Exhibit 10.1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
PURCHASE AND SALE AGREEMENT

BETWEEN

COMSTOCK OIL & GAS, LP

(AS SELLER)

AND

ROSETTA RESOURCES OPERATING LP
 
 
(AS BUYER)

March 14, 2013

 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 
1.
 Sale and Purchase of Assets 
  1

 
 
1.1  Assets to be Sold
1

 
1.2  Exclusions and Reservations
4

 
1.3  Conveyance Instruments
6

 
1.4  Suspended Proceeds
6

 
2.
 Purchase Price and Effective Time
6

 
 
2.1 Purchase Price
6

 
2.2 Delivery of Deposit and Adjusted Purchase Price
7

 
2.3 Allocation of Purchase Price
7

 
2.4 Adjustments to Purchase Price
7

 
2.5 Effective Time of Sale
10

 
3.
 Allocation of Revenues and Costs; Indemnification; Retained Obligations; and
Assumed Obligations
10

 
 
3.1 Allocation of Revenues
10

 
3.2 Allocation of Costs; Payment of Invoices
11

 
3.3 Certain Indemnities
11

 
3.4 Retained Obligations
17

 
3.5 Assumed Obligations
17

 
4.
 Taxes and Payables
18

 
 
4.1 Payment of Taxes
18

 
4.2 Production Taxes
18

 
4.3 Occasional Sale of Assets
18

 
4.4 Tax Deferred Exchange
19

 
5.
 Representations, Warranties, Acknowledgments, Disclaimers and Waivers
20

 
 
5.1 Seller’s Representations and Warranties
20

 
5.2 Buyer’s Representations and Warranties
26

 
5.3 Representations and Warranties Exclusive
29

 
5.4 Disclaimers, Waivers and Acknowledgments
29

 
6.
 Title Matters
30

 
 
6.1 Examination Period
30

 
6.2 Title Defects
30

 
6.3 Permitted Encumbrances
32

 
6.4 Notice of Title Defects; Title Defect Valuation
34

 
6.5 Remedies for Title Defects
36

 
6.6 Title Benefits
37

 
6.7 Limitation of Remedies for Title Defects; Title Benefits
38

 
7.
 Environmental Matters
38

 
 
7.1 Environmental Review
38

 
7.2 Environmental Definitions
40

 
7.3 Notice of Environmental Defects
41

 
7.4 Remedies for Environmental Defects
42

 
7.5 Limitation of Remedies for Environmental Defects
43

 
7.6 Post-Closing Environmental Indemnification by Buyer
43

 
7.7 Condition of the Assets
44

 
7.8 Waiver
45

i

--------------------------------------------------------------------------------

 
 
8.
 Independent Experts
45

 
 
8.1 Selection of Independent Experts
45

 
8.2 Location of Proceeding
45

 
9.
 Additional Covenants
45

 
 
9.1 Operations Prior to Closing
45

 
9.2 Preferential Rights to Purchase and Consents
47

 
9.3 Compliance
48

 
9.4 Employees
48

 
9.5 Non-Compete
48

 
9.6 Financial Information and Audit Cooperation
49

 
10.
 Closing, Termination and Final Adjustments
51

 
 
10.1 Conditions Precedent
51

 
10.2 Closing
56

 
10.3 Termination
57

 
10.4 Final Adjustments
58

 
11.
 Miscellaneous 
59

 
 
11.1 Oil, Gas and End Product Imbalances
59

 
11.2 Insurance
59

 
11.3 Casualty Loss of Assets
60

 
11.4 Books and Records
60

 
11.5 Publicity
60

 
11.6 Assignment
61

 
11.7 Entire Agreement; Amendment
61

 
11.8 Notices
61

 
11.9 Governing Law; Submission to Jurisdiction
62

 
11.10 Confidentiality
62

 
11.11 Survival of Certain Obligations
63

 
11.12 Further Cooperation
63

 
11.13 Counterparts
63

 
11.14 Exhibits and Schedules
63

 
11.15 Severability
63

 
11.16 Expenses, Post-Closing Consents and Recording
63

 
11.17 Removal of Signs and Markers
64

 
11.18 CONSPICUOUSNESS/EXPRESS NEGLIGENCE
64

 
11.19 Waiver of Certain Damages
64

 
11.20 Waiver of Jury Trial
65

 
11.21 Third-Party Beneficiaries
65

 
 
 
 
 
 
 
 
 
 
 
 
ii
 

--------------------------------------------------------------------------------

 
 
LIST OF EXHIBITS
 

Exhibit “A”   – Lease and Well Descriptions  Exhibit “B”   – Surface Interests 
Exhibit “C”   – Form of Assignment  Exhibit “C-2”   – Form of Deed  Exhibit
“C-3”   – Form of Assignment of Midland Office Lease  Exhibit “D”   – Form of
Escrow Agreement  Exhibit “E”   – Form of Certificate of Non-Foreign Status 

 
 
LIST OF SCHEDULES
 

Schedule 1.1(a)(vi)  –  Contracts  Schedule 1.4  –  Suspended Proceeds  Schedule
2.3   –  Allocated Values  Schedule 2.4(a)(ii)  –  Reference Prices for Stock
Hydrocarbons  Schedule 5.1(g)  –  Litigation  Schedule 5.1(i)  –  Claims 
Schedule 5.1(j)   –  Compliance with Laws  Schedule 5.1(l)  –  Rights to
Production  Schedule 5.1(n)  –  Preferential Rights and Required Consents 
Schedule 5.1(q)  –  Non-Consent Operations  Schedule 5.1(r)   –  AFEs  Schedule
5.1(s)  –  Production Burdens and Expenses  Schedule 5.1(t)   –  Other
Production Sales Matters  Schedule 5.1(u)   –  Payout Balances  Schedule 5.1(v) 
–  Wells  Schedule 6.2  –  Stratigraphic Marker Horizon  Schedule 6.3(c)  – 
Liens  Schedule 6.3(k)  –  Liens to be Released Prior to Closing  Schedule
6.4(b)(ix)  –  Net Mineral Acre Values  Schedule 9.4  –  Restricted Employee
List  Schedule 10.2(i)  –  Transition Services Agreement and Marketing Letter 
Schedule 11.1  –  Production and Pipeline Imbalances 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
           

  iii
 

--------------------------------------------------------------------------------

 
TABLE OF DEFINED TERMS
 

Adjusted Purchase Price  7   Excluded Assets  4 Aggregate Environmental Defect
Threshold  44   Final Settlement Statement  59 Aggregate Indemnification
Threshold  13   Financial Statements  50 Aggregate Title Threshold  38  
Financing Sources  66 Agreement  1   Governmental Authority  41 Asset  4  
Hydrocarbons  2 Assets  4   Imbalance  60 Assignment  6   Indemnified Party  14
Assumed Obligations  18   Indemnifying Party  14 Business Day  10   Indemnity
Amount  13 Buyer  1   Independent Expert  46 Buyer Parties  12   Individual
Indemnification Threshold  13 Buyer's Auditors  51   Internal Revenue Code  19
Buyer's Environmental Review  39   Knowledge of Seller  21 Casualty Loss  61  
Leases  1 Claim Notice  14   Marketable Title  31 Claims  12   Net Mineral Acre 
32 Closing  56   Net Revenue Interest  2 Closing Date  57   NORM  41 Closing
Period Termination Date  13   NRI  2 Closing Statement  10   NRI APO  2 COMSTOCK
OIL & GAS, LP 1   Permitted Encumbrances  33 Comstock Time Period  50   Personal
Property  2 Consents  25   Preferential Rights  25 Contracts  2   Purchase
Price  7 Debt Commitment Letter  66   Records  3 Debt Financing  66  
Representatives  64 Deposit  7   Restricted Area  49 Eagle  50   Restricted
Period  49 Eagle Time Period  51   Retained Obligations  17 Effective Time  11  
ROSETTA RESOURCES OPERATING LP  1 Environmental Defect  41   Sale Hydrocarbons 
2 Environmental Defect Notice  42   SEC  50 Environmental Defect Value  42   SEC
Waiver  55 Environmental Information  40   Seller  1 Environmental Laws  41  
Seller Parties  14 Equitable Limitations  21   Seller Policies  60 Escrow
Account  7   Stock Hydrocarbons  3 Escrow Agent  7   Surface Interests  2 Escrow
Agreement  7   Suspended Proceeds  6 Examination Period  31   Title Benefit  38
Exchange Property  19   Title Benefit Notice  38

 

 
 

 
 
 
 
 
 
 
 
 
 
 

iv 
 

--------------------------------------------------------------------------------

 
 

Title Benefit Value 38   Transition Services Agreement 58 Title Benefit Values
46   Units 1 Title Benefits 46   Wells 2 Title Defect 31   WI 2 Title Defect
Notice 34   WI APO 2 Title Defect Value  35   Working Interest  2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
v
 

--------------------------------------------------------------------------------

 
 
PURCHASE AND SALE AGREEMENT
 
THIS PURCHASE AND SALE AGREEMENT (this “Agreement”), dated March 14, 2013, is by
and between COMSTOCK OIL & GAS, LP, a Nevada limited partnership (“Seller”),
whose address is 5300 Town and Country Blvd., Suite 500, Frisco, Texas 75034,
and ROSETTA RESOURCES OPERATING LP, a Delaware limited partnership, whose
address is 717 Texas, Suite 2800, Houston Texas 77002 (“Buyer”).
 
W I T N E S S E T H:
 
That Seller desires to sell to Buyer, and Buyer desires to purchase from Seller,
on the terms set forth in this Agreement, those certain oil and gas interests
and associated assets described herein.  Accordingly, in consideration of the
mutual promises contained herein, the mutual benefits to be derived by each
party hereunder and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, Buyer and Seller agree as follows:
 
1.   Sale and Purchase of Assets
 
1.1   Assets to be Sold.
 
(a)   Subject to the terms and conditions herein, Seller shall sell, transfer
and assign, and Buyer shall purchase, pay for and receive, all of Seller’s
right, title and interest in and to the following, save and except the Excluded
Assets:
 
(i)    the oil and gas leases, oil, gas and mineral leases, working interests,
production payments, net profits interests, fee mineral interests, royalty
interests, overriding royalty interests, non-working and carried interests,
reversionary interests, possibilities of reverter, conversion rights and
options, operating rights and other interests in land described or referred to
in Exhibit “A”, together with all of Seller’s other rights, titles and interests
in and to the above-described properties (collectively, the “Leases”), together
with all lands, leases and minerals that may be allocated to, pooled, unitized
or communitized with any of the Leases, together with a corresponding part of
all oil and gas pooling and unitization agreements, declarations, designations
and orders relating to the Leases (such pooled or unitized areas being,
collectively, the “Units”);
 
(ii)   any and all oil and gas wells, salt water disposal wells, injection wells
and other wells and wellbores, whether abandoned, not abandoned, plugged or
unplugged, located on the Leases or within the Units, together with all of
Seller’s other rights, titles and interests in and to the above-described wells
and Units (collectively, the “Wells”), including, without limitation, those
Wells identified on Exhibit “A”);
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

--------------------------------------------------------------------------------

 
 
(iii)    all easements, rights-of-way, servitudes, lands, surface and subsurface
lease agreements, surface use agreements and other rights or agreements related
to the use of the surface and subsurface, in each case to the extent used in
connection with the exploration, development or operation of the Leases, Units
or Wells, including, without limitation those rights and interests described or
referred to in Exhibit “B” (the “Surface Interests”);
 
(iv)    all structures, facilities, wellheads, tanks, pumps, compressors,
separators, equipment, machinery, fixtures, flowlines, gathering lines,
materials, improvements, workover rigs, SCADA hardware and software and any
other personal property located on or used in the exploration, development or
operation of the Leases, Units or Wells (collectively, the “Personal Property”);
 
(v)   all natural gas, casinghead gas, drip gasoline, natural gasoline, natural
gas liquids, condensate, products, crude oil and other hydrocarbons, whether
gaseous or liquid (the “Hydrocarbons”), produced and saved from, or allocable
to, the Leases, Units or Wells from and after the Effective Time (the “Sale
Hydrocarbons”);
 
(vi)     to the extent transferable and not including the Leases, all licenses,
permits, contracts, pooling, unitization and communitization agreements,
operating agreements, processing agreements, division orders, farm-in and
farm-out agreements, rental agreements, equipment lease agreements and all other
agreements of any kind or nature, whether recorded or unrecorded relating to the
Assets, including, without limitation, those agreements identified in Schedule
1.1(a)(vi), (the “Contracts”);
 
(vii)    all original records, books, files, lease files, land files, abstracts,
title opinions, production records, well files, accounting records, seismic
records and surveys, gravity maps, electronic logs, geological or geophysical
data and records, and other records, books, files, documents and data (whether
tangible, electronic, or in any other medium or format) of every kind and
description, directly relating to the Leases, Surface Interests, Wells, Sale
Hydrocarbons, Contracts, Personal Property, Imbalances and the interests
described in subpart (ix) below in the possession, or within the reasonable
control, of Seller, including, without limitation, any engineering, geophysical
and geological reports, Seller’s proprietary log data and Seller’s behind pipe
potential analysis, and other technical data, regulatory filings, magnetic
tapes, interpretations and other analysis, royalty and accounting records, and
other books, records and files that relate to the Assets (the “Records”);
provided, however, that Seller may keep, at Seller’s expense, copies of the
Records, subject to the confidentiality obligations set forth in Section 11.10
below;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2

--------------------------------------------------------------------------------

 
 
(viii)   all Imbalances (as defined in Section 11.1) as of the Effective Time,
and all Hydrocarbons produced prior to the Effective Time from, or allocable to,
the Leases, Units and Wells, but in storage or upstream of the applicable sales
meter at the Effective Time (the “Stock Hydrocarbons”), together with all
accounts receivable with respect thereto; and
 
(ix)    all geological and geophysical data relating to the Assets, excluding
data that is interpretive in nature and data which cannot be transferred without
the payment to any third party; provided, that Seller will cooperate with Buyer
to obtain any such transfer-restricted data at the sole expense of Buyer,
including but not limited to maps, proprietary and non-proprietary logs, behind
pipe analysis, magnetic tapes, raw and processed and reprocessed data, field
data, stack and migrated versions of the data, as well as all support data
thereto, including digital shotpoint, receiver, and bin center locations,
stacking velocities, surveying and shothole drilling information and any other
information relating to seismic data; provided, however, that Buyer’s right with
respect to any licensed or third party geological and geophysical data acquired
as part of the Assets shall be limited, in each case, to the extent such data
may be assigned without the payment of any fee (unless paid by Buyer), and to
the extent the disclosure of such data is not restricted  by the terms of any
confidentiality, license or similar agreement.  Any such data conveyed hereunder
shall be subject to all the terms and conditions of any valid and existing
third-party license or similar agreement relating to such data.  Seller shall
have no obligation to pay any fee or other consideration in order to assign any
data to Buyer.
 
(x)      All rights of Seller in that certain office lease dated September 4,
2012, by and between Garfield Business Center, LLC, as lessor, and Seller, as
lessee, covering certain leased premises located at Suite 200A, 4305 N. Garfield
Street, Midland, Texas 79705 but expressly excluding all office furniture,
personal equipment, fixtures, inventory and improvements owned, leased, rented
or used in connection with such office, provided that consent to assign is
obtained prior to Closing;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3

--------------------------------------------------------------------------------

 
 
(xi)     All of Seller’s right, title and interest derived from that certain
Asset Purchase Agreement dated September 25, 2012, between Petro Canyon Energy,
LLC and Double Eagle Development, LLC, as seller, and Comstock Oil & Gas, LP, as
buyer (the “RCVC Agreement”) pursuant to which Comstock acquired an electronic
database of the public records of Reeves County, Texas provided that consent to
assign is obtained prior to Closing and that Buyer pays Seller an additional Six
Hundred Thousand Dollars ($600,000.00) as an upward adjustment to the Purchase
Price at Closing.
 
All such Leases, Units, Wells, Surface Interests, Personal Property, Sale
Hydrocarbons, Contracts, Records, Stock Hydrocarbons and other assets described
above are hereinafter collectively referred to as the “Assets” or, when used
individually, an “Asset.”
 
(b)   The risk of loss and transfer of possession and control of the Assets
shall occur and be made at Closing, but for certain accounting and price
adjustments, as well as for allocating certain liabilities,  described in this
Agreement, as between Seller and Buyer, transfer of ownership and title to the
Assets shall be made effective as of the Effective Time.
 
1.2   Exclusions and Reservations.  Specifically excepted and reserved from this
transaction are the following, hereinafter referred to as the “Excluded Assets”:
 
(a)   Seller’s corporate records, financial and tax records unrelated to the
Assets, reserve estimates and reports, economic analyses, computer programs and
applications, pricing forecasts, legal files, legal opinions, attorney-client
communications, and attorney work product (except abstracts of title, title
opinions, certificates of title, title curative documents related to the Assets,
environmental or regulatory compliance or curative efforts regarding the Assets,
and any matters or liabilities concerning the Assets which are to be assumed by
Buyer, which shall be furnished to Buyer), and all other records and documents
subject to confidentiality provisions, or other restrictions on access or
transfer; provided, however, that Seller will, and at no cost or expense to
Seller, request waivers of such restrictions;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4

--------------------------------------------------------------------------------

 
 
(b)   Except for geological and geophysical data included in the Assets, all of
Seller’s intellectual property rights, patents, copyrights, names, marks, logos,
proprietary software and derivatives therefrom;
 
(c)   Subject to the provisions of Section 11.2, all rights and claims arising,
occurring, or existing in favor of or against Seller prior to the Effective
Time, including, but not limited to, any and all contract rights, claims,
penalties, receivables, revenues, recoupment rights, recovery rights, accounting
adjustments, mis-payments, erroneous payments, personal or corporate injury,
property damages, royalty and other rights and claims of any nature in favor of
Seller relating to any time period prior to the Effective Time;
 
(d)   All of Seller’s insurance contracts and rights, titles, claims and
interests of Seller related to the Assets for all periods prior to the Effective
Time (i) under any policy or agreement of insurance or indemnity, (ii) under any
bond or letter of credit or other security device, or (iii) relating to any
insurance or condemnation proceeds or awards, together with all amounts due or
payable to Seller as adjustments to insurance premiums related to the Assets for
all periods prior to the Effective Time;
 
(e)   Claims of Seller for any refund of or loss carry forward with respect to
(i) production, severance, ad valorem or any other taxes attributable to the
Assets for any period prior to the Effective Time, and (ii) income, occupational
or franchise taxes;
 
(f)   All monies, proceeds, benefits, receipts, credits, income or revenues (and
any security or other deposits made) attributable to the Assets or the ownership
or operation thereof prior to the Effective Time, including, without limitation,
amounts recoverable from audits under operating agreements and any overpayments
of royalties to the extent attributable to the period prior to the Effective
Time;
 
(g)   All rights, obligations, benefits, awards, judgments, settlements, if any,
applicable to any litigation pending in which Seller is a named claimant or
plaintiff or holds beneficial rights or interests, to the extent related to
periods prior to the Effective Time and to the extent the same would not impose
any liabilities or restrictions on Buyer on or after the Effective Time
regarding the Assets;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5

--------------------------------------------------------------------------------

 
 
(h)   All telecommunication and communications equipment and services, WARS
control stations and computers, but excluding SCADA hardware and software;
 
(i)   Any credit agreement, loan agreement, promissory notes, as well as any
mortgages, security agreements, pledge agreements or similar agreements or
instruments securing obligations for borrowed money;
 
(j)    Intentionally Deleted;
 
(k)   Any future derivative, swap, collar, put, call, cap, option or other
contract that is intended to benefit from, relate to, or reduce or eliminate the
risk of fluctuations in interest rates, basis risk or the price of commodities,
including Hydrocarbons;
 
1.3   Conveyance Instruments.  The Assets to be conveyed by Seller to Buyer at
Closing pursuant to Section 1.1(a) shall be conveyed without warranty of title
except against claims of title arising by, through or under Seller, but not
otherwise, and subject to the express conditions, representations, warranties,
covenants, indemnities and limitations contained in this Agreement, otherwise
the Assets will be conveyed “AS IS, WHERE IS”.  The Assets to be transferred to
Buyer pursuant to Section 1.1(a) shall be transferred pursuant to an Assignment
and Bill of Sale in the form of Exhibit “C” (the “Assignment”) and such other
necessary instruments as specified in Section 10.2.
 
