EXHIBIT 10.1

 

 

 

 

MEMBERSHIP INTEREST PURCHASE AND SALE AGREEMENT

BY AND AMONG

EXCO RESOURCES, INC.,

SOUTHERN G HOLDINGS, LLC

AND

CRIMSON EXPLORATION INC.

AND

CRIMSON EXPLORATION OPERATING, INC.

AS PURCHASER

Executed on May 8, 2007

 

 

TABLE OF CONTENTS

Page

Article 1 PURCHASE AND SALE

7

Section 1.1.

Purchase and Sale.

7

Section 1.2.

Assets.

7

Section 1.3.

Anadarko Retained Assets.

7

Section 1.4.

Effective Time; Proration of Costs and Revenues.

7

Section 1.5.

Delivery and Maintenance of Records.

7

Article 2 PURCHASE PRICE

7

Section 2.1.

Purchase Price.

7

Section 2.2.

Adjustments to Cash Purchase Price.

7

Section 2.3.

Allocation of Purchase Price for Tax Purposes.

7

Article 3 TITLE MATTERS

7

Section 3.1.

Seller’s Title.

7

Section 3.2.

Definition of Defensible Title.

7

Section 3.3.

Definition of Permitted Encumbrances.

7

Section 3.4.

Notice of Title Defect Adjustments.

7

Section 3.5.

Casualty or Condemnation Loss.

7

Section 3.6.

Government Approvals Respecting Assets.

7

Article 4 ENVIRONMENTAL MATTERS

7

Section 4.1.

Environmental Access.

7

Section 4.2.

NORM, Wastes and Other Substances.

7

Section 4.3.

Environmental Defects.

7

ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
COMPANY                                          
                                          
                                          
                                            7

Section 5.1.

Generally.

7

Section 5.2.

Existence; Qualification and Capitalization.

7

Section 5.3.

Power.

7

Section 5.4.

Authorization and Enforceability.

7

Section 5.5.

No Conflicts.

7

Section 5.6.

Liability for Brokers’ Fees.

7

Section 5.7.

No Business Conduct.

7

Section 5.8.

Anadarko Purchase Agreement.

7

Section 5.9.

Litigation.

7

Section 5.10.

Disregarded Entity.

7

Section 5.11.

Contract Review

7

Section 5.12.

Preference Rights and Transfer Requirements.

7

Section 5.13.

No Conveyances, Liens or Transfers.

7

Section 5.14.

Investment Representations.

7

Section 5.15.

Casualty or Condemnation Losses.

7

ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND CRIMSON
PARENT                                          
                                          
                                                                   7

Section 6.1.

Existence and Qualification.

7

Section 6.2.

Power.

7

Section 6.3.

Authorization and Enforceability.

7

Section 6.4.

No Conflicts.

7

Section 6.5.

Liability for Brokers’ Fees.

7

Section 6.6.

Litigation.

7

Section 6.7.

Financing.

7

Section 6.8.

Limitation.

7

Section 6.9.

SEC Disclosure.

7

Section 6.10.

Bankruptcy.

7

Section 6.11.

Capitalization of Crimson Parent.

7

Section 6.12.

Certificate of Incorporation and By-Laws.

7

Section 6.13.

SEC Documents and Other Reports of Crimson Parent.

7

Section 6.14.

No Required Vote of Crimson Parent Stockholders.

7

Article 7 COVENANTS OF THE PARTIES

7

Section 7.1.

Statements of Revenues and Expenses.

7

Section 7.2.

Government Reviews.

7

Section 7.3.

Public Announcements.

7

Section 7.4.

Tax Matters.

7

Section 7.5.

Further Assurances.

7

Section 7.6.

Anadarko Purchase Agreement.

7

Section 7.7.

Insurance.

7

Section 7.8.

Transition Services Agreement.

7

Section 7.9.

Preference Rights and Transfer Requirements.

7

Article 8 CLOSING

7

Section 8.1.

Time and Place of Closing.

7

Section 8.2.

Obligations of Seller at Closing.

7

Section 8.3.

Obligations of Purchaser at Closing.

7

Section 8.4.

Closing Adjustments.

7

ARTICLE 9 POST-CLOSING OBLIGATIONS; INDEMNIFICATION; LIMITATIONS; DISCLAIMERS
AND WAIVERS                                          
                              7

Section 9.1.

Receipts.

7

Section 9.2.

Expenses.

7

Section 9.3.

Assumed Anadarko Obligations.

7

Section 9.4.

Survival.

7

 

 

ii

Section 9.5.

Indemnification by Seller.

7

Section 9.6.

Indemnification by Purchaser.

7

Section 9.7.

Indemnification Proceedings.

7

Section 9.8.

Limitations on Indemnities.

7

Section 9.9.

Release.

7

Section 9.10.

Disclaimers.

7

Section 9.11.

Waiver of Trade Practices Acts.

7

Section 9.12.

Redhibition Waiver.

7

Article 10 MISCELLANEOUS

7

Section 10.1.

Counterparts.

7

Section 10.2.

Notice.

7

Section 10.3.

Sales or Use Tax Recording Fees and Similar Taxes and Fees.

7

Section 10.4.

Expenses.

7

Section 10.5.

Change of Name.

7

Section 10.6.

Replacement of Bonds, Letters of Credit and Guarantees.

7

Section 10.7.

Governing Law and Venue.

7

Section 10.8.

Captions.

7

Section 10.9.

Waivers.

7

Section 10.10.

Assignment.

7

Section 10.11.

Entire Agreement.

7

Section 10.12.

Amendment.

7

Section 10.13.

No Third-Party Beneficiaries.

7

Section 10.14.

References.

7

Section 10.15.

Construction.

7

Section 10.16.

Conspicuousness.

7

Section 10.17.

Severability.

7

Section 10.18.

Time of Essence.

7

Section 10.19.

Affiliate Liability.

7

Section 10.20.

Schedules.

7

Section 10.21.

Limitation on Damages.

7

 

 

iii

TABLE OF CONTENTS

(continued)

 

EXHIBITS

Exhibit “A”

Leases and Mineral Interests

Exhibit “A-1”

Wells, Future Wells and Units

Exhibit “B”

Anadarko Purchase Agreement

Exhibit “C”

Assignment of Membership Interest

Exhibit “D”

Registration Rights Agreement

Exhibit “E”

Seismic License

Exhibit “F”

Third Amendment to Anadarko Purchase Agreement

Exhibit “G”

Title Defect Notice

Exhibit “H”

Environmental Defect Notice

Exhibit “I”

Transition Services Agreement

Exhibit “J”

Preliminary Settlement Statement

Exhibit “K”

First Amendment Letter Agreement to Anadarko Purchase Agreement

Exhibit “L”

Second Amendment to Anadarko Purchase Agreement

SCHEDULES

Schedule 1.4

Overhead Amounts

Schedule 5.2

Limited Liability Company Agreement

Schedule 5.5

Preference Rights and Transfer Requirements

Schedule 9.3

Proceedings

 

(iv)

DEFINITIONS

“actual knowledge” has the meaning set forth in Section 5.1(b).

“Adjusted Purchase Price” shall mean the Purchase Price after calculating and
applying the adjustments set forth in Section 2.2 to the Cash Purchase Price.

“Adjustment Period” has the meaning set forth in Section 2.2(a).

“Affiliates” with respect to any Person, means any Person that directly or
indirectly controls, is controlled by or is under common control with such
Person. The concept of control, controlling or controlled as used in the
aforesaid context means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of another, whether
through the ownership of voting securities, by contract or otherwise. No Person
shall be deemed an Affiliate of any Person by reason of the exercise or
existence of rights, interests or remedies under this Agreement.

“Agreed Accounting Firm” has the meaning set forth in Section 8.4(b).

“Agreed Interest Rate” means the rate of interest published in the Wall Street
Journal from time to time, as the one month London Interbank Offered Rate
(LIBOR) plus 75 basis points, with adjustments in that rate to be made on the
same day as any change in that rate.

“Agreement” means this Purchase and Sale Agreement.

“Allocated Value” has the meaning set forth in Section 2.3.

“Anadarko” has the meaning set forth in the Recitals hereto.

“Anadarko Closing” means the consummation of the transactions contemplated by
the Anadarko Purchase Agreement.

“Anadarko Closing Date” means the date of the Anadarko Closing.

“Anadarko Deductible” means the Deductible as defined in the Anadarko Purchase
Agreement.

“Anadarko Purchase Agreement” has the meaning set forth in the Recitals hereto
and is attached as Exhibit B as the Anadarko Purchase Agreement is in effect on
the date hereof.

“Anadarko Purchase Price” means the Purchase Price as defined in the Anadarko
Purchase Agreement.

“Anadarko Retained Assets” has the meaning set forth in Section 1.3.

“Anadarko Warranties” means the representations and warranties of Anadarko
contained in the Anadarko Purchase Agreement insofar as such representations and
warranties relate to the Assets and the Assumed Anadarko Obligations.

“Assessment” has the meaning set forth in Section 4.1.

 

(v)

“Assets” has the meaning set forth in Section 1.2.

“Assignment of Membership Interest” means that certain Assignment of Membership
Interest in the form attached hereto as Exhibit C.

“Assumed Anadarko Obligations” has the meaning set forth in Section 9.3.

“Business Day” means each calendar day except Saturdays, Sundays, and Federal
holidays.

“Cash Purchase Price” has the meaning set forth in Section 2.1.

“CERCLA” has the meaning set forth in the definition of Environmental Laws.

“Claim Notice” has the meaning set forth in Section 9.4(b).

“Closing” has the meaning set forth in Section 8.1.

“Closing Date” has the meaning set forth in Section 8.1.

“Closing Payment” has the meaning set forth in Section 8.4(a).

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Company” has the meaning set forth in the preamble hereto.

“Contracts” has the meaning set forth in Section 1.2(d).

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

“Crimson Parent Common Stock” has the meaning set forth in Section 2.1.

“Crimson Parent SEC Documents” has the meaning set forth in Section 6.13.

“Deductible” has the meaning set forth in Section 9.8(a).

“Defensible Title” has the meaning set forth in Section 3.2.

“DTPA” has the meaning set forth in Section 9.11(a).

“Due Diligence Materials” has the meaning set forth in Section 4.1.

“Earned” has the meaning set forth in Section 1.4(b).

“Effective Time” has the meaning set forth in Section 1.4(a).

“Environmental Defect” has the meaning set forth in Section 4.3.

“Environmental Defect Amount” has the meaning set forth in Section 4.3.

“Environmental Defect Notice” has the meaning set forth in Section 4.3.

 

(vi)

“Environmental Laws” means, as the same may have been amended, any federal,
state or local statute, law, regulation, ordinance, rule, order or decree
including any rule of common law, relating to (i) the control of any potential
pollutant or protection of the environment, including air, water or land, (ii)
the generation, handling, treatment, storage, disposal or transportation of
waste materials, or (iii) the regulation of or exposure to hazardous, toxic or
other substances alleged to be harmful, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§ 9601 et seq. (“CERCLA”); the Resource Conservation and Recovery Act, 42 U.S.C.
§ 6901 et seq. (“RCRA”); the Federal Water Pollution Control Act, 33 U.S.C. §
1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq. the Hazardous
Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic Substances
Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act, 33 U.S.C. §
2701 et seq.; the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
§ 11001 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j;
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq.;
the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; the Atomic
Energy Act, 42 U.S.C. § 2011 et seq.; and all applicable related law, whether
local, state, territorial, or national, of any Governmental Body having
jurisdiction over the property in question addressing pollution or protection of
human health, safety, natural resources or the environment and all regulations
implementing the foregoing. The term “Environmental Laws” includes all judicial
and administrative decisions, orders, directives, and decrees issued by a
Governmental Body pursuant to the foregoing.

“Environmental Liabilities” means any and all environmental response costs
(including costs of remediation), damages, natural resource damages,
settlements, consulting fees, expenses, penalties, fines, orphan share,
prejudgment and post-judgment interest, court costs, attorneys’ fees, and other
liabilities incurred or imposed (i) pursuant to any order, notice of
responsibility, directive (including requirements embodied in Environmental
Laws), injunction, judgment or similar act (including settlements) by any
Governmental Body to the extent arising out of any violation of, or remedial
obligation under, any Environmental Laws which are attributable to the ownership
or operation of the Assets prior to the Effective Time or (ii) pursuant to any
claim or cause of action by a Governmental Body or other Person for personal
injury, property damage, damage to natural resources, remediation or response
costs to the extent arising out of any violation of, or any remediation
obligation under, any Environmental Laws which is attributable to the ownership
or operation of the Assets prior to the Closing.

“Equipment” has the meaning set forth in Section 1.2(f).

“Event” has the meaning set forth in the definition of Material Adverse Effect.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, together
with the rules and regulations of the SEC promulgated thereunder.

“Excluded Anadarko Obligations” means Excluded Seller Obligations (as such term
is defined in the Anadarko Purchase Agreement) that relate to the Assets.

“Final Cash Purchase Price” has the meaning set forth in Section 8.4(b).

“Final Settlement Date” has the meaning set forth in Section 8.4(b).

 

(vii)

“First Amendment” has the meaning set forth in the Recitals.

“Fundamental Representations” has the meaning set forth in Section 9.4(a).

“Future Well” means a well to be drilled in the future on a Future Well
Location, which (for the purposes of determining Defensible Title thereto and
any Title Defects associated therewith pursuant to this Agreement) shall be
treated as if such well had been drilled and completed and was in existence at
or prior to the Effective Time.

“Future Well Location” means each drilling location identified on Exhibit A-1,
subject to any depth restriction set forth in such Exhibit A-1 with respect to
such location.

“GAAP” means generally accepted accounting principles in effect in the United
States as amended from time to time.

“Governmental Body” or “Governmental Bodies” means any federal, state, local,
municipal, or other government; any governmental, regulatory or administrative
agency, commission, body, arbitrator or arbitration panel or other authority
exercising or entitled to exercise any administrative, executive, judicial,
legislative, police, regulatory or taxing authority or power; and any court or
governmental tribunal.

“Hazardous Material” means (i) any “hazardous substance,” as defined by CERCLA,
(ii) any “hazardous waste” or “solid waste,” in either case as defined by RCRA,
and any analogous state statutes, and any regulations promulgated thereunder,
(iii) any solid, hazardous, dangerous or toxic chemical, material, waste or
substance, within the meaning of and regulated by any applicable Environmental
Laws, (iv) any radioactive material, including any naturally occurring
radioactive material, and any source, special or byproduct material as defined
in 42 U.S.C. 2011 et seq. and any amendments or authorizations thereof, (v) any
regulated asbestos-containing materials in any form or condition, (vi) any
regulated polychlorinated biphenyls in any form or condition, and (vii)
petroleum, petroleum hydrocarbons or any fraction or byproducts thereof.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

“Hydrocarbons” means oil, gas, casinghead gas, condensate and other gaseous and
liquid hydrocarbons or any combination thereof and sulphur and other minerals
extracted from or produced with the foregoing.

“Imbalance” or “Imbalances” means any over-production, under-production,
over-delivery, under-delivery or similar imbalance of Hydrocarbons produced from
or allocated to the Assets, regardless of whether such over-production,
under-production, over-delivery under-delivery or similar imbalance arises at
the platform, wellhead, pipeline, gathering system, transportation system,
processing plant or other location.

“incurred” has the meaning set forth in Section 1.4(b).

“Indemnified Party” has the meaning set forth in Section 9.7(a).

“Indemnifying Party” has the meaning set forth in Section 9.7(a).

 

(viii)

“Invasive Activity” has the meaning set forth in Section 4.1.

“Lands” has the meaning set forth in Section 1.2(a).

“Laws” means all statutes, laws, rules, regulations, ordinances, orders, and
codes of Governmental Bodies.

“Leases” has the meaning set forth in Section 1.2(a).

“Lien” means any mortgage, pledge, hypothecation, lien, preference, security
interest or other encumbrance.

“Losses” means any and all debts, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, or whether known or unknown,
or due or to become due or otherwise), diminution in value, monetary damages,
fines, fees, Taxes, penalties, interest obligations, deficiencies, losses and
expenses (including amounts paid in settlement, interest, court costs, costs of
investigators, reasonable fees and expenses of attorneys, accountants, financial
advisors and other experts, and other actual out of pocket expenses incurred in
investigating and preparing for or in connection with any Proceeding).

“Lowest Cost Response” means the response required or allowed under
Environmental Laws that addresses the condition present at the lowest cost
(considered as a whole taking into consideration any material negative impact
such response may have on the operations of the relevant assets and any
potential material additional costs or liabilities that may likely arise as a
result of such response) as compared to any other response that is required or
allowed under Environmental Laws.

“Material Adverse Effect” means any change, inaccuracy, circumstance, effect,
event, result, occurrence, condition or fact (each an “Event”) (whether or not
(i) foreseeable or known as of the date of this Agreement or (ii) covered by
insurance) that has had, or could reasonably be expected to have, a material
adverse effect on (i) the ownership, operation or value of the Assets, taken as
a whole, or (ii) the ability of Seller to consummate the transactions
contemplated hereby. Excluded from such Events for the purposes of determining
whether a “Material Adverse Affect” has occurred or could reasonably be expected
to occur are (A) Events resulting from entering into this Agreement or the
announcement of the transactions contemplated by this Agreement, (B) Events
resulting from changes in general market, economic, financial or political
conditions or any outbreak of hostilities or war, (C) Events that affect the
Hydrocarbon exploration, production, development, processing, gathering and/or
transportation industry generally (including changes in commodity prices or
general market prices in the Hydrocarbon exploration, production, development,
processing, gathering and/or transportation industry generally), and (D) any
effect resulting from a change in Laws or regulatory policies.

“Mineral Interests” has the meaning set forth in Section 1.2(a).

“Net Revenue Interest” has the meaning set forth in Section 3.2(a).

“NORM” means naturally occurring radioactive material.

