liabilities 32   8.18 No Buyer Material Adverse Condition 33
  ARTICLE 9 COVENANTS AND AGREEMENTS  34   9.1 Covenants and Agreements 34  
ARTICLE 10 CONDITIONS TO CLOSING  39   10.1 Sellers’ Conditions 39   10.2
Buyer’s Conditions 40   ARTICLE 11 RIGHT OF TERMINATION AND ABANDONMENT  41  
11.1 Termination 41   11.2 Liabilities Upon Termination 41  
 
 
 
 

 
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ARTICLE 12 CLOSING 
42
 
12.1
Date of Closing
42
 
12.2
Closing Obligations
42
 
 
 
 
ARTICLE 13 POST-CLOSING OBLIGATIONS
43
 
13.1
Post-Closing Adjustments
43
 
13.2
Determination of Final Settlement Statement Disputes
44
 
13.3
Records
44
 
13.4
Suspense Accounts
44
 
13.5
Removal of Name
44
 
13.6
Further Assurances
44
 
 
 
 
ARTICLE 14 TAXES 
45
 
14.1
Apportionment of Taxes
45
 
14.2
Transfer Taxes
45
 
14.3
Tax Reports and Returns
45
 
14.4
Like-Kind Exchange
46
 
 
 
 
ARTICLE 15 ASSUMPTION AND RETENTION OF OBLIGATIONS; INDEMNIFICATION 
46
 
15.1
Buyer’s Assumption of Liabilities and Obligations
46
 
15.2
Indemnification
47
 
15.3
Procedure
50
 
15.4
No Insurance; Subrogation
51
 
15.5
Reservation as to Non-Parties
51
 
15.6
Exclusive Remedy
51
 
15.7
Waiver of Right to Rescission
51
 
15.8
Mutual Releases
51
 
15.9
Anti-Indemnity Statute Limitation
52
 
 
 
 
ARTICLE 16 MISCELLANEOUS 
52
 
16.1
Exhibits and Schedules
52
 
16.2
Expenses
52
 
16.3
Notices
52
 
16.4
Entire Agreement
53
  16.5 Amendments and Waivers 53   16.6 Assignment 53   16.7 Confidentiality 53
  16.8 Press Releases 53   16.9 Counterparts 54   16.10 Headings, References,
Titles and Construction 54   16.11 Governing Law; Consent to Jurisdiction and
Venue 54   16.12 Binding Effect 54   16.13 Survival 54   16.14 No Third-Party
Beneficiaries 55   16.15 Severability 55   16.16 Knowledge and Reasonable and
Good Faith Efforts 55

 
 
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  16.17 Disclaimers 55  
 
 
 
 

 
 
 
 
 

iv

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SCHEDULES

Disclosure Schedule
Schedule 1.1 
Sellers’ Shares
Schedule 3.2(a)(iii) 
Wells Not Completed as of Effective Time
Schedule 9.1(p) 
Financial Statement Information Indemnification and Contribution
Schedule 16.16 
Persons With Knowledge

                                                                    
                                      
                                  
EXHIBITS
 
Exhibit
Description
A
Leases, Lands and WI and NRI on Seller by Seller Basis in each Governmental
Quarter-Quarter Section Covered by each Lease
B
Wells and WI and NRI
C
Material Agreements
D
Pipeline and Gathering Systems
E
Yards - Fee and Leased Surface
F-1
Allocated Value of Leases on Governmental Quarter-Quarter Section Basis
F-2
Allocated Value of Wells
G
Form of Assignment, Bill of Sale and Conveyance
H
I
Form of Non-Foreign Status Certificate
Form of Escrow Agreement
 
 

 
 
 
The Company will furnish supplementally to the Commission a copy of any exhibit
to this Agreement
 
 
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PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (this “Agreement”), dated October 29, 2014 (the
"Execution Date"), is by and between Bayswater Exploration & Production, LLC, a
Colorado limited liability company (“Bayswater”), Bayswater Blenheim Holdings,
LLC, a Delaware limited liability company (“Blenheim Holdings”), and Bayswater
Blenheim Holdings II, LLC, a Delaware limited liability company (“Blenheim
Holdings II”) (individually a “Seller” and collectively the “Sellers”), 730 17th
Street, suite 610, Denver, Colorado 80202, and Synergy Resources Corporation, a
Colorado corporation (“Buyer”), 20203 Hwy 60, Platteville, CO 80651.  Sellers
and Buyer are individually referred to as a “Party” and collectively, the
“Parties”.
RECITALS
Sellers own and desire to sell, and Buyer desires to purchase, all of Sellers’
interests in certain oil and gas leases, wells and related assets that
constitute the Assets, as more fully described and defined in Section 2.2, on
the terms and conditions set forth in this Agreement.
AGREEMENT
In consideration of the mutual promises contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Sellers and Buyer agree as follows:
ARTICLE 1
DEFINED TERMS
 
1.1            General Definitions. As used herein the following terms shall
have the indicated meaning:
 
“AFE” is defined in Section 7.20.
“Affiliate” of any designated Person means any Person which, directly or
indirectly, controls, or is controlled by or is under common control with, such
designated Person; for purposes of this definition, “control” (including, with
correlative meanings, the terms “controlled by” and “under common control
with”), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of voting securities,
by contract or otherwise; provided that the Affiliates of Bayswater Blenheim
Holdings LLC shall be limited to Blenheim Natural Resources Fund, LLC and the
Affiliates of Bayswater Blenheim Holdings II, LLC shall be limited to Blenheim
Elgin Natural Resources Fund II, LLC.
“Allocated Properties” is defined in Section 3.3.
“Allocated Property” is defined in Section 3.3.
“Allocated Value” is defined in Section 3.3.
 
 

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"Anadarko Wells" is defined as the following wells: Highway 160 38N-2HZ; Highway
160 37N-2HZ; Highway 160 15N-2HZ; Highway 160 16C-2HZ; Highway 160 15C-2HZ;
Badding 14N-2HZ; Badding 34N-2HZ; Badding 35N-2HZ; Badding 13C-2HZ; D&C Farms
34N-33HZ, NRC 1N-4HZ, NRC 26C-4HZ,  NRC 27C-4HZ, NRC 27N-4HZ, NRC 28N-4HZ  NRC
2C-4HZ, NRC 3C-4HZ, which wells are operated by Kerr-McGee Oil & Gas Onshore LP.
"Anadarko Cap-Ex" is defined as all capital expenses attributable to Anadarko
Wells incurred by Sellers as of the Closing Date, including expenses in
connection with permitting, locating, staking, constructing roads and drill
pads, and drilling and completing wells, but excluding all Property Expenses
other than capital expenses attributable to Anadarko Wells.
“Assets” is defined in Section 2.2.
“Assumed Environmental Liabilities” is defined in Section 15.1(a).
“Assumed Liabilities” is defined in Section 15.1(c).
“Assumed Plugging and Abandonment Obligations” is defined in Section 15.1(b).
“Background Materials” is defined in Section 8.8.
“BLM” means the United States Bureau of Land Management.
“Business Day” means any day other than a Saturday, Sunday or a day on which
national banks are allowed by the Federal Reserve to be closed.
“Buyer Indemnified Parties” is defined in Section 15.2(a).
“Buyer Material Adverse Condition” is defined in Section 8.18.
“Buyer SEC Documents” is defined in Section 8.15.
“Cash Consideration” is defined in Section 3.1.
“Casualty Loss” is defined in Section 5.10.
“Claim” is defined in Section 15.3(c).
“Claim Notice” is defined in Section 15.3(b).
“Closing” is defined in Section 12.1.
“Closing Amount” is defined in Section 3.2.
“Closing Date” is defined in Section 12.1.
“Commission” means the Colorado Oil and Gas Conservation Commission.
“Common Stock” is defined in Section 3.1
 
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“CPR” means the Institute for Conflict Prevention and Resolution.
“Defect Notice Deadline” means 5:00 p.m., MST, on December 8, 2014.
“Defensible Title” is defined in Section 5.1(a).
“Deposit” is defined in Section 3.1.
“Due Diligence Review” is defined in Section 4.1.
“Effective Time” is defined in Section 2.4.
“Environmental Assessment” is defined in Section 6.2.
“Environmental Defect” means a condition existing as of the Effective Time in,
on or under the Assets (including air, land, soil, surface and subsurface
strata, surface water, ground water, or sediments) that (i) causes any portion
of the Assets to be in violation of an Environmental Law or (ii) can reasonably
be expected to require Remediation under applicable Environmental Laws;
provided, however, the following shall not constitute an Environmental Defect:
(A) asbestos and NORM-contaminated pipe, tubing, wellheads and facilities, or
(B) any flaring of natural gas.
“Environmental Defect Adjustment” is defined in Section 6.3(b)(iii).
“Environmental Defect Deductible Amount” means an amount equal to 2% of the
Purchase Price.
“Environmental Defect Exclusion” is defined in Section 6.3(b)(ii).
“Environmental Defect Threshold” means $50,000.
“Environmental Defect Value” is defined in Section 6.3(b)(ii).
“Environmental Law” means any statute, rule, regulation, code or order, issued
by any federal, state, or local governmental entity in effect on or before the
Effective Time relating to the protection of the environment or the release or
disposal of waste materials, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C. §§ 9601 et seq.),
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et  seq.),
the Clean Water Act (33 U.S.C. §§ 466 et seq.), the Safe Drinking Water Act
(14 U.S.C. §§ 1401-1450), the Oil Pollution Act (33 U.S.C. §§ 2702-2761), the
Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Emergency
Planning and Community Right to Know Act (U.S.C. 42 §§ 301-313), the Hazardous
Materials Transportation Act (49 U.S.C. §§ 1801 et seq.), the Toxic Substances
Control Act (15 U.S.C. §§ 2601-2629), the Clean Air Act (42 U.S.C. § 7401
et seq.) as amended, the Clean Air Act Amendments of 1990 and all other federal,
state and local laws, rules, regulations and orders relating to reclamation of
land, wetlands and waterways or relating to use, storage, emissions, discharges,
cleanup, releases or threatened releases of pollutants, contaminants, chemicals
or industrial, toxic or hazardous substances on or into the workplace or the
environment (including ambient air, waterways, wetlands, surface water, ground
water (tributary and non-tributary), land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation or handling of pollutants, contaminants,
chemicals, or industrial, toxic, hazardous or similar substances.
 
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“Escrow Agent” means the KeyBank.
“Escrow Agreement” means an escrow agreement substantially in the form of
Exhibit I attached hereto.
“Execution Date” is defined in the preamble to this Agreement..
“Execution Date Stock Value” is defined in Section 3.4.
“Exchange Act” is defined in Section 9.1.
“Excluded Assets” is defined in Section 2.3.
“Existing Sellers Claims” is defined in Section 7.9.
“Final Purchase Price” is defined in Section 13.1.
“Final Settlement Date” is defined in Section 13.1.
“Final Settlement Statement” is defined in Section 13.1.
“GAAP” is defined in Section 8.17.
“Hydrocarbons” means all oil, gas, natural gas liquids and other hydrocarbons
and products produced in association therewith.
“Indemnified Party” is defined in Section 15.3(b).
“Indemnifying Party” is defined in Section 15.3(b).
“Information” is defined in Section 9.1(g).
“Interest Addition” is defined in Section 5.4(e).
“Lands” is defined in Section 2.2(a).
“Leases” is defined in Section 2.2(a).
“Losses” means all losses, costs, expenses (including court costs, reasonable
fees and expenses of attorneys, technical experts and expert witnesses and the
costs of investigation), liabilities, damages, demands, suits, claims, causes of
action, judgments, and sanctions of every kind and character (including civil
fines) arising from, related to or reasonably incident to matters indemnified
against; excluding, however, income taxes and any special, consequential,
incidental, punitive or exemplary damages, loss of profits incurred by a Party
hereto or losses incurred as a result of the Indemnified Party contractually or
otherwise indemnifying a third party.
 
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“Material Adverse Effect” means a material adverse effect on the ownership,
operation or value of the Assets, taken as a whole; provided, however, that
“Material Adverse Effect” shall not include (i) any effect resulting from
entering into this Agreement or the announcement of the transactions
contemplated by this Agreement; (ii) any effect resulting from changes in
general market, economic, financial or political conditions or any outbreak of
hostilities or war, (iii) any effect that affects the Hydrocarbon exploration,
production, development, processing, gathering or transportation industry
generally (including changes in commodity prices or general market prices in the
Hydrocarbon exploration, production, development, processing, gathering or
transportation industry generally), and (iv) any effect resulting from a change
in laws or regulatory policies.
“Material Agreements” is defined in Section 2.2(d).
“Net Casualty Loss” is defined in Section 5.10.
“NORM” means Naturally Occurring Radioactive Material.
“Notice of Title Defects” is defined in Section 5.3.
“NRI” is defined in Section 5.1.
“Permitted Encumbrances” is defined in Section 5.2.
“Person” means any natural person, corporation, company, limited liability
company, partnership, joint venture, trust, proprietorship or other entity,
organization or association of any kind and shall include all governmental
authorities.
“Preliminary Settlement Statement” is defined in Section 3.2.
“Property Expenses” means all capital expenses, joint interest billings, lease
operating expenses, lease rentals, minimum royalties and shut-in payments,
drilling expenses, workover expenses, geological and any other exploration or
development expenditures chargeable under applicable operating agreements or
state law (or, if there is no applicable operating agreement with respect to
Assets not operated by Sellers, that are charged by the operator of the Assets),
or other agreements consistent with the standards established by the Council of
Petroleum Accountant Societies of North America, that are attributable to the
operation of the Assets during the period in question; provided that Property
Expenses shall not include Royalties, Taxes or income taxes.
“Purchase Price” is defined in Section 3.1.
“Records” is defined in Section 2.2(j).
 
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“Remediation” and “Remediate” mean actions taken to correct an Environmental
Defect.  “Remediated,” with respect to a portion of the Assets, shall mean that
Remediation has been completed with respect to that portion of the Assets.
“Royalties” means all royalties, overriding royalties, net profits interests,
production payments or similar payment burdens.
“SEC” is defined in Section 7.21.
“Securities Act” is defined in Section 7.21.
“Sellers Indemnified Parties” is defined in Section 15.2(b).
“Seller’s Share” means, with respect to a Seller, that percentage set forth in
Schedule 1.1 attached hereto which represents such Seller’s share of the
cumulative Allocated Values of the Assets.  If there are Purchase Price
adjustments or Asset exclusions for Title Defects or Environmental Defects, then
Schedule 1.1 shall be amended and restated accordingly by Sellers to reflect
such adjustments, Sellers shall furnish such amended and restated Schedule 1.1
to Buyer and Schedule 1.1 shall be deemed to be replaced by such amended and
restated Schedule 1.1.
“Stock Consideration” is defined in Section 3.1.
“Taxes” is defined in Section 14.1.
“Target Interval” means the interval from the top of the geologic formation
known as the Niobrara formation to the base of the geologic formation known as
the Codell formation as found at the location of the applicable Allocated
Property-.
“Title Defect” means any encumbrance, encroachment, irregularity, defect in or
objection to the real property title of Sellers to an Allocated Property, that
alone or in combination with other defects renders title to such Allocated
Property less than Defensible Title.
“Title Defect Adjustment” is defined in Section 5.4(d).
“Title Defect Deductible Amount” means an amount equal to 2% of the Purchase
Price.
“Title Defect Exclusion” is defined in Section 5.4(c).
“Title Defect Threshold” means $50,000.
“Title Defect Value” is defined in Section 5.3.
“Transfer Taxes” means any sales, use, excise, stock, stamp, documentary,
filing, recording, registration, authorization and similar taxes, fees and
charges, but not including any income taxes.
“Wells” is defined in Section 2.2(c).
 
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“WI” is defined in Section 5.1.
1.2            Amendment of Defined Instruments.  Unless the context otherwise
requires or unless otherwise provided herein, references in this Agreement to a
particular agreement, instrument or document also refer to and include all
renewals, extensions, amendments, modifications, supplements or restatements of
any such agreement, instrument or document.
 
ARTICLE 2
PURCHASE AND SALE
2.1            Purchase and Sale.  Sellers agree to sell and convey to Buyer,
and Buyer agrees to purchase and receive from Sellers, the Assets, pursuant to
the terms and conditions of this Agreement.
 
2.2            Assets.  “Assets” means all of Sellers’ right, title and interest
in and to the following real and personal property interests, excluding the
Excluded Assets:
 
a. The oil and gas leases described on Exhibit A (the “Leases”), insofar as the
Leases cover the lands described in Exhibit A, and all other lands covered by
the Leases whether or not described in Exhibit A, (the “Lands”), and all
royalty, overriding royalty, net profits and other interests in the Lands.
 
b. All rights that are derived under or from the Leases in existing and
effective unitization, voluntary pooling and communitization agreements, pooling
declarations and pooling orders covering any of the Lands.
 
c. All oil and gas wells, injection wells, disposal wells and other wells now or
hereafter located on the Lands or lands pooled or unitized therewith, including
the oil and gas wells specifically described on Exhibit B, whether producing or
non-producing, (the “Wells”), and (ii) all Hydrocarbons that may be produced
from the Wells after the Effective Time.
 
d. To the extent transferable, (i) all Hydrocarbon sales, purchase, gathering,
compression, treating, transportation, storage and processing agreements listed
in Exhibit C, insofar and only insofar as they cover or relate to the interests
described in Section 2.2(a), 2.2(b) or 2.2(c), and (ii) all other contracts,
operating agreements, balancing agreements, joint venture agreements,
partnership agreements, farmout agreements and other contracts, agreements and
instruments insofar and only insofar as they cover or relate to the interests
described in Section 2.2(a), 2.2(b) or 2.2(c) (including the agreements
described on Exhibit C, (the “Material Agreements”)), excluding any insurance
contracts.
 
e. To the extent transferable all permits, licenses, approvals, servitudes,
rights-of-way, easements, surface use agreements, and other surface rights, that
are used or held primarily for use in connection with the operation of the Wells
or Lands (or lands pooled, communitized or unitized therewith).
 
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f. To the extent transferable all personal property, equipment, machinery,
fixtures and improvements, operational or nonoperational, known or unknown,
located on the Lands (or lands pooled, communitized or unitized therewith),
including pipelines, gathering systems (including the pipelines and gathering
systems described in Exhibit D), manifolds, well equipment, casing, tubing,
pumps, motors, compression equipment, flow lines, processing and separation
facilities, pads, and structures that, as of the date of this Agreement, are
located on the Lands (or lands pooled, communitized or unitized therewith), and
that are used or held for use primarily in connection with the operation of the
Wells or Lands (or lands pooled, communitized or unitized therewith).
 
g. The fee surface property, and the surface leases, described in Exhibit E,
covering the lands described in Exhibit E, used for Sellers yards for operation
of the interests described in Sections 2.1(a), (b) and (c).
 
h. All pipes, tubulars, fittings, and other materials used or specifically held
for use as operating inventory in connection with the operation of the Wells.
 
i. All logs, well files, production data and licensed seismic data relating to
the interests described in Sections 2.2(a), 2.2(b) and 2.2(c), but excluding all
data and information that is (i) subject to unaffiliated third party contractual
restrictions on disclosure or transfer, (ii) subject to a transfer fee, unless
Buyer agrees in writing to pay such transfer fee and execute associated master
service or other agreements required for transfer, and (iii) interpretative
data.
 
j. All of the files, records, land surveys, data and information relating to the
items described in Sections 2.2(a) through 2.2(h) maintained by or in the
possession of Sellers (such copies are herein called the “Records”), including
accounting files, lease files, land contract files, well files, Hydrocarbon
sales contract files, gas gathering, compression, treating, transportation,
storage and processing files, division order files, abstracts, and title
opinions.
 
