Exhibit 10.1
PURCHASE AND SALE AGREEMENT
BETWEEN
NORTEX MINERALS, L.P., PETRUS INVESTMENT, L.P.,
PETRUS DEVELOPMENT, L.P., AND PEROT INVESTMENT PARTNERS, LTD.
AS SELLER
AND
QUICKSILVER RESOURCES INC.
AS PURCHASER
Executed on July 3, 2008

 

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TABLE OF CONTENTS

         
 
       
PURCHASE AND SALE AGREEMENT
    1  
RECITALS
    1  
ARTICLE 1 PURCHASE AND SALE
    1  
Section 1.1 Purchase and Sale
    1  
Section 1.2 Royalties
    1  
Section 1.3 Excluded Assets
    3  
Section 1.4 Effective Time; Proration of Costs and Revenues
    4  
Section 1.5 Delivery and Maintenance of Records
    5  
ARTICLE 2 PURCHASE PRICE
    5  
Section 2.1 Purchase Price
    5  
Section 2.2 Adjustments to Purchase Price
    6  
Section 2.3 Deposit
    7  
ARTICLE 3 TITLE MATTERS
    7  
Section 3.1 Seller’s Title
    7  
Section 3.2 Definition of Defensible Title
    8  
Section 3.3 Definition of Permitted Encumbrances
    8  
Section 3.4 Notice of Title Defect Adjustments
    9  
Section 3.5 Casualty or Condemnation Loss
    12  
Section 3.6 Limitations on Applicability
    12  
Section 3.7 Government Approvals Respecting Royalties
    12  
ARTICLE 4 ENVIRONMENTAL MATTERS
    12  
Section 4.1 Assessment
    12  
Section 4.2 NORM, Wastes and Other Substances
    13  
Section 4.3 Inspection Indemnity
    13  
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER
    14  
Section 5.1 Generally
    14  
Section 5.2 Existence and Qualification
    14  
Section 5.3 Power
    14  
Section 5.4 Authorization and Enforceability
    14  
Section 5.5 No Conflicts
    14  
Section 5.6 Liability for Brokers’ Fees
    15  
Section 5.7 Litigation
    15  
Section 5.8 Taxes and Assessments
    15  
Section 5.9 Contracts
    16  
Section 5.10 Preference Rights and Transfer Requirements
    16  
Section 5.11 Condemnation
    16  
Section 5.12 Bankruptcy
    16  
Section 5.13 PUHCA/NGA
    16  
Section 5.14 Investment Company
    16  
Section 5.15 No Tax Partnership
    16  
Section 5.16 No Hedging
    16  
Section 5.17 Environmental
    17  
Section 5.18 Purchase Entirely for Own Account
    17  
Section 5.19 Restricted Securities
    17  
Section 5.20 Legends
    17  
Section 5.21 Accredited Investor
    18  
Section 5.22 Disclosure of Information
    18  
Section 5.23 Residence
    18  

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Section 5.24 Imbalances
    18  
Section 5.25 Payments for Hydrocarbon Production
    18  
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF PURCHASER
    19  
Section 6.1 Existence and Qualification
    19  
Section 6.2 Power
    19  
Section 6.3 Authorization and Enforceability
    19  
Section 6.4 No Conflicts
    19  
Section 6.5 Liability for Brokers’ Fees
    20  
Section 6.6 Litigation
    20  
Section 6.7 Financing
    20  
Section 6.8 [RESERVED]
    20  
Section 6.9 Limitation
    20  
Section 6.10 SEC Disclosure
    20  
Section 6.11 Bankruptcy
    20  
Section 6.12 SEC Reports; Financial Statements
    21  
Section 6.13 Purchaser Common Stock
    21  
ARTICLE 7 COVENANTS OF THE PARTIES
    22  
Section 7.1 Access
    22  
Section 7.2 Government Reviews
    22  
Section 7.3 Notification of Breaches
    22  
Section 7.4 Letters-in-Lieu; Assignments; Operatorship
    23  
Section 7.5 Public Announcements
    23  
Section 7.6 Operation of Business
    23  
Section 7.7 Tax Matters
    23  
Section 7.8 Further Assurances
    24  
Section 7.9 Historical Financial Statements
    24  
ARTICLE 8 CONDITIONS TO CLOSING
    25  
Section 8.1 Conditions of Seller to Closing
    25  
Section 8.2 Conditions of Purchaser to Closing
    26  
ARTICLE 9 CLOSING
    26  
Section 9.1 Time and Place of Closing
    26  
Section 9.2 Obligations of Seller at Closing
    27  
Section 9.3 Obligations of Purchaser at Closing
    27  
Section 9.4 Closing Payment & Post-Closing Purchase Price Adjustments
    27  
ARTICLE 10 TERMINATION
    29  
Section 10.1 Termination
    29  
Section 10.2 Effect of Termination
    29  
Section 10.3 Distribution of Deposit Upon Termination
    30  
ARTICLE 11 POST-CLOSING OBLIGATIONS; INDEMNIFICATION; LIMITATIONS; DISCLAIMERS
AND WAIVERS
    30  
Section 11.1 Receipts
    30  
Section 11.2 Expenses
    30  
Section 11.3 Assumed Seller Obligations
    31  
Section 11.4 Indemnities
    31  
Section 11.5 Indemnification Actions
    33  
Section 11.6 Release
    34  
Section 11.7 Limitation on Actions
    34  
Section 11.8 Disclaimers
    35  
Section 11.9 Waiver of Trade Practices Acts
    36  
Section 11.10 Recording
    36  
ARTICLE 12 REGISTRATION REQUIREMENTS
    36  

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Section 12.1 Definitions
    36  
Section 12.2 Purchaser Covenants
    37  
Section 12.3 Obligations of Purchaser
    37  
Section 12.4 Furnish Information
    38  
Section 12.5 Expense of Registration
    38  
Section 12.6 Indemnification
    38  
Section 12.7 Rule 144
    39  
ARTICLE 13 MISCELLANEOUS
    40  
Section 13.1 Counterparts
    40  
Section 13.2 Notice
    40  
Section 13.3 Sales or Use Tax Recording Fees and Similar Taxes and Fees
    41  
Section 13.4 Expenses
    41  
Section 13.5 Governing Law and Venue
    42  
Section 13.6 Captions
    42  
Section 13.7 Waivers
    42  
Section 13.8 Assignment
    42  
Section 13.9 Entire Agreement
    42  
Section 13.10 Amendment
    42  
Section 13.11 No Third-Party Beneficiaries
    43  
Section 13.12 References
    43  
Section 13.13 Construction
    43  
Section 13.14 Limitation on Damages
    43  
Section 13.15 Conspicuousness
    44  
Section 13.16 Severability
    44  
Section 13.17 Time of Essence
    44  

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    EXHIBITS

 
   
Exhibit A
  Leases
 
   
Exhibit A-1
  Wells and Units/Allocated Values
 
   
Exhibit B
  Conveyance Form
 
    SCHEDULES

 
   
Schedule 1.2(f)
  Cartwright Leases
 
   
Schedule 5.8
  Taxes and Assessments
 
   
Schedule 5.9
  Contracts
 
   
Schedule 6.4(b)
  Conflicts
 
   
Schedule 9.3(a)
  Closing Payment Allocation and Seller’s Account Information
 
   
Schedule 9.3(e)
  Stock Component Allocation

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DEFINITIONS
“actual knowledge” has the meaning set forth in Section 5.1(a).
“Adjusted Purchase Price” shall mean the Purchase Price after calculating and
applying the adjustments set forth in Section 2.2.
“Adjustment Period” has the meaning set forth in Section 2.2(a).
“Adverse Environmental Condition” means any contamination or condition exceeding
regulatory limits and not otherwise authorized by permit or Law, resulting from
any discharge, release, production, storage, treatment, seepage, escape,
leakage, emission, emptying, leaching or any other activities on, in or from any
lands covered by Leases or the Cartwright Leases, or the migration or
transportation from other lands to any lands covered by Leases or the Cartwright
Leases, of any Hazardous Materials that require Remediation at the Effective
Time pursuant to any Laws, including, but not limited to, Environmental Laws, or
that require Remediation under the terms of any Leases or the Cartwright Leases.
“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.
“Aggregate Benefit Deductible” has the meaning set forth in Section 3.4(h).
“Aggregate Title Deductible” has the meaning set forth in Section 3.4(j).
“Agreed Interest Rate” means simple interest calculated at the rate of four
percent (4%) per annum.
“Agreement” means this Purchase and Sale Agreement.
“Allocated Value” has the meaning set forth in Section 3.4(a).
“Assessment” has the meaning set forth in Section 4.1.
“Assumed Seller Obligations” has the meaning set forth in Section 11.3.
“Audited Special Financial Statements” has the meaning set forth in
Section 7.9(c).
“Barnett Shale Formation” means the interval from the stratigraphic equivalent
of the top of the Barnett Shale Formation to the stratigraphic equivalent of the
base of the Barnett Shale Formation, as found in the Alliance D-1 Well (API
#42-121-32247) located in the Greenberry Overton Survey, A-972, Denton County,
Texas. The top and base of the Barnett Shale Formation were found at the
measured depth of 7172 feet and 7566 feet, respectively, in the referenced well.
“Business Day” means each calendar day except Saturdays, Sundays and federal
holidays.
“Cartwright Leases” has the meaning set forth in Section 1.2(f).
“Cash Component” has the meaning set forth in Section 2.1(a).

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“Claim” or “Claims” has the meaning set forth in Section 11.4(a).
“Claim Notice” has the meaning set forth in Section 11.5(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 7.7(b).
“Confidentiality Agreement” has the meaning set forth in Section 7.1.
“Conveyance” has the meaning set forth in Section 3.1(b).
“Cure Period” has the meaning set forth in Section 3.4(c).
“Damages” has the meaning set forth in Section 12.1(a).
“Defensible Title” has the meaning set forth in Section 3.2(a).
“Deposit” has the meaning set forth in Section 2.3.
“DTPA” has the meaning set forth in Section 11.9(a).
“Effective Time” has the meaning set forth in Section 1.4(a).
“Environmental Laws” means, as the same may have been amended, 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.; the Safe
Drinking Water Act, 42 U.S.C. §§ 300f through 300j; the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq.; the Occupational Safety
and Health Act, 29 U.S.C. § 651 et seq.; the Atomic Energy Act, 42 U.S.C. § 2011
et seq.; and all applicable related law, whether local, state, territorial or
national, of any Governmental Body having jurisdiction over the property in
question addressing pollution or protection of human health, safety, natural
resources or the environment and all regulations implementing the foregoing.
“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 (i) pursuant to any order, notice of
responsibility, directive (including requirements embodied in Environmental
Laws), injunction, judgment or similar act (including settlements) by any
Governmental Body or court of competent jurisdiction to the extent arising out
of any violation of, or remedial obligation under, any Environmental Laws which
are attributable to the ownership or operation of the Royalties prior to the
Effective Time or (ii) pursuant to any claim or cause of action by a
Governmental Body or other Person

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for personal injury, property damage, damage to natural resources, remediation
or response costs to the extent arising out of any violation of, or any
remediation obligation under, any Environmental Laws which is attributable to
the ownership or operation of the Royalties prior to the Effective Time.
“Exchange Act” has the meaning set forth in Section 6.12.
“Excluded Assets” has the meaning set forth in Section 1.3.
“Excluded Seller Obligations” has the meaning set forth in Section 11.3.
“Expansion Agreement” means that certain Exploration and Participation Agreement
(Expansion Area) Tarrant and Denton Counties, Texas, dated January 1, 2005, by
and among Chief Oil & Gas LLC, Chief Holdings LLC and Nortex Minerals, L.P., as
amended.
“Form S-3” has the meaning set forth in Section 12.1(b).
“GAAP” means United States generally accepted accounting principals consistently
applied.
“Governmental Body” or “Governmental Bodies” means any federal, 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.
“Hazardous Materials” means wastes, pollutants, contaminants, hazardous
materials, hazardous wastes and any other materials or substances subject to
regulation relating to the protection of the environment, human health or worker
safety.
“HSR Act” means the Hart-Scott Rodino Antitrust Improvements Act of 1976.
“Hydrocarbons” means oil, gas, condensate and other gaseous and liquid
hydrocarbons or any combination thereof and sulphur extracted from hydrocarbons.
“Imbalance” or “Imbalances” means over deliveries or under deliveries with
respect to Royalties, regardless of whether such over deliveries or under
deliveries arise at the pipeline, gathering system, transportation or other
location.
“Indemnified Party” has the meaning set forth in Section 11.5(a).
“Indemnifying Party” has the meaning set forth in Section 11.5(a).
“Indemnity Claim” has the meaning set forth in Section 11.5(b).
“Individual Benefit Threshold” has the meaning set forth in Section 3.4(h).
“Individual Title Deductible” has the meaning set forth in Section 3.4(j).
“Invasive Activity” has the meaning set forth in Section 4.1.

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“Laws” means all statutes, laws, rules, regulations, ordinances, orders and
codes of Governmental Bodies.
“Leases” has the meaning set forth in Section 1.2(a).
“Material Adverse Effect” means any effect that, when taken together with all
other effects, is reasonably expected to have a material and adverse effect on
the ownership, operation or value of the Royalties, taken as a whole, and as
currently operated; provided, however, that “Material Adverse Effect” shall not
include (i) any effect resulting from entering into this Agreement or the
announcement of the transactions contemplated by this Agreement, (ii) any effect
resulting from changes in general market, economic, financial or political
conditions or any outbreak of hostilities or war, (iii) any effect that affects
the Hydrocarbon exploration, production, development, processing, gathering
and/or transportation industry generally (including changes in commodity prices
or general market prices in the Hydrocarbon exploration, production,
development, processing, gathering and/or transportation industry generally),
and (iv) any effect resulting from a change in Laws or regulatory policies.
“Net Revenue Interest” has the meaning set forth in Section 3.2(a)(i).
“NORM” means naturally occurring radioactive material.
“Option Leases” means oil and gas leases granted by any Seller pursuant to the
Expansion 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,
Governmental Body or any other entity.
“Preference Right” means any right or agreement that enables any Person to
purchase or acquire the Royalties or any portion thereof as a result of or in
connection with (i) the sale, assignment or other transfer of the Royalties or
any portion thereof or (ii) the execution or delivery of this Agreement or the
consummation or performance of the terms and conditions contemplated by this
Agreement.
“Property Costs” has the meaning set forth in Section 1.4(b).
“Purchase Price” has the meaning set forth in Section 2.1.
“Purchaser” has the meaning set forth in the preamble of this Agreement.
“Purchaser Indemnitees” shall mean Purchaser, Purchaser’s Affiliates and
Purchaser’s contractors and each of their respective officers, directors,
employees, agents, representatives, insurers, subcontractors, successors and
permitted assigns.
“Purchaser SEC Reports” has the meaning set forth in Section 6.12.
“Records” has the meaning set forth in Section 1.2(d).
“Reference Lease” means the oil and gas lease, as amended, from Nortex Minerals,
L.P. to Chief Holdings LLC dated May 22, 2003 recorded at Volume 17110, Page
0220, Real Estate

