Exhibit 10.1

 

Execution

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

This Membership Interest Purchase Agreement (this “Agreement”), dated as of May
4, 2018 (the “Execution Date”), is made and entered into by and among Old
Ironsides Fund II-A Portfolio Holding Company, LLC, a Delaware limited liability
company (“OIE Fund II-A”) and Old Ironsides Fund II-B Portfolio Holding Company,
LLC, a Delaware limited liability company (“OIE Fund II-B,” and each of OIE Fund
II-A and OIE Fund II-B, a “Seller,” and together, the “Sellers”), and Carbon
Natural Gas Company, a Delaware corporation (the “Purchaser”) and concerns the
Class A Units of Carbon Appalachian Company, LLC, a Delaware limited liability
company (the “Company”) held by the Sellers. Capitalized terms used but not
defined herein shall have the respective meanings given to such terms in the LLC
Agreement (as defined herein).

 

A. The Company is engaged in the business of evaluating, acquiring, exploring,
drilling, developing, producing and transporting oil, gas and other hydrocarbons
(the “Business”) within the AMI (as such term is defined in the Company’s
Amended and Restated Limited Liability Company Agreement dated August 15, 2017
(the “LLC Agreement”) through the operations of direct and indirect subsidiaries
(each, a “Subsidiary” and collectively, the “Subsidiaries”);

 

B. The Sellers collectively own Twenty-seven Thousand One Hundred Ninety Five
Class A Units of the Company, (the “Subject Class A Units”), which constitutes
Seventy-three and one-half percent (73.50%) of the issued and outstanding Class
A Units of the Company (the respective ownership of the Subject Class A Units
between the Sellers is set forth on Exhibit A attached hereto; and

 

C. The Purchaser desires to purchase from the Sellers and Sellers desire to sell
to the Purchaser, all of the Subject Class A Units, upon the terms and subject
to the conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter expressed, and subject to the satisfaction or waiver of
the conditions hereof, the parties hereto agree as follows:

 

ARTICLE 1
PURCHASE AND SALE

 

1.1 Purchase and Sale of Subject Class A Units. Upon and subject to the terms
and conditions of this Agreement and in reliance on the representations,
warranties and covenants contained herein, the Purchaser hereby agrees to
purchase from the Sellers, and the Sellers hereby agree to sell, assign,
transfer, convey and deliver to the Purchaser all of the Subject Class A Units.

 

1.2 Purchase Price. The price to be paid for the Subject Class A Units shall be
Fifty-Six Million Eight Hundred Five Thousand Eight Hundred Fifty-Four Dollars
($56,805,854.00) (the “Base Purchase Price,” and as adjusted in accordance with
Section 1.3 hereof, the “Purchase Price”). The Purchase Price shall be paid in
cash at Closing, allocated and payable to each Seller in the respective
percentages set forth on Exhibit A opposite such Seller’s name.

 

1.3 Purchase Price Adjustments.

 

(a) Attached hereto as Exhibit B is a spreadsheet setting forth the calculation
and components of the Purchase Price as of December 31, 2017.

 

 

 

(b) The Sellers and the Purchaser acknowledge and agree that the Base Purchase
Price and the Purchase Price shall be calculated in accordance with Exhibit B
using the same methodology thereof. The Purchase Price shall be calculated by
adjusting the following items reflected in Exhibit B and recomputing the line
item identified as “Equity Purchase Price” under the heading “Old Ironsides”:
(i)  the Priority Amount allocable to the outstanding Class A Units as of
December 31, 2017 shall be adjusted to reflect the Priority Amount allocable to
the outstanding Class A Units on the day immediately prior to the Closing Date,
(ii)  the Company’s Working Capital as of December 31, 2017 shall be adjusted to
reflect the Company’s Working Capital on the day immediately preceding the
Closing Date, and (iii)  the outstanding principal amount owed by Carbon
Appalachia Enterprises, LLC to the Lenders under that certain Credit Agreement
dated April 3, 2017, as amended (the “Credit Agreement”), as of December 31,
2017, shall be adjusted to reflect the outstanding principal amount owed to the
Lenders under the Credit Agreement on the day immediately preceding the Closing
Date.

 

(c) For purposes of this Agreement, “Working Capital” means, with respect to the
Company and its Subsidiaries, as of the time of determination, the positive or
negative amount obtained by subtracting (x) the sum of all current Liabilities
of the Company and its Subsidiaries (but excluding, for the avoidance of doubt,
any income Tax Liabilities, any outstanding principal amount under the Credit
Agreement and any fees associated with the amendment of the Credit Agreement)
from (y) the sum of all current assets of the Company and its Subsidiaries (but
excluding, for the avoidance of doubt, any income Tax assets), in each case as
of such time of determination. Working Capital shall be calculated in accordance
with the methodology and the sample calculations set forth on Exhibit C and
otherwise in accordance with GAAP.

 

(d) Preliminary Settlement Statement. Not later than two (2) Business Days prior
to Closing, Purchaser shall prepare and submit to Sellers for review a draft
settlement statement (the “Preliminary Settlement Statement”) that shall set
forth Purchaser’s good faith estimate of the Purchase Price, reflecting each
adjustment made in accordance with this Agreement and the calculation of the
adjustments used to determine such amount. The Preliminary Settlement Statement
will be used to adjust the Base Purchase Price at Closing.

 

(e) Final Settlement Statement. On or before ninety (90) days after Closing, a
final settlement statement (the “Final Settlement Statement”) will be prepared
by Purchaser and delivered to Sellers, setting forth Purchaser’s good faith
calculation of the Purchase Price and reflecting each adjustment made in
accordance with this Agreement and the resulting final Purchase Price (the
“Final Price”). As soon as practicable, and in any event within thirty (30) days
after receipt of the Final Settlement Statement, Sellers shall return to
Purchaser a written report containing any proposed changes to the Final
Settlement Statement and an explanation of any such changes and the reasons
therefor (the “Dispute Notice”). Any changes not so specified in the Dispute
Notice shall be deemed waived, and Purchaser’s determinations with respect to
all such elements of the Final Settlement Statement that are not addressed
specifically in the Dispute Notice shall prevail. If Sellers fail to timely
deliver a Dispute Notice to Purchaser containing changes Sellers propose to be
made to the Final Settlement Statement, the Final Settlement Statement as
delivered by Purchaser will be deemed to be correct and will be final and
binding on the parties hereto and not subject to further audit or arbitration.
If the Final Price set forth in the Final Settlement Statement is mutually
agreed upon in writing by Sellers and Purchaser, the Final Settlement Statement
and the Final Price, shall be final and binding on the parties hereto and not
subject to further audit or arbitration. Any difference in the Purchase Price as
paid at Closing pursuant to the Preliminary Settlement Statement and the Final
Price shall be paid by the owing party within five (5) Business Days of final
determination of such owed amounts in accordance herewith to the owed party.

 

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(f) Disputes. Sellers and Purchaser shall work together in good faith to resolve
any matters addressed in the Dispute Notice. If Sellers and Purchaser are unable
to resolve all of the matters addressed in the Dispute Notice within ten (10)
Business Days after the delivery of such Dispute Notice by Sellers to Purchaser,
either party hereto may, upon notice to the other party hereto, submit all
unresolved matters addressed in the Dispute Notice to arbitration in accordance
with this Section 1.3(f) by such Person as the parties hereto may mutually
select in writing (the “Accounting Arbitrator”), together with the Dispute
Notice, the Final Settlement Statement and any other documentation such party
may desire to submit. If the parties hereto fail to agree on an Accounting
Arbitrator within ten (10) Business Days after a party’s election to submit such
matters to arbitration under this Section 1.3(f), then either party hereto may
request the Denver, Colorado office of the American Arbitration Association to
select the Accounting Arbitrator. Within ten (10) Business Days after receiving
the respective submissions of the parties hereto, the Accounting Arbitrator
shall render a decision choosing either Sellers’ position or Purchaser’s
position with respect to each matter addressed in any Dispute Notice, based on
the materials described above. Any decision rendered by the Accounting
Arbitrator pursuant hereto shall be final, conclusive and binding on Sellers and
Purchaser and enforceable against any of the parties hereto in any court of
competent jurisdiction. The costs of the Accounting Arbitrator shall be borne
fifty percent (50%) by Sellers and fifty percent (50%) by Purchaser.

 

(g) Cooperation. Purchaser and shall cooperate and provide Sellers with access
to the books, records and personnel of the Company and its Subsidiaries and
Purchaser and its Affiliates as reasonably requested by Sellers and related to
the matters addressed in this Section 1.3.

 

ARTICLE 2
CLOSING

 

2.1 Closing. The closing of the sale and purchase of the Subject Class A Units
(the “Closing”) shall take place on the third Business Day following the date on
which there first occurs the satisfaction (or, to the extent permitted, the
waiver) of the conditions set forth in Sections 5.1 and 5.2 (other than any
condition which by its nature is to be satisfied at the Closing, but subject to
satisfaction of all such conditions) or at such other place, time and date as
may be agreed by Seller and Purchaser (such date upon which the Closing occurs,
the “Closing Date”) and the benefits of the transaction, including, but not
limited to the entitlement to the revenue, deductions, expenses and other
financial and/or Tax matters, shall be effective as of 12:01 a.m. on that date.
The Closing shall take place at the offices of the Purchaser, at 1700 Broadway,
Suite 1170, Denver, Colorado 80290, at such time as the parties may agree, or
via email exchange of documents. The date of the Closing is sometimes herein
referred to as the “Closing,” provided, however, that all references to the
“Closing” as a point in time from which, or to which, a period of time is to be
measured shall be deemed references to the Closing Date, unless otherwise set
forth herein. At Closing, (x) Sellers’ shall execute, acknowledge and deliver to
Purchaser the items described in Sections 5.1(c) and 5.1(g) and (y) Purchaser
shall execute, acknowledge and deliver to Sellers the items described in
Sections 5.2(c) and 5.2(e).

 

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ARTICLE 3
REPRESENTATIONS AND WARRANTIES

 

3.1 Representations and Warranties of the Seller. Each Seller severally, and not
jointly, solely as to such Seller, represents and warrants to Purchaser as of
the date of this Agreement the following:

 

(a) Authority of the Sellers. Such Seller has all requisite capacity, power,
authority and legal right to execute, deliver and perform its obligations
pursuant to this Agreement. This Agreement, the underlying transactions
contemplated hereby, and the execution, delivery and performance of this
Agreement by such Seller have been duly authorized by all necessary actions of
such Seller. This Agreement has been, and the other agreements, documents and
instruments required to be delivered by such Seller in accordance with the
provisions hereof (the “Sellers’ Documents”) will be, duly executed and
delivered on behalf of such Seller; and this Agreement constitutes, and the
Sellers’ Documents, when executed and delivered, will constitute, legal, valid
and binding obligations of such Seller, enforceable against such Seller in
accordance with their respective terms, subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and similar Laws, as well as to
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at Law).

 

(b) Ownership.

 

(i) Such Seller is the record and beneficial owner of the Subject Class A Units
set forth opposite its respective name on Exhibit A, free and clear of all Liens
other than (A) restrictions on transfer that may be imposed by state or federal
securities Laws and (B) restrictions on transfer that are set forth in the LLC
Agreement. Such Seller has full right, power and authority to transfer and
deliver to the Purchaser valid title to such respective Subject Class A Units,
free and clear of all Liens other than (A) restrictions on transfer that may be
imposed by state or federal securities Laws and (B) restrictions on transfer
that are set forth in the LLC Agreement. The portion of the Subject Class A
Units held by such Seller represents such Seller’s entire ownership and rights
to ownership in and to the Company.

 

(ii) Except pursuant to this Agreement, there is no contractual obligation
pursuant to which such Seller has, directly or indirectly, granted any option,
warrant or other right to any individual or corporation, association,
partnership, limited liability company, joint venture, joint stock or other
company, business trust, trust, organization or other entity of any kind
(“Person”) to acquire any of the Subject Class A Units held by such Seller or
any interest therein.

 

(iii) There are no Liens on, or other contractual obligations relating to, the
ownership, transfer or voting of such Seller’s portion of the Subject Class A
Units, or otherwise affecting the rights of such Seller in the Company (except
as set forth in the organizational documents of the Company (including the LLC
Agreement)). Except for the transactions contemplated by this Agreement or the
LLC Agreement, there is no contractual obligation, which obligates the Company
to purchase, redeem or otherwise acquire, or make any payment (including any
distribution) in respect of, such Seller’s portion of the Subject Class A Units.

 

(iv) At the Closing, the Purchaser will acquire the record and beneficial
ownership of such Seller’s portion of the Subject Class A Units, free and clear
of all Liens, except as are created by the Purchaser and (A) restrictions on
transfer that may be imposed by state or federal securities Laws and (B)
restrictions on transfer that are set forth in the LLC Agreement.

 

(c) Existence; Organization.

 

(i) The Company is a limited liability company duly organized, validly existing
and in good standing under the laws of the state of Delaware. The Company has
full power and authority to conduct its business and own and operate its
properties as now conducted, owned and operated.

 

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(ii) Such Seller is a limited liability company duly organized, validly existing
and in good standing under the laws of the state of Delaware. Such Seller has
full power and authority to conduct its respective business and own and operate
its respective properties as now conducted, owned and operated.

 

(d) Validity of Contemplated Transaction.