2.3            Excluded and Reserved Assets.  Notwithstanding the foregoing, the
Assets and Records shall not include, and there is excepted, reserved and
excluded from the sale contemplated hereby the following (the “Excluded
Assets”):
 
a. any accounts receivable accruing or attributable to the period before the
Effective Time;
 
b. all Hydrocarbons from or attributable to the Assets with respect to all
periods prior to the Effective Time and all proceeds attributable thereto;
 
c. any refund of, or loss carry forwards or credits with respect to, costs,
taxes or expenses borne by Sellers or Sellers’ predecessors in title
attributable to the period prior to the Effective Time;
 
d. any and all proceeds from the settlements of contract disputes with
purchasers of Hydrocarbons from the Assets, including settlement of disputes,
insofar as said proceeds are attributable to periods of time prior to the
Effective Time;
 
 
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e. the right to exercise any audit rights under operating agreements or other
agreements or state law with respect to periods prior to the Effective Time (and
Buyer will cooperate with Sellers to facilitate Sellers’ exercise of such
rights);
 
f. any claims against third parties related to matters for which Sellers
indemnify Buyer under Section 15.2(a);
 
g. all communications towers and equipment owned or operated by Sellers and
related communications licenses granted by the Federal Communications Commission
or other governmental body;
 
h. all titled vehicles and other rolling stock;
 
i. all communications and work-product covered by the attorney-client or
attorney work-product privileges;
 
j. all seismic, geophysical, geochemical, and interpretative data and
information, except for the seismic data described in Section 2.2(i) that will
be transferred to Buyer;
 
k. (i) all corporate, financial, tax and legal data and records of Sellers that
relate to Sellers’ businesses generally, (ii) any data and records to the extent
disclosure or transfer is prohibited or subjected to payment of a fee or other
consideration by any license agreement or other agreement with a Person other
than Affiliates of Sellers, or by applicable law, and for which no consent to
transfer has been received or for which Buyer has not agreed in writing to pay
the fee or other consideration, as applicable, (iii) any data and records
relating to the sale of the Assets, including bids received from, and records
relating to Sellers’ negotiations with, Buyer or with Persons other than Buyer,
(iv) any data and records constituting or relating to the Excluded Assets and
(v) employee information, internal valuation data, business plans, business
studies, transaction proposals and related correspondence, and similar records
and information;
 
l. Sellers’ intellectual property used in determining whether to participate in
the development or operation of the Assets, including proprietary computer
software, computer software licensed from third parties, patents, pending patent
applications, trade secrets, copyrights, names, marks and logos;
 
m. Sellers’ right, title and interest in easements, rights-of-way, licenses,
permits, servitudes, surface leases, surface use agreements, and similar rights,
obligations and interests, to the extent they are attributable and allocable to
rights and interests retained by Sellers;
 
n. all deposits, cash, checks in process of collection, cash equivalents,
accounts and notes receivable and other funds attributable to any periods before
the Effective Time, and security or other deposits made with third parties prior
to the Effective Time;
 
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o. all swap, futures, or derivative contracts backed by or related to
Hydrocarbons produced from the Assets;
 
p. any equipment, materials, spare parts, tools and other personal property that
may have been previously used on the Leases, but that are presently stored or
warehoused at a Seller’s or third party site not located on the Assets; and
 
q. all reserve reports prepared by Sellers or their consultants, and all reserve
reporting and classification information and supporting materials with respect
to Sellers’ determination or reporting of their reserves, other than the
information furnished to Buyer as part of the sale package materials or
presentations by Sellers.
 
2.4            Effective Time.  The purchase and sale of the Assets shall be
effective as of October 1, 2014, at 12:01 a.m., at the location of the
applicable Assets (the “Effective Time”).
 
 
ARTICLE 3
PURCHASE PRICE
 
3.1            Purchase Price.  The base consideration paid by Buyer to Sellers
for the Assets shall be $125,000,000 (the “Purchase Price”) comprised of (i)
$87,500,000 in cash (the “Cash Consideration”) and (ii) 3,485,131 shares of
Buyer common stock (subject to appropriate adjustment in the event of any stock
dividend, stock split, combination or other similar recapitalization with
respect to Buyer common stock), par value $0.001 per share (“Common Stock”)
(which, when calculated in accordance with Section 3.4, has an aggregate value
of $37,500,000 (the “Stock Consideration”); provided, however, if as of the
Closing Date the Stock Consideration would constitute 5% or more of Buyer’s
outstanding Common Stock, then the Stock Consideration sall be reduced such that
the Stock Consideration constitutes less than 5% of Buyer’s outstanding Common
Stock and the Cash Consideration shall in correspondingly increases.  The
Purchase Price shall be paid by Buyer to Sellers as follows:
 
a. upon execution hereof, an amount equal to $6,250,000 by means of a completed
federal funds wire transfer as an earnest money deposit (the “Deposit”) which
shall be wired to and held by the Escrow Agent in accordance herewith and the
terms of the Escrow Agreement; and
 
b. at Closing, the Closing Amount, which shall be comprised of (i) the Cash
Consideration by wire transfer of immediately available funds less the Deposit,
and (ii) issuance to Sellers of the Stock Consideration.
The Deposit, together with interest thereon, shall be distributed to Sellers and
credited to the Purchase Price at Closing, or if this Agreement is terminated,
shall be distributed or retained pursuant to Section 11.2.  Sellers shall notify
Buyer of the account or accounts for the payment of the Purchase Price at least
two (2) Business Days prior to the Closing Date.  The Purchase Price shall be
allocated among the Sellers as set forth in Schedule 1.1.  Escrow fees charged
by the Escrow Agent pursuant to the Escrow Agreement shall be paid one-half by
Sellers and one-half by Buyer.
 
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3.2            Adjustments to Purchase Price.  The Purchase Price shall be
adjusted according to this Section without duplication.  For all adjustments
known or capable of reasonable estimation as of Closing, the Purchase Price
shall be adjusted at Closing pursuant to a “Preliminary Settlement Statement.” 
A draft of the Preliminary Settlement Statement will be prepared by Sellers
using the best information available and provided to Buyer five Business Days
prior to Closing.  Buyer shall propose any changes it desires to make to the
Preliminary Settlement Statement furnished by Sellers within three Business Days
after receipt thereof.  The Parties shall attempt to agree upon any such changes
but if they do not agree, the Preliminary Settlement Statement as prepared by
Sellers shall control, subject to post-Closing review and adjustment as provided
in Sections 13.1 and 13.2.  The Preliminary Settlement Statement shall set forth
the Purchase Price as adjusted as provided in this Article, which amount, less
the Deposit, shall be paid at Closing and is referred to as the “Closing
Amount.”  The Closing Amount shall be paid at Closing as detailed in Section 3.1
and the Parties will instruct the Escrow Agent to pay all amounts in the Escrow
Account (other than any amounts paid into the Escrow Account pursuant to Section
5.4(b)(i) or 6.3(b)(ii)), to Sellers to such accounts as directed by Sellers. 
Following Closing, any cash received by Sellers applicable to post-Effective
Time production of Hydrocarbons from the Assets will be paid to Buyer net of
Royalties, Taxes paid or withheld for subsequent payment by Sellers on behalf of
Buyer, within 30 days after receipt thereof, and any cash received by Buyer
applicable to pre-Effective Time production of Hydrocarbons from the Assets will
be paid to Sellers within 30 days after receipt thereof.  After Closing, final
adjustments to the Purchase Price shall only be made pursuant to the Final
Settlement Statement to be delivered pursuant to Section 13.1.  Adjustments to
the Purchase Price resulting from Title Defect Exclusions and Title Defect
Adjustments and Environmental Defect Adjustments and Environmental Defect
Exclusions shall be to either the Cash Consideration or Stock Consideration, at
the election of Sellers pursuant to Sections 5.4(e) or 6.3(b)(iv),
respectively.  All other adjustments to the Purchase Price made in accordance
with this Agreement shall be adjustments to the Cash Consideration.
 
a.   Upward Adjustments.  The Purchase Price shall be adjusted upward by the
following, without duplication:
 
(i) the amount of all Property Expenses (including all prepaid Property
Expenses) attributable to the Assets after the Effective Time and paid by
Sellers (and an amount equal to the overhead chargeable under operating
agreements where a Seller or an Affiliate of Seller is the operator even though
overhead may not have historically been charged or paid), and the amount of all
Royalties, Taxes attributable to Hydrocarbons produced from the Assets after the
Effective Time and paid by Seller;
 
(ii) the proceeds of production of Hydrocarbons attributable to the Assets
occurring before the Effective Time and received by Buyer plus an amount equal
to all Hydrocarbons attributable to the Assets that, at the Effective Time, are
owned by Sellers and are in storage above the load line connection to the
storage tanks multiplied by the price for which production from the Assets was
sold immediately prior to the Effective Time, (net of all Royalties, Taxes;
provided that to the extent such a netting is made, Buyer shall assume the
obligation to pay the netted amounts to the Persons to whom such amounts are
due);
 
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(iii) expenses and capital costs incurred by Sellers attributable to permitting,
locating, staking, constructing roads and drill pads, and drilling and
completing wells, and other expenses and costs, whether incurred before or after
the Effective Time, that are attributable to wells located on the Assets the
actual drilling or completion of which is completed after the Effective Time,
including those wells listed on Schedule 3.2(a)(iii), provided the Anadarko
Cap-Ex shall be the responsibility of Sellers and shall not be included in any
upward adjustment calculation;
 
(iv) amounts owed by Buyer to Seller under Article 14;
 
(v) an amount equal to the sum of the Interest Additions; and
 
(vi) an amount equal to the number of shares of Common Stock in the Stock
Consideration multiplied by the per share dividend of cash or other assets with
respect to any dividend of Buyer for which the record date for determining which
stockholder is entitled to receive such dividend occurs on or after the
Execution Date and on or before the Closing Date (or, if later, the date that
Buyer becomes the record owner of the Common Stock included in the Stock
Consideration).
 
b.   Downward Adjustments.  The Purchase Price shall be adjusted downward by the
following, without duplication:
 
(i) the proceeds of production of Hydrocarbons attributable to the Assets
occurring on or after the Effective Time and received by Sellers (net of all
Royalties, Taxes to be paid by Sellers on behalf of Buyer under this Agreement);
 
(ii) the amount of all pre-Effective Time Property Expenses attributable to the
Assets and paid by Buyer, and all Royalties, Taxes attributable to Hydrocarbons
produced from the Assets prior to the Effective Time and paid by Buyer, subject
to Article 14 and Section 15.2;
 
(iii) an amount equal to the sum of the Title Defect Adjustment and all Title
Defect Exclusions;
 
(iv) an amount equal to the sum of the Environmental Defect Adjustment and all
Environmental Defect Exclusions;
 
(v) the amount of any Net Casualty Loss under Section 5.10;
 
(vi) amounts owed by Sellers to Buyer under Article 14; and
 
(vii) the amounts held by Sellers in suspense accounts described in Section
13.4.
 
c. Imbalance Adjustments.  Sellers and Buyer agree that the Purchase Price will
be adjusted downward or upward, as appropriate, by an amount equal to any
wellhead production imbalances in MCF, existing as of the Effective Time,
multiplied by $[4.00] per MCF.  Sellers will retain all pipeline and
transportation imbalances attributable to pipeline shipments of Hydrocarbons
produced from the Assets during Sellers’ period of ownership prior to the
Effective Time as provided in Section 15.2(a)(v).
 
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3.3            Allocated Values.  The Purchase Price is allocated (i) on a
governmental quarter-quarter section by quarter-section basis, aggregating the
interests in all Leases that cover a quarter-quarter section, as set forth on
Exhibit F-1, with all such value being attributable to the Target Interval, and
(ii) the Wells described in Exhibit B, as set forth on Exhibit F-2, with all
such value being attributable to the intervals open to production in such Well
as of the Effective Time.  Each Well, and each governmental quarter-quarter
section covered by one or more Leases, to which a value is separately allocated
on Exhibit F-1 or F-2 is herein called an “Allocated Property” (and two or more
such properties are herein called “Allocated Properties”) and such separate
value is herein called the “Allocated Value” of such Allocated Property.
 
3.4            Valuation.  For purposes of determining the number of shares of
restricted common stock of Buyer comprising the Stock Consideration, the value
has been calculated as the average closing price per share as posted by the
NYSE:MKT for a period twenty (20) trading days immediately preceding the
Execution Date (being $10.76, the “Execution Date Stock Value”).
 
ARTICLE 4
DUE DILIGENCE INSPECTION
 
4.1            Due Diligence.  Sellers shall make the Records available to Buyer
and its representatives for inspection and review to permit Buyer to perform its
due diligence review (“Due Diligence Review”) as hereinafter provided.
 
4.2            Records.  The Records will be made available for Buyer’s
inspection through Closing.  Buyer may inspect the Records and other Assets and
such additional information only to the extent that it may do so without
violating any obligation of confidence or contractual commitment of Sellers to a
third party.
 
4.3            No Representation or Warranty.  Except for the representations
and warranties contained in this Agreement, Sellers do not make any warranty or
representation of any kind as to the accuracy, completeness or materiality of
any Records or any information contained therein.  Buyer agrees that any
conclusions drawn from the Records shall be the result of its own independent
review and judgment.
 
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ARTICLE 5
TITLE MATTERS
 
5.1            Defensible Title.
 
a.     The term “Defensible Title” means, with respect to a Well that is
described in Exhibit B, such title of Sellers in and to such Well, derived
through Sellers’ interest in the Leases, and production therefrom that, subject
to and except for the Permitted Encumbrances:
 
(i) entitles Sellers to receive not less than the net revenue interest or net
revenue interests (“NRI”) described in Exhibit B of production from such Well
throughout the productive life of such Well (except as such NRI may be reduced
from time to time due to the exercise, after the Execution Date, of non-consent
rights under applicable spacing units or under applicable operating and similar
agreements or applicable state law) (for clarity, the WI and NRI of each Sellers
in each Well is set forth in Exhibit B and the interests of Sellers,
collectively, in the Well constitutes the Allocated Property);
 
(ii) obligates Sellers to bear costs and expenses relating to such Well in an
amount not greater than the working interest or working interests (“WI”)
described in Exhibit B, without a corresponding increase in the NRI, through the
plugging and abandonment of such Well (except as such WI may be reduced from
time to time due to the exercise, after the Execution Date, of non-consent
rights under applicable spacing units or under applicable operating and similar
agreements or applicable state law); and
 
(iii) is free and clear of any and all liens (including liens for delinquent
Taxes), encumbrances, mortgages, claims and production payments and any defects
or irregularities that would impair use or enjoyment of, or result in a loss of
interest in, such Well.
 
b.   The term “Defensible Title” means, with respect to each governmental
quarter-quarter section covered by a Lease, such title of Sellers in and to the
Lease insofar as it covers such tract that, subject to and except for the
Permitted Encumbrances:
 
(i) entitles Sellers to receive not less than the NRI described in Exhibit A
share of production allocated to such Lease insofar as it covers such tract
(except as such NRI may be reduced from time to time due to the exercise, after
the Execution Date, of non-consent rights under applicable operating and similar
agreements or applicable state law) (for clarity, the WI and NRI of each Sellers
in each such tract in each Lease is set forth in Exhibit A and the interests of
Sellers, collectively, in the Lease constitutes the Allocated Property);
 
(ii) obligates Sellers to bear costs and expenses allocated to such Lease
insofar as it covers such tract in an amount not greater than the WI described
in Exhibit A, without a corresponding increase in the NRI (except as such WI may
be reduced from time to time due to the exercise, after the Execution Date, of
non-consent rights under applicable operating and similar agreements or
applicable state law); and
 
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(iii) is free and clear of any and all liens (including liens for delinquent
Taxes), encumbrances, mortgages, claims and production payments and any defects
or irregularities that would impair use or enjoyment of, or result in a loss of
interest in, such Lease insofar as it covers such tract.
 
The Parties agree and acknowledge that there is no assurance the Leases will be
spaced or pooled in any particular configuration.
 