 

(ix)

“Notice Period” has the meaning set forth in Section 9.7(a).

“Permitted Encumbrances” has the meaning set forth in Section 3.3.

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

“Personal Property” has the meaning set forth in Section 1.2(g).

“Pipelines” has the meaning set forth in Section 1.2(g).

“Preference Property” has the meaning set forth in Section 7.7.

“Preference Right” means any right or agreement that enables any Person to
purchase or acquire any Asset or any interest therein or portion thereof as a
result of or in connection with (i) the sale, assignment or other transfer of
any Asset or any interest therein or portion thereof or (ii) the execution or
delivery of this Agreement or the consummation or performance of the terms and
conditions contemplated by this Agreement.

“Proceeding” or “Proceedings” means any proceeding, arbitrations, action, suit,
pending settlement, or other legal proceeding of any kind or nature by or before
any Governmental Body.

“Properties” has the meaning set forth in Section 1.2(c).

“Property Costs” has the meaning set forth in Section 1.4(a).

“Proprietary Seismic Data” means all of Seller’s proprietary geophysical,
seismic and geological data collected or obtained from any 3D seismic surveys,
covering the Lands, including any processed or reprocessed data.

“Purchase Price” has the meaning set forth in Section 2.1.

“Purchased Shares” has the meaning set forth in Section 2.1.

“Purchaser” has the meaning set forth in the preamble hereto.

“Purchaser Indemnified Persons” has the meaning set forth in Section 9.5.

“RCRA” has the meaning set forth in the definition of Environmental Laws.

“Records” has the meaning set forth in Section 1.2(i).

“REGARDLESS OF FAULT” MEANS WITHOUT REGARD TO THE CAUSE OR CAUSES OF ANY CLAIM,
INCLUDING, WITHOUT LIMITATION, EVEN THOUGH A CLAIM IS CAUSED IN WHOLE OR IN PART
BY:

OTHER THAN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, THE NEGLIGENCE (WHETHER SOLE,
JOINT, CONCURRENT, COMPARATIVE,

 

(x)

CONTRIBUTORY, ACTIVE OR PASSIVE), STRICT LIABILITY, OR OTHER FAULT OF THE SELLER
INDEMNIFIED PERSONS; AND/OR

A PRE-EXISTING DEFECT, WHETHER PATENT OR LATENT, OF THE PREMISES OF PURCHASER’S
PROPERTY OR SELLER’S PROPERTY (INCLUDING WITHOUT LIMITATION THE ASSETS),
INVITEES AND/OR THIRD PARTIES; AND/OR

THE UNSEAWORTHINESS OF ANY VESSEL OR UNAIRWORTHINESS OF ANY AIRCRAFT OF A PARTY
WHETHER CHARTERED, OWNED, OR PROVIDED BY THE PURCHASER INDEMNIFIED PERSONS,
SELLER INDEMNIFIED PERSONS, INVITEES AND/OR THIRD PARTIES.

“Registration Rights Agreement” means that certain Registration Rights
Agreement, by and between Crimson Parent and Seller in the form attached hereto
as Exhibit D.

“Retained Preference Property” has the meaning set forth in Section 7.9.

“Retained TR Assets” has the meaning set forth in Section 7.9.

“Royalty Amounts” has the meaning set forth in Section 9.3.

“SEC” has the meaning set forth in Section 6.13.

“Second Amendment” has the meaning set forth in the Recitals.

“Securities Act” means the Securities Act of 1933, as amended, together with the
rules and regulations of the SEC promulgated thereunder.

“Seismic License” means that certain seismic license covering Proprietary
Seismic Data in the form attached hereto as Exhibit E.

“Seller” has the meaning set forth in the preamble hereto.

“Seller Credit Agreement” means the Second Amended and Restated Credit
Agreement, dated as of May 2, 2007, among Seller, as borrower, certain
subsidiaries of Seller, as guarantors, the lenders party thereto, JPMorgan Chase
Bank, N.A., as administrative agent, and J.P. Morgan Securities Inc., as sole
bookrunner and lead arranger.

“Seller Indemnified Persons” has the meaning set forth in Section 9.6.

“Seller Indenture” means the Indenture, dated as of January 20, 2004, as amended
and supplemented, among Seller, certain subsidiaries of Seller as guarantors,
and Wilmington Trust Company, a Delaware banking corporation, as trustee, that
governs Seller’s 7 ¼% Senior Notes Due 2011.

“Stock Purchase Price” has the meaning set forth in Section 2.1.

“Surface Contracts” has the meaning set forth in Section 1.2(e).

 

(xi)

“Tax Allocated Value” has the meaning set forth in Section 2.3.

“Taxes” means all federal, state, local, and foreign income, profits, franchise,
sales, use, ad valorem, property, severance, production, excise, stamp,
documentary, real property transfer or gain, gross receipts, goods and services,
registration, capital, transfer, or withholding taxes or other governmental fees
or charges imposed by any Governmental Body, including any interest, penalties
or additional amounts which may be imposed with respect thereto.

“Tax Returns” means all reports, returns, statements (including estimated
reports, returns or statements) and other similar filings with respect to all
Taxes related to the Company or the Assets required to be filed by Seller or the
Company.

“Third Amendment” has the meaning set forth in the Recitals.

“Third Party Claim” has the meaning set forth in Section 9.7(a).

“Title Claim Date” has the meaning set forth in Section 3.4(a).

“Title Defect” has the meaning set forth in Section 3.2(d).

“Title Defect Notice” has the meaning set forth in Section 3.4(a).

“Transfer Requirement” means any consent, approval, authorization or permit of,
or filing with or notification to, any Person which is required to be obtained,
made or complied with for or in connection with any sale, assignment or transfer
of any Asset or any interest therein; provided, however, that “Transfer
Requirement” shall not include any consent of, notice to, filing with, or other
action by any Governmental Body in connection with the sale or conveyance of oil
and/or gas leases or interests therein or Surface Contracts or interests
therein, if they are not required prior to the assignment of such oil and/or gas
leases, Surface Contracts or interests or they are customarily obtained
subsequent to the sale or conveyance (including consents from state agencies).

“Transfer Taxes” has the meaning set forth in Section 10.3.

“Transition Services Agreement” has the meaning set forth in Section 7.8.

“Units” has the meaning set forth in Section 1.2(c).

“UTPCPL” has the meaning set forth in Section 9.11(a).

“Warranty Well” means a Well or a Future Well, as the context requires.

“Wells” has the meaning set forth in Section 1.2(b).

 

(xii)

MEMBERSHIP INTEREST PURCHASE AND SALE AGREEMENT

This Membership Interest Purchase and Sale Agreement (the “Agreement”) is
executed on May 8, 2007, by and among EXCO Resources, Inc., a Texas corporation
(“Seller”), Southern G Holdings, LLC, a Delaware limited liability company (the
“Company”), Crimson Exploration Inc., a Delaware corporation (“Crimson Parent”),
and Crimson Exploration Operating, Inc., a Delaware corporation and wholly-owned
subsidiary of Crimson Parent (“Purchaser”).

RECITALS

A.           Seller formed the Company on March 9, 2007 and owns 100% of the
outstanding membership interests (the “Interests”) in the Company.

B.           Seller is a party to that certain Purchase and Sale Agreement,
dated February 1, 2007, by and among Anadarko Petroleum Corporation, Anadarko
E&P Company LP, Howell Petroleum Corporation, Kerr-McGee Oil & Gas Onshore LP
(collectively, “Anadarko”) and Seller (the “Original Anadarko Purchase
Agreement”), pursuant to which Seller purchased certain oil and gas properties
from Anadarko, including, among others, the Assets.

C.           On April 13, 2007, Anadarko and Seller entered into the First
Amendment Letter Agreement, a copy of which has been attached hereto as Exhibit
K (the “First Amendment”).

D.           On May 1, 2007, Anadarko and Seller entered into the Second
Amendment to Purchase and Sale Agreement, a copy of which has been attached
hereto as Exhibit L (the “Second Amendment”).

E.            On the Anadarko Closing Date, Anadarko, Seller and the Company
entered into the Third Amendment to Purchase and Sale Agreement, a copy of which
has been attached hereto as Exhibit F (the “Third Amendment”), pursuant to which
the Company was designated to take title to the Assets and to assume the Assumed
Anadarko Obligations (the Original Anadarko Purchase Agreement as so amended by
the First Amendment, Second Amendment and the Third Amendment, the “Anadarko
Purchase Agreement”).

F.            Upon the terms and conditions set forth in the Anadarko Purchase
Agreement, the Company took title to the Assets and assumed the Assumed Anadarko
Obligations at the Anadarko Closing.

G.           Seller desires to sell to Purchaser and Purchaser desires to
purchase from Seller all right, title and interest of Seller in the Interests,
in the manner and upon the terms and conditions hereafter set forth.

NOW, THEREFORE, in consideration of the premises and of the mutual promises,
representations, warranties, covenants, conditions and agreements contained
herein, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound
by the terms hereof, agree as follows:

 

 

-1-

ARTICLE 1

PURCHASE AND SALE

•

Purchase and Sale.

At the Closing, and upon the terms of this Agreement, Seller agrees to sell,
transfer and convey the Interests to Purchaser, and Purchaser agrees to
purchase, accept and pay for the Interests.

•

Assets.

As used herein, the term “Assets” means, subject to the terms and conditions of
this Agreement, all of the Company’s right, title, interest and estate, real or
personal, recorded or unrecorded, movable or immovable, tangible or intangible,
in and to the following (but excluding the Anadarko Retained Assets):

(a)          All (i) of the oil and gas leases; subleases and other leaseholds;
carried interests; farmout rights; options; and other properties and interests
described on Exhibit A, subject to such depth limitations and other restrictions
as may be set forth on Exhibit A (collectively, the “Leases”) and (ii) fee
mineral interests, fee royalty interests and other fee interests in oil, gas and
other minerals described on Exhibit A (collectively, the “Mineral Interests”),
(in each case) together with each and every kind and character of right, title,
claim, and interest that the Company has in and to the lands covered by the
Leases and the Mineral Interests and the interests currently pooled, unitized,
communitized or consolidated therewith (the “Lands”);

(b)          All oil, gas, water or injection wells located on the Lands,
whether producing, shut-in, or temporarily abandoned, including the interests in
the wells shown on Exhibit A-1 attached hereto (collectively, the “Wells”);

(c)          All interests of the Company in or to any currently existing pools
or units which include any Lands or all or a part of any Leases or Mineral
Interests or include any Wells, including those pools or units shown on
Exhibit A-1 (the “Units”; the Units, together with the Leases, Mineral
Interests, Lands and Wells, being hereinafter referred to as the “Properties”),
and including all interests of the Company in production of Hydrocarbons from
any such Unit, whether such Unit production of Hydrocarbons comes from Wells
located on or off of a Lease or the Mineral Interests, and all tenements,
hereditaments and appurtenances belonging to the Leases, the Mineral Interests
and Units;

(d)          All contracts, agreements and instruments by which the Properties
are bound or subject, or that relate to or are otherwise applicable to the
Properties, only to the extent applicable to the Properties rather than Seller’s
or any of its Affiliates’ other properties, including but not limited to,
operating agreements, unitization, pooling and communitization agreements,
declarations and orders, joint venture agreements, farmin and farmout
agreements, exploration agreements, participation agreements, exchange
agreements, transportation or gathering agreements, agreements for the sale and
purchase of oil, gas or casinghead gas and processing agreements to the extent
applicable to the Properties or the production of Hydrocarbons produced in
association therewith from the Properties (hereinafter collectively

 

 

-2-

referred to as “Contracts”), but excluding any contracts, agreements and
instruments to the extent transfer would result in a violation of applicable Law
or is restricted by any Transfer Requirement that is not waived by Purchaser or
satisfied and provided that “Contracts” shall not include the instruments
constituting the Leases;

(e)          All easements, permits, licenses, servitudes, rights-of-way,
surface leases and other surface rights (“Surface Contracts”) appurtenant to,
and used or held for use in connection with the Properties, but excluding any
permits and other rights to the extent transfer would result in a violation of
applicable Law or is restricted by any Transfer Requirement that is not waived
by Purchaser or satisfied;

(f)           All treatment and processing plants and equipment, machinery,
fixtures and other tangible personal property and improvements located on the
Properties or used or held for use in connection with the operation of the
Properties (“Equipment”);

(g)          All flow lines, pipelines, gathering systems and appurtenances
thereto located on the Properties or used, or held for use, in connection with
the operation of the Properties (“Pipelines” and, together with the Equipment
and Wells, “Personal Property”);

(h)          All Hydrocarbons produced from or attributable to the Leases,
Mineral Interests, Lands, and Wells from and after the Effective Time, together
with Imbalances associated with the Properties;

(i)           All lease files; land files; well files; gas and oil sales
contract files; gas processing files; division order files; abstracts; title
opinions; land surveys; logs; maps; engineering data and reports; interpretive
data, technical evaluations and technical outputs; and other books, records,
data, files, and accounting records, in each case to the extent related to the
Assets, or used or held for use in connection with the maintenance or operation
thereof, but excluding (i) any books, records, data, files, logs, maps,
evaluations, outputs, and accounting records to the extent disclosure or
transfer would result in a violation of applicable Law or is restricted by any
Transfer Requirement that is not satisfied, (ii) computer or communications
software or intellectual property (including tapes, codes, data and program
documentation and all tangible manifestations and technical information relating
thereto), (iii) reserve studies and evaluations, and (iv) records relating to
the negotiation and consummation of the sale of the Interests (subject to such
exclusions, the “Records”); provided, however, that Seller may retain the
originals of such Records as Seller has reasonably determined may be required
for existing litigation, tax, accounting, and auditing purposes; and

 

(j)

All vehicles or vessels used exclusively in connection with the Assets.

•

Anadarko Retained Assets.

Notwithstanding the foregoing, subject to Section 7.9, the Assets shall not
include, and there is excepted, reserved and excluded from the transaction
contemplated hereby all Assets not conveyed to the Company by Anadarko pursuant
to the Anadarko Purchase Agreement, including pursuant to Sections 3.4(d)(iii)
and 7.7 of the Anadarko Purchase Agreement (collectively, the “Anadarko Retained
Assets”).

 

 

-3-

•

Effective Time; Proration of Costs and Revenues.

(a)          Subject to Section 1.5, possession of the Interests shall be
transferred from Seller to Purchaser at the Closing, but certain financial
benefits and burdens attributable to the Assets were transferred from Anadarko
to the Company effective as of 7:00 A.M., local time, where the respective
Assets are located, on January 1, 2007 (the “Effective Time”), as described
below.

(b)          Pursuant to the Anadarko Purchase Agreement, the Company is
entitled to the benefit of all Hydrocarbon production from or attributable to
the Properties at and after the Effective Time (and all products and proceeds
attributable thereto), and to all other income, proceeds, receipts and credits
earned with respect to the Assets at or after the Effective Time, and is
responsible for (and entitled to any refunds with respect to) all Property Costs
incurred at and after the Effective Time. Pursuant to the Anadarko Purchase
Agreement, Anadarko is entitled to the benefit of all Hydrocarbon production
from or attributable to the Properties prior to the Effective Time (and all
products and proceeds attributable thereto), and to all other income, proceeds,
receipts and credits earned with respect to the Assets prior to the Effective
Time, and is responsible for (and entitled to any refunds with respect to) all
Property Costs incurred prior to the Effective Time. “Earned” and “incurred”, as
used in this Agreement, shall be interpreted in accordance with GAAP and Council
of Petroleum Accountants Society (COPAS) standards, as applicable. “Property
Costs” means all costs attributable to the ownership and operation of the Assets
(including without limitation costs of insurance relating specifically to the
Assets and ad valorem, property, severance, Hydrocarbon production and similar
Taxes based upon or measured by the ownership or operation of the Assets or the
production of Hydrocarbons therefrom, but excluding any other Taxes) and capital
expenditures incurred in the ownership and operation of the Assets in the
ordinary course of business and, where applicable, in accordance with the
relevant operating or unit agreement, if any, and overhead costs charged to the
Assets under the relevant operating agreement or unit agreement, if any, or, if
none, the amounts shown under Schedule 1.4 shall be the overhead amounts deemed
charged to the Assets, but excluding without limitation liabilities, losses,
costs, and expenses attributable to (i) claims for personal injury or death,
property damage or violation of any Law, (ii) obligations to plug wells or
dismantle, abandon and salvage facilities, (iii) obligations to remediate any
contamination of groundwater, surface water, soil, Equipment or Pipelines under
applicable Environmental Laws, (iv) obligations to furnish make-up gas according
to the terms of applicable gas sales, gathering or transportation contracts, (v)
gas balancing obligations and (vi) obligations to pay working interests,
royalties, overriding royalties or other interests held in suspense, all of
which are addressed in Article 9 or elsewhere in this Agreement. For purposes of
this Section 1.4, determination of whether Property Costs are attributable to
the period before or after the Effective Time shall be based on when services
are rendered, when the goods are delivered, or when the work is performed. For
clarification, the date an item or work is ordered is not the date of a
pre-Effective Time transaction for settlement purposes, but rather the date on
which the item ordered is delivered to the job site, or the date on which the
work ordered is performed, shall be the relevant date. For purposes of
allocating Hydrocarbon production (and accounts receivable with respect
thereto), under this Section 1.4, (i) liquid Hydrocarbons shall be deemed to be
“from or attributable to” the Properties when they are placed into the storage
facilities and (ii) gaseous Hydrocarbons shall be deemed to be “from or
attributable to” the Properties when they pass through the delivery point sales
meters on the pipelines through which they are transported. Anadarko shall
utilize reasonable interpolative procedures to arrive at an

 

 

-4-

allocation of Hydrocarbon production when exact meter readings or gauging and
strapping data is not available. Seller has provided to Purchaser all data
necessary to support any estimated allocation, for purposes of establishing the
adjustment to the Cash Purchase Price pursuant to Section 2.2 hereof that has
been used to determine the Closing Payment. Property Costs that are paid
periodically shall be prorated based on the number of days in the applicable
period falling before and the number of days in the applicable period falling at
or after the Effective Time, except that Hydrocarbon production, severance and
similar Taxes shall be prorated based on the number of units actually produced,
purchased or sold or proceeds of sale, as applicable, before, and at or after,
the Effective Time. In each case, Purchaser and Company shall be responsible for
the portion allocated to the period at and after the Effective Time and Anadarko
shall be responsible for the portion allocated to the period before the
Effective Time. For purposes of this Section 1.4, the calculations and
allocations contemplated hereby shall be made in the same manner as such
calculations and allocations are made by Anadarko pursuant to the Anadarko
Purchase Agreement insofar as such calculations and allocations relate to the
Assets.