1.4   Suspended Proceeds.  Seller shall transfer to Buyer at Closing, and Buyer
agrees to accept from Seller, all monies representing the value or proceeds of
production removed or sold from the Assets and held by Seller at the time of the
Closing for accounts from which payment has been suspended, such monies being
hereinafter called “Suspended Proceeds”.  Seller shall provide to Buyer all
documentation or justification pertaining to the Suspended Proceeds.  A list of
Suspended Proceeds existing as of the date of the execution of this Agreement
are shown on Schedule 1.4.  Buyer shall be solely responsible for the proper
distribution of such Suspended Proceeds to the party or parties which or who are
entitled to receive payment of the same, and hereby agrees to indemnify, defend
and hold Seller harmless from any Claims therefor, up to the amount of the
Suspended Proceeds, provided, however, that Buyer’s maximum liability for the
same shall be limited to the amounts delivered or credited to Buyer, it being
understood that the actual amount of Suspended Proceeds may increase or decrease
prior to Closing; and further provided that Buyer shall not be responsible and
liable for and Seller shall remain responsible for and liable for, and shall
indemnify and hold Buyer harmless from and against Suspended Proceeds that
should have been escheated prior to Closing under applicable law together with
any penalties and interest thereon.
 
2.   Purchase Price and Effective Time
 
2.1   Purchase Price.  As consideration for the sale of the Assets, Buyer shall
pay to Seller Seven Hundred Sixty Eight Million Dollars ($768,000,000.00) (the
“Purchase Price”), adjusted as set forth below.  The Purchase Price as adjusted
in accordance with Section 2.4 shall be referred to as the “Adjusted Purchase
Price.”
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6

--------------------------------------------------------------------------------

 
 
(a)   A performance deposit in the amount equal to five percent (5%) of the
Purchase Price (the “Deposit”) shall be paid by Buyer upon execution of this
Agreement to Bank of Texas (the “Escrow Agent”) for deposit into an interest
bearing escrow account (the “Escrow Account”) to be governed by an agreement
substantially in the form of the agreement attached hereto as Exhibit “D” (the
“Escrow Agreement”), such Escrow Agreement to be executed by Buyer, Seller and
the Escrow Agent on the date hereof.  Provided Closing occurs, the Deposit,
together with earnings on the Deposit while held in the Escrow Account, will be
credited to the Buyer at Closing as a reduction to the Purchase Price. The
Deposit is not refundable except as provided in this Agreement and is not,
except as otherwise as expressly provided herein, in lieu of the rights or
remedies Seller or Buyer may have under law or equity.  The earnings on the
Deposit while held in the Escrow Account shall become part of the Deposit and
shall be paid to the party entitled to the Deposit in accordance with the terms
hereof.
 
(b)   The Adjusted Purchase Price, less the Deposit and any interest or earnings
thereon, shall be paid at Closing as provided herein.
 
2.2   Delivery of Deposit and Adjusted Purchase Price.  At Closing, the Deposit
(and any interest and earnings thereon) shall be released to Seller from the
Escrow Account, and the balance of the Adjusted Purchase Price shall be paid by
Buyer by wire transfer, in immediately available funds, to the accounts directed
in writing by Seller.
 
2.3   Allocation of Purchase Price.  Buyer and Seller have agreed upon an
allocation of the Purchase Price to individual Assets (each an “Allocated
Value”) as set forth in Schedule 2.3.  Buyer represents and warrants to Seller
that it has made reasonable allocations, in good faith, and that Seller may rely
on the allocations for all purposes, including, without limitation, (a) to
notify holders of preferential rights of Buyer’s offer, (b) as a basis for
adjustments to the Purchase Price for defect and casualty loss adjustments and
(c) as otherwise provided in this Agreement.
 
2.4   Adjustments to Purchase Price.  At Closing, the Purchase Price shall be
adjusted (without duplication) in accordance with this Section 2.4.
 
(a)   The Purchase Price shall be increased by the following amounts:
 
(i)   the amount of all production expenses, operating expenses, third-party
overhead expenses under applicable operating agreements, ad valorem and
severance taxes, well bonds and capital expenditures actually paid by Seller in
connection with the Assets, insofar and only insofar as the same are
attributable to the period of time from and after the Effective Time, including,
without limitation, (a) all operating costs and expenses paid by Seller, (b) all
capital expenditures, including, without limitation, all drilling, completion,
reworking, deepening, side-tracking, plugging and abandoning costs and expenses
and paid by Seller, (c) all prepaid expenses and land related costs and expenses
attributable to the Assets, including, without limitation, all bonus payments,
royalty disbursements, delay rental payments, shut-in payments and other similar
costs paid by Seller (provided, however, that the Purchase Price shall not be
increased by land related expenses incurred by Seller in connection with Title
Defect or Environmental Defect curative work), (d) excise, severance and
production tax payments, and any other tax payments based upon or measured by
the production of Sale Hydrocarbons or the proceeds of sale or other disposition
therefrom paid by Seller and (e) expenses paid by Seller to any third party
under applicable joint operating agreements or other contracts or agreements
included in the Assets (with respect to which Seller shall provide Buyer with
copies of the related invoices);
 
 
 
 
 
 
 
 
 
7

--------------------------------------------------------------------------------

 
 
(ii)     an amount equal to the value of all Stock Hydrocarbons (it being
understood that such value shall be calculated based on the reference prices set
forth in Schedule 2.4(a)(ii) determined as of the Effective Time, less
transportation costs, quality adjustment, if any, applicable taxes and royalty
payments);
 
(iii)    the adjustment amount, if any, due Seller as determined pursuant to
Section 11.1 with respect to Imbalances;
 
(iv)     by Six Hundred Thousand Dollars ($600,000.00) if all of Seller’s right,
title and interest in the RCVC Agreement are assigned to Buyer pursuant to the
terms of this Agreement; and
 
(v)     any other amount specified herein or otherwise agreed upon by Seller and
Buyer in writing.
 
(b)   The Purchase Price shall be decreased by the following amounts:
 
(i)   an amount equal to the net proceeds (the price at which the Hydrocarbons
are sold after the Effective Time, less transportation costs, quality
adjustment, if any, applicable taxes and royalty payments) received by Seller
from the sale or other disposition of Sale Hydrocarbons and Stock Hydrocarbons;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8

--------------------------------------------------------------------------------

 
 
(ii)     all actual production expenses, operating expenses, overhead under
applicable operating agreements, taxes, and capital expenditures paid or
incurred by Buyer in connection with the Assets (including, without limitation,
royalties, minimum royalties, rentals, and prepaid charges, including, without
limitation, prepaid taxes and prepaid insurance), to the extent they are
attributable to the ownership or operation of the Assets (or to  the
Hydrocarbons produced and saved from, or allocable to, the Assets) before the
Effective Time;
 
(iii)     an amount equal to all proceeds received by Seller from whatever
source that relate to the sale of Assets and are attributable to periods after
the Effective Time;
 
(iv)     the adjustment amount, if any, due Buyer as determined pursuant to
Section 11.1 with respect to Imbalances;
 
(v)      if reductions due to the aggregate Title Defect Value is greater than
the aggregate Title Benefit Value, as provided in Section 6, an amount equal to
such difference;
 
(vi)     reductions due to Environmental Defects as provided in Section 7;
 
(vii)        reductions due to the exercise of Preferential Rights as provided
for in Section 9.2 or the time for the exercise of such right has not expired by
Closing,  or for the Allocated Value of Assets for which consents to assignment
have not been obtained by Closing;
 
(viii)   reductions due to Casualty Loss as provided in Section 11.3;
 
(ix)     Seller’s pro rata share of taxes as determined pursuant to Section 4.1;
 
(x)      reductions of the aggregate Allocated Values (without application of
thresholds and deductibles) of Leases: (a) for which a consent for assignment
has not been obtained by Closing and (b) which have an expiration date between
execution of this Agreement and three (3) months after the Closing Date which
have not been cured by an extension of such Lease for a period of time of not
less than one (1) year; and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9

--------------------------------------------------------------------------------

 
 
(xi)    any other amount specified herein or otherwise agreed upon by Seller and
Buyer in writing.
 
(c)   Primexx and Browning Adjustments to Purchase Price.   Seller sold
properties situated in Reeves County, Texas to Primexx Energy Partners,
Ltd.  (“Primexx”) and Riverford Exploration, LLC (“Riverford”) as purchasers,
(the “Block 13 Transaction”). Seller also acquired certain properties situated
within Reeves County, Texas from Primexx and Riverford, as sellers. (the “Block
5 Transaction”).   In addition, Seller is currently negotiating a possible
acquisition of properties situated in Reeves County, Texas from Browning Oil
Company, Inc. and Ozark Exploration, Inc.  (collectively “Browning”), (the
“Browning Transaction”). The Purchase Price shall be decreased by $5,796,968
which is the purchase price received by Seller in the Block 13 Transaction less
the purchase price paid by Seller in the Block 5 Transaction and is subject to
adjustments in the Block 13 Transaction and the Block 5 Transaction.   If Seller
closes on the Browning Transaction prior to the Closing of the transaction
contemplated herein, then the Purchase Price shall be increased by the purchase
price paid by Seller to Browning in the Browning Transaction, and the properties
purchased by Seller from Browning shall be deemed Assets and included within the
assignment of Assets from Seller to Buyer at Closing.
 
(d)   Seller shall prepare and deliver to Buyer an accounting statement (the
“Closing Statement”) no later than three (3) Business Days prior to Closing that
shall set forth the adjustments to the Purchase Price made in accordance with
this Agreement, it being understood and agreed that the Closing Statement shall
contain reasonable estimates, if actual amounts are not known at the time, and
actual costs and revenues, if known. As used herein, the term “Business Day”
means any day other than Saturday, Sunday, or any day on which the principal
commercial banks located in the State of Texas are authorized or obligated to
close under the laws of such states.
 
2.5   Effective Time of Sale.  The effective time of the sale of the Assets
shall be as of 7:00 a.m., local time where the Assets are located, as
of  January 1, 2013 (the “Effective Time”).
 
3.   Allocation of Revenues and Costs; Indemnification; Retained Obligations;
and Assumed Obligations
 
3.1   Allocation of Revenues.  Seller shall own and receive (or receive credit
in the Closing Statement or the Final Settlement Statement, as applicable, for)
all proceeds from the sale of Hydrocarbons physically produced from or allocable
to the Assets prior to the Effective Time (excluding Stock Hydrocarbons), and
shall also receive (or receive credit in the Closing Statement or the Final
Settlement Statement, as applicable, for) and hold the right to receive all
other revenues, proceeds and benefits attributable to the Assets relating to all
periods before the Effective Time.  Buyer shall receive (or receive credit in
the Closing Statement or the Final Settlement Statement, as applicable, for) all
proceeds from the sale of Sale Hydrocarbons and Stock Hydrocarbons and shall
also receive (or receive credit in the Closing Statement or the Final Settlement
Statement, as applicable, for) and hold the right to receive all other revenues,
proceeds and benefits attributable to the Assets which relate to all periods
from and after the Effective Time.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10

--------------------------------------------------------------------------------

 
 
3.2   Allocation of Costs; Payment of Invoices.  After the Closing, Seller shall
be responsible for and required to pay only that portion of any charge or
invoice received that is applicable to work performed or material received
during the period prior to the Effective Time.  Similarly, after the Closing,
Buyer shall be responsible for and required to pay only that portion of any
charge or invoice received that is applicable to work performed or material
received in the period on or subsequent to the Effective Time.  Charges and
invoices for work performed or material received prior to the Effective Time
paid by Buyer and not reimbursed by Seller prior to the Final Settlement
Statement and charges and invoices for work performed or material received after
the Effective Time paid by Seller and not reimbursed by Buyer prior to the Final
Settlement Statement shall be adjusted in the Final Settlement Statement.
 
3.3   Certain Indemnities.
 
(a)   Definition of Claims.  The term “Claims” means any and all direct or
indirect demands, claims, notices of violation, notices of probable violation,
filings, investigations, administrative proceedings, actions, causes of action,
suits, other legal proceedings, judgments, assessments, damages, deficiencies,
taxes, penalties, fines, obligations, responsibilities, liabilities, losses,
payments, charges, costs and expenses (including, without limitation, costs and
expenses of owning and operating the Assets) of any kind or character (whether
or not asserted prior to Closing, and whether known or unknown, fixed or
unfixed, conditional or unconditional, based on theories of contract, tort,
strict liability or otherwise, choate or inchoate, liquidated or unliquidated,
secured or unsecured, accrued, absolute, contingent or other legal theory),
including, without limitation, penalties and interest on any amount payable as a
result of any of the foregoing, any legal or other costs and expenses incurred
in connection with investigating or defending any Claim, and all amounts paid in
settlement of Claims.  Without limiting the generality of the foregoing, the
term “Claims” specifically includes any and all Claims arising from,
attributable to or incurred in connection with any (i) breach of contract,
representation, warranty, covenant or obligation, (ii) loss of or damage to
property, injury to or death of persons, and other tortuous injury and (iii)
violations of applicable laws, rules, regulations, orders or any other legal
right or duty actionable at law or in equity.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11

--------------------------------------------------------------------------------

 
 
(b)   Seller’s Indemnity.  Subject to the further provisions below, Seller shall
DEFEND, INDEMNIFY AND HOLD Buyer, its affiliates, and its/their directors,
officers, employees, contractors, and representatives (which additional parties,
together with Buyer, are hereinafter collectively referred to as the “Buyer
Parties”) HARMLESS from and against any and all Claims arising from, out of or
in connection with, or otherwise relating to:
 
(i)   any inaccuracy of any representation or warranty of Seller set forth in
this Agreement;
 
(ii)     the Excluded Assets;
 
(iii)    the Retained Obligations (as defined below and only to the extent of
the applicable retention period) expressly excluding, however, matters assumed,
indemnified against and waived by Buyer pursuant to Sections 7.6, 7.7 and 7.8
below; and
 
(iv)    Seller’s breach of, or failure to perform or satisfy, any of its
covenants and obligations hereunder.
 
THE INDEMNITIES UNDER THIS SECTION 3.3(b) ARE  INTENDED TO APPLY REGARDLESS OF
WHETHER ATTRIBUTABLE (IN WHOLE OR IN PART TO) THE SOLE, JOINT, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY, LIABILITY WITHOUT FAULT, REGULATORY
LIABILITY, STATUTORY LIABILITY, BREACH OF CONTRACT, BREACH OF WARRANTY OR OTHER
FAULT OR RESPONSIBILITY OF SELLER, BUYER OR ANY OTHER PERSON OR PARTY, EXCEPT TO
THE EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF BUYER.
 
Seller shall not be liable to the Buyer Parties under clause 3.3(b)(i) (other
than with regard to representations set forth in Sections 5.1(a), 5.1(b),
5.1(c), 5.1(d), 5.1(e), 5.1(f) and 5.1(g)) or clause 3.3(b)(iv) of this Section
3.3(b) with respect to any Claim unless (i) the amount of the Claim resulting
from any separate fact, condition or event that constitutes a Claim is in excess
of $35,000 (the “Individual Indemnification Threshold”) and (ii) the aggregate
amount of all Claims by Buyer under this Agreement meeting the Individual
Indemnification Threshold exceeds one and one-half percent (1.5%) of the
Purchase Price under this Agreement (the “Aggregate Indemnification Threshold”).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12

--------------------------------------------------------------------------------

 
 
Notwithstanding anything herein to the contrary, the cumulative obligation of
Seller to Buyer Parties under clause 3.3(b)(i) (other than with regard to
representations set forth in Sections 5.1(a), 5.1(b), 5.1(c), 5.1(d), 5.1(e),
5.1(f) or 5.1(g)) will be limited to twenty five percent (25%) of the Purchase
Price (the “Indemnity Amount”).  Seller’s obligation to indemnify the Buyer
Parties pursuant to 3.3(b)(i) shall survive twelve (12) months after the Closing
Date; provided, however Seller’s obligation to indemnify Buyer with respect to
breaches of Seller’s representations and warranties in Sections 5.1(a), 5.1(b),
5.1(c), 5.1(d) 5.1(e), 5.1(f) and 5.1(g) shall survive the Closing forever;
Seller’s obligation to indemnify the Buyer Parties for the Retained Obligations
shall survive Closing for the period of time which the applicable Retained
Obligation is retained by Seller pursuant to Section 3.4; and Seller’s
obligation to indemnify the Buyer Parties pursuant to clause 3.3(b)(ii) of this
Section 3.3(b) shall survive indefinitely. Seller’s obligation to indemnify
Buyer Parties pursuant to clause 3.3(b)(iv) of this Section 3.3(b) shall survive
two (2) years after the Closing Date (as applicable, the “Closing Period
Termination Date”).  The foregoing will not limit the rights of Buyer Parties to
proceed against the Seller as provided herein after the Closing Period
Termination Date with respect to Claims for which a Buyer Party has provided
notice to Seller as provided in Section 3.3(d).  Seller’s indemnity obligations
shall, in each case, survive with respect to any indemnity claim asserted by
Buyer prior to the expiration of the relevant Closing Period Termination Date.
 
(c)   Buyer’s General Indemnification.  Subject to Section 3.3(b), upon the
Closing, Buyer shall defend, protect, indemnify and hold Seller, its affiliates,
and its/their partners, members, managers, directors, officers, employees,
contractors and representatives (which additional parties, together with Seller,
are hereinafter collectively referred to as the “Seller Parties”) harmless from
and against any and all Claims in any way arising from, out of or in connection
with, or otherwise relating to:  (i) any inaccuracy of any representation or
warranty of Buyer set forth in this Agreement; (ii) Buyer’s breach of, or
failure to perform or satisfy, any of its covenants and obligations hereunder;
and (iii) the Assumed Obligations, AND THIS INDEMNITY IN THIS SECTION 3.3(c) IS
INTENDED TO APPLY REGARDLESS OF WHETHER ATTRIBUTABLE (IN WHOLE OR IN PART TO)
the sole, joint, concurrent or comparative negligence, strict liability,
liability without fault, regulatory liability, statutory liability, breach of
contract, breach of warranty or other fault or responsibility of Seller or any
other person or party, except to the extent caused by the gross negligence or
willful MISconduct of seller.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13

--------------------------------------------------------------------------------

 
 
(d)   Claims Procedures.  Promptly upon a party becoming aware of any Claim with
respect to which it believes it is entitled to indemnification hereunder,
whether under this Section 3.3, Section 7.7, or the other provisions hereof,
such party (an “Indemnified Party”) shall notify the other party (the
“Indemnifying Party”) in writing of the existence and nature of such Claim, the
identity of any third party claimants and a description of the damages and the
amount thereof relating to such Claim (the “Claim Notice”).  The Indemnified
Party shall be responsible for the defense of any Claim unless the Indemnifying
Party, upon reasonable notice, requests that the defense of a Claim be tendered
to the Indemnifying Party.  If:
 
(i)   the defense of a Claim is so tendered and within ten (10) Business Days
thereafter such tender is accepted by the Indemnifying Party; or
 
(ii)     within ten (10) Business Days after the date on which the Claim Notice
has been given pursuant to this Section 3.3(d), the Indemnifying Party shall
acknowledge in writing to the Indemnified Party its obligation to provide an
indemnity as provided in this Section 3.3 and assume the defense of the Claim;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
14

--------------------------------------------------------------------------------

 
 
then, except as hereinafter provided, the Indemnified Party shall not, and the
Indemnifying Party shall, have the right to contest, defend, litigate or settle
such Claim.  The Indemnified Party shall have the right to be represented by
counsel at the Indemnified Party’s expense, subject to the limitations hereof,
in any such contest, defense, litigation or settlement conducted by the
Indemnifying Party.  The Indemnifying Party shall lose its right to defend and
settle the Claim if it shall fail to diligently contest and defend the Claim
after written notice or demand by the Indemnified Party.  So long as the
Indemnifying Party has not lost its right and/or obligation to contest, defend,
litigate and settle as herein provided, the Indemnifying Party shall have the
exclusive right to contest, defend and litigate the Claim and shall have the
exclusive right, in its discretion exercised in good faith, and upon the advice
of counsel, to settle any such matter, either before or after the initiation of
litigation, at such time and upon such terms as it deems fair and reasonable;
provided, that at least five (5) Business Days prior to any such settlement,
written notice of its intention to settle shall be given to the Indemnified
Party and the Indemnified Party shall have consented thereto, which consent
shall not be unreasonably withheld, conditioned or delayed.  All expenses
(including without limitation attorneys’ fees) incurred by the Indemnifying
Party in connection with the foregoing shall be paid by the Indemnifying Party;
provided that, if the Indemnifying Party is the Seller, such expenses shall be
paid or reimbursed to the Indemnified Party solely out of the Indemnity Amount
and the Seller will have no obligation hereunder in excess of such amount.
Notwithstanding the foregoing, in connection with any settlement negotiated by
an Indemnifying Party, no Indemnified Party shall be required by an Indemnifying
Party to (x) enter into any settlement that does not include as an unconditional
term thereof the delivery by the claimant or plaintiff to the Indemnified Party
of a full and complete release from all liability in respect of such claim or
litigation, (y) enter into any settlement that attributes by its terms liability
or wrongdoing to the Indemnified Party, or which establishes or acknowledges any
liability of the Indemnified Party that is not satisfied by the Indemnifying
Party, or would establish or acknowledge any future restrictions on the
Indemnified Party,  or (z) consent to the entry of any judgment that does not
include as a term thereof a full dismissal of the litigation or proceeding with
prejudice.  No failure by an Indemnifying Party to acknowledge in writing its
indemnification obligations under this Section 3.3 shall relieve it of such
obligations to the extent they exist.  If the Indemnifying Party fails to accept
a tender of, or assume, the defense of a Claim pursuant to this Section 3.3(d),
or if, in accordance with the foregoing, the Indemnifying Party shall lose its
right to contest, defend, litigate and settle such a Claim or if there is a
legal conflict, the Indemnified Party shall have the right, without prejudice to
its right of indemnification hereunder, in its discretion exercised in good
faith and upon the advice of counsel, to contest, defend and litigate such
Claim, and may settle such Claim, either before or after the initiation of
litigation, at such time and upon such terms as the Indemnified Party deems fair
and reasonable; provided, that the Indemnified Party will not settle such Claim
without the prior written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld, conditioned or delayed.  If, pursuant to this
Section 3.3, the Indemnified Party so contests, defends, litigates or settles a
Claim for which it is entitled to indemnification hereunder as hereinabove
provided, the Indemnified Party shall be reimbursed by the Indemnifying Party
for the reasonable attorneys’ fees and other expenses of defending, contesting,
litigating and/or settling the Claim which are incurred from time to time,
forthwith following the presentation to the Indemnifying Party of itemized bills
for said attorneys’ fees and other expenses; provided that, if the Indemnifying
Party is the Seller and the matter relates to a matter subject to indemnity by
Seller pursuant to clause (i) of Section 3.3(b) (other than a breach of Sections
5.1(a), 5.1(b), 5.1(c), 5.1(d), 5.1(e), 5.1(f) or 5.1(g) hereof), such expenses
shall be reimbursable to the Indemnified Party solely out of the Indemnity
Amount and the Seller will have no obligation hereunder in excess of such
amount.
 