5.2          Permitted Encumbrances.  The term “Permitted Encumbrances” shall
mean:
 
a. Royalties if the net cumulative effect thereof does not operate to reduce the
NRIs below those set forth on Exhibits A or B;
 
b. lack of established spacing units, pooling orders or voluntary pooling
declarations, or changes after the Effective Time in the WI or NRI for any
Allocated Property based on a change in any unit, participating area,
communitized area, spacing unit, tract allocation or other changes in pool,
unit, participating area, communitized area or spacing unit participation,
including changes resulting from amendments and modifications to any unit,
participating area, communitized area, spacing unit, pooling orders or voluntary
pooling declarations, and tract allocations thereunder;
 
c. (i) with respect to a Well, lack of pooling or communitization agreements and
lack of Commission approval of a spacing unit for a Well if Sellers is being
paid the NRI set forth on Exhibit B, and (ii) with respect to a Lease lack of
spacing units or any change in the size or configuration of any spacing unit,
and lack of pooling or communitization agreements;
 
d. any required third-party consents to assignment of Leases and contracts, and
preferential purchase rights, all of which are handled exclusively under
Sections 5.8 and 5.9;
 
e. liens for taxes or assessments not yet due or not yet delinquent or, if
delinquent, that are being contested in good faith in the normal course of
business (which contested matters are listed in Section 5.2 of the Disclosure
Schedule);
 
f. all rights to consent by, required notices to, filings with, or other actions
by federal, state, or local governmental entities in connection with the sale or
conveyance of an Allocated Property if the same are customarily obtained
subsequent to such sale or conveyance; and consent requirements arising under a
farmout or similar agreement pursuant to which Sellers have already satisfied
all conditions for earning any interests that constitute a part of the Assets
and Sellers have received, or are due an assignment of, the earned interests
under such agreement;
 
g. the terms, conditions, restrictions, exceptions, reservations, limitations,
and other matters contained in (including any liens or security interests
created by law or reserved in the Leases for Royalties, bonus or rental, or
created to secure compliance with the terms of) the Leases (including the
remaining term of any Lease) and the agreements described in Sections 2.2(d) and
(e), or other terms in such instruments that create or reserve to Sellers their
interest in the Assets; provided, that, such matters do not and will not operate
to reduce the NRIs below those set forth on Exhibit A or B, or increase the WIs
above those set forth on Exhibit A or B (except where there is a corresponding
increase in the NRI, and except as such NRIs may be reduced, or such WIs may be
increased, from time to time,  under non-consent provisions of applicable
operating agreements or state law due to participation elections made after the
Execution Date under applicable operating agreements or state law);
 
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h. rights of reassignment, to the extent any exist as of the date of this
Agreement, upon the surrender or expiration of any Lease;
 
i. easements, rights-of-way, servitudes, permits, surface leases and other
rights with respect to surface operations, on, over or in respect of any
Allocated Property or any restriction on access thereto and that do not
materially interfere with the operation of the affected Allocated Property;
 
j. 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 any Allocated Property: 
(i) if they have not been filed pursuant to law and the time for filing them has
expired, (ii) if filed, they have not yet become due and payable or payment is
being withheld as provided by law, or (iii) if their validity is being contested
in good faith by appropriate action (which contested matters are listed in
Section 5.2 of the Disclosure Schedule);
 
k. rights reserved to or vested in any municipality or governmental, statutory
or public authority to control or regulate any Allocated Property in any manner;
any moratorium, prohibition or restriction on fracing or other operations; and
all applicable laws, rules, regulations and orders of general applicability in
the area;
 
l. liens arising under operating agreements, unitization and pooling agreements
and production sales contracts securing amounts not yet due or, if due, being
contested in good faith in the ordinary course of business (which contested
matters are listed in Section 5.2 of the Disclosure Schedule);
 
m. lack of a division order or an operating agreement covering any Allocated
Property (including portions of an Allocated Property that were formerly within
a unit but which have been excluded from the unit as a result of a contraction
of the unit) or failure to obtain waivers of maintenance of uniform interest,
restriction on zone transfer or similar provisions in operating agreements with
respect to assignments in Sellers’ chain of title to the Allocated Property
unless there is an outstanding, unresolved claim from a third party with respect
to the failure to obtain such waiver;
 
n. defects consisting of the mere failure to recite marital status in a document
or omissions of heirship or probate proceedings unless Buyer provides
affirmative evidence that the lack thereof has resulted in another Person’s
actual and superior claim of title to the Allocated Property;
 
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o. defects that result from the failure to demonstrate of record proper
authority for execution by any Person on behalf of a corporation, limited
liability company, partnership, trust or other entity;
 
p. defects that have been cured by possession under applicable statutes of
limitation for adverse possession or for prescription;
 
q. defects arising out of lack of survey, unless a survey is required by
applicable laws or regulations;
 
r. liens that are released at or prior to Closing;
 
s. defects based on failure to record Leases issued by the BLM or the State of
Colorado, or any assignments of record title or operating rights in such Leases,
in the real property or other county records of the county in which an Allocated
Property is located, provided such Leases or assignments were filed in the BLM
or state offices; provided however, that this subparagraph shall not include
defects arising from the existence of an assignment or other document filed in
the county records where an Allocated Property is located that contradicts or
diminishes the title of Sellers, as reflected by the instruments filed only in
the BLM or applicable state records;
 
t. defects based on failure to file any assignments of record title or operating
rights in Leases issued by the BLM, or the State of Colorado, in the records of
the BLM, the land office of such state, provided such assignments are recorded
in the county records where an Allocated Property and there is no assignment on
file in the records of the BLM, or the land office of the State of Colorado that
contradicts or diminishes the title of Sellers, as reflected by the instruments
recorded in the county;
 
u. liens created under deeds of trust, mortgages and similar instruments by the
lessor under a Lease covering the lessor’s surface or mineral interests in the
land covered thereby;
 
v. any preference leasing right that may exist in favor of holders of
rights-of-way across federal or state lands that burdened the lands prior to
issuance of the applicable Lease;
 
w. defects related to gas balancing issues;
 
x. lack of rights-of-way for gathering or transportation pipelines or
facilities;
 
y. such defects as are accepted by the purchasers of production from any
Allocated Property in paying the proceeds of such production without suspense,
subject only to customary division order warranties and indemnities in favor of
such production purchaser;
 
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z. such defects and irregularities as, individually or in the aggregate (i) do
not interfere materially with the ownership, operation, value or use of any
Allocated Property, (ii) could not reasonably be expected to prevent or delay
Buyer from receiving the proceeds of production from any Allocated Property, or
(iii) the cumulative effect of which does not and will not operate to reduce the
NRIs below those set forth on Exhibit A or B, or increase the WIs above those
set forth on Exhibit A or B (except where there is a corresponding increase in
the NRI, and except as such NRIs may be reduced, or such WIs may be increased,
from time to time under non-consent provisions of applicable operating
agreements or state law due to participation elections made after the Execution
Date under applicable operating agreements or state law);
 
aa. any defects that do not affect the marketability of the Assets pursuant to
“Title Standards” published by the Colorado State Bar Association, as
applicable;
 
bb. any election, or failure to elect, to consent or non-consent to any
operation;
 
cc. any claim of ownership of the oil and gas fee estate by the owner of any
railroad easement or railroad right-of-way;
 
dd. any defects arising from the failure to file an affidavit relating to the
occurrence of a required contingency or expiration of an oil and gas lease for
non-production;
 
ee. with respect to any Lease, any defects affecting any depths other than the
Target Interval; and
 
ff. with respect to any Well, any defects affecting any depths other than
intervals completed and open to production in such Well as of the Effective
Time.
 
5.3            Notice of Title Defects.  Buyer shall give Sellers written notice
of all Title Defects discovered by Buyer promptly upon discovery by delivering
to Sellers a written “Notice of Title Defects” setting forth such Title
Defects.  Buyer shall notify Sellers weekly of all Title Defects discovered by
Buyer through the date of such notice and not previously noticed to Sellers. 
The Notice of Title Defects shall (i) describe the Title Defect, (ii) describe
the basis of the Title Defect, (iii) include copies of any title opinion, title
memoranda and other documentation supporting the basis of the Title Defect,
(iv) describe in general terms the curative action that Buyer reasonably
anticipates would need to be taken in order to cure such Title Defect, and
(v) describe Buyer’s good faith estimate of the reduction in the Allocated
Property’s Allocated Value caused by the Title Defect, taking into consideration
the nature of the Title Defect and the likelihood that such Title Defect may
actually result in a claim against or loss of title (“Title Defect Value”)
(provided that the Title Defect Value, together with the aggregate Title Defect
Values attributable to any other Title Defects affecting such Allocated
Property, shall not exceed the lesser of the Allocated Property’s Allocated
Value or the cost to cure the Title Defect, if the cost to cure is reasonably
determinable) and associated calculations and documentation (for clarity, if a
Title Defect affects a Well and affects a Lease, the Title Defect Value shall be
determined separately with respect to the Well and the Lease and aggregated to
determine the Title Defect Value of the Title Defect).  The final Notice of
Title Defects shall be delivered on or before the Defect Notice Deadline.  Buyer
will be deemed to have conclusively waived (A) any Title Defect about which it
fails to notify Sellers in writing prior to the Defect Notice Deadline and
(B) any Title Defect with respect to which the Title Defect Value is less than
the Title Defect Threshold.
 
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5.4          Defect Adjustments and Deductibles; Interest Additions.  Sellers
shall proceed as follows with respect to an asserted Title Defect:
 
a. Sellers shall have the option until two Business Days prior to the Closing
Date to cure any Title Defect affecting any Allocated Property that is timely
identified under Section 5.3.
 
b. If a Title Defect timely asserted by Buyer affecting an Allocated Property is
not cured or waived on or before two Business Days prior to the Closing Date,
Buyer and Sellers shall attempt in good faith to reach agreement, on or before
Closing, on the existence of the Title Defect and the Title Defect Value, and,
if they reach agreement, such Title Defect Value shall be included in
determining the Title Defect Adjustment, if any, under Section 5.4(c).  In the
event that Buyer and Sellers do not reach such an agreement by Closing, the
subject Allocated Property shall be excluded from the Assets to be conveyed at
Closing and the Purchase Price shall be reduced by the Allocated Value of the
excluded Allocated Property (a “Title Defect Exclusion”)  and such Allocated
Value shall be delivered to the Escrow Agent by Buyer at Closing pursuant to
Section 5.4(e).
 
c. The “Title Defect Adjustment” shall be the amount, if any, by which (i) the
aggregate amount of all Title Defect Values with respect to uncured and unwaived
Title Defects affecting Allocated Properties that are not Title Defect
Exclusions, less the aggregate amount of the value of all individual Interest
Additions, exceeds (ii) the Title Defect Deductible Amount.  The Purchase Price
shall be reduced pursuant to Section 3.2(b)(iii), in accordance with Sellers
election under Section 5.4(e), by the Title Defect Exclusions and the Title
Defect Adjustment.
 
d. If Buyer or Sellers discover any additional interests in an Allocated
Property that are not listed in Exhibit A or B, including any interest that
entitles Sellers to receive more than the NRI set forth in Exhibit A or B, or
obligates Sellers to bear costs and expenses in an amount less than the WI set
forth in Exhibit A or B (without a corresponding decrease in the NRI, and except
as such NRIs may be increased, or such WIs may be decreased, from time to time
under non-consent provisions of applicable operating agreement or state law due
to participation elections made after the date hereof under applicable operating
agreements or state law) (each an “Interest Addition”), the discovering Party
shall promptly notify the other of such Interest Additions.  The Purchase Price
shall be increased by the aggregate amount of the value of all Interest
Additions (less the amount thereof, if any, netted against the Title Defect
Values under Section 5.4(c)(i)).  The Party who discovers Interest Additions
shall give the other Party written notice of the Interest Additions as soon as
possible, but in no event later than the Defect Notice Deadline.  This notice
shall be in writing and shall include (i) a description of each Interest
Addition, (ii) the basis for each Interest Addition, and supporting title
opinions, title memoranda and other documentation with respect thereto,
(iii) the Allocated Value of the Allocated Property affected by the Interest
Addition, and (iv) the value of the Interest Addition or the amount by which the
notifying Party believes the Allocated Value of the Allocated Property has been
increased by the Interest Addition and the computations upon which such Party’s
belief is based.  The value of the Interest Addition shall be determined by the
Parties in good faith taking into account all relevant factors or, if the
Parties are unable to agree on the existence or value of any Interest Addition,
each Party shall have the right to seek judicial determination thereof subject
to Section 16.11.
 
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e. Notwithstanding any other provision of this Article 5, Sellers shall have the
right to elect, at their sole discretion, whether any Purchase Price adjustments
resulting from Title Defect Exclusions or Title Defect Adjustments under Section
5.4(c) shall be adjustments to the Cash Consideration or the Stock
Consideration.  If Sellers elect that any such adjustment will be to the Cash
Consideration, the adjustment at Closing under Section 3.2(b)(iii) shall be made
to the Cash Consideration, and the Title Defect Value under Section 5.4(b), if
applicable, shall be paid into the Escrow Account in cash by wire transfer.  If
Sellers elect that any such adjustment will be to the Stock Consideration, the
adjustment under Section 3.2(b)(iii) shall be to the number of shares of Common
Stock delivered at Closing as the Stock Consideration, and Common Stock shall be
delivered to the Escrow Agent under 5.4(b), if applicable, and the Parties will
amend the Escrow Agreement if necessary to accommodate the Escrow Agent holding
such stock.  The number of shares of Common Stock to be delivered to the Escrow
Agent pursuant to Section 5.4(b) shall be determined by the Allocated Value of
the Title Defect Exclusion(s) or Title Defect Value of the Title Defect(s), as
applicable, divided by the  per share Execution Date Stock Value.  Sellers
election under this Section 5.4(e) shall be set forth in the Preliminary
Settlement Statement.
 
5.5            Post-Closing Cure of Title Defects.  In the event that the Title
Defect giving rise to the exclusion of an Allocated Property from this Agreement
as a Title Defect Exclusion, or to a Purchase Price reduction for the Title
Defect Value, is cured by Sellers (provided Sellers shall have no obligation to
attempt to cure Title Defects) and Sellers deliver to Buyer pertinent
information reasonably necessary to document the curative action within 120 days
after the Closing Date, provided that if Sellers are attempting to cure a Title
Defect and have initiated a quiet title, heirship, probate or other legal
proceeding to cure such Title Defect within 120 days after the Closing Date,
then such 120 day period shall be deemed extended to the date that is 10 days
after a final determination or settlement of such proceeding (or if such
condition is satisfied based on a judicial determination whether such
determination occurs before or after such 120 day period), then (i) in the case
of a Title Defect associated with an Allocated Property that is not a Title
Defect Exclusion, Buyer shall pay to Sellers an amount equal to the Title Defect
Value or (ii) in the case of an Allocated Property that is a Title Defect
Exclusion, Sellers shall have the option to put the excluded Allocated Property
to Buyer, such put option shall be exercised by Sellers delivering written
notice to Buyer of Sellers’ election to put the excluded Allocated Property to
Buyer within 120 days after the Closing Date (or, if later, 15 days after
receipt of (A) the judicial determination or (B) the final determination or
settlement of the proceeding described above), and if such exercise notice is
given, then, within 15 days after Buyer's receipt of such notice, Sellers shall
assign such Allocated Property to Buyer by an assignment in the form of Exhibit
G and Buyer shall pay to Sellers an amount equal to the Allocated Value of such
Allocated Property, adjusted as provided in Section 3.2 and Section 5.6(i),
provided for payments made by Buyer under clause (i) and (ii) above, if the
applicable Title Defect Adjustment or the Allocated Value of the applicable
Title Defect Exclusion, was escrowed in the form of cash, the Parties shall
instruct the Escrow Agent to pay such amount in cash, and if the applicable
Title Defect Adjustment or the Allocated Value of the applicable Title Defect
Exclusion, was escrowed in the form of Common Stock, the Parties shall instruct
the Escrow Agent to deliver the appropriate number shares of Common Stock (with
the number of shares of Common Stock shall be determined using the Execution
Date Stock Value).
 
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5.6            Post-Closing Determination of Title Defects.  Sellers  shall have
the right to commence a judicial action, subject to Section 16.11, to dispute
(x) the validity of the Title Defects  and Title Defect Values asserted by Buyer
with respect to a Title Defect Exclusion, and (y) any dispute regarding the
validity of any of Sellers’ curative actions with respect to a Title Defect,
provided that such action shall be commenced, if at all, within 30 days after
the end of the 120 day period described in Section 5.5.  If Sellers have not
commenced such an action within such 30 day period with respect to a Title
Defect Exclusion, or with respect to any disputed curative actions, Sellers
shall retain such Title Defect Exclusion and the disputed curative actions shall
not be given effect, as the case may be, and the Parties will instruct the
Escrow Agent to release to Buyer the cash or Common Stock, as applicable, held
in the Escrow Account with respect thereto.  If Sellers commence such an action
within such 30 day period, then within 10 Business Days after a final decision
in such action:
 
(i)            with respect to a Title Defect Exclusion, (A) Sellers may elect
to exercise their put option under Section 5.5 (provided that the  put price 
shall be reduced by the amount by which the Title Defect Adjustment would have
been increased at Closing had the uncured Title Defect Values affecting such
Title Defect Exclusion been included in determining the Title Defect Adjustment
at Closing  using the values determined in such action), and (B) if Sellers do
not timely exercise such put option, Sellers shall retain such Title Defect
Exclusion and the Parties shall instruct the Escrow Agent to release to Buyer
the cash or Common Stock, as applicable, held in the Escrow Account with respect
thereto; and
(ii)            if a disputed Title Defect with respect to an Allocated Property
assigned to Buyer at Closing is determined (A) to have been cured, the Parties
shall instruct the Escrow Agent to release to Sellers the cash or Common Stock,
as applicable, held in the Escrow Account with respect thereto, or (B) not to
have been cured, the Parties shall instruct the Escrow Agent to release to Buyer
the cash or Common Stock, as applicable, held in the Escrow Account with respect
thereto.
5.7            Changes in Product Prices; Wells or Other Events.  There shall be
no adjustment to the Purchase Price for, and the following shall not affect
Buyer’s obligations under this Agreement, including Buyer’s obligation to close
the transactions contemplated hereby if the conditions in Section 10.2 are
satisfied or waived by Buyer, and from and after Closing Buyer shall assume all
risk of loss with respect to:  (i) changes in product prices and any other
market factors or conditions, (ii) production declines or any adverse change in
the production characteristics or downhole condition of a Well, including a Well
watering out, experiencing a collapse or failure in the casing or sand
infiltration, including inter-well interference or communication, whenever
occurring, (iii) any change in laws, rules or regulations, or (iv) any ban or
moratorium on drilling, fracing or other completion methods or any legislative
bill, or any ballot initiative or referendum to amend the Colorado constitution
or enact or amend a statute, rule or regulation with respect to drilling,
fracing or other completion methods or the power of any governmental entity to
ban, restrict or regulate drilling, fracing or other completion methods.
 
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5.8            Consents.  Sellers shall use their reasonable commercial efforts
to obtain all required consents known to Sellers relating to a transfer of their
interest in the Assets.  If Buyer discovers other affected Assets that are
subject to a consent to transfer requirement during the course of Buyer’s Due
Diligence Review, Buyer shall notify Sellers immediately and Sellers shall use
their reasonable commercial efforts to obtain such consents prior to Closing.
 
 
a.    Required Consents.  That portion of the Assets for which a consent has not
been obtained and such lack of consent would invalidate an attempted conveyance
of the Assets to Buyer (a “Required Consent”) shall be excluded from the Assets
conveyed at the Closing and the Purchase Price shall be reduced by the Allocated
Value of the excluded Allocated Properties.  Sellers shall use their reasonable
commercial efforts to obtain such Required Consent following Closing for a
period of one year and if a Required Consent is obtained within one year after
the Closing, then, within 15 days after receipt of such consent, Sellers shall
assign such excluded portion of the Assets to Buyer using an assignment in the
form of Exhibit G in exchange for a payment by wire transfer from Buyer equal to
the Allocated Value of the excluded Allocated Properties, subject to the
adjustments described in Section 3.2.  Buyer shall reasonably cooperate with
Sellers in obtaining any required consent including providing assurances of
financial condition.

 
 
b.    Non-Required Consents.  The following types of consents shall not
constitute Required Consents:  (I) consents to transfers of title by the BLM,
the State of Colorado or any county, (II) consents set forth in, or arising out
of, a farmout or similar agreement pursuant to which Sellers has already
satisfied all conditions for earning any interests that constitute a part of the
Assets and Sellers has received or is due an assignment of, the earned interests
under such agreement, and (III) consents which if not obtained by Closing would
not invalidate the conveyance of the Assets.  For each of the consents of the
type described in Section 5.8(b)(I), Buyer, within 30 days after Closing, shall
file for approval with the applicable government agencies all federal, state and
county transfer documents required to effectuate the transfer of the Assets. 
Buyer further agrees promptly after Closing to take all other actions required
of it by federal, state or county agencies having jurisdiction to obtain all
requisite regulatory approvals with respect to this transaction, and to use its
best efforts to obtain the unconditional approval by such federal, state or
county agencies, as applicable, of the assignment documents requiring federal,
state or county approval in order for Buyer to be recognized by the federal,
state or county agencies as the owner of the Assets.  Buyer shall provide
Sellers approved copies of the assignment documents and other federal, state and
county transfer documents as soon as they are available.