 

(i) The execution, delivery and performance of such Seller’s obligations under
this Agreement by such Seller does not and will not violate, conflict with or
result in the breach of any term, condition or provision of, or require the
consent of any Person under (i) any existing regulation of any Governmental Body
to which such Seller or, to such Seller’s Knowledge, the Company is subject,
(ii) any judgment, order, writ, injunction, decree or award of any court,
arbitrator or governmental or regulatory official, body or authority (each a
“Governmental Body” and collectively, “Governmental Bodies”) that is applicable
to such Seller or, to such Seller’s Knowledge, the Company, (iii) to such
Seller’s Knowledge, the organizational documents of the Company or any
securities issued by the Company, (iv) the organizational documents of such
Seller, or (v) any mortgage, indenture, agreement, contract, commitment, lease,
plan, authorization, or other instrument, document or understanding (excluding,
for the avoidance of doubt, the Credit Agreement and all documents contemplated
thereunder), oral or written, to which such Seller or, to such Seller’s
Knowledge, the Company is a party, by which such Seller or, to such Seller’s
Knowledge, the Company may have rights or by which, to such Seller’s Knowledge,
any of the Company’s assets or its Subsidiaries may be bound or affected, or, to
such Seller’s Knowledge, give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of the Company or any Subsidiary thereunder, in each case (i)
through (v), other than (A) in the case of consents, those that have already
been obtained or that are to be obtained prior to Closing and (B) such as could
not reasonably be likely to have a Material Adverse Effect (as defined herein).
As used in this Agreement, the term “Material Adverse Effect” means any change
in, or effect on, the Business, the Company’s assets, Subsidiaries, operations,
or condition (financial or otherwise) which, when considered either individually
or in the aggregate together with all other adverse changes or effects with
respect to which such phrase is used in this Agreement, is materially adverse to
the Business, the Company’s assets, Subsidiaries, operations or condition
(financial or otherwise), taken as a whole; provided, however, that a Material
Adverse Effect shall not include any material adverse effects resulting from:
(i) entering into this Agreement or the announcement or pendency of the
transactions contemplated by this Agreement; (ii) changes in general market,
economic, financial or political conditions (including changes in commodity
prices (including hydrocarbons), fuel supply or transportation markets, interest
or rates); (iii) conditions (or changes in such conditions) generally affecting
the oil and gas and/or gathering, processing or transportation industry;
(iv) acts of God, including storms or meteorological events; (v) orders, actions
or failures to act of Governmental Bodies; (vi) civil unrest or similar
disorder, the outbreak of hostilities, terrorist acts or war; (vii) any actions
taken or omitted to be taken (A) by or at the written request or with the prior
written consent of Purchaser or (B) as expressly permitted or prescribed
hereunder; (viii) matters that are cured or no longer exist by the earlier of
Closing and the termination of this Agreement; (ix) any casualty losses; (x) a
change in any applicable statute, law (including common law), rule, regulation,
ordinance, order, code, ruling, writ, injunction, decree or other official act
of or by any Governmental Body (collectively, “Laws”) or in the interpretation
of generally accepted accounting principles in the United States, consistently
applied (“GAAP”) from and after the Execution Date; (xi) reclassification or
recalculation of reserves in the ordinary course of business; or (xii) natural
declines in well performance. No authorization, approval or consent of, and no
registration or filing with, any Governmental Body is required in connection
with the execution, delivery or performance of this Agreement by such Seller.

 

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(e) No Undisclosed Liabilities. Except as set forth on Schedule 3.1(e), to such
Seller’s Knowledge, as of the Execution Date, the Company does not have any
Liabilities (as defined herein) except (i) as and to the extent of the amounts
reflected or reserved against on the balance sheet of the Company as at December
31, 2017 (the “Balance Sheet”), (ii) Liabilities incurred by the Company in the
ordinary course of the Business since the date of the Balance Sheet or (iii)
Liabilities that would not reasonably be expected to have a Material Adverse
Effect. For purposes of this Agreement, the term “Liability” or “Liabilities”
shall include, without limitation, any direct or indirect indebtedness,
guarantee, claim, loss, damage, cost, expense, obligation or fixed or unfixed,
known or unknown, asserted or unasserted, choate or inchoate, liquidated or
unliquidated, secured or unsecured, matured or unmatured, absolute or
contingent, whether arising under contract, tort or by statute.

 

(f) Absence of Certain Developments. To such Seller’s Knowledge, since March 31,
2018 and prior to the date hereof, except for the matters disclosed in Schedule
3.1(f) or approved, consented to or ratified by Purchaser, or actions taken in
the ordinary course of business:

 

(i) the Company has not authorized the issuance of or issued any additional
Units or other Interests of the Company (other than pursuant to the terms of the
LLC Agreement);

 

(ii) the Company has not borrowed any money or otherwise incurred, guaranteed or
otherwise become liable for any Indebtedness (other than pursuant to the terms
of the LLC Agreement);

 

(iii) the Company has not mortgaged, pledged, assigned in trust or otherwise
encumbered any property or assets of the Company or any of its Subsidiaries, or
assigned any monies owed or to be owed to the Company or any of its
Subsidiaries, except for customary Liens contained in or arising under operating
or similar agreements executed by or binding on the Company or any of its
Subsidiaries or to secure Indebtedness;

 

(iv) the Company has not made any distributions to the Members pursuant to
Section 5.4 or Section 5.5 of the LLC Agreement;

 

(v) the Company has not adjusted the compensation or benefits of any manager,
officer or employee of the Company;

 

(vi) the Company has not incurred any expenditure or series of related
expenditures not otherwise a part of an approved Budget, except any expenditure
or series of related expenditures (x) as required under Section 2.7 of the LLC
Agreement, (y) as permitted under Section 2.8 of the LLC Agreement or (z) that
constitute a Permitted Variance;

 

(vii) the Company has not entered into any binding contractual obligation to do
any of the things referred to elsewhere in this Section 3.1(f); and

 

(viii) to the Seller’s Knowledge, the Company has not experienced a Material
Adverse Effect.

 

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(g) Tax Matters. To the Knowledge of the Sellers, for U.S. federal income Tax
purposes, the Company is currently treated as a partnership.

 

(i) To the Knowledge of the Sellers, all Tax Returns required to be filed by the
Company or any of its Subsidiaries (each, a “Company Tax Return” and
collectively, the “Company Tax Returns”) have been filed with the appropriate
Governmental Body in all jurisdictions in which such Company Tax Returns are
required to be filed, and all such Company Tax Returns properly reflect the
Liabilities of the Company for Taxes for the periods, property or events covered
thereby.

 

(ii) To the Knowledge of the Sellers, all Taxes owed by the Company or any of
its Subsidiaries, including without limitation those which are called for by the
Company Tax Returns, or heretofore or hereafter claimed to be due by any Taxing
authority from the Company, have been properly accrued or paid and no such Taxes
are currently delinquent.

 

Notwithstanding any other provision in this Agreement, the representations and
warranties in this Section 3.1(g) are the only representations and warranties in
this Agreement with respect to the Tax matters of the Company.

 

(h) Brokers’ Fees. None of such Seller or any of such Seller’s Affiliates will
have any Liability for any brokerage fee, finders’ fee or other commission
payable to any broker, finder, investment banker or other Person in connection
with the transactions contemplated hereunder based on arrangements made by or on
behalf of such Seller or any of such Seller’s Affiliates for which Purchaser or
Purchaser’s Affiliates could become liable.

 

3.2 Representations and Warranties of the Purchaser. The Purchaser represents
and warrants to the Sellers the following:

 

(a) Corporate Existence. The Purchaser is a corporation duly organized, validly
existing and in good standing under the Laws of the state of Delaware. The
Purchaser has full power and authority to conduct its business and own and
operate its respective properties as now conducted, owned and operated.

 

(b) Corporate Power and Authorization. The Purchaser has the requisite capacity,
power, authority and legal right to execute, deliver and perform its obligations
pursuant to this Agreement. The Agreement, the underlying transactions
contemplated hereby, and the execution, delivery and performance of the
obligations under this Agreement by the Purchaser has been duly authorized by
all necessary action on the part of the Purchaser. This Agreement has been, and
the other agreements, documents and instruments required to be delivered by the
Purchaser in accordance with the provisions hereof (the “Purchaser Documents”)
will be, duly executed and delivered on behalf of the Purchaser by a duly
authorized officer of the Purchaser and this Agreement constitutes, and the
Purchaser Documents, when executed and delivered, will constitute, the legal,
valid and binding obligation of the Purchaser enforceable against the Purchaser
in accordance with their respective terms, subject to the effects of bankruptcy,
insolvency, reorganization, moratorium and similar Laws, as well as to
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at Law).

 

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(c) Validity of Contemplated Transactions, Etc. The execution, delivery and
performance of this Agreement by the Purchaser does not and will not violate,
conflict with or result in the breach of any term, condition or provision of, or
require the consent of any other Person under (i) any existing regulation of any
Governmental Body to which the Purchaser, or to Purchaser’s Knowledge, the
Company is subject, (ii) any judgment, order, writ, injunction, decree or award
of any Governmental Body that is applicable to Purchaser or, to such Purchaser’s
Knowledge, the Company, (iii) to Purchaser’s Knowledge, the organizational
documents of the Company or any securities issued by the Company, or (iv) the
organizational documents of the Purchaser or any securities issued by the
Purchaser, or (v) any mortgage, indenture, agreement, contract, commitment,
lease, plan, authorization, or other instrument, document or understanding
(excluding, for the avoidance of doubt, (x) the Credit Agreement and all
documents contemplated thereunder and (y) that certain Credit Agreement among
Purchaser, the Lenders from time to time party thereto and LegacyTexas Bank
dated October 3, 2016, as amended, and all documents contemplated thereunder
(the “CRBO Credit Agreement”)), oral or written, to which Purchaser or, to
Purchaser’s Knowledge, the Company is a party, by which Purchaser or the Company
may have rights or by which any of the Company’s assets or its Subsidiaries may
be bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of the Company or any Subsidiary thereunder, in each case (i)
through (v), other than (A) in the case of consents, those that have already
been obtained or that are to be obtained prior to Closing and (B) such as could
not reasonably be likely to have a material adverse effect. No authorization or
approval of, and no filing with, any Governmental Body is required in connection
with the execution, delivery or performance of this Agreement by the Purchaser,
except as otherwise set forth herein.

 

(d) Independent Investigation. The Purchaser is a current member of the Company
and has conducted its own independent investigation, review and analysis of the
business, results of operations, prospects, and the assets of the Business and
acknowledges that it has been provided sufficient access to the personnel,
properties, assets, premises, books and records, and other documents and data of
the Business for such purpose. The Purchaser acknowledges and agrees that in
making its decision to enter into this Agreement and to consummate the
transactions contemplated hereby, the Purchaser has relied solely upon its own
investigation and the express representations and warranties of the Sellers as
set forth in Section 3.1 of this Agreement (including the related portions of
the disclosure schedules), and based on such investigation, has formed an
independent judgment concerning the Sellers, the Subject Class A Units, the
Company, the Subsidiaries, the assets of the Company and the Subsidiaries, the
Business, and the transactions contemplated hereby.

 

(e) Ownership. To Purchaser’s Knowledge, except for the transactions
contemplated by this Agreement, there is no contractual obligation, or provision
in the organizational documents of the Company which obligates the Company to
purchase, redeem or otherwise acquire, or make any payment (including any
distribution (other than Tax distributions)) in respect of, any Seller’s portion
of the Subject Class A Units.

 

(f) Investment Representation. Purchaser is acquiring the Subject Class A Units
for its own account as an investment and not with a view to sell, transfer or
otherwise distribute all or any part thereof to any other Person in any
transaction that would constitute a “distribution” within the meaning of the
Securities Act of 1933, and the rules and regulations promulgated thereunder
(the “Securities Act”). Purchaser acknowledges that it can bear the economic
risk of its investment in the Subject Class A Units, and has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in all of the Subject Series A Units.
Purchaser is an “accredited investor” as such term is defined in Rule 501 of
Regulation D under the Securities Act. Purchaser understands that neither the
offer nor sale of the Subject Class A Units has or will have been registered
pursuant to the Securities Act or any applicable state securities Laws, that all
of the Subject Class A Units will be characterized as “restricted securities”
under federal securities Laws and that, under such Laws and applicable
regulations, none of the Subject Class A Units can be sold or otherwise disposed
of without registration under the Securities Act or an exemption thereunder.

 

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(g) Brokers’ Fees. None of Purchaser or its Affiliates will have any Liability
for any brokerage fee, finders’ fee or other commission payable to any broker,
finder, investment banker or other Person in connection with the transactions
contemplated hereunder based on arrangements made by or on behalf of Purchaser
or any of its Affiliates for which any Seller or such Seller’s respective
Affiliates could become liable.

 

3.3 Survival of Representations and Warranties; Limitations on Breaches of
Representations and Warranties. All representations and warranties made by the
Parties in this Agreement or in any certificate, schedule, statement, document
or instrument furnished hereunder or in connection with negotiation, execution
and performance of this Agreement shall survive the Closing for a period of nine
(9) months, except with respect to (i) occurrences of actual fraud and (ii) the
representations and warranties contained in Sections 3.1(a), 3.1(b), 3.1(h),
3.2(a), 3.2(b), 3.2(d), 3.2(e), 3.2(f) and 3.2(g) (collectively, the
“Fundamental Representations”), which shall survive Closing indefinitely.

 

ARTICLE 4
AGREEMENT PENDING CLOSING

 

4.1 Agreements of Sellers Pending the Closing. Each Seller covenants and agrees,
severally and not jointly, on behalf of itself and, through its application of
commercially reasonable efforts, on behalf of the Company that, during the
period after the date this Agreement is signed and before the earlier of the
termination of this Agreement and the Closing:

 

(a) Conduct of Business. The Company shall conduct the Business in the ordinary
course consistent with past practice and, absent the consent of the Purchaser,
which consent shall not be unreasonably withheld, will make no material changes
to present accounting practices or methods, employee salaries, or officer
compensation.

 

(b) Maintenance of Physical Assets and Inventories. The Company shall continue
to maintain and service its assets and Subsidiaries in substantially the same
manner as has been its consistent past practice.

 

(c) Maintenance of Authorizations. The Company shall use commercially reasonable
efforts to maintain in full force and effect all governmental or
quasi-governmental licenses, permits, certificates, authorizations,
registrations, consents and permits used in or relating to the Business,
including, without limitation, all federal, state and other authorities, permits
and licenses.