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Records of Tarrant County, Texas. References in this Agreement to specific
provisions in the Reference Lease shall be deemed to also include reference to
corresponding provisions (whether or not numbered or worded the same), if any,
in each of the other Leases, as they may have been amended, and in any Option
Lease.
“REGARDLESS OF FAULT” has the meaning set forth in Section 11.4(a).
“Registration Statement” has the meaning set forth in Section 12.2(a).
“Remediation” or “Remedial Action” means the removal, abatement, response,
investigative, cleanup and/or monitoring activities undertaken to address any
Adverse Environmental Conditions, or a release of Hazardous Materials, any
investigation, study, assessment, testing, monitoring, containment, removal,
disposal, closure, corrective action, passive remediation, natural attenuation
or bioremediation, and the installation and operation of remediation systems.
“Retained Employee Liabilities” shall mean, collectively, any liabilities of any
Seller (i) to employees of any Seller arising under the Worker Adjustment
Retraining Notification Act of 1988 (“ERISA”) as a result of actions taken by
any Seller prior to the Closing, (ii) arising out of claims by employees of any
Seller with respect to events that occur prior to the Closing and that relate to
their employment with, or the termination of their employment from, any Seller,
(iii) with respect to employees of any Seller arising under any “employee
benefit plan” (as defined in Section 3(3) of ERISA) that is sponsored by,
contributed to, or maintained by, any Seller, or (iv) arising under ERISA for
which Purchaser may have any liability under ERISA solely as a result of the
consummation of the transaction contemplated by this Agreement.
“Royalties” has the meaning set forth in Section 1.2.
“SEC” has the meaning set forth in Section 6.12.
“SEC Rule 144” has the meaning set forth in Section 12.1(c).
“Securities Act” has the meaning set forth in Section 5.19.
“Seller” has the meaning set forth in the preamble to this Agreement.
“Seller Indemnitees” shall mean Seller, Seller’s Affiliates and Seller’s
contractors, and each of their respective officers, directors, employees,
agents, representatives, insurers, subcontractors, successors and permitted
assigns.
“Seller’s Auditor” has the meaning set forth in Section 7.9(b).
“Shares” has the meaning set forth in Section 5.18.
“Special Financial Statements” has the meaning set forth in Section 7.9(a).
“Stock Component” has the meaning set forth in Section 2.1(a).
“Taxes” means all federal, state, local and foreign income, profits, franchise,
sales, use, ad valorem, property, severance, production, excise, stamp,
documentary, real property transfer or gain, gross receipts, goods and services,
registration, capital, transfer or withholding taxes or

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other governmental fees or charges imposed by any taxing authority, including
any interest, penalties or additional amounts which may be imposed with respect
thereto.
“Tax Returns” has the meaning set forth in Section 5.8.
“Termination Date” has the meaning set forth in Section 10.1(b).
“Title Arbitrator” has the meaning set forth in Section 3.4(i).
“Title Benefit” has the meaning set forth in Section 3.2(b).
“Title Benefit Amount” has the meaning set forth in Section 3.4(e).
“Title Benefit Notice” 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 3.2(b).
“Title Defect Amount” has the meaning set forth in Section 3.4(d)(i).
“Title Defect Notice” has the meaning set forth in Section 3.4(a).
“Title Defect Property” has the meaning set forth in Section 3.4(a).
“Trading Day” has the meaning set forth in Section 2.1(b).
“Transfer Requirement” means any consent, approval, authorization or permit of,
or filing with or notification to, any Person which is required to be obtained,
made or complied with for or in connection with any sale, assignment or transfer
of the Royalties or any portion thereof, other than any consent of, notice to,
filing with, or other action by Governmental Bodies in connection with the sale
or conveyance of oil and/or gas leases or interests therein or surface contracts
or interests therein, if such consent, filing, notice or action is not required
prior to the assignment of such oil and/or gas leases, surface contracts or
interests or is customarily obtained subsequent to the sale or conveyance
(including consents from state agencies).
“Units” has the meaning set forth in Section 1.2(b).
“Volume Weighted Average Price” has the meaning set forth in Section 2.1(b).
“Wells” means those wells located on the Leases, the Cartwright Leases or Units
that are listed on Exhibit A-1 and future projected wells which have been
allocated a value on Exhibit A-1.

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PURCHASE AND SALE AGREEMENT
     This Agreement is executed on July 3, 2008, by and between Nortex Minerals,
L.P., a Texas limited partnership, Petrus Investment, L.P., a Texas limited
partnership, Petrus Development, L.P., a Texas limited partnership, and Perot
Investment Partners, Ltd., a Texas limited partnership (collectively, “Seller”),
and Quicksilver Resources Inc., a Delaware corporation (“Purchaser”).
RECITALS
     A. Seller owns royalty interests in various oil and gas properties, either
of record or beneficially, more fully described in the exhibits hereto.
     B. Seller desires to sell to Purchaser and Purchaser desires to purchase
from Seller the royalty interests of Seller hereafter described, in the manner
and upon the terms and conditions hereafter set forth.
     C. Capitalized terms used herein shall have the meanings ascribed to them
in this Agreement as such terms are identified and/or defined in the preceding
Definitions section hereof.
     NOW, THEREFORE, in consideration of the premises and of the mutual
promises, representations, warranties, covenants, conditions and agreements
contained herein, and for other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound by the terms hereof, agree as follows:
ARTICLE 1
PURCHASE AND SALE
     Section 1.1 Purchase and Sale.
     At the Closing, and upon the terms and subject to the conditions of this
Agreement, Seller agrees to sell, transfer and convey the Royalties to Purchaser
and Purchaser agrees to purchase, accept and pay for the Royalties and to assume
the Assumed Seller Obligations attributable to the Royalties.
     Section 1.2 Royalties.
     As used herein, the term “Royalties” means, subject to the terms and
conditions of this Agreement, all of Seller’s right, title, interest and estate
in and to the following (but excluding the Excluded Assets):
     (a) With respect to all of the oil and gas leases described on Exhibit A,
as amended (collectively, the “Leases”) and the Option Leases, Purchaser shall
have the rights set forth in the paragraphs of the Reference Lease described
below to the extent applicable to the Barnett Shale Formation:

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     (i) Paragraph 3 Royalty, except for the termination rights set forth in sub
paragraph 3(d);
     (ii) Paragraph 6 Limitations/Options; and
     (iii) Paragraph 8 Pooling.
     In addition, Purchaser shall have concurrent rights with Seller with
respect to the following paragraphs in the Reference Lease:
     (1) Paragraph 10 Assignment, to the extent relating to the right to consent
to transfers;
     (2) Paragraph 14 Indemnity;
     (3) Paragraph 15 Force Majeure;
     (4) Paragraph 16 Notice;
     (5) Paragraph 18 Waiver;
     (6) Paragraph 19 Law and Venue;
     (7) Paragraph 20 Headings;
     (8) Paragraph 21 Successors and Assigns;
     (9) Paragraph 24 Confidentiality;
     (10) Paragraph 26 Preparation and Approval of Documents;
     (11) Paragraph 27 Survival;
     (12) Paragraph 28 Compliance with Law; and
     (13) Paragraph 30 Non-default/Ratification.
     (b) The Royalties as described in (a) above in or to any pools or units
which include any part of any Leases, the Cartwright Leases or Option Leases,
including those pools or units shown on Exhibit A-1 (the “Units”);
     (c) All Hydrocarbons produced from or attributable to the Royalties from
and after the Effective Time;
     (d) All land files; non-confidential logs; maps relating to the Royalties;
division order files; abstracts; title opinions; land surveys; and other books,
records, data, files and accounting records, in each case to the extent related
to the Royalties, but excluding (i) any books, records, data, files, maps and
accounting records to the extent disclosure or transfer is restricted by
third-party agreement or applicable Law, (ii) computer or communications
software or intellectual property (including tapes, codes, data and program
documentation and all tangible manifestations and technical information relating
thereto), (iii) attorney-client privileged

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communications and work product of Seller’s legal counsel (other than title
opinions), (iv) reserve studies and evaluations, and (v) records relating to the
negotiation and consummation of the sale of the Royalties (subject to such
exclusions, the “Records”);
     (e) The royalty payable under the Oil, Gas and Mineral Lease dated
August 12, 1985, by and between Lottie Barton Johnson and Mitchell Energy
Corporation, recorded at Volume 8306, Page 1547 of the Deed Records of Tarrant
County, Texas, INSOFAR AND ONLY INSOFAR as such royalty is payable in respect of
production from the Alliance-Haslet Unit under Unit Agreement dated March 18,
2008, Instrument Number D204212990 Property Records of Tarrant County, Texas;
and
     (f) Royalties attributable to the non-executive mineral interests covered
by the leases described on Schedule 1.2(f) (the “Cartwright Leases”).
     Section 1.3 Excluded Assets.
     Notwithstanding the foregoing, the Royalties shall not include, and there
is excepted, reserved and excluded from the purchase and sale contemplated
hereby (collectively, the “Excluded Assets”):
     (a) all corporate, financial, income and franchise tax and legal records of
Seller that relate to Seller’s business generally (whether or not relating to
the Royalties), and all books, records and files that relate to the Excluded
Assets and those records retained by Seller pursuant to Section 1.2(d) and
copies of any other Records retained by Seller pursuant to Section 1.5;
     (b) all rights to any tax credits and any refund of Taxes or other costs or
expenses borne by Seller or Seller’s predecessors in interest and title
attributable to periods prior to the Effective Time;
     (c) with respect to the Leases and the Option Leases, Seller shall have the
rights set forth in the paragraphs of the Reference Lease described below:
     (i) Paragraph 1 Granting;
     (ii) Paragraph 2 Primary Term;
     (iii) Paragraph 3(d), to the extent applicable to the termination rights
set forth therein;
     (iv) Paragraph 4 Release;
     (v) Paragraph 5 Operations;
     (vi) Paragraph 7 Continuous Development and Partial Termination;
     (vii) Paragraph 9 Removal of Lessee’s Property on Termination;
     (viii) Paragraph 10 Assignment, except to the extent specifically described
in Section 1.2(a)(1);

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     (ix) Paragraph 11 Seismic Operations;
     (x) Paragraph 12 Surface Use and Protection;
     (xi) Paragraph 13 Environmental;
     (xii) Paragraph 17 No Warranty;
     (xiii) Paragraph 23 Termination;
     (xiv) Paragraph 25 Naming of Wells; and
     (xv) Paragraph 31 Purchase Right.
     (d) all receivables attributable to the Royalties with respect to any
period of time prior to the Effective Time;
     (e) all fee mineral interests and rights relating thereto, including, but
not limited to, the right to receive all bonus payments under the Leases and
additional leases, if any;
     (f) all rights, titles, claims and interests of Seller or any Affiliate of
Seller to or under any policy or agreement of insurance or any insurance
proceeds;
     (g) any patent, patent application, logo, service mark, copyright, trade
name or trademark of or associated with Seller or any Affiliate of Seller or any
business of Seller or of any Affiliate of Seller; and
     (h) a nonexclusive right for Seller (but no other Person) to retain a copy
and freely use logs, maps, engineering data and reports, reserve studies and
evaluations, and other data and information being transferred as a part of the
Royalties.
     Section 1.4 Effective Time; Proration of Costs and Revenues.
     (a) Subject to Section 1.5, possession of the Royalties shall be
transferred from Seller to Purchaser at the Closing, but certain financial
benefits and burdens of the Royalties shall be transferred effective as of 7:00
A.M., Central Daylight Time, on April 1, 2008 (the “Effective Time”), as
described below.
     (b) Purchaser shall be entitled to the Royalties attributable to all
Hydrocarbon production from or attributable to the Barnett Shale Formation and
the Leases and Units at and after the Effective Time (and all products and
proceeds attributable thereto), and shall be responsible for (and entitled to
any refunds with respect to) all Property Costs incurred at and after the
Effective Time. Seller shall be entitled to the Royalties attributable to all
Hydrocarbon production from or attributable to the Leases, the Cartwright Leases
and Units prior to the Effective Time (and all products and proceeds
attributable thereto), and shall be responsible for (and entitled to any refunds
with respect to) all Property Costs incurred prior to the Effective Time.
“Earned” and “incurred,” as used in this Agreement, shall be interpreted in
accordance with GAAP and Council of Petroleum Accountants Society
(COPAS) standards. “Property Costs” means all costs attributable to the
ownership and operation of the Royalties (including without limitation costs of
insurance and ad valorem, property, severance, Hydrocarbon production and
similar Taxes based upon or measured by the ownership of the Royalties or the

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production of Hydrocarbons therefrom, but excluding any other Taxes). For
purposes of this Section 1.4, determination of whether Property Costs are
attributable to the period before or after the Effective Time shall be based on
when services are rendered, when the goods are delivered or when the work is
performed. For clarification, the date an item or work is ordered is not the
date of a pre-Effective Time transaction for settlement purposes, but rather the
date on which the item ordered is delivered to the job site, or the date on
which the work ordered is performed, shall be the relevant date. For purposes of
allocating Hydrocarbon production (and accounts receivable with respect thereto)
under this Section 1.4, Hydrocarbons shall be deemed to be “from or attributable
to” the Leases, the Cartwright Leases, Units and Wells when they pass through
the meters at the production facilities for each Well. Seller shall utilize
reasonable interpolative procedures to arrive at an allocation of Hydrocarbon
production when exact meter readings are not available. Seller shall provide to
Purchaser, no later than three (3) Business Days prior to Closing, all data
necessary to support any estimated allocation, for purposes of establishing the
adjustment to the Purchase Price pursuant to Section 2.2 hereof that will be
used to determine the Closing Payment (as defined in Section 9.4(a)). Taxes and
other Property Costs, if any, that are paid periodically shall be prorated based
on the number of days in the applicable period falling before and the number of
days in the applicable period falling at or after the Effective Time, except
that Hydrocarbon production, severance and similar Taxes shall be prorated based
on the number of units actually produced, purchased or sold or proceeds of sale,
as applicable, before, and at or after, the Effective Time. In each case,
Purchaser shall be responsible for the portion allocated to the period at and
after the Effective Time and Seller shall be responsible for the portion
allocated to the period before the Effective Time.
     Section 1.5 Delivery and Maintenance of Records.
     (a) Seller, at Seller’s sole cost and expense, shall deliver the Records to
Purchaser within thirty (30) days following Closing. Seller may retain copies of
any Records.
     (b) Purchaser, for a period of seven (7) years following Closing, will
(i) retain the Records, (ii) provide Seller, its Affiliates and their respective
officers, employees and representatives with reasonable access to the Records
during normal business hours for review and copying for legitimate business
reasons at Seller’s expense, and (iii) provide Seller, its Affiliates and their
respective officers, employees and representatives with reasonable access,
during normal business hours, to materials received or produced after Closing
relating to any Indemnity Claim made under Section 11.4 of this Agreement for
review and copying at Seller’s expense.
ARTICLE 2
PURCHASE PRICE
     Section 2.1 Purchase Price.
     (a) The purchase price for the Royalties (the “Purchase Price”) shall
consist of (i) Three Hundred Six Million Eight Hundred Twenty Six Thousand Six
Hundred Thirty Eight Dollars ($306,826,638) in cash (the “Cash Component”) and
(ii) a number of shares of Purchaser Common Stock having a value of Ninety Four
Million Five Hundred Fifty Six Thousand Dollars ($94,556,000) as determined in
accordance with Section 2.1(b) (the “Stock Component”), in each case as adjusted
as provided in Section 2.2.

