Exhibit 10.1

 

PURCHASE AND SALE AGREEMENT

 

BETWEEN

 

SAMSON OIL AND GAS USA, INC.

 

AS SELLER

 

AND

 

EAGLE ENERGY PARTNERS, I, LLC

 

AS PURCHASER

 

Executed on June 14, 2018

 

  

 

 

Table of Contents

 

  Page     PURCHASE AND SALE AGREEMENT 1       RECITALS:   1       Article 1
PURCHASE AND SALE 1       Section 1.1 Purchase and Sale 1       Section 1.2
Assets 1       Section 1.3 Excluded Assets 4       Section 1.4 Effective Time;
Proration of Costs and Revenues 5       Section 1.5 Delivery and Maintenance of
Records 7       Article 2 PURCHASE PRICE 7       Section 2.1 Consideration 7    
  Section 2.2 Adjustments to Purchase Price 8       Section 2.3 Allocation of
Purchase Price 9       Section 2.4 Deposit 9       Article 3 TITLE MATTERS 11  
    Section 3.1 Seller’s Title 11       Section 3.2 Certain Definitions 11      
Section 3.3 Definition of Permitted Encumbrances 13       Section 3.4 Notice of
Title Defect Adjustments; Title Defect Remedies 15       Section 3.5 Consents to
Assignment and Preferential Rights to Purchase 19       Section 3.6 Casualty or
Condemnation Loss 21       Section 3.7 Limitations on Applicability 21      
Article 4 ENVIRONMENTAL MATTERS 22     Section 4.1 Assessment 22       Section
4.2 Hazardous Materials and NORM 22       Section 4.3 Notice of Violations of
Environmental Laws 23       Section 4.4 Remedies for Violations of Environmental
Laws 24       Section 4.5 Limitations 26       Article 5 REPRESENTATIONS AND
WARRANTIES OF SELLER 27       Section 5.1 Disclaimers 27

 

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Table of Contents

(continued)

 

  Page     Section 5.2 Existence and Qualification 28       Section 5.3 Power 28
      Section 5.4 Authorization and Enforceability 28       Section 5.5 No
Conflicts 29       Section 5.6 Liability for Brokers’ Fees 29       Section 5.7
Litigation 29       Section 5.8 Taxes and Assessments 29       Section 5.9
Outstanding Capital Commitments 30       Section 5.10 Compliance with Laws 30  
    Section 5.11 Contracts 30       Section 5.12 Payments for Production 30    
  Section 5.13 Imbalances 31       Section 5.14 Governmental Authorizations 31  
    Section 5.15 Consents and Preferential Purchase Rights 31       Section 5.16
Condemnation 31       Section 5.17 Bankruptcy 31       Section 5.18 Leases 31  
    Section 5.19 Well Status; Plugging and Abandonment 32       Section 5.20
Non-Consent Operations; Payout Status 32       Section 5.21 Environmental
Matters 32       Section 5.22 Audits.  There are no audits currently being
conducted of the operator of any of the Assets of the joint account under any
operating agreements or to Seller’s knowledge, imminent 33       Section 5.23
Judgments.  There are no unsatisfied liens, judgments or injunctions related to
the Assets issued by a court of competent jurisdiction or other Governmental
Body outstanding against the Seller 33       Article 6 REPRESENTATIONS AND
WARRANTIES OF PURCHASER 33       Section 6.1 Existence and Qualification 33    
  Section 6.2 Power 33       Section 6.3 Authorization and Enforceability 33    
  Section 6.4 No Conflicts 33

 

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Table of Contents

(continued)

 

  Page     Section 6.5 Liability for Brokers’ Fees 34       Section 6.6
Litigation 34       Section 6.7 Financing 34       Section 6.8 Independent
Investigation 34       Section 6.9 Bankruptcy 34       Section 6.10
Qualification 34       Section 6.11 Consents 34       Section 6.12 Investment
Intent 35       Article 7 COVENANTS OF THE PARTIES 35       Section 7.1 Access
35       Section 7.2 Government Reviews 35       Section 7.3 Notification of
Breaches 35       Section 7.4 Operatorship 36       Section 7.5 Operation of
Business 36       Section 7.6 38       Section 7.7 Indemnity Regarding Access 38
      Section 7.8 Other Preferential Rights 38       Section 7.9 Tax Matters 38
      Section 7.10 Special Warranty of Title 40       Section 7.11 Suspended
Proceeds 40       Section 7.12 Further Assurances 40       Section 7.13 Oasis
Operational Requirements 40       Section 7.14 [Intentionally Omitted]. 40      
Section 7.15 Use of GTO Tank and Equipment 40       Section 7.16 Enhanced
Recovery Operations 41       Article 8 CONDITIONS TO CLOSING 41       Section
8.1 Conditions of Seller to Closing 41       Section 8.2 Conditions of Purchaser
to Closing 42       Article 9 CLOSING 43       Section 9.1 Time and Place of
Closing 43

 

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Table of Contents

(continued)

 

  Page     Section 9.2 Obligations of Seller at Closing 43       Section 9.3
Obligations of Purchaser at Closing 44       Section 9.4 Closing Payment and
Post-Closing Purchase Price Adjustments 45       Article 10 TERMINATION 46      
Section 10.1 Termination 46       Section 10.2 Effect of Termination 47      
Section 10.3 Distribution of Deposit Upon Termination; Specific Performance 47  
    Article 11 POST-CLOSING OBLIGATIONS; INDEMNIFICATION; LIMITATIONS;
DISCLAIMERS AND WAIVERS 48       Section 11.1 Receipts 48       Section 11.2
Assumption and Indemnification 49       Section 11.3 Indemnification Actions 52
      Section 11.4 Limitation on Actions 54       Section 11.5 Recording 56    
  Section 11.6 [intentionally omitted] 56       Article 12 MISCELLANEOUS 56    
  Section 12.1 Counterparts 56       Section 12.2 Notice 56       Section 12.3
Sales or Use Tax Recording Fees and Similar Taxes and Fees 57       Section 12.4
Expenses 57       Section 12.5 Change of Name 57       Section 12.6 Replacement
of Asset Bonds 57       Section 12.7 Governing Law and Venue 58       Section
12.8 Jurisdiction; Waiver of Jury Trial 58       Section 12.9 Captions 58      
Section 12.10 Amendment; Waivers 59       Section 12.11 Assignment 59      
Section 12.12 Entire Agreement 59

 

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Table of Contents

(continued)

 

  Page     Section 12.13 No Third Person Beneficiaries 59       Section 12.14
Public Announcements 60       Section 12.15 Invalid Provisions 60       Section
12.16 References 60       Section 12.17 Construction 61       Section 12.18
Limitation on Damages 61       Article 13 definitionS 61       “Additional
Leases” has the meaning set forth in Section 1.2(a)(v). 61     “Adjusted
Purchase Price” has the meaning set forth in Section 2.1. 61

 

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EXHIBITS AND SCHEDULES

 

Exhibit A Part 1 Madison Leases Exhibit A Part 2 Red River Leases Exhibit A Part
3 Commingled Leases Exhibit A Part 4 Lands Exhibit A Part 5 Additional Leases
Exhibit A-1 Part 1 Oil and Gas Wells and Units Exhibit A-1 Part 2 Other Wells
and Units Exhibit A-2 Target System Exhibit B Conveyance Exhibit C Persons with
Knowledge Exhibit D Joint Surface Use Agreement Exhibit E Home Run Reserved WI –
Leases and Wells Exhibit F Transition Services Agreement Exhibit G Right of
First Refusal Exhibit H Escrow Agreement Schedule 1.2c) Contracts Schedule 1.3e)
Excluded Asset Bonds and Permits Schedule 2.3 Allocated Value Schedule 3.3e)
Contested Taxes Schedule 3.3f) Contested Mechanic and Materialman Liens Schedule
4.3 Environmental Exceptions Schedule 5.5 Conflicts Schedule 5.7 Litigation
Schedule 5.8 Taxes and Assessments Schedule 5.9 Outstanding Capital Commitments
Schedule 5.10 Compliance With Laws Schedule 5.11(a) Defaults Schedule 5.11(b)
Certain Contracts Schedule 5.12 Payments For Production Schedule 5.13 Imbalances
Schedule 5.14 Governmental Authorizations Schedule 5.15 Preferential Rights &
Consents to Assign Schedule 5.18 Leases Schedule 5.19 Well Status; Plugging and
Abandonment Schedule 5.20 Non-Consent Operations; Payout Balances Schedule 5.21
Environmental Schedule 7.3 Persons with Actual Knowledge Schedule 7.11 Suspended
Proceeds Schedule 7.13 Oasis Requirements Schedule 7.14 Oasis Non-Compete
Schedule 7.14 GTO Agreement Schedule 9.4c) Seller’s Wiring Instructions

 

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PURCHASE AND SALE AGREEMENT

 

This Purchase and Sale Agreement (this “Agreement”), is executed on June 12,
2018, by and between Samson Oil and Gas USA, Inc., a Colorado corporation
(“Seller”), and Eagle Energy Partners I, LLC, a North Dakota limited liability
company (“Purchaser”). Purchaser and Seller may each be referred to herein as a
“Party,” and collectively as the “Parties.”

 

RECITALS:

 

A.           Seller owns certain oil and gas properties in Bowman, Divide,
McKenzie and Williams Counties, North Dakota, and Dawson, Richland, Roosevelt
and Sheridan Counties, Montana.

 

B.           Seller desires to sell to Purchaser and Purchaser desires to
purchase from Seller the Assets, in the manner and upon the terms and conditions
hereafter set forth.

 

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

 

Article 1
PURCHASE AND SALE

 

Section 1.1           Purchase and Sale.

 

At the Closing, but effective as of the Effective Time, and subject to the
reservations and exceptions and the other terms and conditions of this
Agreement, Seller agrees to sell and convey to Purchaser and Purchaser agrees to
purchase, accept and pay for the Assets. Capitalized terms used herein shall
have the meanings ascribed to them in this Agreement as such terms are
identified and/or defined in Article 13 hereof.

 

Section 1.2           Assets. As used herein, the term “Assets” means, subject
to the terms and conditions of this Agreement, all of Seller’s right, title,
interest and estate, real or personal, recorded or unrecorded, movable or
immovable, tangible or intangible, in and to the following, excluding, however,
the Excluded Assets:

 

(a)          All of the oil and gas leases; oil, gas and/or mineral leases;
subleases and other leaseholds; carried interests; mineral fee interests;
overriding royalty interests; force pooled and non-consent interests,
reversionary rights and other properties and interests, together with all
amendments, supplements, extensions, renewals, top leases or ratifications
thereof (collectively, the leases described in this Section 1.2(a), subject to
the applicable depth and other limitations set forth in this Section 1.2(a), are
the “Oil and Gas Leases” or the “Leases”):

 

  

 

 

(i)          described on Exhibit A Part 1 INSOFAR AND ONLY INSOFAR AS such Oil
and Gas Leases cover the depths from one hundred feet (100’) below the surface
to the lesser of (A) one hundred feet (100’) above the top of the Bakken Pool
and (B) the base of the Madison Formation, such base of the Madison Formation
being the stratigraphic equivalent of 10,648, true vertical depth, as seen on
the 1st triple combo log run in the Green 12-6 Well (API # 33053025770000)
located in Section 6, Township 151N, Range 101W, McKenzie County, North Dakota
(the “Base of the Madison Formation”) (the “Madison Leases”);

 

(ii)         described on Exhibit A Part 2, INSOFAR AND ONLY INSOFAR AS such Oil
and Gas Leases cover the stratigraphic equivalent of the depths from 13,347’ to
13,550’ as seen on the Green 12-6, API # 33053025770000, DSTM Log (the “Red
River Leases”);

 

(iii)        described on Exhibit A Part 3, INSOFAR AND ONLY INSOFAR AS such Oil
and Gas Leases cover (A) the depths from one hundred feet (100’) below the
surface to the lesser of (I) one hundred feet (100’) above the top of the Bakken
Pool and (II) the Base of the Madison Formation and (B) solely with respect to
the Wells set forth on Exhibit A Part 3, the additional depths set forth on
Exhibit A Part 3 but only to the extent production exists from the wellbores of
such Wells (the “Commingled Leases”);

 

(iv)        subject to the terms of that certain Joint Surface Use Agreement by
and between Seller and Oasis Petroleum North America LLC (“Oasis”), attached
hereto as Exhibit D (the “Joint Surface Use Agreement”), the Madison Leases, the
Red River Leases, and the Commingled Leases, INSOFAR AND ONLY INSOFAR AS such
Madison Leases, Red River Leases, and Commingled Leases, as applicable, cover
the surface of the Lands and the depths from the surface to one hundred feet
(100”) below the surface; and

 

(v)         described on Exhibit A Part 5 (the “Additional Leases”).

 

provided, further that in the case of each of (i), (ii), (iii), and (iv) above,
the conveyance of the Leases is further limited to INSOFAR AND ONLY INSOFAR as
such Leases cover lands included in the governmental sections described on
Exhibit A Part 4 on which the Oil and Gas Wells (hereinafter defined) are
located (together with all lands covered by, unitized, or pooled with the
Additional Leases, the “Lands”)

 

(b)          Subject to the applicable depth and other limitations set forth in
Section 1.2(a) above, all of the oil and gas wells listed on Exhibit A-1 Part 1
(the “Oil and Gas Wells”) and water, CO2, disposal or injection wells listed on
Exhibit A-1 Part 2 attached hereto (whether or not located on the Lands), in
each case, whether producing, shut-in, plugged or abandoned (collectively, the
“Wells”);

 

(c)          Subject to the applicable depth and other limitations set forth in
Section 1.2(a) above, the pools or units described on Exhibit A-1 (inclusive of
Parts 1 and 2) (the “Units,” such Units together with the Leases, Lands and
Wells, or in cases when there is no Unit, the Leases together with the Lands and
Wells, subject to the applicable depth and other limitations set forth in
Section 1.2(a) above, being hereinafter referred to collectively as the
“Properties” and individually as a “Property”);

 

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(d)          All contracts, agreements and instruments by which the Properties
are bound, or to which the Properties are subject, but in each case only to the
extent applicable to the Properties and not the Excluded Assets or other
properties of Seller or its Affiliates not included in the Assets, including
operating agreements, unitization, pooling and communitization agreements,
declarations and orders, pre-pooling agreements, joint venture agreements,
farmin and farmout agreements, water rights agreements, exploration agreements,
area of mutual interest agreements, participation agreements, exchange
agreements, transportation or gathering agreements, agreements for the sale and
purchase of Hydrocarbons and processing agreements, and further including those
agreements and instruments identified on Schedule 1.2(c) (hereinafter
collectively referred to as the “Contracts”), provided that “Contracts” shall
exclude any master service agreements;

 

(e)          All equipment, machinery, fixtures and other tangible personal
property and improvements located on the Properties and used or held for use
primarily in connection with the operation of the Wells, including any wells,
tanks, boilers, buildings, fixtures, injection facilities, saltwater disposal
facilities, compression facilities, pumping units and engines, flow lines,
pipelines, gathering systems, gas and oil treating facilities, machinery, power
lines, telephone and telegraph lines, roads, and other appurtenances,
improvements and facilities, but in each case only to the extent the foregoing
are applicable to the Properties and not the Excluded Assets or other properties
of Seller or its Affiliates not included in the Assets (the “Equipment”);

 

(f)          All Hydrocarbons produced from or attributable to the Properties
from and after the Effective Time; and all inventories of Hydrocarbons produced
from or attributable to the Properties that are in storage in tanks or pipelines
at the Effective Time, but only to the extent that Seller receives an upward
adjustment to the Purchase Price pursuant to Section 2.2(g) in respect of such
Hydrocarbon inventories;

 

(g)          All Imbalances;

 

(h)          the water gathering and/or transportation system depicted on the
map set forth on Exhibit A-2 attached hereto;

 

(i)          All claims and causes of action (i) arising from acts, omissions or
events or damage to or destruction of any properties or interests described in
Section 1.2(a) through Section 1.2(h) with respect to all periods from and after
the Effective Time or related to any Assumed Seller Obligation, and (ii) for
insurance proceeds from any policy of insurance now or previously held by Seller
that are or may potentially provide recovery for any of the Assumed Seller
Obligations or Environmental Liabilities, regardless of when they arise; and

 

(j)          Copies of all of the following records in Seller’s possession,
subject to Section 1.5: All Lease files; Land files; Well files; and Contract
files; gas processing files; division order files; abstracts; title opinions;
land surveys; non-confidential logs; maps; engineering data and reports; and
files and all other books, records, data, files, maps and accounting records to
the extent used or held for use primarily in connection with the maintenance or
operation of the Properties and not related to the Excluded Assets, but
excluding the Excluded Records (such copies, collectively, and subject to such
exclusion, the “Records”).

 

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Section 1.3           Excluded Assets. Notwithstanding the foregoing, the Assets
shall not include, and there is excepted, reserved and excluded from the
purchase and sale contemplated hereby (collectively, the “Excluded Assets”):

 

(a)          all rights to any refund (whether by payment, credit, offset or
otherwise) of Taxes or other costs or expenses borne by Seller or Seller’s
predecessors in interest and/or title attributable to periods prior to the
Effective Time;

 

(b)          all rights, claims, indemnities, warranties, guaranties, and causes
of action (including insurance claims, whether or not asserted, under policies
of insurance or claims to the proceeds of insurance) that may be asserted
against a third Person and accrued during the period prior to the Effective
Time, or that are attributable to (or by their terms cover) (i) liabilities
retained by Seller hereunder, or (ii) actions, events or omissions prior to the
Effective Time, except, in each case, to the extent such items arise from or by
their terms cover Assumed Seller Obligations or are otherwise allocated to
Purchaser under the other provisions of this Agreement;

 

(c)          all rights of Seller under Contracts attributable to periods before
the Effective Time insofar as such rights relate to Seller Indemnity Obligations
or other liabilities of Seller retained under this Agreement, and all rights of
Seller under Contracts to the extent they relate to other Excluded Assets
described in this Section 1.3;

 

(d)          rights to initiate and conduct joint interest audits or other
audits of Property Costs incurred before the Effective Time, and to receive
costs and revenues in connection with such audits, but in each case only to the
extent, and for the time period, Seller is responsible for such Property Costs
under this Agreement;

 

(e)          Seller’s area-wide Asset Bonds, permits and licenses or other
permits, licenses or authorizations used in the conduct of Seller’s business
generally, as reflected in Schedule 1.3e);

 

(f)          all trade credits, account receivables, note receivables,
take-or-pay amounts receivable, and other receivables, and all other accounts,
instruments and general intangibles (as such terms are defined in the North
Dakota Uniform Commercial Code), in each case attributable to the Assets with
respect to any period of time prior to the Effective Time (excluding Hydrocarbon
inventories subject to Section 1.2(f) for which Seller receives an upward
adjustment to the Purchase Price), as determined in accordance with GAAP;

 

(g)          trademarks, patents, trade names and similar intellectual property;

 

(h)          Asset Bonds retained by Seller pursuant to Section 12.6;

 

(i)          all vehicles used in connection with the Assets (whether or not
leased);

 

(j)          all tools, pulling machines, warehouse stock, equipment or material
(i) temporarily located on the premises of the Properties and not presently
required for the operation of the Seller Operated Assets as currently operated,
excluding those items for which an adjustment is made pursuant to Section
2.2(j), or (ii) used in connection with the other Excluded Assets;

 

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(k)          all offices and office leases, and computers, phones, office
supplies, furniture, equipment and related personal effects located in such
offices, or otherwise located off the Properties or only temporarily located on
the Properties;

 

(l)          all hedges, futures, swaps and other derivatives, including rights
relating thereto, affecting the Assets;

 

(m)          Assets retained by Seller or excluded from the Assets at Closing
pursuant to Sections 3.4d)ii), 3.5, 4.4a)ii) or 7.6, subject to the terms of
such Sections;

 

(n)          That certain ENZO tank owned by Generative Technology Operatives
LLC located at or near the Schmitz 44-35H well (API # 33-053-02594-00-00)) (the
“Schmitz Wellsite”), located in the SESE of Section 35, Township 153N Range102W
(such tank, the “GTO Tank and Equipment”);

 

(o)          An undivided 15% of 8/8ths working interest in the Leases and Wells
located in the “Home Run Field”, which Leases and Wells are set forth on Exhibit
E (the “Home Run Reserved WI”), together with all Hydrocarbons attributable to
the Home Run Reserved WI, and a concurrent interest in and to the Units,
Contracts, and Equipment pertaining to the Home Run Reserved WI; for the
avoidance of doubt, Seller shall be obligated to pay 100% of the Property Costs
attributable to the ownership and operation of the Home Run Reserved WI,
regardless of whether such Property Costs are incurred before or after the
Effective Time; furthermore, the Home Run Reserved WI shall be subject to a
right of first refusal in favor or Purchaser in the form attached as Exhibit G;

 

(p)          any contracts, agreements, and instruments that would otherwise be
included in the definition of Contracts, to the extent transfer is (i)
restricted by their respective terms or third Person agreement and the necessary
consents to transfer are not obtained pursuant to Section 3.5, or (ii) subject
to payment of a fee or other consideration under any license agreement or other
agreement with a Person other than an Affiliate of Seller, and for which no
consent to transfer has been received or for which Purchaser has not agreed in
writing to pay the fee or other consideration, as applicable; and

 

(q)          the Excluded Records.

 

Section 1.4           Effective Time; Proration of Costs and Revenues.

 

(a)          Possession of the Assets shall be transferred from Seller to
Purchaser at the Closing, but certain financial benefits and obligations of the
Assets shall be transferred effective as of 7:00 A.M., local time, where the
respective Assets are located, on January 1, 2018 (the “Effective Time”), as
further set forth in this Agreement.

 

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(b)          Except to the extent accounted for in the adjustments to the
Purchase Price made under Section 2.2, effective upon Closing (i) Purchaser
shall be entitled to all 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 (excluding the
Adjusted Purchase Price and all other consideration due to Seller hereunder)
earned with respect to the Assets at or after the Effective Time, and shall be
obligated to pay all Property Costs and other costs attributable to the
ownership and operation of the Assets incurred at or after the Effective Time
and (ii) Seller shall be entitled to all 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, prior to the
Final Settlement Date, shall be obligated to pay all Property Costs attributable
to the ownership and operation of the Assets 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 applied by Seller in the ordinary course of business consistent
with past practice, subject to the last sentence of Section 1.4(c). For purposes
of allocating production (and accounts receivable with respect thereto), under
this Section 1.4(b), (x) liquid Hydrocarbons shall be deemed to be “from or
attributable to” the Leases, Units and Wells when they pass through the pipeline
connecting into the storage facilities into which they are transported from the
lands covered by the applicable Lease, Unit or Well, or if there are no storage
facilities, when they pass through the LACT meter or similar meter at the entry
point into the pipelines through which they are transported from such lands and
(y) gaseous Hydrocarbons shall be deemed to be “from or attributable to” the
Leases, Units and Wells when they pass through the delivery point sales meters
or similar meters at the entry point into the pipelines through which they are
transported from such lands. Seller shall utilize reasonable interpolative
procedures to arrive at an allocation of production when exact meter readings
(including gas production meters or sales meters) or gauging and strapping data
is not available.