 

(d) Compliance with Laws. The Company shall comply in all material respects with
all regulations applicable to the Business or the Company’s assets and
Subsidiaries.

 

(e) Actions of Sellers. Subject to the terms and conditions of this Agreement,
such Seller shall use commercially reasonable efforts to cooperate with
Purchaser in order to effectuate the transactions contemplated by this
Agreement.

 

(f) Updated Schedules. The Sellers and the Company may promptly disclose to the
Purchaser any information contained in the representations and warranties and
Schedules delivered pursuant hereto that, because of an event occurring after
the date hereof, is incomplete or is no longer correct as of all times after the
date hereof until the Closing; provided, however, that none of such disclosures
shall be deemed to modify, amend or supplement the representations and
warranties of the Sellers contained herein or in any other agreement, document
or instrument for any purpose, unless the Purchaser shall have consented in
writing thereto.

 

9

 

 

(g) Sale of Assets. Absent the consent of the Purchaser, which consent shall not
be unreasonably withheld, the Company shall not directly or indirectly sell or
encumber all or any part of its assets or those of any Subsidiary other than, in
any such case, in the ordinary course of the Business consistent with past
practice.

 

(h) Exclusive Dealing. Until the earlier to occur of the termination of this
Agreement as provided in Section 9.1 below and the Closing:

 

(a)  such Seller will not directly or indirectly, through any representative or
otherwise, solicit or entertain offers from, negotiate with or in any manner
encourage, discuss, accept, or consider any proposal of any other Person
relating to the acquisition of the Subject Class A Units, in whole or in part,
whether directly or indirectly, through purchase, merger, consolidation, or
otherwise; and

 

(b)  such Seller will immediately notify the Purchaser regarding any contact
between the Seller and any other Person regarding any such offer or proposal or
any related inquiry.

 

4.2 Agreements of Purchaser Pending the Closing. The Purchaser covenants and
agrees, on behalf of itself and, through its application of commercially
reasonable efforts, on behalf of the Company that, during the period after the
date this Agreement is signed and before the earlier of the termination of this
Agreement and the Closing:

 

(a) Conduct of Business. The Company shall conduct the Business in the ordinary
course consistent with past practice and, absent the consent of the Sellers,
will make no material changes to present accounting practices or methods,
employee salaries, or officer compensation.

 

(b) Maintenance of Physical Assets and Inventories. The Company shall continue
to maintain and service its assets and Subsidiaries in substantially the same
manner as has been its consistent past practice.

 

(c) Maintenance of Authorizations. The Company shall use commercially reasonable
efforts to maintain in full force and effect all governmental or
quasi-governmental licenses, permits, certificates, authorizations,
registrations, consents and permits used in or relating to the Business,
including, without limitation, all federal, state and other authorities, permits
and licenses.

 

(d) Compliance with Laws. The Company shall comply in all material respects with
all regulations applicable to the Business or the Company’s assets and
Subsidiaries.

 

(e) Actions of Purchaser. Subject to the terms and conditions of this Agreement,
Purchaser shall reasonably cooperate with Seller in order to effectuate the
transactions contemplated by this Agreement.

 

(f) Updated Schedules. Purchaser may promptly disclose to the Sellers any
information contained in the representations and warranties and Schedules
delivered pursuant hereto that, because of an event occurring after the date
hereof, is incomplete or is no longer correct as of all times after the date
hereof until the Closing; provided, however, that none of such disclosures shall
be deemed to modify, amend or supplement the representations and warranties of
Purchaser contained herein or in any other agreement, document or instrument for
any purpose, unless each Seller shall have consented in writing thereto.

 

10

 

 

(g) Sale of Assets. Absent the consent of the Sellers, which consent shall not
be unreasonably withheld, the Company shall not directly or indirectly sell or
encumber all or any part of its assets or those of any Subsidiary other than, in
any such case, in the ordinary course of the Business consistent with past
practice.

 

(h) Financing. Purchaser shall take, or cause to be taken, all commercially
reasonable actions authorized by its board of directors and to do, or cause to
be done, all things necessary, proper or advisable to arrange and consummate the
Public Offering (or any permitted replacement, amended, modified or any
applicable Alternative Financing (as defined herein)), including (i) filing a
draft registration statement on Form S-1 with the Securities and Exchange
Commission stating the consummation of the transactions contemplated hereunder
as the primary use of proceeds (the “SEC”), (ii) promptly responding to any
comments received from the SEC with respect to such draft registration statement
and filing updated drafts of the registration statement, (iii) preparing any
required financial statements for the Public Offering, (iv) engaging investment
banks or underwriters for the Public Offering, and (v) complying in all material
respects with the applicable requirements of the Securities Exchange Act of 1934
and the Securities Act, as applicable. Purchaser shall keep Sellers informed
with respect to any material activity concerning the status of the Public
Offering, including if for any reason Purchaser no longer believes in good faith
that it will be able to obtain all or any portion of the proceeds of the Public
Offering. If the Public Offering becomes unavailable, the Purchaser shall, if
authorized by its board of directors, use commercially reasonable efforts
authorized by its board of directors to arrange to obtain alternative financing
from alternative sources in an amount sufficient to consummate the transactions
contemplated hereunder (“Alternative Financing”). If the Public Offering or any
Alternative Financing is consummated, Purchaser shall use the net proceeds of
such offering, such Alternative Financing or other funds available to it to pay
the Purchase Price at the Closing.

 

(i) Lender Consent. Purchaser shall use reasonable efforts to obtain, prior to
the Closing, the consent of the necessary lenders under the Credit Agreement and
the CRBO Credit Agreement to permit (i) the acquisition by Purchaser of the
Subject Class A Units and (ii) any other action required to consummate the
transactions contemplated by this Agreement (together, the “Credit Agreement
Consents”).

 

4.3 Survival of Covenants; Limitations on Breach of Covenants. All covenants
made by Sellers or Purchaser in this Agreement that are to be performed at or
prior to Closing shall terminate upon the Closing. All other covenants and
agreements shall terminate in accordance with their respective terms.

 

11

 

 

ARTICLE 5
CONDITIONS PRECEDENT TO CLOSING

 

5.1 Conditions Precedent to the Purchaser’s Obligations. The obligation of the
Purchaser to consummate the transactions contemplated by this Agreement is
subject to the fulfillment or satisfaction, at the times indicated herein, of
each of the following conditions precedent:

 

(a) Representations and Warranties True as of the Closing. The Fundamental
Representations of Sellers shall be true and correct in all material respects
and the representations and warranties of Sellers in Section 3.1 that are not
Fundamental Representations (the “Sellers’ Non-Fundamental Representations”)
shall be true and correct in all respects (in each case, without regard to
materiality or Material Adverse Effect qualifiers), on and as of the Closing
Date, with the same effect as though such representations and warranties had
been made or given 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 (excluding the reference to “as of the date of
this Agreement” in the lead in to Section 3.1), except for all such breaches, if
any, of such Sellers’ Non-Fundamental Representations that individually or in
the aggregate would not reasonably be expected to have a Material Adverse
Effect.

 

(b) Compliance with this Agreement. The Sellers shall have performed and
complied in all material respects with all agreements and conditions required by
this Agreement to be performed or complied with by them prior to or at the
Closing.

 

(c) Closing Certificate. The Purchaser shall have received a certificate from
the Sellers dated the Closing Date, certifying that the conditions specified in
Sections 5.1(a) and 5.1(b) hereof have been fulfilled (the “Sellers’
Certificate”).

 

(d) No Threatened or Pending Litigation. At the Closing, no suit, action or
other proceeding, or injunction or final judgment relating thereto shall be
threatened in writing or be pending before any Governmental Body in which it is
sought to restrain or prohibit or to obtain damages in connection with the
consummation of the transactions contemplated hereby.

 

(e) Successful Closing of Public Offering. The Purchaser shall have successfully
closed (i) a public offering of its common stock registered on Form S-1 with net
proceeds payable to and received by the Seller, after payment of all expenses,
brokerage or investment banking commissions, attorneys’ fees, auditors’ fees,
accountant fees, road show expenses, consulting fees and the other costs and
expenses associated therewith, equal to or in excess of the Base Purchase Price
(the “Public Offering”) or (ii) an Alternative Financing.

 

(f) Approval of Lenders and Administrative Agents. Purchaser shall have obtained
the consent of the necessary lenders under the Credit Agreement.

 

(g) Sellers’ Deliveries. The Sellers shall have delivered to the Purchaser at or
prior to the Closing the following, all of which shall be in a form reasonably
satisfactory to the Purchaser and its counsel:

 

(i) the executed Assignment in the form attached hereto as Exhibit D (the
“Assignment”);

 

(ii) the Sellers’ Release described in Section 5.1(h) below, executed by the
Sellers; and

 

(iii) an affidavit, duly executed and acknowledged by each Seller dated as of
the Closing Date, in accordance with Treasury Regulation § 1.1445-2(b)(2) and
Section 1446(f) of the Code, certifying that such Seller is not a “foreign
person” for such purposes.

 

(h) Seller Release. Effective as of the Closing, each Seller shall execute the
form of Release attached hereto as Exhibit E (the “Sellers’ Release”).

 

(i) No Material Adverse Effect. There shall not have occurred between the date
of the execution of this Agreement and the Closing a Material Adverse Effect.

 

12

 

 

5.2 Conditions Precedent to the Obligations of the Sellers. The obligation of
each Seller to consummate the transactions contemplated by this Agreement are
subject to the fulfillment or satisfaction, prior to or at the Closing, of each
of the following conditions precedent:

 

(a) Representations and Warranties True as of the Closing. The Fundamental
Representations of Purchaser shall be true and correct in all material respects
and the representations and warranties of Purchaser in Section 3.2 that are not
Fundamental Representations (the “Purchaser’s Non-Fundamental Representations”)
shall be true and correct in all respects (in each case, without regard to
materiality qualifiers), on and as of the Closing Date, with the same force and
effect as though such representations and warranties had been made or given 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 all such breaches, if any, of such Purchaser’s
Non-Fundamental Representations that individually or in the aggregate would not
have a material adverse effect.

 

(b) Compliance with this Agreement. The Purchaser shall have performed and
complied in all material respects with all agreements and conditions required by
this Agreement to be performed or complied with by it prior to or at the
Closing.

 

(c) Closing Certificate. The Sellers shall have received a certificate from the
Purchaser dated the date of the Closing, certifying that the conditions
specified in Section 5.2(a) and 5.2(b) hereof have been fulfilled (the
“Purchaser’s Certificate”).

 

(d) No Threatened or Pending Litigation. At the Closing, no suit, action or
other proceeding, or injunction or final judgment relating thereto shall be
threatened in writing or be pending before any Governmental Body in which it is
sought to restrain or prohibit or to obtain substantial damages in connection
with the consummation of the transactions contemplated hereby.

 

(e) Purchaser’s Deliveries. The Purchaser shall have delivered to the Seller at
or prior to Closing the following, all of which shall be in a form reasonably
satisfactory to the Sellers and their counsel:

 

(i) the Purchase Price, to the accounts designated in the Preliminary Settlement
Statement, by direct bank or wire transfer in immediately available funds;

 

(ii) the Assignment;

 

(iii) the Purchaser’s Release described in Section 5.2(f) below, executed by the
Purchaser;

 

(iv) the CA Consents Evidence described in Section 5.2(g) below.

 

(f) Purchaser’s Release. Effective as of the Closing, Purchaser shall execute
the form of Release attached hereto as Exhibit F (the “Purchaser’s Release”).

 

(g) Approval of Lenders and Administrative Agents. Purchaser shall have
delivered evidence, to the reasonable satisfaction of Sellers, that the Credit
Agreement Consents shall have been obtained (the “CA Consents Evidence”).

 

(h) No Material Adverse Effect. There shall not have occurred between the date
of the execution of this Agreement and the Closing a Material Adverse Effect or
material adverse effect (as applicable).

 

13

 

 

ARTICLE 6
INDEMNIFICATION

 

6.1 General Indemnification Obligation of the Seller. From and after the
Closing, the Sellers shall reimburse, indemnify, defend, and hold harmless the
Purchaser, its officers, directors, affiliates (including, following the
Closing, the Company), shareholders, employees, and their successors and
permitted assigns (each a “Purchaser Party”) against and in respect of any and
all demands, suits, claims, actions or causes of action, assessments, damages,
losses, deficiencies, Liabilities, settlements, penalties, forfeitures, costs
and expenses (including, without limitation, reasonable legal fees and expenses
and clean-up costs) (hereinafter collectively referred to as “Indemnity Losses”)
and individually an “Indemnity Loss”) incurred, suffered, sustained or required
to be paid, directly or indirectly, by, or sought to be imposed on, a Purchaser
Party resulting from, related to or arising out of any of the following:

 

(a) any breach of any representation or warranty in Section 3.1 (other than
Section 3.1(g)) or the Sellers’ Certificate;

 

(b) any failure to perform any agreement or covenant to be performed on the part
of the Sellers under this Agreement following the Closing; and

 

(c) Sellers’ Allocated Portion (as defined herein) of any and all Taxes (1)
resulting from, related to or arising out of a breach of any representation or
warranty set forth in Section 3.1(g), or (2) imposed on the Company or any
Subsidiary of the Company (A) for all taxable periods ending on or before the
Closing Date and the portion through the end of the Closing Date for any
Straddle Period (determined in accordance with Section 9.17(c)) (the
“Pre-Closing Date Tax Period”) and (B) as a transferee or successor, by
contract, or otherwise, resulting from events, transactions or relationships
occurring or existing prior to the Closing, other than such Taxes attributable
to a transfer or other transaction between the Company and a Purchaser Party
(clause (1) and (2), collectively, “Seller Taxes”); provided, however, that
Seller Taxes shall not include a Tax to the extent such Tax was included as a
current Liability in the determination of Working Capital. As used herein, the
“Sellers’ Allocated Portion” means 58.06%.