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     (b) The number of shares of Purchaser Common Stock to which the Seller will
be entitled pursuant to Section 2.1(a) shall be determined by dividing
$94,556,000 by the Volume Weighted Average Price and rounding the result to the
nearest whole share. The “Volume Weighted Average Price” means the volume
weighted average, for each of the fifteen (15) consecutive Trading Days
immediately prior to the third (3rd) Business Day prior to the Closing Date, of
the per share volume-weighted average prices as displayed under the heading
“Bloomberg VWAP” on Bloomberg page [“KWK<equity>AQR”]. The parties agree that
the calculation of Volume Weighted Average Price shall be carried to five
(5) decimal places. The Seller agrees not to engage in any buying, selling,
trading, or any other transactions related to Purchaser Common Stock or to any
derivates, options, swaps, hedges, puts, calls, collars or similar instruments
relating to the Purchaser Common Stock prior to the Closing. “Trading Day” means
a day on which trading in securities generally occurs on the New York Stock
Exchange or, if Purchaser Common Stock is not then listed on the New York Stock
Exchange, on the principal other United States, national or regional securities
exchange on which Purchaser Common Stock is then listed or, if Purchaser Common
Stock is not then listed on a United States, national or regional securities
exchange, in the principal other market on which Purchaser Common Stock is then
traded.
     Section 2.2 Adjustments to Purchase Price.
     The Purchase Price for the Royalties shall be adjusted as follows with all
such amounts being determined in accordance with GAAP and Council of Petroleum
Accountants Society (COPAS) standards:
     (a) Reduced by the aggregate amount of the following proceeds received by
Seller between the Effective Time and the Closing Date (with the period between
the Effective Time and the Closing Date referred to as the “Adjustment Period”):
proceeds from Royalties during the Adjustment Period (net of any Hydrocarbon
production, severance, sales or excise Taxes charged against the royalty owner
and not reimbursed to Seller by the purchaser of Hydrocarbon production);
     (b) (i) Subject to the Individual Title Deductible and the Aggregate Title
Deductible, reduced by the Title Defect Amount with respect to a Title Defect if
the Title Defect Amount has been determined prior to Closing, and (ii) subject
to the Individual Benefit Threshold and the Aggregate Benefit Deductible,
increased by the Title Benefit Amount with respect to each Title Benefit for
which the Title Benefit Amount has been determined prior to Closing;
     (c) Increased by the amount of all Property Costs and other costs
attributable to the ownership and operation of the Royalties that are paid by
Seller and incurred at or after the Effective Time, except any Property Costs
and other such costs already deducted in the determination of proceeds in
Section 2.2(a);
     (d) Increased or reduced as agreed upon in writing by Seller and Purchaser;
and
     (e) Increased by the amount of actual transaction costs, in an amount not
to exceed $460,653, incurred by Seller in effecting the contemplated
transactions in Purchaser Common Stock.
     Each adjustment made pursuant to Section 2.2(a) shall serve to satisfy, up
to the amount of the adjustment, Purchaser’s entitlement under Section 1.4 to
Hydrocarbon

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production from or attributable to the Royalties during the Adjustment Period,
and as such, Purchaser shall not have any separate rights to receive any
Hydrocarbon production or income, proceeds, receipts and credits with respect to
which an adjustment has been made. Similarly, the adjustment described in
Section 2.2(c) shall serve to satisfy, up to the amount of the adjustment,
Purchaser’s obligation under Section 1.4 to pay Property Costs attributable to
the ownership of the Royalties that are incurred during the Adjustment Period,
and as such, Purchaser shall not be separately obligated to pay for any Property
Costs or other such costs with respect to which an adjustment has been made.
     Notwithstanding anything to the contrary in this Section 2.2, any and all
such adjustments to the Purchase Price shall be made to the Stock Component of
the Purchase Price; provided that if the Stock Component of the Purchase Price
is reduced to zero, then any additional reductions shall be made to the Cash
Component of the Purchase Price.
     Section 2.3 Deposit.
     Concurrently with the execution of this Agreement, Purchaser has paid to
Seller an earnest money deposit in an amount equal to five percent (5%) of the
Purchase Price (the “Deposit”). The Deposit shall be in cash not Purchaser
Common Stock. The Deposit shall be non-interest bearing and applied against the
Cash Component of the Purchase Price if the Closing occurs or shall be otherwise
distributed in accordance with the terms of this Agreement.
ARTICLE 3
TITLE MATTERS
     Section 3.1 Seller’s Title.
     (a) Except for the special warranty of title referenced in Section 3.1(b)
and without limiting Purchaser’s right to adjust the Purchase Price by operation
of this Article 3, Seller makes no warranty or representation, express, implied,
statutory or otherwise, with respect to Seller’s title to any of the Royalties
and Purchaser hereby acknowledges and agrees that Purchaser’s sole remedy for
any defect of title, including any Title Defect, with respect to any of the
Royalties (i) before Closing, shall be Purchaser’s right to adjust the Purchase
Price to the extent provided in this Article 3 and (ii) after Closing, shall be
pursuant to the special warranty of title referenced in Section 3.1(b).
     (b) The conveyance to be delivered by Seller to Purchaser shall be
substantially in the form of Exhibit B hereto (the “Conveyance”) and contain a
special warranty of Defensible Title by, through and under Seller but not
otherwise to Units and Wells shown on Exhibit A-1, but shall otherwise be
without warranty of title of any kind, express, implied or statutory or
otherwise.
     (c) Purchaser shall not be entitled to protection under Seller’s special
warranty of title in the Conveyance against any Title Defect reported under this
Article 3 and/or any Title Defect disclosed in writing to Purchaser by Seller or
demonstrated by Seller to have been actually known by Purchaser prior to the
Title Claim Date.
     (d) Notwithstanding anything herein provided to the contrary, if a Title
Defect under this Article 3 results from any matter which could also result in
the breach of any representation or warranty of Seller set forth in Article 5,
then Purchaser shall only be entitled to assert such

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matter (i) before Closing, as a Title Defect to the extent permitted by this
Article 3, or (ii) after Closing, as a breach of Seller’s special warranty of
title contained in the Conveyance to the extent permitted by this Section 3.1,
and shall be precluded from also asserting such matter as the basis of the
breach of any such representation or warranty.
     Section 3.2 Definition of Defensible Title.
     (a) As used in this Agreement, the term “Defensible Title” means that
record title of Seller with respect to the Units or Wells shown in Exhibit A-1
that, except for and subject to Permitted Encumbrances:
     (i) Entitles Seller to receive a share of the Hydrocarbons produced, saved
and marketed from the Barnett Shale Formation in any Unit or Well shown in
Exhibit A-1 throughout the duration of the productive life of such Unit or Well
(a “Net Revenue Interest”) of not less than the Net Revenue Interest shown in
Exhibit A-1 for such Unit or Well; and
     (ii) Is free and clear of liens, encumbrances, obligations, security
interests or pledges.
     (b) As used in this Agreement, the term “Title Defect” means any lien,
charge, encumbrance, obligation (including contract obligation), defect or other
matter that causes Seller not to have Defensible Title in and to the Royalties
associated with the Units and Wells shown in Exhibit A-1 as of the Effective
Time and the Closing Date. 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 Unit or Well shown on Exhibit A-1 as of
the Effective Time and the Closing Date. Notwithstanding the foregoing, the
following shall not be considered Title Defects:
     (i) defects based solely on (1) lack of information in the Seller’s files,
or (2) references to a document(s) if such document(s) 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 party’s actual and superior claim of title to
the relevant property relating to the Royalties;
     (iii) defects based on a gap in Seller’s chain of title in the county
records as to fee Leases, unless such gap is affirmatively shown to exist in
such records by an abstract of title, title opinion or landman’s title chain
which documents shall be included in a Title Defect Notice; and
     (iv) defects that have been cured by applicable Laws of limitations or
prescription.
     Section 3.3 Definition of Permitted Encumbrances.
     As used herein, the term “Permitted Encumbrances” means any or all of the
following:
     (a) All Leases, unit agreements, pooling agreements and division orders
applicable to the Royalties, to the extent that the net cumulative effect of
such instruments does not reduce

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Seller’s Net Revenue Interest below that shown in Exhibit A-1, and other than
any term or provision in any of the foregoing that would have the effect of
excluding the Barnett Shale Formation from the properties relating to the
Royalties;
     (b) Liens for current Taxes or assessments not yet delinquent or, if
delinquent, being contested in good faith by appropriate actions;
     (c) All rights to consent by, required notices to, filings with or other
actions by Governmental Bodies in connection with the sale or conveyance of the
Royalties if they are not required or customarily obtained prior to the sale or
conveyance;
     (d) Excepting circumstances where such rights have already been triggered,
rights of reassignment arising upon final intention to abandon or release the
Leases, or any of them;
     (e) Easements, rights-of-way, servitudes, permits, surface leases and other
rights in respect of surface operations to the extent that they do not
individually reduce Seller’s Net Revenue Interest below that shown in
Exhibit A-1;
     (f) All rights reserved to or vested in any Governmental Body to control or
regulate any of the Royalties 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; and
     (g) Any encumbrance which is discharged by Seller at or prior to Closing.
     Section 3.4 Notice of Title Defect Adjustments.
     (a) To assert a claim of a Title Defect, Purchaser must deliver claim
notices to Seller (each a “Title Defect Notice”) or before five (5) Business
Days prior to the Closing Date (the “Title Claim Date”). Purchaser will endeavor
in good faith to provide Title Defect Notices in advance of the Title Claim Date
if such are available. Each Title Defect Notice shall be in writing and shall
include (i) a description of the alleged Title Defect(s), (ii) the Units or
Wells affected by the Title Defect (each, a “Title Defect Property”), (iii) the
Allocated Value 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) the
amount by which Purchaser reasonably believes the Allocated Value of each Title
Defect Property is reduced by the alleged Title Defect(s) and the computations
and information upon which Purchaser’s belief is based. Notwithstanding any
other provision of this Agreement to the contrary, Purchaser shall be deemed to
have waived its right to assert Title Defects to the extent that Purchaser does
not provide notice to Seller of such Title Defects on or before the Title Claim
Date; provided, however, such waiver shall have no effect or limitation on the
special warranty of title referenced in Section 3.1(b). For purposes of this
Agreement, the term “Allocated Value” shall mean the portion of the Purchase
Price that has been allocated to a Unit or Well in Exhibit A-1.
     (b) Seller shall have the right, but not the obligation, to deliver to
Purchaser on or before the Title Claim Date with respect to each Title Benefit a
notice (a “Title Benefit Notice”) including (i) a description of the Title
Benefit, (ii) the Units or Wells affected, (iii) the Allocated Values of the
Units or Wells subject to such Title Benefit and (iv) the amount by which the
Seller reasonably believes the Allocated Value of those Units or Wells is
increased by the Title Benefit, and the computations and information upon which
Seller’s belief is based. Seller shall be

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deemed to have waived all Title Benefits for which it fails to provide to
Purchaser a Title Benefit Notice on or before the Title Claim Date.
     (c) Seller shall have the right, but not the obligation, to attempt, at its
sole cost, to cure or remove at any time prior to Closing (the “Cure Period”),
unless the parties otherwise agree, any Title Defects of which Seller has been
advised by Purchaser.
     (d) In the event that any Title Defect is not waived by Purchaser or cured
on or before Closing:
     (i) Seller shall, subject to the Individual Title Deductible and the
Aggregate Title Deductible, reduce the Purchase Price by an amount agreed upon
(“Title Defect Amount”) pursuant to Section 3.4(g) or 3.4(i) by Purchaser and
Seller as being the value of such Title Defect, taking into consideration the
Allocated Value of the Royalties that are subject to such Title Defect, the
portion of such Royalties subject to such Title Defect and the legal effect of
such Title Defect on such Royalties affected thereby; provided, however, that
the methodology, terms and conditions of Section 3.4(g) shall control any such
determination; or
     (ii) if applicable, terminate this Agreement.
     (e) Subject to the Individual Benefit Threshold and the Aggregate Benefit
Deductible, with respect to each Unit or Well affected by Title Benefits
reported under Section 3.4(b), the Purchase Price shall be increased by an
amount (the “Title Benefit Amount”) equal to the increase in the Allocated Value
for such Unit or Well caused by such Title Benefits, as determined pursuant to
Section 3.4(h).
     (f) Section 3.4(d) shall be the exclusive right and remedy of Purchaser
with respect to Title Defects asserted by Purchaser pursuant to Section 3.4.
     (g) The Title Defect Amount resulting from a Title Defect shall be the
amount by which the Allocated Value of the Title Defect Property affected by
such Title Defect is reduced as a result of the existence of such Title Defect
and shall be determined in accordance with the following methodology, terms and
conditions:
     (i) if Purchaser and Seller agree on the Title Defect Amount, 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 (1) the Net
Revenue Interest for any Title Defect Property and (2) the Net Revenue Interest
stated on 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 Net Revenue Interest decrease and the denominator of
which is the Net Revenue Interest stated on Exhibit A-1;
     (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

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subsections (i), (ii) or (iii) above, 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, 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.
     (h) The Title Benefit Amount for any Title Benefit shall be the product of
the Allocated Value of the affected Unit or Well multiplied by a fraction, the
numerator of which is the Net Revenue Interest increase and the denominator of
which is the Net Revenue Interest stated on Exhibit A-1. Notwithstanding
anything to the contrary, (i) in no event shall there be any increase in the
Purchase Price for any Individual Title Benefit if the Title Benefit Amount
attributable thereto does not exceed $50,000 (“Individual Benefit Threshold”);
and (ii) in no event shall there be any increase in the Purchase Price for any
Title Benefits that exceed the Individual Benefit Threshold unless and to the
extent that the sum of all Title Benefit Amounts attributable thereto exceed an
amount equal to one percent (1%) of the Purchase Price (“Aggregate Benefit
Deductible”).
     (i) Seller and Purchaser shall attempt to agree on all Title Defect Amounts
and Title Benefit Amounts prior to Closing. If Seller and Purchaser are unable
to agree by Closing, the Title Defect Amounts and Title Benefit Amounts in
dispute shall be exclusively and finally resolved by arbitration pursuant to
this Section 3.4(i). There shall be a single arbitrator, who shall be a title
attorney with at least ten (10) years experience in oil and gas titles involving
properties in the regional area in which the properties relating to the
Royalties are located, as selected by mutual agreement of Purchaser and Seller
within fifteen (15) Business Days after the end of the Cure Period, and absent
such agreement, by the Dallas office of the American Arbitration Association
(the “Title Arbitrator”). The arbitration proceeding shall be held in Tarrant
County, Texas and shall be conducted 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 Title Arbitrator’s
determination shall be made within fifteen (15) Business Days after submission
of the matters in dispute 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 Sections 3.4(g) and 3.4(h) 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 parties to advise the Title
Arbitrator, including without limitation petroleum engineers. The Title
Arbitrator shall act as an expert for the limited purpose of determining the
specific disputed Title Defect Amounts and Title Benefit Amounts submitted by
either party and may not award damages, interest or penalties to either party
with respect to any matter. Seller and Purchaser shall each bear its own legal
fees and other costs of presenting its case. Each party shall bear one-half of
the costs and expenses of the Title Arbitrator, including any costs incurred by
the Title Arbitrator that are attributable to such third party consultation.
Within ten (10) days after the Title Arbitrator delivers written notice to
Purchaser and Seller of his award with respect to a Title Defect Amount or a
Title Benefit Amount, (i) Purchaser shall pay to Seller the amount, if any, so
awarded by the Title Arbitrator to Seller, plus interest payable on such amount
at the Agreed Interest Rate from (but not including) the Closing Date to (and
including) the date on which such amount is paid to Seller and (ii) Seller shall
pay to Purchaser the amount, if any, so awarded by

