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Exhibit 10.15

PURCHASE AND SALE AGREEMENT

BETWEEN

LUCAS ENERGY, INC.

AS SELLER

AND

HILCORP ENERGY I, L.P.

AS BUYER

April 1, 2010

 
 

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TABLE OF CONTENTS

   
Page
     
ARTICLE I Assets
1
     
Section 1.01
Agreement to Sell and Purchase
1
Section 1.02
Assets
1
Section 1.03
Certain Additional Defined Terms.
3
     
ARTICLE II Purchase Price
3
     
Section 2.01
Purchase Price.
3
Section 2.02
Deposit.
3
Section 2.03
Allocated Values
4
     
ARTICLE III Effective Time
4
     
Section 3.01
Ownership of Assets
4
     
ARTICLE IV Title and Environmental Matters
5
     
Section 4.01
Examination Period
5
Section 4.02
Title Defects
5
Section 4.03
Notice of Title Defects.
5
Section 4.04
Remedies for Title Defects.
6
Section 4.05
Special Warranty of Title
7
Section 4.06
Preferential Rights To Purchase
8
Section 4.07
Consents to Assignment
9
Section 4.08
Environmental Review.
9
Section 4.09
Environmental Definitions.
10
Section 4.10
Notice of Environmental Defects
11
Section 4.11
Remedies for Environmental Defects.
11
     
ARTICLE V Representations and Warranties of Seller
11
     
Section 5.01
Existence
11
Section 5.02
Legal Power
11
Section 5.03
Execution
12
Section 5.04
Brokers
12
Section 5.05
Bankruptcy
12
Section 5.06
Taxes
12
Section 5.07
Environmental Matters.
12
Section 5.08
Violations and Defaults.
12
Section 5.09
Litigation.
13
Section 5.10
Leases.
13
Section 5.11
Material Contracts.
13
Section 5.12
Hydrocarbon Sales Agreements.
13

 
 
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Section 5.13
Preferential Rights and Consents.
13
Section 5.14
Access.
13
Section 5.15
Area of Mutual Interest and Other Agreements.
13
Section 5.16
Expenses.
14
     
ARTICLE VI Representations and Warranties of Buyer
14
     
Section 6.01
Existence
14
Section 6.02
Legal Power
14
Section 6.03
Execution
14
Section 6.04
Brokers
14
Section 6.05
Bankruptcy
14
Section 6.06
Litigation
14
     
ARTICLE VII Covenants
15
     
Section 7.01
Operation of the Leases Prior to the Closing.
15
Section 7.02
Operation of the Assets After the Closing
15
Section 7.03
Seller's Knowledge.
15
Section 7.04
Excluded Wellbores.
15
     
ARTICLE VIII Conditions to Obligations of Seller
16
     
Section 8.01
Representations
16
Section 8.02
Performance
16
Section 8.03
Pending Matters
16
     
ARTICLE IX Conditions to Obligations of Buyer
16
     
Section 9.01
Representations
16
Section 9.02
Performance
16
Section 9.03
Pending Matters
16
     
ARTICLE X The Closing
17
     
Section 10.01
Time and Place of the Closing
17
Section 10.02
Adjustments to Purchase Price at the Closing.
17
Section 10.03
Pre-Closing Allocations/Statement.
17
Section 10.04
Post-Closing Adjustments to Purchase Price.
17
Section 10.05
Transfer Taxes and Costs
18
Section 10.06
Ad Valorem and Similar Taxes
18
Section 10.07
Actions of Seller at the Closing.
18
Section 10.08
Actions of Buyer at the Closing.
19
Section 10.09
Further Cooperation.
19
     
ARTICLE XI Termination
20
     
Section 11.01
Right of Termination
20
Section 11.02
Effect of Termination
20
Section 11.03
Attorneys’ Fees, Etc.
20

 
 
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ARTICLE XII Obligations and Indemnification
21
     
Section 12.01
Seller’s Retained Obligations
21
Section 12.02
Buyer’s Assumed Obligations
21
Section 12.03
Buyer’s Indemnification
21
Section 12.04
Seller’s Indemnification
21
Section 12.05
Indemnification Procedures.
22
     
ARTICLE XIII Limitations on Representations and Warranties; and Casualty Losses
24
     
