Exhibit 10.1
 

 
 

 
ALABAMA/MICHIGAN/PERMIAN PACKAGE
PURCHASE AGREEMENT

BETWEEN

DOMINION EXPLORATION & PRODUCTION, INC.
DOMINION ENERGY, INC.
DOMINION OKLAHOMA TEXAS EXPLORATION & PRODUCTION, INC.
DOMINION RESERVES, INC.
LDNG TEXAS HOLDINGS, LLC
DEPI TEXAS HOLDINGS, LLC
 

 

 
AS SELLERS,
 

 

 
AND
 

 

 

 
L O & G ACQUISITION CORP.,
 

 

 
AS PURCHASER,
 

 

 
 

 
Dated as of June 1, 2007
 
 

 

 

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TABLE OF CONTENTS

   
   
Page

ARTICLE 1.  PURCHASE AND SALE
 
1

Section 1.1
Purchase and Sale
1
Section 1.2
Certain Definitions
1
Section 1.3
Excluded Assets
15
Section 1.4
Transfer of Certain Assets Not Held by Sellers
17
     

ARTICLE 2.  PURCHASE PRICE
 
17

Section 2.1
Purchase Price
17
Section 2.2
Allocation of Purchase Price
18
Section 2.3
Adjustments to Purchase Price
20
Section 2.4
Ordinary Course Pre-Effective Date Costs Paid and Revenues Received
 
 
Post-Closing
25
Section 2.5
Procedures
26

ARTICLE 3.  TITLE MATTERS
 
27

Section 3.1
Company’s Title
27
Section 3.2
Definition of Defensible Title
27
Section 3.3
Definition of Permitted Encumbrances
28
Section 3.4
Allocated Values
30
Section 3.5
Notice of Title Defects; Defect Adjustments
31
Section 3.6
Consents to Assignment and Preferential Rights to Purchase
35
Section 3.7
Limitations on Applicability
38

ARTICLE 4.  REPRESENTATIONS AND WARRANTIES OF SELLERS
 
38

Section 4.1
Sellers
38
Section 4.2
The Companies
39
Section 4.3
The Subsidiaries
42
Section 4.4
Litigation
44
Section 4.5
Taxes and Assessments
44
Section 4.6
Environmental Laws
46
Section 4.7
Compliance with Laws
46
Section 4.8
Contracts
47
Section 4.9
Payments for Production
47
Section 4.10
Production Imbalances
47
Section 4.11
Consents and Preferential Purchase Rights
47
Section 4.12
Liability for Brokers’ Fees
48
Section 4.13
Equipment and Personal Property
48
Section 4.14
Non-Consent Operations
48
Section 4.15
Wells
48
Section 4.16
Outstanding Capital Commitments
49
Section 4.17
Insurance
49

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Section 4.18
Absence of Certain Changes
49
Section 4.19
Assets of the E&P Business
49
Section 4.20
Limitations
49
Section 4.21
Production Allowables
51
Section 4.22
Accuracy of Data
51

ARTICLE 5.  REPRESENTATIONS AND WARRANTIES OF PURCHASER
 
52

Section 5.1
Existence and Qualification
52
Section 5.2
Power
52
Section 5.3
Authorization and Enforceability
52
Section 5.4
No Conflicts
52
Section 5.5
Consents, Approvals or Waivers
53
Section 5.6
Litigation
53
Section 5.7
Financing
53
Section 5.8
Investment Intent
53
Section 5.9
Independent Investigation
53
Section 5.10
Liability for Brokers’ Fees
54
Section 5.11
Qualification
54

ARTICLE 6.  COVENANTS OF THE PARTIES
 
54

Section 6.1
Access
54
Section 6.2
Notification of Breaches
54
Section 6.3
Press Releases
55
Section 6.4
Operation of Business
55
Section 6.5
Conduct of the Companies and Wholly-Owned Subsidiaries
57
Section 6.6
Indemnity Regarding Access
58
Section 6.7
Governmental Reviews
59
Section 6.8
Intercompany Indebtedness
59
Section 6.9
Third Person Indebtedness
59
Section 6.10
Operatorship
60
Section 6.11
Volumetric Production Payments
60
Section 6.12
Hedges
60
Section 6.13
Vehicles and Equipment
60
Section 6.14
Certain Beneficial Interests
60
Section 6.15
Further Assurances
62
Section 6.16
DEPI/Purchaser Transition Services Agreement
62
Section 6.17
Dominion Resources Black Warrior Trust
63
Section 6.18
Financial Statements
63
Section 6.19
Carlsbad Royalties; CoEnergy Contract
65

ARTICLE 7.  CONDITIONS TO CLOSING
 
65

Section 7.1
Conditions of Sellers to Closing
65
Section 7.2
Conditions of Purchaser to Closing
66

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ARTICLE 8.  CLOSING
 
67

Section 8.1
Time and Place of Closing
67
Section 8.2
Obligations of Sellers at Closing
67
Section 8.3
Obligations of Purchaser at Closing
69
Section 8.4
Closing Payment and Post-Closing Purchase Price Adjustment
69

ARTICLE 9.  TAX MATTERS
 
71

Section 9.1
Liability for Taxes
71
Section 9.2
Preparation and Filing of Company Tax Returns
74
Section 9.3
Allocation Arrangements
75
Section 9.4
Access to Information
75
Section 9.5
Contest Provisions
76
Section 9.6
Post-Closing Actions Which Affect Seller’s Tax Liability
77
Section 9.7
Refunds
77
Section 9.8
Conflict
78
Section 9.9
Election Under Section 338(h)(10)
78
Section 9.10
Section 754 Election
78

ARTICLE 10.  U.S. EMPLOYMENT MATTERS
 
79

Section 10.1
Employees
79
Section 10.2
Continued Employment
80
Section 10.3
Plan Participation
82
Section 10.4
Participation in Purchaser Plans
83
Section 10.5
Service Credit
85
Section 10.6
Vacation and Leave
85
Section 10.7
Defined Contribution Plan
85
Section 10.8
Vesting
86
Section 10.9
Welfare Benefit Plans; Workers’ Compensation; Other Benefits
86
Section 10.10
WARN Act
88
Section 10.11
Postretirement Benefits
88
Section 10.12
Annual Incentive Plan
89
Section 10.13
Immigration Matters
90
Section 10.14
No Plan or Amendment
90

ARTICLE 11.  TERMINATION AND AMENDMENT
 
90

Section 11.1
Termination
90
Section 11.2
Effect of Termination
90

ARTICLE 12.  INDEMNIFICATION; LIMITATIONS
 
91

Section 12.1
Assumption
91
Section 12.2
Indemnification
92
Section 12.3
Indemnification Actions
98
Section 12.4
Casualty and Condemnation
100
Section 12.5
Limitation on Actions
100

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ARTICLE 13.  MISCELLANEOUS
 
102

Section 13.1
Counterparts
102
Section 13.2
Notices
102
Section 13.3
Sales or Use Tax, Recording Fees and Similar Taxes and Fees
103
Section 13.4
Expenses
103
Section 13.5
Replacement of Bonds, Letters of Credit and Guarantees
103
Section 13.6
Records
104
Section 13.7
Name Change
105
Section 13.8
Governing Law and Venue
105
Section 13.9
Jurisdiction; Service of Process
105
Section 13.10
Captions
106
Section 13.11
Waivers
106
Section 13.12
Assignment
106
Section 13.13
Entire Agreement
106
Section 13.14
Amendment
106
Section 13.15
No Third-Person Beneficiaries
107
Section 13.16
Guarantees
107
Section 13.17
References
107
Section 13.18
Construction
107
Section 13.19
Limitation on Damages
108

EXHIBITS:
   

 
Exhibit A
Companies
   
Exhibit B-1
Company Leases
   
Exhibit B-2
Company Wells
   
Exhibit B-3
Company Midstream Assets
   
Exhibit B-4
Company Office Leases
   
Exhibit C
Subsidiaries
   
Exhibit D-1
Additional Leases
   
Exhibit D-2
Additional Wells
   
Exhibit D-3
Additional Midstream Assets
   
Exhibit D-4
Additional Office Leases
   
Exhibit D-5
Additional Inventory
   
Exhibit D-6
Additional Radio Licenses
   
Exhibit E
Form of Conveyance
   
Exhibit F
Form of DEPI/Purchaser Transition Services Agreement
   
Exhibit H
Form of DRI Guarantee
   
Exhibit I
Form of Loews Corporation Guarantee
 

SCHEDULES
   

 
Schedule 1.2
Executives, Managing Directors and Key Employees
   
Schedule 1.2(jj)
Non-Excluded Texas Counties
   
Schedule 1.3
Certain Excluded Assets
   
Schedule 1.4
Assets Not Owned By Sellers
   
Schedule 2.2
Allocation of Purchase Price
   
Schedule 2.3(e)
Imbalance Values
 

iv

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Schedule 3.3(j)
Certain Calls on Production
   
Schedule 3.4
Allocation of Unadjusted Purchase Price
   
Schedule 4.2(g)
Balance Sheets and Income Statements
   
Schedule 4.2(j)(i)
Employee Benefits and Compensation Programs List
   
Schedule 4.4
Litigation
   
Schedule 4.5
Tax Disclosures
   
Schedule 4.6
Environmental Disclosures
   
Schedule 4.7
Violations of Laws
   
Schedule 4.8
Contracts
   
Schedule 4.9
Production Payments
   
Schedule 4.10
Production Imbalances
   
Schedule 4.11
Consents and Preferential Rights
   
Schedule 4.13(a)
Equipment Disclosures
   
Schedule 4.16
Outstanding Capital Commitments
   
Schedule 4.17
Insurance
   
Schedule 4.18
Absence of Certain Changes
   
Schedule 4.20(c)
Persons with Knowledge
   
Schedule 4.21
Production Allowables
   
Schedule 5.5
Consents, Approvals or Waivers
   
Schedule 6.4
2007 Plan
   
Schedule 6.9
Third Party Indebtedness
   
Schedule 6.11
Terms of Volumetric Production Payment Contracts
   
Schedule 8.4(d)
Bank Account Information
   
Schedule 10.2(c)(i)
Summary of the Dominion E&P Special Severance Program
   
Schedule 10.2(c)(ii)
Special Package - Managing Directors
   
Schedule 10.2(c)(iii)
Special Package - Key Employees
   
Schedule 10.2(d)
Executive Agreements - Terms and Conditions
   
Schedule 13.5
Guarantees to be Replaced
 

v

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Index of Defined Terms

Defined Term

2007 Plan
Section 6.4
Accounting Arbitrator
Section 8.4(b)
Accounting Principles
Section 2.3
Additional Assets
Section 1.2(a)
Additional Contracts
Section 1.2(a)(iv)
Additional Equipment
Section 1.2(a)(vi)
Additional Excluded Records
Section 1.2(a)(xi)
Additional Leases
Section 1.2(a)(i)
Additional Midstream Assets
Section 1.2(a)(iii)
Additional Properties
Section 1.2(a)(iii)
Additional Records
Section 1.2(a)(xi)
Additional Units
Section 1.2(a)(ii)
Additional Wells
Section 1.2(a)(i)
Adjustment Period
Section 2.3(h)(i)(A)
Administrative Services Agreement
Section 1.2(b)
Adverse Environmental Condition
Section 1.2(c)
Affiliate
Section 1.2(d)
Agreed Environmental Concern
Section 12.2(g)(ii)
Agreed Rate
Section 2.3(h)(iv)
Agreement
Preamble
Allocated Value
Section 3.4
Annual Incentive Plan
Section 1.2(e)
Appalachian Business
Section 1.2(a)(xi)(A)
Assets
Section 1.2(f)
Assumed Seller Obligations
Section 12.1
Audited S-1 Financial Statements
Section 6.18(c)
Audited Statements of Revenue and Expenses
Section 6.18(b)
Balance Sheets
Section 4.2(g)
Business Day
Section 1.2(g)
Carlsbad Royalties
Section 6.19(a)
Claim
Section 12.3(b)
Claim Notice
Section 12.3(b)
Closing
Section 8.1
Closing Date
Section 8.1
Closing Payment
Section 8.4(a)
COBRA
Section 10.9
Code
Section 1.2(i)
Company; Companies
Recitals
Company Assets
Section 1.2(j)
Company Contracts
Section 1.2(j)(iv)
Company Equipment
Section 1.2(j)(vi)
Company Excluded Records
Section 1.2(j)(xi)
Company Leases
Section 1.2(j)(i)

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Company Midstream Asserts
Section 1.2(j)(iii)
Company Onshore Employees
Section 10.1(a)
Company Properties
Section 1.2(j)(iii)
Company Records
Section 1.2(j)(xi)
Company’s U.S. Benefit Plans
Section 10.3(a)(i)
Company Units
Section 1.2(j)(ii)
Company Wells
Section 1.2(j)(i)
Comparability Period
Section 10.2(a)
Computer/Vehicle Buy-Out Costs
Section 6.13
Confidentiality Agreement
Section 6.1
Consolidated Group
Section 1.2(n)
Consolidated Onshore E&P Business
Section 1.2(o)
Contracts
Section 1.2(p)
Conveyances
Section 8.2(d)
Cut-Off Date
Section 2.3
Damages
Section 12.2(d)
Defensible Title
Section 3.2(a)
DEI
Preamble
DEPI
Preamble
DEPI I, LP
Section 1.2(q)
DEPI/Purchaser Transition Services Agreement
Section 8.2(m)
DEPI Survivor LP
Section 6.14(c)
DEPI Texas
Preamble
DEPI Texas Beneficial Interests
Section 1.2(r)
Deloitte
Section 6.18(b)
Designated Affiliates
Section 10.1(a)
Designated Employees
Section 10.1(b)
DNG I, LP
Section 1.2(u)
DOTEPI
Preamble
DOTEPI Survivor LP
Section 6.14(c)
DOTEPI Texas Beneficial Interests
Section 1.2(v)
DRI
Section 1.2(w)
Due Date
Section 9.2(d)
E&P Business
Section 1.2(x)
Effective Date
Section 1.2(y)
Employee Plans
Section 1.2(z)
Environmental Arbitrator
Section 12.2(g)(v)
Environmental Concern
Section 12.2(g)(i)
Environmental Laws
Section 4.6
Environmental Liabilities
Section 1.2(aa)
Equipment
Section 1.2(bb)
Equity Interests
Section 4.3(e)
ERISA
Section 1.2(cc)
ERISA Affiliate
Section 1.2(dd)
Excluded Assets
Section 1.3
Excluded Employees
Section 1.2(ee)

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Excluded Midcontinent Pipeline Interests
Section 1.3(xxii)
Excluded New Mexico County; Excluded New Mexico Counties
Section 1.2(gg)
Excluded Onshore Areas
Section 1.2(hh)
Excluded Records
Section 1.2(ii)
Excluded Texas County; Excluded Texas Counties
Section 1.2(jj)
Excluded Utah Interests
Section 1.3(xxi)
Executives
Section 1.2(kk)
Governmental Authority
Section 1.2(ll)
Hart-Scott-Rodino Act
Section 1.2(mm)
Hazardous Substances
Section 1.2(nn)
Income Statements
Section 4.2(g)
Indemnified Person
Section 12.3(a)
Indemnifying Person
Section 12.3(a)
Independent Appraiser
Section 2.2
Interest Purchase Price
Section 2.2(a)
Interest Unadjusted Purchase Price
Section 2.2(a)
Interests
Section 1.1
Key Employees
Section 1.2(oo)
Laws
Section 1.2(pp)
LDNG
Preamble
Leases
Section 1.2(qq)
Leadership Team
Section 10.1(f)
Loan
Section 6.5(c)
Managing Directors
Section 1.2(ss)
Material Adverse Effect
Section 4.20(d)
Material Contract
Section 1.2(tt)
Midstream Assets
Section 1.2(uu)
Multiemployer Plan
Section 1.2(vv)
NORM
Section 4.6
Offshore Package Areas
Section 1.2(ww)
Oil and Gas Leases
Section 1.2(a)(i)
PBGC
Section 1.2(xx)
Party; Parties
Preamble
Permitted Encumbrances
Section 3.3
Person
Section 1.2(yy)
Phase I Investigation
Section 6.1
Post-Closing Period
Section 9.1(c)
Potential Adverse Environmental Condition
Section 12.2(g)(i)
Pre-Closing Period
Section 9.1(b)
Properties
Section 1.2(zz)
Property Costs
Section 1.2(aaa)
Purchase Price
Section 2.1
Purchaser
Preamble
Purchaser Group
Section 12.2(b)
Purchaser Holdco
Section 6.14(c)
Purchaser Subs
Section 6.14(c)

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Purchaser U.S. Employee Plans
Section 10.4(a)
Records
Section 1.2(ccc)
Reserve Report
Section 4.22
Reserves
Preamble
Retained Seller Obligations
Section 12.1
S-1 Financial Statements
Section 6.18(c)
SEC
Section 6.18(a)
Section 338(h)(10) Elections
Section 9.9
Selected Employees
Section 10.1(c)
Seller Employment Indemnified Persons
Section 10.1(f)
Sellers
Preamble
Shares
Recitals
Special Benefits
Section 10.11(b)
Statements of Revenues and Expenses
Section 6.18(a)
Stonewater LP
Error! Reference source not found.
Sublease
Section 8.2(n)
Subsidiary
Section 1.2(fff)
Survivor LPs
Section 6.14(c)
Target Closing Date
Section 8.1
Tax
Section 1.2(ggg)
Tax Audit
Section 9.5(a)
Tax Expenses
Section 1.2(hhh)
Tax Indemnified Person
Section 9.5(a)
Tax Indemnifying Person
Section 9.5(a)
Tax Items
Section 9.2(a)
Tax Payor
Section 9.2(d)
Tax Return
Section 9.2(a)
Tax Return Preparer
Section 9.2(d)
Tax Sharing Agreement
Section 9.3
Title Arbitrator
Section 3.5(i)
Title Benefit
Section 3.2(b)
Title Benefit Amount
Section 3.5(e)
Title Claim Date
Section 3.5(a)
Title Defect
Section 3.2(b)
Title Defect Amount
Section 3.5(d)
Title IV Plan
Section 4.2(j)(iv)
Transferred Derivatives
Section 1.2(jjj)
Trust Agreement
Section 1.2(kkk)
Unadjusted Purchase Price
Section 2.1
U.S. Temporary Employees
Section 1.2(lll)
Units
Section 1.2(mmm)
WARN Act
Section 10.10(a)
Wells
Section 1.2(ooo)
Wholly-Owned Subsidiary
Section 1.2(qqq)

 
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ALABAMA/MICHIGAN/PERMIAN PACKAGE PURCHASE AGREEMENT
 
This Alabama/Michigan/Permian Package Purchase Agreement (this “Agreement”), is
dated as of June 1, 2007, by and between Dominion Exploration & Production,
Inc., a corporation organized under the Laws of Delaware (“DEPI”), Dominion
Energy, Inc., a corporation organized under the Laws of Virginia (“DEI”),
Dominion Oklahoma Texas Exploration & Production, Inc., a corporation organized
under the Laws of Delaware (“DOTEPI”), Dominion Reserves, Inc., a corporation
organized under Laws of Virginia (“Reserves”), LDNG Texas Holdings, LLC, a
limited liability company organized under the laws of Oklahoma (“LDNG”) and DEPI
Texas Holdings, LLC, a limited liability company organized under the laws of
Delaware (“DEPI Texas”) (collectively “Sellers”), and L O & G Acquisition Corp.,
a company organized under the Laws of Delaware (“Purchaser”). Sellers and
Purchaser are sometimes referred to collectively as the “Parties” and
individually as a “Party.”
 
RECITALS:
 
Each Seller desires to sell and Purchaser desires to purchase all of the issued
and outstanding shares or partnership interests, as applicable, owned of record
by each Seller (the “Shares”) of the corporations and partnerships described
opposite each Seller’s name in Exhibit A (each, a “Company” and collectively,
the “Companies”), and, in the case of LDNG, listed opposite such Seller’s name
in Exhibit C, and DEPI, DOTEPI and Reserves desire to sell and Purchaser desires
to purchase those certain interests in oil and gas properties, rights and
related assets that are defined and described as “Additional Assets” herein.
 
NOW, THEREFORE, in consideration of the premises and of the mutual promises,
representations, warranties, covenants, conditions and agreements contained
herein, and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties agree as follows:
 
 
ARTICLE 1.
PURCHASE AND SALE
 
Section 1.1  Purchase and Sale.  On the terms and conditions contained in this
Agreement, each Seller agrees to sell to Purchaser and Purchaser agrees to
purchase, accept and pay for (i) the Shares set forth opposite such Seller’s
name in Exhibit A and Exhibit C and (ii) in the case of DEPI, DOTEPI and
Reserves as Sellers, the Additional Assets owned by such Seller (collectively,
the “Interests”).
 
Section 1.2  Certain Definitions.  As used herein:
 
(a) “Additional Assets” means all of DEPI’s, DOTEPI’s and Reserves’ right,
title, and interest in and to the following:
 
(i) The oil and gas leases, oil, gas and mineral leases and subleases,
royalties, overriding royalties, net profits interests, mineral fee interests,
carried interests, and other rights to oil and gas in place, and mineral
servitudes (“Oil and Gas Leases”), that are described on Exhibit D-1 and all
other Oil and Gas Leases
 
 
1

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located in (A) any county in Michigan or in any county referred to on Exhibit
D-1 or (B) any county in New Mexico or Texas other than the Excluded New Mexico
Counties or Excluded Texas Counties (collectively, the “Additional Leases”), and
any and all oil, gas, water, CO2 or injection wells thereon or on pooled,
communitized or unitized acreage that includes all or any part of the Additional
Leases, including the interests in the wells shown on Exhibit D-2 attached
hereto (the “Additional Wells”);
 
(ii) All pooled, communitized or unitized acreage which includes all or part of
any Additional Leases (the “Additional Units”), and all tenements, hereditaments
and appurtenances belonging to the Additional Leases and Additional Units.
 
(iii) The gas processing plants, gas gathering systems, pipelines, and other
mid-stream equipment described on Exhibit D-3 (the “Additional Midstream Assets”
and, together with the Additional Leases, Additional Wells and Additional Units,
the “Additional Properties”);
 
(iv) The Material Contracts listed on Schedule 4.8, Part I and all other
currently existing contracts, agreements and instruments with respect to the
Additional Properties, to the extent applicable to the Additional Properties,
including operating agreements, unitization, pooling, and communitization
agreements, declarations and orders, area of mutual interest agreements, joint
venture agreements, farmin and farmout agreements, leases, easements,
rights-of-way, exploration agreements, participation agreements, marketing
agreements, balancing agreements, exchange agreements, transportation
agreements, gathering agreements, agreements for the sale, storage and purchase
of oil and gas and treating and processing agreements, but excluding any
contracts, agreements and instruments included within the definition of
“Excluded Assets,” and provided that the defined term “Additional Contracts”
shall not include the Additional Leases, conveyances and assignments of
Additional Leases and other similar instruments constituting such Seller’s chain
of title to the Additional Leases (subject to such exclusion and proviso, the
“Additional Contracts”);
 
(v) All surface fee interests, easements, permits, licenses, servitudes,
rights-of-way, surface leases and other surface rights appurtenant to, and used
or held for use primarily in connection with, the Additional Properties, but
excluding any permits and other appurtenances included within the definition of
“Excluded Assets;”
 
(vi) All equipment, machinery, facilities, fixtures and other tangible personal
property and improvements, including pipelines and well equipment (both surface
and subsurface), located on the Additional Properties or used or held for use
primarily in connection with the operation of the Additional Properties or the
exploration, production, transportation or processing of oil and gas from the
Additional Properties, but excluding (A) office furniture, fixtures and
equipment except as described in Section 1.2(a)(vii), (B) materials and
equipment inventory
 
 
2

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except as described in Section 1.2(a)(viii), (C) vehicles except as described in
Section 1.2(a)(ix) and (D) any such items included within the definition of
“Excluded Assets” (subject to such exclusions, the “Additional Equipment”);
 
(vii) The offices leases, office subleases or buildings described on
Exhibit D-4, Part I and Part II, and the furniture, fixtures and equipment
located in those offices and buildings (or the applicable portion thereof
indicated on such Exhibit), less furniture, fixture and equipment assigned to
any employee of Sellers or their Affiliates presently located in that space who
does not become a Company Onshore Employee, plus furniture, fixtures and
equipment assigned to any employee of Sellers or their Affiliates in the same
building but outside of the space indicated on Exhibit D-4 who does become a
Company Onshore Employee, but excluding in any case any such items included
within the definition of “Excluded Assets;”
 
(viii) The materials and equipment inventory, if any, described on Exhibit D-5;
 
(ix) The vehicles acquired pursuant to Section 6.13;
 
(x) All oil and gas produced from or attributable to the Additional Leases,
Additional Units or Additional Wells after the Closing Date, all oil, condensate
and scrubber liquids inventories and ethane, propane, iso-butane, nor-butane and
gasoline inventories of Sellers from the Additional Properties in storage as of
the end of the Closing Date, and all production, plant and transportation
imbalances of Sellers with respect to the Additional Properties as of the end of
the Closing Date; and
 
(xi) The information, books, records, trade secrets and confidential
information, including but not limited to geophysical and geological
information, drilling operations, production data, customer information,
operational data, research and development studies, reservoir modeling
information and models, engineering information, and know-how (but excluding any
trade secrets and confidential information of third parties) and other data,
information and records of each Seller and its Affiliates, whether in hard copy
or electronic or digital format, to the extent relating primarily to the
Additional Properties or other Additional Assets, excluding, however, in each
case:
 
(A) all corporate, financial, Tax and legal data, information and records of
such Seller that relates primarily to: (1) such Seller’s business generally
(whether or not relating to the Additional Assets); (2) such Seller’s business
and operations in Virginia, West Virginia, Ohio, Pennsylvania, New York,
Kentucky, and Maryland (the “Appalachian Business”); (3) such Seller’s business
and operations in the Excluded Onshore Areas; (4) such Seller’s business and
operations in the Offshore Package Areas; or (5) the businesses of such Seller
and its Affiliates (other
 
 
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than the Companies and Subsidiaries) other than the exploration and production
of oil and gas, each of which is being retained by such Seller;
 
(B) any data, information and records to the extent disclosure or transfer is
prohibited or subjected to payment of a fee or other consideration by any
license agreement or other agreement with a Person other than Affiliates of
Seller, or by applicable Law, and for which no consent to transfer has been
received or for which Purchaser has not agreed in writing to pay the fee or
other consideration, as applicable;
 
(C) all legal records and legal files of Sellers including all work product of
and attorney-client communications with any Seller’s legal counsel (other than
Additional Leases, title opinions, Additional Contracts and Sellers’ working
files for litigation of DEPI, DOTEPI and Reserves listed on Schedule 4.4 which
is assumed by Purchaser pursuant to Section 12.1);
 
(D) all software;
 
(E) data, information and records relating to any sale of all or any portion of
the Additional Assets proposed or considered by Sellers and their Affiliates
pursuant to that sales process commenced in the fall of 2006 and announced
pursuant to a press release dated November 1, 2006, including bids received from
and records of negotiations with third Persons in connection therewith;
 
(F) any data, information and records relating primarily to the other Excluded
Assets;
 
(G) those original information, data and records retained by any Seller pursuant
to Section 13.6; and
 
(H) originals of well files and division order files with respect to Additional
Wells and Additional Units for which DEPI, DOTEPI or Reserves is operator but
for which Purchaser does not become operator (provided that copies of such files
will be included in the Additional Records).
 
(Clauses (A) through (G) shall hereinafter be referred to as the “Additional
Excluded Records” and subject to such exclusions, the data, information and
records described in this Section 1.2(a)(xi) shall hereinafter be referred to as
the “Additional Records.”) For the avoidance of doubt, employment records of
each Company Onshore Employee who becomes an employee of Purchaser or any
Designated Affiliate pursuant to Article 10 shall not be included in the
Additional Records except to the extent: (i) permitted by applicable Law; and
(ii) such employee expressly authorizes the transfer of such employment records
from Sellers to Purchaser pursuant to a written waiver.
 
 
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(xii) The radio licenses described on Exhibit D-6 except those for which a
transfer is prohibited or subject to payment of a fee or other consideration and
for which no consent to transfer has been received or for which Purchaser has
not agreed in writing to pay the fee or other consideration, as applicable; and
 
(xiii) All (A) accounts, instruments and general intangibles (as such terms are
defined in the Uniform Commercial Code of Texas) attributable to the other
Additional Assets at the Closing Date (other than the Excluded Assets and the
amounts to which Seller is entitled pursuant to Section 2.3 and Section 2.4);
and (B) liens and security interests and collateral in favor of Sellers that
exist as of the Closing Date, whether choate or inchoate, under any law, rule or
regulation or under any of the Additional Contracts (i) arising from the
ownership, operation or sale or other disposition of any of the other Additional
Assets or (ii) arising in favor of any Seller as the operator of any of the
Additional Assets, but only to the extent Purchaser is appointed successor
operator.
 
(b) “Administrative Services Agreement” means that certain Administrative
Services Agreement effective as of June 1, 1994, by and between DRI and Dominion
Resources Black Warrior Trust, as amended from time to time.
 
(c) “Adverse Environmental Condition” shall mean, with respect to the Assets,
any violation of Environmental Laws; any condition that is required to be
remediated or cured under applicable Environmental Laws; the failure to
remediate or cure any condition that is required to be remediated or cured under
applicable Environmental Laws; or any actual or threatened action or proceeding
before any Governmental Authority alleging potential liability arising out of or
resulting from any actual or alleged violation of, or any remedial obligation
under, any Environmental Laws.
 
(d) “Affiliate” means, with respect to any Person, a Person that directly or
indirectly controls, is controlled by or is under common control with such
Person, with control in such context meaning the ability to direct the
management or policies of a Person through ownership of voting shares or other
securities, pursuant to a written agreement, or otherwise.
 
(e) “Annual Incentive Plan” means the annual incentive bonus plan sponsored by
Dominion Resources, Inc. for its eligible employees.
 
(f) “Assets” means the Company Assets and the Additional Assets.
 
(g) “Business Day” means any day other than a Saturday, a Sunday, or a day on
which banks are closed for business in New York, New York or Richmond, Virginia,
United States of America.
 
(h) “COBRA” has the meaning set forth in Section 10.9.
 
(i) “Code” means the United States Internal Revenue Code of 1986, as amended.
 
 
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(j) “Company Assets” means all of each Company’s and Wholly-Owned Subsidiary’s
right, title, and interest in and to the following:
 
(i) The Oil and Gas Leases that are described on Exhibit B-1 and all other Oil
and Gas Leases owned by any Company or Wholly-Owned Subsidiary (collectively,
the “Company Leases”), and any and all oil, gas, water, CO2 or injection wells
thereon or on the pooled, communitized or unitized acreage that includes all or
any part of the Leases, including the interests in the wells shown on
Exhibit B-2 attached hereto (the “Company Wells”);
 
(ii) All pooled, communitized or unitized acreage which includes all or a part
of any Company Lease (the “Company Units”), and all tenements, hereditaments and
appurtenances belonging to the Company Leases and Company Units;
 
(iii) The gas processing plants, gas gathering systems, pipelines and other
mid-stream equipment described on Exhibit B-3 (the “Company Midstream Assets”
and, together with the Company Leases, Company Wells and Company Units, the
“Company Properties”);
 
(iv) The Material Contracts listed on Schedule 4.8 and all other currently
existing contracts, agreements and instruments with respect to the Company
Properties, to the extent applicable to the Company Properties, including but
not limited to, operating agreements, unitization, pooling and communitization
agreements, declarations and orders, area of mutual interest agreements, joint
venture agreements, farmin and farmout agreements, leases, easements,
rights-of-way, exploration agreements, participation agreements, marketing
agreements, balancing agreements, exchange agreements, transportation
agreements, gathering agreements, agreements for the sale, storage and purchase
of oil and gas and treating and processing agreements, but excluding any
contracts, agreements and instruments included within the definition of Excluded
Assets, and provided that the defined term “Company Contracts” shall not include
the Company Leases, conveyances and assignments of Company Leases and other
similar instruments constituting any Company’s or Wholly-Owned Subsidiary’s
chain of title to the Company Leases (subject to such exclusion and proviso, the
“Company Contracts”);
 
(v) All surface fee interests, easements, permits, licenses, servitudes,
rights-of-way, surface leases and other surface rights appurtenant to, and used
or held for use in connection with, the Company Properties, but excluding any
permits and other appurtenances included within the definition of Excluded
Assets;
 
(vi) All equipment, machinery, facilities, fixtures and other tangible personal
property and improvements, including pipelines and well equipment (both surface
and subsurface), located on the Company Properties or used or held for use in
connection with the operation of the Company Properties or the
 
 
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exploration, production, transportation or processing of oil or gas from the
Company Properties, but excluding (A) office furniture, fixtures and equipment
except as described in Section 1.2(j)(vii), and (B) any such items included
within the definition of Excluded Assets (subject to such exclusions, the
“Company Equipment”);
 
(vii) The office leases or buildings, if any, described on Exhibit B-4 and the
furniture, fixtures and equipment located therein, but excluding any such items
included within the definition of Excluded Assets;
 
(viii) The materials and equipment inventory, if any, used or held for use in
connection with the Company Properties, but excluding any such items included
within the definition of Excluded Assets;
 
(ix) All vehicles used in connection with the Company Properties, but excluding
any such items included within the definition of Excluded Assets;
 
(x) All oil and gas produced from or attributable to the Company Leases, Company
Units, or Company Wells after the Closing Date, all oil, condensate and scrubber
liquids inventories and ethane, propane, iso-butane, nor-butane and gasoline
inventories of the Companies and Wholly-Owned Subsidiaries from the Company
Properties in storage as of the end of the Closing Date and production, plant
and transportation imbalances of the Companies and Wholly-Owned Subsidiaries as
of the end of the Closing Date;
 
(xi) The software, trade secrets and confidential information, including but not
limited to geophysical and geological information, drilling operations,
production data, customer information, operational data, research and
development studies, reservoir modeling information and models, engineering
information, and know-how (but excluding any trade secrets and confidential
information of third parties) and other data, information and records of the
Companies and Wholly-Owned Subsidiaries and their Affiliates, excluding however
 
(A) any data, information, software and records to the extent disclosure or
change in ownership in connection with a sale of shares is prohibited or
subjected to payment of a fee or other consideration by any license agreement or
other agreement with a Person other than Affiliates of Seller, or by applicable
Law, and for which no consent to transfer has been received or for which
Purchaser has not agreed in writing to pay the fee or other consideration, as
applicable;
 
(B) all legal records and legal files of Sellers including all work product of
and attorney-client communications with any Seller’s legal counsel (other than
Sellers’ working files for litigation of the Companies and Subsidiaries listed
on Schedule 4.4 which is assumed by Purchaser pursuant to Section 12.1);
 
 
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(C) data, information and records relating to any sale of all or any portion of
the Shares or any Company Assets proposed or considered by Sellers and their
Affiliates pursuant to that sales process commenced in the fall of 2006 and
announced pursuant to a press release on November 1, 2006, including bids
received from and records of negotiations with third Persons;
 
(D) any data, information and records primarily relating to the other Excluded
Assets; and
 
(E) those original data, information, software and records retained by any
Seller pursuant to Section 13.6.
 
(Clauses (A) through (E) shall hereinafter be referred to as the “Company
Excluded Records” and subject to such exclusions, the data, information,
software and records described in this Section 1.2(j)(xi) shall hereinafter be
referred to as the “Company Records”);
 
(xii) Radio licenses except those for which change in ownership in connection
with a sale of equity ownership is prohibited or subject to payment of a fee or
other consideration and for which no consent to transfer has been received or
for which Purchaser has not agreed in writing to pay the fee or other
consideration as applicable;
 
(xiii) the Equity Interests in the Subsidiaries that are not Wholly-Owned
Subsidiaries; and
 
(xiv) All (A) accounts, instruments and general intangibles (as such terms are
defined in the Uniform Commercial Code of Texas) attributable to the other
Company Assets at the Closing Date (other than the Excluded Assets and the
amounts to which Seller is entitled pursuant to Section 2.3 and Section 2.4);
and (B) liens and security interests and collateral in favor of the Companies
and Wholly-Owned Subsidiaries that exist as of the Closing Date, whether choate
or inchoate, under any law, rule or regulation or under any of the Company
Contracts (i) arising from the ownership, operation or sale or other disposition
of any of the other Company Assets or (ii) arising in favor of any Company or
Wholly-Owned Subsidiary as the operator of any of the Company Assets, but only
to the extent Purchaser is appointed successor operator.
 
(k) “Company Onshore Employees” has the meaning set forth in Section 10.1(a).
 
(l) “Company’s U.S. Benefit Plans” has the meaning set forth in
Section 10.3(a)(i).
 
(m) “Comparability Period” has the meaning set forth in Section 10.2(a).
 
 
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(n) “Consolidated Group” means an affiliated, consolidated, combined or unitary
group with respect to any Taxes of which any of (i) a Company or Subsidiary
treated as a corporation for tax purposes and (ii) DRI or an Affiliate of DRI
(other than any such Company or Subsidiary), is or was a member prior to the
Closing Date.
 
(o) “Consolidated Onshore E&P Business” means, together, the E&P Business and
the business and operations conducted by DEPI, DOTEPI, Reserves, and all Persons
that are wholly-owned by DEPI, DOTEPI and Reserves, directly or indirectly, that
pertain to the Excluded Onshore Areas.
 
(p) “Contracts” means Company Contracts and Additional Contracts.
 