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the Title Arbitrator to Purchaser, plus interest payable on such amount at the
Agreed Interest Rate from (but not including) the Closing Date to (and
including) the date on which such amount is paid to Purchaser.
     (j) Notwithstanding anything to the contrary, (i) in no event shall there
be any adjustments to the Purchase Price or other remedies provided by Seller
for individual Title Defects that do not exceed $50,000 (“Individual Title
Deductible”); and (ii) in no event shall there be any adjustments to the
Purchase Price or other remedies provided by Seller for Title Defects unless the
amount of all such Title Defects, in the aggregate, excluding any Title Defects
cured by Seller, exceeds a deductible in an amount equal to one percent (1%) of
the Purchase Price (“Aggregate Title Deductible”), after which point Purchaser
shall be entitled to adjustments to the Purchase Price or other remedies only
with respect to Title Defects in excess of such Aggregate Title Deductible.
     Section 3.5 Casualty or Condemnation Loss.
     Purchaser shall assume all risk of loss with respect to, and any change in
the condition of the Wells from the Effective Time until Closing for production
of Hydrocarbons through normal depletion (including, but not limited to, the
watering out of any Well, collapsed casing or sand infiltration of any Well) and
the depreciation of personal property due to ordinary wear and tear.
     Section 3.6 Limitations on Applicability.
     The right of Purchaser to assert a Title Defect under this Agreement shall
terminate as of the Title Claim Date, 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 reported in a Title Defect Notice or bona fide Title
Benefit Claim properly reported in a Title Benefit Notice on or before the Title
Claim Date. Thereafter, Purchaser’s sole and exclusive rights and remedies with
regard to title to the Royalties shall be as set forth in, and shall arise
under, the Conveyance transferring the Royalties from Seller to Purchaser.
     Section 3.7 Government Approvals Respecting Royalties.
     Purchaser, within thirty (30) days after Closing, shall file for approval
with the applicable government agencies all assignment documents and other state
and federal transfer documents required to effectuate the transfer of the
Royalties. Purchaser further agrees promptly after Closing to take all other
actions reasonably required of it by federal or state agencies having
jurisdiction to obtain all requisite regulatory approvals with respect to this
transaction and to use its reasonable commercial efforts to obtain the approval
by such federal or state agencies, as applicable, of Seller’s assignment
documents requiring federal or state approval in order for Purchaser to be
recognized by the federal or state agencies as the owner of the Royalties.
ARTICLE 4
ENVIRONMENTAL MATTERS
     Section 4.1 Assessment.
     From the date of the execution of this Agreement until the Closing Date,
Seller shall afford to Purchaser and its officers, employees, agents and
authorized representatives reasonable access to the property relating to the
Royalties, including the Records in accordance with Section 7.1. During such
period, Seller shall also make available to Purchaser, upon reasonable notice

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and during regular business hours, such personnel of Seller knowledgeable with
respect to the property relating to the Royalties in order that Purchaser may
make such diligent investigation as Purchaser considers desirable. Upon notice
to Seller, Purchaser shall, subject to the provisions of Section 11.4(b)(v),
have the right to conduct an environmental assessment of all or any portion of
the properties relating to the Royalties (the “Assessment”) to be conducted by a
reputable environmental consulting or engineering firm approved in advance in
writing by Seller, but only to the extent that Seller may grant such right
without violating any obligations to any third party. The Assessment shall be
conducted at the sole cost and expense of Purchaser and shall be subject to the
indemnity provisions of Section 4.3 and Section 11.4(b)(v). Prior to conducting
any sampling, boring, drilling or other invasive investigative activity
(“Invasive Activity”), Purchaser shall furnish for Seller’s review a proposed
scope of such Invasive Activity, including a description of the activities to be
conducted and a description of the approximate locations of such activities. If
any of the proposed activities may unreasonably interfere with normal use or
operation of the properties, Seller may request an appropriate modification of
the proposed Invasive Activity. Seller shall have the right to be present during
any Assessment and shall have the right, at its option and expense, to split
samples with Purchaser. After completing any Assessment, Purchaser shall, at its
sole cost and expense, restore the properties to their condition prior to the
commencement of such Assessment, unless Seller requests otherwise, and shall
promptly dispose of all drill cuttings, corings or other investigative-derived
wastes generated in the course of the Assessment. Purchaser shall maintain, and
shall cause its officers, employees, representatives, consultants and advisors
to maintain, all information obtained by Purchaser pursuant to any Assessment or
other due diligence activity as strictly confidential in perpetuity, unless
disclosure of any facts discovered through such Assessment is required under any
Environmental Laws. Purchaser shall provide Seller with a copy of all
environmental reports prepared by, or on behalf of, Purchaser with respect to
any Assessment or Invasive Activity. In the event that any necessary disclosures
under applicable Environmental Laws are required with respect to matters
discovered by any Assessment conducted by, for or on behalf of Purchaser,
Purchaser agrees that Seller shall be the responsible party for disclosing such
matters to the appropriate Governmental Bodies.
     Section 4.2 NORM, Wastes and Other Substances.
     Purchaser acknowledges that the properties related to the Royalties have
been used for exploration, development and production of Hydrocarbons and that
there may be petroleum, produced water, wastes or other substances or materials
located in, on or under the properties or associated with the properties related
to the Royalties. Equipment and sites may contain asbestos, hazardous substances
or NORM. NORM may affix or attach itself to the inside of wells, materials and
equipment as scale or in other forms. The wells, materials and equipment may
contain NORM and other wastes or hazardous substances. NORM-containing material
and/or other wastes or hazardous substances may have come in contact with
various environmental media, including, without limitation, water, soils or
sediment. Special procedures may be required for the assessment, remediation,
removal, transportation or disposal of environmental media, wastes, asbestos,
hazardous substances and NORM from the properties related to the Royalties.
     Section 4.3 Inspection Indemnity.
     PURCHASER HEREBY AGREES TO DEFEND, INDEMNIFY, RELEASE, PROTECT, SAVE AND
HOLD HARMLESS THE SELLER INDEMNITEES FROM AND AGAINST ANY AND ALL LOSSES AND
CLAIMS RESULTING DIRECTLY FROM ANY DUE DILIGENCE ACTIVITY CONDUCTED BY PURCHASER
OR ITS AGENTS, WHETHER BEFORE OR

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AFTER THE EXECUTION OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY LOSSES
RESULTING, IN WHOLE OR IN PART, FROM THE NEGLIGENCE (OTHER THAN THE GROSS
NEGLIGENCE) OR STRICT LIABILITY OF SELLER.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SELLER
     Section 5.1 Generally.
     (a) Any representation or warranty qualified “to the knowledge of Seller”
or “to Seller’s knowledge” or with any similar knowledge qualification is
limited to matters within the actual knowledge of Mark Rollins, any other
officer of Seller and any employee at a managerial or higher level of Seller.
“Actual knowledge” for purposes of this Agreement means information actually
personally known by such persons.
     (b) 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.
Likewise, the inclusion of a matter on a Schedule in relation to a
representation or warranty shall not be deemed an indication that such matter
necessarily would, or may, breach such representation or warranty absent its
inclusion on such Schedule. Matters may be disclosed on a Schedule to this
Agreement for purposes of information only.
     (c) Subject to the foregoing provisions of this Section 5.1, the
disclaimers and waivers contained in Sections 11.8 and 11.9 and the other terms
and conditions of this Agreement, Seller represents and warrants to Purchaser
the matters set out in Sections 5.2 through 5.25.
     Section 5.2 Existence and Qualification.
     Seller is duly organized, validly existing and in good standing under the
laws of the State of Texas.
     Section 5.3 Power.
     Seller has the partnership authority to enter into and perform this
Agreement and consummate the transactions contemplated by this Agreement.
     Section 5.4 Authorization and Enforceability.
     The execution, delivery and performance of this Agreement, and the
performance of the transactions contemplated hereby, have been duly and validly
authorized by all necessary partnership action on the part of the Seller. This
Agreement has been, 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 against
Seller 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 5.5 No Conflicts.

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     The execution, delivery and performance of this Agreement by Seller and the
transactions contemplated herein will not (a) violate any provision of the
certificate of limited partnership, partnership agreement or other constituent
documents of Seller, (b) result in default (with due notice or lapse of time or
both) or the creation of any lien or encumbrance or give rise to any right of
termination, cancellation or acceleration under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license or agreement to which
Seller is a party or which affect the Royalties, (c) violate any judgment,
order, ruling, or decree applicable to Seller as a party in interest,
(d) violate any Laws applicable to Seller or any of the Royalties, except for
(i) rights to consent by, required notices to, filings with, approval or
authorizations of, or other actions by any Governmental Body where the same are
not required prior to the assignment of the related Royalties or are customarily
obtained subsequent to the sale or conveyance thereof and (ii) any matters
described in clauses (b), (c) or (d) above which would not have 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 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.
     No proceeding, action, suit or other legal proceeding of any kind or nature
before any Governmental Body or arbitrator for which Seller has received service
of process (including any take-or-pay claims) is pending or, to Seller’s
knowledge, threatened, which affects the Royalties; and to Seller’s knowledge,
no investigations are currently pending and no suits have been filed that affect
the Royalties. No notice in writing from any Governmental Body or other Person
has been received by Seller claiming any violation of or noncompliance with any
Law which could have a Material Adverse Effect with respect to the Royalties
(including any such Law concerning the conservation of natural resources).
     Section 5.8 Taxes and Assessments.
     With respect to all Taxes related to the Royalties, (a) all reports,
returns, statements (including estimated reports, returns or statements) and
other similar filings (the “Tax Returns”) relating to the Royalties required to
be filed by Seller with respect to such Taxes have been timely filed with the
appropriate Governmental Body in all jurisdictions in which such Tax Returns are
required to be filed; (b) such Tax Returns are true and correct in all material
respects; and (c) all Taxes reported on such Tax Returns have been paid, except
those being contested in good faith.
     With respect to all Taxes related to the Royalties, except as set forth on
Schedule 5.8, (x) there is not currently in effect any extension or waiver of
any statute of limitations of any jurisdiction regarding the assessment or
collection of any such Tax; (y) there are no administrative proceedings or
lawsuits pending against the Royalties or Seller by any Tax authority; and
(z) there are no Tax liens on any of the Royalties except for liens for Taxes
not yet due.

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     Section 5.9 Contracts.
     Schedule 5.9 sets forth all of the contracts and agreements excluding the
Leases, the Cartwright Leases and any unit or pooling agreements involving the
Leases or the Cartwright Leases to which any of the Royalties will be subject as
of the Closing. Seller is in compliance with all contracts and agreements,
except as such non-compliance would not have a Material Adverse Effect.
     Section 5.10 Preference Rights and Transfer Requirements.
     To Seller’s knowledge, none of the Royalties, or any portion thereof, is
subject to any Preference Right or Transfer Requirement which may be applicable
to the transactions contemplated by this Agreement.
     Section 5.11 Condemnation.
     There is no actual or, to Seller’s knowledge, threatened taking (whether
permanent, temporary, whole or partial) of any part of the Royalties by reason
of condemnation or the threat of condemnation.
     Section 5.12 Bankruptcy.
     There are no bankruptcy, reorganization or similar arrangement proceedings
pending, being contemplated by or, to Seller’s knowledge, threatened against
Seller or any Affiliate of Seller.
     Section 5.13 PUHCA/NGA.
     Seller is not a “holding company,” a “subsidiary company” of a “holding
company,” an “affiliate” of a “holding company,” an “affiliate” of a
“subsidiary” of a “holding company” or a “public-utility company” within the
meaning of the Public Utility Holding Company Act of 1935, as amended. No
consent is required in connection with the transactions contemplated hereby
under the Natural Gas Policy Act of 1978, as amended. Seller is not an
interstate pipeline company within the meaning of the Natural Gas Act of 1938.
     Section 5.14 Investment Company.
     Seller is not an investment company or a company controlled by an
investment company within the meaning of the Investment Company Act of 1940, as
amended.
     Section 5.15 No Tax Partnership.
     The Royalties are not subject to any tax partnership agreement or
provisions requiring a partnership income tax return to be filed under
Subchapter K of Chapter 1 of Subtitle A of the Code that will be binding upon
the Purchaser or the Royalties after the Closing.
     Section 5.16 No Hedging.
     None of the Royalties is subject to or is bound by any futures, hedge,
swap, collar, put, call, option or other commodities contract or agreement that
will be binding upon the Purchaser or the Royalties after the Closing.

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     Section 5.17 Environmental.
     To the knowledge of Seller, except as would not have a Material Adverse
Effect: (a) neither Seller nor any prior owner of the Royalties has caused or
allowed the generation, use, treatment, storage or disposal of Hazardous
Materials at or on any of the lands covered by the Leases or the Cartwright
Leases except in compliance with all applicable Environmental Laws; (b) there
are no Adverse Environmental Conditions. Seller has provided Purchaser with
copies of reports in Seller’s possession reflecting any Adverse Environmental
Conditions of any lands covered by the Leases or the Cartwright Leases, any
prior Phase I or II Environmental Site Assessments relating to the lands covered
by the Leases or the Cartwright Leases and any violations of Environmental Law
known to Seller that have not been remedied.
     Section 5.18 Purchase Entirely for Own Account.
     Seller represents that the shares of Purchaser Common Stock included in the
Stock Component (the “Shares”) to be acquired by Seller will be acquired for
investment for the Seller’s own account, not as a nominee or agent, and not with
a view to the resale or distribution of any part thereof, except in compliance
with applicable securities Laws.
     Section 5.19 Restricted Securities.
     Seller understands that the Shares have not been, and, subject to
Article 12 hereof, will not be at Closing, registered under the Securities Act
of 1933, as amended and the rules and regulations promulgated thereunder (the
“Securities Act”), by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the Seller’s
representations as expressed herein. The Seller understands that the Shares are
“restricted securities” under applicable U.S. federal and state securities Laws
and, accordingly, may not be offered or sold by the Seller except pursuant to an
effective registration statement under the Securities Act or pursuant to an
exemption from registration under the Securities Act.
     Section 5.20 Legends.
     Seller understands that until the shares are registered for resale pursuant
to Article 12, the Shares may bear one or all of the following legends:
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF EXCEPT IN
COMPLIANCE WITH APPLICABLE SECURITIES LAWS. NO SUCH TRANSFER MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933.”
     Any legend required by the securities Laws of any state to the extent such
Laws are applicable to the shares of Purchaser Common Stock represented by the
certificate so legended.