•

Delivery and Maintenance of Records.

To the extent that Seller holds any Records, Seller, at Seller’s sole cost and
expense, shall deliver the Records (FOB Seller’s office) to Purchaser within
thirty (30) days following Closing. To the extent that any Records are held by
Anadarko at or following the Closing, Seller shall use its reasonable best
efforts to obtain such Records from Anadarko; provided that Seller shall not be
obligated to utilize any greater level of effort to obtain such Records from
Anadarko than Seller uses to obtain any other records from Anadarko to which
Seller is entitled pursuant to the terms of the Anadarko Purchase Agreement.
Other than any original Records retained by Seller pursuant to Section 1.2(i),
Purchaser shall be entitled to all original Records maintained by the Company or
its Affiliates. Seller shall be entitled to keep a copy or copies of all
Records; provided, however, that Seller shall not sell or otherwise allow third
parties to review, copy or otherwise use (for any purpose) any Records retained
by Seller for its own account. Purchaser shall, and shall cause the Company to,
preserve the Records for a period of ten (10) years following the Closing and
will allow Seller and its representatives, consultants and advisors reasonable
access, during normal business hours and upon reasonable notice, to the Records
for any legitimate business reason of Seller, including in order for Seller to
comply with a Tax or other legally required reporting obligation or Tax or legal
dispute; provided, however, that Purchaser or the Company shall not be required
to grant access to Seller or any of its representatives, consultants or
advisors, to any Records that are subject to an attorney/client or attorney work
product privilege or that would cause Purchaser or the Company to violate any
obligation to any third party or breach any restriction legally binding on
Purchaser or the Company. Any such access shall be at the sole cost and expense
of Seller. Unless otherwise consented to in writing by Seller, for a period of
ten (10) years following the Closing Date, Purchaser shall not and shall cause
its Affiliates (including the Company) not to, destroy, alter or otherwise
dispose of the Records, or any portions thereof, without first giving at least
thirty (30) days prior written notice to Seller and offering to surrender to
Seller the Records or such portions thereof.

 

 

-5-

ARTICLE 2

PURCHASE PRICE

•

Purchase Price.

The purchase price for the Interests (the “Purchase Price”) shall be (a)
$285,000,000, adjusted as provided in Section 2.2 (the “Cash Purchase Price”),
payable in cash, and (b) 750,000 shares (the “Purchased Shares”) of common
stock, par value $0.001 per share (“Crimson Parent Common Stock”), of Crimson
Parent (the “Stock Purchase Price”).

•

Adjustments to Cash Purchase Price.

The Cash Purchase Price (before adjustment pursuant to this Section 2.2) for the
Interests shall be adjusted in the manner specified below (without duplication),
with all such amounts being determined in accordance with GAAP and Council of
Petroleum Accountants Society (COPAS) standards, as applicable, in order to
reach the Adjusted Purchase Price:

(a)          Reduced by the aggregate amount of the following proceeds received
by the Company, but distributed to Seller, or received by Anadarko and not
remitted to the Company, in each case, between (and including) the Effective
Time and the Closing Date (with the period between the Effective Time and the
Closing Date referred to as the “Adjustment Period”): (i) proceeds from the sale
of Hydrocarbons (net of any royalties, overriding royalties or other burdens on
or payable out of production, gathering, processing and transportation costs and
any production, severance, sales, excise or similar Taxes not reimbursed to
Seller by the purchaser of production) produced from or attributable to the
Properties during the Adjustment Period, and (ii) other proceeds earned with
respect to the Assets during the Adjustment Period, provided that the amount of
any such adjustment for the portion of the Adjustment Period that ends on the
Anadarko Closing Date shall be the same amount by which the Anadarko Purchase
Price is adjusted pursuant to Section 2.2(a) of the Anadarko Purchase Agreement
in respect of the Properties and the Assets;

(b)          Reduced by $1,594,434 for all Retained Preference Property and
Retained TR Assets;

(c)          Reduced by an aggregate of $2,297,764 with respect to (i) all Title
Defects and (ii) all Environmental Defects pursuant to Section 4.3;

(d)          Increased by the amount of all Property Costs and other costs
attributable to the ownership and operation of the Assets which are paid and
incurred during the Adjustment Period (including any overhead costs under
Schedule 1.4 deemed charged to the Assets with respect to the Adjustment Period
even though not actually paid), except any Property Costs and other such costs
already deducted in the determination of proceeds in Section 2.2(a), provided
that the amount of any such adjustment for the portion of the Adjustment Period
that ends on the Anadarko Closing Date shall be the same amount by which the
Anadarko Purchase Price is adjusted pursuant to Section 2.3(d) of the Anadarko
Purchase Agreement in respect of the Properties and the Assets;

 

 

-6-

(e)          Reduced by the aggregate amounts payable to owners of working
interests, royalties and overriding royalties and other interests in the
Properties held in suspense by a Person other than the Company as of the Closing
Date;

(f)           Increased or reduced as mutually agreed upon in writing prior to
Closing by Seller and Purchaser;

(g)          Increased by the value of the amount of merchantable Hydrocarbons
stored in tanks and pipelines attributable to the ownership and operation of the
Assets that belong to the Company as of the Effective Time (which value shall be
computed at the applicable third-party contract prices for the month of
December 2006 for such stored Hydrocarbons), provided that the amount of any
such increase shall be the same amount by which the Anadarko Purchase Price is
adjusted pursuant to Section 2.3(h) of the Anadarko Purchase Agreement in
respect of the Assets;

(h)          Reduced by the actual net aggregate Imbalances, if any, owed to
third-parties, as of the Effective Time, multiplied by a price of $3.00 per
MMBtu, provided that the amount of any such reduction shall be the same amount
by which the Anadarko Purchase Price is adjusted pursuant to Section 2.3(1) of
the Anadarko Purchase Agreement in respect of the Assets; and

(i)           Increased by $150,811 to cover the costs and expenses of the
transition operations to be provided by Anadarko pursuant to Section 1.11 of the
Third Amendment.

Each adjustment made pursuant to Section 2.2(a) shall serve to satisfy, up to
the amount of the adjustment, the Company’s entitlement under Section 1.4 to
Hydrocarbon production from or attributable to the Properties during the
Adjustment Period, and to the value of other income, proceeds, receipts and
credits earned with respect to the Assets during the Adjustment Period, and as
such, Purchaser (and the Company) shall not have any separate rights to receive
any Hydrocarbon production or income, proceeds, receipts and credits with
respect to which an adjustment has been made. Similarly, the adjustment
described in Section 2.2(d) shall serve to satisfy, up to the amount of the
adjustment, Purchaser’s (and the Company’s) obligation under Section 1.4 to pay
Property Costs and other costs attributable to the ownership and operation of
the Assets which are incurred during the Adjustment Period, and as such,
notwithstanding anything in this Agreement to the contrary, Purchaser (and the
Company) shall not be separately obligated to pay for any Property Costs or
other such costs with respect to which an adjustment has been made.

The Cash Purchase Price, adjusted as set forth in clauses (a) through (i) above,
shall be increased by simple interest thereon from the Effective Time to the
Closing Date, computed at the Agreed Interest Rate.

 

•

Allocation of Purchase Price for Tax Purposes.

Purchaser and Seller shall use good faith efforts to agree, as soon as
reasonably practicable after the Closing but not later than ninety (90) days
following the Closing Date, upon an allocation of the unadjusted Purchase Price
among each of the Assets (“Allocated Values”), in compliance with the principles
of Section 1060 of the Code, and the Treasury regulations

 

 

-7-

thereunder. Such allocation of value shall be generally treated as Class V
assets for purposes of Internal Revenue Service Form 8594 to the extent possible
consistent with the character of the Assets involved. The “Tax Allocated Value”
for any Asset equals the portion of the unadjusted Purchase Price to be
allocated to such Asset by the parties pursuant to this Section 2.3, increased
or reduced as described in this Article 2. Any adjustments to the Purchase Price
other than the adjustments provided for in Section 2.2(b) and Section 2.2(c)
shall be applied on a pro rata basis to the amounts agreed to by the parties
pursuant to this Section 2.3 for all Assets to the maximum extent possible
consistent with the character of the adjustments. After all such adjustments are
made, any adjustments to the Purchase Price pursuant to Section 2.2(b) and
Section 2.2(c) shall be applied to the amounts agreed to by the parties pursuant
to this Section 2.3 for the particular affected Assets. After Seller and
Purchaser have agreed on the Tax Allocated Values for the Assets, Seller will be
deemed to have accepted such Tax Allocated Values for purposes of this Agreement
and the transactions contemplated hereby, but otherwise makes no representation
or warranty as to the accuracy of such values. Seller and Purchaser agree (i)
that the Tax Allocated Values shall be used by Seller and Purchaser as the basis
for reporting asset values and other items for purposes of all federal, state,
and local Income Tax Returns, including without limitation Internal Revenue
Service Form 8594 and (ii) that neither they nor their Affiliates will take
positions inconsistent with the Tax Allocated Values in notices to Governmental
Bodies, in audit or other proceedings with respect to Taxes unless required by
applicable Law or with the consent of the other party. Purchaser and Seller
agree that each shall furnish the other a copy of Form 8594 (Asset Acquisition
Statement under Section 1060) proposed to be filed with the Internal Revenue
Service by such party or any Affiliate thereof at least ten (10) days prior to
such filing.

ARTICLE 3

TITLE MATTERS

•

Seller’s Title.

(a)          Except for Seller’s representations and warranties contained in
Section 5.11, Section 5.12 and Section 5.13, Seller makes no warranty or
representation, express, implied, statutory or otherwise, with respect to the
Company’s title to any of the Assets.

(b)          Notwithstanding anything herein provided to the contrary, if a
Title Defect under this Article 3 results from any matter which could also
result in the breach of any representation or warranty of Seller set forth in
Article 5, then (other than the right to assert a breach of any representation
or warranty of Seller contained in Section 5.11, Section 5.12 or Section 5.13
following the Closing) Purchaser shall only be entitled to the adjustment to the
Purchase Price pursuant to Section 2.2(c), and, other than the right to assert a
breach of any representation or warranty contained in Section 5.11, Section 5.12
or Section 5.13 following the Closing, shall be precluded from also asserting
such matter as the basis of the breach of any representation or warranty of
Seller set forth in Article 5.

 

 

-8-

•

Definition of Defensible Title.

As used in this Agreement, the term “Defensible Title” means that title of the
Company with respect to the Units, Warranty Wells or other Assets shown in
Exhibit A-1 that, except for and subject to Permitted Encumbrances:

(a)          Entitles the Company to receive a share of the Hydrocarbons
produced, saved and marketed from any Unit, Warranty Well or other Asset shown
in Exhibit A-1 throughout the duration of the productive life of such Unit,
Warranty Well or other Asset (after satisfaction of all royalties, overriding
royalties, net profits interests or other similar burdens on or measured by
production of Hydrocarbons) (a “Net Revenue Interest”), of not less than the Net
Revenue Interest shown in Exhibit A-1 for such Unit, Warranty Well or other
Asset, except for decreases in connection with those operations in which the
Company (or its predecessor in interest to such Unit, Warranty Well or other
Asset during the Adjustment Period) may from and after the Effective Time become
a non-consenting co-owner, decreases resulting from the establishment or
amendment from and after the Effective Time of pools or units, and decreases
required to allow other working interest owners to make up past underproduction
or pipelines to make up past under deliveries, and except as stated in such
Exhibit A-1;

(b)          Obligates the Company to bear a percentage of the costs and
expenses for the maintenance and development of, and operations relating to, any
Unit, Warranty Well or other Asset shown in Exhibit A-1 not greater than the
“working interest” shown in Exhibit A-1 for such Unit, Warranty Well or other
Asset without increase throughout the productive life of such Unit, Warranty
Well or other Asset, except as stated in Exhibit A-1 and except for increases
resulting from contribution requirements with respect to non-consenting
co-owners under applicable operating agreements and increases that are
accompanied by at least a proportionate increase in the Net Revenue Interest of
the Company; and

(c)          Is free and clear of liens, encumbrances, obligations, security
interests, irregularities, pledges, or other defects.

(d)          As used in this Agreement, the term “Title Defect” means any lien,
charge, encumbrance, obligation (including contract obligation), defect, or
other matter (including without limitation a discrepancy in Net Revenue Interest
or working interest) that causes the Company (or its predecessor in interest to
such Unit, Warranty Well or other Asset during the Adjustment Period) not to
have Defensible Title in and to the Units, Warranty Wells or other Assets shown
on Exhibit A-1 as of the Effective Time and the Closing. As used in this
Agreement, the term “Title Benefit” shall mean any right, circumstance or
condition that operates to increase the Net Revenue Interest of the Company (or
its predecessor in interest to such Unit, Warranty Well or other Asset during
the Adjustment Period) in any Unit, Warranty Well or other Asset shown on
Exhibit A-1, without causing a greater than proportionate increase in the
working interest of the Company (or its predecessor in interest to such Unit,
Warranty Well or other Asset during the Adjustment Period) above that shown in
Exhibit A-1 as of the Effective Time. Notwithstanding the foregoing, the
following shall not be considered Title Defects:

 

 

-9-

 

(i)

defects based solely on (1) lack of information in the files of Seller or the
Company (or its predecessor in interest to such Unit, Warranty Well or other
Asset during the Adjustment Period), or (2) references to a document(s) if such
document(s) is not in the files of Seller or the Company (or its predecessor in
interest to such Unit, Warranty Well or other Asset during the Adjustment
Period);

 

(ii)

defects arising out of lack of corporate or other entity authorization unless
Purchaser provides affirmative evidence that the action was not authorized;

 

(iii)

defects based on failure to record Leases issued by any state or federal
Governmental Body, or any assignments of such Leases, in the real property,
conveyance or other records of the county or parish in which such Property is
located;

 

(iv)

defects based on a gap in the chain of title of the Company (or its predecessor
in interest to such Unit, Warranty Well or other Asset during the Adjustment
Period) in the county or parish records as to Leases, unless such gap is
affirmatively shown to exist in such records by an abstract of title, title
opinion or landman’s title chain which documents shall be included in a Title
Defect Notice; and

 

(v)

defects that have been cured by applicable Laws of limitation or prescription.

•

Definition of Permitted Encumbrances.

As used herein, the term “Permitted Encumbrances” means any or all of the
following:

(a)          Royalties and any overriding royalties, reversionary interests and
other burdens on production, to the extent that any such burden does not reduce
the Net Revenue Interest of the Company (or its predecessor in interest to such
Unit, Warranty Well or other Asset during the Adjustment Period) below that
shown in Exhibit A-1 or increase the working interest of the Company (or its
predecessor in interest to such Unit, Warranty Well or other Asset during the
Adjustment Period) above that shown in Exhibit A-1 without a proportionate
increase in the Net Revenue Interest;

(b)          All Leases, unit agreements, pooling agreements, operating
agreements, Hydrocarbon production sales contracts, division orders and other
contracts, agreements and instruments applicable to the Assets, to the extent
that they do not, individually or in the aggregate, reduce the Net Revenue
Interest of the Company (or its predecessor in interest to such Unit, Warranty
Well or other Asset during the Adjustment Period) below that shown in
Exhibit A-1 or increase the working interest of the Company (or its predecessor
in interest to such Unit, Warranty Well or other Asset during the Adjustment
Period) above that shown in Exhibit A-1 without a proportionate increase in the
Net Revenue Interest;

 

(c)

Preference Rights applicable to this or any future transaction;

 

 

-10-

 

(d)

Transfer Requirements applicable to this or any future transaction;

 

(e)

Liens for current Taxes or assessments not yet delinquent;

(f)           Materialman’s, mechanic’s, repairman’s, employee’s, contractor’s,
operator’s and other similar liens or charges arising in the ordinary course of
business for amounts not yet delinquent (including any amounts being withheld as
provided by Law);

(g)          All rights to consent by, required notices to, filings with, or
other actions by Governmental Bodies in connection with the conveyance of the
Assets or interests therein by means of the sale of the Interests pursuant to
this or to any future transaction if they are not required or customarily
obtained prior to the sale or conveyance;

(h)          Rights of reassignment arising upon final intention to abandon or
release the Assets, or any of them;

(i)           Easements, rights-of-way, servitudes, permits, surface leases and
other rights in respect of surface operations, to the extent that they do not
(i) reduce the Net Revenue Interest of the Company (or its predecessor in
interest to such Unit, Warranty Well or other Asset during the Adjustment
Period) below that shown in Exhibit A-1, (ii) increase the working interest of
the Company (or its predecessor in interest to such Unit, Warranty Well or other
Asset during the Adjustment Period) above that shown in Exhibit A-1 without a
proportionate increase in Net Revenue Interest, or (iii) detract in any material
respect from the value of, or interfere in any material respect with the use,
ownership or operation of, the Assets subject thereto or affected thereby (as
currently used, owned and operated) and which would be acceptable by a
reasonably prudent purchaser engaged in the business of owning and operating oil
and gas properties;

 

(j)

Calls on Hydrocarbon production under existing Contracts;

(k)          All rights reserved to or vested in any Governmental Body to
control or regulate any of the Assets in any manner, and all obligations and
duties under all applicable Laws or under any franchise, grant, license or
permit issued by any such Governmental Body;

(l)           Any encumbrance on or affecting the Assets which is discharged by
the Company (or its predecessor in interest to such Unit, Warranty Well or other
Asset during the Adjustment Period) at or prior to Closing;

 

(m)

Any matters shown on Exhibit A-1;

(n)          Any other liens, charges, encumbrances, defects or irregularities
which do not, individually or in the aggregate, detract in any material respect
from the value of, or interfere in any material respect with the use or
ownership of, the Assets subject thereto or affected thereby (as currently used
or owned), which would be accepted by a reasonably prudent purchaser engaged in
the business of owning and operating oil and gas properties, and which do not
reduce the Net Revenue Interest of the Company (or its predecessor in interest
to such Unit, Warranty Well or other Asset during the Adjustment Period) below
that shown in Exhibit A-1, or increase the working interest of the Company (or
its predecessor in interest to such Unit, Warranty Well

 

 

-11-

or other Asset during the Adjustment Period) above that shown in Exhibit A-1
without a proportionate increase in Net Revenue Interest;

 

(o)

Imbalances associated with the Assets; and

 

(p)

Liens granted under applicable joint operating agreements.