Section 13.01
Disclaimers of Representations and Warranties
24
Section 13.02
Survival
24
     
ARTICLE XIV Arbitration
24
     
Section 14.01
Arbitrator.
24
Section 14.02
Rules and Procedures.
24
     
ARTICLE XV Miscellaneous
25
     
Section 15.01
Recording Expenses
25
Section 15.02
Entire Agreement
25
Section 15.03
Waiver
25
Section 15.04
Publicity
26
Section 15.05
Construction
26
Section 15.06
No Third Party Beneficiaries
26
Section 15.07
Assignment
26
Section 15.08
GOVERNING LAW; VENUE; JURY WAIVER.
26
Section 15.09
Notices
27
Section 15.10
Severability
27
Section 15.11
Survival.
27
Section 15.12
Time of the Essence
28
Section 15.13
Counterpart Execution
28
Section 15.14
Attorney Fees.
28
Section 15.15
Interpretation.
28
Section 15.16
Tax-Deferred Exchange.
29

 
 
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EXHIBITS

Exhibit A
– Leases

Exhibit A-1
– Excluded Wellbores

Exhibit B
– Contracts

Exhibit C
– Partial Assignment of Oil and Gas Leases

Exhibit D
– Participation Agreement

SCHEDULES

Schedule 5.07
Environmental

Schedule 5.09
Litigation

Schedule 5.13
Preferential Rights and Consents

Schedule 5.15
Area of Mutual Interest and Other Agreements

 
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PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (this “Agreement”) is made and entered into
this 1st day of April, 2010, by and between LUCAS ENERGY, INC., a Nevada
corporation (“Seller”), and HILCORP ENERGY I, L.P., a Texas limited partnership
(“Buyer”).  Buyer and Seller are collectively referred to herein as the
“Parties”, and are sometimes referred to individually as a “Party.”

W I T N E S S E T H:

WHEREAS, Seller is willing to sell to Buyer, and Buyer is willing to purchase
from Seller, the Assets (as hereinafter defined), all upon the terms and
conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the mutual benefits derived and to be
derived from this Agreement by each Party, Seller and Buyer hereby agree as
follows:

ARTICLE I
Assets

Section 1.01           Agreement to Sell and Purchase.  Subject to and in
accordance with the terms and conditions of this Agreement, Buyer agrees to
purchase the Assets from Seller, and Seller agrees to sell the Assets to Buyer
as of the Effective Time.

Section 1.02           Assets.  The term “Assets” shall mean the following:

(a)           an undivided 85% of Seller’s interest in the oil, gas and/or
mineral leases described or referred to in Exhibit A attached hereto (the
“Leases”), insofar as the Leases cover depths below the base of the Austin Chalk
Formation (defined below) (the “Subject Lease Interests”);

(b)           an undivided 85% of Seller’s interest in all amendments,
supplements, renewals, extensions or ratifications of the Leases, insofar as the
same affect the Subject Lease Interests;

(c)           an undivided 85% of Seller’s interest in all oil, gas and other
hydrocarbons (“Hydrocarbons”) which may be produced from (i) any formation or
depth below the base of the Austin Chalk Formation in and under the lands
covered by the Leases, and (ii) the Austin Chalk Formation in and under the
lands covered by the Leases to the extent that such Hydrocarbons are produced
from (A) vertical wellbores, the perforations in which are located in the Eagle
Ford Shale Formation (defined below) or in any other formation or depth below
the base of the Austin Chalk Formation, or (B) that portion of any wellbores for
horizontal wells after such wellbores first encounter the Eagle Ford Shale
Formation, in each case whether or not such Hydrocarbon production results from
fracing procedures conducted in the wellbores and whether or not any such
wellbore is in a new well drilled or in an existing well subsequently assigned
by Seller to Buyer, and in the case of item (B) above whether or not such
Hydrocarbon production results from encountering the Austin Chalk Formation “D”
Zone (defined below) in the drilling of horizontal wells after encountering the
Eagle Ford Shale Formation (together with the Subject Lease Interests,
collectively, the ”Subject Interests,” or singularly, a “Subject Interest”).