 
 
 
 
 
 
 
 
 
15

--------------------------------------------------------------------------------

 
 
(e)   Subrogation.  Following full indemnification as provided for hereunder,
the Indemnifying Party shall be subrogated to all rights of the Indemnified
Party with respect to all parties relating to the matter for which
indemnification has been made and the Indemnified Party agrees to fully
cooperate with the Indemnifying Party in exercising such subrogation rights,
insofar and only insofar as the exercise of such subrogation rights does NOT (i)
establish or acknowledge any liability of the Indemnified Party that is not
satisfied by the Indemnifying Party, (ii) establish or acknowledge any future
restrictions on the Indemnified Party, (iii) if the Indemnifying Party is the
Seller, entitle Seller to any benefits or privileges of ownership of the Assets
attributable to periods from and after the Effective Time.
 
(f)   Insured Losses; Recoveries from Third Parties.  The amount of any damages
for which indemnification is provided under this Section 3.3, Section 7.7, or
the other provisions hereof shall be net of any duplicative amounts recovered by
the Indemnified Party under insurance policies or from unaffiliated third
parties with respect to such damages.  If an Indemnified Party receives an
amount under insurance coverage or from an unaffiliated third party with respect
to damages at any time subsequent to any indemnification provided by an
Indemnifying Party pursuant to this Section 3.3, Section 7.7, or the other
provisions hereof, then such Indemnified Party shall promptly deliver such
amount (up to the amount of the indemnification payment made to such Indemnified
Party regarding such matter) to the Indemnifying Party; provided, however, that
such Indemnified Party shall be entitled to retain the amount of any payments
made or costs or expenses incurred in connection with obtaining such
payment.  The obligation created by this Section 3.3(f), Section 7.7, or the
other provisions hereof is an obligation to make repayment in the event and to
the extent of a recovery from a third party and shall not delay an Indemnified
Party’s right to repayment from the Indemnifying Party under this Section 3.3,
Section 7.7, or the other provisions hereof.
 
(g)   Characterization of Indemnification Payments.  Buyer and Seller agree to
treat any payment made under this Section 3.3, Section 7.7, or the other
provisions hereof as an adjustment to the Purchase Price.  Any indemnification
hereunder will be determined on an after-tax basis (taking into account any
actual tax benefits or detriments realized with respect to the damages for which
the payment under this Section 3.3, Section 7.7, or the other provisions hereof
is being made).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
16

--------------------------------------------------------------------------------

 
 
3.4   Retained Obligations.  Provided that the Closing occurs, Seller shall
retain indefinitely all obligations and liabilities related to (a) the Excluded
Assets (b) all liability of Seller to third parties for personal injury, bodily
injury, illness or death to the extent occurring prior to the Effective Time as
a result of the operation of the Assets; (c) ad valorem, property, severance and
similar taxes attributable to the period of time prior to the Effective Time
retained by Seller; (d) all litigation existing or threatened Claims as of the
Closing Date, to the extent it relates to the period of time prior to the
Effective Time, including, without limitation, any matters described in Schedule
5.1(g), and (e) all obligations, liabilities and Claims relating to any
pollutant, contaminant or toxic or hazardous materials that may have originated
from, or been removed from, any of the Assets which were disposed of offsite of
the Assets during the time period November 1, 2011 until Closing; for a period
of two (2) years from Closing, and not thereafter, Seller shall retain (f) all
obligations and liabilities of Seller for the payment or improper payment of
royalties, overriding royalties, production payments, net profits interests,
rentals and other similar payments attributable to Seller’s interests in the
Leases, Units and Wells relating to the Assets accruing prior to the Effective
Time; (g) all obligations of Seller under the Contracts for (i) overhead charges
related to periods prior to the Effective Time, (ii) costs and expenses incurred
prior to the Effective Time for goods and services provided prior to the
Effective Time, (iii) other payment obligations that accrue and become due prior
to the Effective Time, (iv) joint interest billings and trade payables, and (vi)
for alleged breach thereof prior to the Effective Time (collectively, the
“Retained Obligations”).
 
3.5   Assumed Obligations.  Upon Closing, Buyer shall assume all duties,
obligations and liabilities of every kind and character with respect to the
Assets actually conveyed to Buyer at Closing or the ownership or operation
thereof (other than the Retained Obligations and other than liabilities for
which Seller is responsible for under Section 3.3(b)), whether attributable to
periods before or after the Effective Time, except as provided herein,
including, without limitation, those arising out of (a) the terms of the Leases
or Surface Interests, or the Personal Property or Assets, (b) suspense accounts,
to the extent transferred to Buyer except as to Suspense Proceeds that should
have been escheated under applicable law and interest and penalties thereon, (c)
ad valorem, property, severance and other similar taxes or assessments based
upon or measured by the ownership of the Assets or the production therefrom but
only attributable to any period on or after the Effective Time, (d) the
environmental or physical condition of the Assets, regardless of whether such
environmental or physical condition arose before or after the Effective Time,
(e) obligations to properly plug and abandon or re-plug or re-abandon or remove
wells, flowlines, gathering lines or other facilities, equipment or other
personal property or fixtures comprising part of such Assets, (f) obligations to
restore the surface of such  Assets and obligations to remediate or bring the
Assets into compliance with applicable Environmental Laws (including conducting
any remediation activities that may be required on or otherwise in connection
with activities on the Assets) regardless of whether such obligations or
conditions or events giving rise to such obligations arose, occurred or accrued
before or after the Effective Time, and (g) any other duty, obligation, event,
condition or liability assumed by Buyer under the terms of this Agreement
(collectively, the “Assumed Obligations”).  When the retention period for a
Retained Obligation ends, such Retained Obligation becomes an Assumed
Obligation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
17

--------------------------------------------------------------------------------

 
 
4.   Taxes and Payables
 
4.1   Payment of Taxes.  All real estate, use, ad valorem and personal property
taxes and charges upon any of the Assets shall be prorated as of the Effective
Time; provided that Buyer shall pay all such taxes attributable to the calendar
year in which the Closing Date occurs to the extent due and payable after
Closing, and at Closing, the Purchase Price will be decreased by Seller’s pro
rata share of such items for the period prior to the Effective Time.  If the
actual amount of such items is not known as of the Closing Date and the final
reconciliation of the Final Settlement Statement under Section 10.4, then
Seller’s pro rata share of such items will be determined by using the rates and
millages for the most recent year available and the assessed values for the
calendar year immediately preceding the calendar year in which the Closing Date
occurs, with appropriate adjustments for any known changes thereto. In no event
shall the Final Settlement Statement be delayed pending determination of the
proration of taxes pursuant to this Section 4.1.
 
4.2   Production Taxes.  Seller shall be responsible for all oil and gas
production taxes, and any other similar taxes applicable to Hydrocarbons
produced and saved from or attributable to its interest in the Leases, Wells and
Units prior to the Effective Time (excluding Stock Hydrocarbons), and Buyer
shall be responsible for all such taxes applicable to the Stock Hydrocarbons and
all Hydrocarbons produced and saved from or attributable to the Leases, Wells
and Units from and after the Effective Time.  For the avoidance of doubt, the
taxes included in the preceding provisions of this Section 4.2 do not apply to
any and all federal, state, local and foreign income and gains taxes
attributable to the Assets or to the sale transactions resulting from the
operation of this Agreement, including Texas margin tax, and, for purposes of
such taxes, (i) any and all such income and gains taxes resulting from the
ownership of the Assets prior to and including the Closing Date, including any
income and gains taxes arising from the sale of the Assets pursuant to this
Agreement, shall be the obligation and liability of the Seller, and Seller shall
indemnify and hold Buyer harmless from such taxes, and (ii) any and all such
income and gains taxes resulting from the ownership of the Assets after the
Closing Date shall be the obligation and liability of the Buyer, and Buyer shall
indemnify and holder Seller harmless from such taxes.
 
4.3   Occasional Sale of Assets.  Both parties believe that the sale of the
Assets is an occasional sale exempt from sales or use taxes.  If any such taxes
are assessed against the transaction, both parties will cooperate and use their
commercially reasonable efforts (at no cost to Seller) to attempt to eliminate
or reduce such taxes.  If unsuccessful, Buyer shall be responsible for any such
taxes.  In that event, Buyer shall pay Seller any such state and local sales or
use taxes, and Seller shall remit such amount to the appropriate taxing
authority in accordance with applicable law.  Any reasonable legal expenses
incurred by Seller at Buyer’s request to reduce or avoid any of the
aforementioned taxes attributable to Buyer, shall be paid or reimbursed by
Buyer.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18

--------------------------------------------------------------------------------

 
4.4   Tax Deferred Exchange.  Seller and Buyer agree that this transaction may
be completed as a like-kind exchange under Section 1031 of the Internal Revenue
Code of 1986, as amended (the “Internal Revenue Code”) and that each party will
cooperate in completing the sale as a like-kind exchange.  Either of both Seller
or Buyer may, at or before the Closing, elect to affect a tax deferred exchange
of the Assets for other qualifying properties (hereinafter collectively called
the “Exchange Property” in accordance with the following:
 
(a)   In the event Seller makes such an election, Seller shall notify and
instruct Buyer, on or before the Closing Date, to have the Purchase Price paid
to a qualified intermediary (as that term is defined in Treasury Regulation
Section 1.1031(k)-1(g)(4)(iii)) until Seller has designated the Exchange
Property.  The Exchange Property shall be designated by Seller and acquired by
the qualified intermediary with the time periods prescribed by Section
1031(a)(3) of the Internal Revenue Code.  In the event Seller fails to designate
and the qualified intermediary fails to acquire the Exchange Property with such
time periods, the agency or trust shall terminate and the proceeds then held by
the qualified intermediary shall be paid in accordance with the terms of the
agreements entered into between Seller and such qualified intermediary.
 
(b)   In the event Buyer makes such an election, Buyer shall notify and instruct
Seller, on or before the Closing Date, to have the Assets conveyed to a
qualified intermediary or an exchange accommodation titleholder (as that term is
defined in Rev. Proc. 2000-37 issued effective September 15, 2000).
 
(c)   The rights and responsibilities of Seller, Buyer and the qualified
intermediary or exchange accommodation titleholder shall be documented with such
agreements containing such terms and provisions as shall be reasonably
determined by Seller and Buyer to be necessary to accomplish a tax deferred
exchange under Section 1031 of the Internal Revenue Code, subject, however, to
the limitations on costs and liabilities of Buyer and Seller set forth
below.  If Seller makes a tax deferred exchange election, Buyer shall not be
obligated to pay any additional costs or incur any additional obligations in the
acquisition of the Assets.  If Buyer makes a tax deferred exchange election,
Seller shall not be obligated to pay any additional costs or incur any
additional obligations in the consummation of the transactions contemplated in
this Agreement.  Any such tax deferred exchange election by either party, shall
be effected through an assignment of this Agreement, or rights under this
Agreement, to a qualified intermediary or an exchange accommodation titleholder,
but such assignment shall not affect the duties, rights or obligations of the
parties under this Agreement, except as expressly set forth in this Section 4.4.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
19

--------------------------------------------------------------------------------

 
 
(d)   Should either Seller or Buyer make such an election and should the tax
deferred exchange fail or be disallowed by the Internal Revenue Service for any
reason, the non-electing party’s sole responsibility and liability to the
electing party shall be to take such actions as are required by Subsections (a),
(b) or (c) above and such non-electing party shall have no other responsibility
or liability whatsoever to the electing party; and the electing party shall
release, indemnify, defend and hold harmless the non-electing party from any
responsibility or liability related to such election except for such actions as
may be required by Subsections (a), (b) or (c) above.
 
(e)   Notwithstanding Subsections (a) through (d) above, the Closing shall not
be delayed or affected by reason of any tax deferred exchange election nor shall
consummation or accomplishment of a tax deferred exchange be a condition
precedent or condition subsequent to the exchanging party’s duties, rights and
obligations under this Agreement and the exchanging party’s failure or inability
to consummate a tax deferred exchange for any reason shall not excuse or release
the exchanging party from its duties, rights and obligations under this
Agreement.
 
5.   Representations, Warranties, Acknowledgments, Disclaimers and Waivers
 
5.1   Seller’s Representations and Warranties.  Seller represents and warrants
to Buyer that, as of the date hereof and as of Closing, the following statements
are accurate.  For purposes hereof, the term “Knowledge of Seller” (and any
similar expression, including, the expression “Seller’s Knowledge”) shall refer
to matters known by any officer, manager or supervisor of any of the entities
comprising Seller and Aaron Brack, Dan Harrison, Cynthia English and Mason
Guinn. Any representation or warranty by Seller contained herein in Sections
5.1(h) through 5.1(v), inclusive, with respect to any Lease, Well or Unit that
Seller does not operate shall be deemed to be made to the Knowledge of Seller
whether or not expressly stated.
 
(a)   Formation.  Seller is a partnership duly organized and validly existing,
in good standing, under the laws of the State of Nevada.  Seller has the power
and authority to own the Assets and to carry on its business as now conducted
and to enter into and to carry out the terms of this Agreement.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20

--------------------------------------------------------------------------------

 
 
(b)   Authorization.  The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary limited liability company, limited partnership, and corporate
action on behalf of Seller and Seller is not subject to any charter, by-law,
privilege, lien, encumbrance, agreement, instrument, order, or decree of any
court or Governmental Authority (other than any governmental approval required)
which would prevent consummation of the transactions contemplated by this
Agreement.
 
(c)   Enforceability.  This Agreement has been duly executed and delivered on
behalf of Seller and constitutes the legal, valid and binding obligation of
Seller enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, reorganization or moratorium statutes, or
other similar laws affecting the rights of creditors generally or equitable
principles (collectively, “Equitable Limitations”).  At the Closing all other
transaction documents required hereunder to be executed and delivered by Seller
shall be duly executed and delivered and shall constitute legal, valid and
binding obligations of Seller enforceable in accordance with their terms, except
as enforceability may be limited by Equitable Limitations.
 
(d)   Conflicts.  The execution and delivery by Seller of this Agreement and the
other transaction documents to which Seller is a party does not, and the
consummation of the transactions contemplated by this Agreement and the other
transaction documents to which Seller is a party shall not, (i) violate or be in
conflict with, or require the consent of any person or entity under, any
provision of Seller’s organizational documents, (ii) conflict with, result in a
breach of, constitute a default (or an event that with the lapse of time or
notice, or both would constitute a default) under any material agreement or
instrument to which Seller is a party or,  by which any of the Assets or Seller
is bound; provided, however, that with respect to (iii) transaction documents
other than this Agreement and (iv) the consummation of the transactions
contemplated by this Agreement, clause (b) above shall be true and correct
except as to any governmental approvals of the type customarily obtained after
Closing and further provided that the failure to secure any consent or approval
to the conveyance of the Assets shall not be considered a breach of this
warranty (to the extent that the same has been identified by Seller in Schedule
5.1(n)) but shall be treated as a Title Defect, (v) violate any provision of or
require any consent, authorization or approval under any law, judgment, decree,
judicial or administrative order.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21

--------------------------------------------------------------------------------

 
 
(e)   No Brokers.  Seller is not a party to any contract or agreement for the
payment of any broker’s or finder’s fee in connection with the origin,
negotiation, execution or performance of this Agreement for which Buyer will
have any liability whatsoever.
 
(f)   Bankruptcy and Solvency.  There are no bankruptcy, reorganization or
arrangement proceedings pending, being contemplated by or, to the Knowledge of
Seller, threatened against Seller or Comstock Resources, Inc.  None of Seller or
Comstock Resources Inc. are insolvent, nor will Seller or Comstock Resources
Inc. or any of their affiliates be rendered insolvent by the occurrence of the
transactions contemplated herein whether on a fair valuation of their assets and
liabilities under a balance sheet test, ability to pay debts when they become
due test, or capital adequacy for the business in which it engaged test, as each
may be determined under applicable federal and state fraudulent conveyance or
transfer laws.   Based on facts and circumstances known to Seller and Comstock
Resources, Inc., Seller and Comstock Resources, Inc. believe that the Purchase
Price for the Assets is fair market value, as determined under applicable
federal and state fraudulent conveyance or transfer laws.
 
(g)   Litigation.  Except as set forth in Schedule 5.1(g), there is no suit or
action by any person, entity or Governmental Authority (as defined in Section
7.2(b)) pending in any legal, administrative or arbitration proceeding or, to
Seller’s Knowledge, threatened against Seller or the Assets that could
reasonably be expected to affect Seller’s ability to consummate the transactions
contemplated herein, the performance by Seller of its obligations under this
Agreement or other transaction documents, or title to, use or operation of,
development of or the value of any of the Assets.
 
(h)   Taxes.  All ad valorem, property, production, severance, excise and
similar taxes and assessments based on or measured by the ownership of the
Assets, or the production of Hydrocarbons or the receipt of proceeds therefrom,
that have become due and payable have been timely paid.  To Seller’s Knowledge
all material tax returns required to be filed with respect to the Assets have
been timely filed and all such tax returns are complete, accurate and correct in
all material respects.  To Seller’s Knowledge, there are no liens arising from
or related to taxes on or pending against the Assets other than statutory liens
for taxes that are not yet due and payable, and no notices have been given of
any event that could lead to any such lien and, to Seller’s Knowledge, there is
no reasonable basis for  the assertion of such a lien.  Seller has properly
withheld and remitted all material taxes required to be withheld and remitted by
it with respect to the Assets.  Seller has not received a written claim or
demand from any applicable tax authority in connection with any tax relating to
the Assets and no written notices of audits, examinations, investigations or
claims by any tax authority relating to the Assets or taxes owing with respect
to the Assets have been received by Seller.  No written notice or claim has been
received by Seller from any taxing authority as to the filing of tax returns or
the payment of taxes with respect to the Assets in any jurisdiction for which no
tax return has been filed or taxes paid previously.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22

--------------------------------------------------------------------------------

 
 
(i)   Claims.  Except as set forth on Schedule 5.1(i), as of the date of this
Agreement and as of the Closing Date (a) Seller has not been served with any
written claim, demand, filing, investigation, administrative proceeding, action,
suit or other legal proceeding or, (b) to Seller’s Knowledge, Seller has not
been threatened in writing with any of the foregoing, with respect to the Assets
or the ownership or operation of any thereof that would have an material adverse
effect on any of the Assets or the ownership or operation thereof;  and (c) no
written notice from any governmental authority has been received by Seller (i)
claiming any material violation or repudiation of any law, rule, regulation,
ordinance, order, decision or decree of any governmental authority (other than
Environmental Laws which are addressed below) or (ii) requiring, or calling
attention to the need for, any material work, repairs, construction,
alterations, installations, remediation, response, removal or abatement actions,
restoration, investigation or monitoring of, on, in, under, in connection with
or related to the Assets or the ownership or operation of any thereof other
than, in the case of clauses (i) and (ii) above, notices for matters that have
been remedied without further material obligations of Seller.
 