 

6.2 General Indemnification Obligation of the Purchaser. From and after the
Closing, the Purchaser shall reimburse, indemnify, defend, and hold harmless the
Sellers, and each Seller’s Affiliates and its and their respective officers,
directors, affiliates, partners, members, shareholders, employees, and their
successors and permitted assigns (each, a “Seller Party”) against and in respect
of any Indemnity Losses incurred, suffered, sustained or required to be paid,
directly or indirectly, by, or sought to be imposed on, the Seller Party
resulting from, related to or arising out of any of the following:

 

(a) any breach of any representation or warranty in Section 3.2 or in the
Purchaser’s Certificate;

 

(b) any failure to perform any agreement or covenant to be performed on the part
of Purchaser under this Agreement following the Closing; and

 

(c) all Taxes (other than Seller Taxes) imposed on the Company or any Subsidiary
of the Company.

 

14

 

 

6.3 Limitation on Liability.

 

(a) Sellers shall not have any Liability for any indemnification under Section
6.1(a) (i) for any individual Indemnity Loss unless the indemnification amount
with respect to such Indemnity Loss exceeds $100,000 (the “De Minimis
Threshold”) and (ii) until and unless the aggregate amount of all Indemnity
Losses for which Claim Notices are delivered by Purchaser that exceed the De
Minimis Threshold exceeds two and one-half percent (2.5%) of the Base Purchase
Price (the “Indemnity Deductible”), after which point Sellers shall only be
liable for such indemnification to the extent such Indemnity Losses that exceed
the De Minimis Threshold exceed the Indemnity Deductible; provided, that the
limitations on Sellers’ Liability in this Section 6.3(a) shall not apply to
Sellers’ Liability for breaches of the Fundamental Representations and the
corresponding representations and warranties in Sellers’ Certificate or Sellers’
Liability for breaches of its representations and warranties in Section 3.1(g)
and the corresponding representations and warranties in the Sellers’
Certificate.

 

(b) Notwithstanding anything to the contrary contained in this Agreement,
Sellers shall not be required to indemnify the Purchaser Parties for, or
otherwise have any Liability to the Purchaser Parties for, aggregate Indemnity
Losses for any indemnification (i) under Section 6.1(a) (other than any
obligation to indemnify the Purchaser Parties pursuant to Section 6.1(a) for any
breach of any Fundamental Representations and the corresponding representations
and warranties in the Sellers’ Certificate or any breach of representations and
warranties in Section 3.1(g) and the corresponding representations and
warranties in Sellers’ Certificate) in excess of fifteen percent (15%) of the
Base Purchase Price or (ii) otherwise under the terms of this Agreement in
excess of one hundred percent (100%) of the Base Purchase Price. Sellers’ shall
not have any Liability under Section 6.1(a) with respect to representations and
warranties pertaining to the Company in excess of Sellers’ Allocated Portion of
the total Indemnity Losses resulting from such breach.

 

(c) Sellers shall have no Liability for any breach by Sellers of this Agreement
(or the Sellers’ Certificate) if (i) Purchaser had Knowledge of any fact,
circumstance or event prior to Purchaser’s execution and delivery of this
Agreement that resulted in such breach or (ii) (A) Purchaser did not have
Knowledge any fact, circumstance or event prior to Purchaser’s execution and
delivery of this Agreement that resulted in such breach but Purchaser had
Knowledge of such fact, circumstance or event prior to the Closing, (B) where
due to such breach Purchaser’s conditions to Closing set forth in Section 5.1
were not satisfied and (C) Purchaser consummated the transactions contemplated
by this Agreement.

 

(d) For the avoidance of doubt, no Seller or Seller Party shall have any
Liability hereunder for any action taken by Purchaser or its Affiliates in its
capacity as manager of the Company or otherwise on behalf of the Company or
approved by Purchaser’s designee to the Board regardless of whether (i) such
action would give rise to a breach of a representation or warranty or covenant
hereunder or in any of the documents contemplated hereby or (ii) any Seller has
Knowledge of such action taken.

 

(e) Sellers shall have no liability pursuant to Section 6.1 in respect of and to
the extent of any item or any Indemnity Losses that have been reflected as a
deduction in determining the Purchase Price hereunder or otherwise reflected as
a liability or a reserve in Working Capital as finally determined pursuant to
Section 1.3 or that otherwise would result  in a double recovery.

 

(f) Sellers and Purchaser, as applicable, shall use their commercially
reasonable efforts to seek third party and insurance recoveries in respect of
Indemnity Losses. In the event any insurance proceeds or other recoveries from
third parties are actually realized (in each case calculated net of reasonable
third party out-of-pocket costs and expenses of such recoveries but not
including any costs or expenses attributable to increases in insurance premiums)
by Sellers or Purchaser or their respective Affiliates, as applicable,
subsequent to the receipt by such Indemnified Party of an indemnification or
other payment hereunder in respect of the claims to which such insurance
proceeding or third party recovery relate, appropriate refunds shall be made
promptly to the Indemnifying Party regarding the amount of such payment.

 

15

 

 

6.4 Notice of Claim; Right to Contest Claims.

 

(a) In the event either a Purchaser Party or Seller Party seeks indemnification
(the “Indemnified Party”), the Indemnified Party shall give reasonably prompt
written notice (the “Claim Notice”) to all indemnifying parties (the
“Indemnifying Party”). The Claim Notice shall specify the facts constituting the
basis for such claim, the breach of representations, warranty, agreement or
covenant claimed by the Indemnified Party, as applicable, and the amount, to the
extent known, of the claim asserted; provided, that the right of any party to be
indemnified hereunder shall not be adversely affected by a failure to give such
notice unless, and then only to the extent that, an Indemnifying Party is
materially and adversely prejudiced thereby.

 

(b) Upon receipt of a Claim Notice that does not involve a Third Person (as
defined herein), the Indemnifying Party shall have thirty (30) days from the
receipt of such Claim Notice to notify the Indemnified Party in writing that the
Indemnifying Party disputes such claim. If the Indemnifying Party does not
timely notify the Indemnified Party of any dispute, subject to the terms of this
Agreement, the Indemnifying Party shall pay the amount of any valid claim not
more than fifteen (15) days after the expiration of the initial thirty (30) day
period.

 

(c) If the Indemnifying Party does timely notify the Indemnified Party of such
dispute, then the Indemnified Party shall have fifteen (15) days to respond in
writing to the objection of the Indemnifying Party. If after such fifteen-day
period there remains a dispute, then the Indemnified Party and the Indemnifying
Party will attempt in good faith for a period not to exceed thirty (30)
additional days to agree upon the rights of the respective parties with respect
to such claim. If the parties should so agree, a memorandum setting forth such
agreement will be prepared and signed by the Purchaser and the Seller, and
subject to the terms of this Agreement, the Indemnifying Party shall pay the
amount of any valid claim not more than fifteen (15) days after the execution of
such memorandum. If the parties do not agree within such additional thirty-day
period, then the Indemnified Party may pursue any and all other remedies
available to it hereunder.

 

6.5 Right to Contest Claims of Third Persons.

 

(a) If an Indemnified Party is entitled to indemnification hereunder because of
a claim asserted by any claimant other than an Indemnified Party (a “Third
Person”), the Indemnified Party shall promptly deliver to the Indemnifying Party
a Claim Notice after such assertion is actually known to the Indemnified Party;
provided, however, that the right of a Person to be indemnified hereunder in
respect of claims made by a Third Person shall not be adversely affected by a
failure to promptly give such Claim Notice unless, and then only to the extent
that, an Indemnifying Party is materially and adversely prejudiced thereby. The
Indemnifying Party shall have the right, upon written notice to the Indemnified
Party to investigate, contest or settle the claim alleged by such Third Person
(a “Third Person Claim”) so long as (i) the Indemnifying Party gives written
notice to the Indemnified Party within twenty (20) days after the Indemnified
Party has given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of any and all
Indemnity Losses the Indemnified Party may suffer resulting from, arising out
of, relating to, in the nature of, or caused by the Third Party Claim, (ii) the
Third Party Claim involves only money damages and does not seek an injunction or
other equitable relief against the Indemnified Party, (iii) the Third Party
Claim does not relate to or otherwise arise in connection with any criminal or
regulatory enforcement action, (iv) settlement of, an adverse judgment with
respect to or the Indemnifying Party’s conduct of the defense of the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely to
include any findings of fact or admissions of culpability as to the Indemnified
Party and (v) the Indemnifying Party conducts the defense of the Third Party
Claim actively and diligently; provided, that the Indemnifying Party has the
right to settle and compromise such Third Person Claim only with the consent of
the Indemnified Party (which consent may not be unreasonably withheld,
conditioned or delayed) unless there is no finding or admission of any violation
of legal requirements or any violation of the rights of any Person and no affect
or any other claims that may be made against the Indemnified Party, and the sole
relief provided is monetary damages that are paid in full by the Indemnified
Party; provided further, that any settlement shall include an unconditional
release of such claim against the Indemnified Party.

 

16

 

 

(b) The Indemnified Party may thereafter participate in (but not control) the
defense of any such Third Person Claim with its own counsel at its own expense,
unless separate representation is necessary to avoid a conflict of interest, as
determined by the Indemnifying Party’s legal counsel in accordance with
applicable Law, in which case such representation shall be at the expense of the
Indemnifying Party.

 

(c) Subject to the Indemnified Party’s compliance with Section 6.5(a), unless
and until the Indemnifying Party notifies the Indemnified Party pursuant to
Section 6.5(a) of its intent to investigate, contest or settle a Third Person
Claim, the Indemnified Party shall have the right, at its option, to assume and
control the defense of the matter and to look to the Indemnifying Party for the
full amount of the reasonable costs of defense. The failure of the Indemnifying
Party to respond in writing to a Notice of Claim of the Indemnified Party with
respect to such Third Person Claim within thirty (30) days after receipt thereof
shall be deemed an irrevocable election not to defend the same. If the
Indemnifying Party does not notify the Indemnified Party of its intent to
investigate, contest or settle a Third Person Claim, (i) the Indemnified Party
may defend against such claim using counsel of its choice, in such manner as it
may reasonably deem appropriate, including, but not limited to, settling such
claim, after giving notice of the same to the Indemnifying Party, on such terms
as the Indemnified Party may reasonably deem appropriate, and (ii) the
Indemnifying Party may participate in (but not control) the defense of such
action, with its own counsel at its own expense. The Parties shall make
available to each other all relevant information in their possession relating to
any such Third Person Claim and shall cooperate in the defense thereof.

 

6.6 Mitigation. Each Indemnified Party will use all commercially reasonable
efforts to mitigate all Indemnity Losses that may give rise to an
indemnification claim upon and after becoming aware of any event or circumstance
which would reasonably be expected to give rise to such Indemnity Losses.

 

6.7 Exclusive Remedy. From and after the Closing, except for Section 1.3 the
indemnification and remedies set forth in this Article 6 shall constitute the
sole and exclusive remedies of the Purchaser Parties against Seller and of the
Seller Parties against Purchaser with respect to any breach of representation or
warranty or non-performance, partial or total, of any covenant or agreement
contained in this Agreement; provided, however, that nothing in this Section 6.7
shall prevent any Party from seeking injunctive or equitable relief in
accordance with this Agreement; provided further, that in the event a Purchaser
Party or Seller Party should assert rights or obligations in connection with the
transactions contemplated hereunder under any Law or cause of action not based
on the interpretation or application of this Agreement, the Parties agree that
the provisions of this Article 6 shall in all instances apply to such claim or
cause of action.

 

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6.8 Non-Compensatory Damages. NONE OF THE PURCHASER PARTIES NOR SELLER PARTIES
SHALL BE ENTITLED TO RECOVER FROM SELLERS OR PURCHASER, AS APPLICABLE, OR THEIR
RESPECTIVE AFFILIATES, ANY SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE,
EXEMPLARY, REMOTE OR SPECULATIVE DAMAGES OR LOST PROFITS OR DIMINUTION IN VALUE
ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT (EXCEPT AS OTHERWISE PROVIDED
IN SECTION 8.9), THE SELLERS’ CERTIFICATE, THE PURCHASER’S CERTIFICATE OR THE
OTHER DOCUMENTS CONTEMPLATED HEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY, EXCEPT TO THE EXTENT ANY SUCH PARTY SUFFERS SUCH DAMAGES TO A THIRD
PARTY, WHICH DAMAGES (INCLUDING COSTS OF DEFENSE AND REASONABLE ATTORNEYS’ FEES
INCURRED IN CONNECTION WITH DEFENDING AGAINST SUCH DAMAGES) SHALL NOT BE
EXCLUDED BY THIS PROVISION AS TO RECOVERY HEREUNDER. SUBJECT TO THE PRECEDING
SENTENCE, PURCHASER, ON BEHALF OF EACH OF THE PURCHASER PARTIES, AND SELLERS, ON
BEHALF OF EACH OF THE SELLER PARTIES, EACH WAIVE ANY RIGHT TO RECOVER ANY
SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE, EXEMPLARY, REMOTE OR SPECULATIVE
DAMAGES OR LOST PROFITS OR DIMINUTION IN VALUE ARISING IN CONNECTION WITH OR
WITH RESPECT TO THIS AGREEMENT (EXCEPT AS OTHERWISE PROVIDED IN SECTION 8.9),
THE SELLERS’ CERTIFICATE, THE PURCHASER’S CERTIFICATE OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

 

6.9 Waiver of Other Representations.

 

(a) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IT IS THE
EXPLICIT INTENT OF EACH PARTY HERETO, AND THE PARTIES HEREBY AGREE, THAT NEITHER
SELLER NOR ANY OF SUCH SELLER’S AFFILIATES OR SUCH SELLER’S AND SUCH SELLER’S
RESPECTIVE REPRESENTATIVES HAS MADE OR IS MAKING ANY REPRESENTATION OR WARRANTY
WHATSOEVER, EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING ANY IMPLIED
REPRESENTATION OR WARRANTY AS TO THE CONDITION, MERCHANTABILITY, USAGE,
SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE SUBJECT
CLASS A UNITS, EXCEPT THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY MADE BY
SELLERS IN SECTION 3.1 AND IN THE SELLERS’ CERTIFICATE. IN PARTICULAR, AND
WITHOUT IN ANY WAY LIMITING THE FOREGOING, (I) NEITHER SELLER NOR ANY OF SUCH
SELLER’S AFFILIATES OR SUCH SELLER’S OR SUCH SELLER’S RESPECTIVE REPRESENTATIVES
MAKES ANY REPRESENTATION OR WARRANTY REGARDING ANY ENVIRONMENTAL MATTERS AND
(II) NEITHER SELLER NOR ANY OF SUCH SELLER’S AFFILIATES OR SUCH SELLER’S OR SUCH
SELLER’S REPRESENTATIVES MAKES ANY REPRESENTATION OR WARRANTY TO BUYER WITH
RESPECT TO ANY FINANCIAL PROJECTIONS OR FORECASTS RELATING TO THE SUBJECT CLASS
A UNITS.