 
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(d)           an undivided 85% of Seller’s interest in (i) all rights of Seller
to use and occupy the surface of and the subsurface depths under the lands
covered by the Leases, insofar only as such rights pertain to the Subject
Interests; (ii) all rights of Seller in any pooled, communitized or unitized
acreage by virtue of any Subject Interest being a part thereof, including all
Hydrocarbons produced after the Effective Time attributable to the Subject
Interests or any such pool or unit allocated to any such Subject Interest;

(e)           an undivided 85% of Seller’s interest in all easements,
rights-of-way, surface leases, surface use agreements, surface fee or other
surface or subsurface interests, rights and estates of Seller related to or used
or useful in connection with the Subject Interests (the “Easements”), including,
without limitation, the Easements described or referred to in Exhibit A attached
hereto;

(f)           an undivided 85% of Seller’s interest in all permits, licenses,
franchises, registrations, certificates, exemptions, consents, approvals and
other similar rights and privileges of Seller related to or used or useful in
connection with the ownership or operation of the Subject Interests or the
Easements (the “Permits”), to the extent Seller has the authority to assign the
Permits;

(g)           an undivided 85% of Seller’s interest in all contracts, agreements
and other written agreements described in Exhibit B attached hereto, and all
other contracts and agreements of Seller, including, without limitation, all
production sales contracts, farmout agreements, operating agreements, service
agreements, equipment leases, division orders, unit agreements, gas gathering
and transportation agreements, water disposal agreements and other similar
agreements, but only to the extent the same relate to the Subject Interests, the
Easements, the Permits or the G&G Data (defined below) (collectively, the
“Contracts”), and to the extent Seller has the authority to assign the
Contracts;

(h)           an undivided 85% of Seller’s interest in all books, records,
files, muniments of title, reports and similar documents and materials that
relate to the foregoing interests and that are in the possession or control of,
or maintained by, Seller, including, without limitation, all contract files,
title files, title records, title opinions, abstracts, property ownership
reports, well logs, well tests, maps, engineering data and reports, health,
environmental and safety information and records, regulatory records, accounting
and financial records (the “Records”); and

(i)            an undivided 85% of Seller’s interest in all geological,
geophysical and seismic data of Seller (including, without limitation, raw data
and interpretive data whether in written or electronic form), insofar only as it
pertains to the Subject Interests, other than such data which cannot be
transferred without the consent of or payment to any third party (the “G&G
Data”).

Notwithstanding the foregoing, the Assets shall not include, and there is
excepted, reserved and excluded from the sale contemplated by this Agreement,
the wellbores listed on Exhibit A-1 attached hereto (the “Excluded Wellbores”)
as long as such wellbores are not deepened or sidetracked, together with all
Hydrocarbons which may be produced from any depth or formation in the Excluded
Wellbores other than the Eagle Ford Shale Formation.

 
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Section 1.03           Certain Additional Defined Terms.

(a)           Austin Chalk Formation.  For purposes of this Agreement, the term
“Austin Chalk Formation” means the stratigraphic equivalent of the interval
between 9286’ and 9773’ on the 5” Dual Induction Compensated Formation Density
log in the Czar Resources Willa Whyburn Austin #1 Well, Gonzales County, Texas,
API # 42177307170000.

(b)           Eagle Ford Shale Formation.  For purposes of this Agreement, the
term “Eagle Ford Shale Formation” means the stratigraphic equivalent of the
interval between 9773’ and 9896’ on the 5” Dual Induction Compensated Formation
Density log in the Czar Resources Willa Whyburn Austin #1 Well, Gonzales County,
Texas, API # 42177307170000.

(c)           Horizontal Wells.  For purposes of this Assignment, the term
“horizontal well” means any well in which the wellbore deviates at least 75°
from vertical.

(d)           Austin Chalk Formation “D” Zone.  For purposes of this Agreement,
the term “Austin Chalk Formation “D” Zone” means the stratigraphic equivalent of
the interval between 9686’ and 9773’ on the 5” Dual Induction Compensated
Formation Density log in the Czar Resources Willa Whyburn Austin #1 Well,
Gonzales County, Texas, API #42177307170000.

ARTICLE II
Purchase Price

Section 2.01           Purchase Price.    The total consideration for the
purchase, sale and conveyance of the Assets from Seller to Buyer is Buyer’s
payment to Seller of the sum of $12,750,000.00 (the “Purchase Price”), as
adjusted in accordance with the terms of this Agreement.  The adjusted Purchase
Price shall be paid to Seller (or its designee) at the Closing (defined below)
by means of a completed federal funds transfer to an account designated in
writing by Seller.