 
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5.9            Preferential Purchase Rights.  Sellers shall use their
commercially reasonable efforts to comply with all preferential right to
purchase provisions relative to their interest in the Assets by sending notice
of this Agreement, within ten Business Days after execution of this Agreement,
to all Persons holding preferential rights, offering to sell to each such Person
that portion of the Assets for which such a preferential right is held for an
amount equal to the Allocated Values of the subject Allocated Properties and
subject to all other terms and conditions of this Agreement.  If, during the
course of its Due Diligence Review, Buyer discovers any additional preferential
rights, Buyer shall promptly notify Sellers.  That portion of the Assets, if
any, subject to preferential purchase rights which have been expressly waived by
the holder thereof by Closing, or which are deemed waived by the failure of the
holder thereof to exercise its preferential right to purchase within the
applicable period following receipt of notice thereof where such period expired
prior to Closing, shall be included in the Assets to be conveyed to Buyer at
Closing.  That portion of the Assets, if any, subject to preferential purchase
rights where the holder has exercised the preferential right prior to Closing,
or where the deadline for the holder to elect to exercise such right is after
the Closing, shall be excluded from the Assets identified in this Agreement and
the Purchase Price shall be reduced by the Allocated Values of the excluded
Allocated Properties; provided, however, that if the holder of such preferential
right is required to but fails to consummate the purchase of such Assets on or
prior to the Closing Date, then Sellers shall notify Buyer, and Sellers shall
sell to Buyer, and Buyer shall purchase from Sellers, the Assets to which the
preferential purchase right was asserted for such Allocated Values.  If the
preferential purchase rights covering an Asset excluded pursuant to the
preceding sentence are waived or expire without being exercised subsequent to
Closing, Sellers shall give notice thereof to Buyer and within five Business
Days after receipt of such notice, Buyer shall purchase such Asset from Sellers
for the Allocated Value thereof, subject to the adjustments described in Section
3.2, and Sellers shall assign such Asset to Buyer using an assignment in the
form of Exhibit G.
 
5.10            Casualty Loss.  Prior to Closing, if any material portion of an
Allocated Property is destroyed by fire or other casualty or if a portion of an
Allocated Property is taken or threatened to be taken in condemnation or under
the right of eminent domain (“Casualty Loss”) (provided that none of the matters
covered by Section 5.7 shall constitute a Casualty Loss), such Allocated
Property shall be excluded from this Agreement and the Purchase Price shall be
reduced by the Allocated Value of the excluded Allocated Property, unless Buyer
and Sellers agree upon the estimated cost to repair such Allocated Property
(with equipment of similar utility) or other appropriate reduction to the
Purchase Price, not to exceed the Allocated Value of the Allocated Property (the
Purchase Price adjustment, whether from excluding the Allocated Property or
agreement upon an appropriate adjustment, is herein called the “Net Casualty
Loss”) and Sellers shall retain all insurance proceeds and all claims against
third parties with respect to the Casualty Loss.  Sellers, at their option, may
elect to cure such Casualty Loss.  If Sellers elect to cure such Casualty Loss,
Sellers may replace any personal property that is the subject of a Casualty Loss
with equipment of similar grade and utility, or replace any personal property
with personal property of similar nature and kind if such property is acceptable
to Buyer in its reasonable discretion.  If Sellers elect to cure the Casualty
Loss, and in fact cure the Casualty Loss to the reasonable satisfaction of
Buyer, there shall be no adjustment to the Purchase Price.
 
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ARTICLE 6 
ENVIRONMENTAL MATTERS
 
6.1            NORM and Asbestos.  Some production equipment may contain
asbestos and/or NORM.  In this regard Buyer and Sellers expressly understand
that NORM may affix or attach itself to the inside of Wells, materials and
equipment as scale or in other forms, that said Wells, materials and equipment
located on or associated with the Assets may contain NORM and that NORM
containing material may have been buried or otherwise disposed of on the
Assets.  Buyer and Sellers also expressly understand that special procedures may
be required for the Remediation, removal, transportation and disposal of
asbestos or NORM from the Assets where such material may be found and that, if
the Closing occurs, Buyer assumes all liability for or in connection with the
assessment, containment, removal, Remediation, transportation and disposal of
any such materials, in accordance with all past, present or future applicable
laws, rules, regulations and other requirements of any governmental or judicial
entities having jurisdiction and also with the terms and conditions of all
applicable leases and other contracts.
 
6.2            Environmental Assessment.  Upon advance notice to Sellers, to the
extent Sellers have the authority to do so, Sellers shall allow Buyer to
conduct, at Buyer’s sole risk and expense, on-site inspections and an
environmental assessment and compliance audit (an “Environmental Assessment”) of
the Assets.  Buyer acknowledges that Sellers do not operate certain Assets and,
with respect to such Assets, promptly following Buyer’s written request, Sellers
will request that the operator of the Assets allow Buyer access to the Assets
for purposes of conducting its Environmental Assessment but that the operator
may not permit such access.  In connection with any on-site inspections or
Environmental Assessment, Buyer agrees not to interfere with the normal
operation of the Assets and agrees to comply with all requirements and safety
policies of the operator of which Buyer has notice.  If requested by Sellers,
the Parties shall execute a “common undertaking” letter regarding the
confidentiality of Environmental Assessments where appropriate.  Buyer shall not
conduct any test drilling or sampling activities without prior notice to and
consent of Sellers and the operator of the affected Asset.  Buyer shall provide
Sellers prior written notice of any environmental inspections and tests, and
Buyer shall give Sellers the opportunity to participate in all such inspections
and tests.  Buyer shall provide Sellers, at no cost to Sellers, all reports of
environmental inspections and tests.
 
IN CONNECTION WITH THE GRANTING OF SUCH ACCESS, BUYER REPRESENTS THAT IT IS
ADEQUATELY INSURED AND BUYER WAIVES, RELEASES AND AGREES TO INDEMNIFY, DEFEND
AND SAVE AND HOLD HARMLESS THE SELLERS INDEMNIFIED PARTIES FROM AND AGAINST, ALL
CLAIMS FOR INJURY TO, OR DEATH OF, PERSONS OR FOR DAMAGE TO PROPERTY ARISING IN
ANY WAY FROM THE ACCESS AFFORDED TO, OR THE ACTIVITIES OF, BUYER, ITS EMPLOYEES,
CONSULTANTS, AGENTS, CONTRACTORS AND SUBCONTRACTORS.  THIS WAIVER, RELEASE AND
INDEMNITY BY BUYER SHALL SURVIVE TERMINATION OF THIS AGREEMENT.
6.3            Adjustments for Environmental Defects.
 
 a.      Notice of Environmental Defects.  Buyer shall give Sellers written
notice of all Environmental Defects affecting the Assets which Buyer’s
Environmental Assessment reveals, and will provide evidence thereof, promptly
upon discovery.  Buyer shall notify Sellers weekly of all Environmental Defects,
and will provide evidence thereof, discovered by Buyer through the date of such
notice and not previously noticed to Sellers.  The final notice of Environmental
Defects and evidence thereof shall be delivered on or before the Defect Notice
Deadline.  Buyer will be deemed to have conclusively waived (A) any
Environmental Defect about which it fails to notify Sellers in writing prior to
the Defect Notice Deadline and (B) any Environmental Defect as to any single
incident with respect to which the Environmental Defect Value is less than the
Environmental Defect Threshold.
 
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b.     Defect Adjustments.
 
(i) Sellers shall have the option, but not the obligation, to attempt to cure,
on or before three Business Days prior to the Closing Date, any Environmental
Defect affecting the Assets that is timely identified under Section 6.3(a).
 
(ii) If an Environmental Defect timely asserted by Buyer that is not cured by
Sellers on or before two Business Days prior to the Closing Date, Buyer and
Sellers shall attempt in good faith to reach agreement by Closing on the
existence of the Environmental Defect and an adjustment to the Purchase Price
which shall be reflected on the Preliminary Settlement Statement, which
adjustment shall reflect the lowest reasonable cost to Remediate such
Environmental Defect as would a prudent operator (“Environmental Defect
Value”).  In the event that Buyer and Sellers do not reach such an agreement by
Closing, the affected Allocated Property shall be excluded from the Assets to be
conveyed at Closing and the Purchase Price shall be reduced by the Allocated
Value of the excluded Allocated Property (an “Environmental Defect Exclusion”).
 
(iii) The “Environmental Defect Adjustment” shall be the amount, if any, by
which (A) the aggregate amount of all Environmental Defect Values with respect
to un-Remediated and unwaived Environmental Defects exceeds (B) the
Environmental Defect Deductible Amount.  The Purchase Price shall be reduced
pursuant to Section 3.2(b)(iv) in accordance with Seller's election under
6.3(b)(iv) by the sum of the Environmental Defect Exclusions and the
Environmental Defect Adjustment.
 
(iv) Notwithstanding any other provision of this Article 6, Sellers shall have
the right to elect, at their sole discretion, whether any Purchase Price
adjustments resulting from Environmental Defect Exclusions or Environmental
Defect Adjustments under Section 6.3(b)(iii) shall be adjustments to the Cash
Consideration or the Stock Consideration.  If Sellers elect that any such
adjustment will be to the Cash Consideration, the adjustment at Closing under
Section 3.2(b)(iv) shall be made to the Cash Consideration.  If Sellers elect
that any such adjustment will be to the Stock Consideration, the adjustment
under Section 3.2(b)(iv) shall be to the number of shares of Common Stock
delivered at Closing as the Stock Consideration, determined by using the
Execution Date Stock Value per share of the Common Stock.  Sellers election
under this Section 6.3(b)(iv), shall be set forth in the Preliminary Settlement
Statement.
 
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6.4             “As Is, Where Is” Purchase.  Except as otherwise provided in
this Agreement (including the indemnification obligations of each Seller under
Article 15), Buyer shall acquire the Assets (including Assets for which a notice
was given under Section 6.3(a)) in an “AS IS, WHERE IS” condition and shall
assume all risks that the Assets may contain waste materials (whether toxic,
hazardous, extremely hazardous or otherwise) or other adverse physical
conditions, including the presence of unknown abandoned oil and gas wells, water
wells, sumps, pits, pipelines or other waste or spill sites which may not have
been revealed by Buyer’s investigation.  At and after the Closing, all
responsibility and liability related to all such conditions, whether known or
unknown, fixed or contingent, will be transferred from Sellers to Buyer,
regardless of when the responsibility and liability arose.
ARTICLE 7      
SELLERS’ REPRESENTATIONS AND WARRANTIES
Each Seller makes the following representations and warranties as to itself (but
not as to any other Seller) and as to that portion of the Assets owned by it, as
of the date of this Agreement except where a specific date is specified:
7.1            Existence.  Each of Blenheim Holdings and Blenheim Holdings II is
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and is duly qualified to do business in the State of
Colorado.  Bayswater is duly organized, validly existing and in good standing
under the laws of the State of Colorado.
 
7.2            Power and Authority.  Such Seller has all requisite power and
authority to carry on its business as presently conducted, to enter into this
Agreement and each of the documents contemplated to be executed by such Seller
at Closing, and to perform its obligations under this Agreement and under such
documents.  The consummation of the transaction contemplated by this Agreement
and each of the documents contemplated to be executed by such Seller at Closing
will not violate, nor be in conflict with, (i) any provision of such Seller’s
organizational or governing documents, (ii) any agreement or instrument to which
such Seller is a party or is bound, or (iii) to such Seller’s knowledge any
judgment, decree, order, statute, rule or regulation applicable to such Seller.
 
7.3            Authorization.  The execution, delivery and performance of this
Agreement and each of the documents contemplated to be executed by such Seller
at Closing and the contemplated transaction have been duly and validly
authorized by all requisite corporate action on the part of such Seller.
 
7.4            Execution and Delivery.  This Agreement has been duly executed
and delivered on behalf of such Seller, and at the Closing, all documents and
instruments required hereunder to be executed and delivered by such Seller shall
have been, duly executed and delivered.  This Agreement does, and such documents
and instruments shall, constitute legal, valid and binding obligations of such
Seller enforceable in accordance with their terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general application with respect to creditors, (ii) general principles of
equity, and (iii) the power of a court to deny enforcement of remedies generally
based upon public policy.
 
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7.5            Foreign Person.  Such Seller is not a “foreign person” within the
meaning of Sections 1445 and 7701 of the Internal Revenue Code of 1986, as
amended, (i.e. such Seller is not a nonresident alien, foreign corporation,
foreign partnership, foreign trust, or foreign estate as those terms are defined
in such Code, and any regulations promulgated thereunder).
 
7.6            Bankruptcy.  There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by or, to such Seller’s
knowledge, threatened in writing against such Seller or any Affiliate of such
Seller.
 
7.7            Liabilities for Brokers’ Fees.  Such Seller has incurred no
liability, contingent or otherwise, for brokers’ or finders’ fees relating to
the transaction contemplated by this Agreement for which Buyer shall have any
responsibility whatsoever.
 
7.8            Liens.  Except for the Permitted Encumbrances, such Seller’s
interest in the Assets is free and clear of all liens, claims, security
interests, mortgages, charges and encumbrances arising by, through or under such
Seller but not otherwise
 
7.9            Taxes.  Except as set forth in Section 7.9 of the Disclosure
Schedule, all Taxes pertaining to such Seller’s interest in the Assets or the
production of Hydrocarbons therefrom for all taxable periods prior to the
taxable period in which this Agreement is executed that are due and payable have
been properly paid except as may be contested by such Seller in good faith. 
Such Seller has not received any written notice from any governmental authority
of any delinquency in the payment of Taxes on the Assets or the production of
Hydrocarbons from the Assets.
 
7.10          Litigation and Claims.  Except as set forth in Section 7.10 of the
Disclosure Schedule (“Existing Sellers Claims”), there is no action, suit,
proceeding (other than spacing unit and force pooling applications), claim or,
to its knowledge, investigation, pending or, to its knowledge, threatened,
against such Seller or, to such Seller’s knowledge, against the Assets or the
operator of the Assets, in any court or by or before any governmental authority
or arbitration or mediation that would have a Material Adverse Effect or impair
such Seller’s ability to consummate, or that would reasonably be expected to
prevent, delay or make illegal the transaction contemplated hereby.  No
condemnation or eminent domain proceedings are pending, or, to such Seller’s
knowledge, threatened, by any governmental authority affecting any of its
Assets.
 
7.11          Compliance with Laws.  To such Seller’s knowledge, except as set
forth in Section 7.11 of the Disclosure Schedule and except for violations that
in the aggregate would not have a Material Adverse Effect, such Seller is not in
violation of, or in default under, and no event has occurred that (with notice
or the lapse of time or both) would constitute a violation of or default under,
any law, rule, regulation, ordinance, order, writ, decree or judgment of any
governmental authority applicable to the Assets (excluding Environmental Laws,
which are addressed in other provisions of this Agreement).

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7.12            Governmental Licenses.  Except as set forth in Section 7.12 of
the Disclosure Schedule, to such Seller’s knowledge, such Seller has obtained
all material governmental permits, licenses, registrations and other
authorizations required to be obtained by such Seller to own and, with respect
to that portion of the Assets operated by such Seller, to operate the Assets.
 
7.13            No Notice of Violation from Governmental Agencies.  Except as
set forth in Section 7.13 of the Disclosure Schedule, such Seller has not
received written notice of any continuing or uncured violation on the part of
such Seller of any laws (including Environmental Laws) applicable to the Assets
or of any license or permit, which violation or violations would, singly or in
the aggregate, have a Material Adverse Effect.
 
7.14.            Material Agreements; Notice of Defaults.
 
a.            Except for the Leases and agreements entered into in accordance
with Section 9.1(a), Exhibit C sets forth all agreements included in the Assets
of the type described below (collectively, the “Material Agreements”):
 
(i) any agreement (including any joint operating agreement) that can reasonably
be expected to result in aggregate payments by Sellers of more than $500,000
during the current or any subsequent calendar year (based solely on the terms
thereof and current volumes, without regard to any expected increase in volumes
or revenues or any surface use payments with respect to wells drilled after the
Execution Date);
 
(ii) any Hydrocarbon purchase and sale, transportation, processing or similar
agreement that is not terminable without penalty upon 60 days’ or less notice;
 
(iii) any agreement (other than the Leases) that constitutes a lease under which
such Seller is the lessor or the lessee of real or personal property which lease
(A) cannot be terminated by Sellers without penalty upon 60 days’ or less notice
and (B) involves an annual base rental of more than $500,000;
 
(iv) any farmout agreement, participation agreement, exploration agreement or
development agreement under which such Seller has any material unfulfilled
performance obligation in excess of $500,000;
 
(v) any agreement between such Seller and any Affiliate of such Seller that will
not be terminated prior to Closing; and
 
(vi) joint operating agreements covering the Anadarko Wells.
 
b.      Except as set forth in Section 7.14 of the Disclosure Schedule and
except for matters that would not have a Material Adverse Effect, there exists
no default under any Material Agreement by such Seller or, to such Seller’s
knowledge, by any other Person that is a party to such Material Agreement, that
has not been cured, and no event has occurred that with notice or lapse of time
or both would constitute any default under any such Material Agreement by such
Seller or, to such Seller’s knowledge, any other Person who is a party to such
Material Agreement.
 
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7.15            Production Sales Contracts.  Except for the Material Agreements,
to such Seller’s knowledge, its interest in the Assets is not encumbered by any
obligation under a sales contract, hedging contract, take-or-pay clause, or any
similar arrangement, to deliver Hydrocarbons produced from the Assets without
receiving payment at the time or subsequent to delivery, or to deliver
Hydrocarbons in the future for which payment has already been received (e.g., a
“forward” sale contract).
 
7.16            Current Plugging Obligations.  Except as set forth in
Section 7.16 of the Disclosure Schedule, such Seller has not received any
notices or demands from governmental authorities or other third parties to plug
any Wells.
 
7.17            Imbalances.  Except as set forth in Section 7.17 of the
Disclosure Schedule as of the dates set forth therein, to such Seller’s
knowledge, there were no wellhead gas production imbalances with respect to the
Wells as of the date hereof
 
7.18            Suspense Accounts.  Except for the amounts credited against the
Purchase Price under Section 3.2(b)(vii), such Seller did 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 such
Seller is permitted to accumulate prior to payment.
 
7.19            Preferential Purchase Rights.  To such Seller’s knowledge,
except as set forth in Schedule 7.19 of the Disclosure Schedule, there are no
preferential purchase rights, rights of first refusal or other similar rights
that are applicable to the transfer of the Assets in connection with the
transactions contemplated hereby.
 