•

Notice of Title Defect Adjustments.

(a)          Attached as Exhibit G (the “Title Claim Date”) is a notice to
Purchaser setting forth all Title Defects relating to the Assets that were
identified by Seller pursuant to Section 3.4(a) of the Anadarko Purchase
Agreement (the “Title Defect Notice”).

•

Casualty or Condemnation Loss.

From and after the Effective Time, Purchaser shall assume all risk of loss with
respect to and any change in the condition of the Assets and for production of
Hydrocarbons through normal depletion (including, but not limited to, the
watering out of any Well, collapsed casing or sand infiltration of any Well) and
the depreciation of personal property due to ordinary wear and tear with respect
to the Assets.

•

Government Approvals Respecting Assets.

(a)          Federal and State Approvals. To the extent that the Company has not
previously done so pursuant to Section 3.7 of the Anadarko Purchase Agreement,
Purchaser shall, within thirty (30) days after the Anadarko Closing and at
Purchaser’s own expense, file (or cause the Company to file) for approval with
the applicable Governmental Bodies all assignment documents and other state and
federal transfer documents required to effectuate the transfer of the Assets
from Anadarko to the Company. Purchaser further agrees, promptly after Closing,
to take (or cause the Company to take) all other actions reasonably required by
federal or state agencies having jurisdiction to obtain all requisite regulatory
approvals with respect to this transaction and the sale of the Assets to the
Company pursuant to the Anadarko Purchase Agreement, and to use its commercially
reasonable efforts to obtain the approval by such federal or state agencies, as
applicable, of Anadarko’s assignment documents pursuant to the Anadarko Purchase
Agreement requiring federal or state approval in order for the Company to be
recognized by the federal or state agencies as the owner of the Assets.
Purchaser shall provide Seller with the resignation and designation of operator
instruments, and approved copies of the assignment documents and other state and
federal transfer documents, as soon as they are available.

(b)          Title Pending Governmental Approvals. Until all of the governmental
approvals contemplated by Section 3.6(a) have been obtained, the parties
acknowledge that the following shall occur pursuant to the Anadarko Purchase
Agreement with respect to the affected portion of the Assets:

 

(i)

Anadarko shall continue to hold record title to the affected Leases and other
affected portion of the Assets as nominee for Seller;

 

 

-12-

 

(ii)

The Company shall be responsible for all Assumed Anadarko Obligations with
respect to the affected Leases and other affected portion of the Assets as if
the Company was the record owner of such Leases and other portion of the Assets
as of the Effective Time; and

 

(iii)

Anadarko shall act as Seller’s nominee but shall be authorized to act only upon
and in accordance with Seller’s instructions, and Anadarko shall have no
authority, responsibility or discretion to perform any tasks or functions with
respect to the affected Leases and other affected portion of the Assets other
than those which are purely administrative or ministerial in nature, unless
otherwise specifically requested and authorized by Seller in writing. Seller, at
Purchaser’s and the Company’s expense, shall take reasonable direction from
Purchaser in requesting any such tasks or functions.

(c)          Denial of Required Governmental Approvals. Purchaser acknowledges
that pursuant to the Anadarko Purchase Agreement, if the federal or state agency
fails to do so within twenty-four (24) months after the Anadarko Closing,
Anadarko may continue to hold record title to the affected Leases and other
affected Assets as Seller’s nominee or, at Anadarko’s option, it may terminate
the Anadarko Purchase Agreement and all its obligations thereunder as to the
affected Leases and other affected portion of the Assets by giving sixty (60)
days written notice to Seller, which upon such termination: (i) the Anadarko
Purchase Agreement shall be null and void and terminated as to the affected
Leases and other affected portion of the Assets, (ii) Purchaser and the Company
shall promptly reassign and return to Anadarko the assignment documents and any
and all other documents, materials and data previously delivered to the Company
with respect to the affected Leases and other affected portion of the Assets,
and (iii) Anadarko shall pay to the Company (or Seller for the benefit of the
Company) the Allocated Value of the affected Property (without interest), less
the proceeds of Hydrocarbon production received by the Company (which the
Company may retain as its sole property) net of all expenses, overhead,
royalties, and costs of operations (including plugging and abandonment expenses
but excluding mortgage interest and any burdens, liens, or encumbrances created
by the Company which must be released prior to this payment) attributable to the
affected Leases or other affected portion of the Assets from the Effective Time
forward, plus interest payable on such net amount at the Agreed Interest Rate
from (but not including) the Closing Date to (and including) the date on which
such amount is paid to the Company (or Seller for the benefit of the Company).
Purchaser further acknowledges (on behalf of itself and its Affiliates) that in
no event, however, shall Anadarko or Seller or any of their respective
Affiliates ever be required to reimburse Purchaser or the Company or any of
their respective Affiliates for any expenditures associated with workovers,
recompletions, sidetracks, or the drilling, completion or plugging and
abandonment of wells drilled or work performed by Anadarko or any of its
Affiliates.

 

 

-13-

ARTICLE 4

ENVIRONMENTAL MATTERS

•

Environmental Access.

Purchaser acknowledges that Seller has afforded, and has caused the Company to
afford, to Purchaser and its officers, employees, agents and authorized
representatives, at the sole cost and expense of Purchaser, reasonable access to
all due diligence materials and information, environmental reports, work papers
and other information relating to the Assets either developed by Seller or
obtained from Anadarko (the “Due Diligence Materials”), but only to the extent
that Seller could do so without violating any obligations to any third party.
Purchaser further acknowledges that Seller has made available, and caused the
Company to make available, to Purchaser, upon reasonable notice during normal
business hours, Seller’s personnel and consultants knowledgeable with respect to
the Assets and such Due Diligence Materials in order that Purchaser could make
such diligent investigation as Purchaser considered desirable. Purchaser
acknowledges (and accepted the risk) that it had no right to conduct an
environmental assessment of all or any portion of the Properties (an
“Assessment”) or any sampling, boring, drilling or other invasive investigative
activity with respect to the Properties (an “Invasive Activity”), but that
Seller provided Purchaser with a copy of the final draft of all environmental
reports prepared by, or on behalf of, Seller with respect to any Assessment or
Invasive Activity conducted on the Properties pursuant to the Anadarko Purchase
Agreement.

•

NORM, Wastes and Other Substances.

Purchaser acknowledges that the Assets have been used for the exploration,
development, and production of Hydrocarbons and that there may be petroleum,
produced water, wastes, or other substances or materials located in, on or under
the Properties or associated with the Assets. Equipment and sites included in
the Assets may contain Hazardous Materials, including NORM. NORM may affix or
attach itself to the inside of wells, materials, and equipment as scale, or in
other forms. The wells, materials, and equipment located on the Properties or
included in the Assets may contain Hazardous Materials, including NORM.
Hazardous Materials, including NORM, may have come in contact with various
environmental media, including without limitation, water, soils or sediment.
Special procedures may be required for the assessment, remediation, removal,
transportation, or disposal of environmental media and Hazardous Materials,
including NORM, from the Assets.

•

Environmental Defects.

Attached as Exhibit H is a notice to Purchaser of all violations of an
Environmental Law (other than with respect to NORM) relating to the Assets (in
each case, an “Environmental Defect”) identified by Seller pursuant to
Section 4.3 of the Anadarko Purchase Agreement (an “Environmental Defect
Notice”). The Environmental Defect Notice includes (i) a description of the
matter constituting the alleged Environmental Defect, (ii) the Units/Warranty
Wells and associated Assets affected by the Environmental Defect, (iii) the
Lowest Cost Response to eliminate the Environmental Defect in question, as
determined by Anadarko and Seller in accordance with the Anadarko Purchase
Agreement (the “Environmental Defect Amount”), and (iv) a copy of the
environmental defect notice (redacted to show only the information that relates

 

 

-14-

to the Assets) delivered to Anadarko by Seller pursuant to the Anadarko Purchase
Agreement and a copy of the supporting documents provided by Seller to Anadarko
pursuant to Section 4.3 of the Anadarko Purchase Agreement to verify the
existence of the alleged Environmental Defect(s). Each of Purchaser, the Company
and Crimson Parent has no right to assert any Environmental Defect other than
such Environmental Defects contained in the Environmental Defect Notice. The
parties adjusted the Cash Purchase Price to reflect the Environmental Defect
Amounts for all Environmental Defects by the amount set forth in Section 2.2(e)
which is Purchaser’s exclusive remedy for Environmental Defects.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY

•

Generally.

(a)          For purposes of this Agreement, (i) any representations or
warranties given pursuant to Section 5.5, to the extent that such representation
or warranty relates to the Assets, shall be deemed made with respect to events,
acts or omissions occurring or conditions coming into existence on or after the
Anadarko Closing Date, (ii) Seller shall not be deemed to be in breach of this
Agreement to the extent such representations or warranties contained in Section
5.5 are inaccurate due to events, acts or omissions occurring or existing or
conditions occurring or existing prior to the Anadarko Closing Date that do not
constitute a material breach by Seller of any covenants in this Agreement, and
(iii) the Schedules to this Agreement are based on information provided to
Seller in connection with the Anadarko Purchase Agreement.

(b)          Any representation or warranty qualified “to the knowledge of
Seller” or “to Seller’s knowledge” or with any similar knowledge qualification
is limited to matters within the actual knowledge of the officers of Seller or
its Affiliates or those employees of Seller or any of its Affiliates who have
responsibility for the Assets and who have the following titles: all officers of
EXCO with the title of Chief Executive Officer, Chief Financial Officer, Chief
Operating Officer or Vice President. “Actual knowledge” for purposes of this
Agreement means information actually personally known by such Persons.

(c)          Inclusion of a matter on a Schedule in relation to a representation
or warranty which addresses matters having a Material Adverse Effect shall not
be deemed an indication that such matter does, or may, have a Material Adverse
Effect. Likewise, the inclusion of a matter on a Schedule in relation to a
representation or warranty shall not be deemed an indication that such matter
necessarily would, or may, breach such representation or warranty absent its
inclusion on such Schedule. Matters may be disclosed on a Schedule to this
Agreement for purposes of information only.

(d)          Subject to the foregoing provisions of this Section 5.1, the
disclaimers and waivers contained in Section 9.10, Section 9.11, and Section
9.12 and the other terms and conditions of this Agreement, Seller represents and
warrants to Purchaser and Crimson Parent the matters set out in the remainder of
this Article 5.

 

 

-15-

•

Existence; Qualification and Capitalization.

(a)          Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas and is duly qualified to do
business as a foreign corporation in every jurisdiction in which it is required
to qualify in order to conduct its business, except where the failure to so
qualify would not have a Material Adverse Effect. The Company is a limited
liability company duly formed, validly existing and in good standing under the
laws of the State of Delaware and is duly qualified to do business as a foreign
limited liability company where the Assets are located, except where the failure
to so qualify would not have a Material Adverse Effect.

(b)          Subject to the terms of the limited liability company agreement and
the other organizational documents of the Company, a true and correct copy of
which are attached hereto as Schedule 5.2 (collectively, the “Limited Liability
Company Agreement”), Seller is the beneficial and record owner and has good and
marketable title to the Interests, free and clear of all liens, charges,
encumbrances, obligation, security interests, pledges or other limitations or
restrictions, preemptive rights, preferential arrangements or restrictions of
any kind, including any restriction of the use, voting, transfer, right to
income or any other incidents of ownership. Seller has the full legal right,
power and authority to sell such Interests to Purchaser in accordance with the
terms of this Agreement. Upon payment of the Purchase Price in accordance with
the terms of this Agreement, Purchaser will acquire good and marketable title to
the Interests free and clear of all liens, charges, encumbrances, obligation,
security interests, pledges or other limitations or restrictions. No membership
interests of the Company are reserved for issuance. Except for the Interests,
there are not outstanding or in existence (i) membership interests or other
voting securities of the Company, (ii) securities of the Company convertible
into or exchangeable for membership interests or other voting securities of the
Company, (iii) options, warrants or other rights to acquire from the Company, or
obligations of the Company to issue or sell, any membership interests or other
voting securities or any securities of the Company convertible into or
exchangeable for such membership interests or voting securities, or (iv) equity
equivalents, interest in the ownership or earnings, or other similar rights of
or with respect to the Company.

•

Power.

Seller and the Company have the corporate power to enter into and perform this
Agreement and consummate the transactions contemplated by this Agreement.

•

Authorization and Enforceability.

The execution, delivery and performance of this Agreement, and the performance
of the transactions contemplated hereby, have been duly and validly authorized
by all necessary corporate or partnership action on the part of Seller and the
Company. This Agreement has been duly executed and delivered by Seller and the
Company (and all documents required hereunder to be executed and delivered by
Seller and the Company at Closing will be duly executed and delivered by Seller
and the Company, respectively) and this Agreement constitutes, and at the
Closing such documents will constitute, the valid and binding obligations of
Seller and the Company, enforceable against Seller and the Company,
respectively, in accordance with their

 

 

-16-

terms except as such enforceability may be limited by applicable bankruptcy or
other similar laws affecting the rights and remedies of creditors generally as
well as to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at Law).

•

No Conflicts.

Subject to compliance with the Preference Rights and Transfer Requirements set
forth in Schedule 5.5, the execution, delivery and performance of this Agreement
by Seller and the Company, and the transactions contemplated by this Agreement
will not (i) violate any provision of the certificate of incorporation, bylaws,
limited liability company agreement or similar governing documents of Seller or
the Company, (ii) result in default (with due notice or lapse of time or both)
or the creation of any lien or encumbrance or give rise to any right of
termination, cancellation or acceleration under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license or agreement to which
Seller or the Company is a party or which affect the Assets, (iii) violate any
judgment, order, ruling, or decree applicable to Seller or the Company as a
party in interest, (iv) violate any Laws applicable to Seller or the Company or
any of the Assets, except for (a) rights to consent by, required notices to,
filings with, approval or authorizations of, or other actions by any
Governmental Body where the same are not required prior to the sale of the
Interests or they are customarily obtained subsequent to the sale thereof and
(b) any matters described in clauses (ii), (iii) or (iv) above which would not
have a Material Adverse Effect.

•

Liability for Brokers’ Fees.

Purchaser shall not directly or indirectly have any responsibility, liability or
expense, as a result of undertakings or agreements of Seller or its Affiliates
(including the Company), for brokerage fees, finder’s fees, agent’s commissions
or other similar forms of compensation in connection with this Agreement or any
agreement or transaction contemplated hereby.

•

No Business Conduct.

The Company was organized on March 9, 2007. Since its organization to the
Closing Date, the Company has engaged in no activity other than in connection
with (a) its organization, (b) the preparation, negotiation and execution of
this Agreement and the transactions contemplated hereby, (c) obtaining the right
to receive the Assets by transfer from Anadarko pursuant to the Anadarko
Purchase Agreement, (d) its compliance with the Seller Indenture and the Seller
Credit Agreement and (e) the completion of the transactions contemplated by the
Anadarko Purchase Agreement and the ancillary documents thereto and the
ownership and operation of the Assets. As of the Closing, there were no
liabilities or obligations contingent or otherwise, and no assets of the
Company, other than liabilities or obligations arising or existing under or
resulting from, and the Assets acquired pursuant to, (i) this Agreement, (ii)
the ownership and operation of the Assets, (iii) the Anadarko Purchase
Agreement, (iv) the Conveyance (as defined in the Anadarko Purchase Agreement)
to which the Company is a party, (v) the Transition Services Agreement, (vi) the
Seller Indenture, (vii) the Seller Credit Agreement and (viii) the Limited
Liability Company Agreement. As of the Closing, the Company will be released
from its liabilities and obligations under the Seller Indenture and the

 

 

-17-

Seller Credit Agreement. Without limiting the generality of the foregoing, the
Company does not and has not ever had any employees or any benefit plan,
agreement or arrangement or any “employee benefit plan” within the meaning of
any applicable Laws.

•

Anadarko Purchase Agreement.

(a)          To Seller’s knowledge, except as disclosed in writing to Purchaser
prior to the Closing, (i) all of the Anadarko Warranties were true and accurate
in all material respects as though made on and as of the Anadarko Closing Date,
except to the extent that any such Anadarko Warranty was made as of a specified
date, in which case such Anadarko Warranty was true and correct in all material
respects as of such specified date, and (ii) Anadarko performed and observed in
all material respects its covenants and agreements contained in the Anadarko
Purchase Agreement to be performed or observed by Anadarko under the Anadarko
Purchase Agreement prior to or on the Anadarko Closing Date (in the case of the
foregoing clauses (i) and (ii), insofar as, and solely to the extent that, such
Warranties, covenants or agreements relate to the Assets or the Assumed Anadarko
Obligations), and neither Seller nor Company has executed any waivers in respect
of any such untruth, inaccuracy, breach or nonperformance.