Section 2.02           Deposit.

(a)           Not later than 5:00 p.m. Central Time on the next Business Day
(defined below) following the execution of this Agreement by Buyer and Seller,
Buyer shall deliver to Seller a performance guarantee deposit in the amount of
$500,000.00 (together with all accrued interest thereon, the “Deposit”).  The
Deposit shall be paid by Buyer to Seller by means of a completed federal funds
transfer to an account designated in writing by Seller.  The Deposit shall be
held by Seller in an interest bearing account subject to the terms of this
Agreement.

(b)           If all conditions precedent to the obligations of Buyer set forth
in Article IX have been met and the transactions contemplated by this Agreement
are not consummated on or before the Closing Date solely because of the failure
of Buyer to perform any of its material obligations hereunder or the material
breach of any representation herein by Buyer, then in such event and
notwithstanding anything contained in this Agreement to the contrary, Seller
shall have the right to terminate this Agreement and receive the Deposit as
liquidated damages, in lieu of all other damages, which remedy shall be the sole
and exclusive remedy available to Seller for Buyer’s failure to perform any of
its material obligations hereunder or Buyer’s material breach of any
representation herein.  Buyer and Seller acknowledge and agree that (i) Seller’s
actual damages upon such a termination would be difficult to ascertain with any
certainty, (ii) that the Deposit is a reasonable estimate of such actual
damages, and (iii) such liquidated damages do not constitute a penalty.

 
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(c)           If all conditions precedent to the obligations of Seller set forth
in Article VIII have been met and the transactions contemplated by this
Agreement are not consummated on or before the Closing Date solely because of
the failure of Seller to perform any of its material obligations hereunder or
the material breach of any representation herein by Seller, then in such event,
Buyer shall have the option, in its sole discretion, (i) to consummate the
transactions contemplated by this Agreement through enforcement of this
Agreement by an action for specific performance, (ii) to enforce such other
remedies as Buyer may have at law or in equity, or (iii) to terminate this
Agreement, in which event Seller shall return the Deposit to Buyer within three
(3) Business Days.

(d)           If this Agreement is terminated by the mutual written agreement of
Buyer and Seller, or if the Closing does not occur on or before the Closing Date
(as the same may be extended by mutual agreement between Buyer and Seller), for
any reason other than as set forth in Section 2.02(b) or 2.02(c), then Seller
shall return the Deposit to Buyer within three (3) Business Days.  Buyer and
Seller shall thereupon have no further rights or obligations under this
Agreement.  As used herein, the term “Business Day” shall mean any day on which
national banks are open for business in Houston, Texas.

(e)           If the transactions contemplated by this Agreement are
consummated, the Deposit shall be retained by Seller and shall be considered as
prepayment of a portion of the Purchase Price, and the amount payable by Buyer
at the Closing shall be reduced by the amount of the Deposit.

Section 2.03           Allocated Values.  Seller has indicated to Buyer that the
Subject Interests total 12,750 net mineral leasehold acres.  The Purchase Price
is allocated among the Subject Interests by Buyer based upon an allocated value
of $1,000 per net mineral leasehold acre (the “Allocated Values”).  Seller and
Buyer agree that the Allocated Values shall be used to compute any adjustments
to the Purchase Price pursuant to the provisions of Article IV of this
Agreement.

ARTICLE III
Effective Time

Section 3.01           Ownership of Assets.  If the transactions contemplated
hereby are consummated in accordance with the terms and provisions hereof, the
ownership of the Assets shall be transferred from Seller to Buyer on the Closing
Date, but effective for all purposes as of 7:00 a.m. local time on March 1, 2010
(the “Effective Time”).

 
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ARTICLE IV
Title and Environmental Matters

Section 4.01           Examination Period.  Following the execution date of this
Agreement until 5:00 p.m., local time in Houston, Texas on April 22, 2010 (the
“Examination Period”), Seller shall make available for inspection and copying
and shall permit Buyer and/or its representatives to examine and copy, at all
reasonable times (including, by mutual agreement between Buyer and Seller, on
weekends, holidays and before and after normal business hours if requested by
Buyer) in Seller’s offices, the Leases, the Easements, the Contracts, the
Permits, the Records, the G&G Data and all abstracts of title, title opinions,
title files, ownership maps, lease files, Contracts files, assignments, division
orders, operating and accounting records, agreements and other materials
pertaining to the Assets.