 

(b) EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED IN
SECTION 3.1 AND IN THE SELLERS’ CERTIFICATE: THE SUBJECT CLASS A UNITS ARE BEING
TRANSFERRED THROUGH THE SALE OF THE SUBJECT CLASS A UNITS “AS IS, WHERE IS, WITH
ALL FAULTS,” AND EACH SELLER AND ITS AFFILIATES AND ITS AND THEIR RESPECTIVE
REPRESENTATIVES EXPRESSLY DISCLAIM, AND PURCHASER AND ITS AFFILIATES AND THEIR
RESPECTIVE REPRESENTATIVES EXPRESSLY DISCLAIM RELIANCE UPON ANY AND ALL OTHER
REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED,
INCLUDING REPRESENTATIONS AND WARRANTIES AS TO THE CONDITION, VALUE OR QUALITY
OF THE SUBJECT CLASS A UNITS OR THE PROSPECTS, RISKS AND OTHER INCIDENTS OF THE
SUBJECT CLASS A UNITS.

 

(c) PURCHASER ACKNOWLEDGES THAT THE REPRESENTATIONS AND WARRANTIES SET FORTH IN
SECTION 3.1 AND IN THE SELLERS’ CERTIFICATE ARE THOSE ONLY OF SUCH SELLERS AND
NOT OF ANY OTHER PERSON INCLUDING ANY AFFILIATE OR REPRESENTATIVE OF SELLERS OR
ANY OF THEIR AFFILIATES. PURCHASER FURTHER ACKNOWLEDGES, ON BEHALF OF ITSELF AND
ITS AFFILIATES, THAT IT HAS NOT RELIED ON ANY REPRESENTATION NOT EXPRESSLY SET
FORTH IN THIS AGREEMENT.

 

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6.10 Waiver of Right of Rescission. Sellers and Purchaser acknowledge that,
following Closing, the payment of money, as limited by the terms of this
Agreement, shall be adequate compensation for breach of any representation,
warranty, covenant or agreement contained herein or for any other claim arising
in connection with or with respect to this Agreement or the transactions
contemplated by this Agreement. As the payment of money shall be adequate
compensation, following Closing, Purchaser and Sellers waive any right to
rescind this Agreement or any of the transactions contemplated hereby.

 

ARTICLE 7
POST-CLOSING MATTERS

 

7.1 Further Assurances. From and after the Closing, each of the parties hereto
will cooperate with the other and execute and deliver to the other parties
hereto such other instruments and documents and take such other actions as may
be reasonably requested from time to time by any other parties hereto as
necessary to carry out, evidence and confirm the intended purposes of this
Agreement.

 

7.2 D&O Liability and Indemnification.

 

(a) For a period of six (6) years after the Closing, Purchaser will not, and
will not permit the Company or any of its Subsidiaries to, amend, repeal or
modify any provision in the Company’s or any of its Subsidiaries’ certificate or
articles of incorporation, bylaws or other equivalent governing documents
relating to the exculpation, indemnification or advancement of expenses of any
current and former officers and directors (each, an “D&O Indemnified Person”)
(unless required by Law), it being the intent of the parties that the current
and former officers and directors of the Company and its Subsidiaries will
continue to be entitled to such exculpation, indemnification and advancement of
expenses to the full extent of the Law.

 

(b) In addition to the other rights provided for in this Section 7.2 and not in
limitation thereof, from and after the Closing, Purchaser will, and will cause
the Company and its Subsidiaries (each, a “D&O Indemnifying Party”) to, to the
fullest extent permitted by applicable Law, (i) indemnify and hold harmless (and
release from any Liability to Purchaser or the Company or any of its
Subsidiaries), the D&O Indemnified Persons against all D&O Expenses (as defined
herein), losses, claims, damages, judgments or amounts paid in settlement (“D&O
Costs”) in respect of any threatened, pending or completed claim, action or
proceeding, whether criminal, civil, administrative or investigative, based on
or arising out of or relating to the fact that such Person is or was a director
or officer of the Company or any of its Subsidiaries arising out of acts or
omissions occurring on or prior to the Closing (including in respect of acts or
omissions in connection with this Agreement and the transactions contemplated
thereby) (a “D&O Indemnifiable Claim”) and (ii) advance to such D&O Indemnified
Persons all D&O Expenses incurred in connection with any D&O Indemnifiable Claim
(including in circumstances where the D&O Indemnifying Party has assumed the
defense of such claim) promptly after receipt of reasonably detailed statements
therefor; provided, however, that the Person to whom D&O Expenses are to be
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification. Any D&O
Indemnifiable Claims will continue until such D&O Indemnifiable Claim is
disposed of or all judgments, orders, decrees or other rulings in connection
with such D&O Indemnifiable Claim are fully satisfied. For the purposes of this
Section 7.2(b), “D&O Expenses” will include attorneys’ fees and all other costs,
charges and expenses paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal), or
preparing to defend, to be a witness in or participate in any D&O Indemnifiable
Claim, but will exclude losses, judgments and amounts paid in settlement (which
items are included in the definition of D&O Costs).

 

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(c) On or before the Closing, Purchaser and Sellers will cause the Company to,
at the Company’s expense, obtain, maintain and fully pay for irrevocable “tail”
insurance policies naming the D&O Indemnified Persons as direct beneficiaries
with a claims period of at least six (6) years from the Closing Date from an
insurance carrier and in an amount and scope mutually agreed upon by Purchaser
and Sellers. For the avoidance of doubt, the cost of such insurance policies
shall adjust Working Capital and the Purchase Price at Closing and be reflected
in the Preliminary Settlement Statement. From and after Closing, Purchaser will
not, and will cause the Company not to, cancel or change such insurance policies
in any respect.

 

ARTICLE 8
RESTRICTIVE COVENANTS

 

8.1 Consideration Acknowledgement. The operational history of the Company has
created over time substantial goodwill (proprietary information, customer
contacts, etc.) that is currently used in the Business and will be transferred
to Purchaser as part of the membership interest purchase transaction
contemplated by this Agreement. Consequently, the Purchaser wants to assure that
the Sellers will abide by the restrictive covenants set forth in this Article 8.
The Sellers also acknowledge that they will each directly and indirectly receive
substantial benefits from the consummation of the transaction contemplated by
this Agreement and that such consideration is the consideration for the transfer
of the goodwill and the promises and covenants herein. The Sellers hereby
acknowledge that such benefits are good and adequate consideration for the
promises and covenants granted by it hereunder.

 

8.2 Definitions.

 

(a) “Affiliate” means with respect to a specified Person, any other Person
directly or indirectly controlling, controlled by or under common control with,
the specified person or entity.

 

(b) “Business Activities” shall mean all activities conducted by the Company or
any of its Subsidiaries in evaluating, acquiring, exploring, drilling,
developing, and producing oil, gas and other hydrocarbons.

 

(c) “Competing Business” means any (i) Competing Company engaged, whether in
whole or in part, in the performance of Business Activities and (ii) which first
became known to Sellers in connection with Sellers’ receipt of Confidential
Information from the Company and Sellers’ ownership of the Subject Class A Units
prior to the Closing.

 

(d) “Competing Company” means any of the following Persons: (i) Diversified Gas
and Oil PLC, (ii) Energy Corporation of America, Inc., (iii) EnerVest, Ltd.,
(iv) EQT Corporation, (v) Jetta Operating Company, Inc., (vi) Kinzer Drilling
Company, LLC, (vii) Blue Ridge Mountain Resources, Inc., (viii) Vinland Energy,
LLC, (ix) WS Atkins Limited, and (x) Core Minerals III, LLC.

 

(e) “Non-Disclosure Period” means the period beginning on the Closing date and
ending on the second anniversary thereof.

 

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(f) “Restricted Period” means the period beginning on the Closing Date and
ending on the first anniversary thereof.

 

(g) “Territory” means the AMI.

 

8.3 Covenant Not To Compete. In consideration of the substantial benefits to be
received by the Sellers directly and indirectly from the consummation of the
transaction contemplated by this Agreement, to the fullest extent permitted by
applicable Law, during the Restricted Period, each Seller shall not, and shall
direct its Affiliates not to, directly or indirectly own, manage, operate,
control, or otherwise be in any manner affiliated or connected with, or engage
or participate in the ownership, management, operation, financing, or control of
any Competing Company engaged in any Competing Business within the Territory.

 

8.4 Agreement Not to Solicit Employees. In addition to and not in limitation of
Section 8.3, and in further consideration of the substantial benefits received
by them directly and indirectly from the consummation of the transactions
contemplated by this Agreement, each Seller agrees that during the Restricted
Period it will not directly or indirectly, whether for its own account or for
the account of any Affiliate, solicit or recruit or attempt to solicit or
recruit, hire or attempt to hire, contract with or attempt to contract with any
person that, to such Seller’s Knowledge, is an employee of the Company, the
Purchaser or any of their Affiliates; provided, however, that the foregoing
provision shall not prevent any Seller or such Seller’s Affiliates from engaging
in general solicitations (including, without limitation, use of employment
agencies, advertisements and the internet) not specifically directed towards
employees of the Company, the Purchaser or any of their Affiliates, or hiring as
a result thereof; provided further, that this Section 8.4 shall not restrict any
portfolio companies of any Seller or such Seller’s Affiliates who are not acting
upon the direction of such Seller or its Affiliates.

 

8.5 Non-Disclosure. In addition to and not in limitation of the covenants
contained above, and in consideration of the substantial benefits to be received
by them directly and indirectly from the consummation of the transaction
contemplated by this Agreement, each Seller agrees that during the
Non-Disclosure Period, it will not, directly or indirectly, without the prior
written consent of the Purchaser, disclose (except to its representatives) or
use any Confidential Information (as defined herein); provided, however, that,
notwithstanding anything to the contrary in this Section 8.5, the information
subject to the foregoing provisions of this Section will not include any
information (i) generally available to, or known by, the public (other than as a
result of disclosure in violation hereof), (ii) is or becomes available to any
Seller or any of its Affiliates from a source other than the Company or its
Affiliates, provided, that, to the Knowledge such Seller, such source is not
bound by any contractual, legal or fiduciary obligation of confidentiality to
the Company with respect to such information or (iii) is or was independently
developed or derived by any Seller or any of its Affiliates without reliance on
the Confidential Information; and provided further, that the provisions of this
Section 8.5 will not prohibit (A) disclosure of Confidential Information (I)
required or requested by any applicable Law so long as, to the extent reasonably
practicable and legally permissible, prior notice is given of such disclosure
and a reasonable opportunity is afforded to contest the same or (II) made in
connection with the enforcement of any right or remedy relating to this
Agreement or (B) any retention of any Confidential Information as required by
Law, professional rules and standards or internal compliance policies or
contained in an archived computer system backup in accordance with any Seller’s
or its Affiliate’s security and/or disaster recovery procedures. Each Seller
agrees that it will be responsible for any breach or violation of the provisions
of this Section 8.5 by any of its representatives. For purposes of this Article
8, “Confidential Information” means any and all confidential and/or proprietary
information relating to the Company which:

 

(a) was or is used in the business operations of the Company and was created by
the Company, in each case prior to the Closing; or

 

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(b) was or is used in the business operations of the Company, in each case prior
to the Closing.

 

Confidential Information includes, but is not limited to, the following types of
confidential and/or proprietary information relating to the Company (whether or
not reduced to writing or designated as confidential):

 

(i) existing and prospective business opportunities and transactions
information;

 

(ii) customer information;

 

(iii) vendor and supplier information;

 

(iv) employee information;

 

(v) financial information;

 

(vi) marketing, business development, pricing and quoting information;

 

(vii) facilities information;

 

(viii) trade secrets;

 

(ix) information (material or otherwise) regarding the Purchaser that has not
been disclosed to the public; and

 

(x) information of a confidential or secret nature directly or indirectly
relating to or concerning the affairs, financial position, assets, operations,
prospects, business activities or affairs of the Company, the Purchaser and any
of their Affiliates.

 

Confidential Information shall be considered a trade secret under all applicable
Law. Purchaser, on its own behalf and on behalf of the Company from and after
the Closing, hereby acknowledges that Sellers’ and their Affiliates, members,
directors, officers or employees may retain mental impressions of the
Confidential Information, and the use of such mental impressions shall not be
deemed to be a breach hereunder.

 

8.6 Non-Disparagement Covenant. Each of the Sellers and Purchaser agree that,
during the Restricted Period or at any time thereafter, it will not in any
communications with the press or other media or with any Person who, to the
Knowledge of Sellers or Purchaser (as applicable), is customer, employee or
supplier of the Sellers, Purchaser or the Company (as applicable), criticize,
ridicule or make any statement which disparages or is derogatory of the Sellers,
Purchaser, the Company or any of their respective Affiliates, members,
directors, officers or employees (as applicable).