(b)          There was (i) no occurrence or failure to occur of any event that
caused any of Seller’s representations and warranties contained in the Anadarko
Purchase Agreement (insofar as, and solely to the extent that, such
representations and warranties relate to the Assets or the Assumed Anadarko
Obligations) to be untrue or inaccurate in any material respect as though made
on and as of the Anadarko Closing Date, except to the extent that any such
representations and warranties was made as of a specified date, in which case
such representation or warranty was true and correct in all material respects as
of such specified date, and (ii) no breach or nonperformance by Seller in any
material respect of any covenant or agreement contained in the Anadarko Purchase
Agreement to be performed or observed by Seller under the Anadarko Purchase
Agreement prior to or on the Anadarko Closing Date (in the case of the foregoing
clauses (i) and (ii), insofar as, and solely to the extent that, such covenant
or agreement relates to the Assets or the Assumed Anadarko Obligations), in the
case of the foregoing clauses (i) and (ii), that would have a Material Adverse
Effect.

(c)          Seller has previously provided Purchaser with copies of all Title
Defect Notices and Environmental Defect Notices (each as defined in the Anadarko
Purchase Agreement) provided by Seller to Anadarko pursuant to the terms of the
Anadarko Purchase Agreement.

•

Litigation.

As of the date hereof, there are no Proceedings pending, or to the actual
knowledge of Seller, threatened in writing before any Governmental Body against
Seller or any Affiliate of Seller which are reasonably likely to impair
materially Seller’s ability to perform its obligations under this Agreement.
Except as set forth on Schedule 9.3, there are no Proceedings pending, or to the
actual knowledge of Seller, threatened in writing, which relate to the Assets.

 

 

-18-

•

Disregarded Entity.

For U.S. federal income tax purposes, the Company is and has been disregarded as
an entity separate from its owner within the meaning of Section 301.7701-2 of
the United States Treasury Regulations, and neither Seller nor any Affiliate of
Seller has made an election under the entity classification regulations
promulgated pursuant to Section 7701 of the Code to treat the Company as an
entity taxable as a corporation.

 

•

Contract Review

Except as to any Contracts, copies of which have been provided or made available
to Purchaser (to which this Section 5.11 does not apply), Seller has reviewed
the Contracts that were provided to Seller by Anadarko and deemed material by
Seller and concluded that such Contracts contained customary provisions that
would be reasonably acceptable to a reasonably prudent purchaser, similarly
situated to Seller and engaged in the business of owning and operating oil and
gas properties, if it were to purchase and operate the Assets.

•

Preference Rights and Transfer Requirements.

Except for the items listed on Schedule 5.5, all of the Preference Rights
affecting the Assets have been waived and all Transfer Requirements affecting
the Assets have been met.

•

No Conveyances, Liens or Transfers.

Except for (a) the Company becoming a subsidiary guarantor pursuant to the terms
of the Seller Indenture and the Seller Credit Agreement after the Anadarko
Closing and (b) any Lien on the Company or the Assets pursuant to the terms of
the Seller Credit Agreement, each of which guaranties and Liens will be released
as of the Closing, the Company has not conveyed, encumbered or otherwise
transferred any interest in the Assets.

•

Investment Representations.

(a)          Seller is acquiring the Purchased Shares for its own account, and
not with a view toward or for sale associated with any distribution thereof, nor
with any present intention of making a distribution thereof within the meaning
of the Securities Act and applicable state securities laws, without prejudice,
however, to Seller’s right at all times to sell or otherwise dispose of all or
any part of the Purchased Shares under a registration statement under the
Securities Act and applicable state securities laws, whether pursuant to the
Registration Rights Agreement or otherwise, or under an exemption from such
registration available thereunder (including, if available, Rule 144 promulgated
under the Securities Act).

(b)          Seller is an “accredited investor” within the meaning of Rule 501
of Regulation D under the Securities Act.

(c)          Seller understands that the Purchased Shares are being offered and
sold to it in reliance upon specific exemptions from the registration
requirements of the Securities Act and state securities laws and that Crimson
Parent is relying upon the truth and accuracy of, and

 

 

-19-

Seller’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of Seller set forth herein in order to
determine the availability of such exemptions and the eligibility of Seller to
acquire the Purchase Shares. Seller understands that the Purchased Shares are
“restricted securities” under the federal securities laws inasmuch as they are
being acquired from Crimson Parent in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
not be transferred without registration under the Securities Act or pursuant to
an exemption therefrom.

•

Casualty or Condemnation Losses.

Seller did not receive or become entitled to any remedy pursuant to Section
3.5(b) or (c) of the Anadarko Purchase Agreement at the Anadarko Closing for any
loss of any portion of the Assets due to destruction by fire or other casualty
or taking by condemnation or right of eminent domain.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

OF PURCHASER AND CRIMSON PARENT

Purchaser and Crimson Parent jointly and severally represent and warrant to
Seller the following:

•

Existence and Qualification.

Each of Purchaser and Crimson Parent is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation;
and each of Purchaser and Crimson Parent is duly qualified to do business as a
foreign corporation in every jurisdiction in which it is required to qualify in
order to conduct its business, except where the failure to so qualify would not
have a material adverse effect on Purchaser or Crimson Parent; and Purchaser is
duly qualified to do business as a foreign corporation in the respective
jurisdictions where the Assets are located.

•

Power.

Each of Purchaser and Crimson Parent has the corporate power to enter into and
perform this Agreement and consummate the transactions contemplated by this
Agreement.

•

Authorization and Enforceability.

The execution, delivery and performance of this Agreement, and the performance
of the transaction contemplated hereby, have been duly and validly authorized by
all necessary corporate action on the part of Purchaser and Crimson Parent. This
Agreement has been duly executed and delivered by Purchaser and Crimson Parent
(and all documents required hereunder to be executed and delivered by Purchaser
or Crimson Parent at Closing have been duly executed and delivered by Purchaser
and Crimson Parent) and this Agreement and such documents constitute the valid
and binding obligations of Purchaser and Crimson Parent, enforceable against
Purchaser and Crimson Parent in accordance with their terms except as such
enforceability may be limited by applicable bankruptcy or other similar laws
affecting the rights

 

 

-20-

and remedies of creditors generally as well as to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).

•

No Conflicts.

Subject to compliance with the HSR Act and Regulation D of the Securities Act
and applicable state securities laws, the execution, delivery and performance of
this Agreement by Purchaser and Crimson Parent, and the transactions
contemplated by this Agreement will not (i) violate any provision of the
organizational documents of Purchaser or Crimson Parent, (ii) result in a
default (with due notice or lapse of time or both) or the creation of any lien
or encumbrance or give rise to any right of termination, cancellation or
acceleration under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license or agreement to which Purchaser or Crimson Parent
is a party, (iii) violate any judgment, order, ruling, or regulation applicable
to Purchaser or Crimson Parent as a party in interest, or (iv) violate any Law
applicable to Purchaser or Crimson Parent or any of their respective assets, or
(v) require any filing with, notification of or consent, approval or
authorization of any Governmental Body or authority, except any matters
described in clauses (ii), (iii), (iv) or (v) above which would not have a
material adverse effect on Purchaser or Crimson Parent or the transactions
contemplated hereby.

•

Liability for Brokers’ Fees.

Seller shall not directly or indirectly have any responsibility, liability or
expense, as a result of undertakings or agreements of Crimson Parent, Purchaser
or their respective Affiliates, for brokerage fees, finder’s fees, agent’s
commissions or other similar forms of compensation in connection with this
Agreement or any agreement or transaction contemplated hereby.

•

Litigation.

There are no Proceedings pending, or to the actual knowledge of Purchaser or
Crimson Parent, threatened in writing before any Governmental Body against
Purchaser, Crimson Parent or any Affiliate of Purchaser or Crimson Parent which
are reasonably likely to impair materially Purchaser’s or Crimson Parent’s
ability to perform its obligations under this Agreement.

•

Financing.

Purchaser has sufficient sources of immediately available funds (in United
States dollars) to enable it to pay the Closing Payment to Seller at the Closing
and to otherwise satisfy its obligations under this Agreement.

•

Limitation.

Except for the representations and warranties expressly made by Seller in
Article 5 of this Agreement or confirmed in any certificate furnished or to be
furnished to Purchaser or Crimson Parent pursuant to this Agreement, Purchaser
and Crimson Parent represent and acknowledge that (i) there are no
representations or warranties, express, statutory or implied, as to the Assets
or prospects thereof, and (ii) Purchaser and Crimson Parent have not relied upon

 

 

-21-

any oral or written information provided by Seller. Without limiting the
generality of the foregoing, Purchaser and Crimson Parent represent and
acknowledge that Seller has not made and will make no representation or warranty
regarding any matter or circumstance relating to Environmental Laws,
Environmental Liabilities, the release of materials into the environment or
protection of human health, safety, natural resources or the environment or any
other environmental condition of the Assets. Purchaser and Crimson Parent
further represent and acknowledge that they are knowledgeable of the oil and gas
business and of the usual and customary practices of producers such as Seller
and that they have had access to the Company, the Assets (to the extent within
the power and control of Seller to provide such access), the officers and
employees of Seller and the Company, and the books, records and files made
available by Seller relating to the Company and the Assets (to the extent within
the power and control of Seller to provides access to such books, records and
files), and in making the decision to enter into this Agreement and consummate
the transactions contemplated hereby, Purchaser and Crimson Parent have relied
solely on the basis of their own independent due diligence investigation of the
Company and the Assets and Seller’s representations and warranties contained in
this Agreement.

•

SEC Disclosure.

Purchaser is acquiring the Interests for its own account for use in its trade or
business, and not with a view toward or for sale associated with any
distribution thereof, nor with any present intention of making a distribution
thereof within the meaning of the Securities Act and applicable state securities
laws.

•

Bankruptcy.

There are no bankruptcy, reorganization or receivership proceedings pending
against, or, to the knowledge of Purchaser or Crimson Parent, being contemplated
by, or threatened against Purchaser or Crimson Parent.

•

Capitalization of Crimson Parent.

(a)          The authorized capital stock of Crimson Parent consists of (i)
200,000,000 shares of Crimson Parent Common Stock, (ii) 10,000,000 shares of
preferred stock, par value $0.01 per share, of which (A) 12,000 shares are
designated as Series D Preferred Stock, par value $0.01 per share, (B) 9,000
shares are designated as Series E Cumulative Convertible Preferred Stock, par
value $0.01 per share, (C) 81,000 shares are designated as Series G Convertible
Preferred Stock, par value $0.01 per share, and (D) 6,500 shares are designated
as Series H Convertible Preferred Stock, par value $0.01 per share.

(b)          Since March 19, 2007 through the date hereof, except as disclosed
in the Crimson Parent SEC Documents, Crimson Parent has not issued any
additional shares of its capital stock, or any security convertible into or
exchangeable or exercisable for shares of such capital stock, other than upon
the exercise of stock options, and Crimson Parent has not acquired any
additional shares of Parent Common Stock in treasury.

 

 

-22-

(c)          All of the issued and outstanding shares of Crimson Parent Common
Stock and capital stock of Purchaser have been validly issued, and are fully
paid and nonassessable, and are not subject to preemptive rights or other rights
to subscribe for or purchase securities. Each Purchased Share to be issued as
the Stock Purchase Price has been duly authorized and, when so issued, will be
fully paid and nonassessable, and will not be subject to preemptive rights or
other rights to subscribe for or purchase securities.

(d)          Except as set forth in the Crimson Parent SEC Documents, as of the
date hereof, (i) no shares of capital stock or other equity securities of
Crimson Parent are authorized, issued or outstanding, or reserved for issuance
and there are no options, warrants or other rights (including registration
rights), agreements, arrangements or commitments of any character to which
Crimson Parent or any of its subsidiaries is a party relating to the issued or
unissued capital stock or other equity interests of Crimson Parent, requiring
Crimson Parent to grant, issue or sell any shares of the capital stock or other
equity interests of Crimson Parent or any of its subsidiaries by sale, lease,
license or otherwise and (ii) Crimson Parent does not have any obligation,
contingent or otherwise, to repurchase, redeem or otherwise acquire any shares
of the capital stock or other equity interests of Crimson Parent or any of its
subsidiaries.

(e)          No bonds, debentures, notes or other indebtedness of Crimson Parent
having the right to vote (whether currently or upon the occurrence of an event)
on any matters on which the stockholders of Crimson Parent or any of its
subsidiaries may vote are issued or outstanding or subject to issuance.

•

Certificate of Incorporation and By-Laws.

True, correct and complete copies of the Certificates of Incorporation and
By-laws, each as amended to date, of Crimson Parent and Purchaser have been
provided to Seller. The Certificates of Incorporation and By-laws of Crimson
Parent and Purchaser are in full force and effect. Neither Crimson Parent nor
Purchaser is in violation of any provision of its Certificate of Incorporation
or By-laws.

•

SEC Documents and Other Reports of Crimson Parent.

Crimson Parent has filed all documents required to be filed with the Securities
and Exchange Commission (the “SEC”) prior to the date hereof by it and its
subsidiaries under the Securities Act or the Exchange Act (the “Crimson Parent
SEC Documents”). As of their respective dates, or if amended as of the date of
the last such amendment, the Crimson Parent SEC Documents complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and none of the Crimson Parent SEC Documents contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
consolidated financial statements (including related notes) of Crimson Parent
included in the Crimson Parent SEC Documents fairly present in all material
respects the consolidated financial position of Crimson Parent and its
consolidated subsidiaries, as at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the respective periods then ended (subject, in the case of the unaudited
statements, to normal year-end audit adjustments and to any other adjustments

 

 

-23-

described therein and the fact that certain information and notes have been
condensed or omitted in accordance with the Exchange Act) in conformity with
GAAP (except in the case of the unaudited statements) applied on a consistent
basis during the periods involved (except as may be indicated therein or in the
notes thereto).

•

No Required Vote of Crimson Parent Stockholders.

No vote of the stockholders of Crimson Parent is required by law or by the
Certificate of Incorporation or By-laws of Crimson Parent in order for Crimson
Parent and Purchaser to consummate the transactions contemplated hereby,
including the issuance of the Purchased Shares.

ARTICLE 7

COVENANTS OF THE PARTIES

•

Statements of Revenues and Expenses.

(a)          Seller shall use its commercially reasonable efforts to cause
Anadarko to prepare at the sole cost and expense of Purchaser, either (i) if
relief is granted by the U.S. Securities and Exchange Commission, statements of
revenues and direct operating expenses and all notes thereto related to the
Assets or (ii) if such relief is not granted by the U.S. Securities and Exchange
Commission, the financial statements required by the U.S. Securities and
Exchange Commission (such financial statements set forth in the foregoing
clauses (i) and (ii), as applicable, the “Statements of Revenues and Expenses”)
in each case of clauses (i) and (ii), that will be required of Purchaser or any
of its Affiliates in connection with reports, registration statements and other
filings to be made by Purchaser or any of its Affiliates related to the
transactions contemplated by this Agreement with the U.S. Securities and
Exchange Commission pursuant to the Securities Act, or the Exchange Act, in such
form that such statements and the notes thereto can be audited. Seller (x) shall
cooperate with and, to the extent permitted by Anadarko, permit Purchaser to
reasonably participate in the preparation of the Statements of Revenues and
Expenses and (y) shall provide Purchaser and its representatives with reasonable
access to the personnel of Seller and its Affiliates who participate in the
preparation of the Statements of Revenues and Expenses. Seller shall deliver the
Statements of Revenues and Expenses to Purchaser promptly after Seller receives
such financial statements from Anadarko.

(b)          Promptly after the date of this Agreement, Seller shall engage
KPMG, LLP to perform an audit of the Statements of Revenues and Expenses and
shall use commercially reasonable efforts to cause KPMG, LLP to issue
unqualified opinions with respect to Statements of Revenues and Expenses (the
Statements of Revenues and Expenses and related audit opinions being hereinafter
referred to as the “Audited Financial Statements”) and provide its written
consent for the use of its audit reports with respect to Statements of Revenues
and Expenses in reports filed by Purchaser or any of its Affiliates under the
Exchange Act or the Securities Act, as needed. Purchaser shall reimburse Seller
for all fees charged by KPMG, LLP pursuant to such engagement. Seller shall take
all action as may be necessary to facilitate the completion of such audit and
delivery of the Audited Financial Statements to Purchaser or any of its
Affiliates as soon as reasonably practicable, but no later than ten (10) days
prior to the date that such Audited Financial Statements would be required to be
filed by Purchaser or any of its Affiliates with a

 

 

-24-

report on Form 8-K or an amendment thereto under the Exchange Act. Seller shall
provide to Purchaser a draft of the Audited Financial Statements no later than
fifteen (15) days prior to the date that such Audited Financial Statements would
be required to be filed by Purchaser or any of its Affiliates with a report on
Form 8-K or an amendment thereto under the Exchange Act. Seller shall keep
Purchaser regularly informed regarding the progress of such audit and also shall
periodically provide Purchaser with copies of drafts of the Audited Financial
Statements and related audit opinions.

•

Government Reviews.

Seller and Purchaser shall in a timely manner (i) make all required filings, if
any, with and prepare applications to and conduct negotiations with, each
Governmental Body as to which such filings, applications or negotiations are
necessary or appropriate in the consummation of the transactions contemplated
hereby and (ii) provide such information as each may reasonably request to make
such filings, prepare such applications and conduct such negotiations. Each
party shall cooperate with and use all commercially reasonable efforts to assist
the other with respect to such filings, applications and negotiations.

•

Public Announcements.

At or after Closing, the content of any press release or public announcement
first announcing the consummation of this transaction shall be subject to the
prior review and reasonable approval of Seller and Purchaser; provided, however,
the foregoing shall not restrict disclosures by Purchaser or Seller which are
required by applicable securities or other laws or regulations or the applicable
rules of any stock exchange having jurisdiction over the disclosing party or its
Affiliates.