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     Section 5.21 Accredited Investor.
     Seller is an accredited investor as defined in Rule 501(a) of Regulation D
promulgated under the Securities Act.
     Section 5.22 Disclosure of Information.
     Seller has had an opportunity to discuss the Purchaser’s business,
management, financial affairs and the terms and conditions of the offering of
the Shares with the Purchaser’s management and has had an opportunity to review
the Purchaser’s publicly available information on file with the SEC and
otherwise satisfy itself that it has all of the information necessary to make an
informed investment decision regarding an investment in the Purchaser and the
Shares.
     Section 5.23 Residence.
     The office or offices of the Seller’s principal place of business is
identified in the address or addresses of the Seller set forth in Section 13.2
hereof.
     Section 5.24 Imbalances.
     There are no Imbalances as of April 1, 2008 arising with respect to the
Royalties, and as of April 1, 2008, (a) no Person is entitled to receive any
portion of the Royalties or to receive cash or other payments to “balance” any
disproportionate allocation of the Royalties under any gas transportation
agreement or other agreement, whether similar or dissimilar, and (b) Seller is
not obligated to pay any penalties or other payments under any gas
transportation or other agreement as a result of the delivery of quantities of
gas in excess of the contract requirements.
     Section 5.25 Payments for Hydrocarbon Production.
     No Seller is obligated under any contract or agreement for the sale of
Royalties containing a take-or-pay, advance payment, prepayment or similar
provision, or under any gathering, transmission or any other contract or
agreement with respect to the Royalties to gather, deliver, process or transport
any gas attributable thereto without then or thereafter receiving full payment
therefor.

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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
     Purchaser represents and warrants to Seller the following:
     Section 6.1 Existence and Qualification.
     Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation. 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. Purchaser is duly qualified to do business in Texas.
     Section 6.2 Power.
     Purchaser has the corporate power to enter into and perform this Agreement
and consummate the transactions contemplated by this Agreement.
     Section 6.3 Authorization and Enforceability.
     The execution, delivery and performance of this Agreement, and the
performance of the transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate action on the part of Purchaser. This
Agreement has been, 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 herein will not (a) violate any provision of the
certificate of incorporation, bylaws or other constituent documents of
Purchaser, (b) except as set forth on Schedule 6.4(b), result in a default (with
due notice or lapse of time or both) or the creation of any lien or encumbrance
or give rise to any right of termination, cancellation or acceleration under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license or agreement to which Purchaser is a party, (c) violate any judgment,
order, ruling or regulation applicable to Purchaser as a party in interest,
(d) violate any Law applicable to Purchaser or any of its properties, or
(e) require any filing with, notification of or consent, approval or
authorization of any Governmental Body or authority, except any matters
described in clauses (b) through (e) above which would not have a material
adverse effect on Purchaser or the transactions contemplated hereby.

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     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 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.
     There are no actions, suits or proceedings pending or, to the actual
knowledge of Purchaser’s officers, threatened in writing before any Governmental
Body against Purchaser or any Affiliate of Purchaser which are reasonably likely
to impair materially Purchaser’s ability to perform its obligations under this
Agreement.
     Section 6.7 Financing.
     At Closing, 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 Cash Component of the Closing Payment to Seller at the
Closing.
     Section 6.8 [RESERVED]
     Section 6.9 Limitation.
     Except for the representations and warranties expressly made by Seller in
Article 5 of this Agreement, the Conveyance or in any certificate furnished or
to be furnished to Purchaser pursuant to this Agreement, Purchaser represents
and acknowledges that (a) there are no representations or warranties, express,
statutory or implied, as to the Royalties or prospects thereof, and (b)
Purchaser has not relied upon any oral or written information provided by
Seller. Purchaser further represents and acknowledges (x) that it is
knowledgeable of the oil and gas business and of the usual and customary
practices of oil and gas producers and (y) in making the decision to enter into
this Agreement and consummate the transactions contemplated hereby, Purchaser
has relied solely on the basis of its own independent due diligence
investigation of the Royalties and the terms and provisions of this Agreement.
     Section 6.10 SEC Disclosure.
     Purchaser is acquiring the Royalties for its own account for use in its
trade or business and not with a view toward or for sale associated with any
distribution thereof, nor with any present intention of making a distribution
thereof within the meaning of the Securities Act and applicable state securities
Laws.
     Section 6.11 Bankruptcy.
     There are no bankruptcy, reorganization or receivership proceedings pending
against, being contemplated by or, to the actual knowledge of Purchaser,
threatened against Purchaser.

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     Section 6.12 SEC Reports; Financial Statements.
     Purchaser has filed and made available to Seller all forms, reports and
other documents required to be filed by Purchaser with the Securities and
Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), since January 1, 2007. All such required forms,
reports and other documents (including those that Purchaser may file after the
date hereof and prior to the Closing Date) are referred to herein as the
“Purchaser SEC Reports.” The Purchaser SEC Reports (i) were or will be filed on
a timely basis, (ii) were or will be prepared in compliance with the applicable
requirements of the Exchange Act and the rules and regulations of the SEC
thereunder, and (iii) did not, or will not at the time they were or are filed,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Since the last date on which a Purchaser SEC Report was filed, there
has been no material adverse change in the assets, liabilities, condition
(financial or otherwise), operating results, business or prospects of Purchaser
or in the ability of Purchaser to perform its obligations under this Agreement
or that could materially impair or prohibit the consummation of the transactions
contemplated by this Agreement.
     Each of the consolidated financial statements (including, in each case, any
related notes and schedules) contained or to be contained in the Purchaser SEC
Reports (i) complied or will comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, (ii) were or will be prepared in accordance with
GAAP (except as may be indicated in the notes to such financial statements or,
in the case of unaudited statements, as permitted by the SEC on Form 10-Q under
the Exchange Act) and (iii) fairly presented or will fairly present the
consolidated financial position of Purchaser and its subsidiaries as of the
dates indicated and the consolidated results of its operations and cash flows
for the periods indicated, consistent with the books and records of Purchaser
and its subsidiaries, except that the unaudited interim financial statements
were or will be subject to normal and recurring year-end adjustments that were
not or are not expected to be material.
     Section 6.13 Purchaser Common Stock.
     As of June 27, 2008, Purchaser had (i) 400,000,000 authorized shares of
Purchaser Common Stock, of which 160,946,924 (together with an equivalent number
of associated share purchase rights) were issued or outstanding, (ii) issued and
outstanding stock options and restricted stock units to acquire 1,439,313 shares
of Purchaser Common Stock under all stock option plans and agreements,
(iii) issued and outstanding debentures convertible into 9,816,256 shares of
Purchaser Common Stock, and (iv) no warrants to purchase any Purchaser Common
Stock are outstanding under any agreement. The issuance of the Purchaser Common
Stock pursuant to this Agreement has been duly authorized and upon consummation
of the transactions contemplated by this Agreement, the Purchaser Common Stock
will have been validly issued, fully paid, non-assessable, and issued without
application of preemptive rights, have the rights, preferences, and privileges
specified in Purchaser’s Certificate of Incorporation, and will be free and
clear of all liens and restrictions, other than any liens or restrictions
granted or incurred by the Seller and the restrictions imposed by this Agreement
and the Securities Act and state securities and blue sky laws. Except as stated
in the first sentence of this Section 6.13, as of June 27, 2008, there were
outstanding: (i) no securities of Purchaser convertible into or exchangeable for
shares of Purchaser Common Stock, and (ii) no options, warrants, calls, rights
(including preemptive rights), commitments, or agreements to which Purchaser is
a party

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or by which it is bound, in any case obligating Purchaser to issue, deliver,
sell, purchase, redeem, or acquire, or cause to be issued, delivered, sold,
purchased, redeemed, or acquired, any shares of Purchaser Common Stock or
obligating Purchaser to grant, extend or enter into any such option, warrant,
call, right, commitment, or agreement.
ARTICLE 7
COVENANTS OF THE PARTIES
     Section 7.1 Access.
     Between the date of execution of this Agreement and to the Closing Date,
Seller will give Purchaser and its representatives access to the Records in
Seller’s possession for the purpose of conducting an investigation of the
Royalties, but only to the extent that Seller may do so without violating any
obligations to any third party and to the extent that Seller has authority to
grant such access without breaching any restriction binding on Seller. Such
access by Purchaser shall be limited to Seller’s normal business hours and any
weekends and after hours requested by Purchaser that can be reasonably
accommodated by Seller, and Purchaser’s investigation shall be conducted in a
manner that minimizes interference with Seller’s business. All information
obtained by Purchaser and its representatives under this Section shall be
subject to the terms of Section 11.4(b)(v) and the terms of that certain
confidentiality agreement between Chief Oil & Gas LLC and Purchaser dated
May 15, 2008 (the “Confidentiality Agreement”).
     Section 7.2 Government Reviews.
     Seller and Purchaser shall in a timely manner (a) make all required
filings, if any, with and prepare applications to and conduct negotiations with,
each governmental agency as to which such filings, applications or negotiations
are necessary or appropriate in the consummation of the transactions
contemplated hereby, including, without limitation, any such filings,
applications or negotiations under the HSR Act, (b) provide such information as
each may reasonably request to make such filings, prepare such applications and
conduct such negotiations, and (c) request early termination or waiver of any
applicable waiting period under the HSR Act. Each party shall cooperate with and
use all commercially reasonable efforts to assist the other with respect to such
filings, applications and negotiations.
     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.
     (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.

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     (c) If any of Purchaser’s or Seller’s representations or warranties are
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 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(b)), then such breach shall be considered
not to have occurred for all purposes of this Agreement.
     Section 7.4 Letters-in-Lieu; Assignments; Operatorship.
     (a) Seller will execute on the Closing Date letters-in-lieu of division and
transfer orders relating to the Royalties on forms prepared by Seller and
reasonably satisfactory to Purchaser to reflect the transactions contemplated
hereby.
     (b) Seller will prepare, and Seller and Purchaser will execute on the
Closing Date, all assignments necessary to convey to Purchaser all Royalties in
form acceptable to Purchaser and Seller.
     Section 7.5 Public Announcements.
     Neither party shall make any press release or other public announcement
regarding the existence of this Agreement, the contents hereof or the
transactions contemplated hereby without the prior written consent of the other
(which consent shall not be unreasonably withheld or delayed); provided,
however, the foregoing shall not restrict disclosures by Purchaser or Seller
that are required by applicable securities or other laws or regulations or the
applicable rules of any stock exchange having jurisdiction over the disclosing
party or its Affiliates; and provided, further, that Purchaser may disclose the
existence and contents of this Agreement and the transactions contemplated
hereby to the Standard & Poor’s and Moody’s rating agencies (provided that such
agencies are obligated to keep such information confidential).
     Section 7.6 Operation of Business.
     Except as consented to in writing by Purchaser, until the Closing, Seller
(a) will not transfer, sell, hypothecate, encumber or otherwise dispose of any
of the Royalties except for sales and dispositions of Hydrocarbon production
made in the ordinary course of business consistent with past practices, (b) will
not terminate, materially amend, execute or extend any material agreements
affecting the Royalties and (c) will not commit to do any of the foregoing.
     Section 7.7 Tax Matters.
     (a) Subject to the provisions of Section 13.3, Seller shall be responsible
for all Taxes related to the Royalties (other than ad valorem, property,
severance, Hydrocarbon production and similar Taxes based upon or measured by
the ownership or operation of the Royalties or the production of Hydrocarbons
therefrom, which are addressed in Section 1.4) attributable to any period of
time at or prior to the Effective Time, and Purchaser shall be responsible for
all such Taxes related to the Royalties attributable to any period of time after
the Effective Time. Regardless of which party is responsible, Seller shall
handle payment to the appropriate Governmental Body of all Taxes with respect to
the Royalties which are required to be paid prior to Closing (and shall file all
Tax Returns with respect to such Taxes). If requested by Purchaser, Seller will
assist Purchaser with preparation of all ad valorem and property Tax

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Returns due on or before December 31, 2008 (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 Effective Time relating to the
Royalties and any supporting documentation provided by Seller to taxing
authorities, excluding Tax Returns related to income tax, franchise tax or other
similar Taxes.
     (b) Purchaser agrees to cooperate (at no cost or liability to Purchaser)
with Seller so that Seller’s transfer of the Royalties to Purchaser shall, at
Seller’s election, be accomplished in a manner enabling the transfer to qualify
as a part of a like-kind exchange of property by Seller within the meaning of
Section 1031 of the Internal Revenue Code of 1986 (the “Code”). If Seller so
elects, Purchaser shall reasonably cooperate with Seller to effect such
like-kind exchange, which cooperation shall include, without limitation, taking
such actions as Seller reasonably requests in order to pay the Purchase Price in
a manner which enables such transfer to qualify as part of a like-kind exchange
of property within the meaning of Section 1031 of the Code, and Purchaser agrees
that Seller may assign its rights (but not its obligations) under this Agreement
to a qualified intermediary as defined in Treasury Regulations Section 1.1031(k)
– 1(g)(4)(iii) under United States Treasury Regulations, to qualify the transfer
of the Purchase Price as a part of a like-kind exchange of property within the
meaning of Section 1031 of the Code.
     Section 7.8 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 7.9 Historical Financial Statements.
     (a) Seller shall prepare the financial statements required by the SEC to be
filed by Purchaser or any of its Affiliates with the SEC pursuant to the
Securities Act or Exchange Act in connection with reports, registration
statements and other filings to be made by Purchaser or any of its Affiliates
related to the transactions contemplated by this Agreement (the “Special
Financial Statements”). Seller (x) shall cooperate with and permit Purchaser to
reasonably participate in the preparation of the Special Financial Statements
and (y) shall provide Purchaser and its representatives with reasonable access
to the personnel of Seller and its Affiliates who engage in the preparation of
the Special Financial Statements and shall give Purchaser and its
representatives reasonable access to the Properties, Records, and other
financial data relating to the Special Financial Statements..
     (b) Seller shall execute and deliver or cause to be executed and delivered
to Seller’s outside auditing firm (“Seller’s Auditor”) such representation
letters, in form and substance customary for representation letters provided to
external audit firms in such circumstances, as may be reasonably requested by
Seller’s Auditor, with respect to the Special Financial Statements.
     (c) Seller shall use best efforts to cause an independent registered public
accounting firm reasonably acceptable to Purchaser to issue an unqualified
opinion with respect to the Special Financial Statements (the Special Financial
Statements and related audit opinion being hereinafter referred to as the
“Audited Special Financial Statements”) and to provide its written consent for
the use of its audit report with respect to the Special Financial Statements in
reports,

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registration statements or other documents filed by Purchaser or any of its
Affiliates under the Exchange Act or the Securities Act, as needed. Seller shall
take all reasonable action as may be necessary to facilitate the completion of
such audit and delivery of the Audited Special Financial Statements to Purchaser
or any of its Affiliates as soon as reasonably practicable, but no later than
sixty (60 days following the Closing Date.
     (d) Purchaser shall reimburse Seller for all third party out-of-pocket
costs incurred by Seller with respect to Seller’s obligations under this
Section 7.9.
ARTICLE 8
CONDITIONS TO CLOSING
     Section 8.1 Conditions of Seller to Closing.
     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 material respects other than
representations and warranties that are already qualified as to materiality,
which shall be true and correct in all respects, as of the Closing Date as
though made on and as of the Closing Date;
     (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 suit, action or other proceeding by a third
party (including any Governmental Body) seeking to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by this Agreement or
to recover damages from Seller on account thereof shall be pending or threatened
before any Governmental Body or arbitral tribunal;
     (d) Deliveries. Purchaser shall have delivered (or be ready, willing and
able to immediately deliver) to Seller duly executed counterparts of the
Conveyance and the other documents and certificates to be delivered by Purchaser
under Section 9.3;
     (e) Title Defects. The sum of all asserted but uncured Title Defect Amounts
for Title Defects determined under Section 3.4(g) prior to Closing, less the sum
of all Title Benefit Amounts for Title Benefits determined under Section 3.4(h)
prior to the Closing, shall be less than ten percent (10%) of the unadjusted
Purchase Price;
     (f) Payment. Purchaser shall have paid (or be ready, willing and able to
immediately pay) the Cash Component of the Closing Payment and shall have
delivered (or be ready, willing and able to immediately deliver) stock
certificates representing the Stock Component of the Closing Payment to Seller
or its designees as directed by Seller in writing at least five (5) Business
Days prior to Closing; and
     (g) HSR Act. Any waiting period applicable to the consummation of the
transaction contemplated by this Agreement under the HSR Act shall have lapsed
or terminated (by early termination or otherwise).