 

(c)          As used herein, “Property Costs” means, determined without
duplication, (i) all costs attributable to the ownership or operation of the
Assets (including prepaid costs or deposits, costs of insurance, and Property
Taxes, but excluding any other Taxes), (ii) capital expenditures incurred in the
ownership or operation of the Assets in the ordinary course of business, (iii)
where applicable, such costs and capital expenditures charged in accordance with
the relevant operating agreement, unit agreement, pooling agreement, pre-pooling
agreement, pooling order or similar instrument, or if none, charged to the
Assets on the same basis as charged on the date of this Agreement, (iv) overhead
costs charged to the Assets under the relevant operating agreement, unit
agreement, pooling agreement, pre-pooling agreement, pooling order or similar
instrument by unaffiliated third parties, or if none, charged to the Assets on
the same basis as charged on the date of this Agreement and (v) in addition to
the foregoing items, with respect to Seller Operated Assets, an amount equal to
the COPAS overhead charges under applicable joint operating agreements that
would be charged to the interest of Seller in the Assets, or if there is no
joint operating agreement, such amount as would be charged under a joint
operation agreement; provided that “Property Costs” shall exclude, without
limitation, liabilities, losses, costs, and expenses attributable to (A) claims,
investigations, Proceedings or litigation directly or indirectly arising out of
or resulting from actual or claimed personal injury or death, property damage or
violation of any Law (including private rights or causes of action under any
Law), (B) title claims (including claims that the Leases have terminated),
(C) obligations to plug wells, dismantle facilities, close pits and restore the
surface or seabed around such wells, facilities and pits, (D) obligations to
cure, address or Remediate any contamination of groundwater, surface water, soil
or Equipment under applicable Environmental Laws, (E) obligations to furnish
make-up gas according to the terms of applicable gas sales, gathering or
transportation contracts, (F) gas balancing obligations and similar obligations
arising from Imbalances, (G) claims for improper calculation or payment of
royalties, overriding royalties or similar burdens based on the deduction of
post-production costs or the use of prices received by Seller or a particular
reference price, and (H) obligations to pay working interests, royalties,
overriding royalties or other interests held in suspense, all of which are
addressed in Section 11.2 or elsewhere in this Agreement. For the purposes of
calculating the adjustments to the Purchase Price under Section 2.2 or
implementing the terms of Section 7.9 or Article 11, ad valorem, property and
similar Taxes, right-of-way fees, insurance premiums and Property Costs
(excluding delay rentals, lease bonuses, minimum royalties, option payments,
lease extension payments and shut-in royalties) that are paid periodically or
otherwise cover services or deliveries for a period shall be prorated based on
the number of days in the applicable period falling before, or at and after, the
Effective Time, except that 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, or at and after, the Effective Time.
Subject to the preceding sentence, 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 goods are delivered, or when the work is
performed.

 

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Section 1.5           Delivery and Maintenance of Records.

 

(a)          Seller, at Purchaser’s cost, shall use reasonable efforts to
deliver the Records in Seller’s possession or control (FOB Seller’s office) to
Purchaser within ten (10) Business Days following Closing. Seller may retain
original Records and/or copies of any Records, but shall provide Purchaser a
copy of any original record retained by Seller. Seller shall keep all retained
Records and copies of Records, and the information contained therein,
confidential to the fullest extent possible.

 

(b)          Purchaser, for a period of four (4) years following the Closing,
will (i) retain the Records, (ii) provide Seller, its Affiliates, and its and
their officers, employees and representatives with access to the Records during
normal business hours for review and copying at Seller’s expense and (iii)
within five (5) days of receipt of written notice from Seller, provide Seller,
its Affiliates, and its and their officers, employees, consultants and legal
counsel with access, during normal business hours, to materials received or
produced after Closing relating to any claim for indemnification made under
Section 11.2 (excluding, however, (x) attorney work product and communications
protected by attorney-client privilege and prepared with respect to any such
claim being brought by Purchaser and (y) information subject to an applicable
confidentiality restriction in favor of third Persons) for review and copying at
Seller’s expense.

 

Article 2
PURCHASE PRICE

 

Section 2.1           Consideration. The total consideration paid by Purchaser
for the Assets shall be Forty Million Dollars ($40,000,000.00) (the “Purchase
Price”), as adjusted as provided in Section 2.2 and Section 9.4 (the “Adjusted
Purchase Price”).

 

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Section 2.2           Adjustments to Purchase Price. The Purchase Price for the
Assets shall be adjusted as follows with all such amounts being determined in
accordance with GAAP and COPAS standards, as applied by Seller in the ordinary
course of business consistent with past practice (with such adjustments being
made so as to not give duplicative effect):

 

(a)          Reduced by the aggregate amount of the following proceeds received
and retained by Seller: proceeds earned 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 after
the Effective Time;

 

(b)          Reduced in accordance with Section 3.5 or Section 7.6, by an amount
equal to the Allocated Value of those Properties (i) with respect to which
preferential purchase rights have been exercised prior to Closing, or (ii) that
are affected by unsatisfied and unwaived Consent Requirements;

 

(c)          Reduced in accordance with Section 7.6 by an amount equal to the
Allocated Value of those Properties that are subject to a Proceeding prior to
Closing seeking to restrain, enjoin or otherwise prohibit the consummation of
the transactions contemplated hereby in connection with a claim to enforce
preferential rights;

 

(d)          (i) Subject to Section 3.4(i), reduced by the applicable Title
Defect Amount as a result of Title Defects for which the Title Defect Amount has
been finally determined or agreed pursuant to Section 3.4 (or, for purposes of
the Closing Payment, pursuant to Seller’s good faith estimate), and by the
Allocated Value (or applicable portion thereof) of any Title Defect Property
retained by Seller pursuant to Section 3.4(d)(ii) and (ii) increased by the
applicable Title Benefit Amount as a result of Title Benefits for which the
Title Benefit Amount has been finally determined or agreed pursuant to Section
3.4;

 

(e)          Reduced by the Allocated Values (or the applicable portion thereof)
of any Properties excluded by Seller pursuant to Section 3.6;

 

(f)          Subject to Section 4.4, reduced by (i) the applicable Environmental
Defect Amount as a result of Environmental Defects for which Seller made an
election under Section 4.4(a)(i) and the Environmental Defect Amount has been
finally determined or agreed pursuant to Section 4.4 (or, for purposes of the
Closing Payment, pursuant to Seller’s good faith estimate), and (ii) the
Allocated Value of any Property retained by Seller pursuant to Section
4.4(a)(ii);

 

(g)          Increased by the amount equal to the value of all of Seller’s
inventories of Hydrocarbons produced from or attributable to the Properties that
are in storage in tanks or pipelines above the load line or pipeline connection,
as applicable, as of the Effective Time (which value shall be based on the
actual proceeds received therefrom), less any applicable production, severance,
sales or excise Taxes, overriding royalties, royalties and similar burdens on or
payable out of production; provided, however, that the adjustment contemplated
by this paragraph shall be only made to the extent that Seller does not receive
and retain the proceeds, or portion thereof, attributable to the sale of such
Hydrocarbons;

 

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(h)         Increased by the amount of all Property Costs and other costs
attributable to the ownership and operation of the Assets that are paid by
Seller and incurred on or after the Effective Time, including pre-paid costs and
deposits, except any Property Costs and other such costs already deducted in the
determination of proceeds in Section 2.2(a);

 

(i)          Reduced by the amount of all Property Costs attributable to the
ownership and operation of the Assets prior to the Effective Time which are
actually paid by Purchaser or which Purchaser is required to assume under this
Agreement;

 

(j)          Increased by an amount equal to the value, as determined according
to the COPAS 2005 Accounting Procedures, of all surplus tubular, goods and
physical inventory (including water) to the extent such items are owned by
Seller and included in the Assets at the Effective Time; and

 

(k)          Decreased in accordance with Section 7.11, as applicable.

 

The adjustment described in Section 2.2(a) shall serve to satisfy, up to the
amount of the adjustment, Purchaser’s entitlement under Section 1.2(f) and
Section 1.4 to Hydrocarbon production from or attributable to the Properties
during the period between the Effective Time and the Closing Date (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
Purchaser shall not have any separate rights to receive any production or
income, proceeds, receipts and credits with respect to which an adjustment has
been made.

 

Section 2.3           Allocation of Purchase Price. On or before the Closing
Date, Purchaser and Seller will agree upon an allocation of the unadjusted
Purchase Price among each of the Assets, in compliance with the principles of
Section 1060 of the Internal Revenue Code of 1986, as amended (the “Code”), and
the United States Treasury Regulations thereunder. Such allocation of value
shall be as set forth in Schedule 2.3 as adjusted to reflect adjustments to the
Purchase Price in accordance with Section 2.2. The value allocated to an Asset
in Schedule 2.3 with respect to such Asset is herein referred to as its
“Allocated Value.” No Asset may be assigned a negative Allocated Value. After
Seller and Purchaser have agreed on the Allocated Values for the Assets, the
Parties will be deemed to have accepted such Allocated Values for purposes of
this Agreement and the transactions contemplated hereby, but Seller makes no
representation or warranty as to the accuracy of such values. Purchaser and
Seller shall each prepare their respective Forms 8594 with respect to the
transactions contemplated by this Agreement in a manner consistent with the
Allocated Values. The Parties shall not take any Tax position (whether in
audits, on Tax Returns, or otherwise) that is inconsistent with such allocation
unless required to do so by applicable Law.

 

Section 2.4           Deposit. On or before the date that is two (2) Business
Days following the execution of this Agreement, Purchaser shall wire transfer an
earnest money deposit in an amount equal to One Million Dollars ($1,000,000)
(the “Deposit”) as follows (i) Two Hundred and Fifty Thousand Dollars ($250,000)
shall be wired to Seller, according to the wire transfer instructions provided
by Seller; and (iii) Seven Hundred and Fifty Thousand Dollars ($750,000) shall
be wired to Escrow Agent to be held pursuant to the terms of the Escrow
Agreement attached hereto as Exhibit H. The Deposit shall be non-interest
bearing and applied against the Purchase Price if the Closing occurs or shall be
otherwise distributed in accordance with the terms of the Escrow Agreement and
this Agreement. If either tranche of the Deposit is not timely made, then this
Agreement shall immediately become null and void and the Parties shall not be
bound by any of their obligations thereby, and Seller and/or the Escrow Agent
shall return to Purchaser that tranche of the Deposit that was timely made, if
any.

 

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(a)          Terms of Escrow Agreement. The Deposit shall be held by Seller and
the Escrow Agent under the following terms as are more fully set forth in the
Escrow Agreement:

 

i)         Financing Contingency. Purchaser’s agreement to purchase is
conditioned upon approval by Purchaser’s lender of financing on terms acceptable
to Purchaser within fifteen (15) Business Days of execution of this Agreement.
If Purchaser does not give Seller and Escrow Agent notice that financing has
been approved by Purchaser’s lender prior to 5:00 p.m. on the 15th Business Day
following the execution of this Agreement, the condition shall be deemed to have
failed and the Escrow Agent shall return the escrowed portion of the Deposit to
Purchaser.

 

ii)        Shareholder Approval by Seller. Seller’s agreement to sell is
conditioned upon approval by Seller’s shareholders. Seller shall use its best
efforts to obtain shareholder approval. Within 48 hours of the financing
condition having been met or waived by Purchaser, Seller shall begin the process
of seeking shareholder approval. Seller shall obtain shareholder approval prior
to 42 days following the day on which the Purchaser’s financing condition has
been met, provided, however, that if the delivery of Seller’s proxy materials to
its shareholders is delayed by regulatory review by, or comments from, the SEC
or the ASX, a corresponding adjustment shall be made to extend the 42 day period
by the amount of delay caused by such regulatory action. If the Seller does not
receive Shareholder approval of the sale within the time frame stated herein,
the condition shall have failed and Seller and the Escrow Agent shall return the
Deposit to Purchaser.

 

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Article 3
TITLE MATTERS

 

Section 3.1           Seller’s Title.

 

(a)          This Article 3, Section 8.2(e) and the Special Warranty in the
Conveyance (subject to Section 7.10) shall, to the fullest extent permitted by
applicable Law, be the exclusive right and remedy of Purchaser with respect to
title to the Assets.

 

(b)          The conveyance of the Assets to be delivered by Seller to Purchaser
shall be substantially in the form of Exhibit B (the “Conveyance”).

 

Section 3.2           Certain Definitions.

 

(a)          As used in this Agreement, the term “Defensible Title” means that
title of Seller that is deducible of record, by standards of limitations,
adverse possession or prescription, or by any other legally enforceable right,
which, subject to and except for Permitted Encumbrances:

 

(i)          Entitles Seller to receive a share of the Hydrocarbons produced,
saved and marketed from any Well (a “Subject Property”) throughout the
productive life thereof (after satisfaction of all royalties, overriding
royalties, nonparticipating royalties, net profits interests or other similar
burdens on or measured by production of Hydrocarbons) (a “Net Revenue Interest”)
as to the depths and/or intervals specified on Exhibit A or Exhibit A-1, of not
less than the “net revenue interest” share shown in Exhibit A or Exhibit A-1 for
such Subject Property as to such depths and/or intervals, except for decreases
resulting from reversionary interests, carried interests, horizontal or vertical
severances or other matters or changes in interest stated in Exhibit A or
Exhibit A-1, decreases in connection with those operations permitted under
Section 7.5 in which Seller may after the Effective Time be a non-consenting
party, decreases resulting from the election to ratify or the establishment or
amendment of pools or units on or after the Effective Time, and decreases
required to allow other working interest owners to make up past underproduction
or pipelines to make up past under deliveries;

 

(ii)         Obligates Seller to bear not greater than the “working interest”
share shown in Exhibit A or Exhibit A-1 of the costs and expenses for the
maintenance and development of, and operations relating to, any Subject Property
throughout the productive life and the plugging and abandonment thereof (a
“Working Interest”) as to the depths and/or intervals specified on Exhibit A or
Exhibit A-1, except increases resulting from matters stated in Exhibit A or
Exhibit A-1, increases resulting from contribution requirements with respect to
defaulting parties under applicable operating, unit, pooling, pre-pooling or
similar agreements and increases that are accompanied by at least a
proportionate increase in Seller’s Net Revenue Interest;

 

(iii)        Is free and clear of liens and encumbrances on title that affect or
encumber a Property;

 

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in each case excluding, subject to and determined without regard to matters
constituting Permitted Encumbrances. If a Property has not been given an
Allocated Value (or has been given an Allocated Value of zero ($0)), Purchaser
may not assert any Title Defect in respect of such Property or any other remedy
under this Article 3, including, without limitation, under the Special Warranty.

 

(b)          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 Seller in any Subject Property above that shown on Exhibit A or
Exhibit A-1, without causing a greater than proportionate increase in Seller’s
Working Interest above that shown in Exhibit A or Exhibit A-1.

 

(c)          As used in this Agreement, the term “Title Defect” shall mean any
lien, encumbrance, obligation or defect that causes Seller’s title to any
Subject Property shown on Exhibit A or Exhibit A-1 to be less than Defensible
Title; provided that “Title Defect” shall exclude the following:

 

(i)          defects based solely on a lack of information in Seller’s files or
references to a document if such document is not in Seller’s files;

 

(ii)         defects arising out of lack of corporate or other entity
authorization unless Purchaser provides affirmative evidence that the action was
not authorized and results in another Person’s superior claim of title to the
relevant Subject Property;

 

(iii)        defects in the chain of title consisting of the failure to recite
marital status in a document or omissions of successions of heirship or estate
Proceedings, unless Purchaser provides affirmative evidence that such failure or
omission could reasonably be expected to result in another Person’s superior
claim of title to the relevant Subject Property;

 

(iv)        defects based on a gap in Seller’s chain of title unless such gap is
affirmatively shown to exist after a review of the available public and/or
county or parish records and the Records, by an abstract of title, title opinion
or landman’s title chain (which documents shall be included in any Title Defect
Notice);

 

(v)         defects that have been cured by applicable Laws of limitation or
prescription;

 

(vi)        defects arising out of a lack of survey, unless a survey is
expressly required by applicable Laws;

 

(vii)       defects asserting that non-consent or before and after-payout
interests do not transfer leasehold title, or have not been recorded in the
county records, unless Purchaser provides affirmative evidence that such defect
could reasonably be expected to result in another Person’s superior claim of
title to the relevant Subject Property;

 

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(viii)      defects related to mineral ownership other than oil, natural gas and
natural gas liquids; and

 

(ix)         defects asserting a change in Working Interest or Net Revenue
Interest based on a change in drilling or spacing units, tract allocation or
other changes in pool or unit participation occurring after the date hereof, to
the extent that Seller is in compliance with the provisions of Section 7.5.

 

Section 3.3           Definition of Permitted Encumbrances. As used herein, the
term “Permitted Encumbrances” means any or all of the following:

 

(a)          Royalties, nonparticipating royalty interests, net profits
interests and any overriding royalties, reversionary interests and other burdens
to the extent that they do not, individually or in the aggregate, reduce
Seller’s Net Revenue Interest below that shown in Exhibit A or Exhibit A-1 or
increase Seller’s Working Interest above that shown in Exhibit A or Exhibit A-1
without a corresponding increase in the Net Revenue Interest;

 

(b)          The terms and provisions of all Leases (including assignments and
conveyances in the chain of title to the Leases), Contracts, surface rights,
unit agreements, pooling agreements or orders, pre-pooling agreements, operating
agreements, 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: (i) reduce Seller’s Net Revenue Interest
below that shown in Exhibit A or Exhibit A-1 or increase Seller’s Working
Interest above that shown in Exhibit A or Exhibit A-1 without a corresponding
increase in the Net Revenue Interest, or (ii) materially interfere with the
ownership and operation of the Assets as currently owned and operated;

 

(c)          Subject to compliance with Sections 3.5 and 7.6, third Person
consent requirements and preferential rights to purchase the Assets applicable
to this or a future transaction involving the Assets;

 

(d)          Third Person consent requirements and similar restrictions with
respect to which waivers or consents are obtained by Seller from the appropriate
Persons on or prior to the Closing Date or the appropriate time period for
asserting the right has expired or which need not be satisfied prior to a
transfer;

 

(e)          Liens for current Taxes or assessments not yet delinquent or, if
delinquent, being contested in good faith by appropriate actions, such contested
actions being reflected in Schedule 3.3(e);

 

(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), or if delinquent, being contested in good faith by appropriate
actions, such contested actions being reflected in Schedule 3.3(f);

 

(g)          Defects or irregularities of title to which relevant statute(s) of
limitation or prescription would bar any attachment or claim against the
Sellers’ title to the Properties;

 

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(h)          Any and all mortgages, outstanding deeds of trust, liens or other
encumbrances that are to be released at Closing;

 

(i)          All rights to consent, required notices to, filings with, or other
actions by Governmental Bodies in connection with the sale or conveyance of the
Assets if they are not required prior to the sale or conveyance or are of a type
customarily obtained after Closing;

 

(j)          Rights of reassignment normally arising upon final intention to
abandon or release all or any part of the Assets;

 

(k)          Easements, rights-of-way, servitudes, permits, surface leases and
other rights in respect of surface operations to the extent that they do not,
individually or in the aggregate: (i) reduce Seller’s Net Revenue Interest below
that shown in Exhibit A or Exhibit A-1 or increase Seller’s Working Interest
above that shown in Exhibit A or Exhibit A-1 without a corresponding increase in
Net Revenue Interest, and (ii) materially interfere with the ownership and
operation of the Assets as currently owned and operated;

 

(l)          Calls on Hydrocarbon production under existing Contracts;

 

(m)          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, rules and orders of any such Governmental Body
or under any franchise, grant, license or permit issued by any such Governmental
Body;

 

(n)          Any encumbrance on or affecting the Assets which is discharged by
Seller at or prior to Closing;

 

(o)          Any maintenance of uniform interest provision in an operating
agreement or similar agreement if waived by the parties having the right to
enforce such provision;

 

(p)          Imbalances associated with the Assets;

 

(q)          Any lien, security interest, or encumbrance granted by the lessor
or affecting the lessor’s interest in a Lease, unless there is evidence that the
mortgagee or lien holder has asserted a default under any such lien, security
interest, or encumbrance and has exercised, or intends to exercise, foreclosure
proceedings;

 

(r)          Any lien, security interest or encumbrance created under Leases
and/or joint operating agreements or by operation of Law in respect of
obligations that, in each case, are not yet due;

 

(s)          Such Title Defects as Purchaser has waived in writing;

 

(t)          Any liens, charges, encumbrances, defects or irregularities in the
ordinary course of business consisting of minor defects and irregularities in
title or other restrictions (whether created by or arising out of joint
operating agreements, farm-out agreements, leases and assignments, contracts for
purchases of Hydrocarbons or similar Contracts or Surface Rights, or otherwise
in the ordinary course of business) that are of a nature customarily accepted by
prudent purchasers of oil and gas properties and do not, individually or in the
aggregate, reduce Seller’s Net Revenue Interest below that shown in Exhibit A or
Exhibit A-1 or increase Seller’s Working Interest above that shown in Exhibit A
or Exhibit A-1 without a corresponding increase in Net Revenue Interest;

 

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(u)          Any liens, charges, encumbrances, defects or irregularities (i)
which affect a Property from which Hydrocarbons have been and are being produced
(or to which production of Hydrocarbons is allocable) for the last three (3)
years and for which no claim related to title has been made in writing by any
Person during such three (3) year period, which would be accepted by a
reasonably prudent purchaser engaged in the business of owning and operating oil
and gas properties, and (ii) which do not, individually or in the aggregate, (1)
materially detract from the value of or materially interfere with the ownership
and operation of the Assets subject thereto or affected thereby (as currently
owned and operated), and (2) reduce Seller’s Net Revenue Interest below that
shown in Exhibit A or Exhibit A-1, or increase Seller’s Working Interest above
that shown in Exhibit A or Exhibit A-1 without a corresponding increase in the
Net Revenue Interest; and

 

(v)         the Mescalero APO Interest, and with respect to the Assets covered
by that certain Stipulation and Assignment of After Payout Working Interest
dated April 24, 2013, as amended by that certain First Amendment to Stipulation
and Assignment of After Payout Working Interest dated October 1, 2013, between
Oasis and Mescalero Minerals, LLC (as amended, the “Mescalero Agreement”) (each
a successor in interest);

 

Section 3.4           Notice of Title Defect Adjustments; Title Defect Remedies.

 

(a)          To assert a Title Defect, Purchaser must deliver a claim notice to
Seller (each a “Title Defect Notice”) on or before the day that is seven (7)
Business Days before the Scheduled Closing Date (the “Title Claim Date”), except
as otherwise provided under Sections 3.5 or 3.6; provided, however, that
Purchaser agrees that it shall furnish to Seller at least once every week,
commencing on the seventh (7th) day following the date of this Agreement until
the Title Claim Date with a Title Defect Notice for any Title Defects discovered
during such one week period, which may be preliminary in nature and may be
supplemented, revised or revoked at any time prior to the Title Claim Date. Each
Title Defect Notice shall be in writing and shall include (i) a description of
the alleged Title Defect(s), (ii) the Subject Property (or portion thereof)
affected by the Title Defect (each a “Title Defect Property”), (iii) the
Allocated Values of each Title Defect Property, (iv) supporting documents
reasonably necessary for Seller (as well as any title attorney or examiner hired
by Seller) to verify the existence of the alleged Title Defect(s) and (v)
Purchaser’s reasonable estimate of the Title Defect Amount and the computations
and information upon which Purchaser’s estimate is based. Purchaser shall be
deemed to have waived for all purposes under this Article 3 all Title Defects
that were not included in a Title Defect Notice delivered to Seller on or before
the Title Claim Date. The failure of a Title Defect Notice to contain item nos.
3.4a)(i) through (v) shall not render such notice void and ineffective if it
materially complies with the provisions hereof.