 

8.7 Reasonableness of Terms and Consideration. The Sellers and the Purchaser
each stipulate and agree that the terms and covenants contained in this Article
8 are fair and reasonable in duration, geographic scope and all other respects
to protect the legitimate interests of the Company, the Sellers, the Purchaser
and their respective Affiliates, and that these restrictions are designed for
the reasonable protection of the value of the Subject Class A Units purchased,
the goodwill transferred, and the business operations of the Company, the
Sellers, the Purchaser and their respective Affiliates. Each Seller and
Purchaser expressly waives any right to challenge the reasonableness or
enforceability of the terms and covenants contained in this Article 8 and
further stipulates and agrees that it shall be estopped from raising any such
challenge. Additionally, each Seller and Purchaser hereby acknowledges and
agrees that the restrictions in the covenants of this Article 8 have been
supported by adequate consideration as provided throughout this Agreement and
the Purchaser’s payment described in Article 1 and the Sellers’ sale of the
Subject Class A Units.

 

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8.8 Remedies for Breach. Each party understands and agrees that the Company
and/or the other party may suffer irreparable harm if such party shall breach
any of the obligations under this Article 8, and that the monetary damages may
be impossible to estimate or determine and may be inadequate to compensate the
Company and/or such other party for that breach. Accordingly, each party agrees
that, in the event of a breach or a threatened breach of any of the provisions
of this Article 8, the Company, the Purchaser, the Sellers and/or their
respective Affiliates, in addition to and not in limitation of any other rights,
remedies or damages available to them at Law or in equity, shall be entitled to
seek immediate injunctive relief in the form of a temporary restraining order
without notice, preliminary injunction, and/or permanent injunction to prevent
or restrain such breach by the other party or by any and all Persons directly or
indirectly acting for, on behalf of, or with such other party.

 

8.9 Damages. To the extent that any damages are calculable resulting from the
breach of Section 8.3 or Section 8.5, subject to Section 6.8, the Company, the
Purchaser and their Affiliates shall also be entitled to recover any lost
profits or diminution in value of the Company, the Purchaser and their
Affiliates, from the Sellers, in each case, to the extent, and only to the
extent, that such lost profits or diminution in value of the Company constitute
direct damages as a matter of Law.

 

8.10 Interpretation. Each Seller and the Purchaser acknowledge and agree that
the covenants contained in this Article 8 shall be construed as a series of
separate covenants. If any restriction in these covenants are declared by a
court of competent jurisdiction to be invalid, illegal or unenforceable by
reason of the extent, duration, geographic scope or otherwise, then the parties
shall negotiate in good faith to modify the offending terms as necessary to
render the restriction enforceable to the maximum extent possible.

 

8.11 Survival. If, and only if, Closing occurs, the terms of the Article 8 shall
survive the Closing of the transactions contemplated hereby and be enforceable
thereafter for the term of the Restricted Period or the Non-Disclosure Period,
as applicable. Following the expiration of the Restricted Period or the
Non-Disclosure Period, as applicable, all covenants and agreements set forth
under this Article 8, shall automatically terminate without any action of the
parties.

 

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ARTICLE 9
MISCELLANEOUS

 

9.1 Termination.

 

(a) Causes. Anything herein or elsewhere to the contrary notwithstanding, this
Agreement may be terminated by written notice of termination at any time on or
before the Closing only as follows:

 

(i) by mutual written consent of any Seller and the Purchaser;

 

(ii) by Purchaser, if there shall have been a breach by any Seller of such
Seller’s representations, warranties or covenants contained in this Agreement,
and in each case such breach has not been cured within thirty (30) days after
notice thereof has been delivered to such Seller (or is not capable of being
cured) and has not been waived in writing by Purchaser (in Purchaser’s sole
discretion) and such breach causes (or would cause if Closing were then
scheduled to occur) a failure of any of the conditions set forth in Section 5.1;
provided, however, that Purchaser shall not be entitled to terminate this
Agreement and the transactions contemplated hereunder pursuant to this Section
9.1(a)(ii) if Purchaser is in material breach of this Agreement at the time
Purchaser desires to terminate;

 

(iii) by any Seller, if there shall have been a breach by Purchaser of
Purchaser’s representations, warranties or covenants contained in this
Agreement, and in each case such breach has not been cured within thirty (30)
days after notice thereof has been delivered to Purchaser (or is not capable of
being cured) and has not been waived in writing by such Seller (in such Seller’s
sole discretion) and such breach causes (or would cause if Closing were then
scheduled to occur) a failure of any of the conditions set forth in Section 5.2;
provided, however, that such Seller shall not be entitled to terminate this
Agreement and the transactions contemplated hereunder pursuant to this Section
9.1(a)(iii) if such Seller is in material breach of this Agreement at such time;

 

(iv) by the Purchaser upon written notice to Sellers given at any time on or
after September 1, 2018 (the “Purchaser’s Outside Date”); provided, however,
that Purchaser shall not have the right to terminate this Agreement pursuant to
this Section 9.1(a)(iv) if Purchaser is in material breach of this Agreement at
the time this Agreement would otherwise be terminated by Purchaser;

 

(v) by Sellers upon written notice to Purchaser given at any time on or after
September 1, 2018 (the “Sellers’ Outside Date”); provided, however, that Sellers
shall not have the right to terminate this Agreement pursuant to this Section
9.1(a)(v) if Sellers are in material breach of this Agreement at the time this
Agreement would otherwise be terminated by Sellers; or

 

(vi) by any Seller or Purchaser if consummation of the transactions contemplated
hereby is enjoined, restrained or otherwise prohibited or otherwise made illegal
by the terms of a final, non-appealable order.

 

(b) Effect of Termination.

 

(i) In the event of the termination of this Agreement pursuant to the provisions
of this Section 9.1, this Agreement (except for Section 6.8, this Section
9.1(b)(i), the last sentence of Section 9.2 (subject to this Section 9.1(b)(i)),
Sections 9.3, 9.5, 9.6, 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13, 9.14, 9.15, 9.19,
9.20, 9.22, and 9.23 which shall survive such termination) shall become void and
have no effect, without any Liability on the part of any of the parties or their
directors, officers, members or stockholders in respect of this Agreement except
in the case of fraud or willful and intentional breach or as otherwise set forth
in this Section 9.1(b). In addition, (i) if Sellers terminate this Agreement
pursuant to Section 9.1(a)(iii) or Section 9.1(a)(v), Sellers shall be entitled
to recover from Purchaser (in the case of a termination of this Agreement
pursuant to Section 9.1(a)(iii)) or the Company (in the case of a termination of
this Agreement pursuant to Section 9.1(a)(v)) all of Sellers’ transaction costs
and expenses, including attorney fees and court costs and (ii) if Purchaser
terminates this Agreement pursuant to Section 9.1(a)(ii), Purchaser shall be
entitled to recover from Sellers all of Purchaser’s transaction costs and
expenses, including attorney fees and court costs.

 

24

 

 

9.2 Transfer Taxes and Expenses. Each of the Sellers and Purchaser shall bear
and pay 50% of all federal, state and local sales, use, documentary and other
similar Taxes, fees and charges, if any, due as a result of the sale of the
Subject Class A Units contemplated hereby (“Transfer Taxes”). Any Tax Returns
that must be filed in connection with any such Transfer Taxes shall be prepared
and filed when due by the party that is primarily or customarily responsible
under the applicable Law for filing such Tax Returns. Such party will use its
commercially reasonable efforts to provide such Tax Returns to the other party
at least ten (10) days prior to the due date (taking into account any valid
extensions) for filing such Tax Returns, and such Tax Returns shall not be filed
without the prior written consent of the other party (which consent shall not be
unreasonably withheld, conditioned or delayed). Purchaser and Sellers shall
cooperate in good faith, to the extent reasonably requested by the other party
and permissible under applicable Law, to minimize the amount of any such
Transfer Taxes. Except as otherwise provided in this Agreement, each party
hereto shall pay its own expenses incidental to the preparation of this
Agreement, the carrying out of the provisions of this Agreement and the
consummation of the transactions contemplated hereby.

 

9.3 Contents of Agreement; Amendments. This Agreement, the other agreements and
documents referenced herein, collectively set forth the entire understanding of
the parties hereto with respect to the transactions contemplated hereby. It
shall not be amended or modified except by written instrument duly executed by
each of the parties hereto. Any and all previous agreements and understandings
between or among the parties regarding the subject matter hereof, whether
written or oral, are superseded by this Agreement.

 

9.4 Assignment and Binding Effect. This Agreement may not be assigned by any
party hereto without the prior written consent of the other parties, and any
assignment in violation of the foregoing is void ab initio. Subject to the
foregoing, all of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the successors and
permitted assigns of the Sellers and the Purchaser. Prior to execution by all
parties, this Agreement shall not be binding upon or enforceable by or against
any party, by estoppel or otherwise.

 

9.5 Waiver. Any condition, term or provision of this Agreement may be waived at
any time by the party entitled to the benefit thereof by a written instrument
duly executed by such party. Any such written waiver shall not imply a waiver as
to any other term, condition, circumstance or occasion nor estop any party from
enforcing any term, condition, right or remedy not expressly so waived. Failure
of a party to insist upon adherence to any term or condition of this Agreement
on any occasion shall not be considered a waiver or deprive that party of the
right thereafter to insist upon adherence to that term or condition or any other
term or condition of this Agreement.

 

9.6 Notices. Any notice or communication under this Agreement shall be in
writing and delivered (by hand, email or nationally recognized overnight courier
in compliance with the provisions of this Section 9.6):

 

 

If to the Purchaser:

 

 

Carbon Natural Gas Company

Attention: Patrick R. McDonald

1700 Broadway, Suite 1170

Denver, Colorado 80290

pmcdonald@carbonnaturalgas.com

       

With a copy to:

 

 

Welborn Sullivan Meck & Tooley, P.C.

Attention: Jeffrey J. Peterson

1125 17th Street, Suite 2200

   

Denver, Colorado 80202

jpeterson@wsmtlaw.com

 

25

 

       

If to the Sellers:

 

 

Old Ironsides Energy

Attention: Scott Carson

10 St. James Avenue, 19th Floor

Boston, Massachussetts 02116

scarson@oldironsidesenergy.com

       

With a copy to:

 

 

Vinson & Elkins LLP

Attention: Caroline Phillips

666 Fifth Avenue, 26th Floor

New York, New York 10103

cphillips@velaw.com

 

Notice by electronic transmission shall be deemed given on the day sent,
provided the sender receives confirmation of transmission and the sender
contemporaneously sends a copy of the notice to the recipient by first class
mail, postage prepaid. Notice by hand delivery against a written receipt or by
nationally recognized overnight courier shall be deemed given on the day of
delivery. Any party may from time to time specify as its address for purposes of
this Agreement any other address upon the giving of five (5) days’ notice
thereof to the other party in the manner required by this paragraph. This
Section 9.6 shall not prevent the giving of written notice in any other manner,
but such notice shall be deemed effective only when and as of its actual receipt
at the proper address and by the proper addressee.

 

9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware. Each party expressly consents
to the personal jurisdiction of the state and federal courts located in
Wilmington, Delaware for any lawsuit filed there against it by the other party
arising from or relating to this Agreement.

 

9.8 Jurisdiction and Venue. To the fullest extent permitted by applicable Law,
each party hereto (i) agrees that any claim, action or proceeding by such party
seeking any relief whatsoever arising out of, or in connection with, this
Agreement shall be brought only in a Delaware state or federal court located in
Wilmington, Delaware, and not in any other state or federal court in the United
States of America or any court in any other country; (ii) agrees to submit to
the exclusive jurisdiction of such courts located in Wilmington, Delaware, for
purposes of all legal proceedings arising out of, or in connection with, this
Agreement; (iii) waives and agrees not to assert any objection that it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court or any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum; and (iv) agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
applicable Law. Process in any action or proceeding referred to in the preceding
sentence may be served on a party anywhere in the world. EACH OF THE PARTIES
IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY
LITIGATION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

 

9.9 No Benefit to Others. Subject to Section 9.18 below, the representations,
warranties, covenants and agreements contained in this Agreement are for the
sole benefit of the parties hereto and, in the case of Article 6 hereof, the
other Persons entitled to indemnity or defense, and their heirs, executors,
administrators, legal representatives, successors and assigns, and they shall
not be construed as conferring any rights on any other Persons.

 

26

 

 

9.10 Headings, Number, Gender, “Person,” and “Knowledge”. All section headings
contained in this Agreement are for convenience of reference only, do not form a
part of this Agreement, and shall not affect in any way the meaning or
interpretation of this Agreement. Words used herein, regardless of the number
specifically used, shall be deemed and construed to include any other number,
singular or plural, as the context requires. When the context requires, any
reference to the neuter gender herein shall include the masculine and feminine
genders, any reference to the masculine gender herein shall include the neuter
and feminine genders, and any reference to the feminine gender herein shall
include the masculine and neuter genders. In this Agreement, the term
“Knowledge” means (i) with respect to any Seller, the actual knowledge (without
duty of inquiry or investigation) of Scott E. Carson, Daniel A. Rioux, and
Christopher L. Stoeckle and (ii) with respect to Purchaser, the actual knowledge
(without duty of inquiry or investigation) of Patrick R. McDonald, Kevin D.
Struzeki, Mark D. Pierce, Lloyd A. Hall, and Michael J. Potter. Wherever the
words “include,” “includes” or “including” are used in this Agreement, they
shall be deemed to be followed by the words “without limiting the foregoing in
any respect.” All references to “$” or “dollars” shall be deemed references to
United States Dollars. Each accounting term not defined herein will have the
meaning given to it under GAAP as interpreted as of the Execution Date. If any
period of days referred to in this Agreement shall end on a day that is not a
Business Day, then the expiration of such period shall be automatically extended
until the end of the first succeeding Business Day. References to a Person are
also to its successors and permitted assigns.

 

9.11 Exhibits and Schedules. All exhibits and schedules referred to herein are
intended to be and hereby are specifically made a part of this Agreement.