(q) “DEPI I, LP” means Dominion Exploration & Production I, L.P., a limited
partnership organized under the Laws of Texas.
 
(r) “DEPI Texas Beneficial Interests” means all of the interests of DEPI I, LP
in the Additional Properties located in Texas that are not in an Excluded Texas
County, and in any other Assets that are associated therewith.
 
(s) “Designated Affiliates” has the meaning set forth in Section 10.1(a).
 
(t) “Designated Employees” has the meaning set forth in Section 10.1(b).
 
(u) “DNG I, LP” means Dominion Natural Gas I, LP, a limited partnership
organized under the Laws of Texas.
 
(v) “DOTEPI Texas Beneficial Interests” means all of the interests of DNG I, LP
in the Additional Properties located in Texas that are not in an Excluded Texas
County, and in any other Assets that are associated therewith.
 
(w) “DRI” means Dominion Resources, Inc., a corporation organized under the Laws
of Virginia.
 
(x) “E&P Business” means the business and operations conducted with the Assets
by the Companies, Wholly-Owned Subsidiaries, DEPI, DOTEPI and Reserves.
 
(y) “Effective Date” means 11:59 p.m. Central Time on June 30, 2007.
 
(z) “Employee Plans” means employee benefit and compensation plans, agreements,
contracts, policies and programs, including, without limitation, (i) all
retirement, savings and other pension plans; (ii) all health, severance,
insurance, disability and other employee welfare plans; and (iii) all
employment, incentive, perquisites, vacation and other similar plans, programs
or practices whether or not subject to ERISA and whether covering one person or
more than one person, that are maintained by Seller or any Affiliate, including
an ERISA Affiliate, with respect to Company Onshore Employees or to which any
Seller or any Affiliate, including an ERISA Affiliate, contributes on behalf of
Company Onshore Employees.
 
 
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(aa) “Environmental Liabilities” shall mean any and all environmental response
costs, costs to cure (including the costs of any necessary pollution control
equipment), restoration costs, costs of remediation or removal, natural resource
damages, settlements, penalties, fines, attorneys’ fees and other Damages,
including any such matters incurred or imposed pursuant to any claim or cause of
action by a Governmental Authority or other Person, attributable to an Adverse
Environmental Condition occurring with respect to the Assets.
 
(bb) “Equipment” means Company Equipment and Additional Equipment.
 
(cc) “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.
 
(dd) “ERISA Affiliate” means any other Person that is required to be treated as
a single employer with Sellers or any Company or Subsidiary that is an Affiliate
of Sellers under Section 414 of the Code or Section 4001(a)(14) of ERISA.
 
(ee) “Excluded Employees” means the Executives and Managing Directors listed on
Schedule 1.2.
 
(ff) [RESERVED]
 
(gg) “Excluded New Mexico Counties” means all counties in the state of New
Mexico other than (i) Chavez, Eddy, Lea and Roosevelt counties, and (ii), with
respect to overriding royalty interests only, San Juan and Rio Arriba Counties,
and “Excluded New Mexico County” means any of them.
 
(hh) “Excluded Onshore Areas” means Arkansas, Colorado, Illinois, Kansas,
Louisiana, North Dakota, Nebraska, Oklahoma, South Dakota, Utah, Wyoming,
Montana, the Excluded New Mexico Counties and the Excluded Texas Counties.
 
(ii) “Excluded Records” means the Company Excluded Records and the Additional
Excluded Records.
 
(jj) “Excluded Texas Counties” means all counties in the state of Texas other
than those counties identified on Schedule 1.2(jj), and “Excluded Texas County”
means any of them.
 
(kk) “Executives” means the individuals listed on Schedule 1.2, Part I.
 
(ll) “Governmental Authority” means any national government and/or government of
any political subdivision, and departments, courts, arbitrator, arbitral
tribunals, commissions, boards, bureaus, ministries, agencies or other
instrumentalities of any of them.
 
(mm) “Hart-Scott-Rodino Act” means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
 
 
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(nn) “Hazardous Substances” shall mean any substance defined or regulated as a
“pollutant,” “contaminant,” “solid waste,” “hazardous substance,” “toxic
substance” or “hazardous waste” under any Environmental Laws.
 
(oo) “Key Employees” means the individuals listed on Schedule 1.2, Part III.
 
(pp) “Laws” means all laws, statutes, rules, regulations, ordinances, orders,
decrees, requirements, authoritative interpretations, judgments and codes of
Governmental Authorities.
 
(qq) “Leases” means Company Leases and Additional Leases.
 
(rr) “Leadership Team” has the meaning set forth in Section 10.1(f).
 
(ss) “Managing Directors” means the individuals listed on Schedule 1.2, Part II.
 
(tt) “Material Contract” means any Contract (i) which can reasonably be expected
in the case of (A) below to generate gross revenue per year for the owner of the
Assets in excess of Ten Million dollars ($10,000,000) or (ii) which in the case
of (D), (E), (F), (G) or (H) below can reasonably be expected to require
expenditures per year chargeable to the owner of the Assets in excess of Five
Million dollars ($5,000,000) (other than, in the case of (G), expenditures
associated with transfer or re-licensing fees) or (iii) which in the case of (B)
and (C) below can reasonably be expected to require expenditures per year
chargeable to the owner of the Assets in excess of Five Million dollars
($5,000,000) or (iv) which satisfies the description in (I) or (J) below, and is
of one or more of the following types:
 
(A) contracts for the purchase, sale or exchange of oil, gas or other
hydrocarbons;
 
(B) contracts for the gathering, treatment, processing, handling, storage or
transportation of oil, gas or other hydrocarbons;
 
(C) contracts for the use or sharing of drilling rigs;
 
(D) purchase agreements, farmin and farmout agreements, exploration agreements,
participation agreements and similar agreements providing for the earning of an
equity interest;
 
(E) partnership agreements, joint venture agreements and similar agreements;
 
(F) operating agreements, unit agreements and unit operating agreements;
 
(G) seismic licenses and contracts;
 
 
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(H) leases not constituting Oil and Gas leases;
 
(I) contracts for the construction and installation of Equipment with guaranteed
production throughput requirements where amounts owed if the guaranteed
throughput is not delivered exceed Five Million dollars ($5,000,000); and
 
(J) all contracts between any Company (or Subsidiary) on the one hand and any
Seller or any of its Affiliates (other than any Company or Subsidiary) on the
other hand that will remain binding on any Company or Subsidiary, or will become
binding on Purchaser, after the Closing (other than as expressly contemplated by
this Agreement).
 
(uu) “Midstream Assets” means the Company Midstream Assets and the Additional
Midstream Assets.
 
(vv) “Multiemployer Plan” means a multiemployer plan, as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
 
(ww) “Offshore Package Areas” means the Outer Continental Shelf and the state
waters of Texas, Louisiana, Mississippi or Alabama in the Gulf of Mexico.
 
(xx) “PBGC” means the Pension Benefit Guaranty Corporation.
 
(yy) “Person” means any individual, corporation, partnership, limited liability
company, trust, estate, Governmental Authority or any other entity.
 
(zz) “Properties” means Company Properties and Additional Properties.
 
(aaa) “Property Costs” means (without duplication) all operating expenses
(including without limitation costs of insurance, rentals, shut-in payments,
royalty payments, title examination and curative actions, and production and
similar Taxes measured by units of production, and severance Taxes, attributable
to production of oil and gas from the Assets, but excluding any Seller’s,
Company’s or Subsidiary’s other Taxes) and capital expenditures (including
without limitation bonuses, broker fees, and other lease acquisition costs,
costs of drilling and completing wells and costs of acquiring equipment)
incurred in the ownership and operation of the Assets in the ordinary course of
business, general and administrative costs with respect to the E&P Business, and
overhead costs charged to the Assets under the applicable operating agreement or
if none, charged to the Assets on the same basis as charged on the date of this
Agreement, but excluding without limitation liabilities, losses, costs, and
expenses attributable to:
 
(i) claims, investigations, administrative proceedings, arbitration or
litigation directly or indirectly arising out of or resulting from actual or
claimed personal injury, illness or death; property damage; environmental damage
or contamination; other torts; private rights of action given under any Law; or
violation of any Law,
 
 
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(ii) obligations to plug wells, dismantle facilities, close pits and clear the
site and/or restore the surface or seabed around such wells, facilities and
pits,
 
(iii) obligations to remediate actual or claimed contamination of groundwater,
surface water, soil or Equipment,
 
(iv) title claims (including claims that Leases have terminated),
 
(v) claims of improper calculation or payment of royalties (including overriding
royalties and other burdens on production) related to deduction of
post-production costs or use of posted or index prices or prices paid by
affiliates,
 
(vi) gas balancing and other production balancing obligations,
 
(vii) casualty and condemnation,
 
(viii) any claims for indemnification, contribution or reimbursement from any
third Person with respect to liabilities, losses, costs and expenses of the type
described in preceding clauses (i) through (vii), whether such claims are made
pursuant to contract or otherwise; and
 
(ix) non-cash accounting entries such as depletion, depreciation and
amortization incurred with respect to the Assets.
 
Notwithstanding anything to the contrary, Property Costs does not include any
costs incurred by any Seller in connection with any obligation of such Seller to
pay, reimburse or indemnify the Purchaser hereunder, which costs shall be the
sole obligation of such Seller.
 
(bbb) “Purchaser U.S. Employee Plans” has the meaning set forth in
Section 10.4(a).
 
(ccc) “Records” means Company Records and Additional Records.
 
(ddd) “Selected Employees” has the meaning set forth in Section 10.1(c).
 
(eee) “Seller Employment Indemnified Persons” has the meaning set forth in
Section 10.1(f).
 
(fff) “Subsidiary” means any of the entities described on Exhibit C, which are
direct or indirect wholly or partially-owned subsidiaries of one or more of the
Companies.
 
(ggg) “Tax” means (i) all taxes, assessments, unclaimed property and escheat
obligations, fees and other governmental charges imposed by any Governmental
Authority, including any foreign, federal, state or local income tax, surtax,
remittance tax, presumptive tax, net worth tax, special contribution, production
tax, pipeline transportation tax, freehold mineral tax, value added tax,
withholding tax, gross receipts
 
 
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tax, windfall profits tax, profits tax, severance tax, personal property tax, ad
valorem tax, real property tax (including assessments, fees or other charges
imposed by a Governmental Authority which are based on the use or ownership of
real property), sales tax, goods and services tax, service tax, transfer tax,
use tax, excise tax, premium tax, stamp tax, motor vehicle tax, entertainment
tax, insurance tax, capital stock tax, franchise tax, occupation tax, payroll
tax, employment tax, unemployment tax, disability tax, alternative or add-on
minimum tax and estimated tax, (ii) any interest, fine, additions to tax or
penalty imposed by any Governmental Authority in connection with any item
described in clause (i), and (iii) any liability in respect of any item
described in clauses (i) or (ii) above, that arises by reason of a contract,
assumption, transferee or successor liability, operation of law, Treasury
Regulation Section 1.1502-6 (or any predecessor or successor thereof or any
analogous provision under state, local or other law) or otherwise.
 
(hhh) “Tax Expenses” means any costs, expenses, losses or damages, including
reasonable expenses of investigation and attorneys’ and accountants’ fees and
expenses, incurred in connection with the determination, assessment or
collection of Taxes.
 
(iii) “Title IV Plan” has the meaning set forth in Section 4.2(j)(iv).
 
(jjj) “Transferred Derivatives” means the physical derivatives contracts listed
on Schedule 4.8.
 
(kkk) “Trust Agreement” means the Trust Agreement of Dominion Resources Black
Warrior Trust among Dominion Black Warrior Basin, Inc., Dominion Resources,
Inc., Mellon Bank (DE) National Association and Nationsbank of Texas, N.A.,
dated May 31, 1994, as amended from time to time.
 
(lll) “U.S. Temporary Employees” means those individuals providing services with
respect to the Assets as either “co ops,” “interns” or contract workers through
CoreStaff.
 
(mmm) “Units” means Company Units and Additional Units.
 
(nnn) “WARN Act” has the meaning set forth in Section 10.10(a).
 
(ooo) “Wells” means Company Wells and Additional Wells.
 
(ppp) [RESERVED]
 
(qqq) “Wholly-Owned Subsidiary” means any Subsidiary in which all issued and
outstanding equity interests are owned, directly or indirectly, by one or more
Sellers and Companies.
 
Section 1.3  Excluded Assets.  Notwithstanding anything to the contrary in
Section 1.2 or elsewhere in this Agreement, the “Additional Assets,” “Company
Assets,” “Shares” and “Interests” shall not include any rights with respect to
the Excluded Assets, which, if owned by any Company or Wholly-Owned Subsidiary,
Sellers shall be entitled to cause such Company or Wholly-Owned Subsidiary to
transfer or distribute to Sellers, or their Affiliates, or
 
 
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one or more third parties, via one or more steps, prior to Closing; provided
that (i) such transfer shall not involve any representation, warranty or
indemnity provided by the transferor other than a special warranty of title with
respect to the Excluded Utah Interests, the Excluded Midcontinent Pipeline
Interests and any other real property interests and (ii) the transferee shall
assume all obligations and liabilities (known and unknown) with respect to such
Excluded Asset. “Excluded Assets” shall mean the following:
 
(i) the Excluded Records;
 
(ii) copies of other Records retained by Sellers pursuant to Section 13.6;
 
(iii) contracts, agreements and instruments, whose change in ownership in
connection with a sale of equity ownership (if owned by the Companies or
Subsidiaries) or transfer (if owned by DEPI, DOTEPI or Reserves) is prohibited
or subjected to payment of a fee or other consideration by an agreement with a
Person other than an Affiliate of Sellers, or by applicable Law, and for which
no consent to transfer has been received or for which Purchaser has not agreed
in writing to pay the fee or other consideration, as applicable;
 
(iv) Permits and other appurtenances for which change in ownership in connection
with a sale of equity ownership (if owned by the Companies or Subsidiaries) or
transfer (if owned by DEPI, DOTEPI or Reserves) is prohibited or subjected to
payment of a fee or other consideration by an agreement with a Person other than
an Affiliate of Seller, or by applicable Law, and for which no consent to
transfer has been received or for which Purchaser has not agreed in writing to
pay the fee or other consideration, as applicable;
 
(v) all claims against insurers and other third parties pending on or prior to
the Effective Date other than the actions, suits and proceedings being assumed
by Purchaser pursuant to Section 12.1 and any claims against Persons other than
Sellers and their Affiliates with respect to those actions, suits and
proceedings;
 
(vi) assets of or which relate to Sellers’ and their Affiliates’ Employee Plans
or worker’s compensation insurance and programs;
 
(vii) all trademarks and trade names containing “Dominion” or any variant
thereof;
 
(viii) all futures, options, swaps and other derivatives except the Transferred
Derivatives, and all software used for trading, hedging and credit analysis;
 
(ix) the Clearinghouse and Castlewood Road records storage facilities located in
Richmond, Virginia;
 
 
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(x) the portion of the approximately 60,000 sq. ft. office lease of space
located at 16800 Greenspoint Park Drive, Houston, Texas, that is not described
on Exhibit D-4, Part II, the DEPI office lease for space located at 1250 Poydras
Street, New Orleans, Louisiana, the portion of the 123,000 sq. ft. office lease
of space located at 14000 Quail Springs Parkway, Oklahoma City, Oklahoma that is
not described on Exhibit D-4, Part II, and the approximately 136,000 sq. ft.
office lease of space located at Wedge International Tower, 1415 Louisiana
Street, Houston, Texas, and the furniture, fixtures and equipment associated
with such excluded office space, less furniture, fixture and equipment assigned
to any employee of Sellers or their Affiliates presently located in that space
who becomes a Company Onshore Employee in the same building;
 
(xi) any leased equipment and other leased personal property which is not
purchased prior to Closing pursuant to Section 6.13 (except to the extent the
lease is transferable without payment of a fee or other consideration which
Purchaser has not agreed in writing to pay);
 
(xii) all office equipment, computers, cell phones, pagers and other hardware,
personal property and equipment that: (A) relate primarily to any Seller’s
business generally, or to the Appalachian Business, or to Seller’s business with
respect to the Excluded Onshore Areas, or the Offshore Package Areas, or in
Canada, or other business of any Seller and its Affiliates (except the E&P
Business), or (B) are set forth on Schedule 1.3;
 
(xiii) the contracts used for both the Assets and other assets of DEPI, DOTEPI,
Reserves and their Affiliates described on Schedule 1.3;
 
(xiv) any Tax refund (whether by payment, credit, offset or otherwise, and
together with any interest thereon) in respect of any Taxes for which DEPI is
liable for payment or required to indemnify Purchaser under Section 9.1;
 
(xv) refunds received prior to the Cut-Off Date and relating to severance Tax
abatements with respect to all taxable periods or portions thereof ending on or
prior to the Effective Date;
 
(xvi) all indemnities and other claims against Persons (other than the Sellers
and/or their Affiliates) for Taxes for which DEPI is liable for payment or
required to indemnify Purchaser under Section 9.1;
 
(xvii) claims against insurers under policies held by Sellers or their
Affiliates (other than the Companies and Subsidiaries);
 
(xviii) amounts to which Sellers are entitled pursuant to Section 2.4(a), and
Property Costs and revenues associated with all joint interest audits and other
audits of Property Costs to the extent covering periods on or prior to the
Effective Date, which amounts are paid or received prior to the Cut-Off Date;
 
 
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(xix) the CO2 membrane unit, associated equipment and lease and rights-of-way
for locating and accessing such unit and associated equipment as further
described on Schedule 1.3;
 
(xx) all of the partnership interests in DNG I, LP, subject to the terms of
Section 6.14;
 
(xxi) all of the interest of Dominion Midwest Energy, Inc. in and to those
leases and other rights to oil and gas in place described on Schedule 1.3,
Part II, and the contracts, equipment, data and records and other assets used or
held for use in connection therewith (the “Excluded Utah Interests”);
 
(xxii) all of the interest of Stonewater Pipeline Company, L.P. in and to the
gathering systems, pipelines and other mid-stream equipment described on
Schedule 1.3, Part III, and the contracts, equipment, data and records and other
assets used or held for use in connection therewith (the “Excluded Midcontinent
Pipeline Interests”); and
 
(xxiii) any other assets, contracts or rights described on Schedule 1.3.
 
Section 1.4  Transfer of Certain Assets Not Held by Sellers.  Sellers shall, at
Closing, cause Dominion Resources Services, Inc. to assign to Purchaser certain
personal property described on Schedule 1.4. EXCEPT AS EXPRESSLY SET FORTH IN
ARTICLE IV OR THE CERTIFICATE REFERRED TO IN SECTION 8.2(J), EACH ASSIGNMENT OF
SUCH PERSONAL PROPERTY SHALL BE “AS IS, WHERE IS” WITH ALL FAULTS, AND ALL
REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF
CONDITION, QUALITY, AIRWORTHINESS, SUITABILITY, DESIGN, MARKETABILITY, TITLE,
INFRINGEMENT, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY
TO MODELS OR SAMPLES OF MATERIALS ARE HEREBY DISCLAIMED. Such personal property
shall be considered “Additional Assets” for purposes of this Agreement with the
benefit of the representations, warranties, and other provisions of this
Agreement related to the Assets. Without limiting any obligations of their other
Affiliates under Section 6.3 of this Agreement, Sellers shall also cause
Dominion Resources Services, Inc. to comply with the various covenants contained
in Sections 6.1 and 6.4, to the extent applicable to the property described on
Schedule 1.4, prior to Closing.
 
 
ARTICLE 2.
PURCHASE PRICE
 
Section 2.1  Purchase Price.  The purchase price for the Interests (the
“Purchase Price”) shall be Four Billion Twenty-Five Million dollars
($4,025,000,000.00) (the “Unadjusted Purchase Price”), adjusted as provided in
Section 2.3.
 
 
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Section 2.2  Allocation of Purchase Price. 
 
(a) The Unadjusted Purchase Price shall be allocated to the Shares of each
Company and to the DEPI Additional Assets, the DOTEPI Additional Assets and the
Reserves Additional Assets as set forth on Schedule 2.2 (each an “Interest
Unadjusted Purchase Price”). The adjustments to the Unadjusted Purchase Price
under Section 2.3 shall be applied to the Interest Unadjusted Purchase Price for
the Shares of each Company, the DEPI Additional Assets, the DOTEPI Additional
Assets and the Reserves Additional Assets based upon the owner of the specific
Lease, Well or other asset to which the adjustment relates, if determinable. Any
adjustments to the Unadjusted Purchase Price under Section 2.3 that are not
specific to any Company or Additional Asset group (for example, general and
administrative expense of the E&P Business under Section 2.3(h)(ii)) shall be
applied pro rata to the Interest Unadjusted Purchase Price for the Shares of
each Company, the DEPI Additional Assets, the DOTEPI Additional Assets, and the
Reserves Additional Assets, as previously adjusted, in proportion to the amount
of each. Each Interest Unadjusted Purchase Price, as so adjusted, shall be
referred to herein as the “Interest Purchase Price.”
 
(b) Each Seller shall be entitled to the portion of the Purchase Price equal to
the Interest Purchase Price for the various Interests it is selling.
 
(c) At least thirty (30) days prior to the Target Closing Date, Seller shall
prepare and deliver to Purchaser, using and based upon the best information
available to Sellers, a schedule setting forth the following items:
 
(i) the portion of the Unadjusted Purchase Price as set forth in Schedule 2.2
allocated to Interests other than the Additional Assets;
 
(ii) the liabilities of the Companies and the Subsidiaries as of the Closing (as
required for the allocations under clause (iii));
 
(iii) an allocation of the sum of the Unadjusted Purchase Price under clause (i)
and the aggregate amount of such liabilities under clause (ii) that are part of
the adjusted grossed-up basis within the meaning of Treasury Regulation
§ 1.338-5 among the classes of assets of the Companies and any Subsidiary (other
than any Company or Subsidiary that is not a member of a selling consolidated
group within the meaning of Treasury Regulations § 1.338(h)(10)-1(b)(2)) as of
the Closing, which allocations shall be made in accordance with Section
338(b)(5) and (h)(10) of the Code and the Treasury Regulations thereunder and
shall be consistent with the allocations under Section 2.2(a) and the Allocated
Values established pursuant to Section 3.4;
 
(iv) the portion of the Unadjusted Purchase Price as set forth in Schedule 2.2
allocated to the Additional Assets;
 
(v) the liabilities associated with the Additional Assets as of the Closing (as
required for the allocations under clause (vi)); and
 
 
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(vi) an allocation of the sum of the Unadjusted Purchase Price under clause (iv)
and the aggregate amount of such liabilities under clause (v) that are
includable in the Purchaser’s tax basis in the Additional Assets among the
classes of the Additional Assets as of the Closing, which allocations shall be
made in accordance with Section 1060 of the Code and the Treasury Regulations
thereunder and shall be consistent with the allocations under Section 2.2(a) and
the Allocated Values established pursuant to Section 3.4.
 
Sellers shall at Purchaser’s request make reasonable documentation available to
support the proposed allocation. As soon as reasonably practicable, but not
later than fifteen (15) days following receipt of Sellers’ proposed allocation
schedule, Purchaser shall deliver to DEPI a written report containing any
changes that Purchaser proposes to be made in such schedule (and specifying the
reasons therefor in reasonable detail). The Parties shall undertake to agree on
a final schedule no later than six (6) Business Days prior to the Closing Date.
In the event the Parties cannot reach agreement by that date, the Sellers’
allocation, as adjusted to reflect Purchaser’s suggested changes to which
Sellers agree, shall be used pending adjustment under the following paragraph.
 
Within thirty (30) days after the determination of the Purchase Price under
Section 8.4(b), but no later than thirty (30) days prior to the due date (after
extension) of filing the Tax return for the period beginning on or after the
Closing Date, the schedule described above in this Section 2.2(c) shall be
amended by Sellers and delivered to Purchaser to reflect the Purchase Price
following final adjustments. Purchaser shall cooperate with Sellers in the
preparation of the amended schedule in a manner consistent with the provisions
of Section 9.4. If neither the Preliminary Section 2.2(c) Schedule nor the
Sellers’ amendments to it to reflect the Purchase Price following final
adjustments is objected to by Purchaser (by written notice to DEPI specifying
the reasons therefor in reasonable detail) within thirty (30) days after
delivery of Sellers’ adjustments to the schedule, it shall be deemed agreed upon
by the Parties and shall constitute the “Final Section 2.2(c) Schedule” (herein
so called). In the event that the Parties cannot reach an agreement within
twenty (20) days after Seller receives notice of any objection by Purchaser,
then, any Party may refer the matters in dispute to PricewaterhouseCoopers or
another mutually acceptable independent appraiser (the “Independent Appraiser”)
to assist in determining the matters in dispute with respect to the allocation
of the Purchase Price as finally adjusted among the separate classes of Company
Assets or Additional Assets, as the case may be, for the purposes of the
allocation described in this Section 2.2(c). Should PricewaterhouseCoopers fail
or refuse to agree to serve as Independent Appraiser within twenty (20) days
after written request from any Party to serve, and the Parties fail to agree in
writing on a replacement Independent Appraiser within ten (10) days after the
end of that twenty (20) day period, or should no replacement Independent
Appraiser agree to serve within forty-five (45) days after the original written
request pursuant to this sentence, the Independent Appraiser shall be appointed
by the Houston office of the American Arbitration Association. The Independent
Appraiser shall be instructed to deliver to Purchaser and Sellers a written
determination of any revisions to the Section 2.2(c) Schedule within thirty (30)
days after the date of referral thereof to the Independent Appraiser. Purchaser
and Sellers agree to accept the Independent Appraiser’s determinations as to the
matters in dispute and the appropriate adjustments to the schedule to reflect
those determinations, which as so adjusted shall constitute the Final
Section 2.2(c) Schedule. The Independent Appraiser may determine the issues in
dispute following such
 
 
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procedures, consistent with Schedule 2.2, the provisions of this Agreement and
the Allocated Values, as it reasonably deems appropriate in the circumstances,
and with reference to the amounts in issue. The Parties do not intend to impose
any particular procedures upon the Independent Appraiser, it being the desire
and direction of the Parties that any such disagreement shall be resolved as
expeditiously and inexpensively as reasonably practicable. The Independent
Appraiser shall act as an expert for the limited purpose of determining the
specific disputed aspects of the allocation schedule submitted by any Party and
may not award damages, interest, or penalties to any Party with respect to any
matter. Each Seller and Purchaser shall bear its own legal fees and costs of
presenting its case. DEPI shall bear one-half and Purchaser shall bear one-half
of the costs and expenses of the Independent Appraiser.
 
The allocations set forth in the Final Section 2.2(c) Schedule shall be used by
Sellers, Purchaser, the Companies and the Subsidiaries as the basis for
reporting asset values and other items, including the determination of the
deemed sale price and the adjusted grossed-up basis of the assets of the
applicable Companies and Subsidiaries in accordance with Treasury Regulation
§ 1.338-5 or similar applicable law, for purposes of all Tax Returns (including
Internal Revenue Service Forms 8023 and 8883 (or any successor forms)). The
allocations set forth in the Final Section 2.2(c) Schedule shall also be used by
Sellers and Purchaser in preparing Internal Revenue Service Form 8594, Asset
Acquisition Statement (which Form 8594 shall be completed, executed and
delivered by such parties as soon as practicable after the Closing but in no
event later than 15 days prior to the date such form is required to be filed).
Sellers and Purchaser agree not to assert, and will cause their Affiliates not
to assert, in connection with any audit or other proceeding with respect to
Taxes, any asset values or other items inconsistent with the amounts set forth
in Final Section 2.2(c) Schedule unless otherwise required by applicable Laws.
 
Section 2.3  Adjustments to Purchase Price.  The Interest Unadjusted Purchase
Price shall be adjusted with respect to the Shares of each Company, the DEPI
Additional Assets, the DOTEPI Additional Assets and the Reserves Additional
Assets as follows, but only with respect to matters (i) in the case of
Section 2.3(a), for which notice is given on or before the Title Claim Date,
(ii) in the case of Sections 2.3(b), (c), (d), (e), (f) or (g), identified on or
before the 180th day following Closing (the “Cut-Off Date”) and (iii) in the
case of Section 2.3(h), received or paid on or before the Cut-Off Date:
 
(a) Increased or decreased, as appropriate, in accordance with Section 3.5;
 
(b) Decreased as a consequence of Assets excluded from this transaction as a
consequence of the exercise of preferential rights to purchase, as described in
Section 3.6;
 
(c) Decreased by the amount of royalty, overriding royalty and other burdens
payable out of production of oil or gas from the Leases and Units or the
proceeds thereof to third Persons but held in suspense by any Seller, Company or
Wholly-Owned Subsidiary at the Closing, and any interest accrued in escrow
accounts for such suspended funds, to the extent such funds are not transferred
to Purchaser’s control at the Closing;
 
 
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(d) Increased by the amount of the Computer/Vehicle Buy-Out Costs in accordance
with Section 6.13, such increase not to exceed Three Million Nine Hundred Eighty
Thousand dollars ($3,980,000);
 
(e) Adjusted for production, plant and transportation gas imbalances and
inventory on the Effective Date as follows:
 
(i) Decreased by the sum of the amount of each production, plant and
transportation gas imbalance owed by DEPI, DOTEPI, Reserves, the Companies and
Wholly-Owned Subsidiaries (and their equity interest share of imbalances owed by
Subsidiaries other than Wholly-Owned Subsidiaries) to third Persons at the
Effective Date with respect to production from the Properties (or, in the case
of Properties not operated by DEPI, DOTEPI, Reserves, a Company or a
Wholly-Owned Subsidiary, as reported on the most recent imbalance statement as
of a date closest to the Effective Date), in Mmbtu, multiplied by (A) the FOM
Index Price for the point designated with respect to such source of the
imbalance on Schedule 2.3(e) on the first day of the month after the month of
the Effective Date less (B) the adjustments to such FOM Index Price shown on
Schedule 2.3(e).
 
(ii) Increased by the sum of the amount of each production, plant and
transportation gas imbalance owed by third Persons to DEPI, DOTEPI, Reserves,
the Companies and Wholly-Owned Subsidiaries (and their equity share of
imbalances owed to Subsidiaries other than Wholly-Owned Subsidiaries) at the
Effective Date with respect to production from the Properties (or, in the case
of Properties not operated by DEPI, DOTEPI, Reserves, a Company or a
Wholly-Owned Subsidiary, as reported on the most recent imbalance statement as
of a date closest to the Effective Date), in Mmbtu, multiplied by (A) the FOM
Index Price for the point designated with respect to such source of the
imbalance on Schedule 2.3(e) on the first day of the month after the month of
the Effective Date less (B) the adjustments to such FOM Index Price shown on
Schedule 2.3(e).
 
(iii) Decreased by the sum of the amount of each scrubber liquid overlift owed
by DEPI, DOTEPI, Reserves, the Companies and Wholly-Owned Subsidiaries (and
their equity interest share of overlifts owed by Subsidiaries other than
Wholly-Owned Subsidiaries) at the Effective Date with respect to production from
the Properties (or, in the case of Properties not operated by DEPI, DOTEPI,
Reserves, a Company or a Wholly-Owned Subsidiary, as reported on the most recent
statement received as of a date closest to the Effective Date), in Barrels,
multiplied by (A) the index price for the point designated with respect to such
source of the imbalance on Schedule 2.3(e) on the first day of the month after
the month of the Effective Date less (B) the adjustments to such index price
shown on Schedule 2.3(e).
 
(iv) Decreased by the sum of the amount of each ethane, propane, iso-butane,
nor-butane and gasoline overlift owed by DEPI, DOTEPI, Reserves, the Companies
and Wholly-Owned Subsidiaries (and their equity interest share of overlifts owed
by Subsidiaries other than Wholly-Owned Subsidiaries) at the
 
 
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Effective Date with respect to production from the Properties (or, in the case
of Properties not operated by DEPI, DOTEPI, Reserves, a Company or a
Wholly-Owned Subsidiary, as reported on the most recent statement received as of
a date closest to the Effective Date), in gallons, multiplied by (A) the index
price for the point designated with respect to such source of the imbalance on
Schedule 2.3(e) on the first day of the month after the month of the Effective
Date less (B) the adjustments to such index price shown on Schedule 2.3(e).
 
(v) Increased by the sum of the amount of each oil, condensate and scrubber
liquid inventory from the Properties in storage at the end of the Effective Date
and produced for the account of DEPI, DOTEPI, Reserves, the Companies and
Wholly-Owned Subsidiaries (and their equity interest share of such amounts
produced for the account of Subsidiaries other than Wholly-Owned Subsidiaries)
on or prior to the Effective Date, in Barrels, multiplied by (A) the index price
for the point designated with respect to the location of the inventory on
Schedule 2.3(e) on the first day of the month after the month of the Effective
Date less (B) the adjustments to such index price shown on Schedule 2.3(e).
 
(vi) Increased by the sum of the amount of each ethane, propane, iso-butane,
nor-butane and gasoline inventory from the Properties in storage at the end of
the Effective Date and produced for the account of DEPI, DOTEPI, Reserves, the
Companies and Wholly-Owned Subsidiaries (and their equity interest share of such
amounts produced for the account of Subsidiaries other than Wholly-Owned
Subsidiaries) on or prior to the Effective Date, in gallons, multiplied by
(A) the index price for the point designated with respect to the location of the
inventory on Schedule 2.3(e) on the first day of the month after the month of
the Effective Date less (B) the adjustments to such index price shown on
Schedule 2.3(e).
 
(vii) Decreased by the sum of the amount of each oil transportation and
production imbalance owed by DEPI, DOTEPI, Reserves, the Companies and
Wholly-Owned Subsidiaries to third Persons (and their equity interest share of
overlifts owed by Subsidiaries other than Wholly-Owned Subsidiaries to third
Persons) at the Effective Date with respect to production from the Properties
(or, in the case of Properties not operated by DEPI, DOTEPI, Reserves, a Company
or a Wholly-Owned Subsidiary, as reported on the most recent statement received
as of a date closest to the Effective Date), in Barrels, multiplied by (A) the
index price for the point designated with respect to such source of the
imbalance on Schedule 2.3(e) on the first day of the month after the month of
the Effective Date less (B) the adjustments to such index price shown on
Schedule 2.3(e).
 
(viii) Increased by the sum of the amount of each oil transportation imbalance
owed by third Persons to DEPI, DOTEPI, Reserves, the Companies and Wholly-Owned
Subsidiaries (and their equity interest share of such imbalances owed by third
Persons to Subsidiaries other than Wholly-Owned Subsidiaries) at the Effective
Date with respect to production from the Properties (or, in the case of
Properties not operated by DEPI, DOTEPI, Reserves, a
 
 
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Company or a Wholly-Owned Subsidiary, as reported on the most recent statement
received as of a date closest to the Effective Date), in Barrels, multiplied by
(A) the index price for the point designated with respect to such source of the
imbalance on Schedule 2.3(e) on the first day of the month after the month of
the Effective Date less (B) the adjustments to such index price shown on
Schedule 2.3(e).
 
(f) Increased by the net amount of (i) all prepaid expenses (including prepaid
Taxes, bonuses, rentals, cash calls to third Person operators) to the extent
applying to the ownership and operation of the Assets or applying to the
Companies or Wholly-Owned Subsidiaries (or their equity interest share of such
amounts prepaid for the account of Subsidiaries other than Wholly-Owned
Subsidiaries) after the Closing Date (provided that prepaid expenses with
respect to any asset not transferred to Purchaser at Closing shall not increase
the Purchase Price) less (ii) all third Person cash call payments received by
DEPI, DOTEPI, Reserves, the Companies or Wholly-Owned Subsidiaries as operators
to the extent applying to the operation of the Assets after the Closing Date;
 
(g) Increased by the amount of cash and cash equivalents in lock boxes or
otherwise in the possession of any Company or any of its direct or indirect
Wholly-Owned Subsidiaries (and their equity interest share of cash and cash
equivalents in the possession of Subsidiaries other than Wholly-Owned
Subsidiaries) at the end of the Closing Date; and
 
(h) Without prejudice to either Party’s rights under Article 12, adjusted for
proceeds and other income attributable to the Assets, Property Costs and certain
other costs attributable to the Assets, and interest as follows:
 
(i) Decreased by an amount equal to the aggregate amount of the following
proceeds received by any Seller, Company or Wholly-Owned Subsidiary, or any of
their Affiliates, on or prior to the Closing Date, or by any Seller or any
remaining Affiliate of Sellers after the Closing Date:
 
(A) amounts earned from the sale, during the period from but excluding the
Effective Date through and including the Closing Date (such period being
referred to as the “Adjustment Period”), of oil, gas and other hydrocarbons
produced from or attributable to the Properties (net of any (x) royalties,
overriding royalties and other burdens payable out of production of oil, gas or
other hydrocarbons or the proceeds thereof that are not included in Property
Costs, (y) gathering, processing and transportation costs paid in connection
with sales of oil, gas or other hydrocarbons that are not included as Property
Costs under Section 2.3(h)(ii) and (z) production Taxes, other Taxes measured by
units of production, severance Taxes and any other Property Costs, that in any
such case are deducted by the purchaser of production, and excluding the effects
of any futures, options, swaps or other derivatives other than the Transferred
Derivatives), and
 
 
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(B) other income earned with respect to the Assets during the Adjustment Period
(provided that for purposes of this Section, no adjustment shall be made for
funds received by any Seller, Company or Wholly-Owned Subsidiary for the account
of third Persons and to which Seller does not become entitled prior to the
Cut-Off Date, and excluding any income earned from futures, options, swaps or
other derivatives other than the Transferred Derivatives) and (without
duplication) proceeds of the sale of any Asset (other than sales of oil, gas and
other hydrocarbons);
 
(ii) Increased by an amount equal to the amount of all Property Costs, and other
amounts expressly excluded from the definition of Property Costs, which are
incurred in the ownership and operation of the Assets during the Adjustment
Period but (A) paid by or on behalf of any Seller, Company or Wholly-Owned
Subsidiary, or any of their Affiliates, through and including the Closing Date,
or by any Seller or any remaining Affiliate of Sellers after the Closing Date
but prior to the Cut-Off Date, or (B) without duplication, payable by any
Company or Wholly-Owned Subsidiary to DEPI, DOTEPI, Reserves or any other
Affiliate (except another Company or Subsidiary) with respect to the provision
of goods, services, employment-related costs, and other ordinary course of
business expenses with respect to the E&P Business and remaining unpaid at the
end of the Closing Date, except in each case (x) any costs already deducted in
the determination of proceeds in Section 2.3(h)(i) or otherwise taken into
account as an increase in the Interest Unadjusted Purchase Price pursuant to any
other provision of this Agreement, (y) Taxes (other than production Taxes and
other Taxes measured by units of production and severance Taxes), which are
addressed in Section 9.1(e), and (z) costs attributable to futures, options,
swaps or other derivatives, or the elimination of the same pursuant to
Section 6.12, other than costs attributable to the Transferred Derivatives, and
provided that overhead costs charged with respect to development and production
operations shall not exceed the amounts chargeable to the Properties under the
applicable operating agreement or, if for any Property there is none, the
amounts charged for that Property on the same basis as charged on the date of
this Agreement;
 
(iii) Increased (without duplication) by an amount equal to all amounts
reimbursable to DEPI and its Affiliates under Section 6.16 with respect to the
Post-Closing transition of the E&P Business to Purchaser that have not already
been reimbursed to DEPI pursuant to Section Section 6.16(c); and
 
(iv) Increased by the amount that would be calculated on the Interest Unadjusted
Purchase Price (as adjusted under clauses (a), (b), (c), (d), (e), (f), (h)(i),
(h)(ii) and (h)(iii) above), at the Agreed Rate, for the period from but
excluding the Target Closing Date through and including the Closing Date; as
used herein, the term “Agreed Rate” shall mean the lesser of (y) the one month
London Inter-Bank Offered Rate, as published on Telerate Page 3750 on the last
Business Day prior to the Effective Date, plus two percentage points (LIBOR +2%)
and (z) the maximum rate allowed by applicable Laws.
 