 

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(b)          Seller shall have the right, but not the obligation, to deliver to
Purchaser with respect to each Title Benefit a written notice (a “Title Benefit
Notice”) asserting such Title Benefit on or before the Title Claim Date. Each
Title Benefit Notice shall include (i) a description of the Title Benefit(s),
(ii) the Subject Property affected by the Title Benefit (each a “Title Benefit
Property”), (iii) the Allocated Values of the Title Benefit Property,
(iv) supporting documents reasonably necessary for Purchaser (as well as any
title attorney or examiner hired by Purchaser) to verify the existence of the
alleged Title Benefit(s) and (v) Seller’s estimate of the Title Benefit Amount,
and the computations and information upon which Seller’s estimate is based.
Seller shall be deemed to have waived for all purposes hereunder all Title
Benefits that were not included in a Title Benefit Notice delivered to Purchaser
on or before the Title Claim Date. The failure of a Title Benefit Notice to
contain item nos. 3.4b)(i) through (v) shall not render such notice void and
ineffective if it materially complies with the provisions hereof.

 

(c)          Cure Right. Seller shall have the right, but not the obligation,
upon delivering written notice to Purchaser at least two (2) days prior to the
Closing Date, to attempt, at its sole cost, to cure or remove any Title Defects
of which it has been advised by Purchaser on or before the expiration of ninety
(90) days counted from and after the Title Claim Date (the “Cure Period”). If
Seller timely elects to attempt to cure any Title Defect during the Cure Period,
but such Title Defect has not been cured to Purchaser’s reasonable satisfaction
prior to Closing, the portion of the Title Defect Property affected by such
Title Defect shall not be conveyed to Purchaser at Closing, and the Purchase
Price shall be reduced at Closing by the portion of the Allocated Value of such
portion of the Title Defect Property. If at the end of the Cure Period the Title
Defect is cured as agreed by Purchaser and Seller or if Seller and Purchaser
cannot agree, and it is determined by the Title Arbitrator that such Title
Defect is cured as of the end of the Cure Period, then, within five (5) Business
Days thereafter, Seller shall assign to Purchaser using substantially the same
form as the Conveyance, to the extent not previously assigned, each portion of
the Title Defect Property with respect to which Title Defects were cured and the
Purchaser shall pay to Seller an amount equal to such portion of the Allocated
Value of such portion of such Title Defect Property withheld at Closing and, to
the extent not previously included in the adjustments to the Purchase Price at
Closing, the Parties shall account to one another under Section 2.2 and Section
2.3. No action of Seller in electing or attempting to cure a Title Defect shall
constitute a waiver of Seller’s right to dispute the existence, nature or value
of, or cost to cure, the Title Defect. The Parties agree that to the extent a
portion of a DSU is subject to a Title Defect and such portion of the DSU is not
conveyed to Purchaser at Closing, Purchaser shall, subject to Section 1.1, be
appointed successor operator for such portion of the DSU; provided, that, if
none of the DSU is conveyed to Purchaser at Closing, Purchaser shall not be
appointed successor operator for such DSU.

 

(d)          Remedies for Title Defects. In the event that (i) any Title Defect
asserted by Purchaser in accordance with Section 3.4a) is not waived by
Purchaser and (ii) Seller has not provided notice to Purchaser at least two (2)
days prior to the Closing Date of Seller’s intent to attempt to cure the given
Title Defect, then Seller shall, at its sole election, elect to:

 

(i)          reduce the Purchase Price by the Title Defect Amount determined
pursuant to Section 3.4(f) or Section 3.4(h);

 

(ii)         retain the Title Defect Property, in which event the Purchase Price
shall be reduced by an amount equal to the Allocated Value of such Property; or

 

16 

 

 

(iii)        if applicable, terminate this Agreement pursuant to Article 10.

 

In the event Seller elects to retain a Property subject to a Title Defect and
revenue has regularly been paid to Seller or Seller’s predecessor in title with
respect thereto without written complaint for a period in excess of three (3)
years, then Purchaser agrees, except as required by Law (i) not to take any
action to interfere with such revenue stream to Seller, its successors and
assigns (including by causing such interest to be put in suspense), and (ii) to
the extent that Purchaser becomes payor of such revenue, to pay Seller such
revenue upon receipt of a reasonable indemnity agreement from Seller. If a Title
Defect affects only a portion of a Subject Property, Seller shall have the right
to exercise the options set forth in this Section 3.4(d) as to the entire
Subject Property or only the affected portion of such Subject Property.

 

(e)          Remedies for Title Benefits. In the event that any Title Benefit
asserted by Seller in accordance with Section 3.4(b) is not waived by Seller,
then:

 

(i)          to the extent Purchaser and Seller agree on the Title Benefit
Amount as calculated pursuant to Section 3.4(g), the Purchase Price shall be
increased by such amount; and

 

(ii)         to the extent there is no agreement under Section 3.4(e)(i) on or
before the Closing Date, the disagreement between Seller and Purchaser regarding
the Title Benefit Property or the Title Benefit Amount, as applicable, shall be
submitted to arbitration in accordance with Section 3.4h).

 

(f)          The “Title Defect Amount” resulting from a Title Defect shall be
determined as follows, without duplication:

 

(i)          if Purchaser and Seller agree on the Title Defect Amount, then that
amount shall be the Title Defect Amount;

 

(ii)         if the Title Defect is a lien, encumbrance or other charge which is
undisputed and liquidated in amount, then the Title Defect Amount shall be the
amount necessary to be paid to remove the Title Defect from the Title Defect
Property;

 

(iii)        if the Title Defect represents a discrepancy between (A) the Net
Revenue Interest for any Title Defect Property and (B) the Net Revenue Interest
stated on Exhibit A or Exhibit A-1, then the Title Defect Amount shall be the
product of the Allocated Value of such Title Defect Property multiplied by a
fraction, the numerator of which is the actual amount of the decrease in Net
Revenue Interest from that stated on Exhibit A or Exhibit A-1 and the
denominator of which is the Net Revenue Interest stated on Exhibit A or
Exhibit A-1; provided, however, that if the Title Defect does not affect the
Title Defect Property throughout its entire life, the Title Defect Amount shall
be reduced to take into account the applicable time period only;

 

17 

 

 

(iv)        if the Title Defect represents an obligation, encumbrance, burden or
charge upon or other defect in title to the Title Defect Property of a type not
described in subsections (i), (ii), or (iii) above, or represents an obligation,
encumbrance, burden or charge upon or other defect in title to the Title Defect
Property of a type described in two or more of subsections (i), (ii) or (iii)
above, then the Title Defect Amount shall be determined by taking into account
the Allocated Value of the Title Defect Property, the portion of the Title
Defect Property affected by the Title Defect, the legal effect of the Title
Defect, the potential economic effect of the Title Defect over the life of the
Title Defect Property, the values placed upon the Title Defect by Purchaser and
Seller and such other factors as are necessary to make a proper evaluation; and

 

(v)         notwithstanding anything to the contrary in this Article 3, except
if a Title Defect constitutes a lien (other than liens granted by the lessor of
a Lease or affecting the lessor’s interest in a Lease), the aggregate Title
Defect Amounts attributable to the effects of all Title Defects upon any Title
Defect Property shall not exceed the Allocated Value of the Title Defect
Property.

 

(g)          The “Title Benefit Amount” resulting from a Title Benefit shall be
the product of the Allocated Value of the Title Benefit Property multiplied by a
fraction, the numerator of which is the actual amount of the increase in Net
Revenue Interest from that stated on Exhibit A or Exhibit A-1 and the
denominator of which is the Net Revenue Interest stated on Exhibit A or Exhibit
A-1; provided, however, that if the Title Benefit does not affect the applicable
Title Benefit Property throughout its entire life, the Title Benefit Amount
shall be reduced to take into account the applicable time period only.

 

(h)          With respect to Title Defect Notices and Title Benefit Notices
provided and received on or before the Title Claim Date, Seller and Purchaser
shall attempt to agree on all Title Defects, Title Benefits, Title Defect
Amounts and Title Benefit Amounts on or before the Closing Date, subject to
Seller’s rights under Sections 3.4d)ii) and 3.4d)iii). If Seller and Purchaser
are unable to agree by that date, then subject to Section 3.4(c) and Seller’s
rights under Sections 3.4d)ii) and 3.4d)iii), the average of Seller’s and
Purchaser’s respective good faith estimates shall be used for purposes of
calculating the Closing Payment pursuant to Section 9.4(a), and the Title
Defects, Title Benefits, Title Defect Amounts and Title Benefit Amounts in
dispute shall be exclusively and finally resolved by arbitration pursuant to
this Section 3.4(h). Likewise, if Seller has provided notice at least two (2)
days prior to the Closing Date of Seller’s intent to attempt to cure a Title
Defect and by the end of the Cure Period, Seller and Purchaser have been unable
to agree upon whether such Title Defect has been cured, or Seller has failed to
cure any Title Defects which Seller provided notice that Seller would attempt to
cure and Seller and Purchaser have been unable to agree on the Title Defect
Amounts for such Title Defects, then the cure and/or Title Defect Amounts and
Title Benefit Amounts in dispute shall be exclusively and finally resolved by
arbitration pursuant to this Section 3.4(h). There shall be a single arbitrator,
who shall be a title attorney with at least ten (10) years’ experience in oil
and gas titles in the State of North Dakota as selected by mutual agreement of
Purchaser and Seller within fifteen (15) days after the end of the Cure Period
(or such other time as mutually agreed). Absent such agreement on the selection
of the arbitrator, the arbitrator shall be selected by the Denver, Colorado
office of the American Arbitration Association (the “Title Arbitrator”). The
Title Arbitrator shall not have worked as an employee or outside counsel for any
Party or its Affiliates during the five (5) year period preceding the
arbitration or have any financial interest in the dispute. The arbitration
proceeding shall be held in Denver, Colorado, and shall be conducted in English
and 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 3.4. Seller and Purchaser shall have thirty (30) days from the
date the Title Arbitrator is selected (the “Submission Date”) to submit to the
Title Arbitrator all documents, information and briefs supporting their
respective positions in the matters in dispute. The Title Arbitrator’s
determination shall be made within twenty (20) days after the Submission Date
and shall be final and binding upon both Parties, without right of appeal. In
making his determination, the Title Arbitrator shall be bound by the rules set
forth in this Section 3.4 and may consider such other matters as in the opinion
of the Title Arbitrator are necessary or helpful to make a proper determination.
Additionally, the Title Arbitrator may consult with and engage disinterested
third Persons to advise the arbitrator, including petroleum engineers. The Title
Arbitrator shall act as an expert for the limited purpose of determining the
specific disputed Title Defects, Title Benefits, Title Defect Amounts and Title
Benefit Amounts, as applicable, submitted by any Party and may not award
damages, interest or penalties to any Party with respect to any matter. Each
Party shall bear its own legal fees and other costs of presenting its case, and
shall bear one-half of the costs and expenses of the Title Arbitrator. The Title
Arbitrator’s determination shall be reflected as adjustment to the Purchase
Price in the Final Settlement Statement, as applicable.

 

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(i)          Notwithstanding anything herein to the contrary, (x) in no event
shall there be any adjustments to the Purchase Price or other remedies provided
by Seller for any individual Title Defect for which the Title Defect Amount does
not exceed One Hundred Thousand Dollars ($100,000) (the “Individual Defect
Threshold”); and (y) in no event shall there be any adjustments to the Purchase
Price or other remedies provided by Seller for Title Defects unless the
aggregate amount of all Title Defect Amounts for Title Defects covered by
Section 3.4(d)(i) that exceed the Individual Defect Threshold (minus the amount
of any Title Benefit Amounts), exceeds a deductible in an amount equal to three
percent (3%) of the Purchase Price (the “Title Defect Deductible”), after which
point Purchaser shall be entitled to adjustments to the Purchase Price or other
available remedies under this Article 3 with respect to all Title Defects in
excess of the Title Defect Deductible, subject to the Individual Defect
Threshold and Seller’s elections under Section 3.4d). The provisions of this
Section 3.4(i) shall not apply to Title Defects relating to consent to
assignment and preferential rights to purchase which shall be handled or treated
under Section 3.5 and Section 7.6. The Allocated Value of any Subject Property
retained by Seller in accordance with Section 3.4(d)(ii) may not be used in
meeting the Title Defect Deductible.

 

Section 3.5           Consents to Assignment and Preferential Rights to
Purchase. Within five (5) Business Days of the date hereof, Seller shall prepare
and send (a) notices to the third Person holders last known to Seller at the
address last known to Seller (excluding Governmental Bodies, which are addressed
elsewhere in this Agreement) of any consents to assignment of any Assets
requesting applicable consents and (b) notices to the holders last known to
Seller of any applicable preferential rights to purchase any Asset at the
address last known to Seller requesting waivers of such preferential rights to
purchase, in each case that would be triggered by the purchase and sale
contemplated by this Agreement, and of which Seller has knowledge as set forth
on Schedule 5.15 or, if discovered by Purchaser prior to the Title Claim Date,
within five (5) Business Days of the date Purchaser provides written notice of
such additional preferential right or consent (such consents and preferential
rights, “Known Preferential Rights and Consents”). The consideration payable
under this Agreement for any particular Assets for purposes of preferential
purchase right notices shall be the Allocated Value for such Assets
(proportionately reduced if an Asset is only partially affected). Purchaser
shall cooperate with Seller in seeking to satisfy or obtain waivers of, as
applicable, such Known Preferential Rights and Consents, but shall not be
required to incur any expense or additional obligations.

 

19 

 

 

(a)          Consents. Seller shall notify Purchaser prior to Closing of all
Known Preferential Rights and Consents that have not been waived or granted, as
applicable, or that have been exercised in the case of preferential rights to
purchase, and the Assets to which they pertain. In no event shall there be
included in the Conveyances at Closing any Asset subject to an unsatisfied
consent requirement that would be triggered by the purchase and sale of Assets
contemplated by this Agreement and provides that transfer of the Asset without
consent will result in (i) a termination or other material impairment of any
existing rights in relation to such Asset, or (ii) the payment of liquidated
damages absent the consent (such consent requirement, a “Consent Requirement”);
provided that any consent requirement that by its terms may not be unreasonably
withheld shall not be considered a Consent Requirement. In cases where the Asset
subject to a Consent Requirement is a Contract and Purchaser is assigned the
Properties to which the Contract relates, but the Contract is not transferred to
Purchaser due to the unwaived Consent Requirement, Seller shall continue after
Closing to use commercially reasonable efforts to obtain the applicable consent
so that Seller’s right, title and interest in such Contract can be transferred
to Purchaser upon the receipt of such consent. In cases where the Asset subject
to a Consent Requirement is a Property and the third Person consent to the sale
and transfer of such Property is not obtained on or prior to the Closing Date,
Purchaser may elect to treat the unsatisfied Consent Requirement as a Title
Defect by giving Seller notice thereof in accordance with Section 3.4(a), except
that such notice may be given on or prior to the Closing Date; provided,
however, the Title Defect Amount for such Property may not be used in meeting
the Title Defect Deductible, and Seller may elect to cure such unsatisfied
Consent Requirement under Section 3.4(c), in which event the provisions of
Section 3.4(c) shall apply, provided further that the affected Asset shall be
excluded from the Assets for purposes of Closing until the Consent Requirement
is waived or satisfied (unless otherwise agreed by Seller and Purchaser). In
cases where an Asset is subject to a third Person consent requirement that is
not a Consent Requirement, the Asset shall be included in the Assets at Closing
(unless excluded pursuant to the other provisions of this Agreement) and
Purchaser shall be responsible after Closing for satisfying such consent
requirement at its sole cost, risk and expense, to the extent the applicable
consent was not obtained or waived on or prior to Closing. If an unsatisfied
Consent Requirement for which a Purchase Price adjustment is made at Closing is
subsequently satisfied prior to the date of the final determination of the Final
Settlement Statement (the “Final Settlement Date”), Seller shall receive an
additional upward adjustment to the Purchase Price in the Final Settlement
Statement equal to the amount of the previous reduction in the Purchase Price on
account of the Consent Requirement and the provisions of this Section 3.5 shall
no longer apply except for the assignment made under the next sentence. Within
five (5) Business Days of the satisfaction of any Consent Requirement that was
unsatisfied at Closing, but was subsequently satisfied prior to the Final
Settlement Date, Seller shall assign to Purchaser using substantially the same
form as the Conveyance, to the extent previously unassigned, each Property
subject to such Consent Requirement and, to the extent not previously included
in the adjustments to the Purchase Price at Closing, the Parties shall account
to one another under Section 2.2 and Section 2.3.

 

20 

 

 

(b)          Exercised Preferential Rights to Purchase. If any preferential
right to purchase any Property that would be triggered by the purchase and sale
of Assets contemplated by this Agreement is exercised prior to Closing, such
Property transferred to the exercising third Person as a result of the exercise
of such preferential right shall be excluded from the Assets for all purposes
hereunder, and the Purchase Price shall be reduced under Section 2.2(b) by the
Allocated Value for such Property (proportionately reduced if the preferential
right affects only a portion of such Property). Seller shall retain the
consideration paid by the third Person pursuant to the exercise of such
preferential right; provided, however, the adjustment made under this Section
3.5(b) for such Property may not be used in meeting the Individual Defect
Threshold or the Title Defect Deductible. If any preferential right to purchase
any Asset is not exercised and does not expire prior to Closing, then the terms
of Section 7.6 shall apply to such right.

 

Section 3.6           Casualty or Condemnation Loss. Subject to the provisions
of Sections 8.1e) and 8.2e), if, after the date of this Agreement but prior to
the Closing Date, any portion of the Assets is destroyed by fire or other
casualty or is taken in condemnation or under right of eminent domain (such
portion of the Assets, the “Casualty Assets”), and the loss as a result of such
individual casualty or taking exceeds One Hundred Thousand Dollars ($100,000),
Seller shall elect by written notice to Purchaser prior to Closing either (i) to
cause the Casualty Assets to be repaired or restored prior to Closing to at
least its condition prior to the applicable casualty, or replaced with equipment
of similar grade and utility, or replace any real property affected by such
casualty or taking with real property of similar nature and kind reasonably
acceptable to Purchaser, all at Seller’s sole cost (without an adjustment to the
Purchase Price pursuant to Section 2.2 or otherwise), as promptly as reasonably
practicable (which repairs, restoration or replacement may extend after the
Closing Date), or (ii) unless such casualty or taking is waived by Purchaser, to
exclude the Casualty Assets from the Assets or (iii) to include the Casualty
Assets in the Assets delivered at Closing (unless excluded pursuant to the other
provisions of this Agreement) and reduce the Purchase Price by the Allocated
Values of the Casualty Assets. In each case under (i), (ii) or (iii) of the
preceding sentence, Seller shall retain all of the aforementioned rights to
insurance and other claims against third Persons with respect to the applicable
casualty or taking except to the extent the Parties otherwise agree in writing.

 

Section 3.7           Limitations on Applicability. The rights of Purchaser and
seller under Section 3.4 shall terminate as of the Title Claim Date and be of no
further force and effect thereafter, provided there shall be no termination of
Purchaser’s or Seller’s rights under Section 3.4 with respect to any bona fide
Title Defect properly asserted in a Title Defect Notice or bona fide Title
Benefit properly asserted in a Title Benefit Notice on or before the Title Claim
Date. Except as provided in this Article 3 and for the Special Warranty in the
Conveyance (subject to Section 7.10), Purchaser, on behalf of itself and the
Purchaser Indemnitees, releases, remises and forever discharges the Seller
Indemnitees from any and all Damages, suits, legal or administrative
proceedings, claims, demands, damages, losses, costs, liabilities, interest or
causes of action whatsoever, in Law or in equity, known or unknown, which
Purchaser or any Purchaser Indemnitee might now or subsequently may have, based
on, relating to or arising out of, any Title Defect or other lien, encumbrance,
covenant, obligation, or deficiency affecting title to any Asset that was not
properly asserted in a Title Defect Notice on or before the Title Claim Date.

21 

 

 

Article 4
ENVIRONMENTAL MATTERS

 

Section 4.1           Assessment. From and after the date hereof and up to and
including the Environmental Claim Date (or upon the earlier termination of this
Agreement) but subject to (a) applicable Laws, (b) the limitations set forth
herein and in Section 7.1, and (c) obtaining all required consents of third
Persons, including third Person operators of any Assets, Purchaser may, at its
option, cause a Phase I environmental assessment of all or any portion of the
Assets to be conducted by a reputable environmental consulting or engineering
firm approved in advance in writing by Seller and Purchaser (the “Environmental
Consultant”) or such Environmental Consultant may conduct visual inspections,
record reviews, and interviews relating to the Properties, including their
condition and their compliance with Environmental Laws (the “Assessment”). The
Assessment shall be conducted at the sole risk, cost and expense of Purchaser,
and all of Purchaser’s and the Environmental Consultant’s activity conducted
under this Section 4.1 and Section 7.1 shall be subject to the indemnity
provisions of Section 7.7. Purchaser’s right of access shall not, without the
prior written consent of Seller, entitle Purchaser to operate equipment or
conduct testing or sampling. Seller has the right to be present during the
Assessment. Purchaser shall coordinate its Assessment with Seller to minimize
any inconvenience to or interruption of the conduct of business by Seller.
Purchaser, the Environmental Consultant, and their respective agents, employees
and representatives shall abide by Seller’s, and any third Person operator’s,
safety rules, regulations and operating policies while conducting its due
diligence evaluation of the Assets, including the Assessment. Upon Seller’s
request, Purchaser agrees to promptly provide, but not later than the
Environmental Claim Date, copies of all reports, results, and other
documentation and data prepared or compiled by Purchaser, the Environmental
Consultant and/or their respective agents, employees and representatives in
connection with the Assessment. Seller shall not be deemed by its receipt of
said documents or otherwise to have made any representation or warranty,
expressed, implied or statutory, as to the condition of the Assets or the
accuracy of said documents or the information contained therein. During all
periods that Purchaser, the Environmental Consultant, or any of their respective
agents, employees or representatives are on the Assets, Purchaser shall
maintain, at its sole expense and with reputable insurers, such insurance as is
reasonably sufficient to support Purchaser’s indemnity obligations under Section
7.7. All information (including all reports, results and documentation
containing such information) acquired by Purchaser, the Environmental
Consultant, or their respective agents, employees or representatives, in
conducting the Assessment under this Section shall be subject to the
Confidentiality Agreement.

 

Section 4.2           Hazardous Materials and NORM. Purchaser acknowledges the
following:

 

(a)          The Assets have been used for exploration, development, production,
processing and/or gathering of oil and gas and that there may be petroleum,
produced water, wastes, or other materials located on or under the Properties or
associated with the Assets.

 

22 

 

 

(b)          Equipment and sites included in the Assets may contain asbestos,
Hazardous Materials, or NORM.

 

(c)          NORM may affix or attach itself to the inside of wells, materials,
and equipment as scale, or in other forms.

 

(d)          The wells, materials, and equipment located on the Properties or
included in the Assets may contain NORM and other wastes or Hazardous Materials.

 

(e)          NORM containing material and other wastes or Hazardous Materials
may have come in contact with the soil.

 

(f)          Special procedures may be required for the Remediation, removal,
transportation, or disposal of soil, wastes, asbestos, Hazardous Materials, and
NORM from the Assets.