7.20            AFEs.  To such Seller’s knowledge, Section 7.20 of the
Disclosure Schedule sets forth, as of the Execution Date, all approved
authorizations for expenditures and other approved capital commitments,
individually in excess of $500,000 net to Sellers interest (the “AFEs”),
relating to the Assets to drill or rework wells or for other capital
expenditures pursuant to any of the Material Agreements for which all of the
activities anticipated in such AFEs have not been completed by the Execution
Date
 
7.21            Investment Representations.
 
a.            Such Seller is acquiring the Stock Consideration for its own
account with the present intention of holding such securities for investment
purposes and not with a view to or for sale in connection with any public
distribution of such securities in violation of any federal or state securities
laws, subject, however, to such Seller’s right at all times to sell or otherwise
dispose of all or any part of the Stock Consideration under a registration
statement under the Securities Act of 1933, as amended (the “Securities Act”)
and applicable state securities laws or under an exemption from such
registration available thereunder (including, without limitation, if available,
Rule 144 promulgated thereunder). Such Seller is an “accredited investor” as
defined in Regulation D promulgated by the Securities and Exchange Commission
(the “SEC”) under the Securities Act.  Each Seller acknowledges that it is
informed as to the risks of the transactions contemplated hereby and of
ownership of the Stock Consideration.  Each Seller acknowledges that the Stock
Consideration has not been registered under the Securities Act or any state
securities laws and that the Stock Consideration may not be sold, transferred,
offered for sale, pledged hypothecated or otherwise disposed of unless such
transfer, sale, assignment, pledge, hypothecation or other disposition is
pursuant to the terms of an effective registration statement under the
Securities Act or pursuant to the provisions of Rule 144 promulgated under the
Securities Act or pursuant to an exemption from registration under the
Securities Act and any applicable state securities laws.
 
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b.            Each Seller understands that upon the original issuance thereof,
and until such time as the same is no longer required under applicable
requirements of the Securities Act or state securities laws, the book entries
representing the Stock Consideration and all book entries made in exchange
therefor or in substitution thereof, shall bear the following legend: THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY STATE. THEY MAY NOT
BE SOLD, OFFERED FOR SALE OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR PURSUANT TO
AN EXEMPTION FROM REGISTRATION THEREUNDER AND, IN THE CASE OF A TRANSACTION
EXEMPT FROM REGISTRATION, UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT OR THE
ISSUER HAS RECEIVED DOCUMENTATION REASONABLY SATISFACTORY TO IT (WHICH MAY
INCLUDE AN OPINION OF COUNSEL) THAT SUCH TRANSACTION DOES NOT REQUIRE
REGISTRATION UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.
 
ARTICLE 8 
BUYER’S REPRESENTATIONS AND WARRANTIES
Buyer makes the following representations and warranties as of the date of this
Agreement:
8.1            Existence.  Buyer is duly organized, validly existing and in good
standing under the laws of the State of Colorado.
 
8.2            Power and Authority.  Buyer has all requisite power and authority
to carry on its business as presently conducted, to enter into this Agreement
and each of the documents contemplated to be executed by Buyer at Closing, and
to perform its obligations under this Agreement and under such documents.  The
consummation of the transaction contemplated by this Agreement and each of the
documents contemplated to be executed by Buyer at Closing will not violate, nor
be in conflict with:  (i) any provision of Buyer’s organizational or governing
documents, (ii) any agreement or instrument to which Buyer is a party or is
bound, or (iii) any judgment, decree, order, statute, rule or regulation
applicable to Buyer.
 
8.3            Authorization.  The execution, delivery and performance of this
Agreement and each of the documents contemplated to be executed by Buyer at
Closing and the contemplated transaction have been duly and validly authorized
by all requisite action on the part of Buyer.
 
 
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8.4            Execution and Delivery.  This Agreement has been duly executed
and delivered on behalf of Buyer, and at the Closing all documents and
instruments required hereunder to be executed and delivered by Buyer shall have
been duly executed and delivered.  This Agreement does, and such documents and
instruments shall, constitute legal, valid and binding obligations of Buyer
enforceable in accordance with their terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general application with respect to creditors, (ii) general principles of
equity, and (iii) the power of a court to deny enforcement of remedies generally
based upon public policy.
 
8.5            Bankruptcy.  There are no bankruptcy, reorganization or
receivership proceedings pending, being contemplated by or, to Buyer’s
knowledge, threatened in writing against Buyer or any Affiliate of Buyer.
 
8.6            Liabilities for Brokers’ Fees.  Buyer has incurred no liability,
contingent or otherwise, for brokers’ or finders’ fees relating to the
transaction contemplated by this Agreement for which Sellers shall have any
responsibility whatsoever
 
8.7            Litigation and Claims.  There is no action, suit, proceeding,
claim or investigation by any person, entity, administrative agency or
governmental body pending or, to Buyer’s knowledge, threatened in writing,
against Buyer before any governmental authority that impedes or is likely to
impede Buyer’s ability to consummate the transactions contemplated by this
Agreement and to assume the liabilities to be assumed by Buyer under this
Agreement.
 
8.8            Independent Evaluation.  Buyer has such knowledge, sophistication
and experience in business and financial matters that Buyer is capable of
evaluating the merits and risks of the acquisition of the Assets and has so
evaluated the merits and risks of such acquisition.  Buyer is knowledgeable
about the oil and gas business, and Buyer has retained and taken advice
concerning the Assets and transactions herein from advisors and consultants
which are knowledgeable about the oil and gas business, and Buyer is aware of
its risks.  Buyer has been afforded the opportunity to examine the Records and
other materials made available to it by Sellers and Sellers’ authorized
representatives with respect to the Assets (the “Background Materials”).  The
Background Materials include files, or copies thereof, that Sellers have used in
its normal course of business and other information about the Assets that
Sellers and Sellers’ authorized representatives have compiled or generated, all
data and information made available for Buyer’s review in the data room for the
transaction contemplated hereby, and all information communicated to Buyer or
its representatives in presentations, answers to questions or otherwise in the
data room or otherwise in connection the transaction contemplated hereby;
provided, however, Buyer acknowledges and agrees that neither Sellers nor any
other Sellers Indemnified Parties have made any representations or warranties,
express or implied, written or oral, as to the accuracy or completeness of the
Background Materials or, except for the representations and warranties of
Sellers contained in this Agreement, as to any other information relating to the
Assets, furnished or to be furnished to Buyer or its representatives by or on
behalf of Sellers, including any estimate with respect to the value of the
Assets or reserves, the ability to obtain required permits, spacing orders
including increased density spacing orders, exceptions or other approvals that
may be necessary to develop the Assets, the spacing pattern that may apply to
the Assets, the availability or adequacy of facilities or capacity for
gathering, compressing, treating, transporting, storing or processing
Hydrocarbons produced from the existing Wells or any additional Wells drilled on
the Assets; whether adequate rights-of-way exist for facilities for gathering,
compressing, treating, transporting, storing or processing Hydrocarbons that are
included in the Assets, or any projections as to events that could or could not
occur.  In entering into this Agreement, Buyer acknowledges and affirms that it
has relied and will rely solely on the terms of this Agreement and upon its
independent analysis, evaluation and investigation of, and judgment with respect
to, the business, economic, legal, tax or other consequences of this transaction
including its own estimate and appraisal of the extent and value of the
petroleum, natural gas and other reserves attributable to the Assets and the
prices that may be received for Hydrocarbons produced therefrom.  Buyer’s
representatives have accessed the data room for the transaction contemplated
hereby maintained by Sellers or Sellers’ representatives and have been given
opportunities to examine the Records.  Except as expressly provided in this
Agreement, neither Sellers nor any other Sellers Indemnified Parties shall have
any liability to Buyer or its Affiliates, agents, representatives or employees
resulting from any use of, authorized or unauthorized, or reliance on, the
Background Materials or other information relating to the Assets provided by or
on behalf of Sellers or any other Sellers Indemnified Parties
 
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8.9              Qualification.  Buyer is now or at Closing will be and
thereafter will continue to be qualified to own and operate the Assets,
including the federal, state, county, and fee Leases, including meeting all
bonding requirements.  Completing the transaction set out in this Agreement will
not cause Buyer to be disqualified or to exceed any acreage limitation imposed
by law, statute or regulation
 
8.10            Financial Resources.  Buyer has the financial resources
available to close the transactions contemplated by this Agreement without
financing that is subject to any material contingency.
 
8.11            NYSE MKT Listing.  Buyer’s Common Stock is listed on the NYSE
MKT, and Buyer has not received any notice of delisting.
 
8.12            Issuance of Stock Consideration.  The Stock Consideration, when
and if issued pursuant to the terms of this Agreement, will be duly authorized,
validly issued, fully paid and non-assessable and will be free of any and all
liens, pledges, claims, restrictions, charges, preemptive, preferential or
similar purchase rights, security interests, hypothecations and or encumbrances
of any nature whatsoever, other than restrictions on transfer under applicable
state and federal securities laws.
 
8.13            Consents.  No consent, approval, authorization or permit of, or
filing with or notification to, any person is required for or in connection with
the execution and delivery of this Agreement by Buyer or for or in connection
with the consummation of the transactions and performance of the terms and
conditions contemplated hereby and thereby by Buyer.  There are no preemptive or
other outstanding rights, agreements, arrangements, commitments or other similar
interests of any character under which Buyer is obligated to issue or sell, or
giving any third party a right to subscribe for or acquire, the Stock
Consideration.
 
8.14            Capitalization.  The authorized capitalization of Buyer consists
of (i) 200,000,000 shares of Common Stock, of which 77,554,337 shares were
issued and outstanding as of May 31, 2014 and (ii) 10,000,000 shares of
preferred stock, par value $0.01 per share, of which no shares were issued and
outstanding as of May 31, 2014.
 
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8.15            Regulatory Matters; Reports.  Buyer has filed all reports,
schedules, forms, registrations, statements and certifications, together with
any amendments required to be made with respect thereto, that were required to
be filed since [January 1, 2014] with the SEC and the NYSE MKT (together with
the exhibits and other information incorporated therein, the “Buyer SEC
Documents”).  No such Buyer SEC Document, at the time filed or furnished (and in
the case of registration statements and proxy statements, on the dates of
effectiveness and the dates of relevant meetings, respectively) contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements made therein,
taken as a whole, in light of the circumstances under which they were made, not
misleading, except that information in the Buyer SEC Documents as of a later
date (but before the date of this Agreement) shall be deemed to modify
information in the Buyer SEC Documents as of an earlier date.  As of their
respective dates of filing with the SEC (or, if amended or superseded by a
filing prior to the date hereof, as of the date of such filing), all Buyer SEC
Documents complied as to form in all material respects with the regulations of
the SEC with respect thereto.
 
8.16            Financial Statements.  Each of the [consolidated] financial
statements of Buyer and [its subsidiaries] included (or incorporated by
reference) in the Buyer SEC Documents (including the related notes, where
applicable) (i) have been prepared from, and are in accordance with, the books
and records of Buyer [and its consolidated subsidiaries] in all material
respects, (ii) fairly present in all material respects the [consolidated]
results of operations, cash flows, changes in shareholders’ equity and
[consolidated] financial position of Buyer [and its consolidated subsidiaries,
taken as a whole,] for the respective fiscal periods or as of the respective
dates therein set forth (subject in the case of unaudited statements to
recurring year-end audit adjustments normal in nature and amount), (iii)
complied as to form, as of their respective dates of filing with the SEC, in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC), and (iv) have been
prepared in accordance with generally accepted accounting principles in the
United States of America as in effect from time to time (“GAAP”) consistently
applied during the periods involved, except, in each case, as indicated in such
statements or in the notes thereto. The books and records of Buyer [and its
subsidiaries] have been, and are being, maintained in all material respects in
accordance with GAAP and any other applicable legal and accounting requirements.
 
8.17            Undisclosed Liabilities.  Buyer does not have any liability or
obligation required under GAAP to be reflected or reserved against on the
balance sheet of Buyer (whether absolute, accrued, contingent, determined,
determinable or otherwise and whether due or to become due), except for (i)
those liabilities that are reflected or reserved against on the consolidated
balance sheet of Buyer included in its Annual Report on Form 10-K for the fiscal
year ended August 31, 2014 (including any notes thereto), (ii) liabilities
incurred in the ordinary course of business consistent with past practice since
August 31, 2014, or (iii) liabilities in connection with this Agreement and the
transactions contemplated hereby.
 
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8.18            No Buyer Material Adverse Condition.  Since August 31, 2014,
there has not occurred any Buyer Material Adverse Condition and, to the
knowledge of Buyer, no circumstances presently exist which would reasonably be
expected to cause a Buyer Material Adverse Condition.  “Buyer Material Adverse
Condition” shall mean a condition having a material adverse effect on the
financial condition, operations, business or prospects of Buyer, other than any
condition resulting from (a) entering into this Agreement or the announcement of
the transactions contemplated by this Agreement; (b) any action or omission of
Sellers taken in accordance with the terms of this Agreement or with the prior
consent of Buyer; (c) changes in general market, economic, financial, or
political conditions (including changes in commodity prices, fuel supply or
transportation markets, interests or rates), regardless of location; (d) changes
in conditions or developments generally applicable to the oil and gas industry;
(e) acts of God, including hurricanes, storms or other naturally occurring
events; (f) acts or failures to act of a governmental authority; (g) civil
unrest, any outbreak of disease or hostilities, terrorist activities or war or
any similar disorder; (h) matters that are cured or no longer exist by the
earlier of Closing and the termination of this Agreement; (i) any
reclassification or recalculation of reserves in the ordinary course of
business; (j) changes in the prices of any Hydrocarbons; (k) a change in laws
and any interpretations thereof from and after the Execution Date; and (l)
natural declines in well performance.
 
ARTICLE 9 
COVENANTS AND AGREEMENTS
9.1            Covenants and Agreements.  Buyer and each Seller (for itself but
not for any other Seller) agrees as follows:
 
a. Except (I) as set forth in Section 9.1(a) of the Disclosure Schedule, (II)
for the operations covered by the AFEs and other capital commitments described
in Section 7.20 of the Disclosure Schedule, (III) for actions taken in
connection with emergency situations or to maintain a lease and (IV) as
expressly contemplated by this Agreement or as expressly consented to in writing
by Buyer (which consent shall not be unreasonably delayed, withheld or
conditioned), Sellers shall, from and after the Execution Date and until
Closing:
 
(i)            maintain, and if a Seller is the operator thereof, such Seller
shall operate, the Assets in the usual, regular and ordinary manner consistent
with its past practice;
(ii)            maintain the books of account and Records relating to the Assets
in the usual, regular and ordinary manner, in accordance with the usual
accounting practices of Sellers;
(iii)            promptly notify Buyer of Sellers’ election (which election
shall be in Sellers’ sole discretion) to participate or not to participate in
any operation proposed by Sellers or a third party that is reasonably expected
to cost Sellers in excess of $500,000;
 
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(iv)            not enter into any agreement that, if entered into on or prior
to the Execution Date, would be required to be listed in Exhibit C, or terminate
(unless such Material Agreement terminates pursuant to its stated terms) or
materially amend or change the terms of any Material Agreement;
(v)            not transfer, sell, mortgage, pledge or dispose of any portion of
the Assets other than (A) the sale or disposal of Hydrocarbons in the ordinary
course of business, (B) sales of equipment that is no longer necessary in the
operation of the Assets or for which replacement equipment has been obtained and
(C) disposals of Assets where the consideration is less than $100,000 per
disposal; and
(vi)            not commit to do any of the foregoing.
 
b.   Legal Status.  Each Seller and Buyer shall use all reasonable efforts to
maintain its respective legal status from the date hereof until the Final
Settlement Date and to assure that as of the Closing Date and the Final
Settlement Date it will not be under any material corporate, legal or
contractual restriction that would prohibit or delay the timely consummation of
the transaction contemplated hereby.

 
 
c.   Notices of Claims.  Sellers shall promptly notify Buyer and Buyer shall
promptly notify Sellers if, between the date hereof and the Closing Date,
Sellers or Buyer, as the case may be, receives notice of any claim, suit, action
or other proceeding of the type referred to in Sections 7.10, 7.13, 7.14(b) or
8.6, and each Party.  Each Party will notify the other Party promptly after any
officer of the first Party obtains actual knowledge that any representation or
warranty of the other Party contained in this Agreement is, becomes or will be
untrue in any material respect on or before the Closing Date.  No breach of any
representation, warranty, covenant, agreement or condition of this Agreement
shall be deemed to be a breach of this Agreement for any purpose under this
Agreement, and no Party or any Affiliate of a Party shall have any claim or
recourse against the other Party or any Affiliate of the other Party, or their
respective directors, officers, employees, buyers, controlling Persons, agents,
advisors or representatives with respect to such breach, if the first Party or
any Affiliate of the first Party, or any of their respective officers or
representatives, had knowledge prior to the Execution Date of such breach or of
the threat of such breach or the circumstances giving rise to such breach.

 
 
d.   Compliance with Laws.  During the period from the date of this Agreement to
the Closing Date, Sellers shall attempt in good faith to comply in all material
respects with all applicable statutes, ordinances, rules, regulations and orders
relating to the ownership of its interest in the Assets and, to the extent that
a Seller is the operator, the operation of the Assets by.

 
 
e.    Government Reviews and Filings.  Before and after the Closing, Buyer and
Sellers shall cooperate to provide requested information, make required filings
with, prepare applications to and conduct negotiations with each governmental
agency as required to consummate the transaction contemplated hereby, including
any required filings under the Hart-Scott Rodino Antitrust Improvements Act of
1976, as amended.  Each Party shall make any governmental filings occasioned by
its ownership or structure.  Buyer shall make all filings after the Closing at
its expense with governmental agencies necessary to transfer title to the Assets
or to comply with laws and shall indemnify and hold harmless Sellers from and
against all Losses arising out of Sellers’ holding of such title after the
Closing and prior to the securing of any necessary governmental approvals of the
transfer.

 
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f.    Confidentiality.  All data and information obtained by Buyer from Sellers
and their representatives in connection with the Assets and the transactions
contemplated by this Agreement, whether before or after the execution of this
Agreement, and data and information generated by Buyer prior to the Closing Date
in connection with the transactions contemplated by this Agreement
(collectively, the “Information”) is deemed by the Parties to be confidential
and proprietary to Sellers.  Until completion of the Closing, except as required
by law, Buyer and its officers, agents and representatives will hold in strict
confidence all Information, except any Information which:  (i) at the time of
disclosure to Buyer by Sellers is in the public domain; (ii) after disclosure to
Buyer by Sellers becomes part of the public domain by publication or otherwise,
except by breach of this commitment by Buyer; (iii) Buyer can establish by
competent proof was rightfully in its possession at the time of disclosure to
Buyer by Sellers; (iv) Buyer rightfully receives from third parties free of any
obligation of confidence; or (v) is developed independently by Buyer, provided
that the Person or Persons developing the Information shall not have had access
to the Information; provided further that Buyer may disclose Information as
necessary to its consultants, investors and lenders who similarly agree to
protect the confidentiality of such Information and agree to use such
Information only for their due diligence evaluation of the Assets.  If Closing
occurs, that Confidentiality Agreement dated September 29, 2014 between Buyer
and Sellers or Sellers’ Affiliates shall be deemed terminated.

 
 
g.    Return of Information.  If the transaction contemplated by this Agreement
does not close on or before the Closing Date, Buyer shall return to Sellers on
or before the fifth Business Day thereafter all copies of the Information in the
possession of Buyer obtained or generated by Buyer pursuant to any provision of
this Agreement.  The terms of Section 9.1(f) and this Section 9.1(g) shall
survive termination of this Agreement.