 
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For the avoidance of doubt, the Purchase Price shall be increased with respect
to amounts owed by any Wholly-Owned Subsidiary or Company to any Seller or any
of its Affiliates only to the extent the obligation is satisfied by such
Purchase Price increase.
 
The amount of each adjustment to the Interest Unadjusted Purchase Price
described in Section 2.3(f) and Section 2.3(h) shall be determined in accordance
with the United States generally accepted accounting principles consistently
applied (the “Accounting Principles”) or, if the Accounting Principles are
silent, then in accordance with the Council of Petroleum Accountants Society
(COPAS) standards.
 
Section 2.4  Ordinary Course Pre-Effective Date Costs Paid and Revenues Received
Post-Closing.
 
(a) With respect to any revenues earned or Property Costs incurred with respect
to the Assets on or prior to the Effective Date but received or paid after the
Effective Date:
 
(i) Sellers shall be entitled to all amounts earned from the sale, during the
period up to and including the Effective Date, of oil, gas and other
hydrocarbons produced from or attributable to the Properties, which amounts are
received on or before the Cut-Off Date (net of any (A) royalties, overriding
royalties and other burdens payable out of production of oil, gas or other
hydrocarbons or the proceeds thereof that are not included in Property Costs,
(B) gathering, processing and transportation costs paid in connection with sales
of oil, gas and other hydrocarbons that are not included as Property Costs under
Section 2.4(a)(ii) and (C) production Taxes, other Taxes measured by units of
production, severance Taxes, and other Property Costs that in any such case are
deducted by the purchaser of production), and to all other income earned with
respect to the Assets through and including the Effective Date and received on
or before the Cut-Off Date; and
 
(ii) Sellers shall be responsible for (and entitled to any refunds and
indemnities with respect to) all Property Costs incurred through and including
the Effective Date that are paid after the Effective Date but on or before the
Cut-Off Date.
 
“Earned” and “incurred,” as used in this Section and Section 2.3, shall be
interpreted in accordance with accounting recognition guidance under the
Accounting Principles and shall be consistent with Sellers’ current accounting
recognition practices, or, if the Accounting Principles are silent, in
accordance with COPAS standards. For purposes of this Section 2.4(a),
determination of whether Property Costs are attributable to the period before or
after the Effective Date shall be based on when services are rendered, when the
goods are delivered, or when the work is performed.
 
(b) Should Purchaser, the Companies, the Wholly-Owned Subsidiaries or their
Affiliates receive after Closing any proceeds or other income to which Sellers
are entitled under Section 2.4(a), Purchaser (on behalf of the Companies, the
Wholly-Owned
 
 
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Subsidiaries or their Affiliates, as applicable) shall fully disclose, account
for and promptly remit the same to DEPI on behalf of Sellers. If, after Closing,
Sellers or their Affiliates (other than a Company or a Subsidiary) receive any
proceeds or other income with respect to the Assets to which such party is not
entitled under Section 2.4(a), DEPI shall fully disclose, account for and
promptly remit same to Purchaser.
 
(c) Should Purchaser, the Companies, the Wholly-Owned Subsidiaries or their
Affiliates pay after Closing any Property Costs for which Sellers are
responsible under Section 2.4(a), DEPI shall reimburse Purchaser (on behalf of
the Companies, the Wholly-Owned Subsidiaries or their Affiliates, as applicable)
promptly after receipt of such Person’s invoice, accompanied by copies of the
relevant vendor or other invoice and proof of payment. Within forty-five (45)
days following Closing, Sellers shall provide notice to their vendors related to
the E&P Business to send promptly any pre-Effective Date invoices. Should
Sellers or any of their Affiliates (other than a Company or Subsidiary) pay
after Closing any Property Costs for which Sellers are not responsible under
Section 2.4(a), except to the extent such amounts are accounted for pursuant to
Section 2.3(h), Purchaser shall reimburse DEPI (on behalf of Sellers) promptly
after receipt of such Person’s invoices, accompanied by copies of the relevant
vendor or other invoice and proof of payment.
 
(d) Sellers shall have no further entitlement to amounts earned from the sale of
oil, gas and other hydrocarbons produced from or attributable to the Properties
and other income earned with respect to the Assets (except any applicable
Excluded Assets), and no further responsibility for Property Costs incurred with
respect to the Assets, to the extent such amounts have not been received or
paid, respectively, on or before the Cut-Off Date.
 
Section 2.5  Procedures.
 
(a) For purposes of allocating production (and accounts receivable with respect
thereto), under Section 2.3 and Section 2.4, (i) liquid hydrocarbons shall be
deemed to be “from or attributable to” the Properties when they pass through the
pipeline flange connecting into the storage facilities located on the lands
subject to the applicable Lease or Unit or, if there are no such storage
facilities, when they pass through the LACT meters or similar meters at the
point of entry into the pipelines through which they are transported from those
lands, and (ii) gaseous hydrocarbons shall be deemed to be “from or attributable
to” the Properties when they pass through the delivery point sales meters or
similar meters at the point of entry into the pipelines through which they are
transported from the lands subject to the applicable Lease or Unit. Sellers
shall utilize reasonable interpolative procedures to arrive at an allocation of
production when exact meter readings or gauging or strapping data are not
available.
 
Surface use fees, insurance premiums and other Property Costs that are paid
periodically shall be prorated based on the number of days in the applicable
period falling on or before, or after, the Effective Date, or the Closing Date,
as applicable. Production Taxes and similar Taxes measured by units of
production, and severance Taxes, shall be prorated based on the amount of
 
 
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hydrocarbons actually produced, purchased or sold, as applicable, on or before,
and after, the Effective Date, or the Closing Date, as applicable.
 
(b) After Closing, Purchaser shall handle (and Sellers shall cooperate with the
handling of) all joint interest audits and other audits of Property Costs with
respect to the Assets, including those covering periods on or prior to the
Effective Date, provided that Purchaser shall not agree to any adjustments to
previously assessed costs for which Sellers are liable, or any compromise of any
audit claims to which Sellers would be entitled, without the prior written
consent of DEPI, such consent not to be unreasonably withheld or delayed.
Purchaser shall provide DEPI with a copy of all applicable audit reports and
written audit agreements received by Purchaser or any Company or Wholly-Owned
Subsidiary and relating in whole or in part to periods on or prior to the
Effective Date.
 
 
ARTICLE 3.
TITLE MATTERS
 
Section 3.1  Company’s Title.  DEPI represents and warrants to Purchaser that
the Sellers’, Companies’, and the Wholly-Owned Subsidiaries’ (as applicable)
title to the Units and Wells shown on Exhibit B-2 and Exhibit D-2, as of the
date hereof is, and as of the Closing Date shall be, Defensible Title as defined
in Section 3.2. This representation and warranty, the provisions of this Article
3 and the special warranties in the Conveyances provide Purchaser’s exclusive
remedy with respect to any Title Defects. For the purposes of the foregoing
representation, as of the date hereof, DEPI shall be deemed to hold all DEPI
Texas Beneficial Interests then held by DEPI I, LP relating to the Units and
Wells shown on Exhibit B-2 and Exhibit D-2, and DOTEPI shall be deemed to hold
all DOTEPI Texas Beneficial Interests then held by DNG I, LP relating to the
Units and Wells shown on Exhibit B-2 and Exhibit D-2.
 
Section 3.2  Definition of Defensible Title. 
 
(a) As used in this Agreement, the term “Defensible Title” means that title of
each Seller, Company or Wholly-Owned Subsidiary, as applicable, which, subject
to Permitted Encumbrances:
 
(i) Entitles the Seller or Company or Wholly-Owned Subsidiary, as applicable, to
receive throughout the duration of the productive life of any Unit or Well
(after satisfaction of all royalties, overriding royalties, nonparticipating
royalties, net profits interests and other similar burdens on or measured by
production of oil and gas), not less than the “net revenue interest” share shown
in Exhibits B-2 and D-2 of all oil, gas and other minerals produced, saved and
marketed from such Unit or Well, except (A) decreases in connection with those
operations in which the Seller or the Company or Wholly-Owned Subsidiary may
elect after the date hereof to be a nonconsenting co-owner, (B) decreases
resulting from reversion of interest to co-owners with respect to operations in
which such co-owners elect, after the date hereof, not to consent, (C) decreases
resulting from the establishment or amendment, after the date hereof, of pools
or units, (D) decreases required to allow other working interest owners to make
up past
 
 
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underproduction or pipelines to make up past under deliveries and (E) as
otherwise expressly stated in Exhibit B-2 or D-2;
 
(ii) Obligates the Seller, Company or Wholly-Owned Subsidiary, as applicable, to
bear a percentage of the costs and expenses for the maintenance and development
of, and operations relating to, any Unit or Well not greater than the “working
interest” shown in Exhibits B-2 and D-2 without increase throughout the
productive life of such Unit or Well, except as stated in Exhibits B-2 and D-2
and except increases resulting from contribution requirements with respect to
defaulting co-owners under applicable operating agreements or applicable Law and
increases that are accompanied by at least a proportionate increase in the
Seller’s, Company’s or Wholly-Owned Subsidiary’s (as applicable) net revenue
interest; and
 
(iii) Is free and clear of liens, encumbrances, obligations or defects, other
than Permitted Encumbrances.
 
(b) As used in this Agreement, the term “Title Defect” means any lien, charge,
encumbrance, obligation or defect including without limitation a discrepancy in
net revenue interest or working interest that causes a breach of DEPI’s
representation and warranty in Section 3.1. As used in this Agreement, the term
“Title Benefit” shall mean any right, circumstance or condition that operates to
increase the net revenue interest of a Seller or Company or Wholly-Owned
Subsidiary in any Unit or Well above that shown on Exhibits B-2 and D-2, without
causing a greater than proportionate increase in such Seller’s, Company’s or
Wholly-Owned Subsidiary’s working interest above that shown in Exhibits B-2 and
D-2.
 
Section 3.3  Definition of Permitted Encumbrances.  As used herein, the term
“Permitted Encumbrances” means any or all of the following:
 
(a) Lessors’ royalties and any overriding royalties, reversionary interests and
other burdens to the extent that they do not, individually or in the aggregate,
reduce a Seller’s, Company’s or Wholly-Owned Subsidiary’s net revenue interests
below that shown in Exhibits B-2 and D-2 or increase a Seller’s, Company’s or
Wholly-Owned Subsidiary’s working interests above that shown in Exhibits B-2 and
D-2 without a corresponding increase in the net revenue interest;
 
(b) All leases, unit agreements, pooling agreements, operating agreements,
production sales contracts, division orders and other contracts, agreements and
instruments applicable to the Assets, including provisions for penalties,
suspensions or forfeitures contained therein, to the extent that they do not,
individually or in the aggregate, reduce a Seller’s, Company’s or Wholly-Owned
Subsidiary’s net revenue interests below that shown in Exhibits B-2 and D-2 or
increase a Seller’s, Company’s or Wholly-Owned Subsidiary’s working interests
above that shown in Exhibits B-2 and D-2 without a corresponding increase in the
net revenue interest;
 
 
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(c) Rights of first refusal, preferential purchase rights and similar rights
with respect to the Assets;
 
(d) Third-party consent requirements and similar restrictions which are not
applicable to the sale of the Interests contemplated by this Agreement or with
respect to which waivers or consents are obtained from the appropriate Persons
prior to the Closing Date or the appropriate time period for asserting the right
has expired or which need not be satisfied prior to a transfer;
 
(e) Liens for Taxes or assessments not yet delinquent or, if delinquent, being
contested in good faith by appropriate actions;
 
(f) Materialman’s, mechanic’s, repairman’s, employee’s, contractor’s, operator’s
and other similar liens or charges arising in the ordinary course of business
for amounts not yet delinquent (including any amounts being withheld as provided
by Law), or if delinquent, being contested in good faith by appropriate actions;
 
(g) All rights to consent, by required notices to, filings with, or other
actions by Governmental Authorities in connection with the sale or conveyance of
oil and gas leases or rights or interests therein if they are customarily
obtained subsequent to the sale or conveyance;
 
(h) Rights of reassignment arising upon final intention to abandon or release
the Assets, or any of them;
 
(i) Easements, rights-of-way, covenants, servitudes, permits, surface leases and
other rights in respect of surface operations to the extent they, individually
or in the aggregate, neither (i) reduce a Seller’s, Company’s or Wholly-Owned
Subsidiary’s net revenue interest below that shown on Exhibit A-2 or increase a
Seller’s, Company’s or Wholly-Owned Subsidiary’s working interest beyond that
shown on Exhibit A-2 without a corresponding increase in net revenue interest
nor (ii) detract in any material respect from the value of, or interfere in any
material respect with the use, ownership or operation of, the Assets subject
thereto or affected thereby (as currently used, owned or operated) and which
would be acceptable by a reasonably prudent operator engaged in the business of
owning and operating oil and gas properties;
 
(j) Calls on production under: (i) existing Contracts that provide that the
holder of such call on production must pay an index-based price for any
production purchased by virtue of such call on production; and (ii) those
Contracts identified on Schedule 3.3(j);
 
(k) Any termination of any Seller’s, Company’s or Wholly-Owned Subsidiary’s
title to any mineral servitude or any Property held by production as a
consequence of the failure to conduct operations, cessation of production or
insufficient production over any period except to the extent DEPI has knowledge
thereof as of the date hereof;
 
 
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(l) All rights reserved to or vested in any Governmental Authorities to control
or regulate any of the Assets in any manner or to assess Tax with respect to the
Assets, the ownership, use or operation thereof, or revenue, income or capital
gains with respect thereto, and all obligations and duties under all applicable
Laws of any such Governmental Authority or under any franchise, grant, license
or permit issued by any Governmental Authority;
 
(m) Any lien, charge or other encumbrance on or affecting the Assets which is
expressly waived, assumed, bonded or paid by Purchaser at or prior to Closing or
which is discharged by Sellers, any Company or any Wholly-Owned Subsidiary at or
prior to Closing;
 
(n) any lien or trust arising in connection with workers’ compensation,
unemployment insurance, pension or employment laws or regulations;
 
(o) The matters described in Schedule 4.4;
 
(p) Any matters shown on Exhibits B-2 and D-2; and
 
(q) Any other liens, charges, encumbrances, defects or irregularities, which do
not, individually or in the aggregate, materially detract from the value of or
materially interfere with the use or ownership of the Assets subject thereto or
affected thereby (as currently used or owned) including, without limitation, (i)
the absence of any lease amendment or consent by any royalty interest or mineral
interest holder authorizing the pooling of any leasehold interest, royalty
interest or mineral interest and (ii) the failure of Exhibits B-1, B-2, D-1 and
D-2 to reflect any lease or any unleased mineral interest where the owner
thereof was treated as a non-participating co-tenant during the drilling of any
well, which would be accepted by a reasonably prudent purchaser engaged in the
business of owning and operating oil and gas properties.
 
Section 3.4  Allocated Values.  Schedule 3.4 sets forth the agreed allocation of
the Unadjusted Purchase Price among the Assets for purposes of DEPI’s title
representation in this Article 3, consistent with the allocations among the
Shares for each Company, the DEPI Additional Assets, the DOTEPI Additional
Assets and the Reserves Additional Assets under Section 2.2(a). The “Allocated
Value” for any Well or Unit equals the portion of the Interest Unadjusted
Purchase Price for the Company Shares or Additional Asset group to which such
Well or Unit is related that is allocated to such Well or Unit on Schedule 3.4,
increased or decreased by a share of each adjustment to the Interest Unadjusted
Purchase Price under Sections 2.3(c), (d), (e), (f), (g) and (h). The share of
each adjustment allocated to a particular Well or Unit shall be obtained by
taking the portion of that adjustment allocated under Section 2.2(a) to the
Shares or Additional Asset group to which the Well or Unit is related and
further allocating that portion among the various Assets related to such Shares
or Additional Asset group on a pro rata basis in proportion to the Interest
Unadjusted Purchase Price allocated to each such Asset. Sellers have accepted
such Allocated Values for purposes of this Agreement and the transactions
contemplated hereby, but otherwise make no representation or warranty as to the
accuracy of such values.
 
 
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Section 3.5  Notice of Title Defects; Defect Adjustments. 
 
(a) To assert a claim arising out of a breach of Section 3.1, Purchaser must
deliver a claim notice or notices to DEPI on or before a date which is at least
ten (10) Business Days prior to the Closing Date (the “Title Claim Date”). Each
such notice shall be in writing and shall include:
 
(i) a description of the alleged Title Defect(s);
 
(ii) the Units or Wells affected;
 
(iii) the Allocated Values of the Units or Wells subject to the alleged Title
Defect(s);
 
(iv) supporting documents reasonably necessary for Sellers (as well as any title
attorney or examiner hired by Sellers) to verify the existence of the alleged
Title Defect(s); and
 
(v) the amount by which Purchaser reasonably believes the Allocated Values of
those Units or Wells are reduced by the alleged Title Defect(s) and the
computations and information upon which Purchaser’s belief is based.
 
Purchaser shall be deemed to have waived all breaches of Section 3.1 of which
Sellers have not been given notice on or before the Title Claim Date.
 
(b) Should Purchaser discover any Title Benefit on or before the Title Claim
Date, Purchaser shall as soon as practicable, but in any case by the Title Claim
Date, deliver to DEPI a notice including:
 
(i) a description of the Title Benefit;
 
(ii) the Units or Wells affected;
 
(iii) the Allocated Values of the Units or Wells subject to such Title Benefit;
and
 
(iv) the amount by which the Purchaser reasonably believes the Allocated Value
of those Units or Wells is increased by the Title Benefit, and the computations
and information upon which Purchaser’s belief is based.
 
Sellers shall have the right, but not the obligation, to deliver to Purchaser a
similar notice on or before the Title Claim Date with respect to each Title
Benefit discovered by Sellers. Sellers shall be deemed to have waived all Title
Benefits of which no Party has given notice on or before the Title Claim Date,
except to the extent Purchaser has failed to give a notice which it was
obligated to give under this Section 3.5(b).
 
(c) Sellers shall have the right, but not the obligation, to attempt, at
Sellers’ sole cost, to cure or remove on or before sixty (60) days after the
Closing Date any Title
 
 
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Defects of which Sellers have been advised by Purchaser. No reduction shall be
made in the Unadjusted Purchase Price with respect to a Title Defect for
purposes of Closing if DEPI has provided notice at least six (6) Business Days
prior to the Closing Date of Sellers’ intent to attempt to cure the Title
Defect. If the Title Defect is not cured as agreed by Sellers and Purchaser or
if Sellers and Purchaser cannot agree, and it is determined by the Title
Arbitrator that such Title Defect is not cured at the end of the sixty (60) day
post-Closing period, the adjustment required under this Article 3 shall be made
pursuant to Section 8.4(b). Sellers’ election to attempt to cure a Title Defect
shall not constitute a waiver of Sellers’ right to dispute the existence, nature
or value of, or cost to cure, the Title Defect.
 
(d) With respect to each Unit or Well affected by Title Defects reported under
Section 3.5(a), the Unit or Well shall, if an Additional Asset, be assigned at
Closing or, if held by a Company or Wholly-Owned Subsidiary, remain in the
Company or Wholly-Owned Subsidiary, subject in each case to all uncured Title
Defects, and (subject to Section 3.5(c) and the remainder of Section 3.5(d)) the
Unadjusted Purchase Price shall be reduced by an amount (the “Title Defect
Amount”) equal to the reduction in the Allocated Value for such Unit or Well
caused by such Title Defects, as determined pursuant to Section 3.5(g).
Notwithstanding the foregoing provisions of this Section 3.5(d), no reduction
shall be made in the Unadjusted Purchase Price with respect to any Title Defect
that is (i) older than ten (10) years old and, except for unreleased production
payments or similar interests or other unreleased encumbrances, a Title Defect
Amount of less than Twenty-Five Million Dollars ($25,000,000), (ii) involves a
counterparty no longer in existence or in bankruptcy or receivership or (iii)
consists of an alleged defect in the authorization, execution, delivery,
acknowledgement, or approval in a Seller’s, Company’s or Wholly-Owned
Subsidiary’s chain of title for which DEPI at its election executes and delivers
to Purchaser a separate written indemnity agreement, in form and substance
reasonably satisfactory to Purchaser, under which DEPI agrees to fully,
unconditionally and irrevocably indemnify and hold harmless Purchaser and its
successors and assigns from any and all Damages arising out of or resulting from
such Title Defect.
 
(e) With respect to each Unit or Well affected by Title Benefits reported under
Section 3.5(b) (or which Purchaser should have reported under Section 3.5(b)),
the Unadjusted Purchase Price shall be increased by an amount (the “Title
Benefit Amount”) equal to the increase in the Allocated Value for such Unit or
Well caused by such Title Benefits, as determined pursuant to Section 3.5(h),
but in no event will the aggregate adjustments to the Unadjusted Purchase Price
as a result of Title Benefits exceed the aggregate adjustments to the Unadjusted
Purchase Price due to Title Defects.
 
(f) This Article 3 shall, to the fullest extent permitted by applicable Law, be
the exclusive right and remedy of Purchaser with respect to DEPI’s breach of its
warranty and representation in Section 3.1. Except as provided in this
Article 3, Section 4.13(b) and the Conveyances, Purchaser releases, remises and
forever discharges Sellers and their Affiliates and all such parties’
stockholders, officers, directors, employees, agents, advisors and
representatives from any and all suits, legal or administrative proceedings,
claims, demands, damages, losses, costs, liabilities, interest or causes of
action
 
 
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whatsoever, in law or in equity, known or unknown, which Purchaser might now or
subsequently may have, based on, relating to or arising out of, any Title Defect
or other deficiency in title to any Asset.
 
(g) The Title Defect Amount resulting from a Title Defect shall be determined as
follows:
 
(i) if Purchaser and Sellers agree on the Title Defect Amount, that amount shall
be the Title Defect Amount;
 
(ii) if the Title Defect is a lien, encumbrance or other charge which is
undisputed and liquidated in amount, then the Title Defect Amount shall be the
amount necessary to be paid to remove the Title Defect from the appropriate
Seller’s, Company’s or Wholly-Owned Subsidiary’s interest in the affected Unit
or Well;
 
(iii) if the Title Defect represents a discrepancy between (A) the net revenue
interest for any Unit or Well and (B) the net revenue interest or percentage
stated on Exhibit B-2 or D-2 (as appropriate), then the Title Defect Amount
shall be the product of the Allocated Value of such Unit or Well multiplied by a
fraction, the numerator of which is the net revenue interest or percentage
ownership decrease and the denominator of which is the net revenue interest or
percentage ownership stated on Exhibit B-2 or D-2, provided that if the Title
Defect does not affect the Unit or Well throughout its entire productive life,
the Title Defect Amount determined under this Section 3.5(g)(iii) shall be
reduced to take into account the applicable time period only;
 
(iv) if the Title Defect represents an obligation, encumbrance, burden or charge
upon or other defect in title to the affected Unit or Well of a type not
described in subsections (i), (ii) or (iii) above, the Title Defect Amount shall
be determined by taking into account the Allocated Value of the Unit or Well so
affected, the portion of the respective Seller’s, Company’s or Wholly-Owned
Subsidiary’s interest in the Unit or Well affected by the Title Defect, the
legal effect of the Title Defect, the potential economic effect of the Title
Defect over the life of the affected Unit or Well, the values placed upon the
Title Defect by Purchaser and Sellers and such other factors as are necessary to
make a proper evaluation;
 
(v) notwithstanding anything to the contrary in this Article 3, (A) an
individual claim for a Title Defect for which a claim notice is given prior to
the Title Claim Date shall only generate an adjustment to the Unadjusted
Purchase Price under this Article 3 if the Title Defect Amount with respect
thereto exceeds One Million dollars ($1,000,000), (B) the aggregate Title Defect
Amounts attributable to the effects of all Title Defects upon any given Unit or
Well shall not exceed the Allocated Value of such Unit or Well and (C) there
shall be no adjustment to the Unadjusted Purchase Price for Title Defects unless
and until the aggregate Title Defect Amounts that are entitled to an adjustment
under
 
 
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Section 3.5(g)(v)(A) and for which Claim Notices were timely delivered exceed
Twenty-Five Million dollars ($25,000,000), and then only to the extent that such
aggregate Title Defect Amounts exceed Twenty-Five Million dollars ($25,000,000);
 
(vi) if a Title Defect is reasonably susceptible of being cured, the Title
Defect Amount determined under subsections (iii) or (iv) above shall not be
greater than the amount that can reasonably be shown to be the reasonable cost
and expense of curing such Title Defect; and
 
(vii) the Title Defect Amount with respect to a Title Defect shall be determined
without duplication of any costs or losses included in another Title Defect
Amount hereunder, or for which Purchaser otherwise receives credit in the
calculation of the Purchase Price.
 
(h) The Title Benefit Amount for any Title Benefit shall be the product of the
Allocated Value of the affected Unit or Well multiplied by a fraction, the
numerator of which is the net revenue interest increase and the denominator of
which is the net revenue interest stated on Exhibit B-2 or D-2, provided that if
the Title Benefit does not affect a Unit or Well throughout the entire life of
the Unit or Well, the Title Benefit Amount determined under this Section 3.5(h)
shall be reduced to take into account the applicable time period only.
Notwithstanding anything to the contrary in this Article 3, an individual claim
for a Title Benefit which is reported under Section 3.5(b) (or which Purchaser
should have reported under Section 3.5(b)) prior to the Title Claim Date shall
only generate an adjustment to the Unadjusted Purchase Price under this
Article 3 if the Title Benefit Amount with respect thereto exceeds One Million
dollars ($1,000,000).
 
(i) Sellers and Purchaser shall attempt to agree on all Title Defect Amounts and
Title Benefit Amounts by five (5) Business Days prior to the Closing Date. If
Sellers and Purchaser are unable to agree by that date, then subject to
Section 3.5(c), Sellers’ good faith estimate shall be used to determine the
Closing Payment pursuant to Section 8.4(a), and the Title Defect Amounts and
Title Benefit Amounts in dispute shall be exclusively and finally resolved by
arbitration pursuant to this Section 3.5(i). During the 10-day period following
the Closing Date, Title Defect Amounts and Title Benefit Amounts in dispute
shall be submitted to a title attorney with at least 10 years’ experience in oil
and gas titles in the state in which the Units or Wells (or majority of Units
and Wells) in question are located as selected by mutual agreement of Purchaser
and DEPI on behalf of Sellers or absent such agreement during the 10-day period,
by the Houston office of the American Arbitration Association (the “Title
Arbitrator”). Likewise, if by the end of the sixty (60) day post-Closing cure
period under Section 3.5(c), Sellers and Purchaser have been unable to agree
upon whether any Title Defects have been cured, or Sellers have failed to cure
any Title Defects which they provided notice that they would attempt to cure,
and Sellers and Purchaser have been unable to agree on the Title Defect Amounts
for such Title Defects, the cure and/or Title Defect Amounts in dispute shall be
submitted to the Title Arbitrator. The Title Arbitrator shall not have worked as
an employee or outside counsel for either Party or its Affiliates during the
five (5) year period preceding the arbitration or have any financial interest in
 
 
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the dispute. The arbitration proceeding shall be held in Houston, Texas and
shall be conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, to the extent such rules do not conflict with
the terms of this Section. The Title Arbitrator’s determination shall be made
within 45 days after submission of the matters in dispute and shall be final and
binding upon the Parties, without right of appeal. In making his determination,
the Title Arbitrator shall be bound by the rules set forth in Section 3.5(g) and
3.5(h) and may consider such other matters as in the opinion of the Title
Arbitrator are necessary or helpful to make a proper determination.
Additionally, the Title Arbitrator may consult with and engage disinterested
third Persons to advise the arbitrator, including title attorneys from other
states and petroleum engineers. The Title Arbitrator shall act as an expert for
the limited purpose of determining the specific disputed Title Defect cures and
Title Defect Amounts and Title Benefit Amounts submitted by any Party and may
not award damages, interest or penalties to any Party with respect to any
matter. Each Seller and Purchaser shall bear its own legal fees and other costs
of presenting its case. Purchaser shall bear one-half of the costs and expenses
of the Title Arbitrator, and DEPI shall be responsible for the remaining
one-half of the costs and expenses.
 
Section 3.6  Consents to Assignment and Preferential Rights to Purchase. 
 
(a) Promptly after the date hereof, Sellers shall prepare and send (i) notices
to the holders of any required consents to assignment that are set forth on
Schedule 4.11 requesting consents to the transactions contemplated by this
Agreement and (ii) notices to the holders of any applicable preferential rights
to purchase or similar rights that are set forth on Schedule 4.11 in compliance
with the terms of such rights and requesting waivers of such rights. Any
preferential purchase right must be exercised subject to all terms and
conditions set forth in this Agreement, including the successful Closing of this
Agreement pursuant to Article 8. The consideration payable under this Agreement
for any particular Asset for purposes of preferential purchase right notices
shall be the Allocated Value for such Asset. Sellers shall use commercially
reasonable efforts to cause such consents to assignment and waivers of
preferential rights to purchase or similar rights (or the exercise thereof) to
be obtained and delivered prior to Closing, provided that Sellers shall not be
required to make payments or undertake obligations to or for the benefit of the
holders of such rights in order to obtain the required consents and waivers.
Purchaser shall cooperate, and after Closing shall cause the Companies and
Wholly-Owned Subsidiaries to cooperate, with Sellers in seeking to obtain such
consents to assignment and waivers of preferential rights.
 
(b) In no event shall there be transferred at Closing any Asset for which a
consent requirement has not been satisfied and for which transfer is prohibited
or a fee is payable (unless the same has been paid by Purchaser) without the
consent. In cases in which the Asset subject to such a requirement is a Contract
and Purchaser is assigned the Lease(s) to which the Contract relates, but the
Contract is not transferred to Purchaser due to the unwaived consent
requirement, Purchaser shall continue after Closing to use commercially
reasonable efforts to obtain the consent so that such Contract can be
transferred to Purchaser upon receipt of the consent, the Contract shall be held
by Sellers for the benefit of Purchaser, Purchaser shall pay all amounts due
thereunder, and
 
 
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Purchaser shall be responsible for the performance of any obligations under such
Contract to the extent that Purchaser has been transferred the Assets necessary
to perform under such Contract until such consent is obtained. In cases in which
the Asset subject to such a requirement is a Lease and the third Person consent
to the transfer of the Lease is not obtained by Closing, Purchaser may elect to
treat the unsatisfied consent requirements as a Title Defect and receive the
appropriate adjustment to the Unadjusted Purchase Price under Section 2.3 by
giving DEPI written notice thereof in accordance with Section 3.5(a), except
that such notice may be given up to six (6) Business Days prior to the Closing
Date. If an unsatisfied consent requirement with respect to which an adjustment
to the Unadjusted Purchase Price is made under Section 3.5 is subsequently
satisfied prior to the date of the final adjustment to the Unadjusted Purchase
Price under Section 8.4(b), Sellers shall be reimbursed in that final adjustment
for the amount of any previous deduction from the Unadjusted Purchase Price, the
Lease, if not previously transferred to Purchaser under the first sentence of
this Section 3.6(b), shall be transferred, and the provisions of this
Section 3.6 shall no longer apply to such consent requirement.
 
(c) If any preferential right to purchase any Assets is exercised prior to
Closing, the Purchase Price shall be decreased by the Allocated Value for such
Assets, the affected Assets shall not be transferred at Closing if owned by
DEPI, DOTEPI or Reserves, and the affected Assets shall be deemed to be deleted
from Exhibits B and/or D to this Agreement, as applicable, for all purposes.
 
(d) Should a third Person fail to exercise or waive its preferential right to
purchase as to any portion of the Assets prior to Closing and the time for
exercise or waiver has not yet expired, then subject to the remaining provisions
of this Section 3.6, such Assets shall be included in the transaction at
Closing, there shall be no adjustment to the Purchase Price at Closing with
respect to such preferential right to purchase, and Sellers shall, at their sole
expense, continue to use commercially reasonable efforts to obtain the waiver of
the preferential purchase rights and shall continue to be responsible for the
compliance therewith.
 
(e) Should the holder of the preferential purchase right validly exercise the
same (whether before or after Closing), then:
 
(i) If the affected Assets are owned by DEPI, DOTEPI or Reserves, DEPI, DOTEPI
or Reserves shall convey them to the holder on the terms and provisions set out
in the applicable preferential right provision. If the affected Assets were
previously transferred to Purchaser at Closing, Purchaser agrees to transfer the
affected Assets back to the applicable Seller on the terms and provisions set
out herein to permit such Seller to comply with this obligation (or, if the
applicable Seller so requests, shall transfer the affected Assets directly to
the holder on the terms and provisions set out in the applicable preferential
purchase right provision);
 
(ii) If the affected Assets are owned by a Company or Wholly-Owned Subsidiary,
the Company or Subsidiary shall transfer them to the holder on the
 
 
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terms and provisions set out in the applicable preferential purchase right
provision. If Closing has already occurred, Purchaser shall cause the Company or
Subsidiary to perform this obligation;
 
(iii) Pursuant to Section 2.3(b), the applicable Seller(s) shall credit
Purchaser with the Allocated Value of any Asset transferred pursuant to
Section 3.6(e)(i) or (e)(ii) (or, if the transfer of the Asset occurs after the
Cut-Off Date, Sellers shall promptly refund to Purchaser the lesser of the
Allocated Value in respect of such Asset or the amount the applicable Seller
receives from the transferee of such Asset);
 
(iv) Such Seller(s) shall be entitled to the consideration paid by such holder
(which shall, if received by a Company or Subsidiary after Closing, be paid to
such Seller(s) by such Company or Subsidiary or by Purchaser as agent for and on
behalf of such Company or Subsidiary);
 
(v) If the affected Assets were owned by DEPI, DOTEPI or Reserves and were
previously transferred to Purchaser at Closing, Purchase Price adjustments
calculated in the same manner as the adjustments in Section 2.3(h) shall be
calculated for the period from the Closing Date to the date of the reconveyance
and the net amount of such adjustment, if positive, shall be paid by Purchaser
to such Seller and, if negative, by such Seller to Purchaser;
 
(vi) If the affected Assets were owned by DEPI, DOTEPI or Reserves and were
previously transferred to Purchaser at Closing, DEPI, DOTEPI or Reserves, as
applicable, shall assume all obligations assumed by Purchaser with respect to
such Assets under Section 12.1, and shall indemnify, defend and hold harmless
Purchaser from all Damages incurred by Purchaser caused by or arising out of or
resulting from the ownership, use or operation of such Asset from the Closing
Date to the date of the reconveyance, excluding, however, any such Damages
resulting from any violation of any Law caused by the actions of, or
implementation of policies or procedures of, Purchaser or any Company or
Wholly-Owned Subsidiary after Closing, breach of any contract by Purchaser or
any Company or Wholly-Owned Subsidiary after Closing, or gross negligence or
willful misconduct of any Purchaser or any Company or Wholly-Owned Subsidiary
after Closing; and
 
(vii) In the event that the value of any Property operated by any Seller,
Company or Wholly-Owned Subsidiary is materially impaired by the exercise of a
preferential purchase right with respect to a Property also operated by such
Seller, Company or Wholly-Owned Subsidiary on which infrastructure is used by
the first Property without the benefit of an agreement for such use which would
survive the transfer of title to the third party preferential purchase right
holder, Purchaser may claim such material impairment as a Title Defect.
 