(j)   Compliance with Laws.
 
(i)   Except as set forth in Schedule 5.1(j), the Assets operated by Seller are
in material compliance with all laws, permits, licenses, certificates,
authorizations, approvals, consents, rules, regulations and orders applicable to
the Assets (other than Environmental Laws, which are separately addressed
below).
 
(ii)     Except as set forth in Schedule 5.1(j), to the Knowledge of Seller, the
Assets not operated by Seller are in material compliance with all laws, permits,
licenses, certificates, authorizations, approvals, consents,  rules, regulations
and orders applicable to the Assets.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23

--------------------------------------------------------------------------------

 
 
(iii)    Except as set forth in Schedules 5.1(j), to the Knowledge of Seller,
the Assets are in material compliance with applicable Environmental Laws.
 
(k)   Take-or-Pay Arrangements.  Seller has not received any prepayments or
buydowns, or entered into any take-or-pay or forward sale arrangements or any
similar arrangements or agreements, such that Buyer will be obligated after the
Effective Time to make deliveries of gas without receiving full payment
therefor.
 
(l)   Rights to Production.  Except with respect to Imbalances, or as set forth
in Schedule 5.1(l), or to the extent arising under a Contract identified in
Schedule 1.1(a)(vi), no person has any call upon, right to purchase, option to
purchase or similar rights with respect to any portion of the Sale Hydrocarbons
from and after the Closing that is not terminable on 30 days’ or less notice,
without penalty or liability to Seller (or Buyer, after Closing) in connection
therewith.
 
(m)   Imbalances.  As to Assets operated by Seller the Imbalances relating to
the Assets are as reflected on Schedule 11.1 as of the date shown on such
schedule, and as to Assets not operated by Seller, to Seller’s Knowledge, the
Imbalances relating to the Assets are as reflected on Schedule 11.1.
 
(n)   Preferential Rights and Required Consents.  Schedule 5.1(n) contains a
list of (i) all rights or agreements that may permit any person to purchase or
acquire any of the Assets arising in connection with the transactions
contemplated hereby (“Preferential Rights”), and (ii) all required consents,
approvals or authorizations of, or notifications to, any person (excluding any
of the foregoing consents, approvals or authorizations customarily obtained from
governmental entities following Closing) arising in connection with the
transactions contemplated hereby (the “Consents”).
 
(o)   Contracts.  Schedule 1.1(a)(vi) sets forth a list of all contracts and
agreements material to the ownership and operation of the Assets (other than the
Leases, insofar as such Leases are expressly described in Exhibit “A”) and
agreements creating Surface Interests (insofar as such agreements creating
Surface Interests are expressly described in Exhibit “B”), including, without
limitation: (i) any agreement with any Affiliate of Seller, (ii)  all
partnership, joint venture, area of mutual interest, non-compete, purchase,
sale, divestiture, exploration, participation, development, non-competition
farmout, lease, acquisition, option, or similar contracts or agreements,  and
material confidentiality agreements of which any terms remain executory,
gathering contracts, transportation contracts, production sale contracts,
disposal or injection contracts, contracts, any agreements containing any
surface waivers, access, drilling or facility location restrictions, lease for
personal property or equipment, and all other material contracts relating to the
Assets, (iii) any operating agreement to which Seller’s interest in the Assets
is subject, (iv) any contract to expend more than $50,000 in 2013 or any future
year in connection with the Assets, and (v) any agreement to acquire, shoot,
license, process or interpret geophysical or geoseismic data.  All such
agreements are in full force and effect and no default or breach (or event that,
with notice or lapse of time or both, would become a default or breach) of any
such agreements has occurred or is continuing on the part of Seller or, to
Seller’s Knowledge, any other party thereto.  Seller has delivered to Buyer or
made available to Buyer true, complete and correct copies of all such contracts
and agreements, as well as any amendments or supplements thereto.
 
 
 
 
 
 
 
 
 
 
 
 
 
24

--------------------------------------------------------------------------------

 
 
(p)   Compliance with Leases and Agreements Creating Surface Interests.  Seller
is in compliance in all material respects with the Leases and agreements
creating Surface Interests, including all express and implied covenants
thereunder, and no demands or notices of a material default or non-compliance
have been issued to or received by Seller that have not been resolved.
 
(q)   Non-Consent Operations.  Except as set forth on Schedule 5.1(q), there are
no operations or proposed operations with respect to the Assets as to which
Seller has become a non-consenting party under the terms of the applicable
operating agreement.
 
(r)   Planned Future Commitments.  As of the date hereof, except as set forth on
Schedule 5.1(r), there are no outstanding authorizations for expenditures (AFEs)
or other commitments to make capital or other expenditures that are binding on
any of the Assets which will require expenditures on or before May 15, 2013 in
excess of $100,000, individually (net to Seller’s interest), or $300,000 in the
aggregate (net to Seller’s interest).
 
(s)   Production Burdens and Expenses.  Except as set forth in Schedule 5.1(s),
and subject to Seller’s Knowledge as to Assets not operated by Seller all
rentals, royalties, excess royalty, overriding royalty interests, net profits
interests, production payments, and other payments due under or with respect to
the Assets have been properly and timely paid and no royalties are currently
being held in suspense, except as set forth on Schedule 5.1(s).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25

--------------------------------------------------------------------------------

 
 
(t)   Other Production Sales Matters.  Except as set forth on Schedule 5.1(t),
and subject to Seller’s Knowledge as to Assets not operated by Seller (a) as of
the date of this Agreement, none of the purchasers under any production sales
contracts related to hydrocarbons produced from the Assets are entitled to
“make-up” or otherwise receive deliveries of Substances without paying at the
time of such deliveries the full contract price therefor; (b) none of the
purchasers under any production sales contracts related to the Assets has
exercised any economic out provision; (c) none of the purchasers under any
production sales contracts related to the Assets has curtailed its takes of
Hydrocarbons in violation of such contracts; (d) none of the purchasers under
any production sales contracts related to the Assets has given notice that it
desires to amend the production sales contracts with respect to price or
quantity of deliveries; and (e) Seller is not obligated to pay any penalties or
other payments under any transportation or other agreement as a result of the
delivery of quantities of Hydrocarbons from the Assets in excess of the contract
requirements.
 
(u)   Payout Balances.  Schedule 5.1(u), (i) identifies those Wells that, as of
the date hereof, are subject to a reversion or other adjustment at some level of
cost recovery or payout and (ii) to Seller’s Knowledge, the status of the
“payout” balances with respect to each such Well as of such date.
 
(v)   Wells.  To Seller’s Knowledge as of the date of this Agreement, the wells
that currently are required (or under the applicable law, must be plugged and
abandoned within twelve (12) months after Closing) to be permanently plugged and
abandoned pursuant to applicable laws and regulations are set forth on Schedule
5.1(v).
 
(w)   Condition of Personal Property.  The equipment and other personal property
and fixtures forming a part of the Assets are, to Seller’s Knowledge, in all
material respects, in good repair and condition and are adequate for the normal
operation of the Assets in accordance with prudent industry standards.
 
(x)   Representations with Respect to Gaines County, Texas Assets. With respect
to Assets situated in Gaines County, Texas, Seller’s representations and
warranties are limited to Seller’s Knowledge, except as to the representations
and warranties in Sections 5.1(a), 5.1(b), 5.1(c), 5.1(d), 5.1(e), 5.1(f),
5.1(g), 5.1(i), 5.1(m), 5.1(n), 5.1(o) and 5.1(r) which remain applicable as
written.
 
5.2   Buyer’s Representations and Warranties.  Buyer represents and warrants to
Seller that, as of the date hereof and as of Closing, the following statements
are accurate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
26

--------------------------------------------------------------------------------

 
(a)   Formation.  Buyer is a corporation duly organized and validly existing and
in good standing under the laws of the State of Texas and is or will be prior to
Closing, duly qualified to carry on its business in each of the states in which
it is required to be qualified and has the corporate power and authority to own
its property and to carry on its business as now conducted and to enter into and
to carry out the terms of this Agreement and the transactions contemplated by
this Agreement.
 
(b)   Authorization.  The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on behalf of Buyer and Buyer is not subject to
any charter, by-law, privilege, lien, encumbrance, agreement, instrument, order
or decree of any court or Governmental Authority which would prevent
consummation of the transactions contemplated by this Agreement.
 
(c)   No Brokers.  Buyer is not a party to any contract or agreement for the
payment of any broker’s or finder’s fee in connection with the origin,
negotiation, execution or performance of this Agreement for which Seller will
have any liability whatsoever.
 
(d)   Bankruptcy.  There are no bankruptcy, reorganization or arrangement
proceedings pending, being contemplated by or to the actual and current
knowledge of Buyer, threatened against Buyer or any affiliate of Buyer.
 
(e)   Suits and Claims.  There is no suit or action by any person, entity or
Governmental Authority pending in any legal, administrative or arbitration
proceeding or, to Buyer’s knowledge, threatened against Buyer or its affiliates
that will materially affect Buyer’s ability to consummate the transactions
contemplated herein.
 
(f)   Independent Evaluation.  Buyer acknowledges that it is an experienced and
knowledgeable investor in the oil and gas business, and the business of
purchasing, owning, developing and operating oil and gas properties such as the
Assets.  In making the decision to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer has relied solely upon (i) its own
independent due diligence investigation of the Assets and (ii) the express
representations, warranties and covenants made by Seller in this Agreement, and
the agreements, certificates and other documents to be delivered by Seller at or
prior to the Closing, and has been advised by and has relied solely on its own
expertise and its own legal, tax, operations, environmental, reservoir
engineering and other professional counsel and advisors concerning this
transaction, the Assets and the value thereof.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
27

--------------------------------------------------------------------------------

 
 
(g)   Qualification.  As of the Closing, Buyer shall be, and thereafter shall
continue to be, qualified with all applicable Governmental Authorities to own
and, if applicable, operate the Assets.  Without limiting the foregoing, Buyer
is, as of the Closing, and thereafter will continue to be, qualified to own and
operate any  state oil, gas and mineral leases that constitute part of the
Assets, including, without limitation, meeting all bonding requirements.
 
(h)   Securities Laws.  Buyer is acquiring the Assets for its own account and
not with a view to, or for offer of resale in connection with, a distribution
thereof, within the meaning of the Securities Act of 1933, 15 U.S.C. § 77a et
seq., and any other rules, regulations, and laws pertaining to the distribution
of securities.
 
(i)   Funds.  Buyer will arrange to have available by the Closing Date
sufficient funds to enable Buyer to pay in full the Purchase Price as herein
provided and to otherwise perform its duties and obligations under this
Agreement.
 
(j)   Enforceability.  This Agreement has been duly executed and delivered on
behalf of Buyer and constitutes the legal, valid and binding obligation of Buyer
enforceable in accordance with its terms, except as enforceability may be
limited by Equitable Limitations.  At the Closing all other transaction
documents required hereunder to be executed and delivered by Buyer shall be duly
executed and delivered and shall constitute legal, valid and binding obligations
of Buyer enforceable in accordance with their terms, except as enforceability
may be limited by Equitable Limitations.
 
(k)   Conflicts.  The execution and delivery by Buyer of this Agreement and the
other transaction documents to which Buyer is a party does not, and the
consummation of the transactions contemplated by this Agreement and the other
transaction documents to which Buyer is a party shall not, (a) violate or be in
conflict with, or require the consent of any person or entity under, any
provision of Buyer’s organizational documents, (b) conflict with, result in a
breach of, constitute a default (or an event that with the lapse of time or
notice, or both would constitute a default) under any material agreement or
instrument to which Buyer is a party or,  by which Buyer is bound; provided,
however, that with respect to (i) transaction documents other than this
Agreement and (ii) the consummation of the transactions contemplated by this
Agreement, clause (b) above shall be true and correct except as to any
governmental approvals of the type customarily obtained after Closing, (c)
violate any provision of or require any consent, authorization or approval under
any law, judgment, decree, judicial or administrative order.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28

--------------------------------------------------------------------------------

 
 
5.3   Representations and Warranties Exclusive.  All representations and
warranties contained in this Agreement, the Assignment and the agreements,
certificates and other documents to be delivered by Seller at or prior to the
Closing, are exclusive, and are given in lieu of all other representations and
warranties, express, implied or statutory.
 
5.4   Disclaimers, Waivers and Acknowledgments.
 
(a)   Disclaimer.  EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE
ASSIGNMENT, AND THE AGREEMENTS, CERTIFICATES AND OTHER DOCUMENTS TO BE DELIVERED
BY SELLER AT OR PRIOR TO THE CLOSING, THE ASSETS ARE TO BE SOLD AND ACCEPTED BY
BUYER AT CLOSING “AS IS, WHERE IS AND WITH ALL FAULTS.”  EXCEPT AS PROVIDED IN
THIS AGREEMENT, THE ASSIGNMENT, AND THE AGREEMENTS, CERTIFICATES AND OTHER
DOCUMENTS TO BE DELIVERED BY SELLER AT OR PRIOR TO THE CLOSING, SELLER MAKES NO
WARRANTY OR REPRESENTATION OF ANY KIND OR NATURE, EXPRESS OR IMPLIED IN FACT OR
BY LAW, WITH RESPECT TO THE ORIGIN, QUANTITY, QUALITY, CONDITION OR SAFETY OF
ANY EQUIPMENT OR OTHER PERSONAL PROPERTY, TITLE TO PERSONAL OR MIXED PROPERTY,
TITLE TO REAL PROPERTY, COMPLIANCE WITH GOVERNMENTAL REGULATIONS OR LAWS,
MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSES, CONDITION, QUANTITY, VALUE
OR EXISTENCE OF RESERVES OF OIL, GAS OR OTHER MINERALS PRODUCIBLE OR RECOVERABLE
FROM THE LEASES, UNITS OR WELLS, OR OTHERWISE.  EXCEPT AS PROVIDED IN THIS
AGREEMENT, THE ASSIGNMENT, AND THE AGREEMENTS, CERTIFICATES AND OTHER DOCUMENTS
TO BE DELIVERED BY SELLER AT OR PRIOR TO THE CLOSING, ALL WELLS, PERSONAL OR
MIXED PROPERTY, DATA, RECORDS, MACHINERY, EQUIPMENT AND FACILITIES COMPRISING
THE ASSETS OR SITUATED THEREON OR APPURTENANT THERETO, ARE TO BE CONVEYED BY
SELLER AND ACCEPTED BY BUYER PRECISELY AND ONLY “AS IS, WHERE IS,” AND WITHOUT
RECOURSE AGAINST SELLER.
 
(b)   Acknowledgment.  Buyer acknowledges that the Assets have been used for oil
and gas drilling and producing operations, transportation or gathering
operations, related oil field operations and possibly the storage and disposal
of waste materials incidental to or occurring in connection with such
operations, and that physical changes in the land may have occurred as a result
of such uses and that Buyer has entered into this Agreement on the basis of
Buyer’s own investigation or right to investigate, the physical condition of the
Assets, including, without limitation, equipment, surface and subsurface
conditions.  Except as set forth in this Agreement, the Assignment, and the
agreements, certificates and other documents to be delivered by Seller at or
prior to the Closing, Buyer is acquiring the Assets precisely and only in an “as
is and where is” condition and assumes the risk that adverse physical conditions
including, but not limited to, the presence of unknown abandoned or unproductive
oil wells, gas wells, equipment, pits, landfills, flowlines, pipelines, water
wells, injection wells and sumps which may or may not have been revealed by
Buyer’s investigation, are located thereon or therein, and whether known or
unknown to Buyer as of Closing.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
29

--------------------------------------------------------------------------------

 
 
6.   Title Matters
 
6.1   Examination Period.  Following the execution date of this Agreement until
5:00 p.m. Central Standard Time on the date that is five (5) days prior to
Closing (the “Examination Period”), Seller shall permit Buyer and its
representatives to examine, during normal business hours and such other
reasonable times and in Seller’s offices or other authorized location, all
files, records, information and data relating to the Assets (but expressly
excluding information reserved to Seller as part of the Excluded Assets),
including, without limitation, all abstracts of title, title opinions, title
files, ownership maps, Lease, Unit, Well and division order files, assignments,
operating and accounting records and all Contracts and other agreements
pertaining to the Assets, insofar as same may now be in existence and in the
possession or control of Seller, subject to such restrictions upon disclosure as
may exist under confidentiality or other agreements binding upon Seller or such
data; provided, however, that Seller shall, at Buyer’s request and at no cost or
expense to Seller, request waivers of such confidentiality restrictions.  Seller
makes no representations or warranties whatsoever as to the accuracy,
completeness or reliability of such information, and Buyer relies and depends on
and uses such information exclusively and entirely at its own risk and without
recourse to Seller whatsoever.  Seller shall not be required to perform any
additional title work.  No existing abstracts and title opinions will be updated
and made current by Seller.  Buyer specifically agrees that any conclusions made
from any examination done or caused to be done by Buyer from Seller furnished
information regarding title have resulted and shall result from its own
independent review, skill, knowledge and judgment only.
 
6.2   Title Defects.  The term “Title Defect” means (a) any privilege, lien,
burden, encumbrance, irregularity or other defect, excluding Permitted
Encumbrances, that causes Seller not to have Marketable Title to any Asset.  The
term “Marketable Title” means such ownership by Seller in the Assets that,
subject to and except for the Permitted Encumbrances:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30

--------------------------------------------------------------------------------

 
 
(a)   entitles Seller to receive not less than the percentage set forth in
Exhibit “A” as Seller’s Net Revenue Interest (as defined in the Preamble to
Exhibits and Schedules attached hereto) of all Hydrocarbons produced, saved and
marketed from or attributable to a Lease (as to all depths from below the base
of the Delaware Group Sands formation to the top of the Wolfcamp “Red” Sand
formation or their stratigraphic equivalents as reflected on by the
stratigraphic markers on Schedule 6.2 or their stratigraphic equivalents), Unit
or Well, without reduction, suspension or termination of such interest
throughout the productive life of such Lease, Unit or Well, except as
specifically set forth in such Exhibit;
 
(b)   obligates Seller to bear not greater than the percentage set forth in
Exhibit “A” as Seller’s Working Interest of the costs and expenses relating to
the maintenance, development and operation of a Lease (as to all depths from
below the base of the Delaware Group Sands formation to the top of the Wolfcamp
“Red” Sand formation or their stratigraphic equivalents as reflected on by the
stratigraphic markers on Schedule 6.2 or their stratigraphic equivalents), Unit
or Well, all without increase throughout the productive life of such Lease, Unit
or Well, except as specifically set forth in such Exhibit;
 
(c)   entitles Seller to an ownership interest in the Surface Interests,
Personal Property and Contracts which is proportionate to Seller’s working
interest in the related Lease, Unit or Well;
 
(d)   with respect to the gathering systems included in the Assets, entitles
Seller to rights or interests in Surface Interests covering all of the lands on
which such gathering systems are located sufficient to permit such gathering
systems to be located on such lands;
 
(e)   is free and clear of all privileges, liens, burdens and encumbrances on
title, subject to and except for the Permitted Encumbrances;
 
(f)   reflects all consents to assignment, notices of assignment or preferential
purchase rights applicable to or must be complied with in connection with the
transaction contemplated by this Agreement or any prior sale, assignment or
transfer have been complied with;
 
(g)   that the net mineral acres attributable to each of the Leases shall not be
less than those represented on Exhibit “A” with regard to such Leases, and shall
not be less than an aggregate, for all Assets of the net mineral acres
represented on Exhibit “A”; and for purposes hereof, the term “net mineral
acre”  shall mean with respect to each of the Leases: (i) the number of gross
acres covered by such Lease, times (multiplied by) (ii) the percentage of the
oil, gas and Hydrocarbon mineral fee ownership estate covered by such Lease (as
to all depths), times (multiplied by) (iii) the percentage of the estate of the
lessee in said Lease (Working Interest) owned by Seller; and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31

--------------------------------------------------------------------------------

 
 
(h)   that each Lease which is not currently held beyond its primary term via
existing production (being production in volumes sufficient to hold the Lease
beyond its primary term) has a remaining primary term which does not expire
sooner than three (3) months after the Closing Date; provided, however, if
Seller can cure the defect of such an expiring Lease by obtaining an extension
of such Lease of not less than one (1) additional year (i) prior to Closing,
then the Title Defect shall have been cured Lease shall not have a Title Defect
or (ii) prior to three (3) months after the Closing Date, then as to the Closing
such Lease will have a Title Defect in accordance with the procedures herein
with a possible decrease to the Purchase Price, and the Seller and Buyer shall
have a second closing on those Assets as soon as practicable after August 15,
2013 and Buyer shall pay Seller the amount of the adjustment to the Purchase
Price, if any, at Closing directly attributable to the Lease cured by an
extension.
 