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     Section 8.2 Conditions of Purchaser to Closing.
     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 in all material respects, other than
representations and warranties that are already qualified as to materiality,
which shall be true and correct in all respects, 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);
     (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 suit, action or other proceeding by a third
party (including any Governmental Body) seeking to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by this Agreement or
to recover damages from Purchaser on account thereof shall be pending before any
Governmental Body or arbitral tribunal;
     (d) Deliveries. Seller shall have delivered (or be ready, willing and able
to immediately deliver) to Purchaser duly executed counterparts of the
Conveyance and the other documents and certificates to be delivered by Seller
under Section 9.2;
     (e) Title Defects. The sum of all asserted but uncured Title Defect Amounts
for Title Defects determined under Section 3.4(g) prior to the Closing, less the
sum of all Title Benefit Amounts for Title Benefits determined under
Section 3.4(h) prior to Closing, shall be less than ten percent (10%) of the
unadjusted Purchase Price;
     (f) HSR Act. Any waiting period applicable to the consummation of the
transaction contemplated by this Agreement under the HSR Act shall have lapsed
or terminated (by early termination or otherwise); and
     (g) Historical Financial Statements. Purchaser reasonably believes that the
Special Financial Statements that have been provided by Seller can be audited
and that the Audited Special Financial Statements will be delivered within the
time period contemplated by Section 7.11.
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 Kelly Hart & Hallman LLP
located at 201 Main Street, Suite 2500, Fort Worth, Texas 76102, at 10:00 a.m.,
local time, on August 8, 2008 or, if all conditions in Article 8 to be satisfied
prior to Closing have not yet been satisfied or waived, as soon

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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 the
following:
     (a) the Conveyance, in sufficient duplicate originals to allow recording in
all appropriate jurisdictions and offices, duly executed by Seller;
     (b) letters-in-lieu of transfer orders covering the Royalties, duly
executed by Seller;
     (c) certificates duly executed by an authorized officer of Seller or
Seller’s general partner, dated as of Closing, certifying on behalf of Seller
that the conditions set forth in Sections 8.2(a) and 8.2(b) have been fulfilled;
and
     (d) one (1) original 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.
     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 the
following:
     (a) a wire transfer of the Cash Component of the Closing Payment in
same-day funds to the accounts of Seller, and in the respective amounts set
forth on Schedule 9.3(a);
     (b) the Conveyance, duly executed by Purchaser;
     (c) letters-in-lieu of transfer orders covering the Royalties, duly
executed by Purchaser;
     (d) a certificate by an authorized officer of Purchaser, dated as of
Closing, certifying on behalf of Purchaser that the conditions set forth in
Sections 8.1(a) and 8.1(b) have been fulfilled; and
     (e) stock certificates representing shares of Purchaser Common Stock in a
value equal to the Stock Component of the Closing Payment allocated in the
manner shown on Schedule 9.3(e).
     Section 9.4 Closing Payment & 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 provided
for in this Agreement and crediting the Deposit and

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setting forth the calculation of the Volume Weighted Average Price, the Stock
Component and the Cash Component. The estimate delivered in accordance with this
Section 9.4(a) shall constitute the dollar amount to be paid by Purchaser to
Seller at the Closing in the form of the Cash Component and the Stock Component
(the “Closing Payment”).
     (b) As soon as reasonably practicable after the Closing but not later than
one hundred and twenty (120) days following the Closing Date, Seller shall
prepare and deliver to Purchaser a 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 statement hereunder, Purchaser shall deliver
to Seller a written report containing any changes that Purchaser proposes be
made to such statement. The parties shall undertake to agree on the final
statement of the Adjusted Purchase Price no later than one hundred eighty
(180) days after the Closing Date. In the event that the parties cannot reach
agreement within such period of time, either party may refer the remaining
matters in dispute to PricewaterhouseCoopers, or such other
nationally-recognized independent accounting firm as may be accepted by
Purchaser and Seller, for review and final determination. The accounting firm
shall conduct the arbitration proceedings in Fort Worth, Texas in accordance
with the Commercial Arbitration Rules of the American Arbitration Association,
to the extent such rules do not conflict with the terms of this Section 9.4. The
accounting firm’s determination shall be made within thirty (30) days after
submission of the matters in dispute and shall be final and binding on both
parties, without right of appeal. In determining the proper amount of any
adjustment to the Purchase Price, the accounting firm 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
accounting firm shall act as an expert for the limited purpose of determining
the specific disputed matters submitted by either party and may not award
damages or penalties to either party with respect to any matter. Seller and
Purchaser shall each bear their own legal fees and other costs of presenting
their cases. Each party shall bear one-half of the costs and expenses of the
accounting firm. Within ten (10) Business Days after the date on which the
parties or the accounting firm, as applicable, finally determines the disputed
matters, (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(b) shall bear
interest at the Agreed Interest Rate from the Closing Date to the date both
Purchaser and Seller have executed the final settlement statement and shall,
consistent with Section 9.4(c), be made in cash, not Purchaser Common Stock.
     (c) All payments made or to be made hereunder to Seller shall be by
electronic transfer of immediately available funds to the accounts of Seller set
forth on Schedule 9.3(a) or to such other account as may be specified by Seller
in writing. All payments made or to be made hereunder to Purchaser shall be by
electronic transfer of immediately available funds to a bank and account
specified by Purchaser in writing to Seller.

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ARTICLE 10
TERMINATION
     Section 10.1 Termination.
     Unless terminated earlier pursuant to other provisions provided herein,
this Agreement may be terminated at any time prior to Closing:
     (a) by the mutual prior written consent of Seller and Purchaser;
     (b) by either Purchaser or Seller, if Closing has not occurred on or before
October 1, 2008 (the “Termination Date”); provided, however, that the right to
terminate this Agreement under this Section 10.1(b) shall not be available
(i) to Seller, if any breach of this Agreement by Seller has been the principal
cause of, or resulted in, the failure of the Closing to occur on or before the
Termination Date or (ii) to Purchaser, if any breach of this Agreement by
Purchaser has been the principal cause of, or resulted in, the failure of the
Closing to occur on or before the Termination Date;
     (c) by Seller, if (i) any of the representations and warranties of
Purchaser contained in this Agreement shall not be true and correct in all
material respects (provided that any such representation or warranty that is
already qualified by a materiality standard or a material adverse effect
qualification shall not be further qualified); or (ii) Purchaser shall have
failed to fulfill in any material respect any of its obligations under this
Agreement required to be fulfilled prior to Closing; and, in the case of each of
clauses (i) and (ii), such misrepresentation or breach of warranty, covenant or
agreement, if curable, has not been cured within ten (10) days after written
notice thereof from Seller to Purchaser; provided that any cure period shall not
extend beyond the Termination Date and shall not extend the Termination Date; or
     (d) by Purchaser, if (i) any of the representations and warranties of
Seller contained in this Agreement shall not be true and correct in all material
respects (provided that any such representation or warranty that is already
qualified by a materiality or Material Adverse Effect qualification shall not be
further qualified); or (ii) Seller shall have failed to fulfill in any material
respect any of its obligations under this Agreement required to be fulfilled
prior to Closing; and, in the case of each of clauses (i) and (ii), such
misrepresentation or breach of warranty, covenant or agreement, if curable, has
not been cured within ten (10) days after written notice thereof from Purchaser
to Seller; provided that any cure period shall not extend beyond the Termination
Date and shall not extend the Termination Date.
     Section 10.2 Effect of Termination.
     If this Agreement is terminated pursuant to Section 10.1, this Agreement
shall become void and of no further force or effect (except for the provisions
of Sections 4.3, 5.6, 6.5, 7.5, 11.8, 11.9, 13.5, 13.11 and 13.14 of this
Agreement and this Article 10, all of which shall continue in full force and
effect), and Seller shall be free immediately to enjoy all rights of ownership
of the Royalties and to sell, transfer, encumber or otherwise dispose of the
Royalties to any party without any restriction under this Agreement. In the
event this Agreement terminates under Section 10.1 because (i) any of the
conditions to Closing set forth in Section 8.2(a) or Section 8.2(b) have not
been satisfied or (ii) Seller’s refusal or inability to close notwithstanding
the satisfaction of the conditions precedent set forth in Section 8.1, then
Purchaser shall be entitled to all remedies available at law or in equity and
shall be entitled to

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recover court costs and attorneys’ fees in addition to any other relief to which
Purchaser may be entitled.
     Section 10.3 Distribution of Deposit Upon Termination.
     (a) If Seller terminates this Agreement solely (i) because any of the
conditions to Closing set forth in Section 8.1(a) or Section 8.1(b) have not
been satisfied or (ii) because of Purchaser’s refusal or inability to close
notwithstanding the satisfaction of the conditions precedent set forth in
Section 8.2, then Seller may retain, as its sole and exclusive remedy, the
Deposit as liquidated damages, free of any claims by Purchaser or any other
Person with respect thereto. It is expressly stipulated by the parties that the
actual amount of damages resulting from such a termination would be difficult if
not impossible to determine accurately because of the unique nature of this
Agreement, the unique nature of the Royalties, the uncertainties of applicable
commodity markets and differences of opinion with respect to such matters, and
that the liquidated damages provided for herein are a reasonable estimate by the
parties of such damages.
     (b) If this Agreement is terminated for any reason other than the reasons
set forth in Section 10.3(a), then Seller shall promptly deliver the Deposit to
Purchaser, free of any claims by Seller or any other Person with respect
thereto.
     (c) 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.
     Except as otherwise provided in this Agreement, any Hydrocarbons produced
from or attributable to the Royalties (and all products and proceeds
attributable thereto) and any other income, proceeds, receipts and credits
attributable to the Royalties which are not reflected in the adjustments to the
Purchase Price following the final adjustment pursuant to Section 9.4(b) shall
be treated as follows: (a) all Hydrocarbons produced from or attributable to the
Royalties (and all products and proceeds attributable thereto) and all other
income, proceeds, receipts and credits earned with respect to the Royalties 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 promptly to Purchaser, and
(b) all Hydrocarbons produced from or attributable to the Royalties (and all
products and proceeds attributable thereto) and all other income, proceeds,
receipts and credits earned with respect to the Royalties 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 promptly to Seller.
     Section 11.2 Expenses.
     Any Property Costs which are not reflected in the adjustments to the
Purchase Price following the final adjustment pursuant to Section 9.4(b) shall
be treated as follows: (a) all

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Property Costs for which Seller is responsible under Section 1.4 shall be the
sole obligation of Seller, and Seller shall promptly pay, or if paid by
Purchaser, promptly reimburse Purchaser for and hold Purchaser harmless from and
against, such Property Costs; and (b) all Property Costs for which Purchaser is
responsible under Section 1.4 shall be the sole obligation of Purchaser, and
Purchaser shall promptly pay, or if paid by Seller, promptly reimburse Seller
for and hold Seller harmless from and against such Property Costs. Seller is
entitled to resolve all audits covering periods for which Seller is in whole or
in part responsible, provided that Seller shall not agree to any adjustments to
previously assessed costs for which Purchaser is liable without the prior
written consent of Purchaser, such consent not to be unreasonably withheld.
Seller shall provide Purchaser with a copy of all applicable audit reports and
written audit agreements received by Seller and relating to periods for which
Purchaser is partially responsible.
     Section 11.3 Assumed Seller Obligations.
     Without limiting Purchaser’s rights to indemnity under this Article 11, on
the Closing Date, Purchaser shall assume 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 Royalties, regardless of whether such obligations or liabilities arose prior
to, on or after the Effective Time (all of such obligations and liabilities,
subject to the exclusions below, herein being referred to as the “Assumed Seller
Obligations”); provided, however, that Purchaser does not accrue any rights or
assume any obligations or liabilities of Seller to the extent that they are
(such excluded obligations and liabilities, the “Excluded Seller Obligations”):
     (a) attributable to or arise out of the Excluded Assets;
     (b) the continuing responsibility of the Seller under Sections 11.1 and
11.2 or matters for which Seller is required to indemnify Purchaser under
Section 11.4(c);
     (c) related to personal injury or death arising or occurring prior to the
Closing Date that are attributable to Seller’s ownership or operation of the
Royalties; or
     (d) Retained Employee Liabilities.
     Section 11.4 Indemnities.
     (a) Definitions.
     “Claim” or “Claims” means, unless specifically provided otherwise, all
claims (including, but not limited to, those for damage to property, bodily
injury and death, personal injury, illness, disease, maintenance, cure, loss of
parental and spousal consortium, wrongful death, loss of support and wrongful
termination of employment), damages, liabilities, losses, demands, liens,
encumbrances, fines, penalties, causes of action of any kind (including actions
for indirect, consequential, punitive and exemplary damages), obligations, costs
(including payment of all reasonable attorneys’ fees and costs of litigation),
judgments, interest, and awards or amounts, of any kind or character, whether
under judicial proceedings, administrative proceedings, investigation by a
Governmental Body or otherwise, or conditions in the premises of or attributable
to any Person or Persons or any party or parties, breach of representation or
warranty (expressed or implied), under any theory of tort, contract, breach of
contract (including any Claims which arise by reason of indemnification or
assumption of liability contained in other contracts entered into by an
Indemnified Party hereunder), at law or in equity, under statute, or

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otherwise, arising out of, or incident to or in connection with this Agreement
or the ownership of the Royalties.
     The phrase “REGARDLESS OF FAULT” means WITHOUT REGARD TO THE CAUSE OR
CAUSES OF ANY CLAIM, INCLUDING, WITHOUT LIMITATION, EVEN THOUGH A CLAIM IS
CAUSED IN WHOLE OR IN PART BY:
     THE NEGLIGENCE (WHETHER SOLE, JOINT, CONCURRENT, COMPARATIVE, CONTRIBUTORY,
ACTIVE OR PASSIVE), STRICT LIABILITY, OR OTHER FAULT (BUT EXCLUDING GROSS
NEGLIGENCE AND WILLFUL MISCONDUCT) OF PURCHASER INDEMNITEES, SELLER INDEMNITEES,
INVITEES AND/OR THIRD PARTIES; AND/OR
     A PRE-EXISTING DEFECT, WHETHER PATENT OR LATENT, OF THE PREMISES OF
PURCHASER’S PROPERTY OR SELLER’S PROPERTY (INCLUDING, WITHOUT LIMITATION, THE
PROPERTY ASSOCIATED WITH THE ROYALTIES).
     (b) Purchaser Indemnity Obligation. From and after the Closing, subject
only to Section 11.4(c) and the limitations contained in Section 11.7, Purchaser
shall be responsible for and indemnify, defend, release and hold harmless Seller
Indemnitees from and against all Claims caused by, arising out of or resulting
from:
     (i) the Assumed Seller Obligations, REGARDLESS OF FAULT;
     (ii) the ownership of the Royalties after the Effective Time, REGARDLESS OF
FAULT;
     (iii) Purchaser’s breach of any of Purchaser’s covenants or agreements
contained in Article 7, REGARDLESS OF FAULT;
     (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(d), REGARDLESS OF FAULT; and
     (v) Purchaser Indemnitees’ access under Section 4.1, Section 7.1 or
otherwise, to the Records and other related activities or information prior to
the Closing, REGARDLESS OF FAULT.
     (c) Seller Indemnity Obligation. From and after the Closing, subject only
to the limitations contained in Section 11.7, Seller shall be responsible for
and indemnify, defend and hold harmless Purchaser Indemnitees against and from
all Claims to the extent caused by, arising out of or resulting from:
     (i) any breach of any representation or warranty of Seller contained in
Article 5 of this Agreement or in any certificate furnished by or on behalf of
Seller at Closing pursuant to Section 9.2(c);
     (ii) any breach or nonfulfillment of or failure to perform any covenant or
agreement of Seller contained in this Agreement; and
     (iii) any Excluded Seller Obligations.