•

Tax Matters.

Subject to the provisions of Section 10.3, Seller shall be responsible for all
Taxes related to the Company or the Assets (other than ad valorem, property,
severance, Hydrocarbon production and similar Taxes based upon or measured by
the ownership or operation of the Assets or the production of Hydrocarbons
therefrom, which are addressed in Section 1.4) prior to the Closing Date, and
Purchaser shall be responsible for all other such Taxes related to the Company
or the Assets on or after the Closing Date. Seller shall handle payment to the
appropriate Governmental Body of all Taxes with respect to the Company or the
Assets which are required to be paid prior to Closing (and shall file all Tax
Returns with respect to such Taxes). Purchaser shall file all Tax Returns that
are required to be filed after the Closing Date relating to the Company or the
Assets and shall handle payment to the appropriate Governmental Body of all
Taxes required to be paid with respect to such Tax Return.

•

Further Assurances.

After Closing, Seller and Purchaser each agrees to take such further actions and
to execute, acknowledge and deliver all such further documents as are reasonably
requested by the other party for carrying out the purposes of this Agreement or
of any document delivered pursuant to this Agreement.

 

 

-25-

•

Anadarko Purchase Agreement.

(a)          Purchaser acknowledges that neither Seller nor the Company had
ownership or control of the Assets prior to the Anadarko Closing. Purchaser
further acknowledges that it has received a copy of the Anadarko Purchase
Agreement, together with all exhibits and schedules thereto.

(b)          Following the Anadarko Closing, Seller shall comply with the
covenants, agreements and obligations of Seller contained in the Anadarko
Purchase Agreement (including, without limitation Sections 3.7, 7.8, 11.1 and
11.3 of the Anadarko Purchase Agreement) insofar as, and to the extent that,
such covenants, agreements and obligations relate to the Company or the Assets.

(c)          Seller agrees that (i) any waiver following the Anadarko Closing by
it of the performance by Anadarko of any covenant or agreement of Anadarko
contained in the Anadarko Purchase Agreement, the waiver of which would
adversely affect the Assets, or (ii) any amendment or modification of the
Anadarko Purchase Agreement following the Anadarko Closing that would adversely
affect the Assets, in each case shall be subject to the Purchaser’s prior
written consent thereto (which consent shall not be unreasonably withheld,
conditioned or delayed) or absent obtaining such Purchaser’s consent, any Losses
that any Purchaser Indemnified Party incurs due to such waiver, amendment or
modification shall be subject to indemnification by Seller pursuant to Section
9.5(c).

(d)          In consideration of the benefits that Purchaser, the Company and
Crimson Parent shall receive pursuant to Section 1.11 of the Third Amendment,
Purchaser and the Company agree (i) to pay (or, if previously paid by Seller, to
reimburse Seller for) all costs and expenses associated with the continued
employment of the Employees (as defined in the Third Amendment, which Employees
are set forth on Exhibit X thereto) during the transition period specified in
the Transition Services Agreement, including, but not limited to, the costs and
expenses of any employee benefits and increase of severance arrangements
previously offered by Anadarko to such Employees, (ii) to reimburse Anadarko
(or, if Anadarko is previously reimbursed by Seller, Seller) within ten (10)
days after receipt of an invoice therefor (whether from Anadarko or from Seller)
all costs and expenses related to such extension of the terms of the Brammer
Agreement (as defined in the Third Amendment), and (iii) assume and perform
Seller’s obligation pursuant to Section 1.10(iii) of the Third Amendment to
indemnify, defend, and hold harmless the Seller Indemnified Persons (as defined
in the Anadarko Purchase Agreement) from and against any and all Losses asserted
against, resulting from, imposed upon, or incurred or suffered by any Seller
Indemnified Person (as defined in the Anadarko Purchase Agreement), directly or
indirectly, to the extent resulting from, arising out of, or relating to the
continued employment of the Employees and extension of the term of the Brammer
Agreement during the transition period.

•

Insurance.

(a)          Effective as of the Closing Date, Purchaser shall cause the
following insurance to be carried and maintained with respect to the Company and
the Assets: (i) general liability insurance with combined single limits per
occurrence of not less than $1,000,000.00 for bodily

 

 

-26-

injury and property damage, including property damage by blowout and cratering,
completed operations, and contractual liability as respects any contract into
which Purchaser may enter under the terms of this Agreement; and (ii) operators
extra expense insurance with limits of not less than $1,000,000.00 per
occurrence, covering the costs of controlling a blowout, and certain other
related and/or resulting costs and seepage and pollution liability.

•

Transition Services Agreement.

At the Anadarko Closing, Seller and the Company entered into a transition
services agreement with Anadarko in substantially the form attached as Exhibit I
hereto (the “Transition Services Agreement”). Purchaser acknowledges that the
Company shall be liable for, and Purchaser agrees that it shall cause the
Company to pay, 25% of the management fee payable to Anadarko pursuant to the
Transition Services Agreement.

•

Preference Rights and Transfer Requirements.

The Assets subject to Preference Rights (“Preference Property”) described on
Schedule 5.5(a) have been conveyed to Seller (and not the Company) at the
Anadarko Closing and will not be held by the Company at the Closing and the
Purchase Price has been reduced pursuant to Section 2.2(b) by the Allocated
Value of such Preference Property because as of the Closing Date the holder of
the Preference Right in respect of such Preference Property has not yet
exercised or waived its Preference Right and the time in which the Preference
Right may be exercised has not yet expired (the “Retained Preference Property”).
The Assets described on Schedule 5.5(b) were not conveyed to the Company by
Anadarko at the Anadarko Closing and will not be held by the Company at the
Closing and the Purchase Price has been reduced pursuant to Section 2.2(b) by
the Allocated Value of such Assets because as of the Closing Date such Assets
remain subject to a Transfer Requirement that has not been waived, complied with
or otherwise satisfied prior to the Anadarko Closing or the Closing (the
“Retained TR Assets”). The Retained Preference Property will be conveyed by
Seller to Purchaser and the Company at a delayed Closing (which shall become the
new Closing Date with respect to such Retained Preference Property) within ten
(10) days following the date on which Seller obtains a waiver of or notice of
election not to exercise or otherwise satisfies all remaining Preference Rights
with respect to such Retained Preference Property as contemplated by this
Section 7.9. The Retained TR Assets will be conveyed by Seller (or by Anadarko
at the direction of Seller) to Purchaser and the Company at a delayed Closing
(which shall become the new Closing Date with respect to such Retained TR
Assets) within ten (10) days following the date on which Anadarko and/or Seller
complies with, obtains a waiver of or otherwise satisfies all remaining Transfer
Requirements with respect to such Anadarko Retained Assets and such Retained TR
Assets are conveyed to Seller (or Anadarko agrees to convey such Retained TR
Assets directly to Purchaser or the Company). At any delayed Closing, Purchaser
shall pay to or at the direction of Seller a purchase price equal to the amount
by which the Purchase Price was reduced on account of the holding back of such
Retained Preference Property or Retained TR Asset (in each case, as adjusted
pursuant to Section 2.2 through the new Closing Date therefor); provided,
however, if all such Preference Rights and Transfer Requirements with respect to
any Retained Preference Property or Retained TR Asset so held back at the
initial Closing are not obtained, complied with, waived or otherwise satisfied
as contemplated by this Section within one hundred eighty (180) days after the
initial Closing has occurred with respect to any Asset, then such Retained

 

 

-27-

Preference Property or Retained TR Asset shall be eliminated from the Assets and
this Agreement and shall not be transferred or conveyed to Purchaser or the
Company, unless Seller and Purchaser agree to proceed with a closing on such
Retained Preference Property or Retained TR Asset, in which case Seller and
Purchaser shall be deemed to have waived any objection (and shall be obligated
to indemnify the Seller Indemnified Persons for all Losses) with respect to
non-compliance with such Preference Rights and Transfer Requirements with
respect to such Retained Preference Property or Retained TR Asset.

ARTICLE 8

CLOSING

•

Time and Place of Closing.

The completion of the transactions contemplated by this Agreement (the
“Closing”) shall occur as of 11:00 a.m., local time, on the date hereof (the
“Closing Date”), at the offices of Vinson & Elkins L.L.P., Houston, Texas.

•

Obligations of Seller at Closing.

At the Closing, upon the terms of this Agreement, Seller shall deliver or cause
to be delivered to Purchaser and Crimson Parent, or perform or cause to be
performed, the following:

 

(a)

the Assignment of Membership Interest, duly executed by Seller;

(b)          the Transition Services Agreement, duly executed by Anadarko and
the Company;

 

(c)

the Seismic License, duly executed by Anadarko and the Company;

 

(d)

the Registration Rights Agreement, duly executed by Seller; and

(e)          the Conveyance (as defined in the Anadarko Purchase Agreement),
duly executed by the Company and Anadarko.

•

Obligations of Purchaser at Closing.

At the Closing, upon the terms of this Agreement, Purchaser and Crimson Parent
shall deliver or cause to be delivered to Seller, or perform or caused to be
performed, the following:

(a)          a wire transfer of the Closing Payment, by wire transfer of
immediately available funds;

(b)          a certificate, in proper form, issued in the name of Seller and
evidencing the number of shares of Crimson Parent Common Stock that comprise the
Stock Purchase Price;

(c)          a legal opinion of counsel to Purchaser, dated as of the Closing,
to the effect that the Purchased Shares have been validly issued, fully paid and
nonassessable, in form and substance reasonably satisfactory to Seller;

 

 

-28-

 

(d)

the Assignment of Membership Interest, duly executed by Purchaser; and

 

(e)

the Registration Rights Agreement, duly executed by Crimson Parent.

•

Closing Adjustments.

(a)          Seller has prepared and delivered to Purchaser, based upon the best
information available to Seller, the preliminary settlement statement attached
hereto as Exhibit J estimating the cash portion of the Adjusted Purchase Price
after giving effect to all adjustments listed in Section 2.2 (which statement is
consistent in all material respects, to the extent applicable to the Assets,
with the preliminary settlement statement delivered by Anadarko to Seller
pursuant to the Anadarko Purchase Agreement). The estimate delivered in
accordance with this Section 8.4(a) constitutes the dollar amount to be paid by
Purchaser to Seller at the Closing (the “Closing Payment”). Purchaser has had
the opportunity to review and discuss the preliminary settlement statement with
Seller.

(b)          As soon as reasonably practicable after the Closing but not later
than ninety (90) days following the Closing Date, Seller shall prepare and
deliver to Purchaser a statement setting forth the final calculation of the cash
portion of the Adjusted Purchase Price and showing the calculation of each
adjustment, based, to the extent possible, on actual credits, charges, receipts
and other items before and after the Effective Time and taking into account all
adjustments provided for in this Agreement (the “Final Cash Purchase Price”).
Seller shall, at Purchaser’s request, supply reasonable documentation available
to support any credit, charge, receipt or other item. Seller shall afford
Purchaser and its representatives the opportunity to review such statement and
the supporting schedules, analyses, workpapers, and other underlying records or
documentation as are reasonably necessary and appropriate in Purchaser’s review
of such statement. Each party shall cooperate fully and promptly with the other
and their respective representatives in such examination with respect to all
reasonable requests related thereto. As soon as reasonably practicable but not
later than the 30th day following receipt of Seller’s statement hereunder,
Purchaser shall deliver to Seller a written report containing any changes that
Purchaser proposes be made to such statement. Seller and Purchaser shall
undertake to agree on the final statement of the Final Cash Purchase Price no
later than one hundred eighty (180) days after the Closing Date (the “Final
Settlement Date”). In the event that Seller and Purchaser cannot reach agreement
by the Final Settlement Date, either party may refer the remaining matters in
dispute to Ernst & Young LLP, or such other nationally-recognized independent
accounting firm as may be mutually accepted by Purchaser and Seller, for review
and final determination (the “Agreed Accounting Firm”). If issues are submitted
to the Agreed Accounting Firm for resolution, Seller and Purchaser shall each
enter into a customary engagement letter with the Agreed Accounting Firm at the
time the issues remaining in dispute are submitted to the Agreed Accounting
Firm. The Agreed Accounting Firm will be directed to (i) review the statement
setting forth Seller’s calculation of the Final Cash Purchase Price and the
records relating thereto only with respect to items identified by Purchaser in
its written report containing changes to such statement that remain disputed
immediately following the Final Settlement Date and (ii) determine the final
adjustments. Each party shall furnish the Agreed Accounting Firm such work
papers and other records and information relating to the objections in dispute
as the Agreed Accounting Firm may reasonably request and that are available to
such party or its Affiliates (and such parties’ independent public accountants).
The parties will, and

 

 

-29-

will cause their representatives to, cooperate and assist in the conduct of any
review by the Agreed Accounting Firm, including, but not limited to, making
available books, records and, as available, personnel as reasonably required.
The Agreed Accounting Firm shall conduct the arbitration proceedings in Houston,
Texas in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, to the extent such rules do not conflict with the terms
of this Section 8.4(b). The Agreed Accounting Firm’s determination shall be made
within thirty (30) days after submission of the matters in dispute and shall be
final and binding on both parties, without right of appeal and such decision
shall constitute an arbitral award upon which a judgment may be entered by a
court having jurisdiction thereof. In determining the proper amount of any
adjustment to the Final Cash Purchase Price, the Agreed Accounting Firm shall
not increase the Final Cash Purchase Price more than the increase proposed by
Seller nor decrease the Final Asset Value more than the decrease proposed by
Purchaser, as applicable, and may not award damages or penalties to either party
with respect to any matter. Seller and Purchaser shall each bear its own legal
fees and other costs of presenting its case. Each of Seller and Purchaser shall
bear one-half of the costs and expenses of the accounting firm. Within ten (10)
Business Days after the date on which the parties or the Agreed Accounting Firm,
as applicable, finally determines the disputed matters, (x) Purchaser shall pay
to Seller in cash (by wire transfer of immediately available funds) the amount
by which the Final Cash Purchase Price exceeds the Closing Payment or (y) Seller
shall pay to Purchaser in cash (by wire transfer of immediately available funds)
the amount by which the Closing Payment exceeds the Final Cash Purchase Price,
as applicable. Any post-Closing payment pursuant to this Section 8.4(b) shall
bear interest at the Agreed Interest Rate from (but not including) the Closing
Date to (and including) the date both Purchaser and Seller have executed the
final settlement statement.

(c)          All payments made or to be made hereunder to Seller shall be by
electronic transfer of immediately available funds to an account designated in
writing by Seller, for the credit of Seller. All payments made or to be made
hereunder to Purchaser shall be by electronic transfer of immediately available
funds to a bank and account specified by Purchaser in writing to Seller.

ARTICLE 9

POST-CLOSING OBLIGATIONS; INDEMNIFICATION;

LIMITATIONS; DISCLAIMERS AND WAIVERS

•

Receipts.

Except as otherwise provided in this Agreement, any Hydrocarbons produced from
or attributable to the Assets (and all products and proceeds attributable
thereto) and any other income, proceeds, receipts and credits attributable to
the Assets which are not reflected in the adjustments to the Final Cash Purchase
Price (following the final adjustment pursuant to Section 8.4(b)) shall be
treated as follows: (a) all Hydrocarbons produced from or attributable to the
Assets (and all products and proceeds attributable thereto) and all other
income, proceeds, receipts and credits earned with respect to the Assets to
which the Company is entitled under Section 1.4 shall be the sole property and
entitlement of the Company, and, to the extent received by Seller (including
pursuant to Section 1.4 of the Anadarko Purchase Agreement), Seller shall fully
disclose, account for and remit the same promptly to the Company, and (b) all
Hydrocarbons produced from or attributable to the Assets (and all products and
proceeds

 

 

-30-

attributable thereto) and all other income, proceeds, receipts and credits
earned with respect to the Assets to which Seller or Anadarko is entitled under
Section 1.4 shall be the sole property and entitlement of Seller or Anadarko, as
applicable, and, to the extent received by Purchaser or any of its Affiliates
(including the Company), Purchaser shall fully disclose, account for and remit,
or cause to be remitted, the same promptly to Seller or Anadarko, as applicable.

•

Expenses.

Except for Royalty Amounts and except as otherwise provided in this Agreement,
any Property Costs which are not reflected in the adjustments to the Final Cash
Purchase Price (following the final adjustment pursuant to Section 8.4(b)) shall
be treated as follows: (a) all Property Costs for which Seller or Anadarko is
responsible under Section 1.4 shall be the sole obligation of Seller or
Anadarko, as applicable, and Seller or Anadarko, as applicable, shall promptly
pay, or if paid by Purchaser or any of its Affiliates (including the Company),
promptly reimburse Purchaser for and hold Purchaser and its Affiliates
(including the Company) harmless from and against same; and (b) all Property
Costs for which Purchaser or the Company is responsible under Section 1.4 shall
be the sole obligation of Purchaser and the Company, and Purchaser shall
promptly pay, or if paid by Seller (including pursuant to Section 1.4 of the
Anadarko Purchase Agreement), promptly reimburse Seller for and hold Seller
harmless from and against same. Seller is entitled to resolve all joint interest
audits and other audits of Property Costs covering periods for which Seller or
Anadarko is wholly responsible and Purchaser is entitled to resolve all joint
interest audits and other audits of Property Costs covering periods for which
Purchaser or the Company is in whole or in part responsible; provided that
Purchaser shall not agree to any adjustments to previously assessed costs for
which Seller or Anadarko is liable without the prior written consent of Seller,
such consent not to be unreasonably withheld. Purchaser shall provide Seller
with a copy of all applicable audit reports and written audit agreements
received by Purchaser or any of its Affiliates (including the Company) and
relating to periods for which Seller is partially responsible.

•

Assumed Anadarko Obligations.