 
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Section 3.7  Limitations on Applicability.  The representation and warranty in
Section 3.1 shall terminate as of the Title Claim Date and shall have no further
force and effect thereafter, provided there shall be no termination of
Purchaser’s or Sellers’ rights under Section 3.5 with respect to any bona fide
Title Defect or Title Benefit claim properly reported on or before the Title
Claim Date or under the Conveyances.
 
 
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SELLERS
 
Subject to the provisions of this Article 4, and the other terms and conditions
of this Agreement, DEPI represents and warrants to Purchaser the matters set out
in Sections 4.1 through 4.19, and Sections 4.21 and 4.22.
 
Section 4.1  Sellers.
 
(a) Existence and Qualification. Each Seller is a corporation or limited
liability company duly organized, validly existing and in good standing under
the laws of the state where it is incorporated or organized (as set forth in the
preamble).
 
(b) Power. Each Seller has the corporate power to enter into and perform this
Agreement (and all documents required to be executed and delivered by that
Seller at Closing) and to consummate the transactions contemplated by this
Agreement (and such documents).
 
(c) Authorization and Enforceability. The execution, delivery and performance of
this Agreement (and all documents required to be executed and delivered by each
Seller at Closing), and the consummation of the transactions contemplated hereby
and thereby, have been duly and validly authorized by all necessary corporate
action on the part of such Seller. This Agreement has been duly executed and
delivered by each Seller (and all documents required to be executed and
delivered by each Seller at Closing shall be duly executed and delivered by such
Seller) and this Agreement constitutes, and at the Closing such documents shall
constitute, the valid and binding obligations of each Seller, enforceable in
accordance with their terms except as such enforceability may be limited by
applicable bankruptcy or other similar Laws affecting the rights and remedies of
creditors generally as well as to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
 
(d) No Conflicts. The execution, delivery and performance of this Agreement by
each Seller, and the consummation of the transactions contemplated by this
Agreement shall not (i) violate any provision of the certificate of
incorporation or bylaws (or equivalent governing instruments) of such Seller,
(ii) result in default (with due notice or lapse of time or both) or the
creation of any lien or encumbrance or give rise to any right of termination,
cancellation or acceleration under any material note, bond, mortgage, indenture,
or other financing instrument to which such Seller is a party or by which it is
bound, (iii) violate any judgment, order, ruling, or decree applicable to the
Assets or such Seller as a party in interest or (iv) violate any Laws applicable
to such
 
 
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Seller, except any matters described in clauses (ii), (iii), or (iv) above which
would not have a Material Adverse Effect.
 
Section 4.2  The Companies.
 
(a) Existence and Qualification. Each Company other than the Survivor LPs is a
corporation, duly organized, validly existing and in good standing under the
Laws of its respective jurisdiction of incorporation or formation as described
in Exhibit A attached hereto, and each is duly qualified to do business as a
foreign corporation in each jurisdiction where its Company Assets are located,
except where the failure to so qualify would not, individually or in the
aggregate, have a Material Adverse Effect. As of the Closing, each Survivor LP
will be a partnership, duly organized, validly existing and in good standing
under the Laws of its respective jurisdiction of incorporation or formation as
described in Exhibit A attached hereto and will be duly qualified to do business
as a foreign limited partnership in each jurisdiction where its Company Assets
are located, except where the failure to so qualify would not, individually or
in the aggregate, have a Material Adverse Effect.
 
(b) Power. Each Company other than the Survivor LPs has the corporate power and
authority to own, lease or otherwise hold its Assets and conduct its business in
the manner consistent with recent practice. As of the Closing, each Survivor LP
will have the partnership power and authority to own, lease or otherwise hold
its Assets and conduct its business in the manner consistent with recent
practice of the E&P Business.
 
(c) No Conflicts. The consummation of transactions contemplated by this
Agreement shall not (i) violate any provision of the certificate of
incorporation or bylaws (or equivalent governing instruments) of any Company,
(ii) result in default (with due notice or lapse of time or both) or the
creation of any lien or encumbrance or give rise to any right of termination,
cancellation or acceleration under any material note, bond, mortgage, indenture,
or other financing instrument to which any Company is a party or by which it is
bound, (iii) violate any judgment, order, ruling, or decree applicable to any
Company as a party in interest, or (iv) violate any Laws applicable to any
Company, or any of its Company Assets, except any matters described in clauses
(ii), (iii), or (iv) above which would not have a Material Adverse Effect.
 
(d) Certificate of Incorporation and Bylaws. Sellers have delivered to Purchaser
true and complete copies of the certificate of incorporation and by-laws (or
equivalent governing instruments), each as amended to date, of the Companies
other than the Survivor LPs and have made available to Purchaser for inspection
the stock certificates and transfer books, and the minute books, of the
Companies other than the Survivor LPs. Prior to the Closing, Seller shall
deliver to Purchaser true and complete copies of the certificate of
incorporation and by-laws (or equivalent governing instruments), each as amended
as of such date, of the Survivor LPs and make available to Purchaser for
inspection the partnership books, of the Survivor LPs.
 
(e) Title to Shares. Sellers have good and valid title to the Shares of the
Companies other than the Survivor LPs, and as of the Closing, will have good and
valid title to the Shares of the Survivor LPs, in each case, free and clear of
any liens, claims,
 
 
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encumbrances, security interests, options, charges and restrictions of any kind
other than restrictions on transfer that may be imposed by applicable federal or
state securities laws or in the applicable Company’s governing instruments.
Other than this Agreement, and, in the case of the Survivor LPs, their
respective partnership agreements, the Shares are not subject to any voting
agreement or other contract, agreement, arrangement, commitment or
understanding, including any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, dividend rights
or disposition of the Shares.
 
(f) The Shares. The entire issued and outstanding capital stock of the Companies
that are not Survivor LPs are their Shares, consisting of the numbers set forth
on Exhibit A attached hereto, and the entire equity ownership interest in the
Survivor LPs will at Closing be their Shares. In each case, all the Shares of
the Companies that are not Survivor LPs are, and the Shares of the Survivor LPs
at Closing will be, duly authorized and validly issued and outstanding, fully
paid, non-assessable and not issued in violation of any preemptive rights.
Except for the Shares, there are no outstanding shares of capital stock or other
equity interests in any Company, or any contractual arrangements giving any
Person a right to receive any benefits or rights similar to the rights enjoyed
by or accruing to the holders of any Shares of any Company. Other than pursuant
to this Agreement, there are no outstanding warrants, options, rights,
convertible or exchangeable securities or other commitments pursuant to which
any Seller or a Company is or may be required to issue equity interests in such
Company.
 
(g) Balance Sheets and Income Statements. The combined, unaudited balance sheets
of the Consolidated Onshore E&P Business as of December 31, 2005, and
December 31, 2006 (the “Balance Sheets”), and the income statements of the
Consolidated Onshore E&P Business for the year ended December 31, 2005, and for
the year ended December 31, 2006 (the “Income Statements”) attached hereto as
Schedule 4.2(g) have been prepared from the books and records of the Sellers,
Companies and Subsidiaries, in conformity with the Accounting Principles and
fairly present the financial position of the Consolidated Onshore E&P Business
as of the dates thereof and the results of operations of the Consolidated
Onshore E&P Business for the periods then ended, including the allocations of
general and administrative expense, shared assets and other items that have been
made as indicated in Schedule 4.2(g), except for the following:
 
(i) normal period end adjustments, including but not limited to subsequent
events;
 
(ii) the absence of notes required by the Accounting Principles; and
 
(iii) the exclusion of cash and short-term investments, Affiliate accounts
receivable and payable, margin assets and liabilities, goodwill, debt and
interest to be eliminated pursuant to Section 6.9, Affiliate debt and interest
to be eliminated pursuant to Section 6.8, retirement and other employee
benefits, financing fees, the effects of hedging and other derivatives to be
eliminated pursuant to Section 6.12, income taxes, and stock compensation.
 
 
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Parent’s net investment (equity) is included in the Balance Sheets, however no
representation is made regarding these balances.
 
(h) Subsidiaries. No Company or Wholly-Owned Subsidiary directly or indirectly
owns any capital stock or other equity interest in any Person except in
Subsidiaries as set forth in Exhibit C and excluding, for the avoidance of
doubt, any tax partnerships entered into with respect to the Assets.
 
(i) Labor Matters.
 
(i) No Company or Wholly-Owned Subsidiary has any employees other than the
Company Onshore Employees, Excluded Employees, Key Employees and U.S. Temporary
Employees.
 
(ii) Other than for Excluded Employees, Key Employees, U.S. Temporary Employees
or consultants, there are no employment agreements with any individuals who are
(x) employed by DEPI, DOTEPI or Reserves who are rendering services primarily
with respect to the Assets or (y) employed by Dominion Resources Services, Inc.
and who are rendering services primarily with respect to the Assets or
(z) employed by a Company or Wholly-Owned Subsidiary.
 
(iii) DEPI, DOTEPI, Reserves, the Companies and the Wholly-Owned Subsidiaries
have no collective bargaining agreements relating to the Assets. To the
knowledge of DEPI: (A) no labor organization or group of employees of the
Companies or the Wholly-Owned Subsidiary has made a demand for recognition or
certification as a union or other labor organization, and (B) there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any labor relations
tribunal or authority. To DEPI’s knowledge, there are no organizing activities
involving the Companies or the Wholly-Owned Subsidiaries relating to the Assets.
 
(j) Employee Benefits.
 
(i) Schedule 4.2(j)(i) lists all of the Employee Plans.
 
(ii) All Employee Plans subject to ERISA and the Code comply in all material
respects with ERISA, the Code and all applicable Laws, except as set forth on
Schedule 4.2(j)(i).
 
(iii) All Employee Plans contributed to by the Sellers, Companies, Wholly-Owned
Subsidiaries or any ERISA Affiliate intended to be qualified under Section 401
of the Code have filed for or received favorable determination letters with
respect to such qualified status from the Internal Revenue Service. The
determination letter for each such Employee Plan remains in effect, and, to
DEPI’s knowledge, any amendment made, or event relating to such an Employee
 
 
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Plan subsequent to the date of such determination letter, has not materially and
adversely affected the qualified status of the Employee Plan.
 
(iv) No Employee Plan that is subject to Title IV of ERISA (a “Title IV Plan”)
or Section 412 of the Code has incurred an accumulated funding deficiency,
whether or not waived, within the meaning of Section 412 of the Code or Section
302 of ERISA, and to DEPI’s knowledge, no condition exists which would be
expected to result in an accumulated funding deficiency as of the last day of
the current plan year of any Title IV Plan or other Employee Plan subject to
Section 412 of the Code. The PBGC has not instituted proceedings to terminate
any Title IV Plan, and no other event or condition has occurred which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any such Title IV Plan.
 
(v) No Employee Plan covering Company Onshore Employees is subject to the Laws
of any jurisdiction outside the United States.
 
(vi) None of Sellers, the Companies, the Wholly-Owned Subsidiaries, any other
Affiliate of Sellers or any ERISA Affiliate has incurred or reasonably expects
to incur any liability under Title IV of ERISA, including, without limitation,
any liability (including secondary liability) for withdrawal from a
Multiemployer Plan, any liability under Section 412, 4975 or 4980B of the Code,
or any liability under Section 502 of ERISA.
 
Section 4.3  The Subsidiaries.
 
(a) Existence and Qualification. The Wholly-Owned Subsidiary is a limited
partnership duly organized and validly existing under the Laws of its respective
jurisdiction of incorporation or formation as described in Exhibit C and is duly
qualified to do business as a foreign corporation, limited liability company, or
general or limited partnership, as applicable, in each jurisdiction where its
Assets are located, except where the failure to so qualify would not,
individually or in the aggregate, have a Material Adverse Effect.
 
(b) Power. The Wholly-Owned Subsidiary has the partnership power and authority
to own, lease or otherwise hold its Assets and conduct its business in the
manner consistent with recent practice.
 
(c) No Conflicts. The consummation of transactions contemplated by this
Agreement shall not (i) violate any provision of the certificate of
incorporation or the by-laws (or equivalent certificates and governing
instruments) of the Wholly-Owned Subsidiary, (ii) result in default (with due
notice or lapse of time or both) or the creation of any lien or encumbrance or
give rise to any right of termination, cancellation or acceleration under any
material note, bond, mortgage, indenture, or other financing instrument to which
the Wholly-Owned Subsidiary is a party or by which it is bound, (iii) violate
any judgment, order, ruling, or decree applicable to the Wholly-Owned Subsidiary
as a party in interest, or (iv) violate any Laws applicable to the Wholly-
 
 
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Owned Subsidiary, or any of its Assets, except any matters described in clauses
(ii), (iii), or (iv) above which would not have a Material Adverse Effect.
 
(d) Certificate of Incorporation and Bylaws. Sellers have delivered to Purchaser
true and complete copies of the partnership agreements, each as amended to date,
of each Subsidiary (other than those certificates of partnership agreements for
Frederick HOF Limited Partnership and Wilderness Energy Services Limited
Partnership subject to confidentiality restrictions for which Sellers were
unable to obtain all required consents for disclosure) and has made available to
Purchaser for inspection the partnership books of the Wholly-Owned Subsidiary.
Sellers will continue after the date hereof using commercially reasonable
efforts to obtain the necessary consents to disclose the governing instruments
for the Frederick HOF Limited Partnership and Wilderness Energy Services
Partnership, provided that Sellers shall not be required to make payments or
undertake obligations to or for the benefit of the holders of such consent
rights.
 
(e) Title to Equity Interests of the Subsidiaries. The issued and outstanding
shares, partnership interests or membership interests, as appropriate, in each
Subsidiary are owned of record as described in Exhibit C. In the case of such
issued and outstanding shares, partnership interests or membership interests
owned of record by a Seller, Company or Subsidiary as shown on Exhibit C (the
“Equity Interests”), such shares or interest are also owned beneficially and
free and clear of any liens, claims, encumbrances, security interests, options,
charges and restrictions of any kind other than restrictions on transfers that
may be imposed by applicable federal or state securities laws, or in the
applicable Subsidiary’s governing instruments. Other than this Agreement and, in
the case of Subsidiaries that are limited liability companies or general or
limited partnerships, their respective ownership agreements, the Equity
Interests are not subject to any voting agreement or other contract, agreement,
arrangement, commitment or understanding, including any such agreement,
arrangement, commitment or understanding restricting or otherwise relating to
the voting, dividend rights or disposition of the Equity Interests.
 
(f) The Equity Interests. The entire issued and outstanding capital stock of
each Subsidiary that is a corporation consists of the numbers set forth on
Exhibit C attached hereto, and the entire equity ownership of each Subsidiary
that is a limited liability company or general or limited partnership consists
of the partnership interests or membership interests as set forth in Exhibit C
attached hereto. In each case, all the Equity Interests are duly authorized and
validly issued and outstanding, fully paid, non-assessable (except, in the case
of Subsidiaries that are limited liability companies or general or limited
partnerships, as expressly authorized by the terms of the applicable operating
agreements or partnership agreements of the Subsidiaries and except for any
obligation to return distributions under the Laws applicable to each Subsidiary
and have not been issued in violation of any preemptive rights. Except for the
shares, partnership interests or membership interests shown on Exhibit C, there
are no outstanding shares, units or other equity interests in any Subsidiary, or
any contractual arrangements giving any Person a right to receive any benefits
or rights similar to the rights enjoyed by or accruing to the holders of any
Equity Interests of any Subsidiary. Other than pursuant to
 
 
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this Agreement, there are no outstanding warrants, options, rights, convertible
or exchangeable securities or other commitments pursuant to which any Company or
any Subsidiary is or may become obligated to issue or sell any capital stock or
other equity interests in such Subsidiary.
 
Section 4.4  Litigation.  Except as disclosed on Schedule 4.4, there are no
actions, suits or proceedings pending, or to DEPI’s knowledge threatened in
writing, before any Governmental Authority or arbitrator with respect to the E&P
Business or against any Company or Wholly-Owned Subsidiary. There are no
actions, suits or proceedings pending, or to DEPI’s knowledge, threatened in
writing, before any Governmental Authority or arbitrator against any Seller,
Company or Wholly-Owned Subsidiary, or any Affiliate of any of them, which are
reasonably likely to impair or delay materially Sellers’ ability to perform
their obligations under this Agreement.
 
Section 4.5  Taxes and Assessments.  Except as disclosed on Schedule 4.5,
 
(a) To the knowledge of DEPI, each Company and Subsidiary has filed all material
Tax Returns (as defined in Section 9.2(a)) required to be filed by it, and
timely paid all material Taxes that were due and payable by it, except those for
which adequate reserves have been provided;
 
(b) To the knowledge of DEPI, no Company or Subsidiary has received written
notice of any pending claim against it (which remains outstanding) from any
applicable Governmental Authority for assessment of material Taxes, and to the
knowledge of DEPI, no such claim has been threatened;
 
(c) To the knowledge of DEPI, each Seller has filed all material Tax Returns (as
defined in Section 9.2(a)) required to be filed by it and paid all material
Taxes (except those for which adequate reserves have been provided) with respect
to the Additional Assets;
 
(d) To the knowledge of DEPI, no Seller has received written notice of any
pending claim against it (which remains outstanding) from any applicable
Governmental Authority for assessment of material Taxes with respect to the
Additional Assets, and to the knowledge of DEPI, no such claim has been
threatened;
 
(e) Schedule 4.5 sets forth all of the Assets that are deemed by agreement or
applicable law to be held by a partnership for federal tax purposes, and, to the
extent any of the Assets are deemed by agreement or applicable law to be held by
a partnership for federal tax purposes, any such partnerships shall have in
effect an election under Section 754 of the Code that will apply with respect to
such portion of the Assets being sold and purchased under this Agreement and
that are deemed owned by such partnerships;
 
(f) Schedule 4.5(f) lists each Company and Subsidiary and indicates whether each
such Company and Subsidiary (to DEPI’s knowledge in the case of Subsidiaries
other than Wholly-Owned Subsidiaries) is treated as a C corporation,
partnership, or entity disregarded as separate from its owner for United States
federal income tax purposes;
 
 
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(g) None of the Companies or Wholly-Owned Subsidiaries has, during the period
such Companies or Wholly-Owned Subsidiaries have been part of the Consolidated
Group, and to the knowledge of DEPI, none of the other Subsidiaries has,
(i) participated, within the meaning of Treasury Regulation Section 1.6011-4(c),
in any “listed transaction” or any other “reportable transaction” within the
meaning of Treasury Regulation Section 1.6011-4, (ii) engaged in any transaction
that gives rise to (x) a registration obligation under Section 6111 of the Code
and the Treasury Regulations thereunder, or (y) a list maintenance obligation
under Section 6112 of the Code and the Treasury Regulations thereunder, or
(iii) taken any position on any Tax Return which could give rise to a
substantial underpayment of Tax under Section 6662 of the Code or any similar
provision of state, local or foreign Tax law;
 
(h) To the knowledge of DEPI, (i) no audit, litigation or other proceeding with
respect to material Taxes has been commenced or is presently pending with
respect to any of the Companies or the Subsidiaries, or with respect to the
Additional Assets; and (ii) each of the Companies and Subsidiaries has withheld
and paid all material Taxes required to have been withheld and paid by them,
including in connection with amounts paid or owing to any employee, independent
contractor, creditor, member, stockholder, or other third party; and
 
(i) To the knowledge of DEPI, none of the Companies or Subsidiaries has been a
member of a consolidated, combined or unitary group, except for a Consolidated
Group.
 
Section 4.6  Environmental Laws.  Except as disclosed on Schedule 4.6, to DEPI’s
knowledge, each Company’s and Wholly-Owned Subsidiary’s, and DEPI’s, DOTEPI’s
and Reserves’, ownership and operation of its respective Assets is in compliance
with all applicable Environmental Laws, except such failures to comply as,
individually or in the aggregate, would not have a Material Adverse Effect.
Except as disclosed on Schedule 4.6, and except for contamination that would
not, individually or in the aggregate, have a Material Adverse Effect, to DEPI’s
knowledge there has been no pollution or contamination of groundwater, surface
water, soil, subsurface strata or seabed on the Properties resulting from
hydrocarbon or related activities on such Properties which was required to be
remediated under applicable Environmental Laws on or before the date of this
Agreement for which any Company or Wholly-Owned Subsidiary or the owner of the
Additional Assets would be liable but which has not been remediated. Except as
disclosed on Schedule 4.4 or Schedule 4.6, to DEPI’s knowledge, none of the
Sellers has received any unresolved written notice from any Person or
Governmental Authority asserting or alleging that the Companies or the
Properties are or may be in violation of Environmental Laws, are or may be the
subject of any investigation pursuant to Environmental Laws or are or may be
subject to Environmental Liabilities. Notwithstanding anything to the contrary
in this Section or elsewhere in this Agreement, DEPI makes no, and disclaims
any, representation or warranty, express or implied, with respect to the
presence or absence of naturally occurring radioactive material (“NORM”),
asbestos, mercury, drilling fluids and chemicals, and produced waters and
hydrocarbons in or on the Properties or Equipment in quantities typical for
oilfield operations in the areas in which the Properties and Equipment are
located. For purposes of this Agreement, “Environmental Laws” means, as the same
have been amended to the date hereof, the Comprehensive Environmental Response,
Compensation and
 
 
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Liability Act, 42 U.S.C. § 9601 et seq.; the Resource Conservation and Recovery
Act, 42 U.S.C. § 6901 et seq.; the Federal Water Pollution Control Act, 33
U.S.C. § 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic
Substances Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act,
33 U.S.C. § 2701 et seq.; the Emergency Planning and Community Right to Know
Act, 42 U.S.C. § 11001 et seq.; and the Safe Drinking Water Act, 42 U.S.C.
§§ 300f through 300j, in each case as amended to the date hereof, and all
similar Laws as of the date hereof of any Governmental Authority having
jurisdiction over the property in question addressing pollution or protection of
the environment or biological or cultural resources, remediation of
contamination, restoration of environmental quality, Hazardous Substances and
all regulations implementing the foregoing.
 
Section 4.7  Compliance with Laws.  Except with respect to Environmental Laws,
which are addressed in Section 4.6 and except as disclosed on Schedule 4.7, to
DEPI’s knowledge, the Companies and the Wholly-Owned Subsidiaries are in
compliance with, and DEPI’s, DOTEPI’s and Reserves’ ownership, use and operation
of the Additional Assets are in compliance with, all applicable Laws, except
such failures to comply as would not, individually or in the aggregate, have a
Material Adverse Effect. Except as set forth on Schedule 4.7, Sellers and the
Companies and Wholly-Owned Subsidiaries have all material permits, licenses and
other governmental authorizations (collectively, the “Permits”) necessary to
own, lease or otherwise hold their respective properties and assets and to
conduct the E&P Business as currently conducted except where the failure to have
any Permit does not result in a Material Adverse Effect.
 
Section 4.8  Contracts.  Schedule 4.8 lists all Material Contracts. To DEPI’s
knowledge, none of the Sellers, the Companies or the Wholly-Owned Subsidiaries,
nor to the knowledge of DEPI, any other Person, is (or will be with due notice,
lapse of time or both) in default under any Material Contract except as
disclosed on Schedule 4.8 and except such defaults as would not, individually or
in the aggregate, have a Material Adverse Effect. To DEPI’s knowledge, all
Material Contracts are in full force and effect. Except as disclosed on
Schedule 4.8, there are no Contracts with Affiliates of Sellers (other than the
Companies and Subsidiaries) that will be binding on any Company or Wholly-Owned
Subsidiary or the Assets after Closing. Except as disclosed on Schedule 4.8,
there are no futures, options, swaps or other derivatives with respect to the
sale of production that will be binding on any Company or Wholly-Owned
Subsidiary or the Assets after Closing. Except as disclosed on Schedule 4.8, as
of the date identified on such Schedule, there were no contracts for the
purchase, sale or exchange of oil, gas or other hydrocarbons produced from or
attributable to the Properties that will be binding on Purchaser, the Companies,
the Wholly-Owned Subsidiary or the Assets after Closing that Purchaser (or the
applicable Company or Wholly-Owned Subsidiary) will not be entitled to terminate
at will (without penalty) on 90 days notice or less. No notice of default or
breach has been received or delivered by any Seller, Company or Wholly-Owned
Subsidiary under any Material Contract, the resolution of which is currently
outstanding, and no currently effective notices have been received by any
Seller, Company or Wholly-Owned Subsidiary of the exercise of any premature
termination, price redetermination, market-out or curtailment of any Material
Contract.
 
 
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Section 4.9  Payments for Production.  Except as disclosed on Schedule 4.9 and
subject to the covenant in Section 6.11, none of the Sellers, the Companies or
the Wholly-Owned Subsidiaries are obligated by virtue of a take or pay payment,
advance payment or other similar payment (other than royalties, overriding
royalties and similar arrangements established in the Leases or reflected on
Exhibit B-1, Exhibit B-2, Exhibit D-1 or Exhibit D-2), to deliver oil or gas, or
proceeds from the sale thereof, attributable to the Sellers’, Company’s or
Wholly-Owned Subsidiary’s interest in the Properties at some future time without
receiving payment therefor at or after the time of delivery.
 
Section 4.10  Production Imbalances.  Except with respect to Properties and in
the amounts set forth on Schedule 4.10, as of the dates set forth on such
Schedule, there were no imbalances with respect to the Properties arising from
overproduction or underproduction or overdeliveries or underdeliveries or other
imbalance arising at the wellhead, pipeline, gathering system, transportation
system, processing plant or other location, including, without limitation, any
imbalances under gas balancing or similar agreements, or imbalances under
processing agreements and imbalances under gathering or transportation
agreements.
 
Section 4.11  Consents and Preferential Purchase Rights.  As of the date hereof,
there are no preferential rights to purchase or required third Person consents
to assignment, which may be applicable or necessary for the valid execution,
delivery and performance by Sellers of this Agreement (including to the sale of
Shares and Additional Assets by Sellers as contemplated by this Agreement),
except for consents and approvals of Governmental Authorities that are
customarily obtained after Closing, those approvals described in Section 6.7,
and as set forth on Schedule 4.11.
 
Section 4.12  Liability for Brokers’ Fees.  Purchaser, the Companies and the
Subsidiaries shall not directly or indirectly have any responsibility, liability
or expense, as a result of undertakings or agreements of Sellers, the Companies
or the Subsidiaries prior to Closing, for brokerage fees, finder’s fees, agent’s
commissions or other similar forms of compensation to an intermediary in
connection with the negotiation, execution or delivery of this Agreement or any
agreement or transaction contemplated hereby.
 
Section 4.13  Equipment and Personal Property.
 
(a) Except as set forth on Schedule 4.13(a), all currently producing Wells and
Equipment are in an operable state of repair adequate to maintain normal
operations in accordance with past practices, ordinary wear and tear excepted.
DEPI, DOTEPI, Reserves, each Company and the Wholly-Owned Subsidiary have all
material easements, rights of way, licenses and authorizations, from
Governmental Authorities necessary to access, construct, operate, maintain and
repair the Wells and Equipment in the ordinary course of business as currently
conducted by such Persons and in material compliance with all Laws, except such
failures as would not individually or in the aggregate have a Material Adverse
Effect.
 
(b) With respect to Equipment, hydrocarbon production and inventory, DEPI’s,
DOTEPI’s, Reserves’, and each Company’s and Wholly-Owned Subsidiary’s title as
of the date hereof is, and as of the Closing Date, shall be transferred to
Purchaser, free and clear of liens and encumbrances other than Permitted
Encumbrances. To DEPI’s knowledge, the Sellers (and/or the Companies and
Wholly-Owned Subsidiary) have such
 
 
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title to the Midstream Assets as would be deemed adequate by a reasonable and
prudent owner of assets similar to the Midstream Assets.
 
Section 4.14  Non-Consent Operations.  No Seller, Company or Wholly-Owned
Subsidiary has elected not to participate in any operation or activity proposed
with respect to the Assets which could result in any of such Person’s interest
in any Assets becoming subject to a penalty or forfeiture as a result of such
election not to participate in such operation or activity, except to the extent
reflected in the Net Revenue Interest and Working Interest set forth in Exhibit
B-2 or Exhibit D-2.
 
Section 4.15  Wells.  To DEPI’s knowledge, all Wells have been drilled and
completed within the limits permitted by all applicable Leases, contracts, and
pooling or unit agreements. To DEPI’s knowledge, no Well is subject to penalties
on allowables after the Effective Date because of any overproduction or any
other violation of Laws.
 
Section 4.16  Outstanding Capital Commitments.  As of the date of this
Agreement, there are no outstanding AFEs or other commitments for capital
expenditures (except as expressly set forth in the terms of a contract) which
are binding on any Seller, Company or Wholly-Owned Subsidiary with respect to
the Assets or E&P Business and which DEPI reasonably anticipates will
individually require expenditures by the owner of the Assets after the Effective
Date in excess of Two Million dollars ($2,000,000), other than those shown on
Schedule 4.16.
 
Section 4.17  Insurance.  Schedule 4.17 lists all the insurance policies
maintained by Sellers, the Companies and the Wholly-Owned Subsidiary with
respect to the Assets.
 
Section 4.18  Absence of Certain Changes.  Since December 31, 2006, and except
as set forth on Schedule 4.18, (a) there has not been any reduction in the rate
of production of oil, gas or condensate from the Properties which would
constitute a Material Adverse Effect, (b) there has not been any reduction or
write-down in the reserves estimated for the Properties (which reduction or
write-down is not reflected in the Reserve Report) that would constitute a
Material Adverse Effect, (c) there has not been any damage, destruction or loss
with respect to the Assets that would constitute a Material Adverse Effect that
is not addressed by the terms of Section 12.4, or (d) the Assets have not become
subject to any obligation or liability that would be required to be reflected as
an extraordinary item separately listed on an income statement for the E&P
Business prepared in accordance with the Accounting Principles.
 
Section 4.19  Assets of the E&P Business.  Except as described in Section 1.3
and except for those vehicles, computers and software leased for use in the
operation of the E&P Business that are not purchased by Seller or Affiliates of
Seller pursuant to Section 6.13, (a) the Assets include all material equipment,
materials, contracts, data, records, software and other property owned or leased
by Sellers, the Companies, the Wholly-Owned Subsidiaries and their Affiliates
necessary for the conduct of the E&P Business in a manner consistent with recent
practices; (b) since December 31, 2006, the Assets have been operated only in
the ordinary course of business consistent with past practices of DEPI, DOTEPI,
Reserves, the Companies and the Wholly-Owned Subsidiaries; and (c) no property
material to the conduct of the E&P
 
 
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Business is being retained by any Seller or Affiliate of Sellers (other that the
Companies and Subsidiaries).
 
Section 4.20  Limitations.
 
(a) Except as and to the extent expressly set forth in Article 3, this Article 4
or in the certificate of Sellers to be delivered pursuant to Section 8.2(j), or
DEPI’s, DOTEPI’s or Reserves’ special warranty of title in the Conveyances,
(i) Sellers make no representations or warranties, express or implied, and
(ii) Sellers expressly disclaim all liability and responsibility for any
representation, warranty, statement or information made or communicated (orally
or in writing) to Purchaser or any of its Affiliates, employees, agents,
consultants or representatives (including, without limitation, any opinion,
information, projection or advice that may have been provided to Purchaser by
any officer, director, employee, agent, consultant, representative or advisor of
Sellers or any of their Affiliates).
 
(b) EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN ARTICLE 3, THIS ARTICLE 4, IN
THE CERTIFICATE OF SELLERS TO BE DELIVERED AT CLOSING PURSUANT TO
SECTION 8.2(J), OR DEPI’S, DOTEPI’S OR RESERVES’ SPECIAL WARRANTY OF TITLE IN
THE CONVEYANCES, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLERS (1)
MAKE NO AND EXPRESSLY DISCLAIM ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO (I) TITLE TO ANY OF THE ASSETS, (II) THE CONTENTS, CHARACTER OR
NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING
CONSULTANT, OR ANY GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE
ASSETS, (III) THE QUANTITY, QUALITY OR RECOVERABILITY OF PETROLEUM SUBSTANCES IN
OR FROM THE ASSETS, (IV) THE EXISTENCE OF ANY PROSPECT, RECOMPLETION, INFILL OR
STEP-OUT DRILLING OPPORTUNITIES, (V) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR
FUTURE REVENUES GENERATED BY THE ASSETS, (VI) THE PRODUCTION OF PETROLEUM
SUBSTANCES FROM THE ASSETS, OR WHETHER PRODUCTION HAS BEEN CONTINUOUS, OR IN
PAYING QUANTITIES, OR ANY PRODUCTION OR DECLINE RATES, (VII) THE MAINTENANCE,
REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE ASSETS,
(VIII) INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHT, OR (IX) ANY OTHER
MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO
PURCHASER OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS,
REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND (2)
FURTHER DISCLAIM ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR
SAMPLES OF MATERIALS OF ANY EQUIPMENT, IT BEING EXPRESSLY UNDERSTOOD AND AGREED
BY THE PARTIES HERETO THE ASSETS ARE BEING TRANSFERRED
 
 
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 “AS IS, WHERE IS,” WITH ALL FAULTS AND DEFECTS, AND THAT PURCHASER HAS MADE OR
CAUSED TO BE MADE SUCH INSPECTIONS AS PURCHASER DEEMS APPROPRIATE.
 
(c) Any representation “to the knowledge of DEPI” or “to DEPI’s knowledge” is
limited to matters within the actual knowledge of the individuals identified on
Schedule 4.20(c). Actual knowledge only includes information actually personally
known by such individual.
 
(d) Inclusion of a matter on a schedule attached hereto with respect to a
representation or warranty that addresses matters having a Material Adverse
Effect shall not be deemed an indication that such matter does, or may, have a
Material Adverse Effect. Schedules may include matters not required by the terms
of the Agreement to be listed on the Schedule, which additional matters are
disclosed for purposes of information only, and inclusion of any such matter
does not mean that all such matters are included. As used herein, “Material
Adverse Effect” means a material adverse effect on the ownership, operation or
financial condition of the E&P Business, taken as a whole; provided, however,
that Material Adverse Effect shall not include material adverse effects
resulting from general changes in oil and gas prices; general changes in
industry, economic or political conditions, or markets; changes in condition or
developments generally applicable to the oil and gas industry in any area or
areas where the Assets are located; acts of God, including hurricanes and
storms; acts or failures to act of Governmental Authorities (where not caused by
the willful or negligent acts of Sellers, the Companies or Subsidiaries); civil
unrest or similar disorder; terrorist acts; changes in Laws; effects or changes
that are cured or no longer exist by the earlier of the Closing and the
termination of this Agreement pursuant to Article 11; and changes resulting from
the announcement of the transactions contemplated hereby or the performance of
the covenants set forth in Article 6 hereof.
 
(e) A matter scheduled as an exception for any representation shall be deemed to
be an exception to all representations for which it is relevant, except that the
Contracts listed on Schedule 4.11 do not modify the Material Contracts List in
Schedule 4.8.
 
Section 4.21  Production Allowables.  Except as provided on Schedule 4.21, to
DEPI’s knowledge, no Seller or any Company or Wholly-Owned Subsidiary has
received written notice that there has been any change proposed in the
production allowables for any Wells listed on Exhibit B-2 or D-2 except where a
proposed change (if adopted or approved) would not have a Material Adverse
Effect.
 
Section 4.22  Accuracy of Data. The historical factual information, excluding
title information, supplied by Sellers or its Affiliates to Ryder Scott & Co. in
the preparation of its report dated as of December 31, 2006 (the “Reserve
Report”) of the Assets is accurate and complete in all material respects. The
historical production data titled:
 
(a) “YE2006_Product” in EBU_YE2006_Aries_database in the data room folder
2.1.2.1.3.1, as updated by “EBU Production Update thru 1_2007” in the data room
folder 2.1.2.1.3.4.2; and
 
 
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(b) “YE2006_Product” in WBU_YE2006_Aries_database in the data room folder
2.1.2.2.3.1, as updated by “WBU Production Update thru 1_2007” in the data room
folder 2.1.2.2.3.4.2,
 
(DVDs of which have been provided to Purchaser in connection with the signing of
this Agreement and identified by Sellers and Purchaser), to the extent relating
to the Assets, is accurate and complete in all material respects.
 
 
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
 
Purchaser represents and warrants to Sellers the following:
 
Section 5.1  Existence and Qualification.  Purchaser is a corporation organized,
validly existing and in good standing under the laws of Delaware.
 
Section 5.2  Power.  Purchaser has the corporate power to enter into and perform
its obligations under this Agreement (and all documents required to be executed
and delivered by Purchaser at Closing) and to consummate the transactions
contemplated by this Agreement (and such documents).
 
Section 5.3  Authorization and Enforceability.  The execution, delivery and
performance of this Agreement (and all documents required to be executed and
delivered by Purchaser at Closing), and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary corporate action on the part of Purchaser. This Agreement has been
duly executed and delivered by Purchaser (and all documents required to be
executed and delivered by Purchaser at Closing will be duly executed and
delivered by Purchaser) and this Agreement constitutes, and at the Closing such
documents will constitute, the valid and binding obligations of Purchaser,
enforceable in accordance with their terms except as such enforceability may be
limited by applicable bankruptcy or other similar laws affecting the rights and
remedies of creditors generally as well as to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
 
Section 5.4  No Conflicts.  The execution, delivery and performance of this
Agreement by Purchaser, and the consummation of the transactions contemplated by
this Agreement, will not (i) violate any provision of the certificate of
incorporation or bylaws (or other governing instruments) of Purchaser,
(ii) result in a material default (with due notice or lapse of time or both) or
the creation of any lien or encumbrance or give rise to any right of
termination, cancellation or acceleration under any material note, bond,
mortgage, indenture, or other financing instrument to which Purchaser is a party
or by which it is bound, (iii) violate any judgment, order, ruling, or
regulation applicable to Purchaser as a party in interest or (iv) violate any
Law applicable to Purchaser, except any matters described in clauses (ii), (iii)
or (iv) above which would not have a material adverse effect on Purchaser or its
properties.
 