 

Section 4.3           Notice of Violations of Environmental Laws. Purchaser
shall deliver claim notices to Seller in writing (an “Environmental Defect
Notice”), on or before the day that is seven (7) Business Days before the
Scheduled Closing Date (the “Environmental Claim Date”), of each individual
environmental matter disclosed by the Assessment that, except for the matters
set forth in Schedule 4.3 (which shall not constitute Environmental Defects) (a)
constitutes a present violation of Environmental Laws in effect as of the
Effective Time in the jurisdiction to which the affected Assets are subject, or
(b) constitutes a physical condition that requires, if known, or will require,
once sufficiently discovered, reporting to a Governmental Authority,
investigation, monitoring, removal, cleanup, Remediation, restoration or
correction under Environmental Laws, in each case of (a) and (b) that would
result in Environmental Liabilities for which the Environmental Defect Amount
exceeds the Individual Defect Threshold (either of (a) or (b), an “Environmental
Defect”) provided, however, that Purchaser agrees that it shall furnish to
Seller at least once every week, commencing on the seventh (7th) day following
the date of this Agreement until the Environmental Claim Date with an
Environmental Defect Notice for any Environmental Defects discovered during such
one week period. The Environmental Defect Notice shall provide (i) a reasonably
detailed description of the specific matter that is an alleged violation of
Environmental Laws; (ii) the Assets affected; (iii) a reasonable estimate of the
Environmental Defect Amount; and (iv) supporting documents reasonably necessary
for Seller (as well as any consultant, inspector or expert hired by Seller) to
verify the existence of the facts alleged in the Environmental Defect Notice.
The failure of an Environmental Defect Notice to contain item nos. (i) through
(iv) of the prior sentence shall not render such notice ineffective if the
notice materially complies with the provisions hereof. As used herein, the
“Environmental Defect Amount” means an amount equal to the cost of the Lowest
Cost Response applicable to an Environmental Defect. Notwithstanding the
foregoing, the matters set forth in Schedule 4.3 shall not constitute
Environmental Defects and there shall be no adjustment to the Purchase Price in
respect thereof.

 

23 

 

 

Section 4.4           Remedies for Violations of Environmental Laws.

 

(a)          If Seller confirms to its reasonable satisfaction that any
individual matter described in an Environmental Defect Notice delivered pursuant
to Section 4.3 constitutes an Environmental Defect for which the Environmental
Defect Amount exceeds the Individual Defect Threshold, then subject to Seller’s
continuing right to contest an Environmental Defect or Environmental Defect
Amount under Section 4.4(b), Seller shall, at its sole election, elect one of
the following options on or prior to Closing and/or at the time specified below:

 

(i)          reduce the Purchase Price by the Environmental Defect Amount;

 

(ii)         retain the Assets that are subject to (or alleged to be subject to)
the Environmental Defect, in which event the Purchase Price shall be reduced by
an amount equal to the sum of the Allocated Values of such Assets (determined
without duplication);

 

(iii)        perform or cause to be performed prior to the Closing, at the sole
cost and expense of Seller, such Remediation as is contemplated by the Lowest
Cost Response to address the alleged Environmental Defect;

 

(iv)        enter into an agreement with Purchaser whereby Seller will as soon
as reasonably practicable after Closing, at the sole cost and expense of Seller,
perform or cause to be performed such operations as are contemplated by the
Lowest Cost Response to address the matter disclosed in such Environmental
Defect Notice;

 

(v)         subject to Purchaser’s prior consent, which consent shall be in
Purchaser’s sole and absolute discretion, indemnify Purchaser against all
Damages resulting from the Environmental Defect pursuant to an indemnity
agreement; provided, that under no circumstances shall Seller’s aggregate
liability thereunder exceed the Allocated Value for the Asset(s) made the
subject thereof;

 

(vi)        if such Environmental Defect can be Remediated by paying a fine or
penalty, Seller may Remediate such Environmental Defect by electing to pay such
fine or penalty; or

 

(vii)       if applicable, terminate this Agreement pursuant to Article 10.

 

If Seller elects the option set forth in Section 4.4(a)(i), then Purchaser shall
be deemed to have assumed responsibility for all costs and expenses attributable
to the Remediation of the applicable Environmental Defect and all Damages with
respect thereto. If Seller makes any election other than Section 4.4(a)(ii) or
Section 4.4(a)(v) with respect to an Environmental Defect or Environmental
Defect Amount but such Environmental Defect or Environmental Defect Amount is to
be determined by the Environmental Arbitrator pursuant to Section 4.4(b), then
within five (5) Business Days after the Environmental Arbitrator has made its
determination, Seller at its option may change its election to Section
4.4(a)(ii) or Section 4.4(a)(v), and any retained Assets under Section
4.4(a)(ii) shall become Excluded Assets hereunder, and Seller shall pay to
Purchaser an amount equal to the sum of the Allocated Values of such Excluded
Assets to the extent paid by Purchaser to Seller at Closing as part of the
Purchase Price, and the Parties shall account to one another under Section 2.2
and Section 2.3 as if such retained Assets under Section 4.4(a)(ii) were
excluded at Closing. If such retained Asset was conveyed to Purchaser at
Closing, then Purchaser shall reconvey such retained Asset to Seller. If Seller
elects the option set forth in Section 4.4(a)(v), the Purchase Price shall not
be reduced. If Seller elects the option set forth in Section 4.4(a)(iv) and
Purchaser and Seller have failed to agree by Closing on the terms of the
agreement contemplated thereby (which the Parties shall use good faith efforts
to reach), Seller shall then proceed with respect to such matter under another
applicable election. Notwithstanding any of the foregoing, if the Environmental
Defect Amount of an Asset subject to an Environmental Defect exceeds fifty
percent (50%) of the Allocated Value of such Asset, Purchaser may, in its sole
election, require Seller to retain such Assets, in which event the Purchase
Price shall be reduced by an amount equal to the Allocated Value of such Asset.

 

24 

 

 

(b)          Seller and Purchaser shall attempt to agree on all timely alleged
Environmental Defects and Environmental Defect Amounts, and the sufficiency of
any cures performed pursuant to Section 4.4(a)(iii), prior to the Closing Date.
If Seller and Purchaser are unable to agree prior to the Closing Date, the
average of Purchaser’s and Seller’s respective good faith estimate of the
Environmental Defect Amount for each alleged Environmental Defect subject to an
election under Section 4.4(a)(i) shall be used to determine the Closing Payment,
and the Environmental Defects, proposed cures, and Environmental Defect Amounts
in dispute shall be exclusively and finally resolved by arbitration pursuant to
this Section 4.4(b). During the thirty (30) day period following the Closing
Date, Environmental Defects and Environmental Defect Amounts in dispute shall be
submitted to an environmental attorney with at least ten (10) years’ experience
in evaluating the compliance with Environmental Laws of oil and gas assets
similarly situated to the Properties in one or more of the jurisdictions where
they are located, as selected by mutual agreement of Purchaser and Seller or
absent such agreement during the thirty (30) day period, by the Denver, Colorado
office of the American Arbitration Association (the “Environmental Arbitrator”).
Likewise, if by the end of an agreed post-Closing cure period under Section
4.4(a)(iv), Seller and Purchaser have been unable to agree upon whether any
Environmental Defects have been Remediated or cured, the Remediation or cure in
dispute shall be submitted to the Environmental Arbitrator within thirty (30)
days after the expiration of the agreed timeline for the Remediation or cure.
The Environmental Arbitrator shall not have worked as an employee or outside
counsel for any Party or its Affiliates during the five (5) year period
preceding the arbitration or have any financial interest in the dispute. The
arbitration proceeding shall be held in Denver, Colorado, and shall be conducted
in English and 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 4.4(b). Seller and Purchaser shall have thirty (30)
days from the date the Environmental Arbitrator is selected (the “Environmental
Submission Date”) to submit to the Environmental Arbitrator all documents,
information and briefs supporting their respective positions in the matters in
dispute. The Environmental Arbitrator’s determination shall be made within
thirty (30) days after the Environmental Submission Date and shall be final and
binding upon the Parties, without right of appeal. In making his determination,
the Environmental Arbitrator shall be bound by the rules set forth in Article 4
and may consider such other matters as in the opinion of the Environmental
Arbitrator are necessary or helpful to make a proper determination.
Additionally, the Environmental Arbitrator may consult with and engage
disinterested third Persons to advise the arbitrator, including environmental
attorneys from other states and professional environmental consultants. The
Environmental Arbitrator shall act as an expert for the limited purpose of
determining the specific disputed Environmental Defects, attempted Remediation
or cures, and Environmental Defect Amounts, as applicable, submitted by any
Party and may not award damages, interest or penalties to any Party with respect
to any matter. Each Party shall bear its own legal fees and other costs of
presenting its case, and shall bear one-half of the costs and expenses of the
Environmental Arbitrator.

 

25 

 

 

(c)          Notwithstanding anything herein to the contrary, (i) in no event
shall there be any adjustments to the Purchase Price or other remedies provided
by Seller for individual Environmental Defects for which the Environmental
Defect Amount does not exceed the Individual Defect Threshold, and (ii) in no
event shall there be any adjustments to the Purchase Price or other remedies
provided by Seller for Environmental Defects unless and until the aggregate
amount of all Environmental Defect Amounts covered by Section 4.4(a)(i) that
exceed the Individual Defect Threshold, exceeds a deductible in an amount equal
to three percent (3%) of the Purchase Price (the “Environmental Defect
Deductible”), after which point Purchaser shall be entitled to adjustments to
the Purchase Price or other available remedies under this Section 4.4 with
respect to Environmental Defects in excess of the Environmental Defect
Deductible, subject to the Individual Defect Threshold, Seller’s elections under
this Section 4.4, and Section 4.4(d). The Allocated Value of any Property (or
affected portion thereof) retained by Seller in accordance with Section
4.4(a)(ii) may not be used in meeting the Environmental Defect Deductible.

 

(d)          Notwithstanding anything to the contrary in this Article 4, there
shall be no adjustment to the Purchase Price under this Agreement in excess of
the Allocated Value of an Asset affected by an Environmental Defect, provided,
however, to the extent that the Environmental Defect Amount exceeds the
Allocated Value of an Asset, Purchaser shall have the sole and absolute right to
exclude the Asset from the purchase and the Purchase Price shall be reduced by
the Allocated Value.

 

Section 4.5           Limitations. Notwithstanding anything to the contrary in
this Agreement, this Article 4, Section 8.2(e) and Section 11.2(c)(vii) are
intended to be the sole and exclusive remedy that Purchaser Indemnitees shall
have against Seller Indemnitees with respect to any matter or circumstance
relating to Environmental Laws, the release of materials into the environment or
protection of the environment or health. Except to the limited extent necessary
to enforce the terms of this Article 4, Section 8.2(e) or Section 11.2(c)(vii),
Purchaser (on behalf of itself, each of the other Purchaser Indemnitees and
their respective insurers and successors in interest) hereby releases and
discharges any and all claims and remedies at Law or in equity, known or
unknown, whether now existing or arising in the future, contingent or otherwise,
against the Seller Indemnitees with respect to any matter or circumstance
relating to Environmental Laws, the release of materials into the environment or
protection of the environment or health EVEN IF SUCH CLAIMS OR DAMAGES ARE
CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT,
EXCLUDING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), STRICT LIABILITY OR OTHER
LEGAL FAULT OF SELLER INDEMNITEES.

 

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Article 5
REPRESENTATIONS AND WARRANTIES OF SELLER

 

Section 5.1           Disclaimers.

 

(a)          Except as and to the extent expressly set forth in Article 5 OR in
the certificate of Seller to be delivered pursuant to Section 9.2(d), OR FOR THE
SPECIAL WARRANTY IN THE CONVEYANCE (subject to Section 7.10), with respect to
the Assets and the transactions contemplated hereby (i) SELLER MAKES NO
REPRESENTATIONS OR WARRANTIES, STATUTORY, EXPRESS OR IMPLIED, AND (ii) PURCHASER
HAS NOT RELIED UPON, AND 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, OR
ITS OR THEIR EMPLOYEES, AGENTS, OFFICERS, DIRECTORS, MEMBERS, MANAGERS, EQUITY
OWNERS, CONSULTANTS, REPRESENTATIVES OR ADVISORS (INCLUDING ANY OPINION,
INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO PURCHASER BY
ANY EMPLOYEE, AGENT, OFFICER, DIRECTOR, MEMBER, MANAGER, EQUITY OWNER,
CONSULTANT, REPRESENTATIVE OR ADVISOR OF SELLER OR ANY OF ITS AFFILIATES).

 

(b)          EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN ARTICLE 5 OR IN
THE CERTIFICATE OF SELLER TO BE DELIVERED PURSUANT TO Section 9.2(d), OR FOR THE
SPECIAL WARRANTY IN THE CONVEYANCE (subject to Section 7.10), WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, SELLER EXPRESSLY DISCLAIMS, AND PURCHASER
ACKNOWLEDGES AND AGREES THAT IT HAS NOT RELIED UPON, ANY REPRESENTATION OR
WARRANTY, STATUTORY, EXPRESS 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 PETROLEUM SUBSTANCES FROM THE ASSETS, (vi) ANY ESTIMATES OF
OPERATING COSTS AND CAPITAL REQUIREMENTS FOR ANY WELL, OPERATION, OR PROJECT,
(vii) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR
MARKETABILITY OF THE ASSETS, (viii) THE CONTENT, CHARACTER OR NATURE OF ANY
DESCRIPTIVE MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY
THIRD PARTIES, (ix) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT,
TRADEMARK, TRADE DRESS, TRADE SECRET OR OTHER INTELLECTUAL PROPERTY
INFRINGEMENT, OR (x) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE
AVAILABLE OR COMMUNICATED TO PURCHASER OR ITS AFFILIATES, OR ITS OR THEIR
EMPLOYEES, AGENTS, OFFICERS, DIRECTORS, MEMBERS, MANAGERS, EQUITY OWNERS,
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, STATUTORY,
EXPRESS OR IMPLIED, OF MERCHANTABILITY, 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 SHALL BE
DEEMED TO BE OBTAINING THE ASSETS, INCLUDING THE EQUIPMENT, IN THEIR PRESENT
STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS
AND THAT PURCHASER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS PURCHASER
DEEMS APPROPRIATE.

 

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(c)          Any representation “to the knowledge of Seller” or “to Seller’s
knowledge” is limited to matters within the actual knowledge of the persons set
forth on Exhibit C. “Actual knowledge” for purposes of this Agreement means
information actually personally known, after reasonable due inquiry.

 

(d)          Inclusion of a matter on a Schedule 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.
Matters may be disclosed on a Schedule to this Agreement for purposes of
information only. Matters disclosed in each Schedule shall qualify the
representation and warranty in which such Schedule is referenced and any other
representation and warranty to which the matters disclosed reasonably relate.
The fact that any item of information is disclosed in a Schedule to this
Agreement shall not constitute an admission by such Party that such item is
material, that such item has had or would have a Material Adverse Effect or a
material adverse effect, as applicable, or that the disclosure of such be
construed to mean that such information is required to be disclosed by this
Agreement.

 

(e)          Subject to the foregoing provisions of this Section 5.1, and the
other terms and conditions of this Agreement, Seller represents and warrants to
Purchaser, as of the date hereof, the matters set out in Sections 5.2 through
5.23.

 

Section 5.2           Existence and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Colorado and is duly qualified to do business as a foreign limited liability
company where the Assets are located to the extent required by Law, except where
the failure to so qualify would not have a Material Adverse Effect.

 

Section 5.3           Power. Seller has the requisite power to enter into and
perform this Agreement and each other agreement, instrument or document to be
executed by Seller in connection with the transactions contemplated hereby and
to consummate the transactions contemplated hereby and thereby.

 

Section 5.4           Authorization and Enforceability. The execution, delivery
and performance of this Agreement and each other agreement, instrument or
document to be executed by Seller in connection with the transactions
contemplated hereby, and the performance of the transactions contemplated hereby
and thereby, have been duly and validly authorized by all necessary action on
the part of Seller. This Agreement has been duly executed and delivered by
Seller (and all documents required hereunder to be executed and delivered by
Seller at Closing will be duly executed and delivered by Seller) and this
Agreement constitutes, and at the Closing such documents will constitute, the
valid and binding obligations of Seller, enforceable in accordance with their
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), provided,
however, that Seller acknowledges that.

 

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Section 5.5           No Conflicts. Except as disclosed in Schedule 5.5, The
execution, delivery and performance of this Agreement by Seller, and the
transactions contemplated by this Agreement, will not (a) violate any provision
of the Charter Documents of Seller, (b) result in a material 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 promissory note, bond, mortgage,
indenture, loan or similar financing instrument to which Seller is a party and
which affects the Assets, (c) violate any judgment, order, ruling, or decree
applicable to Seller as a party in interest or (d) violate any Laws applicable
to Seller or any of the Assets (except for rights to consent by, required
notices to, and filings with or other actions by Governmental Bodies where the
same are not required prior to the assignment of oil and gas interests), except
any matters described in clauses (b), (c) or (d) above which would not have,
individually or in the aggregate, a Material Adverse Effect.

 

Section 5.6           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 any of its 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.

 

Section 5.7           Litigation. Except as disclosed on Schedule 5.7, (i) there
are no pending Proceedings against Seller for which Seller has received written
notice before any Governmental Body or arbitrator to which any Seller Operated
Assets are subject, and no Proceeding relating to the Seller Operated Assets has
been threatened in writing against Seller or the Seller Operated Assets and (ii)
there are no Proceedings pending against the Assets.

 

Section 5.8           Taxes and Assessments. With respect to all Property Taxes
affecting the ownership or operation of the Assets, Seller warrants and
represents (a) all reports, returns, statements (including estimated reports,
returns or statements), and other similar filings (the “Tax Returns”) affecting
the ownership or operation of the Assets required to be filed on or before the
Effective Time by Seller have been or will be timely filed with the appropriate
Governmental Body in all jurisdictions in which such Tax Returns are required to
be filed; and (b) such Tax Returns are true and correct in all material
respects, and all Property Taxes related to the ownership or operation of the
Assets by Seller (whether or not reported on such Tax Returns) have been paid.

 

With respect to all Property Taxes affecting the ownership or operation of the
Assets, except as set forth on Schedule 5.8, Seller further warrants and
represents (a) there are not currently in effect any extension or waiver of any
statute of limitations of any jurisdiction regarding the assessment or
collection of any Property Tax; (b) there are no Proceedings pending against the
Assets or Seller by any taxing authority for which Seller has received written
notice; (c) there are no Property Tax liens on any of the Assets except for
liens for Property Taxes not yet due; and (d) none of the Assets are subject to
any tax partnership as defined in Section 761 of the Code.

 

29 

 

 

Section 5.9           Outstanding Capital Commitments. As of the date of this
Agreement, there is no individual outstanding authority for expenditure for any
incomplete operation which is binding on the Assets, the value of which Seller
reasonably anticipates exceeds Seventy-five Thousand Dollars ($75,000)
chargeable to Seller’s interests participating in the operation covered by such
authority for expenditure after the Effective Time, other than those shown on
Schedule 5.9 hereto.

 

Section 5.10         Compliance with Laws. Except as disclosed on Schedule 5.10
and except for any Permitted Encumbrances, to the knowledge of Seller, the
Seller Operated Assets are, and the operation of the Seller Operated Assets has
been and currently is, in substantial compliance with the provisions and
requirements of all Laws (excluding Environmental Laws, which are addressed in
Article 4 and Section 5.21) of all Governmental Bodies having jurisdiction with
respect to the Assets, or the ownership, operation, development, maintenance, or
use of any thereof.

 

Section 5.11         Contracts.

 

(a)          Seller is not and, to Seller’s knowledge, no other party is, in
material default under any Contract listed on Schedule 5.11(b), except as
disclosed on Schedule 5.11a).

 

(b)          There are no hedges, swaps or other derivatives contracts that will
be binding on the Assets or the Purchaser after Closing.

 

(c)          Schedule 5.11b) sets forth all of the following Contracts included
in the Assets or to which any of the Assets will be bound as of the Closing: (i)
any agreement with any Affiliate of Seller; (ii) any agreement or contract for
the sale, exchange, or other disposition of Hydrocarbons produced from or
attributable to Seller’s interest in the Assets that is not cancelable without
penalty or other material payment on not more than sixty (60) days’ prior
written notice; (iii) any agreement of or binding upon Seller to sell, lease,
farmout, or otherwise dispose of any interest in any of the Properties after the
Effective Time, other than (x) conventional rights of reassignment arising in
connection with Seller’s surrender or release of any of the Properties and (y)
preferential rights to purchase, which are addressed in Section 5.15; (iv) joint
operating agreements, area of mutual interest agreements and farmout and farmin
agreements, participation agreements, joint venture and exploration or
development program agreements, or agreements containing any drilling or
development commitment or obligation, participation right, reversionary
interest, convertible interest, payout, option to earn, or obligation to assign,
in each case relating to the Properties or by which the Properties are bound;
and (v) any contracts or agreements burdening the Properties which could
reasonably be expected to obligate Purchaser to expend, or entitle Purchaser to
receive, in excess of One Hundred Thousand Dollars ($100,000) in any calendar
year.

 

Section 5.12         Payments for Production. Except for any Suspended Proceeds,
all rentals, royalties, overriding royalty interests, Hydrocarbon production
payments, and other payments due and payable by Seller to other interest owners
under or with respect to the Leases and the Hydrocarbons produced therefrom or
attributable thereto, have been timely and properly paid. Except as set forth on
Schedule 5.12 and for obligations of Seller with respect to Imbalances, Seller
is not obligated under any contract or agreement containing a take-or-pay,
advance payment, prepayment, or similar provision.

 

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Section 5.13         Imbalances. Schedule 5.13 sets forth all of Seller’s
pipeline and production Imbalances and associated material penalties as of the
Effective Time arising with respect to the Seller Operated Assets.

 

Section 5.14         Governmental Authorizations. Except as disclosed on
Schedule 5.14, to the knowledge of Seller, Seller has obtained and is
maintaining all federal, tribal, state and local governmental licenses, permits,
franchises, orders, exemptions, variances, waivers, authorizations,
certificates, consents, rights, privileges, bonds, letters of credit, guarantees
and other surety arrangements and applications therefor (the “Governmental
Authorizations”) that are presently necessary or required for the operation of
the Seller Operated Assets as currently operated (excluding those required under
Environmental Laws, which are addressed in Article 4). All Governmental
Authorizations obtained or held by Seller are set forth on Schedule 5.14.

 

Section 5.15         Consents and Preferential Purchase Rights. To Seller’s
knowledge, none of the Leases, Units or Wells, or any portion thereof, is
subject to any (a) preferential rights to purchase, (b) Consent Requirements, or
(c) other third Person consents to assignment, in each case that would be
triggered by the purchase and sale of Assets contemplated by this Agreement,
except for (x) consents and approvals by Governmental Bodies of assignments that
are customarily obtained after Closing, (y) preferential rights, consents and
restrictions contained in easements, rights-of-way, equipment leases or similar
instruments, and (z) preferential rights, consents and restrictions as are set
forth on Schedule 5.15.

 

Section 5.16         Condemnation. There is no pending or, to Seller’s
knowledge, threatened taking (whether permanent, temporary, whole or partial) of
any part of the Properties by reason of condemnation, eminent domain or similar
proceedings or the threat thereof.

 

Section 5.17         Bankruptcy. There are no bankruptcy, reorganization or
receivership Proceedings pending, being contemplated by or, to Seller’s
knowledge, threatened against Seller.

 

Section 5.18         Leases. Except as set forth on Schedule 5.18, with respect
to Leases and to Seller’s knowledge:

 

(a)          subject to any Permitted Encumbrances, during Seller’s period of
ownership through the date hereof (and to Seller’s knowledge, as to all prior
periods), the Leases have been maintained according to their terms, in
compliance with all material agreements to which the Leases are subject; and

 

(b)          the Leases are in full force and effect and neither Seller, nor to
Seller’s knowledge, any other party to any Lease is in material breach or
default with respect to any of its material obligations thereunder; and

 

(c)          except as set forth in Schedule 5.18(c), to Seller’s knowledge,
there are currently pending no requests or demands for payments, adjustments of
payments or performance pursuant to obligations under the Leases.

 

31 

 

 

Section 5.19         Well Status; Plugging and Abandonment. Except as set forth
on Schedule 5.19, since the Effective Time, Seller has not abandoned, and, as of
the date hereof, there are no on-going abandonment operations in the field
relating to, any Wells associated with the Leases. Except as provided in
Schedule 5.19, there are no Wells associated with the Leases (a) with respect to
which Seller has received a governmental order requiring that such Well be
plugged and abandoned that has not been plugged and abandoned; or (b) that have
been plugged and abandoned by Seller that have not been plugged in accordance
with applicable requirements of each Governmental Body having jurisdiction over
such Well.