Subject to the indemnification by Anadarko under Section 11.5 of the Anadarko
Purchase Agreement, Purchaser acknowledges and understands that on the Anadarko
Closing Date, the Company assumed and agreed to fulfill, perform, pay and
discharge (or cause to be fulfilled, performed, paid or discharged) all of the
obligations and liabilities of Anadarko, known or unknown, with respect to the
Assets, regardless of whether such obligations or liabilities arose prior to, on
or after the Effective Time, including but not limited to obligations to (a)
furnish makeup gas according to the terms of applicable gas sales, gathering or
transportation contracts, and to satisfy all other gas balancing obligations, if
any, (b) pay working interests, royalties, overriding royalties and other
interests held in suspense, (c) properly plug and abandon any and all wells,
including inactive wells or temporarily abandoned wells, drilled on the
Properties, as required by Law, (d) replug any well, wellbore, or previously
plugged well on the Properties to the extent required by Governmental Body, (e)
dismantle, salvage and remove any equipment, structures, materials, platforms,
flowlines, and property of whatever kind related to or associated with
operations and activities conducted on the Properties, (f) clean up, restore
and/or remediate the premises covered by or related to the Assets in accordance
with applicable agreements and Laws, (g) perform all obligations applicable to
or imposed on the lessee, owner, or operator

 

 

-31-

under the Leases or with respect to the Mineral Interests and related contracts,
or as required by applicable Laws, and (h) pay working interests, royalties,
overriding royalties and other interests payable to third parties on account of
production from the Assets other than any royalties owed on account of
production from the Properties before the Closing Date as a result of or
attributable to the resolution of the Proceedings set forth on Schedule 9.3
(collectively, “Royalty Amounts”)(all of said obligations and liabilities,
excluding the Excluded Anadarko Obligations, herein being referred to as the
“Assumed Anadarko Obligations”). Purchaser, Crimson Parent and the Company, on
the one hand, and Seller, on the other hand, agree and acknowledge that the
Company shall be responsible for, and shall fulfill, perform, pay and discharge
(or cause to be fulfilled, performed, paid or discharged) the obligations and
liabilities relating to or arising out of the Proceedings set forth on Schedule
9.3 that were assumed by the Company at the Anadarko Closing pursuant to
Anadarko Purchase Agreement and the Conveyance (as defined in the Anadarko
Purchase Agreement) and that such obligations and liabilities relating to or
arising out of the Proceedings shall constitute Assumed Anadarko Obligations.
Seller and not Company shall be responsible for the obligations and liabilities
relating to or arising out of the other Proceedings (other than those set forth
on Schedule 9.3) that were assumed by Seller at the Anadarko Closing pursuant to
Anadarko Purchase Agreement and the Conveyance (as defined in the Anadarko
Purchase Agreement). Following the Closing, Purchaser shall cause the Company to
fulfill, perform, pay and discharge (or cause to be fulfilled, performed, paid
or discharged) all of the Assumed Anadarko Obligations.

•

Survival.

(a)          All representations and warranties of Seller and Purchaser
contained herein shall survive the Closing Date and shall terminate on the first
anniversary of the Closing Date; provided, however, that (i) the representations
and warranties contained in Section 5.3, Section 5.4, Section 5.6, Section 6.2,
Section 6.3, and Section 6.5 (collectively, the “Fundamental Representations”)
shall survive until the expiration of the applicable statute of limitations
period and (ii) the representations and warranties contained in Section 5.5 and
the Anadarko Warranties and covenants to which Seller Indemnified Persons are
entitled to indemnification pursuant to Section 9.5(e) shall survive the Closing
Date and shall terminate on the first anniversary of the Anadarko Closing Date.
Upon the termination of a representation or warranty in accordance with the
foregoing, such representation or warranty shall have no further force or effect
for any purpose under this Agreement. The covenants and other agreements of
Seller and Purchaser set forth in this Agreement shall survive the Closing Date
until fully performed.

(b)          No party hereto shall have any indemnification obligation pursuant
to this Article 9 or otherwise in respect of any representation, warranty,
covenant or agreement unless it shall have received from the party seeking
indemnification a written notice (a “Claim Notice”) of the existence of the
claim for or in respect of which indemnification in respect of such
representation, warranty, covenant or agreement is being sought on or before the
expiration of the applicable survival period set forth in Section 9.4(a). If an
Indemnified Party delivers a Claim Notice to an Indemnifying Party before the
expiration of the applicable survival period set forth in Section 9.4(a), then
the applicable representation, warranty, covenant or agreement shall survive
until, but only for purposes of, the resolution of the matter covered by such
Claim Notice. A Claim Notice shall set forth with reasonable specificity (1) the
basis for such claim under this Agreement, and the facts that otherwise form the
basis of such claim and (2) to the

 

 

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extent reasonably estimable, an estimate of the amount of such claim (which
estimate shall not be conclusive of the final amount of such claim) and an
explanation of the calculation of such estimate.

•

Indemnification by Seller.

From and after the Closing, subject to the terms and conditions of this Article
9, Seller shall indemnify, defend and hold harmless the Company, Purchaser and
Crimson Parent and their managers, directors, officers, employees, stockholders,
members, agents, consultants, advisors and other representatives (including
legal counsel, accountants and financial advisors) and Affiliates and the
successors and permitted assigns of this Agreement of Purchaser (collectively,
the “Purchaser Indemnified Persons”) from and against any and all Losses
asserted against, resulting from, imposed upon, or incurred or suffered by any
Purchaser Indemnified Person to the extent resulting from, arising out of or
relating to:

(a)          any breach of any representation or warranty of Seller contained in
this Agreement or confirmed in any certificate furnished by or on behalf of
Seller in connection with this Agreement;

(b)          any breach or nonfulfillment of or failure to perform any covenant
or agreement of Seller contained in this Agreement or confirmed in any
certificate furnished by or on behalf of Seller in connection with this
Agreement;

(c)          any waiver, amendment or modification of a covenant of Anadarko
contained in the Anadarko Purchase Agreement that relates to the Assets and for
which Seller does not obtain Purchaser’s prior written consent in accordance
with Section 7.6;

(d)          the ownership, use or operation, following the Anadarko Closing
Date, of the Assets (as defined in the Anadarko Purchase Agreement) acquired
directly by Seller (and not by the Company) pursuant to the Anadarko Purchase
Agreement;

(e)          any breach of any Anadarko Warranty or any breach or nonfulfillment
of or failure to perform any covenant or agreement of Anadarko contained in the
Anadarko Purchase Agreement, in each case, only insofar as, and solely to the
extent that, (i) such breach or nonfulfillment adversely affects the Assets and
(ii) subject to the Section 9.5(e) Deductible and disregarding the Anadarko
Deductible, any Purchaser Indemnified Person would be entitled to
indemnification under Section 11.5(a) or 11.5(b) of the Anadarko Purchase
Agreement if the Purchaser Indemnified Person were the purchaser under the
Anadarko Purchase Agreement; and

(f)           other than the Assumed Anadarko Obligations and the obligations of
Purchaser and the Company pursuant to Section 7.6(d), the Assumed Seller
Obligations (as defined in the Anadarko Purchase Agreement).

•

Indemnification by Purchaser.

From and after the Closing, subject to the terms and conditions of this Article
9, Purchaser, the Company and Crimson Parent shall jointly and severally
indemnify, defend and hold harmless Seller and its directors, officers,
employees, agents, consultants, stockholders,

 

 

-33-

advisors and other representatives (including legal counsel, accountants and
financial advisors), and Seller’s successors, permitted assigns of this
Agreement and Affiliates (collectively, the “Seller Indemnified Persons”) from
and against any and all Losses, asserted against, resulting from, imposed upon,
or incurred or suffered by any Seller Indemnified Person, directly or
indirectly, to the extent resulting from, arising out of, or relating to:

(a)          any breach of any representation or warranty of Purchaser or
Crimson Parent contained in this Agreement or confirmed in any certificate
furnished by or on behalf of Purchaser or Crimson Parent to Seller in connection
with this Agreement;

(b)          any breach or nonfulfillment of or failure to perform any covenant
or agreement of Purchaser, Crimson Parent or the Company contained in this
Agreement or confirmed in any certificate furnished by or on behalf of Purchaser
or Crimson Parent to Seller in connection with this Agreement;

 

(c)

the ownership, use or operation of the Assets after the Effective Time;

(d)          Environmental Laws, Environmental Liabilities, the release of
materials into the environment or protection of human health, safety, natural
resources or the environment, or any other environmental condition of the
Assets; and

 

(e)

the Assumed Anadarko Obligations.

•

Indemnification Proceedings.

(a)          In the event that any claim or demand for which Seller, on the one
hand, or Purchaser, the Company and Crimson Parent, on the other hand, (such
Person, an “Indemnifying Party”) may be liable to an Purchaser Indemnified
Person under Section 9.5 or to an Seller Indemnified Person under Section 9.6
(an “Indemnified Party”) is asserted against or sought to be collected from an
Indemnified Party by a third party (a “Third Party Claim,”) the Indemnified
Party shall with reasonable promptness notify the Indemnifying Party of such
Third Party Claim by delivery of a Claim Notice, provided that the failure or
delay to so notify the Indemnifying Party shall not relieve the Indemnifying
Party of its obligations under this Article 9, except (and solely) to the extent
that the Indemnifying Party demonstrates that its defense of such Third Party
Claim is actually and materially prejudiced thereby. The Indemnifying Party
shall have thirty (30) days from receipt of the Claim Notice from the
Indemnified Party (in this Section 9.7, the “Notice Period”) to notify the
Indemnified Party whether or not the Indemnifying Party desires, at the
Indemnifying Party’s sole cost and expense, to defend the Indemnified Party
against such claim or demand; provided, that the Indemnified Party is hereby
authorized prior to and during the Notice Period, and at the cost and expense of
the Indemnifying Party, to file any motion, answer or other pleading that it
shall reasonably deem necessary to protect its interests or those of the
Indemnifying Party. The Indemnifying Party shall have the right to assume the
defense of such Third Party Claim only if and for so long as the Indemnifying
Party (i) notifies the Indemnified Party during the Notice Period that the
Indemnifying Party is assuming the defense of such Third Party Claim, (ii) uses
counsel of its own choosing that is reasonably satisfactory to the Indemnified
Party, and (iii) conducts the defense of such Third Party Claim in an active and
diligent manner. If the Indemnifying Party is entitled to, and does, assume the
defense of any

 

 

-34-

such Third Party Claim, the Indemnified Party shall have the right to employ
separate counsel at its own expense and to participate in the defense thereof;
provided, however, that notwithstanding the foregoing, the Indemnifying Party
shall pay the reasonable attorneys’ fees of the Indemnified Party if the
Indemnified Party’s counsel shall have advised the Indemnified Party that there
is a conflict of interest that could make it inappropriate under applicable
standards of professional conduct to have common counsel for the Indemnifying
Party and the Indemnified Party (provided that the Indemnifying Party shall not
be responsible for paying for more than one separate firm of attorneys and one
local counsel to represent all of the Indemnified Parties subject to such Third
Party Claim). If the Indemnifying Party elects (and is entitled) to assume the
defense of such Third Party Claim, (i) no compromise or settlement thereof or
consent to any admission or the entry of any judgment with respect to such Third
Party Claim may be effected by the Indemnifying Party without the Indemnified
Party’s written consent (which shall not be unreasonably withheld, conditioned
or delayed) unless the sole relief provided is monetary damages that are paid in
full by the Indemnifying Party (and no injunctive or other equitable relief is
imposed upon the Indemnified Party) and there is an unconditional provision
whereby each plaintiff or claimant in such Third Party Claim releases the
Indemnified Party from all liability with respect thereto and (ii) the
Indemnified Party shall have no liability with respect to any compromise or
settlement thereof effected without its written consent (which shall not be
unreasonably withheld). If the Indemnifying Party elects not to assume the
defense of such Third Party Claim (or fails to give notice to the Indemnified
Party during the Notice Period or otherwise is not entitled to assume such
defense), the Indemnified Party shall be entitled to assume the defense of such
Third Party Claim with counsel of its own choice, at the expense and for the
account of the Indemnifying Party; provided, however, that the Indemnified Party
shall make no settlement, compromise, admission, or acknowledgment that would
give rise to liability on the part of any Indemnifying Party without the prior
written consent of such Indemnifying Party, which consent shall not be
unreasonably withheld, conditioned or delayed.

(b)          Notwithstanding the foregoing, the Indemnifying Party shall not be
entitled to control (but shall be entitled to participate at its own expense in
the defense of), and the Indemnified Party, shall be entitled to have sole
control over, the defense or settlement, compromise, admission, or
acknowledgment of any Third Party Claim (i) at the reasonable expense of the
Indemnifying Party, as to which the Indemnifying Party fails to assume the
defense during the Notice Period after the Indemnified Party gives notice
thereof to the Indemnifying Party or (ii) at the reasonable expense of the
Indemnifying Party, to the extent the Third Party Claim seeks an order,
injunction, or other equitable relief against the Indemnified Party which, if
successful, could materially adversely affect the business, condition (financial
or other), capitalization, assets, liabilities, results of operations or
prospects of the Indemnified Party. The Indemnified Party shall make no
settlement, compromise, admission, or acknowledgment that would give rise to
liability on the part of the Indemnifying Party without the prior written
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld, conditioned or delayed).

(c)          In any case in which an Indemnified Party seeks indemnification
hereunder and no Third Party Claim is involved, the Indemnified Party shall
deliver a Claim Notice to the Indemnifying Party within a reasonably prompt
period of time after an officer of such Indemnified Party or its Affiliates has
obtained knowledge of the Loss giving rise to indemnification hereunder. The
failure or delay to so notify the Indemnifying Party shall not

 

 

-35-

relieve the Indemnifying Party of its obligations under this Article 9 except to
the extent such failure results in insufficient time being available to permit
the Indemnifying Party to effectively mitigate the resulting Losses or otherwise
prejudices the Indemnifying Party.

(d)          Notwithstanding the foregoing, the rights and obligations of
Seller, on the one hand, and Purchaser, the Company and Crimson Parent, on the
other hand, under this Section 9.7 shall be subject (and subordinate) to the
rights and obligations of Anadarko pursuant to Section 11.7 of the Anadarko
Purchase Agreement as to any Third Party Claims under the Anadarko Purchase
Agreement for which Anadarko has the right to control the defense thereof
insofar as such Third Party Claim under the Anadarko Purchase Agreement relates
to the matters indemnified by Seller hereunder.

•

Limitations on Indemnities.

(a)          Notwithstanding the foregoing, (i) Seller shall not be obligated to
indemnify any Purchaser Indemnified Persons for Losses pursuant to Section
9.5(a), and Purchaser, the Company and Crimson Parent shall not be obligated to
indemnify the Seller Indemnified Persons for Losses pursuant to Section 9.6(a),
in each case, pursuant to this Article 9 unless and until the amount of all
Losses incurred by Purchaser Indemnified Persons, or by Seller Indemnified
Persons, as the case may be, exceeds, in the aggregate, $2,000,000 (the
“Deductible”), in which event the party or parties seeking indemnity may recover
all Losses incurred in excess of the Deductible, and (ii) Seller’s maximum
liability for Losses pursuant to Section 9.5(a), and Purchaser’s, the Company’s
and Crimson Parent’s aggregate maximum liability for Losses pursuant to Section
9.6(a), in each case, shall be $30,000,000; provided, however, that,
notwithstanding the foregoing, the Deductible shall not apply to (and the
Indemnified Parties shall be entitled to be indemnified for all Losses relating
to) any claims based on the occurrence of common law actual fraud and (B) any
claims asserted under Section 9.5(a), or Section 9.6(a) insofar as such claims
relate to any breach of Fundamental Representations or any certificate to the
extent based on any such Fundamental Representation.

(b)          Notwithstanding the foregoing, Seller shall not be obligated to
indemnify any Purchaser Indemnified Persons for Losses pursuant to Section
9.5(e) unless and until the amount of all Losses incurred by Purchaser
Indemnified Persons pursuant to Section 9.5(e) exceeds, in the aggregate,
$7,500,000 (the “Section 9.5(e) Deductible”), in which event the party or
parties seeking indemnity may recover all Losses incurred in excess of the
Section 9.5(e) Deductible; provided, however, that Seller’s maximum liability
for Losses pursuant to Section 9.5(e) shall be $75,000,000.

(c)          Solely for purposes of calculating the amount of Losses incurred,
arising out of or relating to any breach or inaccuracy of a representation or
warranty (and not for determining whether a breach has occurred), the references
to “Material Adverse Effect” or other materiality qualifications (or correlative
terms) shall be disregarded.

(d)          The liability of any party under Article 9 shall be in addition to,
and not exclusive of, any other liability that such party may have at Law or
equity based on such party’s common law actual fraud. None of the provisions set
forth in this Agreement, including, but not limited to, the provisions set forth
in Section 9.4(b) (relating to limitations on the period during which a

 

 

-36-

claim for indemnification may be brought) or Section 9.8(a) (relating to the
Deductible), shall be deemed a waiver by any party to this Agreement of any
right or remedy which such party may have at Law or equity based on any other
party’s common law actual fraud, nor shall any such provisions limit, or be
deemed to limit, (i) the amounts of recovery sought or awarded in any such claim
for common law actual fraud, (ii) the time period during which a claim for
common law actual fraud may be brought or (iii) the recourse which any such
party may seek against another party with respect to a claim for common law
actual fraud; provided, that with respect to such rights and remedies at law or
equity, the parties further acknowledge and agree that none of the provisions of
this Section 9.8(d), nor any reference to this Section 9.8(d) throughout this
Agreement, shall be deemed a waiver of any defenses which may be available in
respect of actions or claims for common law actual fraud, including but not
limited to, defenses of statutes of limitations or limitations of damages.

•

Release.