Section 5.5  Consents, Approvals or Waivers.  The execution, delivery and
performance of this Agreement by Purchaser will not be subject to any consent,
approval or
 
 
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waiver from any Governmental Authority or other third Person except, as set
forth on Schedule 5.5.
 
Section 5.6  Litigation.  There are no actions, suits or proceedings pending, or
to Purchaser’s knowledge, threatened in writing before any Governmental
Authority or arbitrator against Purchaser or any Affiliate of Purchaser which
are reasonably likely to impair or delay materially Purchaser’s ability to
perform its obligations under this Agreement.
 
Section 5.7  Financing.  Purchaser has sufficient cash, available lines of
credit or other sources of immediately available funds (in United States
dollars) to enable it to pay the Closing Payment to Sellers at the Closing.
 
Section 5.8  Investment Intent.  Purchaser is acquiring the Interests for its
own account and not with a view to their sale or distribution in violation of
the Securities Act of 1933, as amended, the rules and regulations thereunder,
any applicable state blue sky Laws, or any other applicable securities Laws.
 
Section 5.9  Independent Investigation.  Purchaser is (or its advisors are)
experienced and knowledgeable in the oil and gas business and aware of the risks
of that business. Purchaser acknowledges and affirms that (i) as of the date
hereof, it has made all such independent investigation, verification, analysis
and evaluation of the Companies, the Subsidiaries and the Assets as it deems
necessary or appropriate to enter into this Agreement, and (ii) it has made all
such reviews and inspections of the Assets and the business, books and records,
results of operations, conditions (financial or otherwise) and prospects of the
Companies and the Subsidiaries as it has deemed necessary or appropriate to
execute and deliver this Agreement and (iii) prior to Closing, it will make
further independent investigations, inspections and evaluations of the Assets as
it deems necessary or appropriate to consummate the transactions contemplated
hereby. Except for the representations and warranties expressly made by DEPI in
Articles 3 and 4 of this Agreement, or in the certificate to be delivered to
Purchaser pursuant to Section 8.2(j) of this Agreement or the Conveyances,
Purchaser acknowledges that there are no representations or warranties, express
or implied, as to the financial condition, Assets, liabilities, equity,
operations, business or prospects of the Companies, the Subsidiaries or the
Additional Assets and that in making its decision to enter into this Agreement
and to consummate the transactions contemplated hereby, Purchaser has relied
solely upon its own independent investigation, verification, analysis and
evaluation.
 
Section 5.10  Liability for Brokers’ Fees.  Sellers, and, prior to Closing, the
Companies and the Subsidiaries, shall not directly or indirectly have any
responsibility, liability or expense, as a result of undertakings or agreements
of Purchaser, for brokerage fees, finder’s fees, agent’s commissions or other
similar forms of compensation to an intermediary in connection with the
negotiation, execution or delivery of this Agreement or any agreement or
transaction contemplated hereby.
 
Section 5.11  Qualification.  Purchaser is or as of the Closing will be
qualified under applicable Laws to hold Leases, rights of way and other rights
issued by the U.S. government, and by other Governmental Authorities, which are
included in the Assets.
 
 
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ARTICLE 6.
COVENANTS OF THE PARTIES
 
Section 6.1  Access.  Upon execution of this Agreement, Sellers will give
Purchaser and its representatives access to the Assets (and to personnel and
representatives of Sellers responsible for the Assets at such periodic meetings
as Purchaser may reasonably request and arrange in advance through DEPI subject
to the consent of DEPI, which consent shall not be withheld or delayed
unreasonably) and access to and the right to copy, at Purchaser’s expense, the
Records in Sellers’ possession, for the purpose of conducting a confirmatory
review of the E&P Business and for transition planning purposes, but only to the
extent that Sellers may do so without (i) violating applicable Laws, including
the HSR Act, or (ii) violating any obligations to any third Person and to the
extent that Sellers have authority to grant such access without breaching any
restriction binding on Sellers. Sellers shall use reasonable efforts to obtain
permission for Purchaser to gain access to third-party operated Properties to
inspect the condition of same. Such access by Purchaser shall be limited to
Sellers’ normal business hours, and Purchaser’s investigation shall be conducted
in a manner that minimizes interference with the operation of the E&P Business
or the business of Sellers. Purchaser shall be entitled to conduct a Phase I or
similar environmental assessment and may conduct visual inspections, record
reviews, and interviews relating to the Properties, including their condition
and their compliance with Environmental Laws (collectively, the “Phase I
Investigation”), subject to the receipt of the necessary permission as described
above. Purchaser’s right of access shall not entitle Purchaser to operate
Equipment or conduct intrusive testing or sampling. All information obtained by
Purchaser and its representatives under this Section 6.1 shall be subject to the
terms of that certain confidentiality agreement between Dominion Resources, Inc.
and Purchaser dated December 13, 2006 (the “Confidentiality Agreement”) and any
applicable privacy laws regarding personal information.
 
Section 6.2  Notification of Breaches.  Until the Closing,
 
(a) Purchaser shall notify Sellers promptly after Purchaser obtains actual
knowledge that any representation or warranty of DEPI contained in this
Agreement is untrue in any material respect or will be untrue in any material
respect as of the Closing Date or that any covenant or agreement to be performed
or observed by Sellers prior to or on the Closing Date has not been so performed
or observed in any material respect; and
 
(b) Sellers shall notify Purchaser promptly after any Seller obtains actual
knowledge that any representation or warranty of Purchaser contained in this
Agreement is untrue in any material respect or will be untrue in any material
respect as of the Closing Date or that any covenant or agreement to be performed
or observed by Purchaser prior to or on the Closing Date has not been so
performed or observed in a material respect.
 
If any of Purchaser’s or DEPI’s representations or warranties is untrue or shall
become untrue in any material respect between the date of execution of this
Agreement and the Closing Date, or if any of Purchaser’s or Sellers’ covenants
or agreements to be performed or observed prior to or on the Closing Date shall
not have been so performed or observed in any material respect, but if such
breach of representation, warranty, covenant or agreement shall (if curable) be
cured by the
 
 
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Closing (or, if the Closing does not occur, by the date set forth in
Section 11.1), then such breach shall be considered not to have occurred for all
purposes of this Agreement.
 
Section 6.3  Press Releases.  Until the Closing, neither Sellers nor Purchaser,
nor any Affiliate of any of them, shall make any press release regarding the
existence of this Agreement, the contents hereof or the transactions
contemplated hereby without the prior written consent of the Purchaser (in the
case of announcements by Sellers or their Affiliates) or DEPI (in the case of
announcements by Purchaser or its Affiliates); provided, however, the foregoing
shall not restrict disclosures by Purchaser or Sellers or any of their
Affiliates (i) to the extent that such disclosures are required by applicable
securities or other Laws or the applicable rules of any stock exchange having
jurisdiction over the disclosing Party or its Affiliates or (ii) to Governmental
Authorities and third Persons holding preferential rights to purchase, rights of
consent or other rights that may be applicable to the transactions contemplated
by this Agreement, as reasonably necessary to provide notices, seek waivers.
amendments or terminations of such rights, or seek such consents. Sellers and
Purchaser shall each be liable for the compliance of their or its respective
Affiliates with the terms of this Section.
 
Section 6.4  Operation of Business.  Except as provided in the 2007 business and
budget plan document attached hereto as Schedule 6.4 (the “2007 Plan”), or as
may be required in connection with Sections 6.8, 6.9, 6.11, 6.12, 6.13, 6.14 and
6.16, until the Closing DEPI, DOTEPI and Reserves each shall, and the applicable
Sellers shall cause the Companies and their Wholly-Owned Subsidiaries to each,
operate its business with respect to the Assets in the ordinary course, and,
without limiting the generality of the preceding, shall:
 
(a) not transfer, sell, farmout, hypothecate, encumber or otherwise dispose of
any of the Assets, except for (A) sales and dispositions of oil and gas in the
ordinary course of business (but not including any volumetric production
payments other than as provided in Section 6.11); (B) sales and dispositions of
equipment and materials that are surplus, obsolete or replaced; (C) the sale or
other disposition of the Excluded Utah Interests and the Excluded Midcontinent
Pipeline Interests; and (D) other sales and dispositions of (in the ordinary
course of business) Assets individually or in the aggregate not exceeding Ten
Million dollars ($10,000,000); and
 
(b) where it operates Leases or Units, produce oil, gas and/or other
hydrocarbons from those Leases or Units consistent in the aggregate with the
2007 Plan, utilizing prudent oilfield practices as if Sellers were going to
continue to own the E&P Business after the Closing Date and without regard to
the existence of this Agreement, subject to the terms of the applicable Leases
and Contracts, applicable Laws and requirements of Governmental Authorities and
interruptions resulting from force majeure, mechanical breakdown and planned
maintenance;
 
(c) not terminate, materially amend, execute or extend any contracts reasonably
expected to generate gross revenues per year for the owner of the Assets or to
require expenditures per year chargeable to the owner of the Assets in excess of
Ten Million dollars ($10,000,0000), or any Material Contracts reasonably
expected to generate gross revenues per year for the owner of the Assets or to
require expenditures per year chargeable to the owner of the Assets in excess of
Five Million dollars
 
 
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 ($5,000,000), other than the execution or extension of a contract for the sale
or exchange of oil, gas and/or other hydrocarbons terminable on ninety (90) days
or shorter notice;
 
(d) maintain insurance coverage on the Assets in the amounts and of the types
currently in force;
 
(e) use commercially reasonable efforts to maintain in full force and effect all
Leases, that are capable of producing in paying quantities; and
 
(f) maintain all material governmental permits, licenses, authorizations and
approvals affecting the Assets.
 
Requests for approval of any action restricted by this Section 6.4 shall be
delivered to either of the following individuals, each of whom shall have full
authority to grant or deny such requests for approval on behalf of Purchaser:
 
Jonathan Nathanson
 
Kenneth J. Zinghini
E-Mail:  jnathanson@loews.com
 
E-Mail:  kzinghini@loews.com
Phone:  (212) 521-2135
 
Phone:  (212) 521-2953
Fax:  (212) 521-2136
 
Fax:  (212) 521-2053

 
Purchaser’s approval of any action restricted by this Section 6.4 shall not be
unreasonably withheld or delayed and shall be considered granted within ten (10)
days (unless a shorter time is reasonably required by the circumstances and such
shorter time is specified in Sellers’ notice) of Sellers’ notice to Purchaser
requesting such consent unless Purchaser notifies Sellers to the contrary during
that period. Notwithstanding the foregoing provisions of this Section 6.4, in
the event of an emergency, Sellers may take such action as reasonably necessary
and shall notify Purchaser of such action promptly thereafter.
 
Section 6.5  Conduct of the Companies and Wholly-Owned Subsidiaries.  Except as
provided in the Balance Sheets attached hereto as Schedule 4.2(g), or in the
2007 Plan, or on Schedule 6.5, or as may be required in connection with
Sections 6.8, 6.9, 6.11, 6.12, 6.13 and 6.14, until the Closing, the applicable
Sellers shall not permit any Company or Wholly-Owned Subsidiary to do any of the
following without the prior written consent of Purchaser:
 
(a) amend its charter, by-laws or equivalent governing instruments;
 
(b) issue, redeem or otherwise acquire any shares of its capital stock or issue
any option, warrant or right relating to its capital stock or any securities
convertible into or exchangeable for any shares of capital stock, declare or pay
any stock-split, or declare or pay any dividend or make any other payment or
distribution to any Seller or other Affiliate except cash and Excluded Assets;
provided, however, that capital stock may be issued in conjunction with the
capitalization of Company or Wholly-Owned Subsidiary debt pursuant to
Section 6.8, in which event such additional stock shall become part of the
Shares delivered at Closing;
 
 
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(c) incur or assume any indebtedness for borrowed money (a “Loan”) or guarantee
any such indebtedness (excluding, for the avoidance of doubt, contractual or
statutory joint and several liability obligations for joint operations, accounts
payable incurred in the ordinary course of business and indebtedness to or
guarantees for another Company or Subsidiary), which Loan or guaranty will
remain in effect after Closing;
 
(d) make an equity investment in any other Person (except investments in another
Company or Subsidiary);
 
(e) make any change in any method of accounting or accounting principles other
than those required by the Accounting Principles;
 
(f) acquire by merger or consolidation or purchase of equity interests any
corporation, partnership, association or other business organization or division
thereof;
 
(g) with respect to any Taxes for which Purchaser may have liability under
Article 9 or any item that is likely to materially affect the Tax liability of
Purchaser or any Affiliate in any Post-Closing Period, make, revoke or amend any
material Tax election, enter into any settlement of any material issue with
respect to any assessment or audit or other administrative or judicial
proceeding, or execute or consent to any waivers extending the statutory period
of limitations with respect to the collection or assessment of any material
Taxes or file or amend any material Tax Return;
 
(h) make any Loan (excluding, for the avoidance of doubt, (i) accounts
receivable in the ordinary course of business, (ii) advances or cash call
payments to the operator as required under applicable operating agreements,
(iii) advances as operator on behalf of co-owners for costs under applicable
operating agreements, (iv) Loans to another Company or Subsidiary or (v) other
loans in the ordinary course of business, such as Loans to employees for the
purchase of computers and natural gas appliances) to any Person;
 
(i) terminate or voluntarily relinquish any permit, license or other
authorization from any Governmental Authority necessary for the conduct of the
E&P Business except in the ordinary course of business;
 
(j) grant any bonus or increase in salary to any employee of any Company or
Wholly-Owned Subsidiary, except (i) as required by existing employment
contracts, plans or arrangements, (ii) normal annual adjustments and bonuses
consistent with recent practice, and (iii) any extraordinary adjustments
required for retention purposes consistent with industry practice at the time;
 
(k) establish, materially amend or terminate any Employee Plan for employees of
such Company or Wholly-Owned Subsidiary, except changes generally affecting
plans covering both employees of such Company or Wholly-Owned Subsidiary and
employees of its Affiliates, or consistent with then-current industry practice;
or
 
(l) agree to do any of the foregoing.
 
 
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Requests for approval of any action restricted by this Section 6.5 shall be
delivered to either of the following individuals, each of whom shall have full
authority to grant or deny such requests for approval on behalf of Purchaser:
 
Jonathan Nathanson
 
Kenneth J. Zinghini
 
E-Mail:
jnathanson@loews.com
 
E-Mail:
kzinghini@loews.com
 
Phone:
(212) 521-2135
 
Phone:
(212) 521-2953
 
Fax:
(212) 521-2136
 
Fax:
(212) 521-2053
 

 
Purchaser’s approval of any action restricted by this Section 6.5 shall not be
unreasonably withheld or delayed and shall be considered granted within 10 days
(unless a shorter time is reasonably required by the circumstances and such
shorter time is specified in Sellers’ notice) of Sellers’ notice to Purchaser
requesting such consent unless Purchaser notifies Sellers to the contrary during
that period.
 
Section 6.6  Indemnity Regarding Access.  Purchaser agrees to indemnify, defend
and hold harmless Sellers, its Affiliates (including until Closing the Companies
and Subsidiaries), the other owners of interests in the Properties, and all such
Persons’ directors, officers, employees, agents and representatives from and
against any and all claims, liabilities, losses, costs and expenses (including
court costs and reasonable attorneys’ fees), including claims, liabilities,
losses, costs and expenses attributable to personal injury, death, or property
damage, arising out of or relating to access to the Assets prior to the Closing
by Purchaser, its Affiliates, or its or their directors, officers, employees,
agents or representatives, even if caused in whole or in part by the negligence
(whether sole, joint or concurrent), strict liability or other legal fault of
any indemnified Person.
 
Section 6.7  Governmental Reviews.  Sellers and Purchaser shall each in a timely
manner make (or cause its applicable Affiliate to make) (i) all required
filings, including filings required under the Hart-Scott-Rodino Act, and prepare
applications to and conduct negotiations with, each Governmental Authority as to
which such filings, applications or negotiations are necessary or appropriate in
the consummation of the transactions contemplated hereby and (ii) provide such
information as the other may reasonably request in order to make such filings,
prepare such applications and conduct such negotiations. Each Party shall
cooperate with and use all reasonable efforts to assist the other with respect
to such filings, applications and negotiations. Purchaser shall bear the cost of
all filing or application fees payable to any Governmental Authority with
respect to the transactions contemplated by this Agreement, regardless of
whether Purchaser, any Seller, any Company, any Subsidiary, or any Affiliate of
any of them is required to make the payment.
 
Without limiting the generality of the preceding, prior to Closing, Purchaser
shall take all such actions as are required to qualify to hold government
Leases, rights-of-way and other rights included in the Assets and to meet any
other requirements to receive and hold such Assets. Promptly after Closing,
Purchaser and Sellers shall make all required filings with the U.S. Bureau of
Land Management, U.S. Bureau of Indian Affairs, and other Governmental
Authorities to properly assign and transfer government leases, operating rights
and right of ways and any other related Additional Assets. Purchaser shall make
all other required filings with any
 
 
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Governmental Authorities after Closing with respect to the transactions
contemplated by this Agreement, including filing all required operator
registration and change in operator, designation of operator and designation of
applicant forms, and shall send all statutorily required notices with respect to
Properties presently operated by DEPI, DOTEPI or Reserves. Purchaser shall also
arrange for all bonds, letters of credit and guarantees required with respect to
the ownership or operation of the Assets to be posted on or before Closing, to
the extent and as described in Section 13.5.
 
Section 6.8  Intercompany Indebtedness.  At or prior to Closing, Sellers and
their Affiliates (other than the Companies and Subsidiaries) shall (i) either
capitalize or cause each Company and Wholly-Owned Subsidiary to settle by cash
payment any net indebtedness of such Company or Wholly-Owned Subsidiary to
Sellers or to any other Affiliates (other than the Companies or Subsidiaries)
and (ii) repay any net indebtedness of Sellers or any such Affiliate to each
Company and Wholly-Owned Subsidiary, excluding, however, accounts payable (but
only to the extent not taken into account in increasing the Purchase Price under
Section 2.3) for the purchase of goods or services, or employment-related costs,
or other ordinary course of business expenses owing to any Affiliate with
respect to any period after the Effective Date which are subject to adjustment
pursuant to Section 2.3(h).
 
Section 6.9  Third Person Indebtedness.  At or prior to Closing, Sellers shall
have satisfied or caused the Companies and Wholly-Owned Subsidiaries to satisfy
all outstanding indebtedness owing by the Companies and Wholly-Owned
Subsidiaries pursuant to third Person Loans (and shall by such time cause all
liens and mortgages securing such indebtedness to be released pursuant to a
release that is in form and substance reasonably acceptable to Purchaser),
including Loans described on Schedule 6.9, excluding, for the avoidance of
doubt, accounts payable in the ordinary course of business and Loans from
another Company or Subsidiary.
 
Section 6.10  Operatorship.  Within thirty (30) days after execution of this
Agreement, DEPI, DOTEPI and Reserves shall each send notices (in form and
substance reasonably acceptable to Purchaser) to all co-owners of the Additional
Properties that it currently operates indicating that it is resigning as
operator contingent upon and effective at Closing, and nominating and
recommending Purchaser (or its designee) as successor operator following the
Closing. DEPI, DOTEPI and Reserves make no representation or warranty as to
Purchaser’s ability to succeed to operatorship of these Additional Properties,
but Sellers shall at the request of Purchaser use commercially reasonable
efforts to assist Purchaser (or its designee) to succeed the applicable Seller
as operator of any Wells.
 
Section 6.11  Volumetric Production Payments.  On or prior to the Effective
Date, the volumetric production payment contracts identified on Schedule 4.9
shall be purchased by Sellers or their Affiliates and replaced effective at the
end of the Effective Date with new volumetric production payments on the terms
set forth on Schedule 6.11, which volumetric production payments shall burden
the Assets at Closing.
 
Section 6.12  Hedges.  At or prior to Closing, Sellers and their Affiliates
shall eliminate or cause the Companies and Wholly-Owned Subsidiaries to
eliminate all futures, options, swaps and other derivatives, except the
Transferred Derivatives, with respect to the sale
 
 
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of production from the Assets that are currently binding on any Company or
Wholly-Owned Subsidiary or the Assets.
 
Section 6.13  Vehicles and Equipment.  At or prior to the Closing, Sellers or
Affiliates of Sellers will exercise available options under applicable lease
agreements to terminate such agreements and to purchase certain vehicles,
computers, and software leased thereunder by or on behalf of the Companies or
Wholly-Owned Subsidiaries or otherwise for use in the operation of the E&P
Business, expending up to the amount specified in Section 2.3(d), which
vehicles, computers and software shall then be included in the Assets at
Closing. At Closing, Purchaser shall reimburse Sellers for such purchase costs
and any other costs or expenses related thereto (the “Computer/Vehicle Buy-Out
Costs”), as an adjustment to the Interest Unadjusted Purchase Price in
accordance with Section 2.3(d).
 
Section 6.14  Certain Beneficial Interests. 
 
(a) Except as provided in Section 6.14(c) below, until the Closing, DEPI shall
not permit DEPI I, LP to assign, transfer, encumber or otherwise dispose of all
or any part of the DEPI Texas Beneficial Interests in the possession of DEPI I,
LP as of the date hereof, except to the extent that such assignment, transfer,
encumbrance or other disposition is made in conjunction with an assignment,
transfer, encumbrance or other disposition by DEPI of a corresponding interest
in the Additional Asset associated with such DEPI Texas Beneficial Interests
that is allowed by the terms and conditions of Sections 6.4 and 6.5.
 
(b) Except as provided in Section 6.14(c) below, until the Closing, DOTEPI shall
not permit DNG I, LP to assign, transfer, encumber or otherwise dispose of all
or any part of the DOTEPI Texas Beneficial Interests in the possession of DNG I,
LP as of the date hereof, except to the extent that such assignment, transfer,
encumbrance or other disposition is made in conjunction with an assignment,
transfer, encumbrance or other disposition by DOTEPI of a corresponding interest
in the Additional Asset associated with such DOTEPI Texas Beneficial Interests
that is allowed by the terms and conditions of Sections 6.4 and 6.5.
 
(c) Prior to the Closing, DEPI shall cause DEPI I, LP to undergo a
multi-survivor merger under which DEPI I, LP is survived by two or more limited
partnerships, each with the same ownership as DEPI I, LP, and one of which holds
the DEPI Texas Beneficial Interests (“DEPI Survivor LP”). The issued and
outstanding partnership interests of DEPI Survivor LP shall then become Shares
for all purposes of this Agreement and shall be transferred to two Delaware
limited liability companies (the “Purchaser Subs”), each of which is
wholly-owned by an Affiliate of Purchaser that is directly or indirectly
wholly-owned by Purchaser (“Purchaser Holdco”), as part of the Interests at
Closing. Prior to Closing, DOTEPI shall cause DNG I, LP to undergo a
multi-survivor merger under which DNG I, LP is survived by two or more limited
partnerships, each with the same ownership as DNG I, LP, and one of which holds
the DOTEPI Texas Beneficial Interests (“DOTEPI Survivor LP”, and, together with
DEPI Survivor LP, the “Survivor LPs”). The issued and outstanding partnership
interests of DOTEPI Survivor LP shall then become Shares for all purposes of
this Agreement and
 
 
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shall be transferred to the Purchaser Subs as part of the Interests at Closing.
DEPI shall bear and shall indemnify and hold harmless Purchaser and the
Companies and the Wholly-Owned Subsidiaries from and against all costs incurred
in connection with the multi-survivor mergers described in this Section.
 
(d) [RESERVED]
 
(e) Within 10 days following the Closing Date, Purchaser will cause each of the
Purchaser Subs to merge with and into Purchaser Holdco.
 
(f) Notwithstanding Sections 6.14(c) and 6.14(d), the Sellers may in their sole
discretion cause the Survivor LPs and Stonewater LP to sell their respective
assets directly to Purchaser Holdco in lieu of consummating the transactions
described in Sections 6.14(c) and 6.14(d). 
 
Section 6.15  Further Assurances.  After Closing, Sellers and Purchaser each
agrees to take such further actions and to execute, acknowledge and deliver all
such further documents as are reasonably requested by the other for carrying out
the purposes of this Agreement or of any document delivered pursuant to this
Agreement.
 
Section 6.16  DEPI/Purchaser Transition Services Agreement.
 
(a) Prior to Closing, Sellers and Purchaser agree to cooperate in good faith to
design and implement a mutually agreeable transition plan with respect to the
services listed on the schedules to the DEPI/Purchaser Transition Services
Agreement. Purchaser shall bear all costs of work prior to Closing with respect
to post-Closing transition of the E&P Business to Purchaser, including any costs
of performance of DEPI Services (as defined in the DEPI/Purchaser Transition
Services Agreement), on the basis set forth in Schedule 1.1 to the
DEPI/Purchaser Transition Services Agreement where applicable and, if not
otherwise described in Schedule 1.1 or this Section 6.16, shall reimburse DEPI
in an amount equal to (i) 1.7 multiplied by the Hourly Labor Costs (as defined
in the DEPI/Purchaser Transition Services Agreement) of the personnel of DEPI
and its Affiliates providing the service multiplied by the number of hours in a
relevant month such personnel spent providing such services plus (ii) all other
out-of-pocket, third party or AFE costs incurred by DEPI or its Affiliates in
providing the services described in this Section.
 
(b) Without limiting the generality of Section 6.16(a), after the date hereof,
Sellers and Purchaser shall work together to begin the activities described as
“Master Contract Services” in part (C)(3) of Schedule 1.1 to the DEPI/Purchaser
Transition Services Agreement and the activities described as “Dual Contracts
Services” in part (C)(4) of Schedule 1.1 to the DEPI/Purchaser Transition
Services Agreement. DEPI and its Affiliates shall be entitled to reimbursement
for any such work on the basis set forth in Schedule 1.1 to the DEPI/Purchaser
Transition Services Agreement.
 
(c) Subject to the priorities described in Section (B)(1)(3)(c) of Schedule 1.1
to the DEPI/Purchaser Transition Services Agreement, after the date hereof,
Sellers, Purchaser and consultants designated by Purchaser shall work together
to determine the
 
 
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information technology personnel, equipment and software that will need to be
acquired by Purchaser to replace information technology functions provided to
the E&P Business by Sellers and their Affiliates (other than the Companies and
Subsidiaries), including financial management systems, human resource systems
and IT infrastructure. Subject to the priorities described in Section
(B)(1)(3)(c) of Schedule 1.1 to the DEPI/Purchaser Transition Services
Agreement, Sellers shall, at the written instruction of Purchaser, use
commercially reasonable efforts to acquire such information technology
personnel, equipment and software for the E&P Business. Any personnel hired as
employees of Sellers pursuant to this Section shall be included among the
Company Onshore Employees to whom Purchaser or its Designated Affiliate must
offer employment under Section 10.1, but shall not count toward any minimum or
maximum numbers of employees under Section 10.1. Equipment acquired by Sellers
pursuant to this Section shall be included among the Equipment transferred at
Closing. Software acquired by Sellers pursuant to this Section shall be acquired
with a right to transfer to Purchaser or its wholly-owned Affiliate and shall be
included in the Assets transferred at Closing, notwithstanding Sections
1.1(a)(xi)(D) and 1.3. Purchaser shall bear all costs incurred in connection
with the undertakings described in this Section 6.16(c) and shall reimburse DEPI
for an amount equal to (i) 1.7 multiplied by the Hourly Labor Costs (as defined
in the DEPI/Purchaser Transition Services Agreement) of the personnel providing
the service multiplied by the number of hours in a relevant month such personnel
spent providing such services plus (ii) all costs of hiring and employing
information technology personnel who are newly hired pursuant to this Section,
which costs shall be deemed for purposes of this Section to equal the amount of
any hiring bonus, moving expense and similar hiring costs plus 1.7 times their
annual base salary, allocated pro rata to the period between the date of hiring
and Closing or termination of this Agreement plus (iii) all costs of acquiring
equipment and software pursuant to this Section plus (iv) all other
out-of-pocket, third party or AFE costs incurred by DEPI or its Affiliates in
providing the services described in this Section. 
 
(d) Purchaser shall reimburse DEPI for amounts paid by Sellers or their
Affiliates but for which Purchaser is responsible under the terms of this
Section no later than seven (7) calendar days after the Purchaser’s receipt of
an invoice from DEPI stating Purchaser’s liability therefor. The terms of
Sections 1.3 and 8.1 of the DEPI/Purchaser Transition Services Agreement shall
apply to the services performed under this Section and shall be incorporated
herein by reference as if set out herein in full.
 
Section 6.17  Dominion Resources Black Warrior Trust.  On or prior to Closing,
Purchaser shall take all actions necessary to terminate the DRI obligations
under Article X of the Trust Agreement as of Closing, in accordance with the
terms of Section 10.03 thereof and shall, as of Closing, assume the obligations
of DRI under the Administrative Services Agreement and under Article X of the
Trust Agreement. In addition, to the extent there are any continuing obligations
of DRI under the Trust Agreement, Purchaser shall, as of Closing, indemnify and
hold DRI harmless therefrom in accordance with the indemnity provisions of
Article 12.
 
 
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Section 6.18  Financial Statements.
 
(a) Sellers shall use their commercially reasonable efforts to prepare, as soon
as practicable after the date of this Agreement and at the sole cost and expense
of Purchaser, the statements of revenues and direct operating expenses for the
E&P Business for the most recent three (3) fiscal years ending prior to the
Closing Date and all notes thereto that would be required of Purchaser or any of
its Affiliates were they required to file a Form 8-K with the Securities and
Exchange Commission (the “SEC”) pursuant to the Exchange Act related to the
transactions contemplated by this Agreement (collectively, the “Statements of
Revenues and Expenses”), in such form that such statements and the notes thereto
can be audited. Sellers shall further use their commercially reasonable efforts
to prepare, no later than five (5) days prior to the Target Closing Date, the
first quarter 2007 statements of revenues and direct operating expenses for the
E&P Business that would be required for such a Form 8-K filing in such form that
such statements and the notes thereto can be audited.
 
(b) Promptly after the date of this Agreement, Sellers shall request Deloitte &
Touche LLP, Seller’s external auditor (“Deloitte”), to (i) perform an audit of
the Statements of Revenues and Expenses and to issue its opinion with respect to
the Statements of Revenues and Expenses (the Statements of Revenues and Expenses
and related audit opinions being hereinafter referred to as the “Audited
Statements of Revenue and Expenses”) and (ii) provide its written consent for
the use of its audit reports with respect to Statements of Revenues and Expenses
in reports filed by Purchaser or any of its Affiliates under the Exchange Act or
the Securities Act, as required by such Laws. Both DEPI, DRI or one of their
Affiliates and Purchaser shall sign an engagement letter for Deloitte and
provide such information as may be reasonably requested from time to time by
Deloitte. Purchaser shall bear all fees charged by Deloitte pursuant to such
engagement. Sellers and Purchaser shall reasonably cooperate in the completion
of such audit and delivery of the Audited Statements of Revenue and Expenses to
Purchaser or any of its Affiliates as soon as reasonably practicable, but no
later than five (5) days prior to the Target Closing Date, including by
providing and causing their respective officers or Affiliates to provide, such
certifications, representation letters or similar items as Deloitte shall
reasonably request in connection with its audit of the Statements of Revenue and
Expenses. Sellers shall keep Purchaser reasonably informed regarding the
progress of such audit.
 
(c) Sellers and Purchaser will cooperate with each other and use commercially
reasonable efforts to, within one hundred twenty (120) days following the
Closing Date, (i) prepare financial statements compliant with rules 3-01 and
3-12 of Regulation S-X as would be required in connection with the preparation
and filing by Purchaser of a Registration Statement on Form S-1 or otherwise in
connection with a financing or public offering of securities with respect to the
E&P Business (the “S-1 Financial Statements”), and (ii) with respect to those of
the S-1 Financial Statements which are for a full year period or as of the end
of a year, have such statements audited by Deloitte (the “Audited S-1 Financial
Statements”), including the issuance by Deloitte of its opinion with respect
thereto and its written consent for the use of its audit reports with respect to
the S-1 Financial Statements in reports filed by Purchaser or any of its
Affiliates under the
 
 
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Exchange Act or the Securities Act, as required by such Laws. Both DEPI, DRI or
one of their Affiliates and Purchaser shall sign an engagement letter for
Deloitte and provide such information as may be reasonably requested from time
to time by Deloitte. Sellers, Purchaser and their Affiliates shall (A) provide
each other and Deloitte with reasonable access to their respective records and
personnel, including in the case of Dominion, records necessary to prepare and
audit the allocations of general and administrative expenses and similar items
from Dominion’s exploration and production business as a whole to the E&P
Business, as may be reasonably required in connection with the preparation of
the S-1 Financial Statements and the audit of the Audited S-1 Financial
Statements, and (B) provide and cause their respective officers or Affiliates to
provide, such certifications, representation letters or similar items as
Deloitte shall reasonably request in connection with its audit of the Audited
S-1 Financial Statements. Purchaser will pay all costs and expenses associated
with the preparation and audit of the financial statements described in this
Section 6.18(c).
 
Purchaser shall promptly reimburse DEPI on behalf of Sellers and their
Affiliates for all internal and external expenses incurred by Sellers and their
Affiliates pursuant to this Section 6.18.
 
Section 6.19  Carlsbad Royalties; CoEnergy Contract.
 
(a) The Parties agree that all of DEPI’s, DOTEPI’s and Reserves’ right, title
and interest in overriding royalties located in San Juan and Rio Arriba
Counties, New Mexico (the “Carlsbad Royalties”) are to be transferred to
Purchaser at Closing as part of the Additional Leases. Sellers were not able to
complete the entries necessary to include the Carlsbad Royalties on Exhibit D-1
prior to the date hereof, so Sellers agree to deliver to Purchaser, within
fifteen (15) Business Days after the date hereof, a supplement to Exhibit D-1
listing all Carlsbad Royalties not already on Exhibit D-1. Such supplement shall
be deemed to be a part of Exhibit D-1 for all purposes of this Agreement and the
Carlsbad Royalties shall be Additional Leases for all purposes of this
Agreement.
 
(b) Prior to the Closing, DEI shall transfer to Dominion Midwest Energy, Inc.
all of its right, title and interest in the GISB gas sales contract between DEI
and CoEnergy Trading Company dated September 1, 1999.
 
 
ARTICLE 7.
CONDITIONS TO CLOSING
 
Section 7.1  Conditions of Sellers to Closing.  The obligations of Sellers to
consummate the transactions contemplated by this Agreement are subject, at the
option of Sellers, to the satisfaction on or prior to Closing of each of the
following conditions:
 
(a) Representations. The representations and warranties of Purchaser set forth
in Article 5 shall be true and correct in all material respects as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date;
 
 
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(b) Performance. Purchaser shall have performed and observed, in all material
respects, all covenants and agreements to be performed or observed by it under
this Agreement prior to or on the Closing Date;
 
(c) No Action. On the Closing Date, no injunction, order or award restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement, or granting substantial damages in connection
therewith, shall have been issued and remain in force, and no suit, action, or
other proceeding (excluding any such matter initiated by Sellers or any of its
Affiliates) shall be pending before any Governmental Authority or body of
competent jurisdiction seeking to enjoin or restrain or otherwise prohibit the
consummation of the transactions contemplated by this Agreement or recover
substantial damages from Sellers or any Affiliate of Sellers resulting
therefrom; and
 
(d) Governmental Consents. All material consents and approvals of any
Governmental Authority required for the transfer of the Interests from Sellers
to Purchaser as contemplated under this Agreement, except consents and approvals
of assignments by Governmental Authorities that are customarily obtained after
closing, shall have been granted, or the necessary waiting period shall have
expired, or early termination of the waiting period shall have been granted.
 
Section 7.2  Conditions of Purchaser to Closing.  The obligations of Purchaser
to consummate the transactions contemplated by this Agreement are subject, at
the option of Purchaser, to the satisfaction on or prior to Closing of each of
the following conditions:
 
(a) Representations. The representations and warranties of DEPI set forth in
Article 4 shall be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date (other than
representations and warranties that refer to a specified date, which need only
be true and correct on and as of such specified date), except for such breaches,
if any, as would not individually or in the aggregate have a Material Adverse
Effect (except to the extent such representation or warranty is qualified by its
terms by materiality, Material Adverse Effect or other similar words, such
qualification in its terms shall be inapplicable for purposes of this Section);
 
(b) Performance. Sellers shall have performed and observed, in all material
respects, all covenants and agreements to be performed or observed by them under
this Agreement prior to or on the Closing Date except, in the case of breaches
of Sections 6.4 and 6.5 and 6.10, for such breaches, if any, as would not have a
Material Adverse Effect (except to the extent such covenant or agreement is
qualified by its terms by materiality or Material Adverse Effect, such
qualification in its terms shall be inapplicable for purposes of this Section);
 
(c) No Action. On the Closing Date, no injunction, order or award restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement, or granting substantial damages in connection
therewith, shall have been issued and remain in force, and no suit, action, or
other proceeding (excluding any such matter initiated by Purchaser or any of its
Affiliates)
 
 
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shall be pending before any Governmental Authority or body of competent
jurisdiction seeking to enjoin or restrain or otherwise prohibit the
consummation of the transactions contemplated by this Agreement or recover
substantial damages from Purchaser or any Affiliate of Purchaser resulting
therefrom; and
 
(d) Governmental Consents. All material consents and approvals of any
Governmental Authority required for the transfer of the Interests from Sellers
to Purchaser as contemplated under this Agreement, except consents and approvals
of assignments by Governmental Authorities that are customarily obtained after
closing, shall have been granted or the necessary waiting period shall have
expired, or early termination of the waiting period shall have been granted.
 