 

Section 5.20         Non-Consent Operations; Payout Status. Except as set forth
on Schedule 5.20, no operations are being conducted with respect to the Wells as
to which Seller has elected to be a nonconsenting party under the terms of the
applicable operating agreement and with respect to which Seller has not yet
recovered its full participation. Schedule 5.20 sets forth the status of any
“payout” balance as prepared by the Seller as of the date set forth on such
Schedule, for any Well.

 

Section 5.21         Environmental Matters. To Seller’s knowledge, except as set
forth on Schedule 5.21:

 

(a)          Seller has not received any written notice of violation from any
Governmental Body that alleges that Seller is in violation of any applicable
Environmental Law in connection with the operations in and on the Properties,
which alleged violation remains uncured or unresolved;

 

(b)          there has been no material release, spill, discharge or leak of
Hazardous Materials under or from any of the Wells that, if known to a
Governmental Body, would constitute a violation of Environmental Laws; and

 

(c)          with respect to any Property, Seller has not entered into nor is a
party to any agreement with, consent, order, decree or judgment of any
Governmental Body that requires any Remediation under applicable Environmental
Laws.

 

Notwithstanding the foregoing, if Purchaser identifies any breach by Seller of
this Section 5.21, Purchaser’s sole remedy shall be to assert such breach as an
Environmental Defect in accordance with the terms of Article 4 and, if
applicable, Section 8.2(e). In no event shall Seller be liable to Purchaser for
breach of this Section 5.21 other than pursuant to the terms of Article 4 and,
if applicable, Section 8.2(e).

 

32 

 

  

Section 5.22         Audits. There are no audits currently being conducted of
the operator of any of the Assets of the joint account under any operating
agreements or to Seller’s knowledge, imminent.

 

Section 5.23         Judgments. There are no unsatisfied liens, judgments or
injunctions related to the Assets issued by a court of competent jurisdiction or
other Governmental Body outstanding against the Seller.

 

Article 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER

 

Purchaser represents and warrants to Seller the following:

 

Section 6.1           Existence and Qualification. Purchaser is a limited
liability company organized, validly existing and in good standing under the
Laws of the State of North Dakota; and Purchaser 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 its properties;
and Purchaser is or will be duly qualified to do business as a foreign
corporation in the respective jurisdictions where the Assets are located.

 

Section 6.2           Power. Purchaser has the requisite power to enter into and
perform this Agreement and each other agreement, instrument or document to be
executed by Purchaser in connection with the transactions contemplated hereby
and to consummate the transactions contemplated hereby and thereby.

 

Section 6.3           Authorization and Enforceability. The execution, delivery
and performance of this Agreement and each other agreement, instrument or
document to be executed by Purchaser in connection with the transactions
contemplated hereby, and the performance of the transactions contemplated hereby
and thereby, have been duly and validly authorized by all necessary action on
the part of Purchaser. This Agreement has been duly executed and delivered by
Purchaser (and all documents required hereunder to be executed and delivered by
Purchaser at Closing will be duly executed and delivered by Purchaser) and this
Agreement constitutes, and at the Closing such documents will constitute, the
valid and binding obligations of Purchaser, enforceable in accordance with their
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).

 

Section 6.4           No Conflicts. The execution, delivery and performance of
this Agreement by Purchaser, and the transactions contemplated by this Agreement
will not (a) violate any provision of the Charter Documents of Purchaser, (b)
result in a material 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 promissory note, bond, mortgage, indenture, loan or similar financing
instrument to which Purchaser is a party or which affects Purchaser’s assets,
(c) violate any judgment, order, ruling, or regulation applicable to Purchaser
as a party in interest or (d) violate any Laws applicable to Purchaser or any of
its assets, except any matters described in clauses (b), (c) or (d) above which
would not be reasonably likely to impede its ability to consummate the
transactions contemplated by this Agreement or by any document to be delivered
pursuant hereto.

 

33 

 

 

Section 6.5           Liability for Brokers’ Fees. Seller shall not directly or
indirectly have any responsibility, liability or expense, as a result of
undertakings or agreements of Purchaser or any of its 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.

 

Section 6.6           Litigation. As of the date of the execution of this
Agreement, there are no pending Proceedings, or to Purchaser’s knowledge,
threatened in writing before (or that would be before) any Governmental Body or
arbitrator against Purchaser or any Affiliate of Purchaser which may impair
Purchaser’s ability to perform its obligations under this Agreement if such
Proceedings are determined adversely.

 

Section 6.7           Financing. Subject to the financing condition addressed in
Section 2.4(a)(i), prior to the Closing Date, Purchaser will have sufficient
cash, available lines of credit or other sources of immediately available funds
(in United States dollars) to enable it to pay the Closing Payment to Seller at
the Closing and to pay any supplemental payment required under Section 9.4(b).

 

Section 6.8           Independent Investigation. Purchaser is (or its advisors
are) experienced and knowledgeable in the oil and gas business and aware of the
risks of that business. Purchaser acknowledges and affirms that (a) in making
the decision to enter into this Agreement, it has completed and relied solely
upon its own independent investigation, verification, analysis and evaluation of
the Assets, (b) by Closing, it will have made all such reviews and inspections
of the Assets as it has deemed necessary or appropriate in making the decision
to enter into this Agreement and consummate the transactions contemplated
hereby, and (c) except for the express representations, warranties, covenants
and remedies provided in this Agreement, Purchaser is acquiring the Assets on an
as-is, where-is basis with all faults, and has not relied upon any other
representations, warranties, covenants or statements of Seller in entering into
this Agreement.

 

Section 6.9           Bankruptcy. There are no bankruptcy, reorganization or
receivership Proceedings pending against, being contemplated by, or, to
Purchaser’s knowledge, threatened against Purchaser.

 

Section 6.10         Qualification. Purchaser shall be, at Closing, and
hereafter shall continue to be, qualified under applicable Laws to own and
assume operatorship of federal, tribal, and state oil, gas and mineral leases in
all jurisdictions where the Assets to be transferred to it (or operated by it)
are located to the extent such leases are included in the Assets, and the
consummation of the transactions contemplated in this Agreement will not cause
Purchaser to be disqualified as such an owner or operator. As of the Closing,
Purchaser currently has, and will continue to maintain, lease bonds, area-wide
bonds or any other surety bonds or Asset Bonds to the extent required by, and in
accordance with, all applicable Laws and regulations governing the ownership and
operation of the Assets.

 

Section 6.11         Consents. Except for consents and approvals addressed by
the other provisions of this Agreement that are triggered by the purchase and
sale of the Assets, there are no consents, approvals or restrictions on
assignment applicable to Purchaser that Purchaser is obligated to obtain or
furnish in order to consummate the purchase and sale of Assets contemplated by
this Agreement and perform and observe the covenants and obligations of
Purchaser hereunder.

 

34 

 

 

Section 6.12         Investment Intent. Purchaser is acquiring the Assets for
its own account, for investment, and not with the intent to make, or to offer or
resell in connection with, a distribution in violation of the Securities Act of
1933, as amended (and the rules and regulations promulgated thereunder) or a
distribution in violation of any other applicable securities Laws.

 

Article 7
COVENANTS OF THE PARTIES

 

Section 7.1           Access. Between the date of execution of this Agreement
and continuing until the Closing Date, in addition to Purchaser’s right of
access under Section 4.1, Seller will give Purchaser and its representatives
access to Seller’s offices and the Records in Seller’s possession or control,
including the right to copy the Records at Purchaser’s expense, for the sole
purpose of conducting an investigation of the Assets, but only to the extent
that Seller may do so without violating any applicable Law or obligations to any
third Person and to the extent that Seller has authority to grant such access
without breaching any legal or contractual restriction binding on Seller or its
Affiliates. Such access by Purchaser and its representatives shall be subject to
applicable limitations in Section 4.1 and shall be limited to Seller’s normal
business hours (from 9 A.M. to 5 P.M. local time) on Business Days, and after
hours requested by Purchaser that can be reasonably accommodated by Seller, and
Purchaser’s and its representatives’ investigation shall be conducted in a
manner that minimizes interference with the operation of the Assets. All
information obtained by and access granted to Purchaser, the Environmental
Consultant and their respective agents, employees and representatives under this
Section 7.1 shall be subject to the terms of Section 7.7 and the terms of the
Confidentiality Agreement.

 

Section 7.2           Government Reviews. Each Party shall in a timely manner
(a) 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 for such Party to
consummate the transactions contemplated hereby, and (b) provide such
information as the other Party 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. Purchaser shall
bear the cost of all filing or application fees payable to any Governmental Body
with respect to the transactions contemplated by this Agreement.

 

Section 7.3           Notification of Breaches. Until the Closing,

 

(a)          Purchaser shall notify Seller promptly after Purchaser obtains
actual knowledge that any representation or warranty of Seller contained in this
Agreement is untrue in any material respect or will be untrue in any material
respect as of the Closing Date or that any covenant or agreement to be performed
or observed by Seller prior to or on the Closing Date has not been so performed
or observed in any material respect.

 

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(b)          Seller shall notify Purchaser promptly after Seller obtains actual
knowledge that any representation or warranty of Purchaser contained in this
Agreement is untrue in any material respect or will be untrue in any material
respect as of the Closing Date or that any covenant or agreement to be performed
or observed by Purchaser prior to or on the Closing Date has not been so
performed or observed in any material respect.

 

If any of Purchaser’s or Seller’s representations or warranties is untrue or
shall become untrue in any material respect between the date of execution of
this Agreement and the Closing Date, or if any of Purchaser’s or Seller’s
covenants or agreements to be performed or observed prior to or on the Closing
Date (other than on a specified date) shall not have been so performed or
observed in any material respect, but if such breach of representation,
warranty, covenant or agreement shall (if curable) be cured by the Closing (or,
if the Closing does not occur, by the date set forth in Section 10.1), then such
breach shall be considered not to have occurred for all purposes of this
Agreement. The term “actual knowledge” as set forth in this Section 7.3 shall
mean, with respect to the Purchaser, the individuals set forth on Schedule 7.3
who are aware of or have actual knowledge of a breach.

 

Section 7.4           Operatorship. Seller makes no representation and does not
warrant or guarantee that Purchaser will succeed in being appointed successor
operator for any Assets. Purchaser shall promptly, following Closing (or by
Closing for those items subject to Section 12.6), file all appropriate or
required forms, applications, permit transfers, declarations, guarantees, Asset
Bonds or other financial support with federal, tribal, and state agencies
relative to its assumption of operatorship. For all Seller-Operated Assets, at
Closing or as soon as reasonably practicable thereafter, Seller shall execute
and deliver to Purchaser, and Purchaser shall promptly file, all governmental
forms required to transfer record operatorship of all such Seller Operated
Assets to Purchaser. With respect to those Wells as to which Seller owns a
sufficient share of the Working Interest to control the selection of the
successor operator, Seller shall deliver to Purchaser a written notification
designating Purchaser as the successor operator of such Wells, effective as of
the Closing Date. With respect to those Wells as to which Seller does not own a
sufficient share of the Working Interest to control the selection of the
successor operator, Seller will cast its vote in favor of the designation of
Purchaser as successor operator of such Wells, effective as of the Closing Date.

 

Section 7.5           Operation of Business. Seller will continue to operate the
Seller Operated Assets in the ordinary course of business consistent with recent
past practices of Seller. Except (i) as expressly contemplated by the other
provisions of this Agreement, (ii) for expenditures or operations set forth on
Schedule 5.9, (iii) for the renewal of expiring insurance coverage in the
ordinary course of business, (iv) the amendment, extension or modification of
credit, hedge, financing, security or similar agreements that are to be released
from the Assets at Closing, (v) for conducting or granting consent to operations
that are necessary to prevent forfeiture of any Asset, and (vi) as otherwise
consented to in writing by Purchaser, which consent shall not be unreasonably
withheld or delayed, until the Closing, Seller:

 

(a)          will not commit to any single field operation, or series of related
field operations, reasonably anticipated by Seller to require future capital
expenditures by the owner of the Assets in excess of One Hundred Thousand
Dollars ($100,000) (net to Seller’s interest) or make any capital expenditures
for any single field operation or series of related field operations related to
the Assets in excess of One Hundred Thousand Dollars ($100,000) (net to Seller’s
interest);

 

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(b)          will not terminate, materially amend, execute or extend any
material agreements affecting the Assets;

 

(c)          will maintain its current insurance coverage on the Assets, if any,
presently furnished by unaffiliated third Persons in the amounts and of the
types presently in force;

 

(d)          will use commercially reasonable efforts to maintain in full force
and effect all Leases;

 

(e)          will maintain all material existing Governmental Authorizations
necessary for Seller’s ownership or operation of the Assets as currently owned
and operated;

 

(f)          will not transfer, farmout, sell, hypothecate, encumber or
otherwise dispose of any material Assets except for sales and dispositions of
Hydrocarbon production and surplus, damaged or obsolete Equipment made in the
ordinary course of business consistent with recent past practices;

 

(g)          will not make any non-consent elections with respect to the
operations affecting the Assets;

 

(h)          will not settle or compromise any claim or Proceeding, or waive or
extend any period of limitations attributable to any of the Assets; and

 

(i)          will not commit to do any act prohibited by the foregoing clauses
(a)–(h).

 

Notwithstanding anything contained in this Agreement to the contrary, all
proceeds received by Seller prior to Closing from the sale of surplus and
inventoried Equipment shall be the property of Seller, and there shall be no
adjustment to the Purchase Price for the same. Purchaser’s approval of any
action restricted by this Section 7.5 shall be considered granted within five
(5) Business Days (unless a shorter time is reasonably required by the
circumstances and such shorter time is specified in Seller’s written notice) of
Seller’s notice to Purchaser requesting such consent unless Purchaser notifies
Seller to the contrary during that period. Notwithstanding the foregoing, in the
event of an emergency or a serious risk to life, property, or the environment,
Seller may take or consent to such action as a prudent operator, or non-operator
as the case may be, would take and without obtaining Purchaser’s prior consent;
provided Seller shall notify Purchaser of such action promptly thereafter.
However, except for emergency action that must be taken in the face of serious
risk to life, property, or the environment, Seller has no obligation to
undertake any actions with respect to the Assets that are not required in the
course of the normal operation of the Assets consistent with recent past
practices.

 

Purchaser acknowledges that Seller may own a fractional undivided interest in
certain of the Assets and Purchaser agrees that the acts or omissions of the
other working interest owners, partners or any operator who is not affiliated
with Seller shall not constitute a violation of the provisions of this Section
7.5 nor shall any action required by a vote of working interest owners or
partners constitute such a violation so long as Seller has voted its interest in
a manner consistent with the provisions of this Section 7.5.

 

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Section 7.6           

 

Section 7.7           Indemnity Regarding Access. Purchaser, on behalf of itself
and the Purchaser Indemnitees and the Environmental Consultant, hereby releases
and agrees to indemnify, defend and hold harmless all Seller Indemnitees and the
other owners of interests in the leases and wells described on Exhibit A or
Exhibit A-1 from and against any and all Damages, including claims, liabilities,
losses, costs and expenses attributable to personal injuries, death, or property
damage, arising out of or relating to any and all access by the Purchaser
Indemnitees or the Environmental Consultant to Seller’s offices, the Assets or
the Records (or other related information), or any related activities of the
Purchaser Indemnitees prior to Closing, EVEN IF CAUSED IN WHOLE OR IN PART BY
THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER
LEGAL FAULT OF ANY INDEMNIFIED PARTY EXCLUDING, HOWEVER, ANY CLAIMS,
LIABILITIES, LOSSES, COSTS OR EXPENSES CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF ANY INDEMNIFIED PARTY.

 

Section 7.8           Other Preferential Rights. Should a third Person fail to
exercise its preferential right to purchase as to any portion of the Assets
prior to Closing and the time for exercise or waiver has not yet expired, such
Assets shall be excluded from the Assets transferred at Closing and the Purchase
Price shall be reduced by the Allocated Value of such excluded Assets or
portions thereof. Promptly after the of the time for exercise or waiver of such
preferential rights without exercise, Seller shall sell to Purchaser, and
Purchaser shall purchase from Seller, all such Assets or portions thereof not
being sold to the third Person for a purchase price equal to the Allocated Value
of such Assets or portions thereof, and the Parties shall thereafter account to
each other under Section 2.2 and Section 2.3.

 

Section 7.9           Tax Matters.

 

(a)          Subject to the provisions of Section 12.3, Seller shall be
responsible for all Property Taxes that are attributable to any period of time
at or prior to Effective Time. Purchaser shall be responsible for all Property
Taxes that are attributable to any period of time after the Effective Time. For
purposes of this Section 7.9(a), ad valorem and real property Taxes assessed for
a particular time period shall be deemed “attributable” to such time period,
even if such assessment is valued based upon production or other data for prior
Tax periods. Regardless of which Party is responsible, Seller shall handle
payment to the appropriate Governmental Body of all Property Taxes affecting the
ownership or operation of the Assets which are required to be paid prior to
Closing (and shall file all Tax Returns with respect to such Property Taxes),
and Purchaser shall handle payment to the appropriate Governmental Body of all
Property Taxes affecting the ownership or operation of the Assets which are
required to be paid after Closing (and shall file all Tax Returns with respect
to such Taxes). Notwithstanding the foregoing, this Section 7.9(a) shall not
apply to income, franchise, corporate, business and occupation, business license
and similar Taxes, and Tax Returns therefor, which shall be borne, paid and
filed by the Party responsible for such Taxes under applicable Law. If requested
by Purchaser, Seller will assist Purchaser with preparation of all Property Tax
Returns due on or before thirty (30) days after Closing (including any
extensions requested). Seller shall deliver to Purchaser within thirty (30) days
of filing copies of all Tax Returns filed by Seller after the Closing Date
affecting the Assets and any supporting documentation provided by Seller to
Governmental Bodies.

 

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(b)          If Seller or Purchaser (or an Affiliate of Seller or Purchaser)
receives a refund of any Taxes (whether by payment, credit offset or otherwise,
with any interest thereon) covered by Section 7.9(a) that are paid by and
required to be borne by the other Party, the Party that received (or whose
Affiliate that received) such refund shall promptly (but no later than thirty
(30) days after receipt) remit payment to such other Party of an amount equal to
the refund amount, including all relevant documentation. Each Party shall
cooperate with the other and its Affiliates in order to take all reasonably
necessary steps to claim any refund to which it is entitled. Purchaser agrees to
notify Seller within ten (10) days following the discovery of a right to claim
any refund to which Seller is entitled and upon receipt of any such refund.
Except to the extent required by applicable Laws, Purchaser shall not and shall
not permit its Affiliates to amend any Tax Returns with respect to Taxes for
which Seller is liable under this Section 7.9 or for which Seller may be liable
to indemnify Purchaser under Section 11.2.

 

(c)          Control of any legal or administrative Proceedings concerning any
Property Taxes affecting the Assets shall belong to the Party responsible for
such Property Taxes under this Section 7.9.

 

(d)          Either Party has the right to utilize all or part of the Assets as
part of a tax deferred exchange pursuant to Section 1031 of the Code and
applicable state and local tax laws. In connection with an exchange, and
notwithstanding the terms of Section 12.11, all or part of a Party’s rights
under this Agreement may be assigned, without the need for the other Party’s
consent, to an intermediary, escrow agent, trustee, or other exchange
accommodation party, provided that such assignment shall not relieve such
assigning Party of its obligations to the other Party hereunder. The Parties
shall cooperate in effecting such an exchange, including, without limitation,
the execution of escrow instructions and other instruments, provided that:
(a) the acquisition and exchange of any exchange property shall not impose upon
the non-requesting Party any additional financial obligation other than as set
out in this Agreement; (b) the non-requesting Party shall have no obligation to
become a holder of record title to any exchange property; (c) the requesting
Party shall indemnify and hold the non-requesting Party harmless from any and
all Costs which the non-requesting Party incurs or to which the non-requesting
Party may be exposed as a result of the non-requesting Party’s participation in
the contemplated exchange, including reasonable attorneys’ fees and costs of
defense; (d) the Closing shall not be delayed or affected by reason of such
exchange nor shall the consummation or accomplishment of such exchange be a
condition precedent or condition subsequent to the requesting Party’s
obligations under this Agreement; (e) the non-requesting Party shall not, by
this Agreement or acquiescence to such exchange, have its rights under this
Agreement affected or diminished in any manner; and (f) the non-requesting Party
shall not, by this Agreement or acquiescence to such exchange, be responsible
for compliance with or deemed to have warranted to the requesting Party that
such exchange in fact complies with Section 1031 of the Code or any state or
local tax Law. If any exchange contemplated by the requesting Party should fail
to occur, for whatever reason, the sale of the Assets shall nonetheless be
consummated as provided herein.

 

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Section 7.10         Special Warranty of Title. The Conveyance shall contain a
covenant of Seller to warrant Defensible Title to the Subject Properties after
Closing from and against the lawful claims of third Persons arising by, through
or under Seller, but not otherwise (the “Special Warranty”); provided, however,
that Seller’s aggregate liability to Purchaser in respect of such covenant for
any Subject Property shall not exceed the Allocated Value of such Subject
Property. Without limiting the foregoing, Purchaser shall not be entitled to
claim a breach of the Special Warranty for any Title Defect claimed in a Title
Defect Notice.

 

Section 7.11         Suspended Proceeds. Seller shall transfer and remit to
Purchaser, in the form of an adjustment to the Purchase Price pursuant to
Section 2.2(k), all monies representing the value or proceeds of production
removed or sold from the Properties and held by Seller at the time of the
Closing for accounts from which payment has been suspended, such monies, net of
applicable rights of set off or recoupment, being hereinafter called “Suspended
Proceeds.” Schedule 7.11 sets forth (i) the Suspended Proceeds as of the date
set forth on Schedule 7.11, and (ii) a description from Seller’s existing
records of the source of such funds and the reason they are being held in
suspense. Purchaser shall be solely responsible for the proper distribution of
such Suspended Proceeds to the Person or Persons which or who are entitled to
receive payment of the same.

 

Section 7.12         Further Assurances. After Closing, Seller and Purchaser
each agree 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.

 

Section 7.13         Oasis Operational Requirements. Purchaser acknowledges and
agrees that the Assets are subject to and bound by the operational provisions
set forth in Section 7.12 of that certain Purchase and Sale Agreement dated
December 31, 2015, by and between Oasis and Seller (the “Oasis PSA”), which
provisions, together with the corresponding schedules thereto, are attached
hereto as Schedule 7.12 (the “Oasis Requirements”), together with the terms and
conditions of the Joint Surface Use Agreement. Purchaser hereby agrees, as to
the Assets, to (i) assume and be bound by all of the Oasis Requirements and the
Joint Surface Use Agreement, and (ii) comply with or otherwise discharge, or
authorize Seller as the operator of the Assets to comply with or otherwise
discharge, on behalf of Purchaser, all of the Oasis Requirements and the terms
and conditions of the Joint Surface Use Agreement. Purchaser acknowledges that
the Oasis Requirements are covenants running with the land binding on the
Purchaser and its respective successors and assigns.

 

Section 7.14         [Intentionally Omitted].