EXCEPT WITH RESPECT TO POST-CLOSING REMEDIATION AGREED TO BY SELLER PURSUANT TO
SECTION 4.3, EACH OF PURCHASER, CRIMSON PARENT AND THE COMPANY HEREBY RELEASES,
REMISES AND FOREVER DISCHARGES THE SELLER INDEMNIFIED PERSONS FROM ANY AND ALL
CLAIMS, KNOWN OR UNKNOWN, WHETHER NOW EXISTING OR ARISING IN THE FUTURE,
CONTINGENT OR OTHERWISE, WHICH PURCHASER, CRIMSON PARENT OR THE COMPANY MIGHT
NOW OR SUBSEQUENTLY MAY HAVE AGAINST THE SELLER INDEMNIFIED PERSONS, RELATING
DIRECTLY OR INDIRECTLY TO THE CLAIMS ARISING OUT OF OR INCIDENT TO ENVIRONMENTAL
LAWS, ENVIRONMENTAL LIABILITIES, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT
OR PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT,
INCLUDING, WITHOUT LIMITATION, RIGHTS TO CONTRIBUTION UNDER CERCLA, REGARDLESS
OF FAULT.

•

Disclaimers.

EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN THIS AGREEMENT, OR CONFIRMED
IN THE CERTIFICATE OF SELLER TO BE DELIVERED PURSUANT TO SECTION 8.2(c), (I)
SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED,
AND (II) SELLER EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY
REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY
OR IN WRITING) TO PURCHASER OR ANY OF ITS AFFILIATES (INCLUDING CRIMSON PARENT
AND THE COMPANY), EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES (INCLUDING,
WITHOUT LIMITATION, ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE
BEEN PROVIDED TO PURCHASER, CRIMSON PARENT OR THE COMPANY BY ANY OFFICER,
DIRECTOR, EMPLOYEE, AGENT, CONSULTANT, REPRESENTATIVE OR ADVISOR OF SELLER OR
ANY OF ITS AFFILIATES).

 

 

-37-

EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN ARTICLE 5 OF THIS AGREEMENT, OR
CONFIRMED IN THE CERTIFICATE OF SELLER TO BE DELIVERED PURSUANT TO
SECTION 8.2(c) AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER
EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR
IMPLIED, AS TO (I) TITLE TO ANY OF THE ASSETS, (II) THE CONTENTS, CHARACTER OR
NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING
CONSULTANT, OR ANY GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE
ASSETS, (III) THE QUANTITY, QUALITY OR RECOVERABILITY OF PETROLEUM SUBSTANCES IN
OR FROM THE ASSETS, (IV) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE
REVENUES GENERATED BY THE ASSETS, (V) THE PRODUCTION OF HYDROCARBONS FROM THE
ASSETS, (VI) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR
MARKETABILITY OF THE ASSETS, (VII) THE CONTENT, CHARACTER OR NATURE OF ANY
DESCRIPTIVE MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY
THIRD PARTIES, (VIII) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE
AVAILABLE OR COMMUNICATED TO PURCHASER OR ITS AFFILIATES (INCLUDING CRIMSON
PARENT AND THE COMPANY), OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS,
REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND FURTHER
DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF
MERCHANTABILITY, FREEDOM FROM REDHIBITORY VICES OR DEFECTS (INCLUDING THOSE
CONTEMPLATED IN LOUISIANA CIVIL CODE ARTICLES 2475, AND 2520 THROUGH 2548),
FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS
OF ANY EQUIPMENT, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO
THAT PURCHASER, THE COMPANY AND CRIMSON PARENT SHALL BE DEEMED TO BE OBTAINING
THE ASSETS IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND
“WHERE IS” WITH ALL FAULTS AND THAT EACH OF PURCHASER, THE COMPANY AND CRIMSON
PARENT HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS PURCHASER, THE COMPANY
AND CRIMSON PARENT DEEMS APPROPRIATE, OR (IX) ANY IMPLIED OR EXPRESS WARRANTY OF
FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT.

SELLER HAS NOT AND WILL NOT MAKE ANY REPRESENTATION OR WARRANTY REGARDING ANY
MATTER OR CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, ENVIRONMENTAL
LIABILITIES, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR THE PROTECTION OF
HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER
ENVIRONMENTAL CONDITION OF THE ASSETS, AND NOTHING IN THIS AGREEMENT OR
OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR WARRANTY, AND
PURCHASER, THE COMPANY AND

 

 

-38-

CRIMSON PARENT SHALL BE DEEMED TO BE TAKING THE ASSETS “AS IS” AND “WHERE IS”
FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION.

•

Waiver of Trade Practices Acts.

(a)          It is the intention of the parties that Purchaser’s and Crimson
Parent’s rights and remedies with respect to this transaction and with respect
to all acts or practices of Seller, past, present or future, in connection with
this transaction shall be governed by legal principles other than the Texas
Deceptive Trade Practices--Consumer Protection Act, Tex. Bus. & Com. Code Ann.
§ 17.41 et seq. (the “DTPA”) or the Louisiana unfair trade practices and
consumer protection law, La. R.S. 51:1402, et seq. (the “UTPCPL”). As such, each
of Purchaser and Crimson Parent hereby waives the applicability of the DTPA and
the UTPCPL to this transaction and any and all duties, rights or remedies that
might be imposed by the DTPA and/or the UTPCPL, whether such duties, rights and
remedies are applied directly by the DTPA or the UTPCPL itself or indirectly in
connection with other statutes; provided, however, neither Purchaser nor Crimson
Parent waives § 17.555 of the DTPA. Each of Purchaser and Crimson Parent
acknowledges, represents and warrants that it is purchasing the goods and/or
services covered by this Agreement for commercial or business use; that it has
assets of $5,000,000.00 or more according to its most recent financial statement
prepared in accordance with GAAP; that it has knowledge and experience in
financial and business matters that enable it to evaluate the merits and risks
of a transaction such as this; and that it is not in a significantly disparate
bargaining position with Seller. The foregoing waivers shall be applicable to
the Affiliates of Purchaser and Crimson Parent.

(b)          Each of Purchaser and Crimson Parent expressly recognizes that the
price for which Seller has agreed to perform its obligations under this
Agreement has been predicated upon the inapplicability of the DTPA and the
UTPCPL and this waiver of the DTPA and the UTPCPL. Each of Purchaser and Crimson
Parent further recognizes that Seller, in determining to proceed with the
entering into of this Agreement, has expressly relied on this waiver and the
inapplicability of the DTPA and the UTPCPL.

•

Redhibition Waiver.

Each of Purchaser and Crimson Parent waives all rights in redhibition pursuant
to Louisiana Civil Code Articles 2475 and 2520 through 2548, and acknowledges
that this express waiver shall be considered a material and integral part of
this transaction and the consideration thereof. Each of Purchaser and Crimson
Parent acknowledges that this waiver has been brought to its attention and has
been explained in detail and that each of Purchaser and Crimson Parent has
voluntarily and knowingly consented to this waiver of warranty of fitness and
warranty against redhibitory vices and defects for the Assets. The foregoing
waivers shall be applicable to the Affiliates of Purchaser and Crimson Parent.

 

 

-39-

ARTICLE 10

MISCELLANEOUS

•

Counterparts.

This Agreement may be executed and delivered (including by facsimile
transmission) in counterparts, each of which shall be deemed an original
instrument, but all such counterparts together shall constitute but one
agreement.

•

Notice.

All notices which are required or may be given pursuant to this Agreement shall
be sufficient in all respects if given in writing and delivered personally, by
telecopy or by registered or certified mail, postage prepaid, as follows:

 

If to Seller:

EXCO Resources, Inc.

 

12377 Merit Drive, Suite 1700

 

Dallas, Texas 75251

 

Attention: William L. Boeing

 

Telephone: (214) 368-2084

 

Telecopy: (214) 706-3409

 

 

With a copy to (which:

Vinson & Elkins L.L.P.

 

shall not constitute

2001 Ross Avenue, Suite 3700

 

notice to Seller)

Dallas, Texas 75201

 

Attention: Jeffrey A. Chapman

 

Telephone: (214) 220-7797

 

Telecopy: (214) 999-7797

 

Attention: P. Gregory Hidalgo

 

Telephone: (214) 220-7959

 

Telecopy: (214) 999-7959

 

 

If to Purchaser or

Crimson Exploration Operating, Inc.

 

Crimson Parent:

717 Texas Avenue, Suite 2900

Houston, Texas 77002

Attention: Tracy Price

Telephone: (713) 236-7400

Fax: (713) 236-4402

 

Any party may change its address for notice by notice to the other in the manner
set forth above. All notices shall be deemed to have been duly given at the time
of receipt by the party to which such notice is addressed.

•

Sales or Use Tax Recording Fees and Similar Taxes and Fees.

Purchaser shall bear any sales, use, excise, real property transfer, gross
receipts, goods and services, registration, capital, documentary, stamp or
transfer Taxes, recording fees and

 

 

-40-

similar Taxes and fees (collectively “Transfer Taxes”) incurred and imposed
upon, or with respect to, the transactions contemplated by this Agreement.
Seller will determine, and Purchaser will cooperate with Seller in determining
the amount of any Transfer Taxes, if any, that is due in connection with the
transactions contemplated by this Agreement and Purchaser agrees to pay any such
Transfer Tax to Seller or to the appropriate Governmental Body. If any of the
transactions contemplated by this Agreement are exempt from any such Transfer
Taxes upon the filing of an appropriate certificate or other evidence of
exemption, Purchaser will timely furnish to Seller such certificate or evidence.

•

Expenses.

Except as otherwise expressly provided in Section 10.3 or elsewhere in this
Agreement, (a) all expenses incurred by Seller in connection with or related to
the authorization, preparation or execution of this Agreement and the Exhibits
and Schedules hereto and thereto, and all other matters related to the Closing,
including without limitation, all fees and expenses of counsel, accountants and
financial advisers employed by Seller, shall be borne solely and entirely by
Seller, and (b) all such expenses incurred by Purchaser or Crimson Parent shall
be borne solely and entirely by Purchaser and Crimson Parent.

•

Change of Name.

Following the Closing, each of Purchaser and Crimson Parent shall comply (and
shall cause the Company and all other Affiliates of Purchaser and Crimson Parent
to comply) with the obligations of Seller pursuant to Section 12.5 of the
Anadarko Purchase Agreement insofar as such obligations relate to the Assets.
Without limiting the generality of the foregoing, as promptly as practicable,
but in any case within ninety (90) days after the Anadarko Closing Date,
Purchaser and Crimson Parent shall eliminate (and shall cause the Company and
all other Affiliates of Purchaser and Crimson Parent to eliminate) (i) the names
“Anadarko Petroleum Corporation”, “Anadarko” and any variants thereof, (ii) any
names of Anadarko’s Affiliates and any variants thereof, (iii) the name “EXCO”
and any variants thereof and (iii) any names of Seller’s Affiliates and any
variants thereof from the Assets acquired pursuant to this Agreement 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 Anadarko or
Seller or any of their respective Affiliates.

•

Replacement of Bonds, Letters of Credit and Guarantees.

The parties understand that none of the bonds, letters of credit and guarantees,
if any, posted by Seller or any of its Affiliates with Governmental Bodies and
relating to the Assets may be transferable to Purchaser or the Company. Promptly
following Closing, Purchaser shall obtain, or cause to be obtained in the name
of Purchaser or the Company, replacements for such bonds, letters of credit and
guarantees, to the extent such replacements are necessary to permit the
cancellation of the bonds, letters of credit and guarantees posted by Seller or
any of its Affiliates or to consummate the transactions contemplated by this
Agreement.

 

 

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•

Governing Law and Venue.

THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS OTHERWISE APPLICABLE TO SUCH DETERMINATIONS.
JURISDICTION AND VENUE WITH RESPECT TO ANY DISPUTES ARISING HEREUNDER SHALL BE
PROPER ONLY IN DALLAS COUNTY, TEXAS.

•

Captions.

The captions in this Agreement are for convenience only and shall not be
considered a part of or affect the construction or interpretation of any
provision of this Agreement.

•

Waivers.

Any failure by any party or parties to comply with any of its or their
obligations, agreements or conditions herein contained may be waived in writing,
but not in any other manner, by the party or parties to whom such compliance is
owed. No waiver of, or consent to a change in, any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of, or consent to a
change in, other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.

•

Assignment.

No party shall assign all or any part of this Agreement, nor shall any party
assign or delegate any of its rights or duties hereunder, without the prior
written consent of the other party. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.

•

Entire Agreement.

The Confidentiality Agreement, this Agreement and the Exhibits and Schedules
attached hereto, and the documents to be executed hereunder constitute the
entire agreement between the parties pertaining to the subject matter hereof,
and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties pertaining to the subject
matter hereof.

•

Amendment.

(a)          This Agreement may be amended or modified only by an agreement in
writing executed by the parties hereto.

(b)          No waiver of any right under this Agreement shall be binding unless
executed in writing by the party to be bound thereby.

 

 

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•

No Third-Party Beneficiaries.

Nothing in this Agreement shall entitle any Person other than Purchaser or
Crimson Parent or the Company, on the one hand, or Seller, on the other hand, to
any claims, remedy or right of any kind, except as to those rights expressly
provided to the Seller Indemnified Persons and Purchaser Indemnified Persons
(provided, however, any claim for indemnity hereunder on behalf of an Seller
Indemnified Person or an Purchaser Indemnified Person must be made and
administered by Purchaser in respect of Purchaser Indemnified Persons and Seller
in respect of Seller Indemnified Persons).

•

References.

In this Agreement:

 

(a)

References to any gender includes a reference to all other genders;

 

(b)

References to the singular includes the plural, and vice versa;

(c)          Reference to any Article or Section means an Article or Section of
this Agreement;

(d)          Reference to any Exhibit or Schedule means an Exhibit or Schedule
to this Agreement, all of which are incorporated into and made a part of this
Agreement;

(e)          Unless expressly provided to the contrary, “hereunder”, “hereof’,
“herein” and words of similar import are references to this Agreement as a whole
and not any particular Section or other provision of this Agreement;

(f)           “Include” and “including” shall mean include or including without
limiting the generality of the description preceding such term; and

(g)          Capitalized terms used herein shall have the meanings ascribed to
them in this Agreement as such terms are identified and/or defined in the
Definitions section hereof.

•

Construction.

Each of Purchaser and Crimson Parent is a party capable of making such
investigation, inspection, review and evaluation of the Assets as a prudent
party would deem appropriate under the circumstances including with respect to
all matters relating to the Assets, their value, operation and suitability. Each
of Seller and Purchaser and Crimson Parent has had substantial input into the
drafting and preparation of this Agreement and has had the opportunity to
exercise business discretion in relation to the negotiation of the details of
the transactions contemplated hereby. This Agreement is the result of
arm’s-length negotiations from equal bargaining positions. In the event of a
dispute over the meaning or application of this Agreement, it shall be construed
fairly and reasonably and neither more strongly for nor against either party.

 

 

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•

Conspicuousness.

The parties agree that provisions in this Agreement in “bold” type satisfy any
requirements of the “express negligence rule” and any other requirements at law
or in equity that provisions be conspicuously marked or highlighted.

•

Severability.

If any term or other provisions of this Agreement is held invalid, illegal or
incapable of being enforced under any rule of law, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in a materially adverse manner with respect to any party;
provided, however, that if any such term or provision may be made enforceable by
limitation thereof, then such term or provision shall be deemed to be so limited
and shall be enforceable to the maximum extent permitted by applicable Law.

•

Time of Essence.

Time is of the essence in this Agreement. If the date specified in this
Agreement for giving any notice or taking any action is not a Business Day (or
if the period during which any notice is required to be given or any action
taken expires on a date which is not a Business Day), then the date for giving
such notice or taking such action (and the expiration date of such period during
which notice is required to be given or action taken) shall be the next day
which is a Business Day.

•

Affiliate Liability.

Each of the following is herein referred to, for purposes of this Section 10.19,
as an “Seller Affiliate”: (i) any direct or indirect holder of equity interests
in Seller (whether shareholders or otherwise), and (ii) any director, officer,
manager, employee, representative or agent of (a) Seller or (b) any Affiliate of
Seller. Except to the extent that a Seller Affiliate is an express signatory and
party hereto, no Seller Affiliate shall have any liability or obligation of any
nature whatsoever in connection with or under this Agreement, or the
transactions contemplated hereby, and Purchaser and Crimson Parent hereby waive
and release all claims of any such liability and obligation.

•

Schedules.

The disclosures in any Schedule must relate only to the representations and
warranties in the Section of this Agreement to which it expressly relates and
not to any other representation or warranty in this Agreement, unless some other
representation and warranty is specifically and clearly referred to in such
Schedule.

•

Limitation on Damages.

Notwithstanding any other provision contained elsewhere in this Agreement to the
contrary, the parties acknowledge that this Agreement does not authorize one
party to sue for or collect from the other party its own punitive damages, or
its own consequential or indirect

 

 

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damages in connection with this Agreement and the transactions contemplated
hereby and each party expressly waives for itself and on behalf of its
Affiliates, any and all Claims it may have against the other party for its own
such damages in connection with this Agreement and the transactions contemplated
hereby.

[SIGNATURES BEGIN ON THE FOLLOWING PAGE]

IN WITNESS WHEREOF, this Agreement has been signed by each of the parties hereto
on the date first above written.

SELLER:

 

EXCO RESOURCES, INC.

 

 

By:

_____________________________

 

Name:

R. L. Hodges

 

Title:

Vice President - Land

 

 

COMPANY:

 

SOUTHERN G HOLDINGS, LLC

 

 

By:

_____________________________

 

Name:

R. L. Hodges

 

Title:

Vice President - Land

 

 

PURCHASER:

 

CRIMSON EXPLORATION OPERATING, INC.

 

 

By:

_____________________________

 

Name:

Tracy Price

 

Title:

Senior Vice President of Land and Business Development

 

CRIMSON PARENT:

 

CRIMSON EXPLORATION INC.

 

 

By:

_____________________________

 

Name:

Tracy Price

 

Title:

Senior Vice President of Land and Business Development

 

 

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