 
ARTICLE 8.
CLOSING
 
Section 8.1  Time and Place of Closing.  The consummation of the purchase and
sale of the Interests contemplated by this Agreement (the “Closing”) shall,
unless otherwise agreed to in writing by Purchaser and Sellers, take place at
the offices of Baker Botts L.L.P. located at 910 Louisiana St., Houston, Texas,
at 10:00 a.m., local time, on August 2, 2007 (the “Target Closing Date”), or if
all conditions in Article 7 to be satisfied prior to Closing have not yet been
satisfied or waived, as soon thereafter as such conditions have been satisfied
or waived, subject to the provisions of Article 11. The date on which the
Closing occurs is referred to herein as the “Closing Date.”
 
Section 8.2  Obligations of Sellers at Closing.  At the Closing, upon the terms
and subject to the conditions of this Agreement, and subject to the simultaneous
performance by Purchaser of its obligations pursuant to Section 8.3, Sellers
shall deliver or cause to be delivered to Purchaser (or its Wholly-Owned
Affiliates that (i) have been designated in writing by Purchaser to DEPI at
least fifteen (15) days prior to Closing and (ii) satisfy the requirements of
Section 5.11) among other things, the following:
 
(a) Certificate(s) (or lost certificate affidavit(s)) representing the Shares,
duly endorsed (or accompanied by duly endorsed stock powers) for transfer to
Purchaser, together with instruments of assignment of the non-certificated
Shares to Purchaser, duly executed by the applicable Sellers;
 
(b) Resignations of the directors and officers of the Companies and the
Wholly-Owned Subsidiaries, effective on or before the Closing;
 
(c) Terminations of powers of attorney granted by the Companies or Wholly-Owned
Subsidiaries as may be requested in a written notice to Sellers by Purchaser
delivered at least ten (10) days prior to the Closing Date.
 
(d) Conveyances of the Additional Assets (other than the DEPI Texas Beneficial
Interests and DOTEPI Texas Beneficial Interests, which are transferred pursuant
to Section 8.2(a)) in the form attached hereto as Exhibit E (the “Conveyances”),
 
 
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duly executed by DEPI, DOTEPI or Reserves, as applicable, in sufficient
duplicate originals to allow recording in all appropriate jurisdictions and
offices;
 
(e) Assignments in form required by federal, state or tribal agencies for the
assignment of any federal, state or tribal Additional Properties, duly executed
by DEPI, DOTEPI or Reserves, as applicable, in sufficient duplicate originals to
allow recording in all appropriate offices;
 
(f) Executed certificates described in Treasury Regulation § 1.1445-2(b)(2)
certifying that each Seller is not a foreign person within the meaning of the
Code;
 
(g) Letters-in-lieu of transfer orders with respect to the Additional Properties
duly executed by DEPI, DOTEPI or Reserves, as applicable;
 
(h) Titles to the vehicles acquired pursuant to Section 6.13;
 
(i) Assignments of the personal property described on Schedule 1.4;
 
(j) A certificate duly executed by an authorized corporate officer of DEPI,
dated as of the Closing, certifying on behalf of each Seller that the conditions
set forth in Sections 7.2(a) and 7.2(b) have been fulfilled;
 
(k) A certificate duly executed by the secretary or any assistant secretary of
each Seller, dated as of the Closing, (i) attaching and certifying on behalf of
Seller complete and correct copies of (A) the certificate of incorporation and
the bylaws of Seller, each as in effect as of the Closing, (B) the resolutions
of the Board of Directors of Seller authorizing the execution, delivery, and
performance by such Seller of this Agreement and the transactions contemplated
hereby, and (C) any required approval by the stockholders of Seller of this
Agreement and the transactions contemplated hereby and (ii) certifying on behalf
of Seller the incumbency of each officer of such Seller executing this Agreement
or any document delivered in connection with the Closing;
 
(l) Where notices of approval are received by Sellers pursuant to a filing or
application under Section 6.7, copies of those notices of approval;
 
(m) Counterparts of a transition services agreement between DEPI and Purchaser
in the form attached hereto as Exhibit F (the “DEPI/Purchaser Transition
Services Agreement”), duly executed by DEPI;
 
(n) Subleases of the office space located at 16800 Greenspoint Park Drive,
Houston, Texas and 14000 Quail Springs Parkway, Oklahoma City, Oklahoma
described on Exhibit D-4, each in substantially the same form and for the same
consideration as the base lease, and for the same term, except that assignment
shall not be permitted without the prior written consent of DEPI, such consent
not to be unreasonably withheld (each, a “Sublease”), duly executed by the
applicable Seller;
 
(o) The Forms required by Section 9.9 executed by DRI; and
 
 
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(p) All other documents and instruments reasonably required from Sellers to
transfer the Interests to Purchaser.
 
Section 8.3  Obligations of Purchaser at Closing.  At the Closing, upon the
terms and subject to the conditions of this Agreement, and subject to the
simultaneous performance by Sellers of its obligations pursuant to Section 8.2,
Purchaser shall deliver or cause to be delivered to Sellers, among other things,
the following:
 
(a) A wire transfer of the Closing Payment in same-day funds;
 
(b) Conveyances, duly executed by Purchaser, in sufficient duplicate originals
to allow recording on all appropriate jurisdictions and offices;
 
(c) Assignments in form required by federal, state or tribal agencies for the
assignment of any federal, state or tribal Additional Properties, duly executed
by Purchaser, in sufficient duplicate originals to allow recording in all
appropriate offices;
 
(d) A certificate by an authorized corporate officer of Purchaser, dated as of
the Closing, certifying on behalf of Purchaser that the conditions set forth
in Sections 7.1(a) and 7.1(b) have been fulfilled;
 
(e) A certificate duly executed by the secretary or any assistant secretary of
Purchaser, dated as of the Closing, (i) attaching and certifying on behalf of
Purchaser complete and correct copies of (A) the certificate of incorporation
and the bylaws of Purchaser, each as in effect as of the Closing, (B) the
resolutions of the Board of Directors of Purchaser authorizing the execution,
delivery, and performance by Purchaser of this Agreement and the transactions
contemplated hereby, and (C) any required approval by the stockholders of
Purchaser of this Agreement and the transactions contemplated hereby and
(ii) certifying on behalf of Purchaser the incumbency of each officer of
Purchaser executing this Agreement or any document delivered in connection with
the Closing;
 
(f) Where notices of approval are received by Purchaser pursuant to a filing or
application under Section 6.7, copies of those notices of approval;
 
(g) Evidence of replacement bonds, guarantees, and letters of credit, pursuant
to Section 13.5; and
 
(h) Counterparts of the DEPI/Purchaser Transition Services Agreement, duly
executed by Purchaser; and
 
(i) Each Sublease, duly executed by Purchaser.
 
Section 8.4  Closing Payment and Post-Closing Purchase Price Adjustments.
 
(a) Not later than five (5) Business Days prior to the Closing Date, Sellers
shall prepare and deliver to Purchaser, using and based upon the best
information
 
 
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available to Sellers, a preliminary settlement statement estimating the Interest
Purchase Price for the Interests and showing the portions thereof to which each
Seller is entitled after giving effect to all adjustments set forth in
Section 2.3. Purchaser shall have the opportunity to review and discuss such
statement with Sellers. The estimates delivered in accordance with this
Section 8.4(a) shall constitute the collective dollar amount to be payable by
Purchaser to Sellers at the Closing (the “Closing Payment”).
 
(b) As soon as reasonably practicable after the Closing but not later than the
later of (i) the one hundred and twentieth (120th) day following the Closing
Date and (ii) the date on which the parties or the Title Arbitrator, as
applicable, finally determines all Title Defect Amounts and Title Benefit
Amounts under Section 3.5(i), Sellers shall prepare and deliver to Purchaser a
draft statement setting forth the final calculation of the Interest Purchase
Prices and showing the calculation of each adjustment under Section 2.3, based
on the most recent actual figures for each adjustment. Sellers shall at
Purchaser’s request make reasonable documentation available to Purchaser and its
representatives to support the final figures (including supporting schedules,
analyses, workpapers and underlying records and documentation as are reasonably
necessary or helpful in Purchaser’s review of such statement). Sellers shall
reasonably cooperate with Purchaser and its representatives in such examination.
As soon as reasonably practicable but not later than the sixtieth (60th) day
following receipt of Sellers’ statement hereunder, Purchaser shall deliver to
DEPI a written report containing any changes that Purchaser proposes be made in
such statement. Sellers may deliver a written report to Purchaser during this
same period reflecting any changes that Sellers propose to be made in such
statement as a result of additional information received after the statement was
prepared. The Parties shall undertake to agree on the final statement of the
Purchase Price no later than ninety (90) days after delivery of Seller’s
statement. In the event that the Parties cannot reach agreement within such
period of time, any Party may refer the items of adjustment which are in dispute
to PricewaterhouseCoopers or another nationally-recognized independent
accounting firm or consulting firm mutually acceptable to Purchaser and Sellers
(the “Accounting Arbitrator”), for review and final determination by
arbitration. Should PricewaterhouseCoopers fail or refuse to agree to serve as
Accounting Arbitrator within twenty (20) days after written request from any
Party to serve, and the Parties fail to agree in writing on a replacement
Accounting Arbitrator within ten (10) days after the end of that twenty (20) day
period, or should no replacement Accounting Arbitrator agree to serve within
forty-five (45) days after the original written request pursuant to this
sentence, the Accounting Arbitrator shall be appointed by the Houston office of
the American Arbitration Association. The Accounting Arbitrator shall conduct
the arbitration proceedings in Houston, Texas in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, to the extent such
rules do not conflict with the terms of this Section. The Accounting
Arbitrator’s determination shall be made within forty-five (45) days after
submission of the matters in dispute and shall be final and binding on all
Parties, without right of appeal. In determining the proper amount of any
adjustment to the Purchase Price, the Accounting Arbitrator shall be bound by
the terms of Section 2.3 and may not increase the Purchase Price more than the
increase proposed by Sellers nor decrease the Purchase Price more than the
decrease proposed by Purchaser, as applicable. The Accounting Arbitrator shall
act as an expert for the limited purpose of determining the
 
 
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specific disputed aspects of Purchase Price adjustments submitted by any Party
and may not award damages, interest (except as expressly provided for in this
Section) or penalties to any Party with respect to any matter. Each Seller and
Purchaser shall bear its own legal fees and other costs of presenting its case.
DEPI shall bear one-half and Purchaser shall bear one-half of the costs and
expenses of the Accounting Arbitrator. Within ten (10) days after the earlier of
(i) the expiration of Purchaser’s sixty (60) day review period without delivery
of any written report by Purchaser or (ii) the date on which the Parties or the
Accounting Arbitrator finally determine the Interest Purchase Prices,
(x) Purchaser shall pay to DEPI on behalf of each Seller the amount by which the
portion of any Interest Purchase Price(s) to which that Seller is entitled
exceeds the portion of the Closing Payment received by that Seller or (y) DEPI
on behalf of each Seller shall pay to Purchaser the amount by which the portion
of the Closing Payment received by that Seller exceeds portion of the any
Interest Purchase Price(s) to which that Seller is entitled, as applicable. Any
post-Closing payment pursuant to this Section 8.4 shall bear interest from the
Closing Date to the date of payment at the Agreed Rate.
 
(c) Purchaser shall assist Sellers in preparation of the final statement of the
Interest Purchase Prices under Section 8.4(b) by furnishing invoices, receipts,
reasonable access to personnel and such other assistance as may be requested by
Seller to facilitate such process post-Closing.
 
(d) All payments made or to be made under this Agreement to Sellers shall be
made by electronic transfer of immediately available funds to Consolidated
Natural Gas Company, acting as representative of Sellers, at the account set
forth on Schedule 8.4(d), for the credit of the applicable Sellers, or to such
other bank and account as may be specified by Sellers in writing. All payments
made or to be made hereunder to Purchaser shall be by electronic transfer or
immediately available funds to a bank and account specified by Purchaser in
writing to Sellers, for the credit of Purchaser.
 
 
ARTICLE 9.
TAX MATTERS
 
Section 9.1  Liability for Taxes. 
 
(a) Taxes with Respect to Additional Assets. Sellers shall be responsible for
filing any Tax Return (as defined in Section 9.2(a)) with respect to Taxes
attributable to the Additional Assets for a taxable period ending on or prior to
the Closing Date, and, except with respect to Sellers’ income, franchise or
other Tax Returns required to be filed by Sellers, Purchaser shall be
responsible for filing any other Tax Return with respect to the Additional
Assets. Subject to Section 9.1(e) and Section 9.1(f), from and after Closing,
DEPI shall be liable for, and shall indemnify and hold harmless the Purchaser
Group (as defined in Section 12.2(b)) and the Companies and Wholly-Owned
Subsidiaries from and against all Taxes and Tax Expenses with respect to the
Additional Assets attributable to any taxable period ending on or prior to the
Closing Date, including income Taxes arising as a result of any Seller’s gain on
the sale of the Additional Assets as contemplated by this Agreement. From and
after Closing, Purchaser shall be liable
 
 
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for, and shall indemnify and hold harmless each Seller and its Affiliates from
and against, all such Taxes and Tax Expenses attributable to any taxable period
beginning after the Closing Date and shall reimburse Sellers or their Affiliates
for any such money paid by Sellers or their Affiliates with respect to such
Taxes no later than seven (7) calendar days after the Purchaser’s receipt of
notice and supporting work papers from DEPI of Purchaser’s liability therefor.
If a taxable period includes the Closing Date, any Taxes with respect to the
Additional Assets allocable to the Pre-Closing Period (as defined in
Section 9.1(b) and determined as described in Section 9.1(d)) shall be the
liability of DEPI and any other Taxes with respect to the Additional Assets
shall be the liability of Purchaser.
 
(b) Pre-Closing Taxes of Companies and Subsidiaries. Subject to Sections 9.1(e)
and 9.1(f), from and after Closing, DEPI shall be liable for, and shall
indemnify and hold harmless Purchaser and the Companies and Wholly-Owned
Subsidiaries from and against, any Taxes and Tax Expenses imposed on or incurred
by any Wholly-Owned Subsidiary or any Subsidiary which is not a Wholly-Owned
Subsidiary to the extent of each Seller’s allocable share of such Subsidiary
immediately prior to Closing and attributable to any taxable period ending on or
prior to the Closing Date, and the portion, determined as described in
Section 9.1(d), of any such Taxes for any taxable period beginning on or prior
to the Closing Date and ending after the Closing Date which is allocable to the
portion of such period occurring on or prior to the Closing Date (the
“Pre-Closing Period”).
 
(c) Post-Closing Taxes of Companies and Subsidiaries. From and after Closing,
Purchaser shall be liable for, and shall indemnify and hold harmless each Seller
and its Affiliates from and against, any Taxes and Tax Expenses imposed on or
incurred by a Company or Wholly-Owned Subsidiary or any Subsidiary which is not
a Wholly-Owned Subsidiary to the extent of each Seller’s allocable share of such
Subsidiary immediately prior to Closing and attributable to any taxable period
beginning after the Closing Date, and the portion, determined as described in
Section 9.1(d), of any such Taxes for any taxable period beginning on or prior
to the Closing Date and ending after the Closing Date which is allocable to the
portion of such period occurring after the Closing Date (the “Post-Closing
Period”). 
 
(d) Straddle Period Taxes. Whenever it is necessary for purposes of this
Agreement to determine the portion of any Taxes or earnings and profits of or
with respect to any Company or Subsidiary for a taxable period beginning on or
prior to and ending after the Closing Date which is allocable to the Pre-Closing
Period or the Post-Closing Period, (i) in the case of a Company or Wholly-Owned
Subsidiary, the determination shall be made as if such Company or Wholly-Owned
Subsidiary was not a member of its respective Seller’s consolidated, affiliated,
combined or unitary group for Tax purposes, and, (ii) any Taxes allocable to the
Pre-Closing Period that are based on or related to income, gains or receipts
will be computed (by an interim closing of the books) as if such taxable period
ended as of the end of the Closing Date and any other Pre-Closing Period Taxes
(except production Taxes and other Taxes measured by units of production, and
severance Taxes) will be prorated based upon the number of days in the
applicable period falling on or before, or after, the Closing Date. To the
extent necessary,
 
 
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a Seller shall estimate Taxes based on the Seller’s liability for Taxes with
respect to the same or similar Tax Item (as defined in Section 9.2(a)) in the
immediately preceding year. Notwithstanding anything to the contrary herein,
(i) any franchise Tax paid or payable with respect to each Company or Subsidiary
shall be allocated to the taxable period during which the income, operations,
assets or capital comprising the base of such Tax is measured, regardless of
whether the right to do business for another taxable period is obtained by the
payment of such franchise Tax and (ii) any ad valorem or property Taxes paid or
payable with respect to the Assets shall be allocated to the taxable period
applicable to the ownership of the Assets regardless of when such Taxes are
assessed. Sellers shall, within 60 days after the determination of the Purchase
Price under Section 8.4(b), prepare for Purchaser’s review a pro forma Tax
Return for any taxable period beginning on or before, but ending after, the
Closing Date, that shall include, pursuant to the method described in this
Section 9.1(d), the income Tax liability associated with the Companies for the
period beginning on the first day of such taxable period and ending on the
Closing Date. Such pro forma Tax Return shall be used by Purchaser to prepare a
Tax Return for such taxable period.
 
(e) Period After Effective Date. Notwithstanding anything to the contrary in
this Agreement, in the event Closing occurs after the Effective Date, from and
after Closing, Purchaser shall be liable for, and shall indemnify and hold
harmless each Seller and its Affiliates from and against, any Taxes for which
Purchaser would have been liable had the Closing Date occurred on the Effective
Date (excluding production Taxes and other Taxes measured by units of
production, and severance Taxes) that are allocable to the period from but
excluding the Effective Date to and including the Closing Date, and shall
reimburse any such Seller or Affiliate for any such amount paid by it (or paid
prior to Closing by any Company or Subsidiary) no later than 7 calendar days
after the Purchaser’s receipt of notice and supporting work papers from DEPI of
Purchaser’s liability therefor; provided, however, that, except as provided in
Section 13.3, Purchaser shall be indemnified by Sellers against, and shall not
be obligated under this Section 9.1(e) for, any Taxes attributable to (i) a
Seller’s gain on the sale of Interests, (ii) a Company’s or Subsidiary’s
transfer of Excluded Assets or transactions designed to achieve that purpose
pursuant to Section 1.3 or the multi-survivor mergers and transfer of Equity
Interests in the Survivor LPs pursuant to Section 6.14 hereof, (iii) the period
prior to and through the Closing Date imposed or asserted pursuant to Treasury
Regulations section 1.1502-6 or any analogous or similar state, local or foreign
law or regulation, and (iv) the Section 338(h)(10) elections (as defined in
Section 9.9) as contemplated by this Agreement. The amount of Taxes allocable to
the time period described in the previous sentence will be determined in a
manner similar to and consistent with the determination of Pre-Closing Period
Taxes under Section 9.1(d).
 
(f) Production Taxes. Notwithstanding anything to the contrary in this
Agreement, production Taxes and other Taxes measured by units of production, and
severance Taxes, shall not be subject to Section 9.1 to the extent
responsibility therefor and payment thereof is addressed by Sections 1.3(xv),
2.3, 2.4 and 8.4.
 
(g) Indemnity Regarding Basis Step-Ups. Sellers agree to indemnify, defend and
hold harmless Purchaser and its Affiliates (including following Closing, the
 
 
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Companies and Subsidiaries) from and against any and all Taxes, claims,
liabilities, losses, costs, fees, and expenses (i) arising from any breach of
the representation or warranty set forth in Section 4.5(e) or (ii) resulting
from the failure of the Purchaser Holdco immediately following the merger of the
Purchaser Subs into Purchaser Holdco to have a Tax basis in the assets held by
the Survivor LPs and in the assets held by Stonewater LP for all applicable Tax
purposes equal to the Tax basis that Purchaser Holdco would have obtained if
Sellers had elected to effect the transaction pursuant to Section 6.14(f) unless
such lower Tax basis arises from any act or omission of Purchaser, Purchaser
Holdco, or its Affiliates, including the failure of Purchaser to cause the
Purchaser Subs to timely merge with and into Purchaser Holdco as contemplated by
Section 6.14(e).
 
Section 9.2  Preparation and Filing of Company Tax Returns. 
 
(a) With respect to each Tax return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof (a “Tax Return”) that is
required to be filed for, by or with respect to a Company or Wholly-Owned
Subsidiary with respect to a taxable period ending on or before the Closing
Date, the Sellers shall cause such Tax Return to be prepared in accordance with
applicable Laws, shall cause to be included in such Tax Return all items of
income, gain, loss, deduction and credit or other items (collectively “Tax
Items”) required to be included therein and shall cause the Company or
Wholly-Owned Subsidiary to timely file (assuming it has authority to do so) such
Tax Return with the appropriate Governmental Authority and shall timely pay the
amount of Taxes shown to be due on such Tax Return.
 
(b) With respect to each Tax Return that is required to be filed by a Company or
Wholly-Owned Subsidiary with respect to a taxable period beginning on or before
and ending after the Closing Date, Purchaser shall cause such Tax Return to be
prepared in accordance with applicable Laws, shall cause to be included in such
Tax Return all Tax Items required to be included therein, and shall cause each
Company or Wholly-Owned Subsidiary to file timely such Tax Return with the
appropriate Governmental Authority and shall pay timely the amount of Taxes
shown to be due on such Tax Return.
 
(c) Except with respect to a federal income Tax Return, any Tax Return to be
prepared pursuant to the provisions of this Article shall be prepared in a
manner consistent with practices followed in prior years with respect to similar
Tax Returns, except for changes required by changes in Law, unless, in the
opinion of a partner of a nationally recognized law firm retained by a Party,
complying with the terms of this paragraph would more likely than not result in
noncompliance with applicable provisions of the Code or state, local or foreign
Law.
 
(d) If either (i) DEPI or Purchaser may be liable for any material portion of
the Tax payable in connection with any Tax Return to be filed or caused to be
filed by the other (or, in the case of Purchaser, by any Seller) (or any Tax
Item reported on such Tax Return is likely to materially affect the Tax
liability of such Party) or (ii) in any case with respect to any taxable period
beginning on or before but ending after the Closing Date,
 
 
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the Party responsible under this Agreement for filing such return or causing
such return to be filed (the “Tax Return Preparer”) shall prepare and deliver to
the other Party (the “Tax Payor”) a copy of such return and any schedules, work
papers and other documentation then available that are relevant to the
preparation of the portion of such return for which the Tax Payor is or may be
liable under this Agreement not later than forty-five (45) days before the date
on which the Tax Return is due to be filed (taking into account any valid
extensions) (the “Due Date”). The Tax Return Preparer shall not file such return
or cause such return to be filed until the earlier of either the receipt of
written notice from the Tax Payor indicating the Tax Payor’s consent thereto, or
the Due Date. The Tax Payor shall have the option of providing to the Tax Return
Preparer, at any time at least fifteen (15) days prior to the Due Date, written
instructions as to how the Tax Payor wants any, or all, of the items for which
it may be liable (or any item that is likely to affect the Tax liability of such
party) reflected on such Tax Return. The Tax Return Preparer shall, in preparing
such return, but subject to Section 9.2(c), cause the items for which the Tax
Payor is liable under this Agreement to be reflected in accordance with the Tax
Payor’s instructions (unless, in the opinion of a partner of a nationally
recognized law firm retained by the Tax Return Preparer, complying with the Tax
Payor’s instructions would more likely than not result in noncompliance with
applicable provisions of the Code or state, local or foreign Law) and, in the
absence of having received such instructions, in accordance with Section 9.2(c).
 
Section 9.3  Allocation Arrangements.  Effective as of the Closing, any tax
indemnity, sharing, allocation or similar agreement or arrangement (a “Tax
Sharing Agreement”) that may be in effect prior to the Closing Date between or
among, a Company or Wholly-Owned Subsidiary, on the one hand, and its Seller or
any of its Affiliates (other than the Companies and Wholly-Owned Subsidiaries),
on the other hand, shall be extinguished in full as the Tax Sharing Agreement
relates to such Company or Wholly-Owned Subsidiary, and any liabilities or
rights existing under any such agreement or arrangement by or with respect to a
Company or Wholly-Owned Subsidiary shall cease to exist and shall no longer be
enforceable. The Companies and the Wholly-Owned Subsidiaries shall not have any
obligation under any Tax Sharing Agreement with respect to Taxes attributable to
the period after the Effective Date.
 
Section 9.4  Access to Information. 
 
(a) From and after Closing, each Seller shall grant to Purchaser (or its
designees) access at all reasonable times to all of the information, books and
records relating to a Company or Subsidiary within the possession of the Seller
(including without limitation work papers and correspondence with taxing
authorities, but excluding work product of and attorney-client communications
with any of Sellers’ legal counsel and personnel files), and shall afford
Purchaser (or its designees) the right (at Purchaser’s expense) to take extracts
therefrom and to make copies thereof, to the extent reasonably necessary to
permit Purchaser (or its designees) to prepare Tax Returns, to conduct
negotiations with Tax authorities, and to implement the provisions of, or to
investigate or defend any claims between the Parties arising under, this
Agreement.
 
(b) From and after Closing, Purchaser shall grant to Sellers (or Sellers’
designees) access at all reasonable times to all of the information, books and
records
 
 
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relating to the Companies or Subsidiaries within the possession of Purchaser or
the Companies or Wholly-Owned Subsidiaries (including without limitation work
papers and correspondence with taxing authorities, but excluding work product of
and attorney-client communications with any of Purchaser’s legal counsel and
personnel files), and shall afford Sellers (or Sellers’ designees) the right (at
Sellers’ expense) to take extracts therefrom and to make copies thereof, to the
extent reasonably necessary to permit Sellers (or Sellers’ designees) to prepare
Tax Returns, to conduct negotiations with Tax authorities, and to implement the
provisions of, or to investigate or defend any claims between the Parties
arising under, this Agreement.
 
(c) Each of the Parties hereto will preserve and retain all schedules, work
papers and other documents within the possession of the Seller relating to any
Tax Returns of or with respect to Taxes of the Companies or Subsidiaries or to
any claims, audits or other proceedings affecting the Companies or Subsidiaries
until the expiration of the statute of limitations (including extensions)
applicable to the taxable period to which such documents relate or until the
final determination of any controversy with respect to such taxable period, and
until the final determination of any payments that may be required with respect
to such taxable period under this Agreement.
 
(d) At either Purchaser’s or Sellers’ request, the other Party shall provide
reasonable access to Purchaser’s or Sellers’, as the case may be, and their
respective Affiliates’ (including the Companies’ and Wholly-Owned Subsidiaries’)
personnel who have knowledge of the information described in this Section 9.4.
 
Section 9.5  Contest Provisions. 
 
(a) Each of Purchaser, on the one hand, and Sellers, on the other hand (the “Tax
Indemnified Person”), shall notify the chief tax officer (or other appropriate
person) of DEPI or Purchaser, as the case may be (the “Tax Indemnifying
Person”), in writing within twenty (20) days of receipt by the Tax Indemnified
Person of written notice of any pending or threatened audits, adjustments,
claims, examinations, assessments or other proceedings (a “Tax Audit”) which are
likely to affect the liability for Taxes of such other party. If the Tax
Indemnified Person fails to give such timely notice to the other party, it shall
not be entitled to indemnification for any Taxes arising in connection with such
Tax Audit if such failure to give notice materially adversely affects the other
party’s right to participate in the Tax Audit.
 
(b) If such Tax Audit relates to any taxable period, or portion thereof, ending
on or before the Closing Date or for any Taxes for which only DEPI would be
liable to indemnify Purchaser under this Agreement, DEPI shall have the option,
at its expense, to control the defense and settlement of such Tax Audit. If DEPI
does not elect to control the defense and settlement of such Tax Audit,
Purchaser may, at Purchaser’s expense, control the defense and settlement of
such Tax Audit, provided that DEPI shall pay any Tax for which it is otherwise
liable under this Article 9. If such Tax Audit relates solely to any taxable
period, or portion thereof, beginning after the Closing Date or for any Taxes
for which only Purchaser would be liable under this Agreement, Purchaser shall,
at its expense, control the defense and settlement of such Tax Audit.
 
 
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(c) If such Tax Audit relates to Taxes for which both DEPI and Purchaser could
be liable under this Agreement, to the extent practicable, such Tax Items will
be distinguished and each Party will have the option to control the defense and
settlement of those Taxes for which it is so liable. If such Tax Audit relates
to a taxable period, or portion thereof, beginning on or before and ending after
the Closing Date and any Tax Item cannot be identified as being a liability of
only one party or cannot be separated from a Tax Item for which the other party
is liable, DEPI, at its expense, shall have the option to control the defense
and settlement of the Tax Audit, provided that such party defends the items as
reported on the relevant Tax Return and provided further that no such matter
shall be settled without the written consent of both parties, not to be
unreasonably withheld. If DEPI does not elect to control the defense and
settlement of such Tax Audit, Purchaser may, at Purchaser’s expense, control the
defense and settlement of such Tax Audit, provided that DEPI shall pay any Tax
for which it is otherwise liable under this Article 9.
 
(d) Any party whose liability for Taxes may be affected by a Tax Audit shall be
entitled to participate at its expense in such defense and to employ counsel of
its choice at its expense and shall have the right to consent to any settlement
of such Tax Audit (not to be unreasonably withheld) to the extent that such
settlement would have an adverse effect with respect to a period for which that
party is liable for Taxes, under this Agreement or otherwise.
 
Section 9.6  Post-Closing Actions Which Affect Seller’s Tax Liability.  Except
with respect to federal income Taxes, Purchaser shall not and shall not permit
its Affiliates, including the Companies and Wholly-Owned Subsidiaries, to take
any action on or after the Closing Date which could reasonably be expected to
materially increase any Seller’s liability for Taxes (including any liability of
DEPI to indemnify Purchaser for Taxes under this Agreement). Except to the
extent required by applicable Laws, Purchaser shall not and shall not permit its
Affiliates, including the Companies and Wholly-Owned Subsidiaries, to amend any
Tax Return with respect to a taxable period for which DEPI may be liable to
indemnify Purchaser for Taxes under Section 9.1.
 
Section 9.7  Refunds. 
 
(a) Purchaser agrees to pay to DEPI any refund received (whether by payment,
credit, offset or otherwise, and together with any interest thereon) after the
Closing by Purchaser or its Affiliates, net of any Taxes imposed thereon,
including the Companies and Wholly-Owned Subsidiaries, in respect of any Taxes
for which DEPI is liable or required to indemnify Purchaser under Section 9.1.
Purchaser shall provide reasonable cooperation to DEPI and DEPI’s Affiliates at
their expense in order to take all necessary steps to claim any such refund. Any
such refund received by Purchaser or its Affiliates or the Companies or
Wholly-Owned Subsidiaries shall be paid to DEPI, net of any Taxes imposed
thereon, within thirty (30) days after such refund is received. Purchaser agrees
to notify DEPI within ten (10) days following the discovery of a right to claim
any such refund if such refund is material and upon receipt of any such refund.
Purchaser agrees to claim any such refund as soon as possible after the
discovery of a
 
 
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right to claim a refund and to furnish to DEPI all information, records and
assistance necessary to verify the amount of the refund or overpayment.
 
(b) Purchaser shall not make, and shall not cause any Company or Wholly-Owned
Subsidiary to file any carryback claims with respect to any Tax Item of such
Company or Wholly-Owned Subsidiary arising in any taxable period beginning after
the Closing Date with respect to a period prior to the Closing Date.
 
Section 9.8  Conflict.  In the event of a conflict between the provisions of
this Article 9 and any other provision of this Agreement, except Section 13.3
hereof, this Article 9 shall control.
 
Section 9.9  Election Under Section 338(h)(10).  Sellers and Purchaser agree
that they shall make a joint election under Section 338(h)(10) of the Code and
under any comparable provisions of state or local law with respect to the
purchase of the Interests (other than Interests in any Company or Subsidiary
that is not a member of a selling consolidated group within the meaning of
Treasury Regulations § 1.338(h)(10)-1(b)(2)) (the “Section 338(h)(10)
Elections”. To facilitate such elections, at the Closing Purchaser shall deliver
to DEPI on behalf of Sellers Internal Revenue Service Forms 8023 and any similar
forms under applicable state, local or foreign income Tax law (the “Forms”) with
respect to Purchaser’s purchase of the Interests, which Forms shall be duly
executed by an authorized person for Sellers. Purchaser shall cause the Forms to
be duly executed by an authorized person for Purchaser, shall provide a copy of
the executed Forms to Seller, and shall duly and timely file the Forms as
prescribed by Treasury Regulation 1.338(h)(10)-1 or the corresponding provisions
of applicable state, local or foreign income Tax law. The Parties agree that the
Purchase Price and the liabilities of the relevant Company and Subsidiaries
(plus other relevant items) will be reported on Forms 8883 and otherwise for
income Tax purposes, consistent with the Purchase Price Allocation as determined
under Section 2.2. Except to the extent required by applicable Law, neither
Sellers nor Purchaser shall take any action inconsistent with, or fail to take
any action necessary for, the validity of the elections described in this
Section 9.9.
 
Section 9.10  Section 754 Election.  Each Seller shall obtain any consents
required to facilitate the elections under Section 754 of the Code described in
Section 4.5(e).
 
 
ARTICLE 10.
U.S. EMPLOYMENT MATTERS
 
Section 10.1  Employees.
 
(a) “Company Onshore Employees” shall mean all those individuals other than
Excluded Employees (i) who are either Designated Employees or Selected Employees
and (ii) who accept an offer of employment or continued employment with
whichever of Purchaser or its Affiliates is designated by Purchaser in its sole
discretion to make the offer of employment or continued employment (“Designated
Affiliates”) pursuant to Section 10.2.
 
 
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(b) “Designated Employees” are those individuals (i) who, as of the Closing Date
are (x) employed by DEPI, DOTEPI, Reserves, the Companies or Wholly-Owned
Subsidiaries and are rendering services primarily with respect to the Assets or
(y) employed by Dominion Resources Services, Inc. and are rendering services
primarily with respect to the Assets or (z) employed pursuant to the college
recruiting program of the Companies or their Affiliates with respect to the
Assets and (ii) who are not U.S. Temporary Employees. Seller shall provide
Purchaser and its Designated Affiliates not later than ten (10) days after the
execution of this Agreement a list of Designated Employees to whom Purchaser or
its Designated Affiliates must offer employment or continued employment in
accordance with Section 10.2(a). In no event shall the number of employees on
the list exceed three hundred thirty (330) unless Purchaser approves a higher
number in writing.
 
(c) “Selected Employees” are no fewer than 270 individuals (i) who, as of the
Closing Date are (x) employed by DEPI, DOTEPI, Reserves, the Companies or
Wholly-Owned Subsidiaries and are rendering services with respect to the Assets
or (y) employed by Dominion Resources Services, Inc. and are rendering services
with respect to the Assets, (ii) who are not U.S. Temporary Employees and (iii)
who are selected by the Leadership Team acting as agents for Purchaser and its
Affiliates from a list provided to Purchaser and its Affiliates not later than
fourteen (14) days after the execution of this Agreement as individuals to whom
Purchaser or its Designated Affiliates must offer employment or continued
employment in accordance with Section 10.2(a). The Leadership Team shall have
until the date that is no later than thirty (30) days after the date the list of
Selected Employees is provided to Purchaser and its Affiliates to designate and
notify Sellers or their delegate which of the Selected Employees will receive
offers in accordance with Section 10.2(a).
 
(d) From the date hereof through a date eighteen (18) months from the Closing
Date, none of Purchaser, its Designated Affiliates, its wholly-owned Affiliates
designated to receive Conveyances pursuant to Section 8.2, or any of its other
Affiliates which have assisted Purchaser with or otherwise participated in the
transactions that are the subject of this Agreement will, directly or
indirectly, solicit (provided that in no event will general advertising be
deemed solicitation for purposes of this Section 10.1(d)), or offer employment
to any employee of any of Sellers or their Affiliates other than the Designated
Employees listed pursuant to Section 10.2(b) and the Selected Employees listed
pursuant to Section 10.1(c) without the prior written consent of DEPI. From the
date hereof through a date eighteen (18) months from the Closing Date, neither
Sellers nor any of their Affiliates engaged in the exploration and production
business will, directly or indirectly, solicit or offer employment to any
Company Onshore Employee without the prior written consent of Purchaser.
 
(e) Individuals who are otherwise Company Onshore Employees but who on the
Closing Date are not actively at work due to a leave of absence covered by the
Family and Medical Leave Act of 1993, or due to any other authorized leave of
absence, shall nevertheless be treated as Company Onshore Employees; provided,
however, that an individual shall not be considered a Company Onshore Employee
if such individual as of
 
 
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the Closing Date is receiving benefits under the Dominion Resources, Inc.
Long-Term Disability Plan.
 