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     (d) Additional Provisions.
     It is the intention of the parties that this Article 11 shall govern the
allocation of risks and liabilities between Purchaser and Seller except to the
extent that it is expressly stated (whether elsewhere in this Article 11 or in
some other Article hereof) that the provisions of such other Article (or part
thereof) shall control over the terms of all or part of this Article 11.
     Notwithstanding anything to the contrary contained in this Agreement, this
Section 11.4 contains the parties’ exclusive remedy against each other with
respect to breaches of the representations, warranties, covenants and agreements
of the parties contained in Articles 5 and 6 and Sections 7.1, 7.2, 7.3, 7.4,
7.5 and 7.6 and the affirmations of such representations, warranties, covenants
and agreements contained in the certificate or certificates delivered by each
party at Closing pursuant to Sections 9.2(c) or 9.3(d), as applicable.
     Section 11.5 Indemnification Actions.
     All claims for indemnification under Section 11.4 shall be asserted and
resolved as follows:
     (a) For purposes of this Article 11, the term “Indemnifying Party” shall
mean the party or parties having an obligation to indemnify another party or
parties pursuant to the terms of this Agreement. The term “Indemnified Party”
shall mean the party or parties having the right to be indemnified by another
party or parties pursuant to the terms of this Agreement.
     (b) To make a claim for indemnification (“Indemnity Claim”) under
Section 11.4, and/or any other Article (or part thereof) expressly stating that
it controls over the terms of this Article 11, an Indemnified Party shall notify
the Indemnifying Party in writing of its Indemnity Claim, including the specific
details of and specific basis under this Agreement for its Indemnity Claim (the
“Claim Notice”). The Indemnified Party shall provide its Claim Notice promptly
after the Indemnified Party has actual knowledge of the Claim for which it seeks
indemnification and shall enclose a copy of all papers (if any) served with
respect to the Claim; provided that the failure of any Indemnified Party to give
notice of a Claim as provided in this Section 11.5 shall not relieve the
Indemnifying Party of its obligations under Section 11.4 except to the extent
such failure results in insufficient time being available to permit the
Indemnifying Party to effectively defend against the Claim or otherwise
prejudices the Indemnifying Party’s ability to defend against the Claim. In the
event that the Indemnity Claim 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) The Indemnifying Party shall have thirty (30) 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 the relevant Claim at the sole
cost and expense of the Indemnifying Party. The Indemnified Party is authorized,
prior to and during such 30-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.
     (d) If the Indemnifying Party admits its liability to indemnify the
Indemnified Party, it shall have the right and obligation to diligently defend,
at its sole cost and expense, the Claim. The Indemnifying Party shall have full
control of such defense and proceedings, including any compromise or settlement
thereof. If requested by the Indemnifying Party, the Indemnified Party agrees to
cooperate in contesting any Claim which the Indemnifying Party elects to
contest. The

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Indemnified Party may participate in, but not control, any defense or settlement
of any Claim controlled by the Indemnifying Party pursuant to this
Section 11.5(d). An Indemnifying Party shall not, without the written consent of
the Indemnified Party, (i) settle any Claim or consent to the entry of any
judgment with respect thereto which does not include an unconditional written
release of the Indemnified Party from all liability in respect of such Claim, or
(ii) settle any Claim or consent to the entry of any judgment with respect
thereto in any manner that may materially and adversely affect the Indemnified
Party (other than as a result of money damages covered by the indemnity).
     (e) If the Indemnifying Party does not admit its liability to indemnify the
Indemnified Party or admits its liability but fails to diligently prosecute or
settle the Claim, then the Indemnified Party shall have the right to defend
against the 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 Claim at
any time prior to settlement or final determination thereof. If the Indemnifying
Party has not yet admitted its liability for a Claim, the Indemnified Party
shall send written notice to the Indemnifying Party of any proposed settlement
and the Indemnifying Party shall have the option for ten (10) Business Days
following receipt of such notice to (i) admit in writing its liability to
indemnify the Indemnified Party from and against the Claim and, (ii) if
liability is so admitted, reject, in its reasonable judgment, the proposed
settlement.
     Section 11.6 Release.
     (a) EXCEPT TO THE EXTENT EXPRESSLY SET FORTH IN THIS AGREEMENT, PURCHASER
RELEASES, REMISES AND FOREVER DISCHARGES SELLER INDEMNITEES FROM ANY AND ALL
CLAIMS, KNOWN OR UNKNOWN, WHETHER NOW EXISTING OR ARISING IN THE FUTURE,
CONTINGENT OR OTHERWISE, WHICH PURCHASER MIGHT NOW OR SUBSEQUENTLY MAY HAVE
AGAINST SELLER INDEMNITEES, RELATING DIRECTLY OR INDIRECTLY TO THE ROYALTIES.
     (b) Purchaser covenants and agrees that it will not attempt to avoid the
effect of the release made by it hereinabove by later arguing that at the time
of the release it did not fully appreciate the extent of any such Claims,
including, without limitation, environmental Claims.
     Section 11.7 Limitation on Actions.
     (a) The representations and warranties of the parties in Articles 5 and 6
terminate six months after Closing, except that Section 5.12 and Section 6.11
shall survive indefinitely. The remainder of the representations, warranties,
covenants and agreements provided for in this Agreement shall survive Closing
for one year except that covenants and agreements contemplated to be complied
with or performed following the Closing shall survive indefinitely.
Representations, warranties, covenants and agreements shall be of no further
force and effect after the date of their expiration, provided that there shall
be no termination of any bona fide Claim asserted pursuant to this Agreement
with respect to the breach of such a representation, warranty, covenant or
agreement on or before its expiration date.
     (b) The indemnities in Sections 11.4(b)(iii), 11.4(b)(iv), 11.4(c)(i) and
11.4(c)(ii) 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 Claims asserted pursuant to this
Agreement with respect to the breach of such representation, warranty, covenant
or agreement on or before such termination date. Purchaser’s indemnities in

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Sections 11.4(b)(i), 11.4(b)(ii) and 11.4(b)(v) and Seller’s indemnity in
Section 11.4(c)(iii) shall continue without time limit.
     Section 11.8 Disclaimers.
     (a) EXCEPT AS AND TO THE EXTENT EXPRESSLY SET FORTH IN ARTICLE 5 OF THIS
AGREEMENT, THE CERTIFICATES OF SELLER TO BE DELIVERED PURSUANT TO SECTION 9.2(c)
OR IN THE CONVEYANCE, (I) SELLER MAKES NO REPRESENTATIONS OR WARRANTIES,
EXPRESS, STATUTORY OR IMPLIED, AND (II) SELLER EXPRESSLY DISCLAIMS ALL LIABILITY
AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION
MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO PURCHASER OR ANY OF ITS
AFFILIATES, EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES (INCLUDING,
WITHOUT LIMITATION, ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE
BEEN PROVIDED TO PURCHASER BY ANY OFFICER, DIRECTOR, EMPLOYEE, AGENT,
CONSULTANT, REPRESENTATIVE OR ADVISOR OF SELLER OR ANY OF THEIR AFFILIATES).
     (b) EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN ARTICLE 5 OF THIS
AGREEMENT, THE CERTIFICATES OF SELLER TO BE DELIVERED PURSUANT TO SECTION 9.2(c)
OR IN THE CONVEYANCE, AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR
IMPLIED, AS TO (I) TITLE TO ANY OF THE ROYALTIES, (II) THE CONTENTS, CHARACTER
OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, ANY REPORT OF ANY PETROLEUM ENGINEERING
CONSULTANT, OR ANY GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE
ROYALTIES, (III) THE QUANTITY, QUALITY OR RECOVERABILITY OF PETROLEUM SUBSTANCES
IN OR FROM THE ROYALTIES, (IV) ANY ESTIMATES OF THE VALUE OF THE ROYALTIES OR
FUTURE REVENUES GENERATED BY THE ROYALTIES, (V) THE PRODUCTION OF HYDROCARBONS
FROM THE ROYALTIES, (VI) THE MAINTENANCE, REPAIR, CONDITION, QUALITY,
SUITABILITY, DESIGN OR MARKETABILITY OF THE EQUIPMENT ASSOCIATED WITH THE
ROYALTIES, (VII) THE CONTENT, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM,
REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY SELLER OR THIRD PARTIES,
AND (VIII) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE
OR COMMUNICATED TO PURCHASER OR ITS AFFILIATES, OR TO ITS OR THEIR EMPLOYEES,
AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION
RELATING THERETO.
     (c) EXCEPT TO THE EXTENT EXPRESSLY PROVIDED IN THIS AGREEMENT OR IN THE
CERTIFICATES OF SELLER TO BE DELIVERED PURSUANT TO SECTION 9.2(c), SELLER HAS
NOT AND WILL NOT MAKE ANY REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR
CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, ENVIRONMENTAL LIABILITIES, THE
RELEASE OF MATERIALS INTO THE ENVIRONMENT OR THE PROTECTION OF HUMAN HEALTH,
SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT.

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     Section 11.9 Waiver of Trade Practices Acts.
     (a) It is the intention of the parties that Purchaser’s rights and remedies
with respect to this transaction and with respect to all acts or practices of
Seller, past, present or future, in connection with this transaction shall be
governed by legal principles other than the Texas Deceptive Trade
Practices—Consumer Protection Act, Tex. Bus. & Com. Code Ann. § 17.41 et seq.
(the “DTPA”). As such, Purchaser hereby waives the applicability of the DTPA to
this transaction and any and all duties, rights or remedies that might be
imposed by the DTPA, whether such duties, rights and remedies are applied
directly by the DTPA itself or indirectly in connection with other statutes;
provided, however, Purchaser does not waive § 17.555 of the DTPA. Purchaser
acknowledges, represents and warrants that it is purchasing the goods and/or
services covered by this Agreement for commercial or business use; that it has
assets of $5 million or more according to its most recent financial statements
prepared in accordance with GAAP; that it has knowledge and experience in
financial and business matters that enable it to evaluate the merits and risks
of a transaction such as this; and that it is not in a significantly disparate
bargaining position with Seller.
     (b) Purchaser expressly recognizes that the price for which Seller has
agreed to perform its obligations under this Agreement has been predicated upon
the inapplicability of the DTPA and this waiver of the DTPA. Purchaser further
recognizes that Seller, in determining to proceed with the entering into of this
Agreement, has expressly relied on this waiver and the inapplicability of the
DTPA.
     Section 11.10 Recording.
     As soon as practicable after Closing, Purchaser shall record the Conveyance
in the appropriate counties and provide Seller with copies of all recorded or
approved instruments.
ARTICLE 12
REGISTRATION REQUIREMENTS
     Section 12.1 Definitions.
     For purposes of this Article 12:
     (a) “Damages” means any loss, damage, or liability (joint or several) to
which a party hereto may become subject under the Securities Act, the Exchange
Act, or other federal or state Law, insofar as such loss, damage, or liability
(or any action in respect thereof) arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement of the Purchaser registering the Shares, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto; (ii) an omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading; or (iii) any violation or alleged violation by the
Purchaser (or any of its agents or Affiliates) of the Securities Act, the
Exchange Act, any state securities Law, or any rule or regulation promulgated
under the Securities Act, the Exchange Act, or any state securities Law in
connection with the registration of the Shares.
     (b) “Form S-3” means such form under the Securities Act as in effect on the
date hereof or any registration form under the Securities Act subsequently
adopted by the SEC that permits incorporation of substantial information by
reference to other documents filed by the Purchaser with the SEC.