6.3   Permitted Encumbrances.  The term “Permitted Encumbrances” means:
 
(a)   lessor’s royalties, non-participating royalties, overriding royalties,
division orders, sales, gathering, transportation and transportation-related
services contracts containing customary terms and provisions, reversionary
interests, and similar burdens if the net cumulative effect of such burdens does
not operate to reduce the Net Revenue Interest in any Well, Lease, Unit, or PUD
to an amount less than the Net Revenue Interest set forth on Exhibit “A”, or
increase the Working Interest of any Well, Lease, Unit or PUD from that set
forth in Exhibit “A” without a corresponding increase in the Net Revenue
Interest;
 
(b)   the terms, conditions, restrictions, exceptions, reservations, limitations
and other matters contained in (including, without limitation, any privileges,
liens or security interests created by law or reserved in oil and gas leases for
royalty, bonus or rental, or created to secure compliance with the terms of) the
agreements, instruments and documents identified in, and all other matters
expressly described or referred to in, any of the Exhibits and Schedules hereto,
and only insofar as the same are not due or delinquent;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32

--------------------------------------------------------------------------------

 
 
(c)   privileges, liens for taxes or assessments not yet due or delinquent or,
if delinquent, are identified on Schedule 6.3(c);
 
(d)   preferential rights to purchase and required non-governmental third party
consents to assignments and similar agreements identified in Schedule 5.1(n)
with respect to which prior to Closing (i) waivers or consents are obtained from
the appropriate parties or (ii) the appropriate time period for asserting such
rights has expired without an exercise of such rights;
 
(e)   all rights to consent by, required notices to, filings with, or other
actions by Governmental Authorities in connection with the sale or conveyance of
the Assets or interests therein, if the same are customarily obtained subsequent
to such sale or conveyance;
 
(f)   Title Defects or other deficiencies or irregularities (other than breaches
of Seller’s special warranty of title) waived by Buyer in writing or not
asserted on or before the expiration of the Examination Period;
 
(g)   easements, rights-of way, servitudes, permits, surface leases, defects,
irregularities, and other burdens, to the extent they do not materially
interfere with the value of the Assets or the operation or use or development of
the Assets as currently conducted by Seller;
 
(h)   all laws, rules, regulations and orders of Governmental Authority having
jurisdiction over the Assets, including, without limitation, rules and
regulations governing production rates and allowables, insofar as neither Seller
nor the Assets are in violation of any of the same;
 
(i)   vendors’, carriers’, warehousemen’s, repairmen’s, mechanics’, workmen’s,
materialmen’s, construction or other like privileges or liens which have expired
as a matter of law or arising by operation of law in the ordinary course of
business or incident to the construction or improvement of any property in
respect of obligations which are not yet due;
 
(j)   any other privilege, lien, claim, charge, encumbrance, contract,
agreement, instrument, obligation, defect, or irregularity affecting the Assets
relating to obligations not yet in default, which, individually or in the
aggregate, does not interfere materially with the value or the use of the
Assets, as currently used by Seller, does not prevent Buyer from receiving the
proceeds of production from the Assets, does not reduce the Net Revenue Interest
of any of the Wells, Leases, Units or PUDs to less than the Net Revenue Interest
set forth on Exhibit “A” and does not obligate Buyer to bear costs and expenses
relating to the maintenance, development and operation of any of the Wells,
Leases, Units or PUDs in any amount greater than the Working Interest set forth
on Exhibit “A” (unless the Net Revenue Interest for such Well, Leases, Units or
PUDs is greater than the Net Revenue Interest set forth in Exhibit “A” in the
same proportion as any increase in such Working Interest);
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33

--------------------------------------------------------------------------------

 
 
(k)   any privilege, mortgage, lien or encumbrance to be released at or prior to
Closing.
 
6.4   Notice of Title Defects; Title Defect Valuation.
 
(a)   If Buyer discovers any Title Defect affecting an Asset, Buyer shall
promptly notify Seller of such alleged Title Defect.  To be effective, such
notice (a “Title Defect Notice”) must (i) be in writing, (ii) be received prior
to the expiration of the Examination Period, (iii) describe the Title Defect in
reasonable detail (including any alleged variance in the Net Revenue Interest or
Working Interest), (iv) identify the specific Asset or Assets affected by such
Title Defect and (v) include the Title Defect Value, as reasonably determined by
Buyer acting in good faith.  Upon receipt of a timely Title Defect Notice, upon
request by Seller, Buyer shall promptly deliver to Seller copies of all data,
records, title reports, opinions and other information in Buyer’s possession or
control bearing upon or relating to the alleged Title Defect and its
determination of the Title Defect Value.
 
(b)   The value attributable to each Title Defect (the “Title Defect Value”)
shall be determined based upon the criteria set forth below:
 
(i)   If the Title Defect is a privilege or lien upon an Asset, the Title Defect
Value is the amount necessary to be paid to remove fully the privilege or lien
from the affected Asset.
 
(ii)   If the Title Defect asserted is that the Net Revenue Interest
attributable to a Well, Lease, Unit or PUD is less than that stated in Exhibit
“A” (and there is a corresponding and proportionate decrease in Working
Interest), then the Title Defect Value is the product of the Allocated Value
attributed to such Asset, multiplied by a fraction, the numerator of which is
the difference between the Net Revenue Interest applicable thereto set forth in
Exhibit “A” and the actual Net Revenue Interest, and the denominator of which is
the applicable Net Revenue Interest stated in Exhibit “A”.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
34

--------------------------------------------------------------------------------

 
 
(iii)    If the Title Defect represents an obligation, encumbrance, burden or
charge upon the affected Asset (including any increase in Working Interest for
which there is not a proportionate increase in Net Revenue Interest) and for
which the economic detriment to Buyer is unliquidated, the amount of the Title
Defect Value shall be determined by taking into account the Allocated Value of
the affected Asset, the portion of the Asset affected by the Title Defect, the
legal effect of the Title Defect, and the potential discounted economic effect
of the Title Defect over the life of the affected Asset.
 
(iv)     If a Title Defect does not adversely affect an Asset throughout the
entire productive life of such Asset or all depths as to all depths from below
the base of the Delaware Group Sands formation to the top of the Wolfcamp “Red”
Sand formation or their stratigraphic equivalents as reflected on by the
stratigraphic markers on Schedule 6.2 or their stratigraphic equivalents such
fact shall be taken into account in determining the Title Defect Value;
provided, however, that no Title Defect shall be asserted by Seller with respect
to the Chevy 17 Well and Big Joe 29 #1 Well solely because Seller does not own
marketable title below the base of the 3rd Bone Springs Formation.
 
(v)   The Title Defect Value of a Title Defect shall be determined without
duplication of any costs or losses included in another Title Defect Value
hereunder.
 
(vi)     Notwithstanding anything herein to the contrary, in no event shall a
Title Defect Value exceed the Allocated Value of the Wells, Leases and other
Assets affected thereby.
 
(vii)     Such other factors as are reasonably necessary to make a proper
evaluation.
 
(viii)    If the Title Defect is an un-obtained consent, then the Title Defect
Value shall be the Allocated Value of the affected Assets and the threshold and
deductible for Title Defects described in Section 6.7 shall not be applicable.
 
(ix)     If the Title Defect concerns a deficiency of net mineral acres, then
the Title Defect Value shall be calculated by the number of net mineral acres by
which Seller is deficient, multiplied by the per net mineral acre value
described in Schedule 6.4(b)(ix).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
35

--------------------------------------------------------------------------------

 
 
(x)   If the Title Defect concerns a remaining primary term shorter than three
(3) months after the Closing date for a Lease not currently held by production,
the Title Defect Value shall be the Allocated Value for such Lease, and if no
Allocated Value is provided for such Lease, then the Title Defect Value shall be
the applicable per net mineral acre value for such Lease multiplied by the
number of net mineral acres covered by such Lease, and the threshold and
deductible for Title Defects described in Section 6.7 shall not be applicable.
 
6.5   Remedies for Title Defects.  Subject to Section 2.4(b)(vii), 6.7 and
10.1(b)(iv) (and except with regard a breach of the special warranty of title
under the Assignment), the following shall be Buyer’s sole and exclusive remedy
with respect to Title Defects:
 
(a)   Upon the receipt of a Title Defect Notice from Buyer asserting an alleged
Title Defect, Seller shall have the option, but not the obligation, to attempt
to cure such Title Defect at Seller’s sole cost at any time prior to the
Closing.
 
(b)   With respect to any alleged Title Defect that is not reasonably cured on
or before the Closing and the Title Defect Value for such Asset equals or
exceeds the Allocated Value for such Asset, Seller shall have the option, but
not the obligation, to exclude the affected Asset from the Assets delivered at
Closing and the Purchase Price shall be reduced by the Allocated Value of such
affected Asset.
 
(c)   With respect to each alleged Title Defect that is not reasonably cured on
or before the Closing and the affected Asset has not been excluded from the
transaction pursuant to Section 6.5(b), the Purchase Price hereunder will be
reduced by an amount equal to the Title Defect Value thereof, and giving effect
to the criteria set out in Section 6.4(b) above.
 
(d)   (i) if Seller has not agreed on or before Closing upon the validity of an
asserted Title Defect, or has not agreed upon the Title Defect Value
attributable thereto, or (ii) if Buyer has not agreed upon whether a Title
Defect has been reasonably cured, then either party shall have the right to
elect by written notice, delivered before or after Closing, to have the validity
of such Title Defect, such Title Defect Value or the sufficiency of Seller’s
cure determined by an Independent Expert pursuant to Section 8.  The Assets to
which such dispute relates shall, nonetheless, be assigned and conveyed to Buyer
at Closing, but until resolved by such Independent Expert, the Title Defect
Value asserted by Buyer with regard thereto shall be withheld from the Closing
payment and retained by Buyer until such dispute is finally resolved as provided
in Section 8 hereof, which shall include, without limitation, an award of the
amounts withheld from Closing attributable to such Title Defect.  To the extent
the Independent Expert is determining the validity of a Title Defect, Seller
shall have ninety (90) days from the date the Independent Expert determines that
a Title Defect exists to cure such Title Defect.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
36

--------------------------------------------------------------------------------

 
 
(e)   Any Title Defect cured by Seller or for which Buyer receives a Purchase
Price adjustment or payment pursuant to this Section 6.5, shall constitute a
Permitted Encumbrance hereunder and under the Assignment.
 
6.6   Title Benefits.
 
(a)   Subject to Section 6.7, Seller shall be entitled to an upward adjustment
to the Purchase Price with respect to all Title Benefits of which Seller
provides Buyer notice (a “Title Benefit Notice”) in writing prior to the
expiration of the Examination Period in an amount (the “Title Benefit Value”)
mutually agreed upon by the parties determined in accordance with the criteria
set forth in Section 6.4(b).  Notwithstanding the foregoing, if the Title Defect
Value is disputed, no upward adjustment to the Purchase Price shall be made for
Title Benefits until the Title Defect Value has been determined in accordance
with Section 6.5.  A party identifying a Title Benefit affecting the Assets
shall promptly deliver such a Title Benefit Notice to the other party in the
same form and including the same information as specified in Section 6.4(a) for
a Title Defect Notice.  The term “Title Benefit” shall mean Seller’s Net Revenue
Interest in any Well that is greater than the Net Revenue Interest set forth in
Exhibit “A”, or Seller’s Working Interest in any Well that is less than the
Working Interest set forth in Exhibit “A” (without a proportionate decrease in
the Net Revenue Interest).  A Title  Benefit Value agreed to by Buyer and Seller
shall offset the aggregate Title Defects Values only, and shall not be a direct
increase to the Purchase Price.
 
(b)   If, with respect to an asserted Title Benefit, the parties have not agreed
on the validity of the Title Benefit or the Title Benefit Value attributable
thereto on or before Closing, then either party shall have the right to elect by
written notice to the other party to have the validity of the Title Benefit
and/or the Title Benefit Value determined by an Independent Expert pursuant to
Section 8.  If the validity of the Title Benefit and/or the Title Benefit Value
is not determined pursuant to this Agreement by the Closing, the Title Benefit
Value determined by Seller, acting reasonably and in good faith, shall offset
the aggregate Title Defect Value.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
37

--------------------------------------------------------------------------------

 
 
6.7   Limitation of Remedies for Title Defects; Title Benefits.  Notwithstanding
anything to the contrary contained in this Agreement, if (a) the Title Defect
Value for a given Title Defect, or the Title Benefit Value of a given Title
Benefit, does not exceed $35,000, then no claim or adjustment to the Purchase
Price shall be made for such Title Defect or Title Benefit; (b) if the aggregate
net value of all uncured Title Defects does not exceed 3/4ths of one percent
(0.75%) of the Purchase Price under this Agreement (the “Aggregate Title
Threshold”), then no adjustment of the Purchase Price shall be made therefor and
(c) if the aggregate net value of all uncured Title Defects and Title Benefits
exceeds the Aggregate Title Threshold (prior to any adjustments thereto), then
the Purchase Price shall only be adjusted by the amount of excess net value of
all uncured Title Defects and Title Benefits.
 
7.   Environmental Matters
 
7.1   Environmental Review.
 
(a)   Buyer shall have the right to conduct an environmental review of the
Assets prior to the expiration of the Examination Period (“Buyer’s Environmental
Review”).  Seller shall provide Buyer such access as it may reasonably request
to the Assets (if operated by Seller) and the environmental data in Seller’s
files for the Assets.  With respect to Assets not operated by Seller, Seller
agrees, at no cost or expense to Seller, to request that the operator of such
Assets grant Buyer (and shall use commercially reasonable and diligent efforts
to obtain for Buyer) such access.  Except in connection with any applicable
representations and warranties under this Agreement, Seller makes no
representations or warranties whatsoever as to the accuracy, completeness or
reliability of any such environmental information, and Buyer relies and depends
on and uses any and all such environmental information, review or inspection
exclusively and entirely at its own risk and without any recourse to Seller
whatsoever.
 
(b)   The cost and expense of Buyer’s Environmental Review shall be borne solely
by Buyer.  The scope of work comprising Buyer’s Environmental Review conducted
at or upon the Leases, Units and Wells shall not include any intrusive test or
procedure without the prior written consent of Seller.  Buyer shall (i) consult
with Seller before conducting any work comprising such Buyer’s Environmental
Review, (ii) perform all such work in a safe and workmanlike manner and so as to
not unreasonably interfere with operations of the Assets, and (iii) comply with
all applicable laws, rules, and regulations of applicable Governmental
Authority.  Seller shall be responsible for obtaining any third party consents
that are required in order to perform any work comprising Buyer’s Environmental
Review.  Buyer shall consult with Seller prior to requesting each such third
party consent and Seller shall reasonably cooperate with Buyer in connection
with obtaining such consent.  Seller shall have the right to have a
representative or representatives accompany Buyer at all times during Buyer’s
Environmental Review, and Buyer shall give Seller notice not more than seven (7)
days and not less than 24 hours before any visits by Buyer to the Assets, and
Buyer shall seek and obtain Seller’s prior consent (which shall not be
unreasonably withheld) before it enters upon the Assets.  With respect to any
samples taken in connection with Buyer’s Environmental Review, Buyer shall take
split samples, providing one of each such sample, properly labeled and
identified, to Seller.  Buyer hereby agrees to release, defend, indemnify and
hold harmless Seller Parties from and against all Claims arising from, out of or
in connection with, or otherwise relating to, Buyer’s Environmental Review,
REGARDLESS OF THE SOLE, JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE (BUT NOT ANY
SELLER PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), STRICT LIABILITY,
REGULATORY LIABILITY, STATUTORY LIABILITY, BREACH OF CONTRACT, BREACH OF
WARRANTY OR OTHER FAULT OR RESPONSIBILITY OF A SELLER PARTY OR ANY OTHER PERSON
OR PARTY. Provided, however, the mere discovery of information by Buyer in
connection with Buyer’s Environmental Review relating to the condition of the
Assets prior to Buyer’s Environmental Review, shall not itself give rise to an
indemnity obligation owed by Buyer to Seller pursuant to this Section 7.1(b).
 
 
 
 
 
 
38

--------------------------------------------------------------------------------

 
 
(c)   Unless otherwise required by applicable law, Buyer shall treat all matters
revealed by Buyer’s Environmental Review, including, without limitation, any
analyses, compilations, studies, documents, reports or data prepared or
generated from such review (the “Environmental Information”), as confidential,
and Buyer shall not disclose any Environmental Information to any Governmental
Authority or other third party without the prior written consent of Seller
except as hereafter provided or to the extent required by applicable law.  Buyer
may use the Environmental Information only in connection with the transactions
contemplated by this Agreement.  The Environmental Information shall be
disclosed by Buyer to only those persons who need to know the Environmental
Information for purposes of evaluating the transaction contemplated by this
Agreement, and who agree to be bound by the terms of this Section 7.1(c).  If
Buyer or any third party to whom Buyer has provided any Environmental
Information is requested, compelled or required to disclose any of the
Environmental Information by a court or other Governmental Authority, or
disclosure is otherwise required under applicable law, Buyer shall provide
Seller with prompt notice sufficiently prior to any such disclosure so as to
allow Seller to file for any protective order, or seek any other remedy, as it
deems appropriate under the circumstances.  If this Agreement is terminated
prior to the Closing, upon Seller’s request Buyer shall promptly deliver the
Environmental Information, and all copies thereof and works based thereon, to
Seller, which Environmental Information shall become the sole property of
Seller; provided, however, that Buyer may retain copies thereof in the event of
a dispute between Buyer and Seller arising from or relating to such
termination.  Upon request, Buyer shall provide copies of the Environmental
Information to Seller without charge.  The terms and provisions of this Section
7.1(c) shall survive any such termination of this Agreement, notwithstanding
anything to the contrary.  In no event shall an Environmental Defect be the
basis for adjusting the Purchase Price by an amount greater than the Allocated
Value of the Asset(s) affected thereby.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
39

--------------------------------------------------------------------------------

 
 
(d)   NORM.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, BUYER
ACKNOWLEDGES THAT SOME OILFIELD PRODUCTION EQUIPMENT LOCATED ON THE PROPERTIES
MAY CONTAIN ASBESTOS AND/OR NATURALLY OCCURRING RADIOACTIVE MATERIAL
(“NORM”).  IN THIS REGARD, BUYER EXPRESSLY UNDERSTANDS THAT NORM MAY AFFIX OR
ATTACH ITSELF TO THE INSIDE OF WELLS, MATERIALS AND EQUIPMENT AS SCALE OR IN
OTHER FORMS, AND THAT WELLS, MATERIALS AND EQUIPMENT LOCATED ON THE PROPERTIES
DESCRIBED HEREIN MAY CONTAIN NORM AND THAT NORM-CONTAINING MATERIALS MAY BE
BURIED OR MAY HAVE BEEN OTHERWISE DISPOSED OF ON THE PROPERTIES COMPRISING OR
SITUATED ON THE ASSETS.  BUYER ALSO EXPRESSLY UNDERSTANDS THAT SPECIAL
PROCEDURES MAY BE REQUIRED FOR THE REMOVAL AND DISPOSAL OF ASBESTOS AND NORM
FROM THE PROPERTIES WHERE THEY MAY BE FOUND.  BUYER SHALL, BY CLOSING ITS
PURCHASE OF THE PROPERTIES, ASSUME ALL LIABILITY WHEN SUCH ACTIVITIES ARE
PERFORMED AFTER CLOSING.
 
7.2   Environmental Definitions.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
40

--------------------------------------------------------------------------------

 
 
(a)   The term “Environmental Defect” shall mean, with respect to any given
Asset, a material violation of Environmental Laws in effect as of the Effective
Time in the jurisdiction in which such Asset is located.
 