 
 
h.    Required Bonding.  Buyer shall obtain all required bonds and other surety
arrangements relating to the ownership or operation of the Assets (including all
bonds and surety arrangements required by the BLM and the State of Colorado)
necessary to cause Sellers’ bonds and surety arrangements with respect to the
Assets to be released.  No later than three Business Days prior to Closing,
Buyer shall provide Sellers with satisfactory evidence that all such bonds and
surety arrangements have been obtained and will be unconditionally effective as
of the Closing.

 
 
i.     Required Insurance.  Buyer shall obtain and maintain such insurance
coverages as are required under the applicable operating agreements under which
Buyer will become the operator.

 
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No later than three Business Days prior to Closing, Buyer shall provide Sellers
with satisfactory evidence that such insurance has been obtained and will be
unconditionally effective as of the Closing.
 
 j.    Assets Not Operated by Sellers.  Buyer acknowledges that Sellers own
undivided interests in certain of the properties comprising the Assets that
Sellers are not the operator thereof, and Buyer agrees that the acts or
omissions of the other working interest owners (including the operators) who are
not a Seller or an Affiliate of any Seller shall not constitute a breach of the
provisions of this Section 9.1(j), and no action required by a vote of working
interest owners shall constitute such a breach so long as Sellers have voted
their interests in a manner that complies with the provisions of this Section
9.1.

 
 
k.   Successor Operator.  Buyer acknowledges and agrees that Sellers cannot and
do not covenant or warrant that Buyer shall become successor operator of those
Assets operated by Sellers and that such succession is subject to operating or
other agreements that control the appointment of a successor operator.  Sellers
agree, however, that, as to the Assets operated by a Seller, they shall use
their commercially reasonable efforts to support Buyer’s efforts to become
successor operator of such Assets (to the extent permitted under any applicable
joint operating agreement) effective as of Closing (at Buyer’s sole cost and
expense) and to designate or appoint, to the extent legally possible and
permitted under any applicable joint operating agreement, Buyer as successor
operator of such Assets effective as of Closing.

 
 
l.    Record Retention.  Buyer shall and shall cause its successors and assigns
to, for a period of seven years following Closing, (i) retain the Records, (ii)
provide Sellers, their Affiliates and their respective officers, employees and
representatives with access to the Records during normal business hours for
review and copying at Sellers’ expense, and (iii) provide Sellers, their
Affiliates and their respective officers, employees and representatives with
access, during normal business hours, to materials received or produced after
Closing relating to any indemnity claim made under Section 15.2 for review and
copying at Sellers’ expense.  At the end of such seven year period and prior to
destroying any of the Records, Buyer shall notify Sellers in advance of such
destruction and provide Sellers a reasonable opportunity to copy any or all of
such Records at Sellers’ sole cost and expense.

 
 
m.  Amendment to Schedules.  Buyer agrees that, with respect to the
representations and warranties of Sellers contained in this Agreement, Sellers
shall have the continuing right and obligation until Closing to add, supplement
or amend the Disclosure Schedule to its representations and warranties with
respect to any matter hereafter arising or discovered which, if existing or
known on the Execution Date or thereafter, would have been required to be set
forth or described in the Disclosure Schedule.  For all purposes of this
Agreement, including for purposes of determining whether the conditions set
forth in Section 10.2 have been fulfilled, the Disclosure Schedule shall be
deemed to include only that information contained therein on the Execution Date
and shall be deemed to exclude all information contained in any addition,
supplement or amendment thereto; provided, however, that if Closing shall occur,
then all matters disclosed pursuant to any such addition, supplement or
amendment at or prior to Closing shall be waived and Buyer shall not be entitled
to make a claim with respect thereto pursuant to the terms of this Agreement or
otherwise.

 
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n.   [Intentionally omitted]

 
 
o.   Several, Not Joint, Liability of Sellers.  No Seller shall have any
liability for (i) any breach of any warranty, representation, covenant or
agreement of any other Seller under this Agreement, or (ii) any breach or
default under this Agreement or any other document or instrument executed or
delivered in connection with this Agreement by any other Seller.

 
 
p.   Historical Asset Revenue and Expense Information.  Sellers shall cooperate
with Buyer and make available, during normal business hours, to Buyer prior to
and for a period of twelve (12) months following Closing any and all existing
information and documents relating to revenues and expenses attributable to the
Assets and in the possession of Sellers (subject to the rights of third parties)
that Buyer may reasonably require to comply with Buyer’s tax and financial
reporting requirements and audits, including any filings with any governmental
entity and filings that may be required by the SEC under the Securities Act
and/or the Exchange Act. Without limiting the generality of the foregoing,
Sellers will use commercially reasonable efforts after execution of this
Agreement and following Closing to cooperate with the independent auditors
chosen by Buyer (“Buyer’s Auditor”) in connection with their audit or review of
any revenue and expense records pertaining to the Assets that Buyer or any of
its affiliates requires to comply with their tax, financial and other reporting
requirements.  Sellers’ cooperation will include (i) reasonable access during
normal business hours to Sellers’ employees and representatives designated by
Sellers who were responsible for preparing or maintaining the revenue and
expense records and work papers and other supporting documents used in the
preparation of such financial statements as may be required by Buyer’s Auditor
to perform an audit or conduct a review in accordance with generally accepted
auditing standards or to otherwise verify such financial statements; and (ii)
delivery of one or more customary representation letters from Sellers to Buyer’s
Auditor that are reasonably requested by Buyer to allow such auditors to
complete an audit (or review of any financial statements), and to allow Buyer’s
Auditor to issue an opinion with respect to its audit or review.  Buyer shall
indemnify and hold harmless Sellers to the extent and as provided in Schedule
9.1(p) attached hereto.  The provisions of this Section and Schedule 9.1(p)
shall survive the Closing and shall be binding upon any successors or assigns of
Buyer.

 
 
q.   Rule 144.  With a view to making available to Sellers the benefits of Rule
144 promulgated under the Securities Act and any other similar rule or
regulation of the SEC that may at any time permit Sellers to sell securities of
Buyer to the public without registration, Buyer agrees to:

 
(i) make and keep public information available, as those terms are understood
and defined in Rule 144;
 
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(ii) file with the SEC in a timely manner all reports and other documents
required of Buyer under the Securities Act and the Securities Exchange Act of
1934, as amended (the “Exchange Act”) so long as Buyer remains subject to such
requirements and the filing of such reports and other documents as is required
for the applicable provisions of Rule 144;
(iii) submit electronically and post on its corporate web site, if any, every
interactive data file required to be submitted and posted pursuant to Rule 405
of Regulation S-T; and
(iv) furnish to Sellers, promptly upon written request, (A) a written statement
by Buyer that it has complied with the reporting requirements of Rule 144, the
Securities Act, and the Exchange Act, (B) a copy of the most recent annual or
quarterly report of Buyer and such other reports and documents so filed by
Buyer, and (C) such other information as may be reasonably requested to permit
Sellers to sell such securities pursuant to Rule 144 without registration.
r.    Legend.  Provided such Seller meets the requirements of Rule 144 as
heretofore referenced, Buyer shall promptly, upon such Seller’s written request,
provide instructions to its stock transfer agent to remove the restrictive
legend from the Shares.
 
s.   Expenses and Costs.  Any and all expenses and costs, including attorney
fees, associated with Buyer obtaining the requisite consents and approvals to
issue the Stock Consideration and to remove the legend and to take other
measures as necessary to sell the Stock Consideration under Rule 144, shall be
borne solely by Buyer.
 
ARTICLE 10
CONDITIONS TO CLOSING
10.1            Sellers’ Conditions.  The obligations of each Seller at the
Closing are subject, at the option of such Seller, to the satisfaction at or
prior to Closing of the following conditions precedent:
 
a.   Representations and Warranties.  All representations and warranties of
Buyer contained in Article 8 of this Agreement shall be true and correct in all
material respects (except as to representations and warranties qualified by
materiality, which shall be true in all respects) on and as of the Closing Date,
and Buyer shall have performed and satisfied all covenants and agreements
required by this Agreement to be performed and satisfied by Buyer at or prior to
the Closing in all material respects
 
b.   No Action.  No order shall have been entered by any court or governmental
agency having jurisdiction over the Parties or the subject matter of this
Agreement that restrains or prohibits the purchase and sale contemplated by this
Agreement and which remains in effect at the time of Closing or seeks to recover
damages from Sellers resulting therefrom.  No litigation or proceeding shall be
pending or threatened to enjoin or prevent the consummation of the transactions
contemplated by this Agreement.
 
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c.   Closing Deliveries.  Buyer shall have delivered to Sellers duly executed
copies of each of the documents or instruments required by this Agreement to be
delivered by Buyer at Closing.
 
d.   Title and Environmental.  The aggregate of the Title Defect Adjustment, all
Title Defect Exclusions, the Net Casualty Loss, the Environmental Defect
Adjustment, all Environmental Defect Exclusions, and the Allocated Value of all
Allocated Properties subject to Required Consents that have not been obtained
prior to Closing, shall not exceed 15% of the Purchase Price;
 
e.   Hart-Scott-Rodino.  All applicable waiting periods (and any extensions
thereof) under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as
amended, shall have expired or otherwise been terminated.
 
10.2            Buyer’s Conditions.  The obligations of Buyer at the Closing are
subject, at the option of Buyer, to the satisfaction on or prior to the Closing
of the following conditions precedent:
 
a.   Representations and Warranties.  The representations and warranties of each
Seller contained in Article 7 of this Agreement shall be true and correct in all
material respects (except as to representations and warranties qualified by
materiality, which shall be true in all respects) on and as of the Closing Date
(except with respect to representations and warranties made as of a specific
date, which shall be true as of such date), and Sellers shall have performed and
satisfied all covenants and agreements required by this Agreement to be
performed and satisfied by Sellers at or prior to the Closing in all material
respects.
 
b.   No Action.  No order shall have been entered by any court or governmental
agency having jurisdiction over the Parties or the subject matter of this
Agreement that restrains or prohibits the purchase and sale contemplated by this
Agreement and which remains in effect at the time of Closing or seeks to recover
damages from Buyer resulting therefrom.  No litigation or proceeding shall be
pending or threatened to enjoin or prevent the consummation of the transactions
contemplated by this Agreement.
 
c.   Closing Deliveries.  Sellers shall have delivered to Buyer duly executed
copies of each of the documents or instruments required by this Agreement to be
delivered by Sellers at Closing.
 
d.   Title and Environmental.  The aggregate of the Title Defect Adjustment, all
Title Defect Exclusions, the Net Casualty Loss, the Environmental Defect
Adjustment, all Environmental Defect Exclusions, the Allocated Value of all
Allocated Properties subject to Required Consents that have not been obtained
prior to Closing, and the Allocated Value of all Allocated Properties with
respect to which a preferential right has been exercised prior to Closing, shall
not exceed 15% of the Purchase Price.
 
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e.   Hart-Scott-Rodino.  All applicable waiting periods (and any extensions
thereof) under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as
amended, shall have expired or otherwise been terminated.
 
f.   Interest Additions.  The upward adjustment to the Purchase Price, if any,
for the Interest Additions, after netting Interest Additions against Title
Defect Amounts as provided in Section 5.4(c)(i), shall not exceed 15% of the
Purchase Price.
 
ARTICLE 11
RIGHT OF TERMINATION AND ABANDONMENT
11.1            Termination.  This Agreement may be terminated by Sellers or
Buyer under the following provisions:
 
a.    By Sellers, if the conditions set forth in Section 10.1 are not satisfied,
through no fault of Sellers, and have not been waived by Sellers in writing, as
of the Closing Date;
 
b.    By Sellers, if the conditions in Section 10.2 are satisfied or waived by
Buyer as of the Closing Date, and Sellers are ready, willing and able to tender
performance of the Closing on the Closing Date, but Buyer fails to tender
performance of the Closing on the Closing Date;
 
c.    By Buyer, if the conditions set forth in Section 10.2 are not satisfied,
through no fault of Buyer, and have not been waived by Buyer in writing, as of
the Closing Date; or
 
d.    By Buyer, if the conditions in Section 10.1 are satisfied or waived by
Sellers as of the Closing Date, and Buyer is ready, willing and able to tender
performance of the Closing on the Closing Date, but Sellers fails to tender
performance of the Closing on the Closing Date.
 
e.    By Buyer prior to November 14, 2014, if Buyer, acting in good faith,
determines that Sellers’ accounts, books, ledgers, balance sheets, income
statements, other financial information and accounting methods make it
impossible for Buyer to timely file, within 75 days after the Closing Date,
audited financial statements of Buyer that Buyer, acting in good faith,
determines will be required by the U.S. Securities and Exchange Commission with
respect to Buyer’s purchase and operation of  the Assets.
 
11.2            Liabilities Upon Termination.
 
a.    Buyer’s Default.  If Sellers have the right to terminate this Agreement
pursuant to Section 11.1(a) by reason of the non-satisfaction of the conditions
in Section 10.1(a) or pursuant to Section 11.1(b), and Sellers are not in
material default or breach under this Agreement, Sellers shall be entitled to
elect between (i) terminating this Agreement and retaining the Deposit as
liquidated damages as Sellers’ sole and exclusive remedy (if Sellers elect to
proceed under this clause (i) the Parties will instruct the Escrow Agent to pay
to Sellers Deposit and all other amounts in the Escrow Account within two
Business Days after receipt of such election), or (ii) asserting Sellers’ legal
and equitable rights (including specific performance) and Escrow Agent shall
continue to hold the Deposit as security for payment of any damages or other
amounts finally determined to be owed by Buyer to Sellers.  Sellers and Buyer
agree that Sellers’ damages in the event Buyer wrongfully fails to close are
difficult to measure and Sellers and Buyer agree that the amount of the
liquidated damages provided in clause ”(i)” above bears a reasonable
relationship to and is a reasonable estimation of such damages.
 
b.    Sellers’ Default.  If Buyer has the right to terminate this Agreement
pursuant to Section 11.1(c) by reason of the non-satisfaction of the conditions
in Section 10.2(a) or pursuant to Section 11.1(d), and Buyer is not in material
default or breach under this Agreement, Buyer shall be entitled to elect between
(i) specific performance with respect to the interest of Sellers in the Assets
or (ii) terminating this Agreement and receiving the return of the Deposit, as
Buyer’s sole and exclusive remedy (if Buyer elects to proceed under this clause
(ii) the Parties will instruct the Escrow Agent to pay to Buyer the Deposit and
all other amounts in the Escrow Account within two Business Days after receipt
of such election).
 
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c.    Other Termination.  If this Agreement is terminated other than as provided
in Section 11.2(a)(i) or Section 11.2(b)(ii), then the Parties will instruct the
Escrow Agent to return the Deposit, and all other amounts in the Escrow Account,
to Buyer and no Party shall have any further liability to the other Party
arising out of this Agreement except for such provisions hereof which by their
terms survive the termination of this Agreement.
 
 
ARTICLE 12 
CLOSING
12.1            Date of Closing.  Subject to the satisfaction or waiver of the
conditions set forth in Article 10, the closing of the transactions contemplated
by this Agreement (“Closing”) shall be held on December 15, 2014 (the “Closing
Date”), at the offices of Sellers in Denver, Colorado, at 9:00 a.m. or at such
other time and place as the Parties may agree in writing.
 
12.2            Closing Obligations.  At Closing, the following events shall
occur, each being a condition precedent to the others and each being deemed to
have occurred simultaneously with the others:
 
a    . Assignment.  Sellers and Buyer shall execute, acknowledge and deliver
(i) an Assignment, Bill of Sale and Conveyance dated effective as of the
Effective Time (in sufficient counterparts to facilitate filing and recording)
substantially in the form of Exhibit G hereto covering the Assets, and (ii) such
other assignments and assumptions, bills of sale, or deeds necessary to transfer
the Assets to Buyer, including any conveyances on official forms and related
documentation necessary to transfer the Assets to Buyer in accordance with
requirements of state and federal governmental regulations.
 
b.     Preliminary Settlement Statement.  Sellers and Buyer shall execute and
deliver the Preliminary Settlement Statement.
 
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c.     Purchase Price.  Buyer shall deliver to Sellers the Closing Amount by
paying the Cash Consideration (less the Deposit, which shall be delivered under
Section 12.2 (h)) by wire transfer of immediately available funds and delivering
the Stock Consideration, in each case, pursuant to Section 3.1.
 
d.     Letters in Lieu.  Sellers and Buyer shall execute and deliver all
necessary letters in lieu of transfer orders directing all purchasers of
production and operators to pay Buyer the proceeds attributable to production
from the Assets from and after the Effective Time.
 
e.     Releases.  Each Seller shall deliver to Buyer duly executed and
acknowledged releases in recordable form of all mortgages and deeds of trust
encumbering its interest in the Assets created by such Seller and releases of
the associated financing statements.
 
f.     Non-Foreign Status Certificate.  Each Seller shall deliver to Buyer a
certificate in the form of Exhibit H as to its non-foreign status.
 
g.    Change of Operator Forms.  The applicable Sellers and Buyer shall execute
federal and state change of operator forms with respect to those Assets that
will be operated by Buyer after Closing and the applicable Sellers shall execute
and deliver to Buyer resignation of operator letters in a form reasonably
acceptable to Buyer.
 
h.    Escrow Instructions.  The Parties shall execute written instructions
instructing the Escrow Agent to disburse the Deposit, and all interest accrued
thereon, to Sellers.
 
i.     Possession.  Sellers shall deliver to Buyer possession of the Assets.
 
j.     Book Entry.  Buyer shall cause a book entry representing the Stock
Consideration to be made in favor of each Seller.
 
k.     Listing Application.  Buyer shall deliver an additional listing approval
notice to Sellers, duly executed by the NYSE MKT, authorizing, subject to
official notice of issuance, the listing of the Stock Consideration component of
the Purchase Price.

ARTICLE 13
POST-CLOSING OBLIGATIONS
13.1            Post-Closing Adjustments.  On or before 120 days after Closing,
Sellers with the assistance of Buyer’s staff and with access to such records as
necessary, shall prepare and deliver to Buyer 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
adjustment, any adjustments previously settled between the Parties, and the
resulting Purchase Price as finally adjusted (the “Final Purchase Price”).  The
Final Settlement Statement shall be adjusted to reflect any Title Defects cured
pursuant to Section 5.5, any adjustments for Required Consents that have been
obtained under Section 5.8, the outcome of any judicial determination under
Section 5.6 that is completed prior to the Final Settlement Date for which the
Parties have not settled payment, and any unpaid Taxes that are apportioned to
periods prior to the Effective Time pursuant to Section 14.1.  As soon as
practicable after receipt of Sellers’ proposed Final Settlement Statement, but
in any event on or before 15 days after receipt of Sellers’ proposed Final
Settlement Statement, Buyer shall deliver to Sellers a written report containing
any changes that Buyer proposes to make to the Final Settlement Statement. 
Buyer’s failure to deliver to Sellers a written report detailing changes to the
proposed Final Settlement Statement by that date shall be deemed an acceptance
by Buyer of the Final Settlement Statement as submitted by Sellers.  The Parties
shall attempt in good faith to agree with respect to the changes proposed by
Buyer, if any, no later than 15 days after receipt by Sellers of Buyer’s
comments on the proposed Final Settlement Statement.  The date upon which such
agreement is reached or upon which the Final Purchase Price is established
pursuant to Section 13.2 shall be called the “Final Settlement Date.”  If the
Final Purchase Price is more than the Closing Amount plus the Deposit, Buyer
shall pay Sellers the amount of such difference pursuant to Section 3.1.  If the
Final Purchase Price is less than the Closing Amount plus the Deposit, Sellers
shall pay to Buyer the amount of such difference.  Any such payment by Buyer or
Sellers shall be by wire transfer in immediately available funds within five
Business Days after the Final Settlement Date.
 