(f) The Parties acknowledge that Purchaser intends to identify a leadership
team, composed of employees of Sellers or their Affiliates (the “Leadership
Team”), that will act as agents on behalf of Purchaser and its Affiliates with
regard to the selection, staffing and hiring of Selected Employees. Purchaser
shall indemnify, defend and hold harmless Sellers, their current and former
Affiliates and the respective officers, directors, employees and agents of each
of them (including the members of the Leadership Team) (“Seller Employment
Indemnified Persons”) from and against all liability, loss, cost, expense,
claim, award, damage, fine, fee, penalty, interest, deficiency, or judgment,
including court costs and fees and expenses of attorneys, incurred or suffered
by any Seller Employment Indemnified Person resulting from, arising out of, or
related to or in connection with any of the Leadership Team’s, Purchaser’s, its
Affiliates’, Sellers’, their Affiliates’ or any of their employees’ or agents’
acts or omissions related to the selection of the Selected Employees or
Purchaser’s staffing and hiring process for Selected Employees, even if such
liability is caused in whole or in part by the negligence (whether sole, joint
or concurrent), strict liability or other legal fault of any Seller Employment
Indemnified Person.
 
Section 10.2  Continued Employment.
 
(a) Purchaser and its Designated Affiliates shall cause the Purchaser or its
Affiliate who is the employer of each Company Onshore Employee to employ or
continue the employment of such Company Onshore Employee, in the case of a
Designated Employee, effective as of the Closing Date, and in the case of a
Selected Employee, effective as of the date on or after the Closing Date
designated by DEPI (which shall be no later than the date on which the Selected
Employee ceases to perform transition services in connection with sales by
Sellers and their Affiliates of assets and companies pursuant to DRI’s sales
process that commenced in the fall of 2006 and was announced pursuant to a press
release dated November 1, 2006, including services pursuant to the
DEPI/Purchaser Transition Service Agreement and services with respect to sales
involving the Excluded Onshore Areas and the Offshore Package Areas), during the
Comparability Period (i) at levels of total compensation (base pay and payroll
practices) and benefits, including the amounts provided under Section 10.11,
that are comparable, in the aggregate to the levels of total compensation (base
pay and payroll practices) and benefits as noted under the Plans and Programs on
Schedule 4.2(j)(i) in effect as of the Closing Date and (ii) at a work location
no more than 50 miles from the individual’s work location as of the Closing
Date. “Comparability Period” shall mean (y) with respect to Company Onshore
Employees who are Designated Employees, the twelve (12) month period beginning
on the Closing Date and (z) with respect to each Company Onshore Employees who
is a Selected Employee, the twelve (12) month period following the date such
employee becomes an employee of Purchaser or its Affiliates. In determining
comparability for the Comparability Period, in no event will the base pay and
annual incentive bonus opportunity for each such employee be less than his or
her base pay and annual incentive bonus opportunity with Seller as of the
Closing Date. In determining comparability, any long term incentive opportunity,
retention plans or
 
 
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retention programs, Six Sigma and Spot Cash Programs listed on Part II of
Schedule 4.2(j)(i), Equity-Based Programs listed on Part III of
Schedule 4.2(j)(i) and amounts paid or payable from the Success Pool listed on
Part V of Schedule 4.2(j)(i) shall be excluded. Purchaser and its Designated
Affiliates will provide to each Company Onshore Employee during the
Comparability Period coverage and benefits under plans substantially identical
(or providing equal or greater value in the aggregate) to the Company’s U.S.
Benefit Plans set out in Section 1 of Schedule 4.2(j)(i), except for Salaried
Employees’ Pension Plan, Retiree Medical Plan and Retiree Life Insurance Plan
which Purchaser has no obligation to provide.
 
(b) Purchaser and its Designated Affiliates may offer to employ or continue the
employment of any Excluded Employee effective as of the Closing Date; provided,
however, that any offer to an Excluded Employee must include terms and
conditions that are equal to or greater than those specified on
Schedule 10.2(c)(ii) for Managing Directors or Schedule 10.2(d) for Executives,
as appropriate for such Excluded Employee’s position. Any such Excluded Employee
who accepts such offer and becomes an employee of Purchaser or its Designated
Affiliates shall be a Company Onshore Employee, and Purchaser will provide terms
and conditions no less favorable to such Excluded Employee than those specified
on Schedule 10.2(c)(ii) for any such Managing Director and Schedule 10.2(d) for
any such Executive.
 
(c) If the employment of any Company Onshore Employee is involuntarily
terminated by the Purchaser or its Designated Affiliates, other than for cause,
under the severance plan on Schedule 10.2(c)(i) or resigns by reason of the
relocation, without his or her consent, of his or her work location more than 50
miles from the individual’s work location as of the Closing Date during the
Comparability Period, Purchaser and its Designated Affiliates shall provide, or
cause to be provided, the terminated Company Onshore Employee with whichever of
the following results in the greater value to such Company Onshore Employee:
(i) salary continuation and health benefits until the end of the Comparability
Period, (ii) severance benefits which are comparable, in the aggregate, to the
severance benefits set out on Schedule 10.2(c)(i) and which, with respect to
salary continuation, health benefits, outplacement services and annual incentive
plan payment are no less than the benefits set out on Schedule 10.2(c)(i), or
(iii) for Key Employees, the severance benefits provided by the special award
letters as set out in Schedule 10.2(c)(iii).
 
(d) If a Designated Employee or Selected Employee receives cash severance or
other severance related compensation or benefits from DEPI or its Affiliates but
is subsequently employed by Purchaser or its Designated Affiliates within twelve
(12) months of, in the case of a Designated Employee, the Closing Date, or in
the case of a Selected Employee, the date such Selected Employee would have
otherwise been released by Seller to become an employee of Purchaser or its
Designated Affiliates, then Purchaser or its Designated Affiliates shall pay
promptly to Sellers an amount equal to the aggregate of the cash severance and
other severance related compensation and benefits provided by Sellers and their
Affiliates to such employee in connection with the termination of such
employee’s employment with Sellers and their Affiliates. If an Executive or
Managing Director is employed by Purchaser or its Designated Affiliates
 
 
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within twenty four (24) months of the Closing Date, then Purchaser or its
Designated Affiliates shall pay promptly to Sellers an amount equal to the
aggregate of the cash severance and other severance related compensation and
benefits provided to such Executive or Managing Director by Sellers and their
Affiliates, if any, in connection with the termination of such Executive’s or
Managing Director’s employment with Sellers.
 
Section 10.3  Plan Participation.
 
(a)    (i) Effective as of the day after the Closing Date, the Companies,
Subsidiaries, Companies and Wholly-Owned Subsidiaries shall cease to be
participating employers in all Employee Plans sponsored by Sellers or any of
their ERISA Affiliates (“Company’s U.S. Benefit Plans”), all Company Onshore
Employees that are Designated Employees shall cease to accrue additional
benefits by reason of employment with Sellers or their Affiliates for any
periods after the Closing Date, and Sellers shall, if applicable, provide all
such Designated Employees with appropriate notice of such cessation of
participation and accruals in accordance with Section 204(h) of ERISA and Code
Section 4980F (and the related regulations), at least forty-five (45) days in
advance of the Closing Date.
 
(ii) Effective as of the day after the Closing Date, Company Onshore Employees
that are Designated Employees shall be entitled to such benefits, if any, from
Company’s U.S. Benefit Plans provided to similarly situated employees employed
by an entity ceasing to be an ERISA Affiliate of Sellers (including continued
benefits under flexible spending arrangements if applicable continuation
coverage is elected).
 
(b)    (i) All Company Onshore Employees that are Selected Employees shall
continue to participate in Company’s U.S. Benefit Plans until the earlier of the
date such employee is employed by the Purchaser or its Designated Affiliates or
such employee’s employment with DEPI, DOTEPI, Reserves, the Companies or the
Wholly-Owned Subsidiaries otherwise ceases.
 
(ii) Effective as of the date a Company Onshore Employee that is a Selected
Employee is employed by the Purchaser or its Designated Affiliates, such
Selected Employee shall cease to accrue additional benefits by reason of
employment with Sellers or their Affiliates under the Company’s U.S. Benefit
Plans, and Sellers shall, if applicable, provide all such Selected Employees
with appropriate notice of such cessation of participation and accruals in
accordance with Section 204(h) of ERISA and Code Section 4980F (and the related
regulations), at least forty-five (45) days in advance of the date such Selected
Employee will be released by Seller to become an employee of Purchaser or its
Designated Affiliates.
 
(iii) Effective as of the day after the date a Company Onshore Employee that is
a Selected Employee is employed by the Purchaser or its Designated Affiliates,
such Selected Employee shall be entitled to such benefits, if any, from
Company’s U.S. Benefit Plans provided to similarly situated
 
 
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employees employed by an entity ceasing to be an ERISA Affiliate of Sellers
(including continued benefits under flexible spending arrangements if applicable
continuation coverage is elected).
 
(c) Except as is set forth in this Section 10.3, Section 10.2, Section 10.4,
Section 10.6 and Section 10.9, after the Closing Date, neither Purchaser and its
Affiliates nor the Companies or Wholly-Owned Subsidiaries shall have any
liability or obligations (i) with respect to, based upon or arising under any
Company U.S. Benefit Plan or any other employee benefit plan of Seller or their
Affiliates or (ii) with respect to any current or former employee of DRI, DEPI,
DOTEPI, Reserves, the Companies or the Subsidiaries except Company Onshore
Employees.
 
Section 10.4  Participation in Purchaser Plans.
 
(a) As of the day after the Closing Date, all Company Onshore Employees that are
Designated Employees shall, if applicable, be eligible to participate in and, if
elected, shall commence participation in the employee benefit plans (within the
meaning of Section 3(3) of ERISA), programs, policies, contracts, fringe
benefits, or arrangements (whether written or unwritten) of Purchaser or its
Affiliates covering similarly situated employees primarily engaged with respect
to operations in the U.S. (collectively, “Purchaser U.S. Employee Plans”).
Purchaser and its Affiliates shall, to the extent permissible under any
Purchaser U.S. Employee Plan (provided that Purchaser and its Affiliates shall
use reasonable efforts to remove any restrictions including restrictions in any
insurance policy), waive all limitations as to pre-existing condition exclusions
and waiting periods with respect to such Designated Employees and their spouses
and dependents, if applicable, under the Purchaser U.S. Employee Plans other
than, but only to the extent of, limitations or waiting periods that were in
effect with respect to such employees under the Company’s U.S. Benefit Plans
that have not been satisfied as of the Closing Date. Purchaser and its
Affiliates shall, to the extent permissible under any Purchaser U.S. Employee
Plan (provided that Purchaser and its Affiliates shall use reasonable efforts to
remove any restrictions under any Purchaser U.S. Employee Plan or related
insurance policy), provide each such Designated Employee with credit for any
year-to-date co-payments and deductibles paid as of the Closing Date in
satisfying any deductible or out-of-pocket requirements under the Purchaser U.S.
Employee Plans. Purchaser and its Affiliates shall accept or cause to be
accepted transfers from Sellers’ health care spending account plan and dependent
care flexible spending account plan included in the Company’s U.S. Benefit Plans
of each such Designated Employee’s unused account balance as of the day after
the Closing Date and credit such employee with such amounts under the applicable
Purchaser U.S. Employee Plans. In the event the plan years under the Purchaser
U.S. Employee Plans and Company’s U.S. Benefit Plans do not end on the same
date, such credits and transfers set forth in the preceding sentence shall be
applied under the Purchaser U.S. Employee Plans for the plan year which includes
the Closing Date; provided, however, that if there are less than six (6) months
remaining in the plan year which includes the Closing Date, such credits and
transfers shall be applied to the plan year which begins next following the
Closing Date, to the extent permitted by applicable Law.
 
 
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(b) As of the day after the date a Company Onshore Employee that is a Selected
Employee is released by Seller to become an employee of Purchaser or its
Designated Affiliates, such Selected Employee shall, if applicable, be eligible
to participate in and, if elected, shall commence participation in the Purchaser
U.S. Employee Plans. Purchaser and its Affiliates shall, to the extent
permissible under any Purchaser U.S. Employee Plan (provided that Purchaser and
its Affiliates shall use reasonable efforts to remove any restrictions including
restrictions in any insurance policy), waive all limitations as to pre-existing
condition exclusions and waiting periods with respect to each such Selected
Employee and his or her spouse and dependents, if applicable, under the
Purchaser U.S. Employee Plans other than, but only to the extent of, limitations
or waiting periods that were in effect with respect to such employee under the
Company’s U.S. Benefit Plans that have not been satisfied as of the date such
employee is released by Seller to become an employee of Purchaser or its
Designated Affiliates. Purchaser and its Affiliates shall, to the extent
permissible under any Purchaser U.S. Employee Plan (provided that Purchaser and
its Affiliates shall use reasonable efforts to remove any restrictions under any
Purchaser U.S. Employee Plan or related insurance policy), provide each such
Selected Employee with credit for any year-to-date co-payments and deductibles
paid as of the date such employee is released by Seller to become an employee of
Purchaser or its Designated Affiliates in satisfying any deductible or
out-of-pocket requirements under the Purchaser U.S. Employee Plans. Purchaser
and its Affiliates shall accept or cause to be accepted transfers from Sellers’
health care spending account plan and dependent care flexible spending account
plan included in the Company’s U.S. Benefit Plans of each such Selected
Employee’s unused account balance as of the day after the date such employee is
released by Seller to become an employee of Purchaser or its Designated
Affiliates and credit such employee with such amounts under the applicable
Purchaser U.S. Employee Plans. In the event the plan years under the Purchaser
U.S. Employee Plans and Company’s U.S. Benefit Plans do not end on the same
date, such credits and transfers set forth in the preceding sentence shall be
applied under the Purchaser U.S. Employee Plans for the plan year which includes
the date such employee is released by Seller to become an employee of Purchaser
or its Designated Affiliates; provided, however, that if there are less than six
(6) months remaining in the plan year which includes the date such employee is
released by Seller to become an employee of Purchaser or its Designated
Affiliates, such credits and transfers shall be applied to the plan year which
begins next following the date such employee is released by Seller to become an
employee of Purchaser or its Designated Affiliates, to the extent permitted by
applicable Law.
 
Section 10.5  Service Credit.  Purchaser and its Affiliates shall cause to be
provided to each Company Onshore Employee credit for prior service with Sellers
or their Affiliates for purposes (including vesting, eligibility, benefit
accrual and/or level of benefits) in all Purchaser U.S. Employee Plans,
including fringe benefit plans, vacation and sick leave policies, severance
plans or policies, and matching contributions under defined contribution plans,
other than for benefit accruals under defined benefit pension plans subject to
Title IV of ERISA or Section 412 of the Code and retiree medical plans
maintained or provided by Purchaser or its wholly-owned subsidiaries or
Affiliates, in which such Company Onshore Employees are eligible to participate
on or after the date such employee is employed by the Purchaser or its
Designated Affiliates. Under Purchaser’s vacation plan, each Company Onshore
 
 
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Employee initially shall be entitled to vacation at least equal to the vacation
such Company Onshore Employee was entitled to under Seller’s vacation plan.
 
Section 10.6  Vacation and Leave.  Purchaser and its Affiliates shall provide
each Company Onshore Employee credit for all of the Company Onshore Employee’s
earned but unused vacation and sick leave and other time-off as of the date such
employee is employed by the Purchaser or its Designated Affiliates as determined
under Sellers’ time-off policies.
 
Section 10.7  Defined Contribution Plan.  To the extent allowable by Law,
Purchaser and its Affiliates shall take any and all necessary action to cause
the trustee of a tax qualified defined contribution plan of Purchaser or one of
its Affiliates, if requested to do so by a Company Onshore Employee, to accept a
direct “rollover” of all or a portion of such employee’s distribution from
Sellers’ tax qualified defined contribution plan (excluding securities (or other
in-kind forms of distributions), but including plan loans).
 
Section 10.8  Vesting.
 
(a) As of the Closing Date, Sellers shall take all necessary action to cause the
tax qualified defined contribution and defined benefit pension plans maintained
by the Sellers or an Affiliate of Sellers to fully vest Company Onshore
Employees that are Designated Employees in their account balances and/or accrued
benefits under such plans.
 
(b) As of the date such employee is employed by the Purchaser or its Designated
Affiliates, Sellers shall take all necessary action to cause the tax qualified
defined contribution and defined benefit pension plans maintained by the Sellers
or an Affiliate of Sellers to fully vest Company Onshore Employees that are
Selected Employees in their account balances and/or accrued benefits under such
plans.
 
Section 10.9  Welfare Benefit Plans; Workers’ Compensation; Other Benefits.
 
(a) With respect to each Company Onshore Employee that is a Designated Employee
(including any beneficiary or the dependent thereof), the Sellers shall retain
all liabilities and obligations arising under any Seller welfare benefit plans
and workers’ compensation benefits to the extent that such liability or
obligation relates to claims incurred (whether or not reported or paid) on or
prior to the Closing Date. For purposes of this Section 10.9(a), a claim shall
be deemed to be incurred when (i) with respect to medical, dental, health
related benefits, accident and disability (but not including workers’
compensation benefits and wage continuation/replacement type benefits), the
medical, dental, health related, accident or disability services with respect to
such claim are performed, (ii) with respect to life insurance, when the death
occurs and (iii) with respect to workers’ compensation benefits, when the injury
or condition giving rise to the claim occurs on or prior to the Closing Date.
Subject to Section 10.1, with respect to each Company Onshore Employee that is a
Designated Employee receiving workers’ compensation benefits, for purposes of
this Section 10.9(a), the Seller or Affiliate (other than a Company or
Subsidiary) employing such Designated Employee shall be
 
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responsible for claims incurred on or prior to the Closing Date, including
payments made after the Closing Date for such claims. Subject to Section 10.1,
with respect to each Company Onshore Employee that is a Designated Employee
receiving wage continuation/replacement benefits for sickness/disability, for
purposes of this Section 10.9(a), the Seller or Affiliate (other than a Company
or Subsidiary) employing such Designated Employee shall be responsible for any
payments due on or prior to the Closing Date and Purchaser and its Designated
Affiliates shall be responsible for any payments due after the Closing Date.
Effective as of the Closing Date, the Seller or Affiliate employing a Company
Onshore Employee that is a Designated Employee shall be responsible for
providing coverage under the Consolidated Omnibus Budget Reconciliation Act
(“COBRA”) to any such Designated Employee, his or her spouse or dependent person
as to whom a “qualifying event” as defined in Section 4890B of the Code has
occurred on or prior to the Closing Date. Purchaser and its Designated
Affiliates shall be responsible for providing COBRA coverage to any Company
Onshore Employee that is a Designated Employee, his or her spouse or dependent
person as to whom a “qualifying event” occurs after the Closing Date.
 
(b) With respect to each Company Onshore Employee that is a Selected Employee
(including any beneficiary or the dependent thereof), the Sellers shall retain
all liabilities and obligations arising under any Seller welfare benefit plans
and workers’ compensation benefits to the extent that such liability or
obligation relates to claims incurred (whether or not reported or paid) on or
prior to the date such employee is employed by the Purchaser or its Designated
Affiliates. For purposes of this Section 10.9(b), a claim shall be deemed to be
incurred when (i) with respect to medical, dental, health related benefits,
accident and disability (but not including workers’ compensation benefits and
wage continuation/replacement type benefits), the medical, dental, health
related, accident or disability services with respect to such claim are
performed, (ii) with respect to life insurance, when the death occurs and
(iii) with respect to workers’ compensation benefits, when the injury or
condition giving rise to the claim occurs on or prior to the date such employee
is employed by the Purchaser or its Designated Affiliates. Subject to Section
10.1, with respect to each Company Onshore Employee that is a Selected Employee
receiving workers’ compensation benefits, for purposes of this Section 10.9(b),
the Seller or Affiliate (other than a Company or Subsidiary) employing such
Selected Employee shall be responsible for claims incurred on or prior to the
date such employee is employed by the Purchaser or its Designated Affiliates,
including payments made after such date for such claims. Subject to Section
10.1, with respect to each Company Onshore Employee that is a Selected Employee
receiving wage continuation/replacement benefits for sickness/disability, for
purposes of this Section 10.9(b), the Seller or Affiliate (other than a Company
or Subsidiary) employing such Selected Employee shall be responsible for any
payments due on or prior to the date such employee is employed by the Purchaser
or its Designated Affiliates and Purchaser and its Designated Affiliates shall
be responsible for any payments due after the date such employee is employed by
the Purchaser or its Designated Affiliates. Effective as of the Closing Date,
the Seller or Affiliate employing a Company Onshore Employee that is a Selected
Employee shall be responsible for providing coverage under COBRA to any such
Selected Employee, his or her spouse or dependent person as to whom a
“qualifying event” as defined in Section 4890B of the Code has occurred on or
prior to the date such
 
 
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employee is employed by the Purchaser or its Designated Affiliates. Purchaser
and its Designated Affiliates shall be responsible for providing COBRA coverage
to any Company Onshore Employee that is a Selected Employee, his or her spouse
or dependent person as to whom a “qualifying event” occurs after the date such
employee is employed by the Purchaser or its Designated Affiliates.
 
(c) For Company Onshore Employees that are Designated Employees, effective as of
the Closing Date, and for Company Onshore Employees that are Selected Employees,
effective as of the date such employee is employed by the Purchaser or its
Designated Affiliates, with respect to (i) relocation costs and reimbursements,
(ii) appliance loans, (iii) education assistance, (iv) computer loans and (v)
adoption assistance programs, Purchaser and its Designated Affiliates agree to
assume responsibility for payments and benefits provided by or committed to by
Sellers or their Affiliates to such Company Onshore Employees except that
Purchaser and its Designated Affiliates undertake no obligation to continue any
of these programs.
 
Section 10.10  WARN Act.
 
(a) If a plant closing or a mass layoff occurs or is deemed to occur with
respect to DEPI, DOTEPI, Reserves, the Companies, the Subsidiaries and Dominion
Resource Services, Inc. at any time on or after the Closing Date as a result of
a termination of employment of Company Onshore Employees that are Designated
Employees by Purchaser, Purchaser and its Designated Affiliates shall be solely
responsible for providing all notices required under the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. §2109 et seq. or the regulations
promulgated thereunder (the “WARN Act”) and for taking all remedial measures,
including, without limitation, the payment of all amounts, penalties,
liabilities, costs and expenses if such notices are not provided. 
 
(b) If a plant closing or a mass layoff occurs or is deemed to occur with
respect to DEPI, DOTEPI, Reserves, the Companies, the Subsidiaries and Dominion
Resource Services, Inc. at any time on or after the date a Company Onshore
Employee that is a Selected Employee is employed by the Purchaser or its
Designated Affiliates as a result of a termination of employment of such
Selected Employees by Purchaser, Purchaser and its Designated Affiliates shall
be solely responsible for providing all notices required under the WARN Act and
for taking all remedial measures, including, without limitation, the payment of
all amounts, penalties, liabilities, costs and expenses if such notices are not
provided.
 
Section 10.11  Postretirement Benefits.
 
(a) Except as set forth in Sections 10.2, 10.3, 10.4, 10.6 and 10.9, Sellers
shall retain any and all liabilities, assets and obligations which relate to
service of any Company Onshore Employee or former employee of Sellers or their
Affiliates that arise under any Employee Plans, with respect to Company Onshore
Employees that are Designated Employees, as of the Closing Date and with respect
to Company Onshore Employees that are Selected Employees, as of the date such
employee is employed by the
 
 
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Purchaser or its Designated Affiliates, including, without limitation, those
providing postretirement benefits for any Company Onshore Employee or former
employee (i) that are defined benefit pension plans, (ii) that are defined
contribution plans as defined in Section 3(34) of ERISA, or (iii) which relate
to other post-employment benefits for all current retirees of DEPI, DOTEPI,
Reserves, the Companies, the Subsidiaries or Dominion Resource Services, Inc.
 
(b) Purchaser does not currently sponsor a qualified defined benefit pension
plan, retiree medical plan or retiree life insurance plan, nor does Purchaser
intend to implement such plans following the Closing Date. Therefore, in lieu of
such benefits, Purchaser will pay or provide, as appropriate, or will cause its
Designated Affiliates to pay or provide, to each Company Onshore Employee
employed by Purchaser or its Designated Affiliates as of the Closing Date
additional benefits and/or a one time cash bonus (the “Special Benefits”). To
the maximum extent permitted by applicable Law, such Special Benefits shall be
in the form of one or more contributions for each Company Onshore Employee to a
tax qualified defined contribution plan equal to, in the aggregate, 12.9% of the
individual’s annual rate of base pay as of the (i) Closing Date for Designated
Employees or (ii) for Selected Employees, the date such employees becomes
employed by Purchaser or its Designated Affiliates. If all or a part of such
Special Benefits cannot by reason of applicable Law be provided in a tax
qualified defined contribution plan (the “Excess Amount”), the Excess Amount
that cannot be so provided shall be paid in cash on a fully tax grossed up basis
so that after all state and federal Taxes the Company Onshore Employee retains
an amount equal to the Excess Amount. Purchaser may propose an alternative
method for calculating the Special Benefits that provides equal or greater value
in the aggregate for Company Onshore Employees, subject to DEPI’s approval that
will not be unreasonably withheld.
 
(c) With respect to Company Onshore Employees that are Designated Employees, the
lesser of one-half of the Special Benefits or the maximum amount of the Special
Benefits that can be contributed to the tax qualified plan for the 2007 plan
year for such employee will be paid within 30 days after the end of the 2007
plan year of the tax qualified plan and the remainder paid on the first
anniversary of the Closing Date. If such Designated Employee is terminated by
the Purchaser for cause or such Designated Employee terminates his/her
employment prior to the first anniversary of the Closing Date, then he/she shall
forfeit all rights to any of the Special Benefits that have not been paid as of
the termination date.
 
(d) With respect to Company Onshore Employees that are Selected Employees, the
lesser of one-half of the Special Benefits or the maximum amount of the Special
Benefits that can be contributed to the tax qualified plan for the 2007 plan
year for such employee will be paid within 30 days after the end of the 2007
plan year of the tax qualified plan and the remainder paid on the first
anniversary of the date such employee is employed by the Purchaser or its
Designated Affiliates. If such Selected Employee is terminated by the Purchaser
for cause or such Selected Employee terminates his/her employment prior to the
first anniversary of the date such employee is employed by the Purchaser or its
Designated Affiliates, then he/she shall forfeit all rights to of the Special
Benefits that have not been paid as of the termination date.
 
 
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Section 10.12  Annual Incentive Plan.  Sellers shall pay, or shall cause the
Companies or Wholly-Owned Subsidiaries, as applicable, to pay to each Company
Onshore Employee as part of such individual’s final pay from Sellers and their
Affiliates a prorated incentive amount in accordance with the Sellers’ Annual
Incentive Plan.
 
Section 10.13  Immigration Matters.  Purchaser and its Designated Affiliates
shall use reasonable efforts to employ Company Onshore Employees with H-1B
immigration status under terms and conditions such that both (i) Purchaser and
its Designated Affiliates qualify as a “successor employer” under applicable
United States immigration laws and (ii) “green card portability” applies to such
employees in respect of the transactions contemplated by this Agreement. Seller
shall retain all immigration related liabilities and responsibilities (y) with
respect to Company Onshore Employees that are Designated Employees arising from
acts or omissions which occur on or prior to the Closing Date and (z) with
respect to Company Onshore Employees that are Selected Employees arising from
acts or omissions which occur on or prior to the date such employee is employed
by the Purchaser or its Designated Affiliates.
 
Section 10.14  No Plan or Amendment.  Nothing in this Article 10 is intended to
constitute, nor shall it operate or be construed as constituting, an employee
benefit plan or an amendment to any employee benefit plan of the Purchaser or
any Affiliate of the Purchaser.
 
 
ARTICLE 11.
TERMINATION AND AMENDMENT
 
Section 11.1  Termination.  This Agreement may be terminated at any time prior
to Closing: (i) by the mutual prior written consent of Sellers and Purchaser; or
(ii) by either Sellers or Purchaser, if Closing has not occurred on or before
October 1, 2007 provided, however, that no Party shall be entitled to terminate
this Agreement under this Section 11.1 if the Closing has failed to occur
because such Party negligently or willfully failed to perform or observe in any
material respect its covenants and agreements hereunder.
 
Section 11.2  Effect of Termination.  If this Agreement is terminated pursuant
to Section 11.1, this Agreement shall become void and of no further force or
effect (except for the provisions of Sections 1.2, 1.3, 4.12, 5.10, 6.3, 6.6,
11.1, 11.2, 13.1, 13.2, 13.4, 13.8, 13.9, 13.10, 13.11, 13.12, 13.13, 13.14,
13.15, 13.16, 13.17, 13.18 and 13.19 and of the Confidentiality Agreement, all
of which shall continue in full force and effect). Notwithstanding anything to
the contrary in this Agreement, the termination of this Agreement under
Section 11.1 shall not relieve any Party from liability for any willful or
negligent failure to perform or observe in any material respect any of its
agreements or covenants contained herein that were to be performed or observed
at or prior to Closing. In the event this Agreement terminates under
Section 11.1 and any Party has willfully or negligently failed to perform or
observe in any material respect any of its agreements or covenants contained
herein which are to be performed or observed at or prior to Closing, then the
other Party, subject to Section 13.19, shall be entitled to all remedies
available at law or in equity and shall be entitled to recover court costs and
attorneys’ fees in addition to any other relief to which the other Party may be
entitled (and, for the avoidance of doubt, damages recoverable by the other
Party for a termination under this Article 11 shall
 
 
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include, without limiting similar damages of Purchaser or Sellers to the extent
not described below, all applicable damages (it being agreed that the following
damages do not constitute consequential, special, or punitive damages for the
purpose of Section 13.19) constituting: (i) all out of pocket costs paid by it
and its Affiliates in connection with the terminated transaction, including
brokers, agents, advisors and attorneys fees; (ii) with respect to Sellers as
the other Party, all costs of additional employee retention payments and/or
costs of temporary or contract workers to replace workers departing after the
termination of this transaction for a period of one year to the extent those
costs of Seller exceed the baseline costs that would have been incurred by
Seller in maintaining the employees of Seller as if the terminated transaction
had never been agreed upon; (iii) with respect to Sellers as the other Party,
the amount, if any, by which the Unadjusted Purchase Price exceeds the aggregate
unadjusted sales price for the subsequent sale or sales comprising in aggregate
the sale of the Interests to a third Person or third Persons to the extent such
sale or sales are completed within a period of one year following the
termination of the transaction; and (iv) interest at the Agreed Rate on the
outstanding amount of the excess described in clause (iii) from the Target
Closing Date until the last of any such subsequent sale or sales of the
Interests are consummated not to exceed one year following the termination of
the transaction).
 
 
ARTICLE 12.
INDEMNIFICATION; LIMITATIONS
 
Section 12.1  Assumption.  Without limiting Purchaser’s rights to indemnity
under this Article 12, as of the Closing Date Purchaser shall assume and hereby
agrees to fulfill, perform, pay and discharge (or cause to be fulfilled,
performed, paid or discharged) all of the obligations and liabilities of Sellers
and their Affiliates, known or unknown, with respect to the Interests,
regardless of whether such obligations or liabilities arose prior to or after
the Closing Date, including but not limited to, obligations to furnish makeup
gas according to the terms of applicable gas sales, gathering or transportation
Contracts, production balancing obligations, obligations to pay working
interests, royalties, overriding royalties, net profits interests and other
interests held in suspense, obligations to plug wells and dismantle structures,
and to restore and/or remediate the Assets, ground water, surface water, soil or
seabed in accordance with applicable agreements and Laws, including any
obligations to assess, remediate, remove and dispose of NORM, asbestos, mercury,
drilling fluids and chemicals, and produced waters and hydrocarbons, other
environmental liabilities with respect to the E&P Business, obligations with
respect to the actions, suits and proceedings identified as items 2 through 14
(inclusive), 18, 19 and 20 on Schedule 4.4 (and any other actions, suits or
proceedings arising out of the same facts or circumstances), regardless of the
properties or assets to which such actions, suits or proceedings relate (unless
such properties and assets are included in clauses (a) or (b) below), any claims
regarding the general method, manner or practice of calculating or making
royalty payments with respect to the Properties, and continuing obligations
under any agreements pursuant to which the Sellers or their Affiliates
(including without limitation the Companies and Subsidiaries) purchased Assets
prior to the Closing (all of said obligations and liabilities, subject to the
exclusions of the proviso below, herein being referred to as the “Assumed Seller
Obligations”); provided, however, that Purchaser does not assume any obligations
or liabilities to the extent that they are (collectively, the “Retained Seller
Obligations”):
 
 
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(a) attributable to or arise out of the Excluded Assets;
 
(b) directly attributable to interests held or formerly held by DEPI, DOTEPI
Reserves or any of the Companies or Subsidiaries located in the Offshore Package
Areas, the Excluded Onshore Areas or the states in which the Appalachian
Business is located;
 
(c) required to be borne by Sellers under Section 2.3 or Section 2.4(c),
including as provided in Section 8.4;
 
(d) attributable to or arise out of any futures, options, swaps or other
derivatives in place prior to Closing, except the Transferred Derivatives;
 
(e) Tax obligations retained by Sellers pursuant to Article 9;
 
(f) obligations retained by Sellers under Article 10;
 
(g) obligations owed by any Seller, Company or Wholly-Owned Subsidiary or its
Affiliates to a third Person claimant in the actions, suits and proceedings
identified as items 1 and 15 through 17 (inclusive) of Schedule 4.4, regardless
of the Assets to which such actions, suits or proceedings relate;
 
(h) amounts owed by any Seller, Company or Wholly-Owned Subsidiary to any
Affiliate (other than a Company or Wholly-Owned Subsidiary) at the end of the
Closing Date that are not incurred for the provision of goods or services, for
employment related costs, or otherwise in the ordinary course of business, with
respect to the ownership or operation of the Assets; or
 
(i) any current liabilities (as determined in accordance with the Accounting
Principles) composed of Property Costs that are outstanding at the Effective
Date (provided that Seller’s retention of the same, and their classification as
“Retained Seller Obligations,” shall terminate on the Cut-off Date).
 
Section 12.2  Indemnification.
 
(a) From and after Closing, Purchaser shall indemnify, defend and hold harmless
Sellers and their current and former Affiliates (other than the Companies and
Subsidiaries) and their respective officers, directors, employees and agents
(“Seller Group”) from and against all Damages incurred or suffered by Seller
Group:
 
(i) caused by or arising out of or resulting from the Assumed Seller
Obligations,
 
(ii) caused by or arising out of or resulting from the ownership, use or
operation of the Assets, whether before or after the Closing Date,
 
(iii) caused by or arising out of or resulting from Purchaser’s breach of any of
Purchaser’s covenants or agreements contained in Article 6,
 
 
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(iv) caused by or arising out of or resulting from any breach of any
representation or warranty made by Purchaser contained in Article 5 of this
Agreement or in the certificate delivered at Closing pursuant to Section 8.3(d),
or
 
(v) consisting of Environmental Liabilities (except to the extent DEPI is
required to indemnify Purchaser pursuant to Section 12.2(b) or Section 12.2(g)).
 
even if such Damages are caused in whole or in part by the negligence (whether
sole, joint or concurrent), strict liability or other legal fault of any
Indemnified Person, or a pre-existing condition, but excepting in each case
Damages against which DEPI would be required to indemnify Purchaser under
Section 12.2(b) at the time the claim notice is presented by Purchaser.
 
(b) From and after Closing, DEPI shall indemnify, defend and hold harmless
Purchaser, its current and former Affiliates and its and their respective
officers, directors, employees and agents (“Purchaser Group”) against and from
all Damages incurred or suffered by Purchaser Group:
 
(i) caused by or arising out of or resulting from Sellers’ breach of any of
Sellers’ covenants or agreements contained in Article 6, (provided, however, for
purposes of interpretation of the preceding indemnity, Sellers’ covenants and
agreements qualified by “Material Adverse Effect” but not “material” or
materiality generally shall be deemed to have been made without the “Material
Adverse Effect” qualification),
 
(ii) caused by or arising out of or resulting from any breach of any
representation or warranty made by DEPI contained in Article 4 of this Agreement
(other than Section 4.5(e), which shall be exclusively subject to
Section 9.1(g)), or in the certificates delivered at Closing pursuant to
Section 8.2(j) (other than in respect of Section 4.5(e)) (provided, however, for
purposes of interpretation of the preceding indemnity, Sellers’ representations
and warranties qualified by “Material Adverse Effect,” but not “material” or
materiality generally shall be deemed to have been made without the “Material
Adverse Effect” qualification),
 
(iii) caused by, arising out of or resulting from the Retained Seller
Obligations,
 
(iv) caused by, arising out of or resulting from claims for injury or death to
any natural person attributable to or arising out of DEPI’s, DOTEPI’s, Reserves’
or any Company’s or Wholly-Owned Subsidiary’s ownership or operation of the
Assets or any part thereof prior to the Effective Date,
 
(v) caused by, arising out of or resulting from claims (whether brought by a
Governmental Authority, an individual pursuant to a qui tam or false claims act
proceeding, or otherwise) that DEPI, DOTEPI, Reserves or any Company or
Wholly-Owned Subsidiary failed to pay, missed a payment of, or made an error in
 
 
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the payment of, royalties (including minimum royalties, rentals, shut-in
payments and overriding royalties) during such Person’s period of ownership or
operation of the Assets or any part thereof prior to the Effective Date, to the
extent attributable to such Person’s failure to pay, consistent with then
current industry practices, royalties owing with respect to such Person’s share
of production from specific Properties,
 
(vi) consisting of Environmental Liabilities for which Seller is required to
indemnify Purchaser pursuant to Section 12.2(b)(ii) or Section 12.2(g) and any
Environmental Liabilities caused by, arising out of or resulting from Sellers’
failure to perform any remediation operations that Sellers elect to perform
pursuant to Section 12.2(g)(vi) in accordance with the requirements of such
Section and applicable Law,
 
(vii) related to off-site disposal of Hazardous Substances from the Assets prior
to the Effective Date for which the owner of the Assets may be liable, or
 
(viii) constituting fines, or civil, criminal or regulatory penalties that may
be levied by a Governmental Authority for a violation of Environmental Laws with
respect to the Assets which occurred prior to the Effective Date.
 
even if such Damages are caused in whole or in part by the negligence (whether
sole, joint or concurrent), strict liability or other legal fault of any
Indemnified Person, or a pre-existing condition.
 