(b)   The term “Governmental Authority” shall mean any tribal authority, the
United States and any state, county or parish, city and political subdivisions
that exercises jurisdiction, and any agency, judicial authority, department,
board, commission or other instrumentality thereof.
 
(c)   The term “Environmental Laws” shall mean all laws, statutes, ordinances,
court decisions, rules and regulations of any Governmental Authority pertaining
to the protection or preservation of the environment, human health, wildlife or
environmentally sensitive areas, the remediation of contamination or the
handling, transportation, disposal or release into the environment of hazardous
or toxic materials, including, without limitation, those arising under or by
virtue of any Lease, Contract, agreement, document, permit, applicable statute
or rule or regulation or order of any governmental authority, specifically
including, without limitation, any governmental request or requirement to take
any clean-up or other action with respect to any of the Assets or premises,
including hazardous waste cleanup costs under the Solid Waste Disposal Act, 42
U.S.C. 6901, et seq., the Resource Conservation and Recovery Act of 1976 (RCRA),
42 U.S.C. 6901, et seq., the Comprehensive Environmental Response, Compensation
and Liability Act (CERCLA), 42 U.S.C. 9601, et seq., the Clean Air Act, the
Federal Water Pollution Control Act, the Toxic Substances Act, the Oil Pollution
Act of 1990, and any and all provisions of the Texas Water Code and the Texas
Natural Resources Code, or similar laws, rules or regulations.
 
(d)   The term “Environmental Defect Value” shall mean, with respect to an
Environmental Defect, the estimated costs and expenses to correct or remediate
such Environmental Defect, and to satisfy any and all liabilities, damages,
fines or penalties associated therewith.
 
7.3   Notice of Environmental Defects.  If Buyer discovers any alleged
Environmental Defect affecting the Assets, Buyer shall promptly notify Seller of
such alleged Environmental Defect.  To be effective, such notice (an
“Environmental Defect Notice”) must (a) be in writing, (b) be received prior to
the expiration of the Examination Period, (c) describe the Environmental Defect
in reasonable detail, including (i) the written conclusion of Buyer that an
Environmental Defect exists and (ii) if then known by Buyer, a citation of the
Environmental Laws alleged to be violated and a summary of the related facts
that substantiate such violation (but failure to cite all applicable laws shall
not reduce or relieve the Seller in connection with liability thereunder nor the
calculation of the Environmental Defect Value thereof), (d) identify the
specific Asset or Assets affected by such Environmental Defect, (e) indicate the
procedures recommended to correct the Environmental Defect and (f) indicate
Buyer’s reasonable good faith estimate of the Environmental Defect Value, for
which Buyer would agree to adjust the Purchase Price in order to accept such
Environmental Defect if Seller elected Section 7.4(c) as the remedy
therefor.  Any matters that may otherwise constitute Environmental Defects, but
of which Seller has not been specifically notified by Buyer in accordance with
the foregoing, together with any environmental matter that does not constitute
an Environmental Defect, shall be deemed to have been waived by Buyer for all
purposes and constitute an Assumed Obligation of Buyer at Closing, except for a
breach of the representations and warranties in Section 5.1(j) above. Upon
receipt of a timely Environmental Defect Notice, upon request by Seller, Buyer
shall promptly deliver to Seller copies of all data, records, reports, opinions
and other information in Buyer’s possession or control bearing upon or relating
to the alleged Environmental Defect and its determination of the Environmental
Defect Value, including, without limitation, site plans showing the location of
sampling events, boring logs and other field notes describing the sampling
methods utilized and the field conditions observed, chain of custody
documentation and laboratory reports.
 
 
 
 
 
 
 
 
 
 
 
 
41

--------------------------------------------------------------------------------

 
 
7.4   Remedies for Environmental Defects.  Subject to Sections 7.5 and 7.6, the
following shall be Buyer’s sole and exclusive remedy with respect to alleged
Environmental Defects:
 
(a)   Upon the receipt of an Environmental Defect Notice from Buyer asserting an
alleged Environmental Defect, Seller shall have the option, but not the
obligation, to attempt to cure such Environmental Defect at any time prior to
the Closing.
 
(b)   With respect to any alleged Environmental Defect that is not reasonably
cured on or before the Closing, and the Environmental Defect Value for such
Asset exceeds the Allocated Value for such Asset, either Party may have the
option, but not the obligation, to exclude the affected Asset from the Assets
delivered at Closing and the Purchase Price shall be reduced by the Allocated
Value of such affected Asset.
 
(c)   With respect to each alleged Environmental Defect that is not reasonably
cured on or before the Closing and has not been excluded from the transaction
pursuant to Section 7.4(b), the Purchase Price hereunder will be reduced by an
amount equal to the Environmental Defect Value thereof.
 
(d)   (i) If Seller has not objected in writing to Buyer on or before Closing
upon the validity of any asserted Environmental Defect, or  on the Environmental
Defect Value therefor or (ii) if Buyer has not agreed upon whether an alleged
Environmental Defect has been reasonably cured, then either party by written
notice to the other party, delivered before or after Closing, shall have the
right to elect to have the validity of the asserted Environmental Defect, the
Environmental Defect Value for such Environmental Defect, or the sufficiency of
Seller’s cure determined by an Independent Expert pursuant to Section 8.  If the
asserted Environmental Defect Value exceeds the Allocated Value of the Asset,
then the affected Asset shall be withheld from Closing and not conveyed to Buyer
(and the Purchase Price shall be reduced by the Allocated Value, subject to the
resolution of such dispute by the Independent Expert under Section 8 (and if the
Environmental Defect Value is less than the Allocated Value of the affected
Asset, then such Asset shall be conveyed to Buyer at Closing, but Buyer shall
withhold the  Environmental Defect Value asserted by Buyer from the Closing
payment, subject to the resolution of such dispute by the Independent Expert
under Section 8).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
42

--------------------------------------------------------------------------------

 
 
7.5   Limitation of Remedies for Environmental Defects.  Notwithstanding
anything to the contrary contained in this Agreement, (a) if the Environmental
Defect Value for a given Environmental Defect does not exceed $35,000, then no
adjustment to the Purchase Price shall be made for such Environmental Defect,
(b) if the aggregate of all Environmental Defect Values exceeding $35,000 for
uncured Environmental Defects not waived by Buyer and aggregate net does not
exceed one and one-half percent (1.5%) of the Purchase Price under this
Agreement (the “Aggregate Environmental Defect Threshold”), then no adjustment
of the Purchase Price shall be made therefor and (c)  if the aggregate of all
Environmental Defect Values exceeding $35,000 for uncured Environmental Defects
not waived by Buyer in writing exceeds the Aggregate Environmental Defect
Threshold, then the Purchase Price shall only be reduced by the amount of such
excess Environmental Defect Values.
 
7.6   Post-Closing Environmental Indemnification by Buyer.  Subject to Section
3.3(b) and the representations and warranties in Section 5.1(j)(iii) above, and
other than Retained Obligations, upon Closing, Buyer shall, with respect to the
Assets conveyed to Buyer at Closing and without regard to whether same arise or
occur prior to or after the Effective Time (except as otherwise expressly
provided below) assume and indemnify, defend and hold Seller Parties harmless
from and against any and all Claims caused by, resulting from, or relating or
incidental to all matters affecting health, safety and the environment
(excluding, however, fines and penalties owed by Seller with respect to
ownership or operation of the Assets prior to the Effective Time) including
without limitation Claims relating to:
 
(a)   environmental pollution or contamination on the Assets conveyed to Buyer
at Closing, including pollution or contamination of the soil, groundwater or air
by Hydrocarbons, drilling fluid and other chemicals, brine, produced water, NORM
or any other substance, and other violation of Environmental Laws;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
43

--------------------------------------------------------------------------------

 
 
(b)   underground injection activities and waste disposal on the Assets conveyed
to Buyer at Closing;
 
(c)   clean-up responses, and the cost of remediation, control, assessment or
compliance with respect to surface and subsurface pollution caused by spills,
pits, ponds, lagoons or storage tanks solely insofar as attributed to the Assets
conveyed to Buyer at Closing;
 
(d)   disposal of any hazardous substances and wastes regulated under
Environmental Laws, materials and products generated by or used in connection
with the ownership, development, operation or abandonment of any part of the
Assets; and
 
(e)   non-compliance of the Assets conveyed to Buyer at Closing
under  Environmental Laws,
 
REGARDLESS OF THE SOLE, JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE (BUT NOT
SELLER’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT), BREACH OF CONTRACT, BREACH OF
WARRANTY, STRICT LIABILITY, REGULATORY LIABILITY, STATUTORY LIABILITY OR OTHER
FAULT OR RESPONSIBILITY OF SELLER OR ANY OTHER PERSON OR PARTY.
 
7.7   Condition of the Assets.  Subject to Section 3.3(b) and the
representations and warranties in Section 5.1(j) and 5.1(v) above, and other
than Retained Obligations, upon the Closing, Buyer specifically assumes the
environmental risk and environmental condition of the Assets and the physical
condition of any equipment or personal property included as part of the Assets
and shall inspect the Assets prior to Closing, or if such right of inspection is
not exercised, shall be deemed to have waived such right.  Buyer stipulates that
any such inspection, if made, shall cover but not be limited to the physical and
environmental condition, both surface and subsurface, of the Assets.  It is
expressly recognized by Buyer that the  lands, along with the facilities and
equipment located thereon, having been used in connection with oil, gas and
water production, treatment, storage and disposal activities, and may contain
NORM, asbestos and other hazardous substances as a result of these
operations.  Following the Closing, and subject to Section 3.3(b) and the
representations and warranties in Section 5.1(j)(iii) above, and other than
Retained Obligations, the generation, formation, or presence of NORM, asbestos
or other hazardous substances in or on the Assets shall be the sole
responsibility of Buyer, and upon Closing, with regard to the Assets actually
conveyed to Buyer, Buyer and all future assignees and successors of Buyer shall
defend, indemnify and hold Seller Parties harmless from and against any and all
Claims in any way arising from, out of or in connection with, or otherwise
relating to, the presence of NORM, asbestos or other hazardous substances,
without regard to whether such NORM, asbestos or other hazardous substance was
in place before or after the Effective Time, and REGARDLESS OF THE SOLE, JOINT,
CONCURRENT OR COMPARATIVE NEGLIGENCE (BUT NOT SELLER’S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT), BREACH OF CONTRACT, BREACH OF WARRANTY, STRICT LIABILITY,
REGULATORY LIABILITY, STATUTORY LIABILITY OR OTHER FAULT OR RESPONSIBILITY OF
SELLER OR ANY OTHER PERSON OR PARTY.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
44

--------------------------------------------------------------------------------

 
 
7.8   Waiver.  Buyer, with and upon Closing, and subject to Section 3.3(b) and
the representations and warranties in Section 5.1(j)(iii) above, and other than
Retained Obligations waives for all purposes all objections associated with the
environmental condition of the Assets, unless raised by proper notice within the
Examination Period, and Buyer (and on behalf of Buyer Parties and their
successors and assigns) irrevocably waives any and all such unasserted Claims
they may have against the Seller Parties associated therewith, except with
regard to the representations and warranties under Section 5.1(j)(iii) above.
 
8.   Independent Experts
 
8.1   Selection of Independent Experts.  Any disputes regarding Title Defects,
Title Benefits, Title Defect Values, Title Benefit Values, Environmental
Defects, Environmental Defect Values, the cure of Title Defects or Environmental
Defects, any other matter for which Buyer or Seller is indemnified hereunder,
and the calculation of the Final Settlement Statement, or revisions thereto,
may, as herein provided, be submitted by a party, with written notice to the
other party, to an independent expert (the “Independent Expert”), who shall
serve as the sole and exclusive arbitrator of any such dispute.  The Independent
Expert, with regard to any disputes regarding Title Defect Values, Title Benefit
Values, Environmental Defects, Environmental Defect Values, the cure of Title
Defects or Environmental Defects, shall be selected upon his field of expertise
with the mutual agreement of Buyer and Seller and shall have both knowledge and
experience involving properties in the regional area in which the properties are
located.  If the parties are unable to agree on an Independent Expert, Seller
shall appoint an arbitrator of its choice and Buyer shall appoint an arbitrator
of its choice (each, a “Party Appointed Arbitrator”).  the two Party Appointed
Arbitrators shall in turn appoint a third to be the Independent Expert.
 
8.2   Location of Proceeding.  All proceedings under this Section 8 shall be
conducted in Houston, Texas.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
45

--------------------------------------------------------------------------------

 
 
9.   Additional Covenants
 
9.1   Operations Prior to Closing.  After the date of this Agreement and prior
to the Closing, as to any of the Assets operated by Seller, Seller shall use,
operate and maintain the Assets in substantially the same manner in which they
have been used, operated and maintained prior to this Agreement, in accordance
with all applicable laws and regulations, in accordance with common industry
standards and as a reasonable and prudent operator.  During the period from the
Effective Time until Closing, Seller shall have no liability to Buyer for Claims
sustained or liabilities incurred with respect to the Assets, REGARDLESS OF THE
SOLE, JOINT, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY, REGULATORY
LIABILITY, STATUTORY LIABILITY, BREACH OF CONTRACT (EXCLUDING BREACH OF THIS
AGREEMENT BY SELLER), BREACH OF WARRANTY OR OTHER FAULT OR RESPONSIBILITY OF
SELLER OR ANY OTHER PERSON OR PARTY, EXCEPT TO THE EXTENT CAUSED BY THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLER.  After the date hereof and prior to
Closing, Seller may (without Buyer’s consent) enter into agreements or
transactions in relation to the Assets which (a) individually involve a
reasonably anticipated cost of less than $50,000, individually, and do not
impose any area of mutual interest, non-compete, drilling or surface
restrictions, and (b) are entered into in the ordinary course of business,
consistent with past practices.  With Closing, Seller is relieved of and shall
not be obligated for any expenditures attributable to periods after the
Effective Time, and shall recover any such charges and expenses as part of the
Closing Statement and Final Settlement Statement adjustments, as
appropriate.  Except with respect to those matters described above, if any
material expenditure, contract or agreement is proposed or contemplated, Seller
shall promptly submit such proposal to Buyer for concurrence with Seller’s
recommendation.  Buyer will make any required election under its independent
evaluation and, if the Closing occurs and such Assets are conveyed to Buyer,
shall assume the cost and risk of any consequences which arise as a result of
Buyer’s election to participate or Buyer’s failure to timely elect or election
to not participate in or not approve an operation and not pay such expenditure,
without regard to whether Closing occurs.  Failure of Buyer to timely respond to
an election request (which election request shall be provided to Buyer no later
than ten (10) business  days prior to the date such election must be made),
shall be deemed an election by Buyer to accept and agree to the proposed
election proposed (and participate in the proposed operation).  Additionally,
after the execution of this Agreement and prior to Closing, Seller shall have
the right to make any changes, repairs or modifications to the Assets, and incur
any related expenditure deemed necessary by Seller, insofar as the same is
necessary to prevent or respond to an emergency involving serious risk of loss
of or damage to life, property, or the environment, or maintain economic
production from any Lease, Well or Unit.  With regard to the preceding sentence,
Seller shall notify Buyer as soon as possible of the emergency and Seller’s
response thereto and shall have the right to cause or effect such expenditure or
action with or without Buyer’s approval, and recover such costs in the Closing
Statement or Final Settlement Statement adjustments, as appropriate. Prior to
Closing, Seller shall (i) consult with and advise Buyer regarding all material
matters concerning the operation, management, and administration of the Assets
and (ii) obtain Buyer’s written approval before voting or making any election
under any operating, unit, joint venture, or similar agreement. Furthermore,
Seller will not, without the prior written consent of Buyer, (x) enter into any
agreement or arrangement transferring, selling, abandon, forfeit, or encumbering
any of the Assets, (y) grant any preferential or other similar right to purchase
any of the Assets, enter into any areas of mutual interest, non-compete
agreements, drilling or surface restrictions, (z) enter into any new production
sales, gathering, transportation, treating, or processing  contract extending
beyond the Closing Date and not terminable on thirty (30) days’ notice or less,
without penalty or liability, (aa) amend or terminate any Contract, (bb) take
any other action or election with regard to the Assets equal to or in excess
$50,000, net to the interest in the Assets to be conveyed Buyer.  Promptly after
execution of this Agreement, Seller shall notify the holders of the Consents of
the transactions contemplated herein and request their consent.  Buyer shall
have the right to review and approve the form of such notices, such approval not
to be unreasonably withheld.  Buyer and Seller each agree to reasonably
cooperate with efforts to obtain such required Consents.
 
 
 
 
 
 
 
 
 
 
 
 
 
46

--------------------------------------------------------------------------------

 
 
9.2   Preferential Rights to Purchase and Consents.
 
(a)   Notice.  Promptly after execution of this Agreement (and in no event later
than five (5) days after execution), Seller shall (i) use the Allocated Values
set forth on Schedule 2.3 to provide each required Preferential Right
notification, in accordance with the terms thereof, and (ii) send to any party
whose consent or approval is required in connection with the transfer and
conveyance of the Assets to Buyer as contemplated herein a written request for
such consent or approval, in accordance with the requirements of the Lease,
Contract, agreement, instrument, or provision giving rise to the need for such
consent or approval.
 
(b)   Third Party Exercise.  If a third party gives valid and timely notice of
its exercise of a Preferential Right to purchase any of the Assets, the affected
Assets will not be sold to Buyer and the Purchase Price will be adjusted by the
Allocated Value of the affected Assets.  If Buyer has allocated a positive
Allocated Value to the Preferential Right Asset, the Purchase Price will be
reduced by the dollar amount of the positive allocation.  If Buyer has allocated
a negative Allocated Value to the Preferential Right Asset, the Purchase Price
will be increased by the absolute value of the negative allocation.  Buyer
remains obligated to purchase the remainder of the Assets not affected by
exercised Preferential Rights without reduction to the Purchase Price
attributable to such unaffected Assets in accordance with the terms of this
Agreement.
 
(c)   Third Party Failure to Purchase.  If a third party gives notice of its
intent to exercise a Preferential Right to purchase any of the Assets, but does
not close the purchase for any reason either before or within a reasonable time
after Closing, or if a third party fails to give valid and timely notice of its
exercise of a Preferential Right to purchase any of the Assets  within the
express time provided for such notice, then there shall promptly be an
additional Closing between Seller and Buyer for such portion of the Assets
pursuant to the terms of this Agreement, by which Seller will transfer the
affected portion of the Assets to Buyer and Buyer will pay Seller that portion
of the Purchase Price attributable thereto (or in the case of a negative
allocation, Seller will refund the absolute value of the negative amount to
Buyer) (in each case subject to adjustment in accordance with Section 2.4).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
47

--------------------------------------------------------------------------------

 
 
9.3   Compliance.  From and after Closing, Buyer shall comply with contracts,
agreements, Leases and applicable laws, ordinances, rules and regulations and
shall promptly obtain and maintain all permits required by Governmental
Authorities in connection with the Assets purchased.
 
9.4   Employees.  Except for those persons listed on Schedule 9.4, Buyer shall
not contact or communicate with Seller’s employees until Closing; provided,
however, Buyer shall be permitted and allowed to discuss employment or offer to
employ or employ any non-employee contract field personnel and contract land
services providers promptly after execution of this Agreement; and provided,
further, that this provision shall not apply to any employee of Seller who
responds to a public posting or advertisement for employment with Buyer.
 