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13.2            Determination of Final Settlement Statement Disputes.  If the
Parties are unable to resolve any dispute concerning the Final Settlement
Statement or Final Purchase Price on or before 30 days after the Final
Settlement Statement is received by Buyer, Sellers shall have the right to seek
judicial determination of such dispute, subject to Section 16.11, provided that
such action shall be filed, if at all, within 15 days after the end of such 30
day period and if such action is not filed within such 15 day period Sellers
shall be deemed to have accepted Buyer’s changes to the Final Settlement
Statement
 
13.3            Records.  Buyer shall and shall cause its successors and assigns
to provide Sellers access to the Records pursuant to Section 9.1(l).
 
13.4            Suspense Accounts.  Under Section 3.2(b)(vii) Buyer shall be
credited with an amount equal to all funds held in suspense by Sellers relating
to Hydrocarbons produced from the Assets.  Buyer will assume full and complete
responsibility and liability for proper handling and payment of such amounts and
for maintaining any necessary suspense accounts relating thereto.
 
13.5            Removal of Name.  As promptly as practicable, but in any case
within 30 days after the Closing Date, Buyer shall eliminate the name
“Bayswater,” its logo and any variants thereof from the Assets and, except with
respect to such grace period for eliminating existing usage, shall have no right
to use any logos, trademarks or trade names belonging to Sellers or any of their
Affiliates.
 
13.6            Further Assurances.  From time to time after Closing, Sellers
and Buyer shall each execute, acknowledge and deliver to the other such further
instruments and take such other action as may be reasonably requested in order
more effectively to assure to the other the full beneficial use and enjoyment of
the Assets and otherwise to accomplish the purposes of the transactions
contemplated by this Agreement, including Buyer’s execution of separate letters
assuming specific contracts included in the Assets as may be required to comply
with the assignment or assumption provisions of such contracts in lieu of
furnishing a copy of this Agreement to the counterparty to such contract.
 
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ARTICLE 14
TAXES
14.1            Apportionment of Taxes.  “Taxes” means all ad valorem, property,
production, excise, net proceeds, severance, and all other taxes and similar
obligations assessed against the Assets or based upon or measured by the
ownership of the Assets or the production of Hydrocarbons or the receipt of
proceeds therefrom, other than income taxes.  All Taxes based on production of
hydrocarbons shall be deemed attributable to the period during which such
production occurred, and not to the period during which such Taxes are assessed.
All Taxes shall be prorated between Buyer and Seller as of the Effective Date
for all taxable periods that include the Effective Date.  The apportionment of
Taxes between the Parties, adjusted to take into account credits for withholding
amounts assigned to or applied for the benefit of Buyer as provided below, shall
take place as an adjustment to the Purchase Price pursuant to Article 3.2 in the
Preliminary Settlement Statement, using estimates of such Taxes if actual
numbers are not available.
 
14.2            Transfer Taxes.  Each Party shall be liable for any Transfer
Taxes required to be paid by it in connection with the sale of the Assets
pursuant to this Agreement.
 
14.3            Tax Reports and Returns.  Buyer will file all ad valorem tax
returns from 2014 revenues and production and Seller shall have filed all ad
valorem tax returns related to 2013 revenue and production.  The Party not
filing the return agrees to provide the Party filing the return with appropriate
information which is necessary to file any required tax reports and returns
related to the Assets.  Buyer agrees to pay all ad valorem taxes due after the
Effective Date.  Notwithstanding the above, the rights to any amounts withheld
by third parties from previous production proceeds for the purpose of paying
then unpaid ad valorem taxes for 2013 production assessed in 2014 (payable in
2015) or for 2014 production assessed in 2015 (payable in 2016) will be assigned
by Seller to Buyer at Closing. If any purchaser of production has not withheld
appropriate amounts from 2013 production proceeds for the purpose of paying ad
valorem taxes assessed for 2014 (payable in 2015), or for 2014 production
assessed in 2015 (payable in 2016) then (i) the actual amount necessary to pay
the then unpaid ad valorem taxes assessed on 2013 production (payable in 2015)
and (ii) the estimated amount that should have been withheld from 2014
production based upon pre-Effective Date production (at the rate indicated by
the most recently published mill levy) will be determined, and such amounts will
be credited to Buyer at Closing pursuant to Sections 3.2 and 14.1. The
assignment of, and credit for, these amounts shall serve as a final settlement
for ad valorem taxes.  To the extent that Seller receives any ad valorem taxes
withheld from post-Effective Date revenue, Seller shall promptly pay such
amounts to Buyer.  For Tax periods in which the Effective Time occurs, Sellers
agree to promptly forward to Buyer copies of any tax reports and returns
received by Sellers after Closing and provide Buyer with any information Sellers
have that is necessary for Buyer to file any required tax reports and returns
related to the Assets.  Buyer agrees to file all tax returns and reports
applicable to the Assets that Buyer is required to file after the Closing and,
subject to the provisions of Section 14.1, to pay all taxes payable with respect
to the Assets.
 
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14.4            Like-Kind Exchange.  If requested by any Seller, Buyer will
cooperate with such Seller to accommodate a like-kind exchange under Section
1031 of the Code with respect to all or any of the Assets (or any portion
thereof) owned by such Seller.  Such cooperation will include, without
limitation, the execution of certain documents in connection with such like-kind
exchange, but Buyer shall not be required to assume any additional liabilities
or obligations in connection therewith.  Each Seller shall have the right,
without the consent of Buyer, to assign all or any portion of its interests in
the Assets to a third party designated by such Seller for purposes of
facilitating the like-kind exchange.
 
ARTICLE 15
ASSUMPTION AND RETENTION OF
OBLIGATIONS; INDEMNIFICATION
15.1            Buyer’s Assumption of Liabilities and Obligations.  Subject to
Section 15.2(a), from and after the Closing, Buyer shall be deemed to have
assumed and shall have full responsibility and liability for:
 
a.     Assumed Environmental Liabilities.  All damages, losses, claims, demands,
causes of action, judgments and other costs (including any civil fines,
penalties, costs of assessment, clean-up, removal and Remediation of pollution
or contamination, and expenses for the modification, repair or replacement of
facilities on or associated with the Assets) required by law or attributable to
claims by any and all persons and any agency or other body of federal, state or
local government, on account of any personal injury, illness or death, any
damage to, destruction or loss of property, and any contamination or pollution
of natural resources (including soil, air, surface water or groundwater) to the
extent any of the foregoing directly or indirectly is caused by or otherwise
involves any environmental condition of the Assets, whether created or existing
before, on or after the Effective Time, including the presence, disposal or
release of any material (whether hazardous, extremely hazardous, toxic or
otherwise) of any kind in, on or under the Assets (the “Assumed Environmental
Liabilities”).  BUYER’S INDEMNIFICATION OBLIGATIONS SHALL EXTEND TO AND INCLUDE,
BUT NOT BE LIMITED TO (I) THE NEGLIGENCE OR OTHER FAULT OF SELLER AND THIRD
PARTIES, WHETHER SUCH NEGLIGENCE IS ACTIVE OR PASSIVE, GROSS, JOINT, SOLE OR
CONCURRENT, (II) SELLER’S OR BUYER’S STRICT LIABILITY, AND (III) SELLER’S OR
BUYER’S LIABILITIES OR OBLIGATIONS UNDER ANY ENVIRONMENTAL LAW.
 
b.     Assumed Plugging and Abandonment Obligations.  Upon Closing, Buyer hereby
assumes the following plugging and abandonment obligations related to the Assets
(“Assumed Plugging and Abandonment Obligations”), regardless of whether such
obligations are attributable to the ownership or operation of the Assets before,
on or after the Effective Time:
 
(i)    the necessary and proper plugging, replugging and abandonment of all
Wells
 
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(ii)   the necessary and proper removal, abandonment and disposal of all
structures, pipelines, equipment, abandoned property, trash, refuse and junk
located on or comprising part of the Assets;
 
(iii)  the necessary and proper capping and burying of all associated flow lines
located on or comprising part of the Assets;
 
(iv)  the necessary and proper restoration of the surface and subsurface to the
condition required by applicable laws, regulations, Leases or contracts;
 
(v)  all obligations relating to the items described in Section 15.1(b)(i)
through 15.1(b)(iv) arising from contractual requirements and demands made by
courts, authorized regulatory bodies or parties claiming a vested interest in
the Assets; and
 
(vi) obtain and maintain all bonds, or supplemental or additional bonds, that
may be required contractually or by governmental authorities.
 
c.    General Assumption.  Except to the extent covered by Sellers’ limited
indemnification of Buyer under Section 15.2(a), upon Closing, Buyer shall assume
and pay, perform, fulfill and discharge (i) all claims, costs, expenses,
liabilities and obligations accruing or relating to the ownership or operation
of the Assets before, on or after the Effective Time, including the owning,
developing, exploring, operating and maintaining of the Assets and the
producing, transporting and marketing of Hydrocarbons from the Assets, including
the payment of Property Expenses, the make-up and balancing obligations for
overproduction of gas from the Wells, all liability for Royalties with respect
to the Assets, (ii) the Assumed Environmental Liabilities, (iii) the Assumed
Plugging and Abandonment Obligations, (iv) all wellhead imbalances associated
with the Assets or Hydrocarbons produced therefrom whether attributable to
periods before, on or after the Effective Time, and (v) all pipeline and
transportation imbalances associated with the Assets or Hydrocarbons produced
therefrom that are attributable to periods from and after the Effective Time
(collectively, the “Assumed Liabilities”).
 
 
15.2            Indemnification.  Losses arising from diminution of value of any
portion of the Assets shall in no event exceed the Allocated Value of those
Allocated Properties included in such portion of the Assets, less the net
proceeds received by Buyer therefrom.
 
After the Closing, Buyer shall indemnify Sellers, and each Seller (as to itself
but not as to any other Seller) shall indemnify Buyer, other as follows:
 
a.    Seller’s Indemnification of Buyer.  Subject to the limitations set forth
below, each Seller shall indemnify, defend and save and hold harmless Buyer, its
officers, directors, members, managers, employees, representatives, attorneys
and agents (the “Buyer Indemnified Parties”), from and against any and all
Losses attributable to or which arise from or in connection with:
 
 
(i)   (Certain Representations) any breach by such Seller of any of its
representations or warranties under Sections 7.1 through 7.9, inclusive;
provided that such Seller shall not have any liability for claims made under
this clause (i) after 12 months after the Closing Date;
 
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(ii)   (Other Representations) any breach by such Seller of any of its
representations or warranties under Sections 7.10 through 7.20,
inclusive; provided:
 
(A)            such Seller shall not have any liability for claims made under
this clause (ii) after 180 days after the Closing Date;
(B)            no Seller shall have any liability for any individual Loss that
relates to or arises out of a breach of such Seller’s representations or
warranties under Sections 7.10 through 7.20 unless such Loss has a value in
excess of $25,000;
(C)            such Seller shall have liability for claims made under this
clause (ii) only to the extent that such claims in the aggregate exceed a
deductible amount equal to 2% of such Seller’s Share of the Purchase Price;
(D)            such Seller’s aggregate liability for all claims made under this
clause (ii) shall be limited to and shall not exceed an amount equal to 10% of
such Seller’s Share of the Purchase Price; and
(E)            Buyer shall be deemed to have irrevocably waived any claim under
this clause (ii) if, as of the Closing, Buyer has knowledge of the breach giving
rise to such claim and such breach causes Buyer’s Closing condition in
Section 10.2(a) not to be satisfied but Buyer nonetheless proceeds with the
Closing;
(iii)   (Royalties) any third party claims for Royalties payable by such Seller
on or attributable to production from its interests in the Assets during the
period prior to the Effective Time that such Seller owned such interests;
provided that no Sellers shall have any liability for claims made under this
clause (iii) after 12 months after the Closing Date;
 
(iv)   (Property Expenses) any Property Expenses incurred by such Seller with
respect to its interests in the Assets during the period prior to the Effective
Time that such Seller owned such interests; provided that no Sellers shall have
any liability for claims made under this clause (iv) after the Final Settlement
Date;
 
(v)   (Pipeline Imbalances) all pipeline and transportation imbalances
attributable to pipeline shipments of Hydrocarbons produced from such Seller’s
interests in the Assets during such Seller’s period of ownership thereof prior
to the Effective Time;
 
(vi)   (Personal Injury) any claim by any employee of such Seller or any other
person for personal injury or wrongful death which is attributable to events
occurring during the period prior to the Effective Time that such Seller owned
the Assets (but not including any Assumed Environmental Liabilities); provided
that such Seller shall not have any liability for claims made under this
clause (vi) after 12 months after the Closing Date; and
 
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(vii)   (Covenants and Agreements) any breach by such Seller of its covenants or
agreements under this Agreement; provided that such Seller shall not have any
liability for claims made under this clause (vii) after 90 days after such
covenant or agreement was required by this Agreement to be performed;
 
PROVIDED THAT EACH SELLER’S LIABILITY WITH RESPECT TO CLAIMS UNDER THIS
SECTION 15.2(a) SHALL BE FURTHER LIMITED AS FOLLOWS:
(1)            For purposes of determining whether indemnification is payable
under Section 15.2(a)(i) or (ii) and calculating Losses related thereto, all
“Material Adverse Effect” qualifiers in each Seller’s representations and
warranties set forth in Article 7 shall be disregarded;
(2)            Subject to each of the foregoing limitations that may further
limit a Seller’s liability with respect to a particular claim, each Seller’s
liability for claims under this Section 15.2(a), in the aggregate, shall be
limited to and shall not exceed an amount equal to 25% of such Seller’s Share of
the Purchase Price (for clarity, such 25% limit shall not enlarge the 10% limit
in Section 15.2(a)(ii)(D) with respect to claims made under Section
15.2(a)(ii)); and
(3)            Other than claims under Section 15.2(a) for breach of
Section 7.9, this Section 15.2(a) shall not cover or apply to any matter
regarding taxes, which shall be handled solely as provided in Section 13.1 and
Article 14.
b.    Buyer’s Indemnification of Sellers.  Buyer assumes all risk, liability,
obligation and Losses in connection with, and shall defend, indemnify, and save
and hold harmless Sellers, their respective officers, directors, shareholders,
members, managers, partners, employees, representatives, attorneys and agents
(the “Sellers Indemnified Parties”), from and against any and all Losses
attributable to or which arise from or in connection with (i) the Assumed
Liabilities (including the Assumed Environmental Liabilities and Assumed
Plugging and Abandonment Obligations), (ii) any breach of any representation,
warranty, covenant or agreement made by Buyer in this Agreement, and (iii) any
matter for which Buyer has agreed to indemnify Sellers under this Agreement. 
The indemnification obligations of Buyer shall survive the Closing without any
time limitation.
 
c.    Scope.  EXCEPT AS OTHERWISE PROVIDED HEREIN, THE INDEMNIFICATION
OBLIGATIONS UNDER THIS AGREEMENT SHALL BE WITHOUT REGARD TO THE INDEMNIFIED
PERSON’S SOLE, JOINT OR CONCURRENT NEGLIGENCE, GROSS NEGLIGENCE, STRICT
LIABILITY OR OTHER FAULT.
 
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d. Waiver of Consequential Damages.  EACH PARTY EXPRESSLY WAIVES ANY AND ALL
RIGHTS TO SPECIAL, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR EXEMPLARY DAMAGES, AND
LOSS OF PROFITS RESULTING FROM BREACH OF THIS AGREEMENT AND LOSSES INCURRED AS A
RESULT OF SUCH PARTY CONTRACTUALLY OR OTHERWISE INDEMNIFYING A THIRD PARTY.
 
15.3            Procedure.  The indemnification obligations contained in
Section 15.2 shall be implemented as follows:
 
a.    Coverage.  Such indemnity shall extend to all Losses suffered or incurred
by the indemnified Party.
 
b.    Claim Notice.  The Party seeking indemnification under the terms of this
Agreement (the “Indemnified Party”) shall submit a written “Claim Notice” to the
other Party (the “Indemnifying Party”) which, to be effective, must state: 
(i) the amount of each payment claimed by an Indemnified Party to be owing,
(ii) the basis for such claim, with supporting documentation, and (iii) a list
identifying to the extent reasonably possible each separate item of Loss for
which payment is so claimed.  The amount claimed shall be paid by the
Indemnifying Party to the extent required herein within 10 days after the later
of (x) receipt of the Claim Notice and (y) the date that the amount of such
payment has been finally established.
 
c.    Notification of Claims.  Within 20 days after the Indemnified Party
receives notice of a claim or legal action that may result in a Loss for which
indemnification may be sought under this Article 15 (“Claim”), the Indemnified
Party shall give written notice of such Claim to the Indemnifying Party.  If the
Indemnifying Party or its counsel so requests, the Indemnified Party shall
furnish the Indemnifying Party with copies of all pleadings and other
information with respect to such Claim.  At the election of the Indemnifying
Party made within 60 days after receipt of such notice, the Indemnified Party
shall permit the Indemnifying Party to assume control of such Claim (to the
extent only that such Claim, legal action or other matter relates to a Loss for
which the Indemnifying Party is liable), including the determination of all
appropriate actions, the negotiation of settlements on behalf of the Indemnified
Party, and the conduct of litigation through attorneys of the Indemnifying
Party’s choice; provided, however, that no such settlement can result in any
liability or cost to the Indemnified Party for which it is entitled to be
indemnified hereunder without its consent not to be unreasonably withheld.  If
the Indemnifying Party elects to assume control of a claim or legal action,
(i) any expense incurred by the Indemnified Party thereafter for investigation
or defense of the matter shall be borne by the Indemnified Party, and (ii) the
Indemnified Party shall give all reasonable information and assistance, other
than pecuniary, that the Indemnifying Party shall deem necessary to the proper
defense of such Claim, legal action, or other matter.  In the absence of such an
election, the Indemnified Party will use its reasonable efforts to defend, at
the Indemnifying Party’s expense, any claim, legal action or other matter to
which such other Party’s indemnification under this Article 15 applies until the
Indemnifying Party assumes such defense, and, if the Indemnifying Party fails to
assume such defense within the time period provided above, settle the same in
the Indemnified Party’s reasonable discretion at the Indemnifying Party’s
expense.  If such a Claim requires immediate action, both the Indemnified Party
and the Indemnifying Party will cooperate in good faith to take appropriate
action so as not to jeopardize defense of such Claim or either Party’s position
with respect to such Claim.
 