(c) Notwithstanding anything to the contrary contained in this Agreement, from
and after Closing, Sellers’ and Purchaser’s exclusive remedy against each other
with respect to breaches of the representations, warranties, covenants and
agreements of the Parties contained in Articles 4 (other than Section 4.5(e),
which shall be exclusively subject to Section 9.1(g)), 5 and 6 (excluding
Section 6.6, which shall be separately enforceable by Sellers pursuant to
whatever rights and remedies are available to it outside of this Article 12) and
the affirmations of such representations, warranties, covenants and agreements
contained in the certificates delivered by each Party at Closing pursuant to
Sections 8.2(j) or 8.3(d), as applicable, is set forth in this Section 12.2.
Except for (i) the remedies contained in this Section 12.2 and Section 11.2, and
(ii) any other remedies available to the Parties at law or in equity with
respect to provisions of this Agreement other than Articles 4 (excluding
Section 4.5(e)), 5 and 6 (excluding Section 6.6), or the breach thereof, upon
Closing Sellers and Purchaser each release, remise and forever discharge the
other and their or its Affiliates and all such Persons’ stockholders, officers,
directors, employees, agents, advisors and representatives from any and all
suits, legal or administrative proceedings, claims, demands, damages, losses,
costs, liabilities, interest, or causes of action whatsoever, in law or in
equity, known or unknown, which such Parties might now or subsequently may have,
based on, relating to or arising out of this Agreement or any Seller’s,
Company’s or Subsidiary’s ownership, use or operation of the Assets, or the
condition, quality, status or nature of the Assets, including rights to
contribution under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, breaches of statutory and implied warranties,
nuisance
 
 
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or other tort actions, rights to punitive damages, common law rights of
contribution, any rights under insurance policies issued or underwritten by the
other Party or Parties or any of its or their Affiliates and any rights under
agreements between the Companies or the Subsidiaries and the Sellers or any
other Affiliate of the Companies, even if caused in whole or in part by the
negligence (whether sole, joint or concurrent), strict liability or other legal
fault of any released Person, or a pre-existing condition, but excluding,
however, any remaining balance owed by DEPI, DOTEPI, Reserves, any Company or
any Subsidiary to any other Affiliate at the end of the Closing Date for
provision of goods or services, or employment-related costs, or other ordinary
course of business expenses, with respect to the ownership or operation of the
Assets, the Companies or the Subsidiaries. Without limiting the generality of
the preceding sentence, Purchaser agrees that from and after Closing its only
remedy with respect to any Seller’s breach of its covenants and agreements in
Article 6 shall be the indemnity of DEPI in Section 12.2(b), as limited by the
terms of this Article 12.
 
(d) “Damages,” for purposes of this Article 12, shall mean the amount of any
actual liability, loss, cost, expense, claim, award or judgment incurred or
suffered by any Indemnified Person arising out of or resulting from the
indemnified matter, whether attributable to personal injury or death, property
damage, contract claims, torts or otherwise, including reasonable fees and
expenses of attorneys, consultants, accountants or other agents and experts
reasonably incident to matters indemnified against, and the costs of
investigation and/or monitoring of such matters, and the costs of enforcement of
the indemnity; provided, however, that “Damages” shall not include any
adjustment for Taxes that may be assessed on payments under this Article 12 or
for Tax benefits received by the Indemnified Person as a consequence of any
Damages. Notwithstanding the foregoing, Purchaser and Sellers shall not be
entitled to indemnification under this Section 12.2 for, and Damages shall not
include, (i) loss of profits, whether actual or consequential, or other
consequential damages suffered by the Party claiming indemnification, or any
punitive damages (other than loss of profits, consequential damages or punitive
damages suffered by third persons for which responsibility is allocated between
the Parties), (ii) any increase in liability, loss, cost, expense, claim, award
or judgment to the extent such increase is caused by the actions or omissions of
any Indemnified Person after the Closing Date or (iii) except with respect to
claims for any Retained Seller Obligations or breach of Sections 6.8, 6.9, 6.11,
6.12 and 6.13, any liability, loss, cost, expense, claim, award or judgment that
does not individually exceed One Million dollars ($1,000,000).
 
(e) Any claim for indemnity under this Section 12.2 by any current or former
Affiliate, director, officer, employee or agent must be brought and administered
by the applicable Party to this Agreement. No Indemnified Person other than
Sellers and Purchaser shall have any rights against either Sellers or Purchaser
under the terms of this Section 12.2 except as may be exercised on its behalf by
Purchaser or Sellers, as applicable, pursuant to this Section 12.2(e). Each of
Sellers and Purchaser may elect to exercise or not exercise indemnification
rights under this Section on behalf of the other Indemnified Persons affiliated
with it in its sole discretion and shall have no liability to any such other
Indemnified Person for any action or inaction under this Section.
 
 
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(f) Without prejudice to those Sections, this Section 12.2 shall not apply in
respect of title matters, which are exclusively covered by Article 3 (provided
the aforesaid is not a limitation on Section 4.13), Tax matters other than
Section 4.5(a)-(d) and (f)-(i), which are exclusively covered by Article 2 and
Article 9, or claims for Property Costs, which are covered exclusively by
Sections 2.3, 2.4 and 8.4.
 
(g)    (i) Purchaser may at its option notify DEPI in writing on or before
ten (10) Business Days prior to the Closing Date of any matter disclosed by a
Phase I Investigation conducted by Purchaser pursuant to Section 6.1 which
Purchaser in good faith believes may constitute an Adverse Environmental
Condition (an “Environmental Concern”). If the existence of such Adverse
Environmental Condition is suspected to exist in connection with the Phase I
Investigation but can only be determined through further investigation or
testing of soil, groundwater, or other materials or information (a “Potential
Adverse Environmental Condition”), Purchaser shall conduct a Phase II
environmental assessment with respect thereto within the timeframe provided
below and notify DEPI in writing in accordance with the procedure described
below of any item or information resulting from that Phase II environmental
assessment that the Purchaser believes in good faith constitutes an Adverse
Environmental Condition. Purchaser agrees that it is not permitted to conduct a
Phase II environmental assessment prior to Closing.
 
(ii) If Purchaser delivers timely notice of an Environmental Concern as
described above or of an alleged Adverse Environmental Condition confirmed
through a Phase II environmental assessment as described below and DEPI confirms
to its reasonable satisfaction that such Environmental Concern or alleged
Adverse Environmental Condition may constitute an Adverse Environmental
Condition or it is determined by the Environmental Arbitrator (defined below)
that such Environmental Concern or alleged Adverse Environmental Condition may
constitute an Adverse Environmental Condition (an “Agreed Environmental
Concern”), Seller shall provide indemnification pursuant to, and subject to the
limitations applicable to, Section 12.2(b)(vi) to the extent, and only to the
extent, of the Environmental Liabilities that arise from or relate thereto.
 
(iii) Except for such disclosure to DEPI, Purchaser and DEPI shall maintain the
results of any environmental assessment and all findings in connection therewith
strictly confidential, subject to the terms of (including the authorized
disclosures pursuant to) the Confidentiality Agreement, as if each Party were
the “Recipient” and the other “DRI” thereunder. Each notice by Purchaser under
Section 12.2(g)(i) or Section 12.2(g)(iv) shall include a reasonably detailed
description of the Environmental Concern, including the relevant excerpt from
the Phase I Investigation or Phase II environmental assessment, as appropriate.
 
(iv) With respect to any Potential Adverse Environmental Condition, Purchaser,
within ninety (90) days after the Closing Date may conduct a Phase II
environmental assessment with respect thereto. Purchaser must notify Seller on
 
 
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or before one hundred eighty (180) days after the Closing Date of the existence
of any alleged Adverse Environmental Conditions, and any such notice shall
include a copy of any relevant Phase II environmental assessment reports or
other relevant documentation supporting Purchaser’s determination.
 
(v) If Purchaser and Seller do not agree on the existence of an Environmental
Concern or an Adverse Environmental Condition, the matter shall be submitted to
a nationally recognized independent environmental consulting firm mutually
acceptable to both the Purchaser and Seller (the “Environmental Arbitrator”) for
review and final determination. The Environmental Arbitrator shall conduct the
arbitration proceedings in Houston, Texas in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, to the extent such
rules do not conflict with the terms of this Section. The Environmental
Arbitrator’s determination shall be made within thirty (30) days after
submission of the matters in dispute and shall be final and binding on all
Parties, without right of appeal. In determining whether an Environmental
Concern or Adverse Environmental Condition exists, the Environmental Arbitrator
shall be bound by the terms of Section 12.2(g) and the defined terms contained
in this Agreement. The Environmental Arbitrator shall act as an expert for the
limited purpose of determining whether an Environmental Concern or Adverse
Environmental Condition exists and may not award damages, interest or penalties
to any Party with respect to any matter. Seller and Purchaser shall each bear
its own legal fees and other costs of presenting its case. DEPI shall bear one
half and Purchaser shall bear one half of the costs and expenses of the
Environmental Arbitrator.
 
(vi) Purchaser shall not conduct (or have conducted on its behalf) any material
remediation operations with respect to any claimed Damages relating to a breach
of DEPI’s representation or warranty pursuant to Section 4.6 or any Claim
relating to the subject matter of such representation or warranty or any claim
related to this Section 12.2(g) without first giving Sellers notice of the
remediation with reasonable detail at least thirty (30) days prior thereto (or
such shorter period of time as shall be required by any Governmental Authority,
required to comply with Environmental Laws or required to respond to any
emergency situation). Sellers shall have the option (in their sole discretion)
to conduct (or have conducted on their behalf) such remediation operations. If
Sellers shall not have notified Purchaser of their agreement to conduct such
remediation operations within such specified period, then Purchaser may conduct
(or have conducted on its behalf) such operations. Purchaser and Sellers agree
that any remediation activities undertaken with respect to the Assets, whether
conducted by Purchaser or Sellers, for which DEPI may have responsibility shall
be reasonable in extent and cost effective and shall be designed or implemented
in such a manner as to achieve the least stringent permanent risk-based closure
or remediation standard applicable to the property in question under
Environmental Laws, subject to the approval of any Governmental Authority with
jurisdiction over such remediation activities, and as necessary to permit the
continued use of the affected property in the same manner and for the same
purposes for which it
 
 
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was being used at the Closing Date, provided that continuation of the
pre-Closing use is acceptable to the relevant Governmental Authority. All
remediation activities conducted by Sellers under this Agreement shall be
conducted by qualified personnel or contractors in a professional and
workmanlike manner and, to the extent reasonably possible, so as not to
substantially interfere with Purchaser’s operation of the Assets.
 
(h) The Parties shall treat, for Tax purposes, any amounts paid under this
Article 12 as an adjustment to the applicable Interest Purchase Price(s) in the
same manner as provided in Section 2.2(a).
 
Section 12.3  Indemnification Actions.  All claims for indemnification under
Section 12.2 shall be asserted and resolved as follows:
 
(a) For purposes of this Article 12, the term “Indemnifying Person” when used in
connection with particular Damages shall mean the Person having an obligation to
indemnify another Person or Persons with respect to such Damages pursuant to
this Article 12, and the term “Indemnified Person” when used in connection with
particular Damages shall mean a Person having the right to be indemnified with
respect to such Damages pursuant to this Article 12 (including, for the
avoidance of doubt, those Persons identified in Section 12.2(e)).
 
(b) To make a claim for indemnification under Section 12.2, an Indemnified
Person shall notify the Indemnifying Person of its claim, including the specific
details of and specific basis under this Agreement for its claim (the “Claim
Notice”). In the event that the claim for indemnification is based upon a claim
by a third Person against the Indemnified Person (a “Claim”), the Indemnified
Person shall provide its Claim Notice within thirty (30) days after the
Indemnified Person has actual knowledge of the Claim and shall enclose a copy of
all papers (if any) served with respect to the Claim; provided that the failure
of any Indemnified Person to give notice of a Claim as provided in this
Section 12.3 shall not relieve the Indemnifying Person of its obligations under
Section 12.2 except to the extent such failure results in insufficient time
being available to permit the Indemnifying Person to effectively defend against
the Claim or otherwise prejudices the Indemnifying Person’s ability to defend
against the Claim. In the event that the claim for indemnification is based upon
an inaccuracy or breach of a representation, warranty, covenant or agreement,
the Claim Notice shall specify the representation, warranty, covenant or
agreement that was inaccurate or breached.
 
(c) In the case of a claim for indemnification based upon a Claim, the
Indemnifying Person shall have thirty (30) days from its receipt of the Claim
Notice to notify the Indemnified Person whether it admits or denies its
obligation to defend the Indemnified Person against such Claim under this
Article 12. If the Indemnifying Person does not notify the Indemnified Person
within such thirty (30) day period regarding whether the Indemnifying Person
admits or denies its obligation to defend the Indemnified Person, it shall be
conclusively deemed obligated to provide such indemnification hereunder. The
Indemnified Person is authorized, prior to and during such thirty (30) day
period, to file any motion, answer or other pleading that it shall deem
 
 
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necessary or appropriate to protect its interests or those of the Indemnifying
Person and that is not prejudicial to the Indemnifying Person.
 
(d) If the Indemnifying Person admits its obligation, it shall have the right
and obligation to diligently defend, at its sole cost and expense, the Claim.
The Indemnifying Person shall have full control of such defense and proceedings,
including any compromise or settlement thereof. If requested by the Indemnifying
Person, the Indemnified Person agrees to cooperate in contesting any Claim which
the Indemnifying Person elects to contest (provided, however, that the
Indemnified Person shall not be required to bring any counterclaim or
cross-complaint against any Person). The Indemnified Person may participate in,
but not control, any defense or settlement of any Claim controlled by the
Indemnifying Person pursuant to this Section 12.3(d), provided that the
Indemnified Person may file initial pleadings as described in the last sentence
of paragraph (c) above if required by court or procedural rules to do so within
the thirty (30) day period in paragraph (c) above. An Indemnifying Person shall
not, without the written consent of the Indemnified Person, settle any Claim or
consent to the entry of any judgment with respect thereto that (i) does not
result in a final resolution of the Indemnified Person’s liability with respect
to the Claim (including, in the case of a settlement, an unconditional written
release of the Indemnified Person from all further liability in respect of such
Claim) or (ii) may materially and adversely affect the Indemnified Person (other
than as a result of money damages covered by the indemnity).
 
(e) If the Indemnifying Person does not admit its obligation or admits its
obligation but fails to diligently defend or settle the Claim, then the
Indemnified Person shall have the right to defend against the Claim (at the sole
cost and expense of the Indemnifying Person, if the Indemnified Person is
entitled to indemnification hereunder), with counsel of the Indemnified Person’s
choosing, subject to the right of the Indemnifying Person to admit its
obligation to indemnify the Indemnified Person and assume the defense of the
Claim at any time prior to settlement or final determination thereof. If the
Indemnifying Person has not yet admitted its obligation to indemnify the
Indemnified Person, the Indemnified Person shall send written notice to the
Indemnifying Person of any proposed settlement and the Indemnifying Person shall
have the option for ten (10) days following receipt of such notice to (i) admit
in writing its obligation for indemnification with respect to such Claim and
(ii) if its obligation is so admitted, assume the defense of the Claim,
including the power to reject the proposed settlement. If the Indemnified Person
settles any Claim over the objection of the Indemnifying Person after the
Indemnifying Person has timely admitted its obligation for indemnification in
writing and assumed the defense of the Claim, the Indemnified Person shall be
deemed to have waived any right to indemnity with respect to the Claim.
 
(f) In the case of a claim for indemnification not based upon a Claim, the
Indemnifying Person shall have thirty (30) days from its receipt of the Claim
Notice to (i) cure the Damages complained of, (ii) admit its obligation to
provide indemnification with respect to such Damages or (iii) dispute the claim
for such Damages. If the Indemnifying Person does not notify the Indemnified
Person within such thirty (30) day period that it has cured the Damages or that
it disputes the claim for such Damages, the
 
 
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Indemnifying Person shall be conclusively deemed obligated to provide
indemnification hereunder.
 
Section 12.4  Casualty and Condemnation.  If, after the date of this Agreement
but prior to the Closing Date, any portion of the Assets is destroyed or damaged
by fire or other casualty or is expropriated or taken in condemnation or under
right of eminent domain, Purchaser shall nevertheless be required to close. In
the event that the amount of the costs and expenses associated with repairing
and/or restoring all Assets affected by any such casualty or the Allocated
Values, determined in the same manner as a Title Defect in accordance with
Section 3.5(g), for all Units and Wells taken in a condemnation or pursuant to
right of eminent domain exceeds one percent (1%) of the Unadjusted Purchase
Price, Sellers must elect by written notice to Purchaser prior to Closing either
(i) to cause the Assets affected by any casualty to be repaired or restored, at
Sellers’ sole cost, as promptly as reasonably practicable (which work may extend
after the Closing Date), (ii) to indemnify Purchaser through a document to be
delivered at Closing reasonably acceptable to Sellers and Purchaser against any
costs or expenses that Purchaser reasonably incurs to repair or restore the
Assets subject to any casualty or (iii) to treat the costs and expenses
associated with repairing or restoring the Assets affected by such casualty or
taking the Allocated Value for any Unit or Well taken as a breach of DEPI’s
representation under Section 3.1, but without regard to the limitations in
Section 3.5(g) (other than Section 3.5(g)(v)(B)). In each case with respect to
clauses (i), (ii) or (iii) above, Sellers shall retain (or, if applicable,
receive an assignment from the Company or Wholly-Owned Subsidiary owning the
affected properties of) all rights to insurance and other claims against third
Persons with respect to the casualty or taking except to the extent the Parties
otherwise agree in writing.
 
Section 12.5  Limitation on Actions.
 
(a) The representations and warranties of the DEPI and Purchaser in Articles 4
and 5 and the covenants and agreements of the Parties in Article 6, (excluding
Sections 6.6 and 6.19) and the corresponding representations and warranties
given in the certificates delivered at Closing pursuant to Sections 8.2(j) and
8.3(d), as applicable, shall survive the Closing until May 31, 2008 except
that the representations and warranties of DEPI in Sections 4.2(e) [Title to
Shares], 4.2(f) [The Shares], 4.3(e) [Title to Equity Interests of the
Subsidiaries], 4.4(f) [The Equity Interests] and 4.5(e) [Taxes and Assessments]
and the corresponding representations and warranties given in the certificate
delivered at Closing pursuant to Section 8.2(j), in respect thereof, shall
survive the Closing without time limit and the representations and warranties of
DEPI in Section 4.18 shall terminate at Closing.
 
                      The remainder of this Agreement shall survive the Closing
without time limit except as may otherwise be expressly provided herein.
Representations, warranties, covenants and agreements shall be of no further
force and effect after the date of their expiration, provided that there shall
be no termination of any bona fide claim asserted pursuant to this Agreement
with respect to such a representation, warranty, covenant or agreement prior to
its expiration date.
 
(b) The indemnities in Sections 12.2(a)(iii), 12.2(a)(iv), 12.2(b)(i) and
12.2(b)(ii) shall terminate as of the termination date of each respective
representation,
 
 
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warranty, covenant or agreement that is subject to indemnification, except in
each case as to matters for which a specific written claim for indemnity has
been delivered to the Indemnifying Person on or before such termination date.
The indemnities in Sections 12.2(a)(i), 12.2(a)(ii), 12.2(a)(v), 12.2(b)(iii)
(to the extent related to Sections 12.1(a), 12.1(b), 12.1(d) 12.1(e), 12.1(f) or
12.1(g)) and 12.4 shall continue without time limit. The indemnities in Sections
12.2(b)(iii) (to the extent related to Sections 12.1(c), 12.1(h) and 12.1(i)),
12.2(b)(iv), 12.2(b)(v), 12.2(b)(vi), 12.2(b)(vii) and 12.2(b)(viii) shall
terminate one (1) year after Closing, except in each case at to matters for
which a specific written claim for indemnity has been delivered to the
Indemnifying Person on or before such termination date.
 
(c) DEPI shall not have any liability for any indemnification under Section 12.2
until and unless the aggregate amount of the liability for all Damages for which
Claim Notices are delivered by Purchaser exceeds Forty Million  dollars
($40,000,000), and then only to the extent such Damages exceed Forty Million 
dollars ($40,000,000). This Section shall not limit (i) indemnification for
breach of those representations and warranties that survive without time limit
under the first sentence of Section 12.5(a), (ii) indemnification for any breach
of those covenants contained in Sections 6.8, 6.9, 6.11, 6.12, 6.13 and 6.14 and
(iii) indemnification for the Retained Seller Obligations nor shall Damages for
those matters count toward the Forty Million  dollars ($40,000,000). 
 
(d) Notwithstanding anything to the contrary contained elsewhere in this
Agreement, DEPI shall not be required to indemnify Purchaser under this
Article 12 for aggregate Damages in excess of Four Hundred Million dollars
($400,000,000); provided, however, that this Section 12.5(d) shall not limit
DEPI’s liability with respect to breaches of (i) those representations and
warranties that survive without time limit under the first sentence of
Section 12.5(a), (ii) those covenants contained in Sections 6.8, 6.9, 6.12 and
6.13 and (iii) the Retained Seller Obligations.
 
(e) The amount of any Damages for which an Indemnified Person is entitled to
indemnity under this Article 12 shall be reduced by the amount of insurance
proceeds realized by the Indemnified Person or its Affiliates with respect to
such Damages (net of any collection costs, and excluding the proceeds of any
insurance policy issued or underwritten by the Indemnified Person or its
Affiliates).
 
 
ARTICLE 13.
MISCELLANEOUS
 
Section 13.1  Counterparts.  This Agreement may be executed in counterparts,
each of which shall be deemed an original instrument, but all such counterparts
together shall constitute but one agreement. Delivery of an executed counterpart
signature page by facsimile is as effective as executing and delivering this
Agreement in the presence of the other Parties to this Agreement.
 
 
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Section 13.2  Notices.  All notices that are required or may be given pursuant
to this Agreement shall be sufficient in all respects if given in writing, in
English and delivered personally, by telecopy or by recognized courier service,
as follows:
 
If to Sellers:                       Consolidated Natural Gas Company
                                        120 Tredegar Street
                                        Richmond, Virginia 23219
                                        Attention: Christine M. Schwab
                                        Telephone: (804) 819-2142
                                        Facsimile: (804) 819-2214
 
With a copy
to:                                                             Dominion
Resources, Inc.
                                        120 Tredegar Street
                                        Richmond, Virginia 23219
                                        Attention: Mark O. Webb
                                        Telephone: (804) 819-2140
                                        Telecopy: (804) 819-2202
 
and with a copy to:                                                      Baker
Botts L.L.P.
                                        910 Louisiana Street
                                        Houston, Texas 77002
                                        Attention:  David F. Asmus
                                        Telephone: (713) 229-1539
                                        Telecopy: (713) 229-2839
 
If to Purchaser:                                                             L O
& G Acquisition Corp.
                                        667 Madison Avenue, 7th Floor
                                        New York, NY 10021
                                        Attention:  Corporate Secretary
                                        Telephone: (212) 521-2000
                                        Telecopy:  (212) 521-2997
 
With a copy
to:                                                            Vinson & Elkins
LLP
                                        First City Tower
                                        1001 Fannin Street
                                        Suite 2500
                                        Houston, Texas 77002-6760
                                        Attention:  Douglas S. Bland
                                        Telephone: (713) 758-2498
                                        Telecopy:  (713) 615-5649
 
Either Party may change its address for notice by notice to the other in the
manner set forth above. All notices shall be deemed to have been duly given at
the time of receipt by the Party to which such notice is addressed.
 
Section 13.3  Sales or Use Tax, Recording Fees and Similar Taxes and Fees.
 Notwithstanding anything to the contrary in Article 9, Purchaser shall bear any
sales, use, excise,
 
 
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real property transfer, registration, documentary, stamp or transfer Taxes,
recording fees and similar Taxes and fees incurred and imposed upon, or with
respect to, the property transfers to Purchaser (or its Affiliates) contemplated
hereby. Should any Seller, Company or Subsidiary or Affiliate of any of them pay
prior to Closing, or should Seller or any continuing Affiliate of Seller pay
after Closing, any amount for which Purchaser is liable under this Section 13.3,
Purchaser shall, promptly following receipt of Sellers’ invoice, reimburse the
amount paid. If such transfers or transactions are exempt from any such taxes or
fees upon the filing of an appropriate certificate or other evidence of
exemption, the Parties shall cooperate to timely furnish such certificate or
evidence. Sellers shall provide reasonable assistance to Purchaser in
establishing the applicability of any exemption from sales, use, real property
transfer or any other transfer Taxes that is based wholly or partially on facts
and information related to Sellers, including, but not limited to, providing
Purchaser and taxing authorities access to books and records establishing the
lack of prior similar sales activity and the ability of a particular Seller to
separately establish income and expenses attributable to assets being
transferred to Purchaser.
 
Section 13.4  Expenses.  Except as provided in Section 6.7 and in Section 13.3,
all expenses incurred by Sellers in connection with or related to the
authorization, preparation or execution of this Agreement, and the Exhibits and
Schedules hereto and thereto, and all other matters related to the Closing,
including without limitation, all fees and expenses of counsel, accountants and
financial advisers employed by Sellers, shall be borne solely and entirely by
Sellers, and all such expenses incurred by Purchaser shall be borne solely and
entirely by Purchaser.
 
Section 13.5  Replacement of Bonds, Letters of Credit and Guarantees.  The
Parties understand that none of the bonds, letters of credit and guarantees, if
any, posted by Sellers or any other Affiliate of the Companies or Subsidiaries
(except the Companies and Subsidiaries) with any Governmental Authority or third
Person and relating to the Companies, the Subsidiaries, or the Assets are to be
transferred to Purchaser. On or before Closing, Purchaser shall obtain, or cause
to be obtained in the name of Purchaser, replacements for such bonds, letters of
credit and guarantees, and shall cause, effective as of the Closing, the
cancellation or return to Sellers of the bonds, letters of credit and guarantees
posted by Sellers and such Affiliates. Purchaser may also provide evidence that
such replacements are not necessary as a result of existing bonds, letters of
credit or guarantees that Purchaser has previously posted as long as such
existing bonds, letters of credit or guarantees are adequate to secure the
release of those posted by Sellers. Except for bonds, letters of credit and
guarantees related primarily to the Excluded Assets, Schedule 13.5 identifies
the bonds, letters of credit and guarantees posted by Sellers or any other
Affiliate of the Companies or Subsidiaries (except the Companies and
Subsidiaries) with respect to the E&P Business as of the date noted on such
schedule.
 
Section 13.6  Records.
 
(a) Within ten (10) days after the Closing Date, Sellers shall deliver or cause
to be delivered to Purchaser any Records that are in the possession of Sellers
or its Affiliates (except the Subsidiaries that are not Wholly-Owned
Subsidiaries), subject to Section 13.6(b).
 
 
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(b) Sellers may retain the originals of those Records relating to Tax and
accounting matters and provide Purchaser, at its request, with copies of such
Records that pertain to (i) non-income Tax matters solely related to the
Companies, the Subsidiaries or the Additional Assets; or (ii) if such Records
are necessary for Purchaser to adequately prepare Tax Returns or to contest a
Tax Audit pursuant to Article 9 with respect to any taxable period falling
partly in the Pre-Closing Period and partly in the Post-Closing Period, with
copies of such Records that are required by Purchaser for such Tax Records or
Tax Audit. Sellers may retain copies of any other Records.
 
(c) Purchaser, for a period of seven (7) years following the Closing, (and
subject to Purchaser’s additional obligations under Section 9.4) shall:
 
(i) retain the Records,
 
(ii) provide Sellers, their Affiliates, and their respective officers, employees
and representatives with access to the Records during normal business hours for
review and copying at Sellers’ expense and
 
(iii) provide Sellers, their Affiliates, and their respective officers,
employees and representatives with access, during normal business hours, to
materials received or produced after Closing relating to
 
(A) Sellers’ obligations under Article 9 (including to prepare Tax Returns and
to conduct negotiations with Tax Authorities), or
 
(B) any claim for indemnification made under Section 12.2 of this Agreement
(excluding, however, attorney work product and attorney-client communications
with respect to any such claim being brought by Purchaser under this Agreement)
 
for review and copying at Sellers’ expense and to the Companies’, the
Wholly-Owned Subsidiaries’ and their Affiliates’ personnel for the purpose of
discussing any such matter or claim.
 
(d) Sellers shall provide Purchaser, its Affiliates and their respective
officers, employees and representatives with access, during normal business
hours, to Excluded Records of the type described in Clauses (A) and (F) of
Section 1.2(a)(xi) and Clause (D) of Section 1.2(j)(xi) for review and copying
at Purchaser’s expense, to the extent necessary for Purchaser and/or its
Affiliates to defend any action, suit or proceeding before any Governmental
Authority or arbitration or any investigation by any Governmental Authority,
provided that Purchaser, its Affiliates and their respective officers, employees
and representatives shall have no access to any such Excluded Records that are
also excluded by virtue of Sections 1.2(a)(xi)(B), (C), (D) or (E) or Sections
1.2(j)(xi)(A), (B) or (C).
 
Section 13.7  Name Change.  On the Closing Date, Purchaser shall make the
filings required in each Company’s and Wholly-Owned Subsidiary’s jurisdiction of
organization to eliminate the name “Dominion” and any variants thereof from the
name of each Company and
 
 
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Wholly-Owned Subsidiary. As promptly as practicable, but in any case within one
hundred twenty (120) days after the Closing Date, Purchaser shall (i) make all
other filings (including assumed name filings) required to reflect the change of
name in all applicable records of Governmental Authorities and (ii) eliminate
the use of the name “Dominion” and variants thereof from the Assets and the E&P
Business, and, except with respect to such grace period for eliminating existing
usage, shall have no right to use any logos, trademarks or trade names belonging
to any Seller or any of its Affiliates. Purchaser shall be solely responsible
for any direct or indirect costs or expenses resulting from the change in use of
name, and any resulting notification or approval requirements.
 
Section 13.8  Governing Law and Venue.  This Agreement and the legal relations
between the Parties shall be governed by and construed in accordance with the
laws of the State of Texas, without regard to principles of conflicts of laws
that would direct the application of the laws of another jurisdiction.
 
Section 13.9  Jurisdiction; Service of Process.  Each Party consents to personal
jurisdiction in any action brought in the United States federal courts located
in the State of Texas (or, if jurisdiction is not available in the United States
federal courts located in the State of Texas, to personal jurisdiction in any
action brought in the state and federal courts located in the State of Delaware)
with respect to any dispute, claim or controversy arising out of or in relation
to or in connection with this Agreement, and each of the Parties hereto agrees
that any action instituted by it against the other with respect to any such
dispute, controversy or claim (except to the extent a dispute, controversy, or
claim arising out of or in relation to or in connection with the allocation of
the Purchase Price pursuant to Section 2.2, the determination of a Title Defect
Amount or Title Benefit Amount pursuant to Section 3.5(i), the determination of
Purchase Price adjustments pursuant to Section 8.4(b) or the determination of an
Adverse Environmental Condition pursuant to Section 12.2(g)(vi) is referred to
an expert pursuant to those Sections) will be instituted exclusively in the
United States District Court for the Southern District of Texas, Houston
Division (or, if jurisdiction is not available in the United States District
Court for the Southern District of Texas, Houston Division, then exclusively in
the state or federal courts located in the State of Delaware). The Parties
hereby waive trial by jury in any action, proceeding or counterclaim brought by
any Party against another in any matter whatsoever arising out of or in relation
to or in connection with this Agreement.
 
Section 13.10  Captions.  The captions in this Agreement are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
 
Section 13.11  Waivers.  Any failure by any Party to comply with any of its
obligations, agreements or conditions herein contained may be waived by the
Party to whom such compliance is owed by an instrument signed by the Party to
whom compliance is owed and expressly identified as a waiver, but not in any
other manner. No waiver of, or consent to a change in, any of the provisions of
this Agreement shall be deemed or shall constitute a waiver of, or consent to a
change in, other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
 
 
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Section 13.12  Assignment.  No Party shall assign or otherwise transfer all or
any part of this Agreement, nor shall any Party delegate any of its rights or
duties hereunder, without the prior written consent of the other Party and any
transfer or delegation made without such consent shall be void; provided,
however, Purchaser shall be entitled in accordance with Section 8.2 to assign
its rights (but not its obligations) to purchase specific portions of the
Interests under this Agreement to one or more directly or indirectly
wholly-owned Affiliates of Purchaser that satisfy the requirements of
Section 5.11 where applicable. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the Parties hereto and their respective
successors and assigns.
 
Section 13.13  Entire Agreement.  The Confidentiality Agreement, this Agreement
and the documents to be executed hereunder and the Exhibits and Schedules
attached hereto constitute the entire agreement among the Parties pertaining to
the subject matter hereof, and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the Parties pertaining
to the subject matter hereof.
 
Section 13.14  Amendment.  This Agreement may be amended or modified only by an
agreement in writing signed by Sellers and Purchaser and expressly identified as
an amendment or modification.
 
Section 13.15  No Third-Person Beneficiaries.  Nothing in this Agreement shall
entitle any Person other than Purchaser and Sellers to any claim, cause of
action, remedy or right of any kind, except the rights expressly provided to the
Persons described in Section 6.6 and Section 12.2(d).
 
Section 13.16  Guarantees.  Simultaneously with execution of this Agreement,
Sellers have caused DRI to deliver to Purchaser a guarantee for the performance
of Sellers’ obligations under this Agreement and any other agreements executed
pursuant to this Agreement in substantially the form attached hereto as
Exhibit “H” and Purchaser has caused Loews Corporation to deliver to Seller a
guarantee for the performance of Purchaser’s obligations under this Agreement
and any other agreements executed pursuant to this Agreement in substantially
the form attached hereto as Exhibit “I.”
 
Section 13.17  References.
 
In this Agreement:
 
(a) References to any gender includes a reference to all other genders;
 
(b) References to the singular includes the plural, and vice versa;
 
(c) Reference to any Article or Section means an Article or Section of this
Agreement;
 
(d) Reference to any Exhibit or Schedule means an Exhibit or Schedule to this
Agreement, all of which are incorporated into and made a part of this Agreement;
 
 
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(e) Unless expressly provided to the contrary, “hereunder”, “hereof”, “herein”
and words of similar import are references to this Agreement as a whole and not
any particular Section or other provision of this Agreement;
 
(f) References to “$” or “dollars” means United States dollars; and
 
(g) “Include” and “including” shall mean include or including without limiting
the generality of the description preceding such term.
 
Section 13.18  Construction.  Purchaser is capable of making such investigation,
inspection, review and evaluation of the Assets as a prudent purchaser would
deem appropriate under the circumstances, including with respect to all matters
relating to the Assets, their value, operation and suitability. Each of Sellers
and Purchaser has had the opportunity to exercise business discretion in
relation to the negotiation of the details of the transaction contemplated
hereby. This Agreement is the result of arm’s-length negotiations from equal
bargaining positions. It is expressly agreed that this Agreement shall not be
construed against any Party, and no consideration shall be given or presumption
made, on the basis of who drafted this Agreement or any particular provision
thereof.
 
Section 13.19  Limitation on Damages.  Notwithstanding anything to the contrary
contained herein, except with respect to damages under Section 9.1(g) for loss
of Tax benefits (or the incurrence of Taxes) attributable to failure to obtain a
step-up in Tax basis, none of Purchaser, Sellers or any of their respective
Affiliates shall be entitled to consequential, special or punitive damages in
connection with this Agreement and the transactions contemplated hereby (other
than consequential, special or punitive damages suffered by third Persons for
which responsibility is allocated between the Parties) and each of Purchaser and
Sellers, for itself and on behalf of its Affiliates, hereby expressly waives any
right to consequential, special or punitive damages in connection with this
Agreement and the transactions contemplated hereby (other than consequential,
special or punitive damages suffered by third Persons for which responsibility
is allocated between the Parties).
 

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

 
SELLER:
DOMINION EXPLORATION & PRODUCTION, INC.

   
Name:
/s/    
Title:
 

 
SELLER:
DOMINION ENERGY, INC.

   
Name:
/s/    
Title:
 

 
SELLER:
DOMINION OKLAHOMA TEXAS EXPLORATION &
   
PRODUCTION, INC.

   
Name:
/s/    
Title:
 

 
SELLER:
DOMINION RESERVES, INC.

   
Name:
/s/    
Title:
 

 
SELLER:
LDNG TEXAS HOLDINGS, LLC

   
Name:
/s/    
Title:
 

 
SELLER:
DEPI TEXAS HOLDINGS, LLC

   
Name:
/s/    
Title:
 

 
PURCHASER:
L O & G ACQUISITION CORP.

   
Name:
/s/    
Title:
 

 
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