 

Section 7.15         Use of GTO Tank and Equipment. Purchaser acknowledges that
Seller and Generative Technology Operatives, LLC (“GTO”) are parties to an
arrangement with respect to the use and operation of the GTO Tank and Equipment,
which tank and associated equipment are owned by GTO and are installed at or
near and are used in connection with the Schmitz Wellsite. The essential terms
of this arrangement are set forth on Schedule 7.14 (collectively referred to as
the “GTO Agreement”). The Schmitz Wellsite is among the Assets to be conveyed to
Purchaser at Closing, but the GTO Tank and Equipment are Excluded Assets that
will continue to be owned by GTO and will not be conveyed to Purchaser at
Closing. Notwithstanding the foregoing, Purchaser agrees to (i) assume and be
bound by the GTO Agreement, as to the Schmitz Wellsite, including, without
limitation, by allowing GTO to use and maintain the GTO Tank and Equipment at
the Schmitz Wellsite, and (ii) comply with or otherwise discharge all of the
provisions of the GTO Agreement, as to the Schmitz Wellsite.

 

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Section 7.16         Enhanced Recovery Operations. Purchaser acknowledges that
on August 22, 2017, the North Dakota Industrial Commission (the “NDIC”) entered
that certain Order No. 28396 in Case No. 25983 (the “NDIC Agreement”), under the
terms of which Seller is to report certain information to the NDIC in connection
with certain of Seller’s enhanced recovery operations (the “Enhanced Recovery
Reporting Requirements”). Purchaser agrees to (i) assume and be bound by the
Enhanced Recovery Reporting Requirements, as to the Assets, and (ii) comply with
or otherwise discharge all of the provisions of the Enhanced Recovery Reporting
Requirements, as to the Assets.

 

Article 8
CONDITIONS TO CLOSING

 

Section 8.1           Conditions of Seller to Closing. In addition to the
condition that the Seller’s shareholders approve of this transaction as
addressed in Section 2.4(a)(ii), the obligations of Seller to consummate the
transactions contemplated by this Agreement are subject, at the option of
Seller, to the satisfaction on or prior to Closing of each of the following
conditions:

 

(a)          Representations. The representations and warranties of Purchaser
set forth in Article 6 shall be true and correct in all respects as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date (other than representations and warranties that refer to a
specified date, which need only be true and correct on and as of such specified
date), except for such breaches, if any, as would not have a material adverse
effect on Purchaser (provided that to the extent such representation or warranty
is qualified by its terms by materiality, material, material adverse effect, or
similar qualification, such qualification in its terms shall be inapplicable for
purposes of this Section 8.1(a) and the material adverse effect qualification
contained in this Section 8.1(a) shall apply in lieu thereof);

 

(b)          Performance. Purchaser shall have performed and observed, in all
material respects, all covenants and agreements to be performed or observed by
it under this Agreement prior to or on the Closing Date;

 

(c)          Pending Litigation. No Proceeding by a third Person (including any
Governmental Body) seeking to restrain, enjoin or otherwise prohibit the
consummation of the transactions contemplated by this Agreement shall be pending
before any Governmental Body or have resulted in an injunction, order or award
that grants such relief;

 

(d)          Deliveries. Purchaser shall have delivered to Seller duly executed
counterparts of the Conveyances and the other documents and certificates to be
delivered by Purchaser under Section 9.3;

 

(e)          Title Defects and Environmental Defects. The aggregate amount of
(i) the sum of all Title Defect Amounts for actual Title Defects covered by
Section 3.4(d)(i) and the Allocated Values of any Title Defect Properties
retained by Seller under Section 3.4(d)(ii), less the sum of all Title Benefit
Amounts for actual Title Benefits, as determined under Article 3, (ii) the sum
of all Environmental Defect Amounts for actual Environmental Defects covered by
Section 4.4(a)(i) and the Allocated Values of any Environmental Defect
Properties retained by Seller under Section 4.4(a)(ii), (iii) the sum of the
Allocated Values of any Assets excluded from the transaction at Closing due to
an unobtained Consent Requirement covered by Section 3.5(a), and (iv) the sum of
the Allocated Values of any Assets excluded from the transaction at Closing due
to exercised preferential rights covered by Section 3.5(b) or Section 7.6, shall
not exceed an amount equal to fifteen percent (15%) of the Purchase Price;

 

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(f)          Payment. Purchaser shall be ready, willing and able to pay the
Closing Payment; and

 

(g)          Governmental Consents. All material consents and approvals of any
Governmental Body required for the transfer of the Assets from Seller to
Purchaser as contemplated under this Agreement, except for consents and
approvals of assignments by Governmental Bodies that are customarily obtained
after Closing (including customary post-closing consents), shall have been
granted, or the necessary waiting period shall have expired, or early
termination of the waiting period shall have been granted.

 

Section 8.2           Conditions of Purchaser to Closing. In addition to the
financing condition as addressed in Section 2.4(a)(i), the obligations of
Purchaser to consummate the transactions contemplated by this Agreement are
subject, at the option of Purchaser, to the satisfaction on or prior to Closing
of each of the following conditions:

 

(a)          Representations. The representations and warranties of Seller set
forth in Article 5 shall be true and correct as of the date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date (other
than representations and warranties that refer to a specified date, which need
only be true and correct on and as of such specified date), except for such
breaches, if any, as would not have a Material Adverse Effect (provided that to
the extent such representation or warranty is qualified by its terms by
material, materiality or Material Adverse Effect or similar qualification, such
qualification in its terms shall be inapplicable for purposes of this Section
8.2(a) and the Material Adverse Effect qualification contained in this Section
8.2(a) shall apply in lieu thereof);

 

(b)          Performance. Seller shall have performed and observed, in all
material respects, all covenants and agreements to be performed or observed by
it under this Agreement prior to or on the Closing Date;

 

(c)          Pending Litigation. No Proceeding by a third Person (including any
Governmental Body) seeking to restrain, enjoin or otherwise prohibit the
consummation of the transactions contemplated by this Agreement shall be pending
before any Governmental Body or have resulted in an injunction, order or award
that grants such relief (except with respect to the Casualty Assets subject to
Section 3.6);

 

(d)          Deliveries. Seller shall be ready, willing and able to deliver to
Purchaser duly executed counterparts of the Conveyances and the other documents
and certificates to be delivered by Seller under Section 9.2;

 

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(e)          Title Defects and Environmental Defects. The aggregate amount of
(i) the sum of all Title Defect Amounts for actual Title Defects covered by
Section 3.4(d)(i) and the Allocated Values of any Title Defect Properties
retained by Seller under Section 3.4(d)(ii), less the sum of all Title Benefit
Amounts for actual Title Benefits, as determined under Article 3, (ii) the sum
of all Environmental Defect Amounts for actual Environmental Defects covered by
Section 4.4(a)(i) and the Allocated Values of any Environmental Defect
Properties retained by Seller under Section 4.4(a)(ii), (iii) the sum of the
Allocated Values of any Assets excluded from the transaction at Closing due to
an unobtained Consent Requirement covered by Section 3.5(a), and (iv) the sum of
the Allocated Values of any Assets excluded from the transaction at Closing due
to exercised preferential rights covered by Section 3.5(b) or Section 7.6, shall
not exceed an amount equal to fifteen percent (15%) of the Purchase Price; and

 

(f)          Governmental Consents. All material consents and approvals of any
Governmental Body required for the transfer of the Assets from Seller to
Purchaser as contemplated under this Agreement, except for consents and
approvals of assignments by Governmental Bodies that are customarily obtained
after Closing (including customary post-closing consents), shall have been
granted, or the necessary waiting period shall have expired, or early
termination of the waiting period shall have been granted.

 

Article 9
CLOSING

 

Section 9.1           Time and Place of Closing.

 

(a)          Consummation of the purchase and sale transaction as contemplated
by this Agreement (the “Closing”), shall, unless otherwise agreed to in writing
by Purchaser and Seller, take place at the offices of Seller at 9:00 A.M. local
time (i) on the date that is five (5) business days following the approval of
the transaction by Seller’s shareholders (the “Scheduled Closing Date”), or (ii)
if all conditions in Article 8 to be satisfied prior to Closing have not yet
been satisfied or waived by the Scheduled Closing Date, as soon as thereafter as
such conditions have been satisfied or waived, subject to the rights of the
Parties under Article 10.

 

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

 

Section 9.2           Obligations of Seller at Closing. At the Closing, upon the
terms and subject to the conditions of this Agreement, Seller shall deliver or
cause to be delivered to Purchaser, among other things, the following:

 

(a)          the Conveyance, in sufficient duplicate originals to allow
recording in all appropriate jurisdictions and offices, duly executed by Seller;

 

(b)          to the extent applicable, assignments, on appropriate forms, of
state, of tribal, and of federal leases comprising portions of the Assets, duly
executed by Seller;

 

(c)          letters-in-lieu of division or transfer orders covering the Assets
that are prepared and provided by Purchaser and reasonably satisfactory to
Seller to reflect the transactions contemplated hereby, duly executed by Seller;

 

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(d)          a certificate duly executed by an authorized officer of Seller,
dated as of Closing, certifying on behalf of Seller in his capacity as officer
that (i) the representations and warranties of Seller set forth in Article 5 are
true and correct as of the date of this Agreement and as of the Closing Date, in
each case as though made on and as of such date (other than representations and
warranties that refer to a specified date, which are true and correct on and as
of such specified date), except for such breaches, if any as would not have a
Material Adverse Effect (provided that to the extent such representation or
warranty is qualified by its terms by material, materiality or Material Adverse
Effect or similar qualification, such qualification in its terms shall be
inapplicable for purposes of this certification and the Material Adverse Effect
qualification contained in this certification shall apply in lieu thereof), and
(ii) Seller has performed and observed, in all material respects, all covenants
and agreements to be performed or observed by it under this Agreement prior to
or on the Closing Date;

 

(e)          releases and terminations of any mortgages, deeds of trust,
assignments of production, financing statements, fixture filings and other
recorded encumbrances burdening the Assets;

 

(f)          an executed statement described in Treasury Regulation
§1.1445-2(b)(2) certifying that Seller is not a foreign Person within the
meaning of the Code;

 

(g)          the transition services agreement in a form substantially similar
to the form set forth in Exhibit F attached hereto (the “Transition Services
Agreement”), duly executed by Seller; and

 

(h)          the right of first refusal agreement in a form substantially
similar to the form set forth in Exhibit G attached hereto, duly executed by
Seller.

 

Section 9.3           Obligations of Purchaser at Closing.

 

At the Closing, upon the terms and subject to the conditions of this Agreement,
Purchaser shall deliver or cause to be delivered to Seller, among other things,
the following:

 

(a)          a wire transfer of the Closing Payment in same-day funds;

 

(b)          the Conveyance, duly executed by Purchaser;

 

(c)          copies of all Asset Bonds required to be obtained by Purchaser
under Section 12.6 or other written evidence that Purchaser is not required
under Section 12.6 to obtain such items;

 

(d)          letters in lieu of division or transfer orders covering the Assets
that are prepared and provided by Purchaser and reasonably satisfactory to
Seller to reflect the transactions contemplated hereby;

 

(e)          a certificate by an authorized officer of Purchaser, dated as of
Closing, certifying on behalf of Purchaser in his capacity as officer that (i)
the representations and warranties of Purchaser set forth in Article 6 are true
and correct as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date (other than representations and
warranties that refer to a specified date, which are true and correct on and as
of such specified date), except for such breaches, if any, as would not have a
material adverse effect on Purchaser (provided that to the extent such
representation or warranty is qualified by its terms by material, materiality,
material adverse effect or similar qualification, such qualification in its
terms shall be inapplicable for purposes of this certification and the material
adverse effect qualification contained in this certification shall apply in lieu
thereof), and (ii) Purchaser has performed and observed, in all material
respects, all covenants and agreements to be performed or observed by it under
this Agreement prior to or on the Closing Date; and

 

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(f)          the Transition Services Agreement, duly executed by Purchaser

 

(g)          the right of first refusal agreement in a form substantially
similar to the form set forth in Exhibit G attached hereto, duly executed by
Purchaser.

 

Section 9.4           Closing Payment and Post-Closing Purchase Price
Adjustments.

 

(a)          Not later than three (3) Business Days prior to the Closing Date,
Seller shall prepare and deliver to Purchaser, based upon the best information
available to Seller, a preliminary settlement statement estimating the Adjusted
Purchase Price after giving effect to all Purchase Price adjustments set forth
in Section 2.2 and the Deposit. If Purchaser notifies Seller on or before
Closing that it disputes Seller’s estimate of the Adjusted Purchase Price as set
forth in the preliminary settlement statement, the Parties shall work together
in good faith to resolve such dispute prior to Closing. If the Parties are
unable to resolve any such dispute prior to Closing, the Adjusted Purchase Price
paid at Closing shall be the Seller’s estimated amounts. The Adjusted Purchase
Price as determined in accordance with this Section 9.4(a) shall constitute the
dollar amount to be paid by Purchaser to Seller at the Closing (the “Closing
Payment”).

 

(b)          As soon as reasonably practicable after the Closing but not later
than one hundred twenty (120) days following the Closing Date, Seller shall
prepare and deliver to Purchaser a final settlement statement (the “Final
Settlement Statement”) setting forth the final calculation 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. Seller shall at Purchaser’s request supply reasonable
documentation available to support any credit, charge, receipt or other item. As
soon as reasonably practicable but not later than the 30th day following receipt
of Seller’s proposed Final Settlement Statement, Purchaser shall deliver to
Seller a written report containing any changes that Purchaser proposes be made
to the Final Settlement Statement. Purchaser may not later contest or submit to
the Independent Expert any amounts or adjustments that were not contested in
Purchaser’s written report, which amounts or adjustments Purchaser will be
deemed to have accepted. If Purchaser does not timely deliver such written
report within such 30-day period, Purchaser shall be deemed to accept the Final
Settlement Statement as submitted by Seller. The Parties shall attempt in good
faith to agree with respect to the changes proposed by Purchaser, if any, no
later than fifteen (15) days after receipt by Seller of Purchaser’s comments on
the proposed Final Settlement Statement. In the event that the Parties cannot
agree on the Final Settlement Statement within such period, the specific
disputed items will be automatically referred to an independent expert of the
Parties’ choosing with at least ten (10) years of oil and gas accounting
experience for arbitration (the “Independent Expert”). If the Parties are unable
to agree upon an Independent Expert, then such Independent Expert shall be
selected by any Federal District Court or State District Court Judge in Denver,
Colorado. The burden of proof in the determination of the Adjusted Purchase
Price shall be upon Purchaser. The Independent Expert shall conduct the
arbitration proceedings in Denver, Colorado, 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. The Independent Expert’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; provided that disputes relating to any Title Defects or Environmental
Defects (including adjustments or remedies to be provided on account thereof)
shall be resolved in accordance with Section 3.4(h) and Section 4.4(b). In
determining the proper amount of any adjustment to the Purchase Price, the
Independent Expert shall not increase the Purchase Price more than the increase
proposed by Seller nor decrease the Purchase Price more than the decrease
proposed by Purchaser, as applicable. The Independent Expert shall act as an
expert for the limited purpose of determining the specific disputed matters
submitted by any Party and may not award damages or penalties to any Party with
respect to any matter. Each Party shall each bear its own legal fees and other
costs of presenting its case, and shall bear one-half of the costs and expenses
of the Independent Expert. Within ten (10) days after the date on which the
Parties agree (or are deemed to agree) on the Final Settlement Statement or the
Independent Expert finally determines the disputed matters, as applicable, (i)
Purchaser shall pay to Seller the amount by which the Adjusted Purchase Price
exceeds the Closing Payment or (ii) Seller shall pay to Purchaser the amount by
which the Closing Payment exceeds the Adjusted Purchase Price, as applicable.
Any post-Closing payment pursuant to this Section 9.4 shall bear interest from
the Closing Date to the date of payment at the Agreed Interest Rate.

 

45 

 

 

(c)          All payments made or to be made hereunder to Seller shall be in
cash by electronic transfer of immediately available funds to the account of
Seller pursuant to the wiring instructions reflected in Schedule 9.4(c) or as
separately provided in writing. All payments made or to be made hereunder to
Purchaser shall be in cash by electronic transfer of immediately available funds
to a bank and account specified by Purchaser in writing to Seller.

 

Article 10
TERMINATION

 

Section 10.1         Termination. Subject to Section 10.2, this Agreement may be
terminated: (a) at any time prior to Closing by the mutual prior written consent
of Seller and Purchaser; (b) by Seller or Purchaser if Closing has not occurred
on or before August 8th, 2018 (the “Termination Date”); (c) by Purchaser if any
condition set forth in Section 8.2 has not been satisfied or waived by Purchaser
at Closing or (d) by Seller if any condition set forth in Section 8.1 has not
been satisfied or waived by Seller at Closing; provided, however, that
termination under clauses (b), (c) or (d) shall not be effective until the Party
electing to terminate has delivered written notice to the other Party of its
election to so terminate. Notwithstanding the foregoing, if a Party’s failure to
perform or observe any of its covenants or obligations under this Agreement, or
the inaccuracy of any of its representations (other than the representation in
Section 6.7), has been the cause of, or shall have resulted in, the failure of
Closing to occur on or prior to the Termination Date because the conditions to
the other Party’s obligation to perform at Closing in Article 8 have not been
satisfied, the defaulting Party shall not be entitled to exercise any right of
termination under this Section 10.1.

 

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Section 10.2         Effect of Termination. If this Agreement is validly
terminated pursuant to Section 10.1, except as set forth in this Section 10.2 or
Section 10.3, this Agreement shall become void and of no further force or effect
(except for the Confidentiality Agreement, the provisions of Sections 5.6, 6.5,
7.7, 10.2, 12.2, 12.4, 12.7, 12.8, 12.9, 12.11, 12.12, 12.14, 12.15, 12.16,
12.17, and 12.18, and all disclaimers herein, all of which shall survive such
termination and continue in full force and effect in accordance with their
respective terms) and the transactions contemplated hereby shall be abandoned
without any further action or liability to any Party or its respective
Indemnitees, and following such termination, Seller shall be free immediately to
enjoy all rights of ownership of the Assets and to sell, transfer, encumber or
otherwise dispose of the Assets to any Person without any restriction under this
Agreement.

 

Section 10.3         Distribution of Deposit Upon Termination; Specific
Performance.

 

(a)          If this Agreement is terminated by Seller pursuant to Section
10.1(b) or Section 10.1(d), Seller has performed or is ready, willing and able
to perform all of its agreements and covenants contained herein in all material
respects which are to be performed or observed at Closing, and Purchaser has
failed to perform or observe any of its agreements or covenants contained herein
which are to be performed or observed at Closing, then Seller shall retain the
Deposit as liquidated damages as Seller’s sole and exclusive remedy for any
breach or failure to perform by Purchaser under this Agreement, except for the
indemnities provided in Section 7.7, and all other rights and remedies arising
under this Agreement (except for the provisions that survive pursuant to Section
10.2, which shall remain in full force and effect) are hereby expressly waived
by Seller. Seller and Purchaser agree upon the Deposit as liquidated damages due
to the difficulty and inconvenience of measuring actual damages and the
uncertainty thereof, and Seller and Purchaser agree that such amount would be a
reasonable estimate of Seller’s loss in the event of any such breach or failure
to perform by Purchaser. Upon such termination, Seller shall be free immediately
to enjoy all rights of ownership of the Assets and to sell, transfer, encumber
or otherwise dispose of the Assets to any Person without any restriction under
this Agreement.

 

(b)          [intentionally omitted]

 

(c)          If this Agreement is terminated by Purchaser pursuant to Section
10.1(b) or Section 10.1(c), Purchaser has performed or is ready, willing and
able to perform all of its agreements and covenants contained herein in all
material respects which are to be performed or observed at Closing, and Seller
has failed to perform or observe any of its agreements or covenants contained
herein which are to be performed or observed at Closing, then at Purchaser’s
option, Seller shall return the Deposit to Purchaser and Purchaser shall be
entitled to seek money damages from Seller available at Law for Seller’s
applicable breach of this Agreement subject to Section 12.18, as Purchaser’s
sole and exclusive remedy for any breach or failure to perform by Seller under
this Agreement, and all other rights and remedies arising under this Agreement
(except for the provisions that survive pursuant to Section 10.2, which shall
remain in full force and effect) are hereby expressly waived by Purchaser, and
Seller shall be free immediately to enjoy all rights of ownership of the Assets
and to sell, transfer, encumber or otherwise dispose of the Assets to any Person
without any restriction under this Agreement.

 

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(d)          In lieu of termination of this Agreement, Purchaser shall be
entitled to specific performance of this Agreement, it being specifically agreed
that monetary damages will not be sufficient to compensate Purchaser if
Purchaser determines the same in its sole discretion. To seek specific
performance and as a condition thereto, Purchaser must deliver notice in writing
to Seller of Purchaser’s election to seek specific performance under this
Section 10.3(d) within thirty (30) days counted from and after the Termination
Date. If Purchaser elects to seek specific performance of this Agreement
pursuant to this Section 10.3(d), the Deposit shall be held by Seller, until a
non-appealable final judgment or award on Purchaser’s claim for specific
performance is rendered, at which time the Deposit shall be distributed as
provided in the judgment or award resolving the specific performance claim or
shall be applied as provided in Section 2.4 of this Agreement. Seller hereby
agrees not to raise any objections to the availability of the equitable remedy
of specific performance to specifically enforce the terms and provisions of this
Agreement or to enforce compliance with the covenants and agreements of Seller
under this Agreement. Purchaser shall not be required to provide any bond or
other security in connection with seeking an injunction or injunctions to
enforce specifically the terms and provisions of this Agreement. The Parties
hereto further agree that (x) by seeking the remedies provided for in this
paragraph, including by the institution of a court proceeding, Purchaser shall
not in any respect waive its right to seek any other form of relief that may be
available to it under this Agreement (including those set forth in Section 10.2
and Section 10.3(c)) in the event that the remedies provided for in this
paragraph are not available or otherwise are not granted, and (y) nothing set
forth in this paragraph shall require Purchaser to institute any Proceeding for
(or limit Purchaser’s right to institute a Proceeding for) specific performance
prior or as a condition to exercising any termination right under this Article
10, nor shall the commencement of any Proceeding pursuant to this paragraph
restrict or limit Purchaser’s right to terminate this Agreement in accordance
with this Article 10.

 

(e)          If this Agreement terminates for reasons other than those set forth
in Section 10.3(a), Seller shall deliver the Deposit to Purchaser, free of any
claims by Seller to the Deposit, and the terms of Section 10.2 shall apply.

 

(f)          Notwithstanding anything to the contrary in this Agreement,
Purchaser shall not be entitled to receive interest on the Deposit, whether the
Deposit is applied against the Purchase Price or returned to Purchaser pursuant
to this Section 10.3.

 

Article 11
POST-CLOSING OBLIGATIONS; INDEMNIFICATION;
LIMITATIONS; DISCLAIMERS AND WAIVERS

 

Section 11.1         Receipts.

 

(a)          Except as otherwise provided in this Agreement, any production 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 Purchase Price
following the Final Settlement Date shall be treated as follows: (i) all
production 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 Purchaser is entitled under Section
1.4 shall be the sole property and entitlement of Purchaser, and, to the extent
received by Seller, Seller shall fully disclose, account for and remit the same
to Purchaser within ten (10) days of Seller’s receipt of the same, and (ii) all
production 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 Seller is entitled under Section 1.4
shall be the sole property and entitlement of Seller and, to the extent received
by Purchaser, Purchaser shall fully disclose, account for and remit the same to
Seller within ten (10) days of Purchaser’s receipt of the same.

 

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(b)          Notwithstanding any other provisions of this Agreement to the
contrary, Seller shall be entitled to retain (and Purchaser shall not be
entitled to any decrease to the Purchase Price in respect of) all overhead
charges it has collected, billed or which shall be billed later, relating to the
Seller Operated Assets and relating to the period from the Effective Time to the
date Seller relinquishes operatorship of the applicable Seller Operated Assets,
even if after the date of Closing.

 

Section 11.2         Assumption and Indemnification.