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15.4            No Insurance; Subrogation.  To the extent of the indemnification
obligations in this Agreement, Buyer and Sellers hereby waive for themselves,
their successors and assigns, including any insurers, any rights to subrogation
for Losses for which each of them is respectively liable or against which each
respectively indemnifies the other, and, if required by applicable policies,
Buyer and Sellers shall obtain waiver of such subrogation from their respective
insurers.
 
15.5            Reservation as to Non-Parties.  Nothing in this Agreement is
intended to limit or otherwise waive any recourse Buyer or Sellers may have
against any Person not a party to this Agreement for any obligations or
liabilities that may be incurred with respect to the Assets.
 
15.6            Exclusive Remedy.  The sole and exclusive remedy of Buyer with
respect to the Assets shall be pursuant to the express provisions of this
Agreement.  Without limitation of the foregoing, if the Closing occurs the sole
and exclusive remedy of Buyer for any and all:  (a) claims relating to any
representations, warranties, covenants and agreements that are contained in this
Agreement or in any certificate delivered at Closing, (b) other claims pursuant
to or in connection with this Agreement, and (c) other claims relating to the
Assets and the purchase and sale thereof, shall be any right to the limited
indemnification from such claims that is expressly provided in this Article 15,
and if no such right of indemnification is expressly provided, then such claims
are hereby waived to the fullest extent permitted by law.  If the Closing
occurs, Buyer shall also be deemed to have waived, to the fullest extent
permitted under applicable law, any right to contribution against Sellers
(including any contribution claim arising under any applicable Environmental
Law) and any and all other rights, claims and causes of action it may have
against Sellers arising under or based on any federal, state or local statute,
law, ordinance, rule or regulation or common law or otherwise.
 
15.7            Waiver of Right to Rescission.  Other than Sellers’ and Buyer’s
right to enforce specific performance under Section 11.2(a)(ii) and 11.2(b)(i),
respectively, Sellers and Buyer acknowledge that the payment of money (as
limited by Section 15.2(a) and the other provisions of this Agreement) shall be
adequate compensation for breach of any representation, warranty, covenant or
agreement contained herein or for any other claim arising in connection with or
with respect to the transactions contemplated in this Agreement.  As the payment
of money shall be adequate compensation, Buyer and Sellers waive any right to
rescind this Agreement, the sale of the Assets to Buyer, or any of the
transactions contemplated hereby.
 
15.8            Mutual Releases.  Buyer shall be deemed to have released the
Sellers Indemnified Parties, at Closing, from any and all Losses for which Buyer
has agreed to indemnify the Sellers Indemnified Parties hereunder, and Sellers
shall be deemed to have released the Buyer Indemnified Parties, at Closing, from
any and all Losses for which Sellers have agreed to indemnify the Buyer
Indemnified Parties hereunder (to the extent of the dollar or time limitations
on such indemnity).
 
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15.9            Anti-Indemnity Statute Limitation.  Notwithstanding the other
provisions of this Agreement, to the extent, if at all, that Colo. Rev. Stat. §
13-21-111.5 (as amended from time to time or any successor statute) is
applicable, no provision of this Agreement shall be construed or applied to
require any Indemnifying Party to indemnify any Indemnified Party against loss
or liability for damages for (i) death or bodily injury to persons, (ii) injury
to property or (iii) any other loss, damage or expense arising under (i) or (ii)
from the sole or concurrent negligence of such Indemnified Party or its agents
or employees, the sole or concurrent negligence of an independent contractor who
is directly responsible to such Indemnified Party, or any accident that occurs
in operations carried on at the direction or under the supervision of such
Indemnified Party or an employee or representative of such Indemnified Party or
in accordance with methods and means specified by such Indemnified Party or
employees or representatives of such Indemnified Party.
 
ARTICLE 16
MISCELLANEOUS
16.1            Exhibits and Schedules.  The Exhibits and Schedules referred to
in this Agreement are hereby incorporated in this Agreement by reference and
constitute a part of this Agreement.
 
16.2            Expenses.  Except as otherwise specifically provided, all fees,
costs and expenses incurred by Sellers or Buyer in negotiating this Agreement or
in consummating the transactions contemplated by this Agreement shall be paid by
the Party incurring same, including legal, investment banking, brokerage and
accounting fees, costs and expenses.
 
16.3            Notices.  All notices and communications required or permitted
under this Agreement shall be in writing and addressed as follows:

If to Sellers:
Bayswater Exploration & Production, LLC
730 17th Street, Suite 610
Denver, Colorado 80202
Telephone:
(303) 893-2503
Facsimile:
(303) 893-2508
Attention:
Steve Struna and Lynn Belcher

 
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If to Buyer:
Synergy Resources Corporation
20203 Highway 60
Platteville, Colorado 80651
Telephone:
(970) 737-1073
Facsimile:
(970) 737-1045
Attention:
Ed Holloway and Bill Scaff
 
 

Any communication or delivery hereunder shall be deemed to have been duly made
and the receiving Party charged with notice (i) if personally delivered, when
received, (ii) if faxed, when received, (iii) if mailed, certified mail, return
receipt requested, on the date set forth on the return receipt or (iv) if sent
by overnight courier, when received; provided that a copy of any notice
delivered pursuant to subsections (i) through (iv) above shall also be sent by
electronic mail, but such electronic mail shall not itself constitute notice for
purposes of this Agreement.  Any Party may, by written notice so delivered to
the other Party, change the address or individual to which notice shall
thereafter be made.
16.4            Entire Agreement.  This Agreement, the documents to be executed
hereunder and the exhibits attached hereto constitute the entire Agreement
between Sellers and Buyer pertaining to the subject matter hereof and supersede
all prior agreements, understandings, negotiations and discussions, whether oral
or written, of Sellers and Buyer pertaining to the subject matter hereof.
 
16.5            Amendments and Waivers.  This Agreement may not be amended
except as provided in a written instrument executed by both Parties.  Except for
waivers specifically provided for in this Agreement, no right of either Party
under this Agreement may be waived except by an instrument in writing signed by
the Party to be charged with such waiver and delivered by such Party to the
Party claiming the benefit of such waiver.
 
16.6            Assignment.  Neither Buyer nor Sellers may assign all or any
portion of its respective rights hereunder (including any of its rights under
Article 15) or delegate all or any portion of its respective duties hereunder
without the prior written consent of the other Party; provided, however, that as
long as Buyer shall continue to remain liable for the performance of its
obligations and liabilities under this Agreement after such assignment, Buyer
may assign any or all of its rights hereunder and may delegate any or all of its
duties hereunder to any of its Affiliates.
 
16.7            Confidentiality.  Sellers and Buyer agree that the provisions of
this Agreement shall be kept confidential except as disclosure (a) may be
required by applicable law, rules and regulations of governmental agencies or
stock exchanges, or (b) is contemplated by the terms of this Agreement.  Buyer
shall inform Sellers in advance of all such disclosures by Buyer.  Sellers shall
inform Buyer in advance of all such disclosures by Sellers.  Notwithstanding the
foregoing, Sellers shall be entitled to provide a copy of this Agreement to any
preferential right holder.
 
16.8            Press Releases.  Without the prior written consent of the other
Party, neither Party shall make, or permit any agent or Affiliate of such Party
to make, any public announcement or statement with respect to the transactions
contemplated by this Agreement and no permitted public announcement or statement
shall identify the other Party by name; provided, however, if a Party is
required to make such public announcement or statement, or identify the other
Party by name in such announcement or statement, by law or under the rules and
regulations of the New York Stock Exchange (or other public stock exchange of
similar  reputation and standing) on which the shares of such Party or any of
its Affiliates are listed, then the same may be made without the approval of the
other Party.  The opinion of counsel of the Party making such announcement or
statement shall be conclusive evidence of such requirement by law or rules or
regulations.
 
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16.9            Counterparts.  This Agreement may be executed by Sellers and
Buyer in any number of counterparts, each of which shall be deemed an original
instrument, but all of which together shall constitute one and the same
instrument.  Execution can be evidenced by fax or .PDF signatures.
 
16.10            Headings, References, Titles and Construction.  All references
in this Agreement to Exhibits, Schedules, Articles, Sections, subsections, and
other subdivisions refer to the Exhibits, Schedules, Articles, Sections,
subsections and other subdivisions of this Agreement unless expressly provided
otherwise.  Titles and headings appearing at the beginning of any subdivision
are for convenience only and do not constitute any part of any such subdivision
and shall be disregarded in construing the language contained in this
Agreement.  The words “this Agreement,” “herein,” “hereby,” “hereunder” and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited.  The phrases “this Section”
and “this subsection” and similar phrases refer only to the Sections or
subsections hereof in which the phrase occurs.  The word “or” is not exclusive,
and “including” (and its various derivatives), means “including without
limitation.”  Pronouns in masculine, feminine and neuter gender shall be
construed to include any other gender.  Words in the singular form shall be
construed to include the plural and words in the plural form shall be construed
to include the singular, unless the context otherwise requires.  In the event an
ambiguity or question of intent or interpretation of this Agreement arises, this
Agreement shall be construed as if jointly drafted by the Parties, and no
presumption or burden of proof shall arise favoring or disfavoring a Party as a
result of authorship or drafting of any provision of this Agreement.
 
16.11            Governing Law; Consent to Jurisdiction and Venue.  This
Agreement and the transactions contemplated hereby, shall be construed in
accordance with, and governed by, the laws of the State of Colorado without
regard to its conflict of laws rules.  The Parties consent to jurisdiction and
venue in the United States District Court, or the Colorado State District Court,
located in Denver, Colorado, with respect to all claims arising under this
Agreement or any document or instrument delivered at Closing.
 
16.12            Binding Effect.  This Agreement shall be binding upon, and
shall inure to the benefit of, the Parties hereto, and their respective
successors and assigns.
 
16.13            Survival.  The representations, warranties, covenants,
agreements and indemnification obligations of the Parties shall survive to the
extent claims may be made for breach thereof under Article 15.
 
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16.14            No Third-Party Beneficiaries.  This Agreement is intended only
to benefit the Parties hereto and their respective permitted successors and
assigns.
 
16.15            Severability.  It is the intent of the Parties that the
provisions contained in this Agreement shall be severable.  Should any
provision, in whole or in part, be held invalid as a matter of law, such holding
shall not affect the other provisions of this Agreement, and such provisions
that are not invalid shall be given effect without the invalid provision.
 
16.16            Knowledge and Reasonable and Good Faith Efforts.  The knowledge
or best knowledge of a Party, or similar phrases, shall mean for purposes of
this Agreement, the actual knowledge of the individuals listed on
Schedule 16.16, without duty of inquiry, with respect to such Party.  Reasonable
efforts, reasonable commercial efforts, or good faith efforts, as used in this
Agreement, do not include the obligation to pay consideration.
 
16.17            Disclaimers.  THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY
APPLICABLE LAW TO BE OPERATIVE, THE DISCLAIMERS OF WARRANTIES CONTAINED IN THIS
SECTION 16.18 ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE
LAW, RULE OR ORDER.  THE EXPRESS REPRESENTATIONS AND WARRANTIES OF SELLER
CONTAINED IN THIS AGREEMENT, AND THE TITLE WARRANTIES IN THE CONVEYANCES OF THE
ASSETS TO BE DELIVERED AT CLOSING, (COLLECTIVELY “SELLERS’ WARRANTIES”) ARE
EXCLUSIVE AND ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS,
IMPLIED, STATUTORY OR OTHERWISE.  SELLER EXPRESSLY DISCLAIMS ANY AND ALL SUCH
OTHER REPRESENTATIONS AND WARRANTIES.  WITHOUT LIMITATION OF THE FOREGOING AND
EXCEPT FOR SELLER’S WARRANTIES, THE ASSETS SHALL BE CONVEYED PURSUANT HERETO
WITHOUT (A) ANY WARRANTY OR REPRESENTATION, WHETHER EXPRESS, IMPLIED, STATUTORY
OR OTHERWISE, RELATING TO (I) TITLE TO THE ASSETS, THE CONDITION, QUANTITY,
QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO THE MODELS OR SAMPLES
OF MATERIALS OR MERCHANTABILITY OF ANY EQUIPMENT OR ITS FITNESS FOR ANY PURPOSE,
(II) THE ACCURACY OR COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS,
INFORMATION OR MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR MADE
AVAILABLE TO BUYER IN CONNECTION WITH THIS AGREEMENT, (III) PRICING ASSUMPTIONS,
OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE
ASSETS OR THE ABILITY OR POTENTIAL OF THE ASSETS TO PRODUCE HYDROCARBONS,
(IV) THE
 
 
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ENVIRONMENTAL CONDITION OF THE ASSETS, BOTH SURFACE AND SUBSURFACE, (V) ANY
IMPLIED OR EXPRESS WARRANTY OF NON-INFRINGEMENT, OR (VI) ANY OTHER MATTERS
CONTAINED IN ANY MATERIALS FURNISHED OR MADE AVAILABLE TO BUYER BY SELLERS OR BY
SELLERS” AGENTS OR REPRESENTATIVES, OR (B) ANY OTHER EXPRESS, IMPLIED, STATUTORY
OR OTHER WARRANTY OR REPRESENTATION WHATSOEVER.  BUYER SHALL HAVE INSPECTED, OR
WAIVED (AND UPON CLOSING SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT,
THE ASSETS FOR ALL PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND
ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED
TO CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF
HAZARDOUS SUBSTANCES, SOLID WASTES, ASBESTOS AND OTHER MAN MADE FIBERS, OR
NORM.  BUYER IS RELYING SOLELY UPON THE TERMS OF THIS AGREEMENT AND ITS OWN
INSPECTION OF THE ASSETS, AND BUYER SHALL ACCEPT ALL OF THE SAME IN THEIR “AS
IS, WHERE IS” CONDITION.
 

[Signature Page Follows]
 
 
 
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first set forth above.
SELLERS:
 
Bayswater Exploration & Production, LLC
 
 
By:
/s/ Stephen M. Struna
Name:
Stephen M. Struna
Title:
President

 

Bayswater Blenheim Holdings, LLC
 
By:
/s/ Guy J. Castranova
Name:    
Guy J. Castranova
Title:      
Managing Director
 

 

 
Bayswater Blenheim Holdings II, LLC

 
By: /s/ Guy J. Castranova
Name:    
Guy J. Castranova
Title:      
Managing Director

BUYER:
 
Synergy Resources Corporation
 
By:
/s/ Ed Holloway
Name: Ed Holloway Title: Co-CEO

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Schedule 1.1

Sellers’ Shares

The Parties agree that Sellers shall furnish a completed Schedule 1.1 to Buyer
reflecting the Sellers’ Shares on or before November 14, 2014 and that such
Schedule 1.1 furnished by Sellers shall be deemed to constitute Schedule 1.1 as
if attached to the Agreement on the Execution Date.
 
 
 

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Schedule 3.2(a)(iii)

Wells Not Completed as of Effective Time

The Anadarko Wells as defined in Article 1 of the Agreement.
 
 
 

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Schedule 9.1(p)

Financial Statement Information Indemnification and Contribution

A.            Buyer agrees to indemnify and hold harmless Sellers Indemnified
Parties from any and all Losses, whether joint or several, arising from any
Claim to which any Sellers Indemnified Party may become subject or liable or
which may be incurred by or assessed against any Seller Indemnified Party under
any statute, common law, contract or otherwise, relating to or arising out of
any of:  (a) any actions or omissions of the Sellers relating to the providing
of the financial information under Section 9.1(p) (b) the completeness or
accuracy of any of the financial information under Section 9.1(p) (c) any
securities, tax, corporate, or other filings of the Buyer; or (d) Buyer’s use of
the financial information under Section 9.1(p).  Promptly after receipt by the
Sellers Indemnified Parties of notice of the occurrence of a Claim, or any claim
or the commencement of any action or proceeding in respect of which indemnity
may be sought against the Buyer, Sellers Indemnified Party will notify Buyer in
writing of the commencement thereof or of such Claim, and Buyer shall
immediately assume the full defense thereof (including the employment of counsel
satisfactory to the Sellers Indemnified Parties and the payment of the fees and
expenses of such counsel).  Notwithstanding the preceding sentence, the Sellers
Indemnified Parties will be entitled to employ their own counsel in such
circumstance if the Sellers Indemnified Parties are advised in a written opinion
of counsel that a conflict of interest exists which makes representation by
counsel chosen by the Buyer not advisable.  In such event, the reasonable fees
and disbursements of such separate counsel will be paid by the Buyer.

B.            If for any reason (other than as specifically provided herein) the
foregoing indemnity for a Claim is unavailable to Sellers Indemnified Parties or
insufficient to fully hold any Sellers Indemnified Party harmless, then the
Buyer shall contribute to the amount paid or payable by the Sellers Indemnified
Parties as a result of such Claim in such proportion as is appropriate to
reflect the relative benefits received (including the proceeds of any offering)
by and fault of Buyer on the one hand, and the relative benefits received by and
fault of the Sellers Indemnified Parties on the other hand, as well as any
relevant equitable considerations.  It is hereby further agreed that the
relative fault of the Buyer on the one hand and Sellers Indemnified Parties on
the other hand with respect to the financial information under Section 9.1(p)
shall be determined by reference to, among other things, whether any untrue or
alleged untrue statement of a material fact or incorrect opinion or conclusion
or the omission or alleged omission to state a material fact related to the
information supplied by the Buyer on the one hand or by the Sellers Indemnified
Parties on the other hand, as well as the parties’ relative intent, knowledge,
access to information and opportunity to correct or prevent such statement,
opinion, conclusion or omission.  No Sellers Indemnified Party shall have any
liability to the Buyer or any other person in connection with the financial
information under Section 9.1(p) except for any liability for losses, claims,
damages or liabilities finally judicially determined to have resulted solely and
exclusively from actions taken or omitted to be taken as a direct result of such
Sellers Indemnified Party’s willful misconduct.  The indemnity, contribution and
expense reimbursement agreements and obligations set forth herein shall be in
addition to any other rights, remedies or indemnification which Sellers
Indemnified Parties may have or be entitled to at common law or otherwise. 
Buyer shall not settle any Claim covered by this Schedule 9.1(p) without the
prior consent of Sellers Indemnified Parties involved therein if any admission
of wrong doing, negligence or improper activity of any kind of such Sellers
Indemnified Party is a part of such settlement.  Buyer shall not, without the
prior written consent of Sellers Indemnified Parties, effect any settlement of
any pending or threatened action, suit or proceeding in respect of which Sellers
Indemnified Parties are or could have been a party and indemnity could have been
sought hereunder by Sellers Indemnified Party, unless such settlement includes
an unconditional release of such Sellers Indemnified Party from all liability on
claims that are the subject matter of such action, suit or proceeding.
 
 

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Schedule 16.16

Persons with Knowledge

BAYSWATER EXPLORATION & PRODUCTION, LLC
Steve M. Struna
Lynn S. Belcher
Don W. Barbula
Pamela B. Kingery

BAYSWATER BLENHEIM HOLDINGS LLC AND BAYSWATER BLENHEIM HOLDINGS II, LLC
Guy J. Castranova
 

 
SYNERGY RESOURCES COPORATION
Ed Holloway
Bill Scaff
Monty Jennings
Val Dunn