9.5   Non-Compete.  Seller, and all its parent company, sister companies,
affiliates, and any direct or indirect majority owned and controlled
subsidiaries or affiliates, and subsidiaries agree to forego, directly or
indirectly, (i) top leasing any of the acreage currently covered by any of the
Leases during the Restricted Period (as defined below), (ii) purchasing,
farming-in or otherwise acquiring, directly or indirectly, during the Restricted
Period (as defined below) of any oil and gas leases, oil, gas and mineral
leases, working interests, production payments, net profits interests, fee
mineral interests, royalty interests, overriding royalty interests, non-working
and carried interests, reversionary interests, possibilities of reverter,
conversion rights and options, operating rights and other interests in land,
including, without limitation, any rights and interests in any unit or pooled
area, and purchasing of any oil, gas and condensate wells within a radius of one
(1) mile from each of the Wells existing as of the Closing Date or within a
radius of one (1) mile from the boundaries of each of the Leases (the area
described in subparts (i) and (ii) above are collectively referred to as the
“Restricted Area”); and (iii) all activities related to exploration, drilling,
development, production, marketing and/or selling of hydrocarbons produced from
the Restricted Area for a period of one (1) year after the Closing Date (such
period commencing on the Closing Date and expiring one (1) year thereafter is
referred to as the “Restricted Period”) without the express written consent of
Buyer.  Acceptance by Buyer to particular exceptions to this clause will not
constitute waiver of this clause.  Seller acknowledges that the restrctions and
covenants set forth herein constitute valuable consideration for Buyer’s
agreement to enter into this Agreement and consummate the transactions
contemplated herein, and Buyer would not have entered into this Agreement but
for Seller’s agreement to the provisions of this Section 9.5.  It is also agreed
that in addition to any other rights or remedies that Buyer have have at law or
in equity, Buyer shall have the continuing right to specific enforcement and
injunctive relief, to enforce the provisions of this Section 9.5.  Seller shall
cause its affiliates and subsidiaries to comply with, assume and be bound by the
provisions of this Section 9.5, and Seller shall be jointly and severally liable
for any breach of these provisions by any of its affiliates or subsidiaries.
Provided, however, this Section 9.5 shall not apply to Assets retained by Seller
because they have been excluded from the transaction contemplated by this
Agreement pursuant to and in compliance with the terms of this Agreement.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
48

--------------------------------------------------------------------------------

 
 
9.6   Financial Information and Audit Cooperation.  After execution of this
Agreement, and continuing thereafter including for a period of twelve (12)
months following Closing Date, Seller agrees to make available to Buyer, during
normal business hours and in such a manner as not to unreasonably interfere with
the normal operation of the business of Seller or any Affiliate of Seller, any
and all existing information and documents in the possession of Seller or any of
its Affiliates relating to the Assets that is required to comply with Buyer’s or
any of its Affiliates’ financial reporting requirements under the Securities Act
of 1933, as amended, the Securities and Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder by the United States Securities
and Exchange Commission (the “SEC”), including but not limited to Rule 3-05 of
Regulation S-X and related or applicable rules and regulations of the
SEC.  Without limiting the generality of the foregoing, Seller agrees to the
following:
 
(a)   Seller will, at Buyer’s  sole cost and expense, use its commercially
reasonable efforts (i) to assist Buyer and Buyer’s auditors in preparing audited
financial statements and any pro forma financial statements and other financial
data related to the Assets (“Financial Statements”) for the period of time of
November 1, 2011 through and including December  31, 2012 (“Comstock Time
Period”), and, (ii) to provide Buyer unaudited statements of oil and gas
revenues and direct operating expenses for the Seller for each subsequent fiscal
quarter after December 31, 2012 ended at least 45 days before the Closing Date,
including providing on or before April 12, 2013 (x) access to the Seller’s
financial books and records required to comply with SEC reporting requirements
to Buyer and its designated auditors for the periods set forth above, and (y) a
customary representation letter  to Buyer ‘s designated auditors, in each case,
applicable to the Comstock Time Period.  If Seller should fail to meet its
obligations set forth above in (x) and/or (y), then Buyer may extend the Closing
Date up to thirty (30) days.
 
(b)   Seller will, at Buyer’s sole cost and expense, provide and use its
commercially reasonable efforts to have its accountants, counsel, agents and
other third parties to assist Buyer with regard to the preparation of Financial
Statements for the period of time after the Comstock Time Period s, by no later
than thirty (30) calendar days after the Closing Date.
 
(c)   Seller will, at Buyer’s sole cost and expense, use its commercially
reasonable efforts to assist Buyer with information for Buyer’s financing
arrangements with regard to the Assets including but not limited to its
commercially reasonable efforts to cause its independent reserve engineers to
deliver customary “comfort letters” with respect to the Assets proved reserves
in connection with Buyer’s financing arrangements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
49

--------------------------------------------------------------------------------

 
 
(d)   Seller will, at Buyer’s sole cost and expense, use its commercially
reasonable efforts  (i) to assist Buyer and its designated auditors in obtaining
access from Eagle Oil and Gas Co., Eagle Wolfbone Energy Partners, L.P. , and
Eagle Oil & Gas Partners, L.L.C. (collectively referred to as “Eagle”) to the
required financial books and records of Eagle that will permit Buyer to prepare
the Financial Statements for the period from the January 1, 2011 through October
31, 2011 (“Eagle Time Period”) and (ii) to cause Eagle to provide a customary
representation letter applicable to the Eagle Time Period by not later than
April 12, 2013.  If Eagle should fail perform the requirements set forth above
in (i) and/or (ii), then Buyer may extend the Closing Date up to thirty (30)
days.
 
(e)   As soon as reasonably practicable after execution of this Agreement,
Seller shall provide Buyer with any reserve evaluation material covering the
Assets and any additional Financial Statements for period after the Effective
Time, excepting any Excluded Assets, in Sellers’ possession that is reasonably
required of the Buyer to comply with SEC reporting requirements.
 
(f)   Without limiting the generality of the foregoing, Seller will use
commercially reasonable efforts after execution of this Agreement and for twelve
(12) months following the Closing Date  to cooperate with Buyer and any of its
Affiliates, or as reasonably requested by Buyer, the independent auditor chosen
by Buyer (“Buyer’s Auditors”), in connection with the audit or review of any
financial statements with respect to the Assets that Buyer or any of its
Affiliates reasonably requires to comply with its financial reporting
requirements with the SEC reporting requirements.  Seller’s cooperation will
include, without limitation, (i) such reasonable access to Seller’s employees or
agents as may be reasonably required by Buyer’s auditor to perform an audit in
accordance with generally accepted auditing standards, and (ii) delivery of one
or more customary representation letters from Seller and Seller’s predecessor in
interest to the Assets to Buyer’s Auditor that are requested by Buyer and
required of Seller to allow such auditors to complete an audit, review of any
interim quarterly financial statements, or as required of Seller for subsequent
SEC filings by Buyer, and to issue an opinion as required by the SEC with
respect to any audit or review of those financial statements required pursuant
to this Section 9.6.
 
In relation to the filing of Financial Statements for the calendar years 2011
and 2012, Buyer agrees to the following:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50

--------------------------------------------------------------------------------

 
 
(x)  Buyer will file within three (3) business days following the execution of
this Agreement a request to the SEC for an SEC Waiver (as that term is defined
in Section 10.1(b)(vii));
 
(y)  Subject to Seller’s and Eagle’s timely compliance with the requirements set
forth in Section 9.6 above, Buyer will use commercially reasonable efforts to
obtain an audit of the Financial Statements on  the same date as the date of
Seller’s and Eagle’s representation letters; and
 
(z)  Buyer will reimburse Seller, within ten (10) Business Days after request
therefor, for any reasonable costs and expenses incurred by Seller in complying
with the provisions of this Section 9.6.
 
10.   Closing, Termination and Final Adjustments
 
10.1   Conditions Precedent.  Each party’s obligation to consummate the
transactions contemplated by this Agreement is subject to the satisfaction of
the following:
 
(a)   The obligations of Seller to consummate the transactions provided for
herein are subject, at the option of Seller, to the fulfillment on or prior to
the Closing Date of each of the following conditions:
 
(i)   The representations and warranties of Buyer herein contained shall be true
and correct in all material respects on the Closing Date (except that those
representations and warranties of Buyer that are qualified by materiality shall
be true and correct in all respects), as though made on and as of such date,
except that representations which by their terms are made as of a specified date
shall be true and correct as of the date so specified, and Buyer shall have
delivered to Seller a certificate, dated as of the Closing Date, to that effect.
 
(ii)   Buyer shall have performed and complied in all material respects with the
duties, obligations and covenants under this Agreement required to be performed
or complied with by it at or prior to Closing, and Buyer shall have delivered to
Seller a certificate, dated as of the Closing Date, to that effect.
 
(iii)     No suit, action or other proceeding shall be pending or threatened
that seeks to, or could reasonably result in a judicial order, judgment or
decree that would, restrain, enjoin or otherwise prohibit the consummation of
the transactions contemplated by this Agreement, other than an action or
proceeding instituted or threatened by Seller or any of its affiliates.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
51

--------------------------------------------------------------------------------

 
 
(iv)    All Consents shall have been made, obtained or waived by the other party
or parties thereto, or the time period by which such consents were required to
be made, given or withheld have expired without action by the party whose
consent is required.  Provided, however, if this condition is not satisfied,
either Party shall have the option to treat the affected Asset as having a Title
Defect and may exclude the affected Asset from the Assets delivered at Closing
and the Purchase Price shall be reduced by the Allocated Value of such affected
Asset.  In such event the failure to satisfy this condition shall not be grounds
for termination.
 
(v)   All Preferential Rights shall have been waived, exercised, or the time
period in which to exercise expired without exercise.  Provided, however, if
this condition is not satisfied, either Party shall have the option to treat the
affected Asset as having a Title Defect and may exclude the affected Asset from
the Assets delivered at Closing and the Purchase Price shall be reduced by the
Allocated Value of such affected Asset.  In such event the failure to satisfy
this condition shall not be grounds for termination.
 
(vi)    Buyer shall have delivered to Seller either: (A) copies of any bonds
covering the Assets required under any laws, rules or regulations of any
federal, state or local Governmental Authority having jurisdiction over the
Assets, to replace Seller’s existing bonds covering the Assets shown on Exhibit
“A”; or (B) a commitment by a surety company, satisfactory to Seller, to issue
such replacement bonds for Buyer upon Closing.
 
(vii)   The aggregate of all adjustments to the Purchase Price for Environmental
Defects, Title Defects, Preferential Rights exercised by third parties, and
Casualty Losses shall not exceed twelve and one half  percent (12.5 %) of the
Purchase Price.
 
(b)   The obligations of Buyer to consummate the transactions provided for
herein are subject, at the option of Buyer, to the fulfillment on or prior to
the Closing Date of each of the following conditions:
 
(i)   The representations and warranties of Seller herein contained shall be
true and correct in all material respects on the Closing Date (except that those
representations and warranties of Seller that are qualified by materiality shall
be true and correct in all respects), as though made on and as of such date,
except representations that by their terms are made as of a specified date shall
be true and correct as of the date so specified and Seller shall have delivered
to Buyer a certificate, dated as of the Closing Date, to that effect.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
52

--------------------------------------------------------------------------------

 
 
(ii)     Seller shall have performed and complied in all material respects with
the duties, obligations and covenants under this Agreement required to be
performed or complied with by it at or prior to Closing unless an earlier date
is required of Seller for performance or compliance herein, and Seller shall
have delivered to Buyer a certificate, dated as of the Closing Date, to that
effect.
 
(iii)    No suit, action or other proceeding shall be pending or threatened that
seeks to, or could reasonably result in a judicial order, judgment or decree
that would, restrain, enjoin or otherwise prohibit the consummation of the
transactions contemplated by this Agreement, other than an action or proceeding
instituted or threatened by Buyer or any of its affiliates.
 
(iv)    All Consents shall have been made, obtained or waived by the other party
or parties thereto, or the time period by which such consents were required to
be made, given or withheld have expired without action by the party whose
consent is required.  Provided, however, if this condition is not satisfied,
either Party shall have the option to treat the affected Asset as having a Title
Defect and may exclude the affected Asset from the Assets delivered at Closing
and the Purchase Price shall be reduced by the Allocated Value of such affected
Asset and shall not be subject to the Title  Defect Threshold.  In such event
the failure to satisfy this condition shall not be grounds for termination,
except to the extent that the condition under Section 10.1(b)(vi) below is not
satisfied.  For an Asset subject to a consent to assignment that Seller did not
obtain prior to Closing and which was excluded from Closing at pursuant to this
Section 10.1(b)(iv) or Section 10.1(a)(iv), should Seller obtain for such Assets
the required consent to assignment by August 15, 2013, Seller and Buyer shall
may mutually agree to have a second closing on those Assets as soon as
practicable after August 15, 2013 and Buyer shall pay Seller the Allocated
Values for such Assets.  Seller and Buyer may mutually agree to close on Assets
for which consents have been obtained after the Closing Date on a date before
August 15, 2013.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
53

--------------------------------------------------------------------------------

 
 
(v)     All Preferential Rights shall have been waived, exercised, or the time
period in which to exercise expired without exercise.  Provided, however, if
this condition is not satisfied, either Party shall have the option to treat the
affected Asset as having a Title Defect and may exclude the affected Asset from
the Assets delivered at Closing and the Purchase Price shall be reduced by the
Allocated Value of such affected Asset.  In such event the failure to satisfy
this condition shall not be grounds for termination, except to the extent that
the condition under Section 10.1(b)(vi) below is not satisfied.
 
(vi)     The aggregate of all adjustments to the Purchase Price for
Environmental Defects, Title Defects (including, without limitation, the
Environmental Defect Values asserted by Buyer for any Environmental Defects or
Environmental Defect Values that are disputed by Seller), Title Defects
(including, without limitation, the Title Defect Values asserted by Buyer for
any Title Defects or Title Defect Values that are disputed by Seller, and
including any deemed Title Defects due to failure to obtain Consents),
Preferential Rights exercised by third parties, un-obtained consents, and
Casualty Losses shall not have exceeded twelve and one-half percent (12.5%) of
the Purchase Price.
 
(vii)     Buyer shall have by April 15, 2013 obtained a waiver from the SEC
providing that in lieu of providing full audited historical financial statements
of the Assets in connection with Buyer’s reporting obligations or any securities
offering by Buyer, Buyer may instead provide the SEC or present in any
registration statement with respect to such offering only the following
financial statements and disclosures related to the Assets  (“SEC Waiver”):
 
Historical Financial Statements
 
1.           Audited statements of oil and gas revenues and direct operating
expenses for the Assets covering the two year period ended December 31, 2012
together with any applicable interim financial statements.  Consistent with the
SEC staff’s guidance, the statements of oil and gas revenues and direct
operating expenses will exclude only those costs not directly involved in the
revenue producing activity, such as corporate overhead, interest and taxes.
 
2.           Footnote disclosures explaining the basis of the partial
presentation and omitted expenses and other relevant matters including the oil
and gas disclosures described below.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
54

--------------------------------------------------------------------------------

 
 
3.           A statement that the historical results presented are not
necessarily indicative of the future results of the Assets due to the changes in
business and omission of various expenses.
 
Oil and Gas Disclosures
 
1.           Estimates of quantities of proved oil and gas reserves for each of
the years in the two year period ended December 31, 2012.
 
2.           Reconciliation of quantities of proved oil and gas reserves for the
two year period ended December 31, 2012.
 
3.           A standardized measure of discounted future net cash flows
(exclusive of future income taxes) relating to proved oil and gas reserve
quantities for each of the years in the two year period ended December 31, 2012.
 
4.           A reconciliation of the standardized measure of discounted future
net cash flows relating to proved oil and gas reserve quantities for the two
year period ended December 31, 2012.
 
Pro Forma Financial Information
 
1.           Unaudited pro forma balance sheet as of December 31, 2012, together
with any applicable pro forma balance sheet.
 
2.           Unaudited pro forma statement of operations for the year ending
December 31, 2012, together with any applicable unaudited interim pro forma
statement of operations.
 
3.           Required footnote disclosures accompanying the pro forma financial
information.
 
This condition 10.1(b)(vii) is subject to Buyer promptly requesting an SEC
waiver after execution of this Agreement. If Buyer has not obtained an SEC
Waiver by April 15, 2013 (or if Buyer extends the Closing Date pursuant to
Section 9.6(a) or Section 9.6(d), if Buyer has not obtained an  SEC Waiver by
thirty (30) days prior to such extended Closing Date)  and Buyer has not
notified Seller of a termination of this Agreement before April 15, 2013, Buyer
shall have waived this condition precedent to Closing in this Section
10.1(b)(vii).
 
(viii)   Seller having provided Buyer and Buyer’s auditors, for the Comstock
Time Period, with access to sufficient financial statements and a representation
letter, by April 12, 2013, for Buyer and its Auditors to prepare financial
statements, oil and gas disclosures, and financial statements described above
under the caption “Historical Financial Statements”, “Oil and Gas Disclosures”
and “Pro Forma Financial Information.”
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
55

--------------------------------------------------------------------------------

 
 
10.2   Closing.  Subject to the satisfaction of the conditions described in
Section 10.1 above, the closing of the transactions contemplated herein and the
transfer of the Assets (“Closing”) shall occur on May 15, 2013 at the offices of
Locke Lord LLP, located at 600 Travis, Suite 2800, Houston, Texas 77002 at 10:00
a.m., local time, or on such other date or time, or at such other place, as
Seller and Buyer may agree in writing (the “Closing Date”).  At Closing, the
following shall occur:
 
(a)   Buyer and Seller shall execute, acknowledge and deliver the Assignment
and, assuming that applicable consents to assign or obtained prior to Closing,
the Deed in the form of Exhibit “C-2”, and the Assignment of Midland Office
Lease in the form of Exhibit “C-3”.
 
(b)   Buyer and Seller shall execute and acknowledge, if appropriate, any such
other assignments, bills of sale, deeds, or other instruments as are reasonably
necessary to effectuate the transfer, sale or conveyance of the Assets to Buyer,
including without limitation and to the extent required, separate assignments of
the Assets on officially approved forms in sufficient counterparts to satisfy
applicable statutory and regulatory requirements for the transfer of the Assets.
 
(c)   Seller and Buyer shall execute and deliver at Closing the requisite number
of change of operator forms or other designation of operator forms and any other
necessary forms as may be required by any Governmental Authority.
 
(d)   At the Closing, upon and against delivery of the Assignment and other
instruments described in this Section 10.2, Buyer shall pay the Adjusted
Purchase Price, less the Deposit and any interest and earnings thereon, to
Seller by bank wire, as designated in advance by Seller under Section 2.2.
 
(e)   On or before Closing, Seller shall, where Buyer is to become operator,
supply Buyer with an appropriate governmental form as required by the
Governmental Authority, board or commission having jurisdiction and authority to
change the name of operator from Seller to Buyer, for each Seller-operated Well
(whether dry, inactive, injector or producing), Lease or any other well or
facility or Personal Property, as may be required or defined by said agency,
board or commission located on the premises that form a part of the subject
matter of this Agreement.  All such forms shall be executed by Buyer and/or
Seller as may be required prior to or during Closing.  Buyer shall be solely
responsible for any fee as may be required by such Governmental Authority, board
or commission and, at the parties’ option, shall either deliver its check
payable to the Governmental Authority, board or commission to Seller at Closing
or credit this fee amount to Seller in the Final Settlement Statement.  Seller
shall mail the completed form and fee to the proper Governmental Authority,
board or commission after Closing.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
56

--------------------------------------------------------------------------------

 
(f)   Buyer and Seller shall execute and deliver to Buyer letters-in-lieu or
transfer orders, and immediately after Closing, Seller shall prepare and execute
and Buyer shall send notifications to all pertinent operators, non-operators,
oil or gas purchasers, and governmental agencies that Buyer has purchased the
Assets, and the Effective Time of such acquisition. Buyer shall notify all
royalty owners that Buyer has purchased the Assets, and the Effective Time of
such acquisition
 
(g)   Seller shall deliver to Buyer a certificate pursuant to Internal Revenue
Code Section 1445, in the form of Exhibit “E”, certifying that Seller is not a
foreign person.
 
(h)   Seller shall execute and deliver a clearance certificate or similar
document reasonably requested by the Buyer which may be required by any state or
local taxing authority in order to relieve the Buyer of any obligation to
withhold any portion of the Adjusted Purchase Price.
 
(i)   Buyer and Seller shall deliver the Transition Services Agreement and
Marketing Letter (“Transition Services Agreement”) in the forms attached as
Schedule 10.2(i), which such Transition Service Agreement shall have been
executed, but not delivered, concurrently with the execution of this Agreement,
but shall be delivered at Closing.
 
(j)   Seller shall deliver to Buyer Possession of the Assets; provided however,
that any Records required for Seller’s performance of the Transition Services
Agreement shall be delivered within fifteen (15) days after termination of the
Transition Services Agreement.
 
10.3   Termination.  This Agreement and the transactions contemplated hereby may
be terminated in the following instances:
 
(a)   By Seller if any condition set forth in Section 10.1(a) has not been
satisfied or waived by Seller by the Closing Date; provided that Seller is not
in material breach of this Agreement;
 
(b)   By Buyer if any condition set forth in Section 10.1(b) has not been
satisfied or waived by Buyer by the Closing Date or for a condition set forth in
Section 10.1(b) that must be satisfied on a date prior to the Closing Date and
such condition has not been waived by Buyer by such date; provided that Buyer is
not in material breach of this Agreement;
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
57

--------------------------------------------------------------------------------

 
 
(c)   By mutual written agreement of Buyer and Seller; or
 
(d)   By either Buyer or Seller if Closing has not occurred on or before July
15, 2013, unless Buyer and Seller agree in writing to extend Closing to a date
later than July 15, 2013.
 