 

(a)          Without limiting Purchaser’s rights to indemnity under this Article
11 and subject to the Purchase Price adjustments set forth in Section 2.2(i), on
and effective as of the Closing Date, Purchaser hereby assumes and hereby agrees
to fulfill, perform, pay and discharge (or cause to be fulfilled, performed,
paid or discharged) all of the obligations and liabilities of Seller, 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 (i) obligations to furnish makeup gas according to the terms of
applicable gas sales, gathering or transportation contracts, (ii) gas balancing
obligations and other obligations arising from Imbalances, (iii) obligations to
pay Property Costs and other costs and expenses attributable to the ownership or
operation of the Assets, and to accommodate joint interest audits of same,
(iv) obligations to pay working interests, royalties, and overriding royalties,
and to pay the Suspended Proceeds and other interests to be held in suspense,
(v) obligations to plug, remove, dispose or abandon and reclamation of wells,
equipment, facilities, platforms and pipelines, and to dismantle structures, and
to restore and/or Remediate the Assets in accordance with applicable agreements,
Leases or Laws (including Environmental Laws), (vi) clean up or dispose of any
Asset contaminated by NORM, (vii) any claims regarding the general method,
manner or practice of calculating or making royalty payments (or payments for
overriding royalties or similar burdens on production) with respect to the
Properties, (viii) all obligations, covenants and agreements under the Mescalero
Agreement, (ix) [intentionally omitted], (x) continuing obligations, if any,
under any Contracts or other agreements pursuant to which Seller or its
Affiliates purchased or acquired Assets prior to the Closing, (xi) the Oasis
Requirements and Oasis Non-Compete, (xii) all obligations, covenants and
agreements under the GTO Agreement, and (xiii) all obligations under the
Enhanced Recovery Agreement (all of said obligations and liabilities, subject to
the exclusions below, herein being referred to as the “Assumed Seller
Obligations”), it being understood that Purchaser shall similarly bear all risk
of loss associated with the Assets (including changes in condition, depletion
and depreciation); provided, however, that the Assumed Seller Obligations do not
include and Purchaser does not assume any obligations or liabilities of Seller
relating solely to the Excluded Assets, and, other than the Excluded Assets, to
the extent, and only during the applicable survival period, that they are Seller
Indemnity Obligations.

 

49 

 

 

(b)          Except for Damages for which Seller is required to indemnify
Purchaser Indemnitees under Section 11.2(c) at the time an applicable Claim
Notice is provided to Seller, from and after Closing, Purchaser shall indemnify,
defend and hold harmless Seller Indemnitees from and against all Damages
incurred or suffered by Seller Indemnitees caused by, arising out of or
resulting from:

 

(i)          the Assumed Seller Obligations;

 

(ii)         the ownership, use or operation of the Assets at and after the
Effective Time;

 

(iii)        Purchaser’s breach of any of Purchaser’s covenants or agreements
herein that survive the Closing;

 

(iv)        any breach of any representation or warranty made by Purchaser
contained in Article 6 of this Agreement or in the certificate delivered by
Purchaser at Closing pursuant to Section 9.3(e); or

 

(v)         subject to Seller’s election under Section 4.4(a)(iii), Section
4.4(a)(iv), and Section 4.4(a)(v), any claims or actions asserted by Persons
(including Governmental Bodies) with respect to (A) any condition affecting any
Asset that violates or requires Remediation, notice or other corrective action
under Environmental Law, (B) any operations conducted on such Asset that violate
any Environmental Law, or (C) any Remediation, notice or other corrective action
required for an Asset under any Environmental Law regardless of whether known or
unknown, or whether attributable to periods of time before, on or after the
Effective Time;

 

EVEN IF SUCH DAMAGES ARE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER
SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF SELLER
INDEMNITEES OR ANY INDEMNIFIED PARTY.

 

(c)          From and after Closing, Seller shall indemnify, defend and hold
harmless Purchaser Indemnitees against and from all Damages incurred or suffered
by Purchaser Indemnitees to the extent caused by, arising out of or resulting
from (the “Seller Indemnity Obligations”):

 

(i)          liabilities and obligations of Seller in respect of Taxes to the
extent attributable to periods prior to the Effective Time;

 

(ii)         the death or physical injury to any Person to the extent
attributable to periods prior to the Effective Time;

 

50 

 

 

(iii)        except for any Suspended Proceeds, the obligation to pay royalties,
overriding royalties and other payments, to other interest owners or with
respect to the Leases and the Hydrocarbons produced therefrom, in each case,
attributable to the period of Seller’s ownership of the Assets prior to the
Effective Time;

 

(iv)        the disposal or transportation of Hazardous Substances during the
period of Seller’s ownership of the Assets until the Effective Time generated by
or used in connection with the ownership or operation of the Assets to a
location not on the Properties;

 

(v)         any breach asserted during the applicable survival period of any of
Seller’s covenants or agreements herein that survive the Closing;

 

(vi)        any breach asserted during the applicable survival period of any
representation or warranty made by Seller contained in Article 5 (except for
claims for breach of the representation and warranty set forth in Section 5.21)
of this Agreement or in the certificate delivered by Seller at Closing pursuant
to Section 9.2(d); or

 

(vii)       the Excluded Assets.

 

(d)          Notwithstanding anything to the contrary contained in this
Agreement, except for the rights of the Parties under Article 10, Section 7.7
and the Special Warranty in the Conveyance (subject to Section 7.10), this
Section 11.2 contains the Parties’ exclusive remedy against each other with
respect to breaches of this Agreement, including breaches of the representations
and warranties contained in Articles 5 (except for breaches of the
representation and warranty set forth in Section 5.21) and 6, the covenants and
agreements that survive the Closing pursuant to the terms of this Agreement and
the affirmations of such representations, warranties, covenants and agreements
contained in the certificates delivered by the Parties at Closing pursuant to
Sections 9.2d) or 9.3e), as applicable, Seller’s ownership, use or operation of
the Assets, the Assumed Seller Obligations, or the condition, quality, status or
nature of the Assets, it being acknowledged that the Parties shall not be
entitled to a rescission of this Agreement or to any further indemnification or
other rights or claims of any nature whatsoever in respect thereof, all of which
the Parties hereby waive. Except for the remedies contained in this Section 11.2
and for the rights of the Parties under Article 10, Section 7.7 and the Special
Warranty in the Conveyance (subject to Section 7.10), Purchaser (on behalf of
itself, each of the other Purchaser Indemnitees and their respective insurers
and successors in interest) releases, remises and forever discharges the Seller
Indemnitees from any and all Damages whatsoever, in Law or in equity, known or
unknown, which such Persons might now or subsequently may have, based on,
relating to or arising out of this Agreement, Seller’s ownership, use or
operation of the Assets, the Assumed Seller Obligations, or the condition,
quality, status or nature of the Assets, including rights to contribution under
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, and under other Environmental Laws, breaches of statutory or
implied warranties, nuisance or other tort actions, rights to punitive damages
and common law rights of contribution, rights under agreements between Seller
and any Persons who are Affiliates of Seller, and rights under insurance
maintained by Seller or any Person who is an Affiliate of Seller, EVEN IF CAUSED
IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT, BUT
EXCLUDING WILLFUL MISCONDUCT), OF ANY RELEASED PERSON, excluding, however, any
existing contractual rights between (i) Purchaser or any of Purchaser’s
Affiliates and (ii) Seller or any of Seller’s Affiliates under contracts between
them relating to the Assets, other than this Agreement.

 

51 

 

 

(e)          “Damages,” for purposes of this Agreement, shall mean the amount of
any actual liability, loss, cost, diminution in value, expense, claim, demand,
notice of violation, investigation by any Governmental Body, administrative or
other Proceeding, payment, charge, obligation, fine, penalty, deficiency, award
or judgment incurred or suffered by any Indemnified Party arising out of or
resulting from the indemnified matter, including reasonable fees and expenses of
attorneys, consultants, accountants or other agents and experts reasonably
incident to matters indemnified against, and the costs of investigation and/or
monitoring of such matters, and the costs of enforcement of the indemnity;
provided, however, that no Purchaser Indemnitee shall be entitled to
indemnification under this Section 11.2 for Damages that constitute (i) Damages
that are waived or not recoverable under Section 12.18, or (ii) any liability,
loss, cost, expense, claim, award or judgment to the extent resulting from or
increased by the actions or omissions of any Purchaser Indemnitee after the
Effective Time.

 

(f)          Notwithstanding any other provision of this Agreement or a document
to be delivered hereto to the contrary, any claim for indemnity to which a
Seller Indemnitee or Purchaser Indemnitee is entitled must be asserted by and
through Seller or Purchaser, as applicable.

 

(g)          The amount of any Damages for which an Indemnified Party is
entitled to indemnity under Article 11 shall be reduced by the amount of
insurance proceeds realized by the Indemnified Party or its Affiliates with
respect to such Damages (net of any collection costs and excluding the proceeds
of any insurance policy issued or underwritten by the Indemnified Party or its
Affiliates). Upon the request of the Indemnifying Party, the Indemnified Party
shall provide the Indemnifying Party with information sufficient to allow the
Indemnifying Party to calculate the amount of the indemnity payment in
accordance with this Agreement. An Indemnified Party shall take all reasonable
steps to mitigate damages in respect of any Damages for which it is seeking
indemnification and shall use commercially reasonable efforts to avoid costs or
expenses associated with such Damages and, if such costs and expenses cannot be
avoided, to minimize the amount thereof.

 

Section 11.3         Indemnification Actions. All claims for indemnification
under Section 11.2 shall be asserted and resolved as follows:

 

(a)          For purposes of this Article 11, the term “Indemnifying Party” when
used in connection with particular Damages shall mean the Party having an
obligation to indemnify another Person or Persons with respect to such Damages
pursuant to this Article 11, and the term “Indemnified Party” when used in
connection with particular Damages shall mean the Person or Persons having the
right to be indemnified with respect to such Damages by another Party pursuant
to this Article 11, subject to Section 11.2(f).

 

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(b)          To make a claim for indemnification under Article 11, an
Indemnified Party shall notify the Indemnifying Party of its claim under this
Section 11.3, including the specific details of and specific basis under this
Agreement for its claim (the “Claim Notice”). In the event that the claim for
indemnification is based upon a claim by a third Person against the Indemnified
Party (a “Third Party Claim”), the Indemnified Party shall provide its Claim
Notice promptly after the Indemnified Party has actual knowledge of the Third
Party Claim and shall enclose a copy of all papers (if any) served with respect
to the Third Party Claim; provided that the failure of any Indemnified Party to
give notice of a Third Party Claim as provided in this Section 11.3 shall not
relieve the Indemnifying Party of its obligations under Section 11.2 except to
the extent such failure prejudices the Indemnifying Party’s ability to defend
against the Third Party Claim. In the event that the claim for indemnification
is based upon an inaccuracy or breach of a representation, warranty, covenant or
agreement, the Claim Notice shall specify the representation, warranty, covenant
or agreement which was inaccurate or breached.

 

(c)          In the case of a claim for indemnification based upon a Third Party
Claim, the Indemnifying Party shall have fourteen (14) Business Days from its
receipt of the Claim Notice to notify the Indemnified Party whether it admits or
denies its liability to defend the Indemnified Party against such Third Party
Claim at the sole cost and expense of the Indemnifying Party. The Indemnified
Party is authorized, prior to and during such fourteen (14) Business Day period,
to file any motion, answer or other pleading that it shall deem necessary or
appropriate to protect its interests or those of the Indemnifying Party and that
is not prejudicial to the Indemnifying Party all costs of which shall be
included as Damages in respect of such claim for indemnification. The failure to
provide notice to the Indemnified Party shall be deemed to be denial of
liability, except as may be provided in a subsequent notice from the
Indemnifying Party to the Indemnified Party.

 

(d)          If the Indemnifying Party admits its liability, it shall have the
right and obligation to diligently defend, at its sole cost and expense, the
Third Party Claim. The Indemnifying Party shall have full control of such
defense and all related Proceedings, including any compromise or settlement
thereof. If requested by the Indemnifying Party, the Indemnified Party agrees to
cooperate, at the sole cost of the Indemnifying Party, in contesting any Third
Party Claim which the Indemnifying Party elects to contest. The Indemnified
Party may participate in, but not control, at its sole cost without any right of
reimbursement, any defense or settlement of any Third Party Claim controlled by
the Indemnifying Party pursuant to this Section 11.3(d). Irrespective of whether
the Indemnified Party elects to participate in contesting a Third Party Claim
subject to this Section 11.3(d) in accordance with the foregoing sentence, the
Indemnifying Party at its sole cost and expense shall provide to the Indemnified
Party the following information with respect to the Third Party Claim: all
filings made by any party; all written communications exchanged between any
parties to the extent available to the Indemnifying Party and not subject to a
restriction on disclosure to the Indemnified Party or potential waiver of
attorney-client privilege in favor of the Indemnifying Party or the Indemnified
Party; and all orders, opinions, rulings or motions. The Indemnifying Party
shall deliver the foregoing items to the Indemnified Party promptly after they
become available to the Indemnifying Party. An Indemnifying Party shall not,
without the written consent of the Indemnified Party (which shall not be
unreasonably withheld, conditioned or delayed), (i) settle any Third Party Claim
or consent to the entry of any judgment with respect thereto which does not
include a written release of the Indemnified Party from all liability in respect
of such Third Party Claim, or (ii) settle any Third Party Claim or consent to
the entry of any judgment with respect thereto in any manner that may materially
and adversely affect the Indemnified Party, in each case except for any
settlement made by the Indemnifying Party in which the only consideration is the
payment of money damages (or similar consideration) and/or obligations
undertaken by the Indemnifying Party and which payment and/or undertaking would
otherwise resolve all or a portion of the Third Party Claim.

 

53 

 

 

(e)          If the Indemnifying Party does not admit its liability or admits
its liability but fails to diligently prosecute or settle the Third Party Claim,
then the Indemnified Party shall have the right to defend against the Third
Party Claim at the sole cost and expense of the Indemnifying Party, with counsel
of the Indemnified Party’s choosing, subject to the right of the Indemnifying
Party to admit its liability and assume the defense of the Third Party Claim at
any time prior to settlement or final determination thereof. If the Indemnifying
Party has not yet admitted its liability for a Third Party Claim, the
Indemnified Party shall send written notice to the Indemnifying Party of any
proposed payment or settlement, whether whole or partial, and the Indemnifying
Party shall have the option for ten (10) days following receipt of such notice
to (i) admit in writing its liability for the Third Party Claim or portion
thereof and (ii) if liability is so admitted, reject, in its reasonable
judgment, the proposed payment or settlement. If the Indemnifying Party fails to
respond and admit in writing its liability during such ten (10) day period, the
Indemnifying Party will be deemed to have denied liability and not approved such
proposed payment or settlement. Notwithstanding the foregoing, the Indemnified
Party shall not settle any Third Party Claim without the prior written consent
of the Indemnifying Party.

 

(f)          In the case of a claim for indemnification not based upon a Third
Party Claim, the Indemnifying Party shall have thirty (30) days from its receipt
of the Claim Notice to (i) cure or remedy the Damages complained of, (ii) admit
its liability for such Damages or (iii) dispute the claim for such Damages. If
the Indemnifying Party does not notify the Indemnified Party within such 30-day
period that it has cured or remedied the Damages or that it disputes the claim
for such Damages, the Indemnifying Party shall be deemed to have disputed the
claim for such Damages.

 

Section 11.4         Limitation on Actions.

 

(a)          All representations and warranties of Seller and Purchaser
contained herein shall survive until the date that is one (1) year counted from
and after the Closing Date and expire thereafter; provided, however, that (i)
the representation and warranty of Seller contained in Section 5.18 and Section
5.21 shall expire on the Closing Date, and (ii) the representations and
warranties of Seller contained in Sections 5.2, 5.3, 5.4, 5.6 and 5.8, and the
representations and warranties of Purchaser contained in Sections 6.1, 6.2, 6.3,
6.5, 6.8, 6.9 and 6.10 shall survive until the expiration of the applicable
statute of limitations period. The covenants and other agreements of Seller and
Purchaser set forth in this Agreement to be performed on or before Closing shall
expire on the day following the Closing Date and each other covenant and
agreement of Seller and Purchaser shall survive the Closing until fully
performed in accordance with its terms and expire thereafter. The affirmations
of representations, warranties, covenants and agreements contained in the
certificate delivered by each Party at Closing pursuant to Sections 9.2d) and
9.3e), as applicable, shall survive the Closing as to each representation,
warranty, covenant and agreement so affirmed for the same period of time that
the specific representation, warranty, covenant or agreement survives the
Closing pursuant to this Section 11.4, and shall expire thereafter.
Representations, warranties, covenants and agreements shall terminate and be of
no further force and effect after the respective date of their expiration, after
which time no claim may be asserted thereunder by any Person, provided that
there shall be no termination of any bona fide claim asserted pursuant to this
Agreement with respect to such a representation, warranty, covenant or agreement
prior to its expiration or termination date.

 

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(b)          The indemnities in Sections 11.2b)iii) and 11.2b)iv) shall
terminate as of the termination date of each respective representation,
warranty, covenant or agreement that is subject to indemnification, except in
each case as to matters for which a specific written claim for indemnity has
been delivered to the Indemnifying Party on or before such termination date.
Purchaser’s indemnities in Sections 7.7, 11.2b)i), 11.2b)ii) and 11.2b)v) shall
continue without time limit. Seller’s indemnities in Section 11.2(c)(ii),
Section 11.2(c)(iii), Section 11.2(c)(iv) shall survive until the date that is
one (1) year from and after the Closing Date and expire thereafter, except in
each case as to matters for which a specific written claim for indemnity has
been delivered to the Indemnifying Party on or before such termination date.
Seller’s indemnities in Section 11.2(c)(v) and Section 11.2(c)(vi) shall
terminate as of the termination date of each respective representation,
warranty, covenant or agreement that is subject to indemnification. Seller’s
indemnity in Section 11.2(c)(i) and Section 11.2(c)(vii) shall continue without
time limit, subject however to applicable statutes of limitations. Seller’s
other indemnity obligations under Section 11.2(c) shall terminate and be of no
further force and effect after the respective date of their expiration, after
which time no claim may be asserted thereunder by any Person, provided that
there shall be no termination of any bona fide claim asserted pursuant to this
Agreement with respect to such a representation, warranty, covenant or agreement
prior to its expiration or termination date.

 

(c)          Notwithstanding anything to the contrary contained elsewhere in
this Agreement, except for (i) claims for indemnification under Section
11.2(c)(i) and Section 11.2(c)(vii), (ii) claims for breaches of the Special
Warranty, (iii) claims based on a breach of Seller’s representation in Section
5.6 or Section 5.8 or (iv) the adjustments to the Purchase Price under Section
2.2 and any payments in respect thereof:

 

(i)          Seller shall not be required to indemnify any Person under Section
11.2(c) for any individual liability, loss, cost, expense, claim, award or
judgment that does not exceed One Hundred Thousand Dollars ($100,000), and such
individual Damages may not be applied towards the Indemnity Deductible;

 

(ii)         Subject to Section 11.4(c)(i), Seller shall not have any liability
for indemnification under Section 11.2(c) until and unless the aggregate amount
of the liability for all Damages for which Claim Notices are timely delivered by
Purchaser exceeds a deductible amount equal to one and one half percent (1.5%)
of the Purchase Price (the “Indemnity Deductible”), after which point Purchaser
(or Purchaser Indemnitees) shall be entitled to claim Damages in excess of the
Indemnity Deductible;

 

(iii)        Subject to Section 11.4(c)(i) and Section 11.4(c)(ii), Seller shall
not have any liability for indemnification under Section 11.2(c)(vi) for breach
of Section 5.15 with respect to a preferential right or Consent Requirement in
excess of the Allocated Value of the Asset affected thereby; and

 

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(iv)        Seller shall not be required to indemnify Purchaser and Purchaser
Indemnitees for aggregate Damages in excess of ten percent (10%) of the Purchase
Price.

 

(d)          Notwithstanding anything to the contrary contained in this
Agreement, in addition to the foregoing limitations, in no event shall Seller’s
aggregate liability to Purchaser and Purchaser Indemnitees under the Agreement
at any time exceed the Purchase Price.

 

(e)          Notwithstanding anything to the contrary contained in this
Agreement, in no event shall Seller have any obligations for indemnification
with respect to any claim for breach of the representation and warranty set
forth in Section 5.21.

 

Section 11.5         Recording. As soon as practicable after Closing, Purchaser
shall record the Conveyances in the appropriate counties as well as the
appropriate governmental agencies and provide Seller with copies of all recorded
or approved instruments.

 

Section 11.6         [intentionally omitted]

 

Article 12
MISCELLANEOUS

 

Section 12.1         Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original instrument, but all such
counterparts together shall constitute but one agreement. Delivery of an
executed counterpart signature page by facsimile or electronic transmittal (PDF)
is as effective as executing and delivering this Agreement in the presence of
other Parties to this Agreement.

 

Section 12.2         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 facsimile or by registered or certified
mail, postage prepaid, as follows:

 

If to Seller: Samson Oil & Gas USA   1331 17th Street, Suite 710   Denver, CO
80202   Attn: Terry Barr   Telephone: 303-295-0344   Fax: 303-295-1961   Email:
terry.barr@samsonoilandgas.com

 

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If to Purchaser: Eagle Energy Partners I, LLC   2501 6th St. SE, Suite B  
Minot, ND 58701-3153   Attn:  Pat Nickodemus   Telephone: 970.556.0814   Email:
PNickodemus@empire-co.com

 

Either 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 (a)
when physically delivered in person to the Party to which such notice is
addressed, (b) when transmitted to the Party to which such notice is addressed
by confirmed facsimile transmission or electronic transmission, or (c) at the
time of receipt by the Party to which such notice is addressed.

 

Section 12.3         Sales or Use Tax Recording Fees and Similar Taxes and Fees.
Purchaser and Seller shall each bear fifty percent (50%) of any sales, use,
excise, real property transfer, registration, capital, documentary, stamp or
transfer Taxes, recording fees and similar Taxes and fees incurred and imposed
upon, or with respect to, the property transfers or other transactions
contemplated hereby. Seller will determine, and Purchaser agrees to cooperate
with Seller in determining, sales Tax, if any, that is due in connection with
the sale of Assets and Purchaser agrees to pay fifty percent (50%) of any such
Tax to Seller at Closing. If such transfers or transactions are exempt from any
such Taxes or fees upon the filing of an appropriate certificate or other
evidence of exemption, Purchaser and Seller will cooperate in a timely manner to
furnish such certificate or evidence to the appropriate party.

 

Section 12.4         Expenses. Except as provided in Section 12.3, all expenses
incurred by Seller in connection with or related to the authorization,
preparation or execution of this Agreement, the conveyances delivered hereunder
and the Exhibits and Schedules hereto and thereto, and all other matters related
to the Closing, including all fees and expenses of counsel, accountants and
financial advisers employed by Seller, shall be borne solely and entirely by
Seller, and all such expenses incurred by Purchaser shall be borne solely and
entirely by Purchaser.

 

Section 12.5         Change of Name. Unless otherwise authorized by Seller in
writing, as promptly as practicable, but in any case within thirty (30) days
after the Closing Date, Purchaser shall eliminate the name “Samson Oil and Gas
USA” 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 Seller or any of its Affiliates.

 

Section 12.6         Replacement of Asset Bonds. The Parties understand that
none of the Asset Bonds are to be transferred to Purchaser. On or before
Closing, Purchaser shall obtain, or cause to be obtained in the name of
Purchaser, the corresponding Asset Bonds as necessary to permit the cancellation
or proportionate adjustment thereof, as applicable, and to consummate the
transactions contemplated by this Agreement. Purchaser may also provide evidence
that such new Asset Bonds are not necessary as a result of existing Asset Bonds
that Purchaser has previously posted as long as such existing Asset Bonds are
adequate to secure the release of or proportionately adjust, as applicable,
those posted by Seller and to consummate the transactions contemplated by this
Agreement.