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     (c) “SEC Rule 144” means Rule 144 promulgated by the SEC under the
Securities Act.
     Section 12.2 Purchaser Covenants.
     The Purchaser covenants and agrees as follows:
     (a) As promptly as practicable (and in any event within one (1) Business
Day) after the Closing, the Purchaser shall register the resales of the Shares
by the Seller on an automatically effective Form S-3 shelf registration
statement under the Securities Act, the form of which will be provided to the
Seller prior to the filing thereof with the SEC for its reasonable comments
which will be included in the prospectus contained therein (the “Registration
Statement”).
     (b) If after twenty (20) Business Days after the Registration Statement has
become effective, the Purchaser furnishes to the Seller a certificate signed by
the Purchaser’s chief executive officer stating that in the good faith judgment
of the Purchaser’s Board of Directors it would be materially detrimental to the
Purchaser and its stockholders for the Registration Statement to be used for
resales of the Shares, because such action would (i) materially interfere with a
significant acquisition, corporate reorganization, or other similar transaction
involving the Purchaser or (ii) require premature disclosure of material
information that the Purchaser has a bona fide business purpose for preserving
as confidential, or if at any time the Purchaser shall determine in good faith
that the making of offers or sales of the Shares pursuant to the Registration
Statement would otherwise be unlawful as a result of an event or circumstance
outside of Purchaser’s control, then by notice to the Seller, the Purchaser may
suspend the rights of the Seller to make offers or sales of the Shares pursuant
to the Registration Statement for a period of not more than ninety (90) days;
provided, however, that the Purchaser may not invoke this right more than once.
Upon receipt of any suspension notice referred to in the preceding sentence, the
Seller shall immediately discontinue making offers or sales of the Shares under
the shelf registration statement until the Purchaser shall advise Seller in
writing that it is again permissible to do so.
     Section 12.3 Obligations of the Purchaser.
     The Purchaser shall, as expeditiously as reasonably possible:
     (a) use its commercially reasonable efforts to keep the Registration
Statement effective for a period of one year after the Closing;
     (b) prepare and file with the SEC such amendments and supplements to the
Registration Statement, and the prospectus used in connection with the
Registration Statement, as may be necessary to comply with the Securities Act in
order to enable the disposition of all securities covered by the Registration
Statement;
     (c) furnish to the Seller such numbers of copies of a prospectus, including
a preliminary prospectus, as required by the Securities Act, and such other
documents as the Seller may reasonably request in order to facilitate their
disposition of their Shares;
     (d) use its commercially reasonable efforts to register and qualify the
securities covered by the Registration Statement under such other securities or
blue-sky laws of such states as shall be reasonably requested by the Seller;
provided that the Purchaser shall not be

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required to qualify to do business or to file a general consent to service of
process in any such states;
     (e) use its commercially reasonable efforts to cause the Shares to be
listed on the New York Stock Exchange;
     (f) notify Seller, promptly after the Purchaser receives notice thereof, of
the time when the Registration Statement has been declared effective or a
supplement to any prospectus forming a part of the Registration Statement has
been filed; and
     (g) after the Registration Statement becomes effective, notify Seller of
any request by the SEC that the Purchaser amend or supplement the Registration
Statement or prospectus.
     Section 12.4 Furnish Information.
     It shall be a condition precedent to the obligations of the Purchaser to
register the Shares hereunder that the Seller shall have furnished to the
Purchaser such information regarding the Seller and the Royalties, financial
statements or other information within the reasonable control of the Seller as
is reasonably required to effect the registration of the Shares, and the
Purchaser shall have the right to defer taking action with respect to any
filings required to complete such registration, and any time periods with
respect to filing or effectiveness thereof shall be tolled correspondingly.
     Section 12.5 Expense of Registration.
     All expenses incurred by the Purchaser in connection with registrations,
filings, or qualifications pursuant to this Article 12, including all
registration, filing, and qualification fees; printers’ and accounting fees;
fees and disbursements of counsel for the Purchaser, shall be borne and paid by
the Purchaser.
     Section 12.6 Indemnification.
     If any Shares are included in a registration statement under this
Article 12:
     (a) To the extent permitted by law, the Purchaser will indemnify and hold
harmless Seller, and the partners, members, officers, directors, and
stockholders of Seller, against any Damages, and the Purchaser will pay to
Seller, or other aforementioned Person any legal or other expenses reasonably
incurred thereby in connection with defending any claim or proceeding from which
Damages may result, as such expenses are incurred; provided, however, that the
indemnity agreement contained in this Section 12.6(a) shall not apply to amounts
paid in settlement of any such claim or proceeding if such settlement is
effected without the consent of the Purchaser, which consent shall not be
unreasonably withheld or delayed, nor shall the Purchaser be liable for any
Damages to the extent that they arise out of or are based upon actions or
omissions made in reliance upon and in conformity with written information
furnished by or on behalf of Seller or other aforementioned Person expressly for
use in the Registration Statement.
     (b) To the extent permitted by Law, Seller will indemnify and hold harmless
the Purchaser, and each of its directors, officers, and stockholders, against
any Damages, in each case only to the extent that such Damages arise out of or
are based upon actions or omissions

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made in reliance upon and in conformity with written information furnished by or
on behalf of Seller expressly for use in the Registration Statement; and Seller
will pay to the Purchaser and each other aforementioned Person any legal or
other expenses reasonably incurred thereby in connection with defending any
claim or proceeding from which Damages may result, as such expenses are
incurred; provided, however, that the indemnity agreement contained in this
Section 12.6(b) shall not apply to amounts paid in settlement of any such claim
or proceeding if such settlement is effected without the consent of the Seller,
which consent shall not be unreasonably withheld or delayed; and provided
further that in no event shall the aggregate amounts payable by Seller by way of
indemnity or contribution under Sections 12.6(b) and 12.6(d) exceed the proceeds
from the offering received by Seller, except in the case of intentional fraud or
willful misconduct by Seller.
     (c) Promptly after receipt by an indemnified party under this Section 12.6
of notice of the commencement of any action (including any governmental action)
for which a party may be entitled to indemnification under this Article 12, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 12.6, give the indemnifying party notice
of the commencement thereof. The indemnifying party shall have the right to
participate in such action and, to the extent the indemnifying party so desires,
participate jointly with any other indemnifying party to which notice has been
given, and to assume the defense thereof with counsel mutually satisfactory to
the parties.
     Section 12.7 Rule 144.
     (a) With a view to making available to the Seller the benefits of SEC
Rule 144 and any other rule or regulation of the SEC that may at any time permit
Seller to sell securities of the Purchaser to the public without registration or
pursuant to a registration on Form S-3, the Purchaser shall:
     (i) make and keep available adequate current public information, as those
terms are understood and defined in SEC Rule 144, at all times;
     (ii) use commercially reasonable efforts to file with the SEC in a timely
manner all reports and other documents required of the Purchaser under the
Securities Act and the Exchange Act; and
     (iii) furnish to Seller, so long as the Seller owns any Shares, forthwith
upon request (i) to the extent accurate, a written statement by the Purchaser
that it has complied with the reporting requirements of SEC Rule 144, the
Securities Act, and the Exchange Act, or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3; (ii) a copy of the most recent
annual or quarterly report of the Purchaser and such other reports and documents
so filed by the Purchaser; and (iii) such other information as may be reasonably
requested in availing Seller of any rule or regulation of the SEC that permits
the selling of any such securities without registration or pursuant to Form S-3.
     (b) To the extent that the Seller is able to offer and sell the Shares at
the times and in the volumes that it desires to offer and sell the Shares
pursuant to SEC Rule 144 rather than pursuant to the Registration Statement, the
Seller shall make such offers and sales of the Shares pursuant to SEC Rule 144
rather than pursuant to the Registration Statement.
     (c) No later than the seventh Business Day after the one year anniversary
of the Closing Date, Purchaser shall use its best efforts to cause its transfer
agent to provide to the

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holders of the Purchaser Common Stock, in exchange for certificates they
surrender evidencing such shares that bear the legend set forth in Section 5.20,
certificates evidencing like numbers of shares that do not bear such legend.
ARTICLE 13
MISCELLANEOUS
     Section 13.1 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.
     Section 13.2 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 telecopy or by registered or certified mail, postage prepaid, as
follows:

     
If to Seller:
  Nortex Minerals, L.P.
 
  2300 West Plano Parkway
 
  Plano, TX 75075
 
  Attention: J.Y. Robb III
 
  Telephone: (972) 535-1930
 
  Telecopy: (972) 535-1999
 
   
 
  Petrus Investment, L.P.
 
  2300 West Plano Parkway
 
  Plano, TX 75075
 
  Attention: J.Y. Robb III
 
  Telephone: (972) 535-1930
 
  Telecopy: (972) 535-1999
 
   
 
  Petrus Development, L.P.
 
  2300 West Plano Parkway
 
  Plano, TX 75075
 
  Attention: J.Y. Robb III
 
  Telephone: (972) 535-1930
 
  Telecopy: (972) 535-1999
 
   
 
  Perot Investment Partners, Ltd.
 
  2300 West Plano Parkway
 
  Plano, TX 75075
 
  Attention: J.Y. Robb III
 
  Telephone: (972) 535-1930
 
  Telecopy: (972) 535-1999

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With a copy to:
(which shall not
itself constitute
notice)
  Don C. Plattsmier
Kelly Hart & Hallman LLP
201 Main Street, Suite 2500
Fort Worth, TX 76102

 
  Telephone: (817) 878-3505
 
  Telecopy: (817) 878-9280
 
   
If to Purchaser:
  Quicksilver Resources Inc.
 
  777 West Rosedale St.
 
  Fort Worth, Texas 76104
 
  Attention: John C. Cirone, Senior Vice President and General Counsel
 
  Telephone: (817) 665-4939
 
  Telecopy: (817) 665-5021
 
    With a copy to: (which shall not itself constitute notice)
 
  Fulbright & Jaworski L.L.P.
 
  Fulbright Tower
 
  1301 McKinney, Suite 5100
 
  Houston, Texas 77010-3095
 
  Attention: Deborah A. Gitomer
 
  Telephone: (713) 651-5151
 
  Telecopy: (713) 651-5246

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 at
the time of receipt by the party to which such notice is addressed.
     Section 13.3 Sales or Use Tax Recording Fees and Similar Taxes and Fees.
     Purchaser shall bear any sales, use, excise, real property transfer or
gain, gross receipts, goods and services, 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 Royalties and Purchaser agrees to pay 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 will timely furnish to Seller such certificate or evidence.
     Section 13.4 Expenses.
     Except as provided in Section 13.3, all expenses incurred by Seller in
connection with or related to the authorization, preparation or execution of
this Agreement, the Conveyance delivered hereunder and the Exhibits and
Schedules hereto and thereto, and all other matters related to the Closing,
including without limitation, all fees and expenses of counsel, accountants and
financial advisers employed by Seller, shall be borne solely and entirely by

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Seller, and all such expenses incurred by Purchaser shall be borne solely and
entirely by Purchaser.
     Section 13.5 Governing Law and Venue.
     THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN THE PARTIES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS OTHERWISE APPLICABLE TO SUCH
DETERMINATIONS. JURISDICTION AND VENUE WITH RESPECT TO ANY DISPUTES ARISING
HEREUNDER SHALL BE PROPER ONLY IN TARRANT COUNTY, TEXAS.
     Section 13.6 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.
     Section 13.7 Waivers.
     Any failure by any party or parties to comply with any of its obligations,
agreements or conditions herein contained may be waived in writing, but not in
any other manner, by the party or parties to whom such compliance is owed. No
waiver of, or consent to a change in, any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of, or consent to a change in,
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
     Section 13.8 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. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
     Section 13.9 Entire Agreement.
     The Confidentiality Agreement, this Agreement and the Exhibits and
Schedules attached hereto, and the documents to be executed hereunder constitute
the entire agreement between the parties pertaining to the subject matter hereof
and supersede all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties pertaining to the subject
matter hereof.
     Section 13.10 Amendment.
     (a) This Agreement may be amended or modified only by an agreement in
writing executed by all parties.
     (b) No waiver of any right under this Agreement shall be binding unless
executed in writing by the party to be bound thereby.

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     Section 13.11 No Third-Party Beneficiaries.
     Nothing in this Agreement shall entitle any Person other than Purchaser and
Seller to any Claim or Damages, remedy or right of any kind, except as to those
rights expressly provided to Seller Indemnitees, Purchaser Indemnitees or the
indemnitees of Seller or Purchaser referenced in Section 12.6 (provided,
however, any claim for indemnity hereunder on behalf of a Seller Indemnitee,
Purchaser Indemnitee or any indemnitee of Seller or Purchaser referenced in
Section 12.6 must be made and administered by a party to this Agreement).
     Section 13.12 References.
     In this Agreement:
     (a) References to any gender include a reference to all other genders;
     (b) References to the singular include the plural, and vice versa;
     (c) Reference to any Article or Section means an Article or Section of this
Agreement;
     (d) Unless expressly provided otherwise, a reference to any Exhibit or
Schedule means an Exhibit or Schedule to this Agreement, all of which are
incorporated into and made a part of this Agreement;
     (e) Unless expressly provided to the contrary, “hereunder,” “hereof,”
“herein” and words of similar import are references to this Agreement as a whole
and not any particular Section or other provision of this Agreement; and
     (f) “Include” and “including” shall mean include or including without
limiting the generality of the description preceding such term.
     Section 13.13 Construction.
     Purchaser is a party capable of making such investigation, inspection,
review and evaluation of the Royalties as a prudent purchaser would deem
appropriate under the circumstances, including with respect to all matters
relating to the Royalties, their value, operation and suitability. 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 transactions contemplated
hereby. This Agreement is the result of arm’s-length negotiations from equal
bargaining positions. In the event of a dispute over the meaning or application
of this Agreement, it shall be construed fairly and reasonably and neither more
strongly for nor against either party.
     Section 13.14 Limitation on Damages.
     Notwithstanding any other provision contained elsewhere in this Agreement
to the contrary, the parties acknowledge that this Agreement does not authorize
one party to sue for or collect from the other party its own punitive damages or
its own consequential or indirect damages in connection with this Agreement and
the transactions contemplated hereby, and each of Seller and Purchaser expressly
waives for itself and on behalf of its Affiliates any and all

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Claims it may have against the other parties for such damages in connection with
this Agreement and the transactions contemplated hereby.
     Section 13.15 Conspicuousness.
     The parties agree that provisions in this Agreement in “bold” type satisfy
any requirements of the “express negligence rule” and any other requirements at
law or in equity that provisions be conspicuously marked or highlighted.
     Section 13.16 Severability.
     If any term or other provision of this Agreement is held invalid, illegal
or incapable of being enforced under any rule of law, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in a materially adverse manner with respect to either
party.
     Section 13.17 Time of Essence.
     Time is of the essence in this Agreement. If the date specified in this
Agreement for giving any notice or taking any action is not a Business Day (or
if the period during which any notice is required to be given or any action
taken expires on a date which is not a Business Day), then the date for giving
such notice or taking such action (and the expiration date of such period during
which notice is required to be given or action taken) shall be the next day
which is a Business Day.
[SIGNATURES BEGIN ON THE FOLLOWING PAGE]

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

                  PURCHASER:    
 
                QUICKSILVER RESOURCES INC.,         a Delaware corporation    
 
           
 
  By:   /s/ Glenn Darden    
 
     
 
Glenn Darden    
 
      President and Chief Executive Officer    
 
                SELLER:    
 
                NORTEX MINERALS, L.P.,         a Texas limited partnership    
 
                By: Nortex GP, LLC, a Texas limited liability         company,
its general partner    
 
           
 
  By:   /s/ J.Y. Robb III    
 
           
 
      J.Y. Robb III, Manager    
 
                PETRUS INVESTMENT, L.P.,         a Texas limited partnership    
 
                By: PMC Management, L.P.,
a Texas limited partnership,
its general partner    
 
                By: Hillwood Development Company, LLC,
a Texas limited liability company,
its general partner    
 
           
 
  By:   /s/ M. Thomas Mason    
 
           
 
  Name:   M. Thomas Mason    
 
           
 
  Title:   Executive Vice President    
 
           

 

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                  PETRUS DEVELOPMENT, L.P.,
a Texas limited partnership    
 
                By: PMC Management, L.P.,
a Texas limited partnership,
its general partner    
 
                By: Hillwood Development Company, LLC,
a Texas limited liability company,
its general partner    
 
           
 
  By:   /s/ M. Thomas Mason    
 
           
 
  Name:   M. Thomas Mason    
 
           
 
  Title:   Executive Vice President    
 
           
 
                PEROT INVESTMENT PARTNERS, LTD.
a Texas limited partnership    
 
                By: Hillwood Holding Corporation,
a Texas corporation,
its general partner    
 
           
 
  By:   /s/ M. Thomas Mason    
 
           
 
  Name:   M. Thomas Mason    
 
           
 
  Title:   Executive Vice President