(e)   By either Buyer or Seller if any governmental authority shall have issued
an order, judgment or decree or taken any other action challenging, delaying,
restraining, enjoining, prohibiting or invalidating the consummation of any of
the transactions contemplated herein.
 
(f)   If all of Buyer’s conditions to close under Section 10.1(b) have been
fully satisfied, and Buyer, through no fault of Seller refuses,  for any reason
not permitted by this Agreement to close the sale pursuant hereto, subject to
Section 11.19 Seller shall have the right to seek all remedies available at law
or equity, including specific performance, and any of Deposit delivered to
Seller shall be credited against any damages asserted or claimed by Seller in
any manner whatsoever.  If Seller, through no fault of Buyer, fails, refuses, or
is unable for any reason not permitted by this Agreement to close the sale
pursuant hereto, the Deposit shall, except as otherwise provided herein, be
disbursed from the Escrow Account to Buyer and subject to Section 11.19 Buyer
shall have the right to seek all remedies available at law or
equity.  Notwithstanding the foregoing, if this Agreement is terminated by
either Buyer or Seller under Section 10.3(b), Section 10.3(d) or 10.3(e) or by
mutual agreement of Buyer and Seller under Section 10.3(c), the Deposit
(including, without limitation, any interest and earnings thereon) shall be
disbursed from the Escrow Account to Buyer and neither party shall have any
further liability whatsoever to the other party pursuant to this Agreement.
 
10.4   Final Adjustments.  Within one hundred twenty (120) days after the date
of Closing, Seller shall prepare, in consultation with Buyer, a Final Settlement
Statement, acting reasonably and in good faith (the “Final Settlement
Statement”), setting forth (i) the final adjustments to the Purchase Price
provided in Section 2.4 and (ii) any other adjustments arising pursuant to this
Agreement or to which the parties mutually agree.  Seller may set off any
resulting amount due to Buyer against any amount or sum that Buyer may otherwise
owe to Seller under the terms of this Agreement.  Seller shall submit the Final
Settlement Statement to Buyer, along with copies of third party vendor invoices,
or other evidence of expenses agreed to by Buyer and Seller.  Buyer shall
respond in writing with objections and proposed corrections within thirty (30)
days of receiving the Final Settlement Statement.  If Buyer does not respond to
the Final Settlement Statement by signing or objecting in writing within such
thirty (30) day period, the statement will be deemed approved by Buyer and final
and binding between the parties.  After approval of the Final Settlement
Statement, Buyer or Seller will send a check or invoice to Seller or Buyer, as
the case may be, for the net amount reflected therein as owed by such party.  If
Buyer and Seller are unable to agree to all adjustments within thirty (30) days
after Buyer’s written objection to the Final Settlement Statement submitted by
Seller, adjustments which are not in dispute shall be paid by Buyer or Seller,
as the case may be, at the expiration of such thirty day period and either party
may submit such disagreement to an Independent Expert selected in the manner
provided in Section 8 for resolution.  An Independent Expert selected with
respect to any dispute relating to the Final Settlement Statement need not be
the Independent Expert selected pursuant to Section 8 with respect to a Title
Defect or Environmental Defect, if any such person had been previously selected
with respect to such matters.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
58

--------------------------------------------------------------------------------

 
 
11.   Miscellaneous
 
11.1   Oil, Gas and End Product Imbalances.  Regardless of whether Seller is
overproduced or underproduced as to its share of total oil, condensate, gas or
end product production, any balancing obligation or credit arising from such
over or underproduction, and any pipeline imbalance, in each case determined as
of the Effective Time (an “Imbalance”) shall transfer to Buyer as of the
Effective Time, and Seller shall have no further liability therefor nor benefit
therefrom (whichever the case may be) as of the Effective Time.  If Seller is a
party to a gas balancing agreement(s) or other reconciliation obligations
pursuant to any commingling authority covering all or a portion of the Assets,
Buyer shall assume all rights and duties of Seller pursuant thereto.  If any of
the Assets are not covered by a gas balancing agreement or other reconciliation
obligations pursuant to any commingling authority, Buyer shall fulfill its
obligations under this provision in accordance with applicable law.  Buyer
agrees to indemnify, defend and hold Seller and Seller Parties harmless against
any and all Claims arising directly or indirectly out of Buyer’s failure to
fulfill its obligation under this provision, insofar and only insofar as the
Buyer’s aggregate liability under this indemnity does not exceed (and Buyer’s
liability is expressly limited and capped at) an aggregate amount equal to the
downward adjustments to the Purchase Price credit to Buyer at Closing
attributable to the Imbalance.  Buyer and Seller will settle all Imbalances as
between themselves using a settlement price based on $85.00 a barrel for oil,
$85.00 per barrel for condensate, $3.25 per mcf for gas, and $32.00 per barrel
for end product (NGL’s).
 
11.2   Insurance.  With regard to any Seller-operated properties:
 
(a)   Seller and Buyer acknowledge that insurance coverage for the Assets and
the operations in which the Assets have been used has been provided, in part,
under insurance programs arranged and maintained by Seller for itself and, if
applicable, its subsidiaries and affiliates (such policies are herein called
“Seller Policies”).
 
(b)   Seller agrees that during the period between the date of this Agreement
and the Closing Date, Seller shall maintain insurance with respect to the Assets
with financially sound and reputable insurance companies, in such amounts, with
such deductibles and covering such risks as are customarily carried by
reasonable, prudent operators of similar properties.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
59

--------------------------------------------------------------------------------

 
 
(c)   Seller and Buyer agree that, as of the Closing Date, all of the Seller
Policies shall cease to apply to the Assets and the operations in which the
Assets are used and that Buyer shall make no claims under the Seller Policies
with respect to any matter whatsoever, whether arising before or after the
Closing Date.
 
(d)   In the event that any Claim is hereafter made under or with respect to any
of the Seller Policies by Buyer or any of its affiliates, but not an unrelated
third party, Buyer shall indemnify and defend Seller and Seller Parties against
and shall hold them harmless from such Claim and all costs and expenses
(including, without limitation, attorney’s fees and court costs) related
thereto.
 
11.3   Casualty Loss of Assets.  If, after execution of this Agreement and prior
to Closing, a portion of the Assets is damaged or destroyed by a Casualty Loss,
Seller may at its sole option, prior to Closing, repair the damage at its cost
or reduce the Purchase Price by the amount of the damage, or if Buyer agrees,
withdraw the damaged Asset from the sale and reduce the Purchase Price by the
Allocated Value thereof.  Should Buyer and Seller not agree as to the amount of
such price reduction such dispute shall be submitted to the Independent Expert
for determination.  The term “Casualty Loss” shall mean physical damage to, loss
of, condemnation or other taking by a governmental authority of any part of, an
Asset that (a) occurs between execution of this Agreement and Closing, (b) is
not the result of normal wear and tear, mechanical failure or gradual structural
deterioration of materials, equipment and infrastructure, reservoir changes, or
downhole failure (including, without limitation, downhole failure arising or
occurring during drilling or completing operations, junked or lost holes or
sidetracking or deviating a well) and (c) exceeds Thirty Five Thousand Dollars
($35,000) in value.
 
11.4   Books and Records.  Seller shall deliver the Records to Buyer at Closing
or within a reasonable time thereafter, if such Records useful or necessary for
Seller to Seller to provide Services under the Transition Services Agreement,
then fifteen (15) days after termination of the Transition Services Agreement.
 
11.5   Publicity.  Seller and Buyer shall consult with each other with regard to
all press releases or other public or private announcements made concerning this
Agreement or the transactions contemplated hereby, and except as may be required
by applicable laws or the applicable rules and regulations of any Governmental
Authority or stock exchange, neither Buyer nor Seller shall issue any such press
release or other publicity without the prior written consent of the other party,
which shall not be unreasonably withheld.  Except as may be required by
applicable laws or the applicable rules and regulations of any Governmental
Authority or stock exchange, no such press release shall include any reserve
estimates.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
60

--------------------------------------------------------------------------------

 
 
11.6   Assignment.  Prior to Closing, neither Party  may  assign any rights
acquired hereunder or delegate any duties assumed hereunder without the prior
written consent of the other Party; provided, however, that Buyer may assign
this Agreement to any wholly owned subsidiary without Seller’s consent; and any
other such transfer, assignment, sublease or delegation without the other
Party’s  consent shall be null and void, ab initio.  Notwithstanding anything
herein to the contrary, the assigning Party  shall remain responsible to Seller
for all obligations and liabilities under this Agreement and under the
Assignment, until expressly released by the non-assigning Party in writing.
 
11.7   Entire Agreement; Amendment.  This Agreement constitutes the entire
agreement between Seller and Buyer with respect to the transactions contemplated
herein, and supersedes all prior oral or written agreements, commitments, and
understandings between the parties.  No amendment shall be binding unless in
writing and signed by both parties.  Headings used in this Agreement are only
for convenience of reference and shall not be used to define the meaning of any
provision.  This Agreement is for the benefit of Seller and Buyer and their
respective successors, representatives, and assigns and not for the benefit of
third parties.
 
11.8   Notices.  All notices and consents to be given hereunder shall be in
writing and shall be deemed to have been duly given if delivered either by
personal delivery, telex, telecopy or similar facsimile means, electronic email,
by certified or registered mail, return receipt requested, or by courier or
delivery service, addressed to the parties hereto at the following addresses:
 
If to Seller:                                                                If
to Buyer:
 
Comstock Oil & Gas, LP                                         Rosetta Resources
Operating LP
5300 Town and Country Blvd                                 717 Texas Ave.
Suite 500                                                                  Suite
2800
Frisco, Texas 75034                                                 Houston
Texas 77002
Attention:  Mark Williams                                      Attention: Alex
Wall
Telephone No.:  972-668-8823                               Telephone No.
713-335-4041
Fax No. 972-668-8822                                            Fax No.
713-481-8537
Email:mwilliams@comstockresources.com
         Email:Alex.Wall@rosettaresources.com
 

 
With a copy to:
 
Rosetta Resources Operating LP
717 Texas Ave., Suite 2800
Houston Texas 77002
Attention: Norman D. Ewart
Telephone: 713-335-4041
Fax: 713-481-8572
Email:Norman.Ewart@rosettaresources.com
 

 
or at such other address and number as either party shall have previously
designated by written notice given to the other party in the manner herein above
set forth.  Notices shall be deemed given when received, if sent by facsimile
(confirmation of such receipt by confirmed facsimile transmission being deemed
receipt of communications); and when delivered and receipted for (or upon the
date of attempted delivery where delivery is refused), if either hand-delivered,
sent by express courier or delivery service, or sent by certified or registered
mail, return receipt requested.
 
 
 
 
 
 
 
 
 
61

--------------------------------------------------------------------------------

 
 
11.9   Governing Law; Submission to Jurisdiction.
 
(a)   This Agreement shall be governed by the laws of the State of Texas,
without giving effect to any principles of conflicts of law.  The validity of
the conveyances affecting the title to real property shall be governed by and
construed in accordance with the laws of the jurisdiction in which such property
is situated.  The provisions contained in such conveyances and the remedies
available because of a breach of such provisions shall be governed by and
construed in accordance with the laws of the State of Texas, without giving
effect to the principles of conflict of laws.
 
(b)   Notwithstanding anything to the contrary contained herein, each of the
parties hereto expressly agrees that it will not bring or support any action,
including any action, cause of action, claim, cross-claim or third-party claim
of any kind or description, whether in law or in equity, whether in contract or
in tort or otherwise, against the Financing Sources (as defined below) in any
way relating to this Agreement or any of the transactions contemplated by this
Agreement, including any dispute arising out of or relating in any way to any
agreement entered into by the Financing Sources under the Debt Commitment Letter
or the performance thereof, in any forum other than the Supreme Court of the
State of New York, County of New York, or, if under applicable law exclusive
jurisdiction is vested in the Federal courts, the United States District Court
for the Southern District of New York (and appellate courts thereof). The
parties hereto further agree that all of the provisions of Section 11.20
relating to waiver of jury trial shall apply to any action, cause of action,
claim, cross-claim or third party claim referenced in this paragraph with
respect to the Financing Sources. The foregoing provisions of this Section
11.9(b) shall not be applicable with respect to the enforcement of Seller’s
rights and remedies under this Agreement against Buyer or its successors and
assigns including without limitation the Financing Sources in the event the
Financing Sources take a pledge of the Assets and/or this Agreement.
 
11.10   Confidentiality.  Buyer agrees that all confidential, non-public
information furnished or disclosed by Seller or acquired by Buyer from Seller in
connection with the sale of the Assets shall remain confidential prior to
Closing, provided, however, that upon Closing, Buyer shall not be obligated
under any such confidentiality obligations relating to the Assets it acquires
(and after Closing, Seller shall maintain the confidentiality, and  shall not
use or disclose, any such confidential, non-public information regarding the
Assets Buyer acquires without Buyer’s prior written consent).  Buyer may
disclose such information only to its subsidiaries or affiliates, agents,
advisors, counsel or representatives (herein “Representatives”) who have agreed,
prior to being given access to such information, to maintain the confidentiality
thereof In the event that Closing of the transactions contemplated by this
Agreement does not occur for any reason, Buyer agrees that all information
furnished or disclosed by Seller or acquired by Buyer in connection with the
inspection, testing, inventory or sale of the Assets shall remain confidential,
with Seller a third party beneficiary of any privilege held by Buyer.  Buyer and
its Representatives shall promptly return to Seller any and all materials and
information furnished or disclosed by Seller relating in any way to the Assets,
including any notes, summaries, compilations, analyses or other material derived
from the inspection or evaluation of such material and information, without
retaining copies thereof and destroy any information relating to the Assets and
independently acquired by Buyer.  In the event of any conflict between this
Section 11.10 and any other confidentiality agreement affecting Buyer and
Seller, this Section 11.10 shall control.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
62

--------------------------------------------------------------------------------

 
 
11.11   Survival of Certain Obligations.  Except as expressly provided otherwise
in this Agreement, waivers, disclaimers, releases, representations, warranties
and continuing obligations of Buyer, and all obligations of either party for
indemnity and defense contained in this Agreement shall survive the execution
and delivery of the Assignment and the Closing.
 
11.12   Further Cooperation.  After the Closing, each party shall execute,
acknowledge, and deliver all documents, and take all such acts which from time
to time may be reasonably requested by the other party in order to carry out the
purposes and intent of this Agreement.
 
11.13   Counterparts.  This Agreement may be executed in one or more
counterparts with the same effect as if all signatures of the parties hereto
were on the same document, but in such event each counterpart shall constitute
an original, and all of such counterparts shall constitute one Agreement; but in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart signed by each party.
 
11.14   Exhibits and Schedules.  All of the Exhibits and Schedules referred to
in this Agreement are hereby incorporated into this Agreement by reference and
constitute a part of this Agreement.
 
11.15   Severability.  If any term or provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law, all other conditions
and provisions of the Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the transactions
contemplated hereby are not affected in any materially adverse manner to the
other party.
 
11.16   Expenses, Post-Closing Consents and Recording.  Notwithstanding other
provisions of this Agreement, Buyer shall be responsible for the filing and
recording of the Assignment(s), conveyances or other instruments required to
convey title to the Assets to Buyer in the appropriate federal, state and local
records, and all required documentary, filing and recording fees and expenses
incurred in connection therewith.  Buyer shall supply Seller with a true and
accurate photocopy of all the recorded and filed Assignment(s) within a
reasonable period of time after such are available.  Buyer shall be responsible
for timely obtaining all consents and approvals of Governmental Authorities
customarily obtained subsequent to transfer of title and all costs and fees
associated therewith.  Except as otherwise specifically provided, all fees,
costs and expenses incurred by Buyer or Seller in negotiating this Agreement or
in consummating the transactions contemplated by this Agreement shall be paid by
the party incurring the same, including, without limitation, legal and
accounting fees, costs and expenses.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
63

--------------------------------------------------------------------------------

 
 
11.17   Removal of Signs and Markers.  Seller may either remove its name and
signs from the Seller-operated Wells, facilities and Personal Property or
require Buyer, at Buyer’s cost, to do so for those Assets that Buyer will
operate.  If Seller’s name or signs remain on the Assets after Seller ceases to
be operator and Buyer has become operator, Buyer shall (a) remove any remaining
signs and references to Seller within ninety (90) days after Seller ceases to be
operator or such earlier time as may be required by applicable regulations, (b)
install signs complying with applicable governmental regulations, including
signs showing Buyer as operator of the Assets it operates and (c) upon Seller’s
request after Closing, notify Seller of the removal and installation. Seller
reserves a right of access to the Assets for a period of 120 days after it
ceases to be operator to remove its signs and name from all Wells, facilities
and Personal Property, or to confirm that Buyer has done so for the Assets
operated by Buyer.
 
11.18   CONSPICUOUSNESS/EXPRESS NEGLIGENCE.  THE DEFENSE, INDEMNIFICATION AND
HOLD HARMLESS PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE
WHETHER OR NOT THE DAMAGES, LOSSES, INJURIES, LIABILITIES, COSTS OR EXPENSES IN
QUESTION AROSE SOLELY OR IN PART FROM THE ACTIVE, PASSIVE OR CONCURRENT
NEGLIGENCE, STRICT LIABILITY, BREACH OF DUTY (STATUTORY OR OTHERWISE) OR OTHER
FAULT OF ANY INDEMNIFIED PARTY, OR FROM ANY PRE-EXISTING DEFECT, EXCEPT TO THE
EXTENT CAUSED BY THE INDEMNIFIED PARTY’S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.  BUYER AND SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE
EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.
 
11.19   Waiver of Certain Damages.  Each party irrevocably waives and agrees not
to seek indirect, consequential, punitive, SPECIAL or exemplary damages of any
kind in connection with any dispute arising out of or related to this Agreement
or the breach hereof, WHETHER OR NOT THE DAMAGES, LOSSES, INJURIES, LIABILITIES,
COSTS OR EXPENSES IN QUESTION AROSE SOLELY OR IN PART FROM THE ACTIVE, PASSIVE
OR CONCURRENT NEGLIGENCE, STRICT LIABILITY, BREACH OF DUTY (STATUTORY OR
OTHERWISE) OR OTHER FAULT OF ANY INDEMNIFIED PARTY, OR FROM ANY PRE-EXISTING
DEFECT.  For the avoidance of doubt, this Section 11.19 does not diminish or
otherwise affect the parties’ rights and obligations to be indemnified against,
and provide indemnity for, indirect, consequential, punitive or exemplary
damages awarded to any third party for which indemnification is provided in this
Agreement or Seller’s right to receive the Deposit as liquidated damages subject
to and pursuant to the provisions of Section 10.3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
64

--------------------------------------------------------------------------------

 
 
11.20   Waiver of Jury Trial.  EACH PARTY HERETO HEREBY KNOWINGLY, VOLUNTARILY,
AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT (INCLUDING ANY SUCH ACTION INVOLVING THE FINANCING SOURCES UNDER
THE DEBT COMMITMENT LETTER), OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OF THE PARTIES.  THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO THIS AGREEMENT.
 
11.21   Third-Party Beneficiaries.  Nothing in this Agreement, express or
implied, is intended to or will confer upon any Person other than the parties
hereto, and their respective legal representatives, successors, and permitted
assigns, any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement. Notwithstanding the foregoing, the Financing Sources
shall be deemed third party beneficiaries of Sections 11.9(b), 11.20 and this
Section 11.21, but of no other provision of this Agreement.  As used herein, the
term “Financing Sources” shall mean JPMorgan Chase Bank, N.A., J.P. Morgan
Securities LLC, Morgan Stanley Senior Funding, Inc., WF Investment Holdings,
LLC, Wells Fargo Securities, LLC, each in its capacity as a party to that
certain debt commitment letter, dated as of the date hereof (the “Debt
Commitment Letter” and the financing thereunder, the “Debt Financing”), together
with their affiliates, officers, directors, employees, representatives,
successors and assigns.
 
EXECUTED as of the date first above written.
 

 

 
[Signature pages to follow]

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
65

--------------------------------------------------------------------------------

 

SELLER:

COMSTOCK OIL & GAS, LP

By: Comstock Oil & Gas GP, LLC
Its General Partner

By: Comstock Resources, Inc.
Its Sole Member

By:  /s/ M. JAY
ALLISON                                                                
Name:  M. Jay Allison
Title:  President and Chief Executive Officer

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

--------------------------------------------------------------------------------

 

BUYER:

ROSETTA RESOURCES OPERATING LP
By Rosetta Resources Operating GP, LLC
Its General Partner

By:  /s/ JAMES E.
CRADDOCK                                                                
Name:  James E.
Craddock                                                                
Title:  Chairman, CEO and
President