 

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Section 12.7         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 North Dakota without regard to principles of
conflicts of Law that would direct the application of the Law of another
jurisdiction. The venue for any action brought under this Agreement shall be
Denver County, Colorado.

 

Section 12.8         Jurisdiction; Waiver of Jury Trial. EACH PARTY CONSENTS TO
PERSONAL JURISDICTION IN ANY ACTION BROUGHT IN THE UNITED STATES FEDERAL COURTS
LOCATED WITHIN DENVER COUNTY, COLORADO (OR, IF JURISDICTION IS NOT AVAILABLE IN
THE UNITED STATES FEDERAL COURTS, TO PERSONAL JURISDICTION IN ANY ACTION BROUGHT
IN THE STATE COURTS LOCATED IN DENVER COUNTY, COLORADO) WITH RESPECT TO ANY
DISPUTE, CLAIM OR CONTROVERSY ARISING OUT OF OR IN RELATION TO OR IN CONNECTION
WITH THIS AGREEMENT, AND EACH OF THE PARTIES AGREES THAT ANY ACTION INSTITUTED
BY IT AGAINST THE OTHER WITH RESPECT TO ANY SUCH DISPUTE, CONTROVERSY OR CLAIM
(EXCEPT TO THE EXTENT A DISPUTE, CONTROVERSY, OR CLAIM ARISING OUT OF OR IN
RELATION TO OR IN CONNECTION WITH THE DETERMINATION OF A TITLE DEFECT, TITLE
BENEFIT OR ENVIRONMENTAL DEFECT PURSUANT TO SECTION 3.4(h) OR SECTION 4.4(b), OR
THE DETERMINATION OF PURCHASE PRICE ADJUSTMENTS PURSUANT TO SECTION 9.4(b) IS
REFERRED TO AN EXPERT PURSUANT TO THOSE SECTIONS) WILL BE INSTITUTED EXCLUSIVELY
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO (OR, IF
JURISDICTION IS NOT AVAILABLE IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF COLORADO, THEN EXCLUSIVELY IN THE STATE COURTS LOCATED IN DENVER
COUNTY, COLORADO). THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST ANOTHER IN ANY MATTER
WHATSOEVER ARISING OUT OF OR IN RELATION TO OR IN CONNECTION WITH THIS
AGREEMENT. IN ADDITION, EACH PARTY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING
ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION IN THE RESPECTIVE JURISDICTIONS REFERENCED IN THIS SECTION.

 

Section 12.9         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.

 

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Section 12.10         Amendment; Waivers. No amendment, modification or
discharge of this Agreement, and no waiver under this Agreement, shall be valid
or binding unless set forth in writing and duly executed by the Party against
whom enforcement of the amendment, modification, discharge or waiver is sought.
Any such waiver shall constitute a waiver only with respect to the specific
matter described in such writing and shall in no way impair the rights of the
Party granting such waiver in any other respect or at any other time. The waiver
by either of the Parties of a breach of or a default under any of the provisions
of this Agreement, or to exercise any right or privilege under this Agreement,
shall not be construed as a waiver of any other breach or default of a similar
nature, or as a waiver of any of such provisions, rights or privileges under
this Agreement.

 

Section 12.11         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 and any
assignment or delegation made without such consent shall be void and of no
effect, provided, however, that Purchaser shall be free to partially assign this
Agreement prior to Closing to another oil and gas company without the consent of
Seller provided, that, such assignment shall not relieve Purchaser of any or all
of its obligations under this Agreement and the transactions contemplated hereby
and Purchaser and its assignee shall be jointly and severally liable for any and
all of the obligations of Purchaser under this Agreement and the transactions
contemplated hereby. This Agreement shall inure to the benefit of, and be
binding on and enforceable by and against, the Parties and their respective
successors and permitted assigns. Notwithstanding the foregoing, nothing in this
Agreement shall prohibit a Party from selling or disposing of an interest in the
Assets after Closing to another Person, subject to the other terms of this
Agreement and all applicable agreements, instruments, obligations, covenants and
burdens binding on the Assets, provided that such sale or disposition shall not
relieve the selling or disposing Party of any covenant or obligation under this
Agreement or any document or instrument delivered hereunder. Any assignment or
transfer of any Assets by Purchaser, its successors and assigns shall require
the transferee to expressly assume the obligations set forth in Section 7.13 and
Section 7.13 with respect to the transferred Assets, otherwise such assignment
or transfer shall be null and void. Any assignment or transfer of any interest
in the Schmitz Wellsite or the Properties related thereto by Purchaser, its
successors and assigns shall require the transferee to expressly assume the
obligations set forth in Section 7.14 with respect to the GTO Tank and Equipment
and the GTO Agreement, otherwise such assignment or transfer shall be null and
void.

 

Section 12.12         Entire Agreement. This Agreement and the documents to be
executed hereunder and the Exhibits and Schedules attached hereto, together with
the Confidentiality Agreement, 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. In the event of
a conflict between the Confidentiality Agreement and this Agreement, the terms
and provisions of this Agreement shall prevail.

 

Section 12.13         No Third Person Beneficiaries. Nothing in this Agreement
shall entitle any Person other than Purchaser and Seller to any claims, cause of
action, remedy or right of any kind, except the rights expressly provided to the
Persons described in Section 11.2(f).

 

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Section 12.14         Public Announcements. The Parties acknowledge and agree
that no press release or other public announcement, or public statement or
comment in response to any inquiry, or other disclosure that is reasonably
expected to result in a press release or public announcement, relating to the
subject matter of this Agreement shall be issued or made by Seller or Purchaser,
or their respective Affiliates, without the joint written approval of Seller and
Purchaser, each of which may withhold its approval in its sole discretion;
provided that, a press release or other public announcement, or public statement
or comment in response to any inquiry, made without such joint approval shall
not be in violation of this Section if it is made in order for the disclosing
Party or any of its Affiliates to comply with applicable Laws or stock exchange
rules or regulations and provided (a) it is limited to those disclosures that
are required to so comply and (b) the disclosing Party provides the other Party
with prior written notice of the disclosure and a reasonable opportunity to
provide comments thereon. Notwithstanding the foregoing, this Section 12.14
shall not restrict any Party from recording the Conveyances delivered at
Closing, making disclosures that are required pursuant to Contracts or Leases,
or from complying with any disclosure requirements of Governmental Bodies that
are applicable to or triggered by the transfer of the Assets or of the operation
thereof.

 

Section 12.15         Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under present or future Laws
effective during the term hereof, such provision shall be fully severable; this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof; and the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance from this Agreement.

 

Section 12.16         References. In this Agreement:

 

(a)          The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement;

 

(b)          References to any agreement or contract are to that agreement or
contract as amended, modified, or supplemented from time to time, except where
the context otherwise requires;

 

(c)          References to any Person includes his successors and permitted
assigns;

 

(d)          References to any Law are to that Law as amended from time to time
(unless the context requires otherwise), and to the regulations, if any,
promulgated thereunder,

 

(e)          References to any gender includes a reference to all other genders;

 

(f)          References to the singular includes the plural, and vice versa;

 

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

 

(h)          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;

 

(i)          References to $ or Dollars means United States Dollars.

 

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(j)          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; and

 

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

 

Section 12.17         Construction. Each of Seller and Purchaser 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 transaction contemplated hereby. This
Agreement is the result of arm’s-length negotiations from equal bargaining
positions.

 

Section 12.18         Limitation on Damages. EXCEPT WITH RESPECT TO BREACHES OF
SECTION 7.12, SECTION 7.13, OR SECTION 7.14 BY PURCHASER, Notwithstanding
anything to the contrary contained herein, none of Purchaser, Seller or any of
their respective Affiliates OR INDEMNITEES shall be entitled to either punitive,
SPECIAL, INDIRECT or consequential damages (INCLUDING LOSS OF PROFITS, REVENUE
OR PRODUCTION) in connection with this Agreement and the transactions
contemplated hereby and each of Purchaser and Seller, for itself and on behalf
of its Affiliates AND INDEMNITEES, hereby expressly waives any right to
punitive, SPECIAL, INDIRECT or consequential damages (INCLUDING LOSS OF PROFITS,
REVENUE OR PRODUCTION) in connection with this Agreement and the transactions
contemplated hereby, except to the extent an Indemnified Party is required to
pay punitive, SPECIAL, INDIRECT or consequential damages (INCLUDING LOSS OF
PROFITS, REVENUE OR PRODUCTION) to a third PERSON that is not an Indemnified
Party.

 

Article 13
definitionS

 

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

 

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

 

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

 

“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.

 

“Agreed Interest Rate” shall mean simple interest computed at the rate of the
prime interest rate as published in the Wall Street Journal.

 

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

 

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

 

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

 

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

 

“Asset Bonds” means all bonds, letters of credit, guarantees or similar
instruments or obligations, if any, posted or promised by Seller with
Governmental Bodies, or to the extent securing Assumed Seller Obligations,
posted or promised by Seller with other third Persons, in each case relating to
the ownership or operation of the Assets, including lease bonds, operator bonds
and plugging and abandonment bonds.

 

“Assumed Seller Obligations” has the meaning set forth in Section 11.2(a).

 

“Bakken Pool” means those stratigraphic units between the top of the upper
Bakken Shale Formation and the top of the Nisku Formation commonly known as the
Bakken Formation and without limiting the foregoing expressly includes the
stratigraphic equivalent of 10,637’ to 10,887’, true vertical depths, as seen on
the on the Platform Express log run in the Martell 36-25 HTF2 Well (API #
33053048250000) located in Section 36, Township 151N, Range 103W, McKenzie
County North Dakota.

 

“Base of the Madison Formation” has the meaning set forth in Section 1.2(a)(i).

 

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

 

“Casualty Assets” has the meaning set forth in Section 3.6.

 

“Charter Documents” means, with respect to any Person, the certificate of
incorporation, articles of incorporation or association, or certificate of
formation and by-laws, the limited liability company agreement, or limited
partnership agreement or other agreement or agreements that establish the legal
personality of such Person, in each case as amended to date.

 

“Claim Notice” has the meaning set forth in Section 11.3(b).

 

“Closing” has the meaning set forth in Section 9.1(a).

 

“Closing Date” has the meaning set forth in Section 9.1(b).

 

“Closing Payment” has the meaning set forth in Section 9.4(a).

 

“Code” has the meaning set forth in Section 2.3.

 

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

 

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“Confidentiality Agreement” means the Confidentiality Agreement between
Purchaser and Seller dated [___________], 2018.

 

“Consent Requirement” has the meaning set forth in Section 3.5(a).

 

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

 

“Conveyance” has the meaning set forth in Section 3.1(b).

 

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

 

“Cure Period” has the meaning set forth in Section 3.4(c).

 

“Damages” has the meaning set forth in Section 11.2(e).

 

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

 

“Deposit” has the meaning set forth in Section 2.4.

 

“DSU” means the drilling and spacing unit created and formed pursuant to North
Dakota Law.

 

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

 

“Enhanced Recovery Agreement” has the meaning set forth in Section 7.16.

 

“Enhanced Recovery Reporting Requirements” has the meaning set forth in Section
7.16.

 

“Environmental Arbitrator” has the meaning set forth in Section 4.4(b).

 

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

 

“Environmental Consultant” has the meaning set forth in Section 4.1.

 

“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 Deductible” has the meaning set forth in Section 4.4(c).

 

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

 

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“Environmental Laws” means, as the same have been amended as of the Effective
Time, the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. § 9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C.
§ 6901 et seq.; 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.; and the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j; and all
similar Laws as of the Effective Time of any Governmental Body having
jurisdiction over the property in question addressing pollution or protection of
the environment, and all regulations implementing the foregoing. Notwithstanding
the foregoing, the phrase “violation of Environmental Laws” and words of similar
import used herein shall mean, as to any given Asset, the violation of or
failure to meet specific objective requirements or standards that are clearly
applicable to such Asset under applicable Environmental Laws where such
requirements or standards are in effect as of the Effective Time. The phrase
does not include good or desirable operating practices or standards that may be
employed or adopted by other oil or gas well operators or recommended by a
Governmental Body.

 

“Environmental Liabilities” shall mean 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 (a) 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 Law which is attributable to the ownership
or operation of the Properties prior to the Effective Time or (b) 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 Law to the extent attributable to the
ownership or operation of the Properties prior to the Effective Time, provided
that Environmental Liabilities excludes any of the foregoing liabilities to the
extent caused by or relating to NORM or otherwise disclosed in any Schedule.

 

“Environmental Submission Date” has the meaning set forth in Section 4.4(b).

 

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

 

“Escrow Agent” means [______________].

 

“Escrow Agreement” means the Escrow Agreement by and among Seller, Purchaser and
Escrow Agent, substantially in the form attached hereto as Exhibit H.

 

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

 

“Excluded Records” means:

 

(a) all corporate, partnership, limited liability company, financial and legal
records, and income, margin, franchise and similar tax records of Seller, in
each case that relate to Seller’s business generally (whether or not relating to
the Assets) and, without limiting the foregoing, all accounting records relating
to the period prior to the Effective Time;

 

(b) all books, data, correspondence, records and files that relate solely to the
Excluded Assets;

 

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(c) copies of any other records retained by Seller pursuant to Section 1.5;

 

(d) any books, records, Governmental Authorizations, documents, correspondence,
data, software, logs, files, maps and accounting records to the extent
disclosure or transfer, or a change of ownership, in connection with a sale of
the Assets is restricted by third-Person agreement or applicable Law and the
necessary consents to transfer are not obtained pursuant to Section 3.5, or
subjected to payment of a fee or other consideration by any license agreement or
other agreement with a Person other than an Affiliate of Seller, or by
applicable Law, and for which no consent to transfer has been received or for
which Purchaser has not agreed in writing to pay the fee or other consideration,
as applicable;

 

(e) all legal files, records and correspondence of Seller, all records and
correspondence protected by or subject to attorney-client privilege, all
engagements and similar letters and agreements with Seller’s legal advisors, and
all work product of Seller’s legal counsel, but excluding in each case the
Leases, Contracts and title opinions (and any work product related thereto), it
being agreed that Purchaser shall have no right to claim, own or waive any
attorney-client or similar privilege in favor of Seller or any of its Affiliates
with respect to the ownership or operation of the Assets;

 

(f) (i) other than the provision (appropriately redacted) of the transaction
agreement, pursuant to which Seller obtained the obligations relating to the
Jackson #1-29 Well, records and correspondence relating to the presentation,
offer, negotiation or consummation of the sale of the Assets or any interest in
the Properties, or to the preparation or negotiation of this Agreement (or any
similar transaction agreement) or any Exhibit, Schedule or document to be
delivered pursuant hereto, including marketing materials, research, pricing or
valuation information, bidding materials and bids, and correspondence and
transaction documents exchanged with third Persons, and (ii) all agreements and
engagements of Seller or any Affiliate with investment advisors, underwriters,
brokers or consultants in connection with the foregoing; and

 

(g) Seller’s reserve studies, estimates and evaluations, estimates and
valuations of assets or unliquidated liabilities, pilot studies, engineering,
production, financial or economic studies, reports or forecasts, and any and all
similar forward-looking economic, evaluative, or financial information relating
to the Assets, and all licensed or proprietary geological, geophysical or
seismic data.

 

“Final Settlement Date” has the meaning set forth in Section 3.5(a).

 

“Final Settlement Statement” has the meaning set forth in Section 9.4(b).

 

“GAAP” means United States generally accepted accounting principles, as
consistently applied by Seller in accordance with its past practices.

 

“Governmental Authorizations” has the meaning set forth in Section 5.14.

 

“Governmental Body” means any federal, tribal, state, local, municipal, or other
governments; any governmental, regulatory or administrative agency, commission,
body 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.

 

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“GTO” has the meaning set forth in Section 7.14.

 

“GTO Agreement” has the meaning set forth in Section 7.14.

 

“GTO Tank and Equipment” has the meaning set forth in Section 1.3(n).

 

“Hazardous Materials” means any toxic or hazardous material or substances; solid
wastes, including asbestos, polychlorinated biphenyls, mercury, flammable or
explosive materials; radioactive materials, including naturally occurring
radioactive materials; and any other chemical, pollutant, contaminant,
substance, or waste, including a petroleum or petroleum-derived substance or
waste, that is regulated under any Environmental Laws, including any substance
that would require Remediation, clean-up, or other action if spilled or
released.

 

“Home Run Reserved WI” shall have the meaning set forth in Section 1.3(o).

 

“Hydrocarbons” means oil, gas, condensate and other gaseous and liquid
hydrocarbons or any combination thereof, including scrubber liquid inventory and
ethane, propane, isobutene, nor-butane and gasoline inventories (excluding tank
bottoms), and sulphur and other minerals extracted from or produced from the
foregoing hydrocarbons.

 

“Imbalance” 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 imbalance arises at the platform,
wellhead, pipeline, gathering system, transportation system, processing plant or
other location.

 

“Indemnified Party” has the meaning set forth in Section 11.3(a).

 

“Indemnifying Party” has the meaning set forth in Section 11.3(a).

 

“Indemnitee” means a Purchaser Indemnitee or Seller Indemnitee, as applicable.

 

“Indemnity Deductible” has the meaning set forth in Section 11.4(c)(ii).

 

“Independent Expert” has the meaning set forth in Section 9.4(b).

 

“Individual Defect Threshold” has the meaning set forth in Section 3.4(i).

 

“Joint Surface Use Agreement” has the meaning set forth in Section 1.2(a)(iv).

 

“Known Preferential Rights and Consents” has the meaning set forth in Section
3.5.

 

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

 

“Laws” means any and all applicable laws, statutes, rules, regulations,
ordinances, orders, codes, decrees, writs, injunctions, judgments, or principles
of common law that are promulgated, issued, or enacted by a Governmental Body.

 

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

 

“Lowest Cost Response” means the response required or allowed under
Environmental Laws that cures, Remediates, removes or remedies the applicable
present condition alleged pursuant to an Environmental Defect Notice 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) sufficient to comply with Environmental Laws or
bring the affected Assets into compliance with applicable Environmental Laws, as
compared to any other response that is required or allowed under applicable
Environmental Laws. The Lowest Cost Response shall include taking no action,
leaving the condition unaddressed, periodic monitoring or the recording of
notices in lieu of Remediation, if such responses are allowed under applicable
Environmental Laws.

 

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

 

“Material Adverse Effect” means any adverse effect on the ownership, operation
or value of the Assets, as currently operated, which is material to the
ownership, operation or value of the Assets, taken as a whole; provided,
however, that the following shall not be deemed to constitute, create, or cause
a Material Adverse Effect: any changes, circumstances or effects that (a) affect
generally the oil and gas industry, such as fluctuations in the price of
commodities, industry inputs, or Hydrocarbons, (b) result from international,
national, regional, state, or local economic conditions, (c) result from general
developments or conditions in the oil and gas industry, (d) result from changes
in Laws (including regulatory or enforcement policy) applicable to Seller or its
Affiliates, (e) result from any of the transactions contemplated by this
Agreement and any public announcement thereof, (f) result from the failure of a
Governmental Body to act or omit to act pursuant to Law, (g) result from acts of
God or natural disasters, (h) result from an outbreak or escalation of
hostilities (whether nationally or internationally), or the occurrence of any
other calamity or crisis (whether nationally or internationally), including
terrorist attacks, or (i) result from a condition that is cured or eliminated on
or before Closing.

 

“Mescalero Agreement” has the meaning set forth in Section 3.3(v).

 

“Mescalero APO Interest” means that certain five percent (5%) working interest
(proportionately reduced) held by Mescalero Minerals, LLC in and to the oil and
gas leases subject to the Mescalero Agreement.

 

“NDIC” has the meaning set forth in Section 7.16.

 

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

 

“NORM” means naturally occurring radioactive material.

 

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

 

“Oasis Non-Compete” has the meaning set forth in Section 7.13.

 

“Oasis PSA” has the meaning set forth in Section 7.12.

 

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“Oasis Requirements” has the meaning set forth in Section 7.12.

 

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

 

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

 

“Party” or “Parties” has the meaning set forth in the first paragraph of this
Agreement.

 

“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,
government or agency or subdivision thereof or any other entity.

 

“Proceeding” means any suit, legal action, or legal, administrative, arbitration
or other alternative dispute resolution proceeding, hearing or formal
investigation.

 

“Properties” and “Property” have the meanings set forth in Section 1.2(c).

 

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

 

“Property Taxes” means all ad valorem, real property, personal property,
severance, production and similar Taxes based upon or measured by the ownership
or operation of the Assets or the production of Hydrocarbons from or
attributable thereto. The term “Property Taxes” shall not include any income and
franchise Taxes.

 

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

 

“Purchaser” has the meaning set forth in the first paragraph of this Agreement.

 

“Purchaser Indemnitees” means Purchaser, its Affiliates, and the officers,
directors, managers, members, stockholders, general or limited partners,
employees, agents, representatives, advisors, subsidiaries, successors and
assigns of Purchaser or its Affiliates.

 

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

 

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

 

“Remediation” or “Remediate” means monitoring, sampling, analysis, removal
action, remedial action, response action, corrective action, mitigation,
treatment or cleanup of Hazardous Materials or other similar actions as required
by any applicable Environmental Laws from soil, land surface, groundwater,
sediment, surface water or subsurface strata.

 

“Scheduled Closing Date” has the meaning set forth in Section 9.1(a).

 

“Schmitz Wellsite” is defined in Section 1.3(n).

 

“Seller” has the meaning set forth in the first paragraph of this Agreement.

 

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“Seller Indemnitees” shall mean Seller, its Affiliates, and the officers,
directors, managers, members, stockholders, general or limited partners,
employees, agents, representatives, advisors, subsidiaries, successors and
assigns of Seller or its Affiliates.

 

“Seller Indemnity Obligations” has the meaning set forth in Section 11.2(c).

 

“Seller Operated Assets” shall mean Assets operated by Seller or its Affiliates.

 

“Special Warranty” has the meaning set forth in Section 7.10.

 

“Subject Property” has the meaning set forth in Section 3.2(a)(i).

 

“Submission Date” has the meaning set forth in Section 3.4(h).

 

“Suspended Proceeds” has the meaning set forth in Section 7.11.

 

“Tax Returns” has the meaning set forth in Section 5.8.

 

“Taxes” means all federal, tribal, 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 taxing authority, including any
interest, penalties or additional amounts which may be imposed with respect
thereto.

 

“Termination Date” has the meaning set forth in Section 10.1.

 

“Third Party Claim” has the meaning set forth in Section 11.3(b).

 

“Title Arbitrator” has the meaning set forth in Section 3.4(h).

 

“Title Benefit” has the meaning set forth in Section 3.2(b).

 

“Title Benefit Amount” has the meaning set forth in Section 3.4(g).

 

“Title Benefit Notice” has the meaning set forth in Section 3.4(b).

 

“Title Benefit Property” has the meaning set forth in Section 3.4(b).

 

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

 

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

 

“Title Defect Amount” has the meaning set forth in Section 3.4(f).

 

“Title Defect Deductible” has the meaning set forth in Section 3.4(i).

 

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

 

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

 

“Transition Services Agreement” has the meaning set forth in Section 9.2(g).

 

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

 

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

 

“Working Interest” has the meaning set forth in Section 3.2(a)(ii).

  

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

 

    SELLER           SAMSON OIL & GAS USA, INC.

 

    By: /s/ Terry Barr     Name:  Terry Barr     Title:  Chief Executive Officer

 

    PURCHASER           EAGLE ENERGY PARTNERS I, LLC

 

    By: /s/ Adrian Zajac     Name:   Adrian Zajac     Title:  Partner

 

Signature page to Purchase and Sale Agreement