 

9.12 Attorneys’ Fees. Any party to this Agreement who is the prevailing party in
any legal, arbitration or equitable proceeding against any other party brought
under this Agreement shall be additionally entitled to recover court costs and
reasonable and documented, out-of-pocket attorneys’ fees from the non-prevailing
party. For purposes of this Agreement, “prevailing party” shall include, without
limitation, a party obtaining substantially the relief sought, whether by
compromise, settlement, arbitration award or judgment.

 

9.13 Invalidity; Severability. If a Governmental Body or arbitrator finds any
provision unenforceable in a particular jurisdiction, then the following will
apply: (a) the Governmental Body or arbitrator considering the matter may amend
the unenforceable provision to the least extent necessary to make it
enforceable; (b) if an unenforceable provision cannot be reformed under this
Section 9.14, then that provision will be ineffective in that jurisdiction, but
only to the least extent necessary to make the rest of this Agreement
enforceable there; and (c) reforming any provision must not affect the rest of
this Agreement and must not prevent the affected provision, as originally
written, from being enforced elsewhere.

 

9.14 Mutual Negotiation. This Agreement has been mutually negotiated by the
parties. Therefore, any legal presumptions that contractual ambiguities shall be
construed against the drafter shall not apply.

 

9.15 Publicity. The parties agree that, upon execution of this Agreement,
(i) the Purchaser shall file a current report on Form 8-K in accordance with the
instructions of such Form 8-K announcing the entry into this Agreement and
(ii) that this Agreement and the transactions contemplated hereby will be
disclosed in connection with the Public Offering. Prior to filing a current
report on Form 8-K or a press release pursuant to the foregoing, Purchaser shall
furnish a draft of such current report and press release and, except with
respect to matters required to be disclosed by Purchaser pursuant to applicable
Law or securities exchange regulations, shall consider any reasonable comments
that Sellers may have to such drafts. Except as provided in the previous
sentence, all press releases or other public communications relating to the
transactions contemplated by this Agreement, and the method of the release for
publication thereof, shall be subject to the prior written consent of Purchaser
and Sellers, which consent shall not be unreasonably withheld, conditioned or
delayed by any party.

 

27

 

 

9.16 Counterparts. This Agreement may be executed in any number of counterparts
and any party hereto may execute any such counterpart, each of which when
executed and delivered shall be deemed to be an original, and all of which
counterparts taken together shall constitute but one and the same instrument.
This Agreement shall become binding when one or more counterparts taken together
shall have been executed and delivered by the parties. It shall not be necessary
in making proof of this Agreement or any counterpart hereof to produce or
account for any of the other counterparts.

 

9.17 Tax Matters.

 

(a) Tax Treatment. For U.S. federal income tax purpose (and for the purposes of
any applicable state, local or foreign Tax that follows the U.S. federal income
tax treatment), Purchaser and Seller agree to treat the transactions
contemplated by this Agreement in accordance with Revenue Ruling 99-6, 1999-1
C.B. 432 (Situation 1): (i) by Sellers, as a sale of the Subject Class A Units
by Sellers to Purchaser, and (ii) by Purchaser, as (A) a purchase of an
undivided 73.50% interest in the assets of the Company and (B) the assumption by
Purchaser of 73.50% of the liabilities of the Company, following a liquidating
distribution by the Company to the Sellers and the Purchaser in respect of their
limited liability company interests in the Company. In connection therewith,
effective as of the close of business on the Closing Date, the Company shall
close its books. The Company, the Sellers and the Purchasers shall each take any
and all necessary action to confirm that the status of the Company as a
partnership for tax purposes has terminated as of the Closing Date, and that, as
of the date immediately following the Closing Date, the Company will be treated
as an entity disregarded for U.S. federal income tax purposes. Purchaser and
Sellers will prepare and file all Tax Returns consistent with the foregoing and
will not take any inconsistent position on any Tax Returns, or during the course
of any audit, litigation or other proceeding with respect to Taxes, except as
otherwise required by applicable law following a final determination by a court
of competent jurisdiction or other administrative settlement with or final
administrative decision by the relevant Governmental Body.

 

(b) Tax Returns. The Purchaser shall cause the Company to prepare and file all
Company Tax Returns for Pre-Closing Tax Periods (including, for the avoidance of
doubt, a final federal partnership tax return on Form 1065) and to prepare and
deliver to the Sellers and the Purchaser final Forms K-1 for the final U.S.
federal tax year ended on the Closing Date. At least 30 days prior to the due
date for filing each such Company Tax Return, Purchaser will deliver a copy of
such Company Tax Return, together with all supporting documentation and
workpapers, to Sellers for its review and comment. Purchaser will revise such
Company Tax Return to reflect any reasonable comments received from Sellers and
will timely file such Company Tax Return with the appropriate Governmental Body
and will provide a copy to Sellers.

 

(c) Allocation of Straddle Period Taxes. In the case of Taxes that are payable
by the Company or any Subsidiary of the Company with respect to any Straddle
Period, the portion of any such Taxes that is attributable to the portion of
such Straddle Period ending on the Closing Date shall be:

 

(i) in the case of Taxes that are either (A) based upon or related to income or
receipts, or (B) imposed in connection with any sale or other transfer or
assignment of property (real or personal, tangible or intangible), deemed equal
to the amount that would be payable if the relevant Straddle Period ended with
and included the Closing Date; provided that exemptions, allowances or
deductions that are calculated on an annual basis (including depreciation and
amortization deductions) shall be allocated between the portion of the Straddle
Period ending on and including the Closing Date and the portion of the Straddle
Period beginning after the Closing Date in proportion to the number of days in
each period; and

 

28

 

 

(ii) in the case of Taxes that are imposed on a periodic basis with respect to
the assets or capital of the Company or any Subsidiary, deemed to be the amount
of such Taxes for the entire Straddle Period (or, in the case of such Taxes
determined on an arrears basis, the amount of such Taxes for the immediately
preceding period), multiplied by a fraction the numerator of which is the number
of calendar days in the portion of the period ending on and including the
Closing Date and the denominator of which is the number of calendar days in the
entire period.

 

(d) Cooperation on Tax Matters; Tax Contests.

 

(i) The Purchaser and the Sellers will cooperate fully, as and to the extent
reasonably requested by the other party, in connection with any Tax matters
relating to the Company (including by the provision of reasonably relevant
records or information). The party requesting such cooperation will pay the
reasonable out-of-pocket expenses of the other party.

 

(ii) Notwithstanding Section 6.5(a), after the Closing, the Company shall in
good faith control and defend, through counsel of its own choosing, any audit,
review, examination, assessment, claim for refund or administrative, judicial or
other proceeding of the Company involving (i) U.S. federal income Taxes or any
other Tax imposed on a “flow-through” basis, in each case, with respect to a
Taxable period (or portion thereof) in which Sellers were a member of the
Company or (ii) any other Tax for which Sellers may be required to provide
indemnification pursuant to this Agreement (each a “Tax Contest”); provided,
however, the Purchaser shall (i) give Sellers prompt notice of a Tax Contest,
(ii) keep Sellers reasonably informed regarding the progress and substantive
aspects of such Tax Contest, (iii) permit the Sellers to participate in the
defense of such Tax Contest, with their own counsel at their own expense, and
(iv) not settle, compromise or concede any portion of such Tax Contest without
the prior written consent of the Sellers, which consent shall not be
unreasonably withheld, conditioned or delayed.

 

(e) Tax Definitions.

 

(i) “Straddle Period” means a Taxable period that begins on or before and ends
after the Closing Date.

 

(ii) “Taxes” shall mean any United States federal, state, local or foreign
taxes, assessments, fees and other governmental charges or impositions imposed
by any Governmental Body, including, without limitation, all income,
unemployment compensation, social security, payroll, sales and use, excise,
privilege, severance, production, property, ad valorem, franchise, license,
school, fuel, mileage, registration fees, and any other tax or similar
governmental charge or imposition under laws of the United States or any state,
including agreements and compacts thereof or therewith, or municipal or
political subdivision thereof or any foreign country or political subdivision
thereof), including any interest, deficiency, fines, penalty or addition
thereto.

 

(iii) “Tax Return” shall mean any United States federal, state, local and
foreign tax return, declaration, report, claim for refund, information return or
other similar filing or statement required to be filed with a Governmental Body
with respect to Taxes (including any schedules or attachments thereto), and any
amendment thereof.

 

29

 

 

9.18 Subsequent Merger. The Purchaser may at its election file articles and/or
certificates of merger pursuant to applicable Law and pursuant to resolutions of
the boards of directors of the Purchaser and the members of the Company to merge
the Company with and into the Purchaser, and the separate organizational
existence of the Company would cease and the Purchaser would continue as the
surviving entity. The representations, warranties and obligations of the Seller
and the Purchaser set forth herein, including without limitation the obligations
of indemnification and Section 7.2, shall survive any such merger of the
Purchaser and the Company.

 

9.19 Individual Liability. Notwithstanding anything in this Agreement to the
contrary, the Liabilities and obligations of each Seller shall be separate,
individual and not joint and several. With respect to any obligation of Sellers
to pay money, such obligations shall be borne pro rata by the Sellers in
accordance with their relative ownership of the Subject Class A Units.

 

9.20 Affiliate Liability. Each of the following is herein referred to as a
“Party Affiliate”: with respect to a party, (a) any direct or indirect holder of
equity interests or securities in such party (whether limited or general
partners, members, stockholders or otherwise), and (b) any director, officer,
manager, employee, representative or agent of (i) such party or (ii) any direct
or indirect holder of equity interests or securities in such party referred to
in clause (a) of this Section 9.20. No Party Affiliate of a party shall have any
liability or obligation to the other party of any nature whatsoever in
connection with or under this Agreement or any of the documents contemplated
hereby or the transactions contemplated hereby or thereby, and each party hereby
waives and releases all claims of any such liability and obligation.

 

9.21 Specific Performance. Each party hereby acknowledges and agrees that the
rights of each party to consummate the transactions contemplated hereby are
special, unique and of extraordinary character and that, if any party violates
or fails or refuses to perform any covenant or agreement made by it herein, the
non-breaching party may be without an adequate remedy at Law. If any party
violates or fails or refuses to perform any covenant or agreement made by such
party herein, the non-breaching party, subject to the terms hereof and in
addition to any remedy at Law for damages or other relief permitted under this
Agreement, may (at any time prior to the valid termination of this Agreement)
institute and prosecute an action in any court of competent jurisdiction to
enforce specific performance of such covenant or agreement or seek any other
equitable relief, without the necessity of proving actual damages or posting of
a bond.

 

9.22 Expenses. Except as otherwise specifically provided, all fees, costs and
expenses incurred by Purchaser or Sellers in negotiating this Agreement and
documents contemplated hereunder or in consummating the transactions
contemplated hereby and thereby shall be paid by the party incurring the same,
including, legal and accounting fees, costs and expenses.

 

9.23 Disclosure Schedules. No reference to or disclosure of any item or other
matter in the disclosure schedules attached hereto (the “Disclosure Schedules”)
shall be construed as an admission or indication that such item or other matter
is material or that such item or other matter is required to be referred to or
disclosed in the Disclosure Schedules. No disclosure in the Disclosure Schedules
relating to any possible breach or violation of any agreement or Law shall be
construed as an admission or indication that any such breach or violation exists
or has actually occurred. The inclusion of any information in the Disclosure
Schedules shall not be deemed to be an admission or acknowledgment by any Seller
that in and of itself, such information is material or is required to be
disclosed on the Disclosure Schedules.

 

[Remainder of This Page is Left Intentionally Blank]

 

30

 

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the
date first written above.

 

  SELLERS:         OLD IRONSIDES FUND II-A PORTFOLIO HOLDING COMPANY, LLC      
  By: /s/ Scott E. Carson   Scott E. Carson   Managing Partner         OLD
IRONSIDES FUND II-B PORTFOLIO HOLDING COMPANY, LLC         By: /s/ Scott E.
Carson   Scott E. Carson   Managing Partner

 

Signature Page to Membership Interest Purchase Agreement

 

 

 

  PURCHASER:         CARBON NATURAL GAS COMPANY         By: /s/ Patrick R.
McDonald     Patrick R. McDonald,     Chief Executive Officer

  

Signature Page to Membership Interest Purchase Agreement 

 

 

 

EXHIBIT A

 

Seller  Class A Units   Allocable Percentage  OIE Fund II-A   22,613.69  
 83.15385% OIE Fund II-B   4,581.31    16.84615%

 

 Exhibit A-1 

 

 

EXHIBIT B

 

PURCHASE PRICE CALCULATION AS OF DECEMBER 31, 2017

 

[attached]

 

 Exhibit B-1 

 

 

CARBON NATURAL GAS COMPANY & CARBON APPALACHIAN COMPANY, LLC Combination
Analysis and Old Ironsides Energy Funds Purchase Price Determination As of
December 31, 2017

  

   PV10% - Strip   %   Debt   Net of Debt  

Carbon Appalachia Company, LLC  

Priority Amount Calculations

Carbon (Separate Appalachia Assets)  $60,696,000    29.6%  $-   $60,696,000     
    CAC  $44,254,000    70.3%  $37,975,000   $106,279,000    12/31/17      10%
Total        $204,950,000      100. %                  $38,807,233 

 

      Purchase Valuation
(12/31/2017 Audit)  Contribution Date     Principal   Priority Amount Valuation
(based on indicative third party offer)     $175,000,000                Carbon
    $51,826,299      $ 37,000,000   $ 38,807,233 CAC     $123,173,701           
    CAC Debt     $(37,975,000) 3/31/17   $ 12,000,000   $ 12,893,402 CAC Working
Capital     $2,585,933  7/15/17   $ 14,000,000   $ 14,631,654 CAC - Net of
Debt/Working Capital     $87,784,634  9/25/17   $ 11,000,000   $ 11,282,178  
                      Priority of CAC Distributions                            
                  Class C Distribution                       OIE Fund II-A
0.00%  $-                OIE Fund II-B 0.00%  $-                Carbon 1.00% 
$877,846                Total 1.00%  $877,846                                   
    Remaining Funds to Allocate     $86,906,788                                 
      Class A - Priority Amounts                       OIE Fund II-A 61.12% 
$23,718,456                OIE Fund II-B 12.38%  $4,804,860               
Carbon 26.50%  $10,283,917                Total 100.00%  $38,807,233           
                            Class B Distribution                       OIE Fund
II-A 0.00%  $-                OIE Fund II-B 0.00%  $-                Carbon
20.00%  $9,619,911                Total 20.00%  $9,619,911                     
                  Class A - Tier II                       OIE Fund II-A 61.12% 
$23,518,238                OIE Fund II-B 12.38%  $4,764,300               
Carbon 26.50%  $10,197,106                Total 100.00%  $38,479,644           
                            Total CAC Distributions                       OIE
Fund II-A     $47,236,694                OIE Fund II-B     $9,569,160           
    Carbon     $30,978,780                Total     $87,784,634                 
                      Old Ironsides                       Equity Purchase Price
    $56,805,854               

   

 Exhibit B-2 

 

    

EXHIBIT C

 

WORKING CAPITAL CALCULATION

 

[attached]

  

 Exhibit C-1 

 

 

 [ex10-1_001.jpg]

 

Carbon Appalachian Company LLC

 

Consolidated Balance Sheet

 

   Audited Balance Sheet     December 31,   Working     2017   Capital        
   ASSETS                   Current assets:           Cash and cash equivalents 
$4,511,695   $4,511,695  Accounts receivable:           Revenue   10,681,576  
 10,681,576  Trade receivables   1,569,484    1,569,484  Prepaid expenses,
deposits and other current assets   487,031    487,031  Derivative asset 
 1,883,619    1,883,619  Gas inventory   1,192,740    1,192,740  Inventory 
 466,845    466,845  Total current assets   20,792,990    20,792,990         
    Property, plant and equipment:           Oil & gas properties          
Proved,net   82,622,337       Unevaluted   1,779,600       Other property and
equipment, net   12,677,908           97,079,845                   Investments
in affiliates   -       Gas inventory - long term   -       Other long-term
assets   683,485                   Total assets  $118,556,320                  
LIABILITIES AND MEMBERS’ EQUITY                       Current liabilities:      
    Accounts payable and accrued liabilities  $12,069,985   $12,069,985  Due to
related parties   1,852,529    1,852,529  Firm transportation contract
obligations   4,284,543    4,284,543  Total current liabilities   18,207,057  
 18,207,057  Non-current liabilities:           Asset retirement obligations 
 4,789,411       Firm transportation contract obligations   14,843,269       Ad
valorem taxes payable   1,812,502       Notes payable   37,975,000       Total
non-current liabilities   59,420,182                   Members’ equity:      
    Members’ contributions   37,923,763       Retained earnings   3,005,318  
    Total members’ equity   40,929,081                   Total liabilities and
members’ equity  $118,556,320   $2,585,933 

  

 Exhibit C-2 

 

 

EXHIBIT D

 

FORM OF ASSIGNMENT

 

[attached]

  

 Exhibit D-1 

 

 

ASSIGNMENT AND ASSUMPTION OF CLASS A UNITS

 

This Assignment and Assumption of Class A Units (this “Assignment”) is made and
entered into as of ____________, 2018 (the “Execution Date”), by and among Old
Ironsides Fund II-A Portfolio Holdings Company, LLC, a Delaware limited
liability company (“OIE Fund II-A”), Old Ironsides Fund II-B Portfolio Holdings
Company, LLC, a Delaware limited liability company (“OIE Fund II-B,” and
together with OIE Fund II-A, “Assignors,” and each, an “Assignor”), and Carbon
Natural Gas Company, LLC, a Delaware corporation (“Assignee”). Capitalized terms
used but not otherwise defined herein shall have the meanings given to such
terms in the Purchase Agreement (as defined below).

 

RECITALS:

 

WHEREAS, Assignors and Assignee entered into that certain Membership Interest
Purchase Agreement dated as of May 4, 2018 (the “Purchase Agreement”);

 

WHEREAS, pursuant to the Purchase Agreement, OIE Fund II-A and OIE Fund II-B are
obligated to sell, assign, transfer, convey and deliver to Assignee, and
Assignee is obligated to purchase from Assignors, 22,613.69 and 4,581.31 Class A
Units, respectively, of Carbon Appalachian Company, LLC, a Delaware limited
liability company (the “Company”), (the “Subject Class A Units”), which
constitute 73.50% of the issued and outstanding Class A Units of the Company;
and

 

WHEREAS, in accordance with the terms of the Purchase Agreement, Assignee
desires to accept the Subject Class A Units from Assignors, on the terms and
conditions set forth herein.

 

AGREEMENT:

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration including the
consideration as set forth in the Purchase Agreement, the receipt and
sufficiency of which are hereby acknowledged, Assignors and Assignee agree as
follows:

 

Section 1. Assignment. In accordance with and subject to the terms of the
Purchase Agreement, OIE Fund II-A and OIE Fund II-B hereby sell, assign,
transfer, convey and deliver 22,613.69 and 4,581.31 Subject Class A Units,
respectively, to Assignee effective as of Closing, together with all of
Assignors’ rights associated with such Subject Class A Units. Assignors
recognize and agree that as a result of such assignment, they will no longer
have any membership interest in the Company, and upon execution of this
Assignment, each Assignor shall cease to be a member of the Company.

 

Section 2. Acceptance. In accordance with and subject to the terms of the
Purchase Agreement, Assignee hereby accepts the Subject Class A Units effective
as of Closing, and, in consideration therefor, agrees to assume all liabilities
associated with the Subject Class A Units, subject to the terms and conditions
of the Purchase Agreement.

 

Section 3. Purchase Agreement. Nothing in this Assignment, express or implied,
is intended to or shall be construed to modify, expand or limit in any way the
terms of the Purchase Agreement. To the extent that any provision of this
Assignment conflicts or is inconsistent with the terms of the Purchase
Agreement, the Purchase Agreement shall govern. This Assignment is executed and
delivered pursuant to the Purchase Agreement.

 

Section 4. Governing Law. This Assignment shall be governed by and construed in
accordance with the laws of the State of Delaware. Each of Assignors and
Assignee expressly consents to the personal jurisdiction of the state and
federal courts located in Wilmington, Delaware for any lawsuit filed there
against it by the other party arising from or relating to this Assignment.

 

Section 5. Counterparts. This Assignment may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

 

[Remainder of Page Intentionally Left Blank]

  

 Exhibit D-2 

 

 

IN WITNESS WHEREOF, this Assignment has been executed as of the Execution Date.

 

  ASSIGNORS:       OLD IRONSIDES FUND II-A PORTFOLIO HOLDING COMPANY, LLC      
By:     Name:  Scott Carson   Title: Managing Partner       OLD IRONSIDES FUND
II-B PORTFOLIO HOLDING COMPANY, LLC       By:     Name: Scott Carson   Title:
Managing Partner

 

Signature Page to Assignment and Assumption of Class A Units

 

 Exhibit D-3 

 

 

  ASSIGNEE:       CARBON NATURAL GAS COMPANY       By:     Name:  Patrick R.
McDonald   Title: Chief Executive Officer

    

 Exhibit D-4 

 

 

Execution

 

EXHIBIT E

 

FORM OF SELLERS’ RELEASE

 

[attached]

   

 Exhibit E-1 

 

 

RELEASE

  

THIS RELEASE (the “Release”) dated ____________, 2018 (the “Effective Date”) is
made by Old Ironsides Fund II-A Portfolio Holding Company, LLC, a Delaware
limited liability company (“OIE Fund II-A”), and Old Ironsides Fund II-B
Portfolio Holding Company, LLC, a Delaware limited liability company (together
with OIE Fund II-A, “Sellers” and each, a “Seller”). Capitalized terms used but
not otherwise defined herein shall have the meanings given to such terms in the
Purchase Agreement (as defined below).

 

RECITALS

 

WHEREAS, reference is made to that certain Membership Interest Purchase
Agreement, dated May 4, 2018 (the “Purchase Agreement”) by and among Sellers and
Carbon Natural Gas Company, a Delaware corporation (“Purchaser”) pursuant to
which Purchaser purchased from Sellers certain Class A Units of Carbon
Appalachian Company, LLC, a Delaware limited liability company (the “Company”);
and

 

WHEREAS, this Release is delivered by Sellers pursuant to Section 5.1(g) of the
Purchase Agreement.

 

WHEREAS, in connection with such closing, each Seller desires to waive and
release Purchaser, its Affiliates (including the Company and its Subsidiaries)
and its and their respective officers, directors, managers, partners, members,
shareholders, employees and successors and permitted assigns from certain
claims, demands, causes of action, obligations, liabilities, costs and expenses
in accordance with the terms set forth herein.

 

RELEASE

 

NOW, THEREFORE, in consideration of the promises, agreements and covenants
contained herein and in the Purchase Agreement, and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Sellers agree as follows:

 

1.Each Seller, on behalf of itself and its Affiliates, hereby unconditionally
waives and releases Purchaser, its Affiliates (including the Company and its
Subsidiaries) and its and their respective officers, directors, managers,
partners, members, shareholders, employees and successors and permitted assigns
from any and all claims, demands, causes of action, obligations, liabilities
(whether absolute, accrued, contingent, fixed or otherwise, or whether due or to
become due, whether known or unknown), costs or expenses with respect to the
transactions contemplated by the Purchase Agreement or any document contemplated
thereunder or otherwise with respect to the Company, its Subsidiaries and their
respective businesses, whenever arising or occurring, and whether arising under
contract, statute, common law or otherwise; provided, however, that the
foregoing release shall not include: (a) any right of any Seller, its Affiliates
or its and their respective officers, directors, managers, partners, members,
shareholders, employees and successors and permitted assigns to indemnification
or advancement of expenses pursuant to the organizational documents of the
Company or its Subsidiaries; or (b) any right of any Seller Party pursuant to
Section 6.2 of the Purchase Agreement.

 

2.This Release shall be governed by and construed in accordance with the laws of
the State of Delaware.

 

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 Exhibit E-2 

 

 

IN WITNESS WHEREOF, Sellers have caused this Release to be fully executed as of
the Effective Date.

   

  SELLERS:       OLD IRONSIDES FUND II-A PORTFOLIO HOLDING COMPANY, LLC      
By:     Name: Scott Carson   Title: Managing Partner       OLD IRONSIDES FUND
II-B PORTFOLIO HOLDING COMPANY, LLC       By:     Name:  Scott Carson   Title:
Managing Partner

  

 Exhibit E-3 

 

 

Execution

 

EXHIBIT F

 

FORM OF PURCHASER’S RELEASE

 

[attached]

    

 Exhibit F-1 

 

 

RELEASE

  

THIS RELEASE (the “Release”) dated ____________, 2018 (the “Effective Date”) is
made by Carbon Natural Gas Company, a Delaware corporation (“Purchaser”).
Capitalized terms used but not otherwise defined herein shall have the meanings
given to such terms in the Purchase Agreement (as defined below).

 

RECITALS

 

WHEREAS, reference is made to that certain Membership Interest Purchase
Agreement, dated May 4, 2018 (the “Purchase Agreement”), by and among Purchaser,
Old Ironsides Fund II-A Portfolio Holding Company, LLC, a Delaware limited
liability company (“OIE Fund II-A”) and Old Ironsides Fund II-B Portfolio
Holding Company, LLC, a Delaware limited liability company (together with OIE
Fund II-A, “Sellers”) pursuant to which Purchaser purchased from Sellers certain
Class A Units of Carbon Appalachian Company, LLC, a Delaware limited liability
company (the “Company”); and

 

WHEREAS, this Release is delivered by Purchaser pursuant to Section 5.2(e) of
the Purchase Agreement.

 

WHEREAS, in connection with such closing, Purchaser, on behalf of itself and the
Company, desires to waive and release Sellers, their respective Affiliates and
Sellers’ and such Affiliates’ respective officers, directors, managers,
partners, members, shareholders, employees and successors and permitted assigns
from certain claims, demands, causes of action, obligations, liabilities, costs
and expenses in accordance with the terms set forth herein.

 

RELEASE

 

NOW, THEREFORE, in consideration of the promises, agreements and covenants
contained herein and in the Purchase Agreement, and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Purchaser agrees as follows:

 

1.       Purchaser, on behalf of itself and its Affiliates (including the
Company), hereby unconditionally waives and releases Sellers, their respective
Affiliates and Sellers’ and such Affiliates’ respective officers, directors,
managers, partners, members, shareholders, employees and successors and
permitted assigns from any and all claims, demands, causes of action,
obligations, liabilities (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due, whether known or unknown), costs or
expenses with respect to the transactions contemplated by the Purchase Agreement
or any document contemplated thereunder or otherwise with respect to the
Company, its Subsidiaries and their respective businesses, whenever arising or
occurring, and whether arising under contract, statute, common law or otherwise;
provided, however, that the foregoing release shall not include any right of any
Purchaser Party pursuant to the indemnification provisions of Section 6.1 of the
Purchase Agreement.

 

2.       This Release shall be governed by and construed in accordance with the
laws of the State of Delaware.

 

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 Exhibit F-2 

 

 

Execution

 

IN WITNESS WHEREOF, the Purchaser has caused this Release to be fully executed
as of the Effective Date.

 

  PURCHASER:       CARBON NATURAL GAS COMPANY       By:     Name:  Patrick R.
McDonald   Title: Chief Executive Officer

   

 Exhibit F-3 

 

 

Schedule 3.1(e)

 

Undisclosed Liabilities

 

●Shonk Land Company LLC v. Cabot Oil & Gas Corporation and Carbon West Virginia
Company LLC

   

Schedule 3.1(e)

 

 

SCHEDULE 3.1(f)

 

ABSENCE OF CERTAIN DEVELOPMENTS

     

Schedule 3.1(f)