Section 4.02           Title Defects.  The term “Title Defect,” as used in this
Agreement, shall mean, subject to Section 4.03, any material encumbrance,
encroachment, irregularity, deficiency, defect in or reasonable objection to
Seller’s ownership of the Subject Interests (expressly excluding Permitted
Encumbrances, as hereinafter defined) that causes Seller, or Buyer from and
after the Effective Time, not to have Good and Defensible Title (as hereinafter
defined) to the Subject Interests.  For purposes of this Agreement, the term
“Good and Defensible Title” means subject to and except for the Permitted
Encumbrances:

(a)           that the net mineral leasehold acres attributable to the Subject
Interests total not less than 12,750 net mineral leasehold acres (i.e., 85% x
15,000 net mineral leasehold acres);

(b)           that Seller’s average net revenue interest in all Hydrocarbons
produced, saved and sold from the Subject Interests (“Net Revenue Interest”) is
not less than 73.5%, proportionately reduced (Seller’s average Net Revenue
Interest shall be calculated on an acreage basis using the number of net mineral
leasehold acres and the Net Revenue Interests attributable thereto);

(c)           that Seller’s interest in and to the Subject Interests is
deducible from the real property records of Gonzales County, Texas; and

(d)           that the Subject Interests are free and clear of all liens,
obligations, encumbrances and defects in title.

Section 4.03           Notice of Title Defects.

(a)           If Buyer discovers any Title Defect affecting any Asset, Buyer
shall notify Seller prior to 5:00 p.m., local time in Houston, Texas, on
April 22, 2010 (the “Defects Deadline”) of such alleged Title Defect.  To be
effective, such notice (a “Defects Notice”) must (i) be in writing, (ii) be
received by Seller prior to the Defects Deadline, (iii) describe the Title
Defect, (iv) to the extent applicable, identify the specific Asset or Assets
affected by such Title Defect, and (v) include a good faith estimate of the
Defect Value (defined below) of such Title Defect as determined by Buyer.  Any
matters that may otherwise constitute a Title Defect, but of which Seller has
not been specifically notified by Buyer in accordance with the foregoing, shall
be deemed to have been waived by Buyer, except to the extent any unasserted
Title Defect would constitute (A) a breach of the Seller’s special warranty of
title contained in the Assignment, (B) a breach of any of Seller’s
representations or warranties contained in this Agreement, or (C) a Retained
Obligation (defined below).  Except as otherwise provided herein, upon the
receipt of any Defects Notice from Buyer, Seller shall have the option, but not
the obligation, to attempt to cure such Title Defect to Buyer’s reasonable
satisfaction at any time prior to Closing.

 
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(b)           The value attributable to each Title Defect (the “Defect Value”)
that is asserted by Buyer in a Defects Notice shall be determined based upon the
criteria set forth below:

(i)           if a Title Defect is a lien upon any Asset, the Defect Value is
the amount necessary to be paid to remove the lien from the affected Asset;

(ii)           if a Title Defect is that the net mineral leasehold acres
attributable to the Subject Interests total less than 12,750 net mineral
leasehold acres, then the Defect Value thereof shall be an amount equal to the
product of $1,000 multiplied by the difference between 12,750 net mineral
leasehold acres and the number of net mineral leasehold acres actually
attributable to the Subject Interests;

(iii)           if a Title Defect represents an obligation, encumbrance, burden
or charge upon the affected Asset for which the economic detriment to Buyer is
unliquidated, the amount of the Defect Value shall be determined by taking into
account the Allocated Value of the affected Asset, the portion of the Asset
affected by the Title Defect, the legal effect of the Title Defect, the
potential economic effect of the Title Defect over the life of the affected
Asset, and the Defect Values placed upon the Title Defect by Buyer and Seller;

(iv)           if a Title Defect is not then currently in effect or does not
adversely affect an Asset throughout the entire productive life of such Asset,
such fact shall be taken into account in determining the Defect Value;

(v)           the Defect Value of a Title Defect shall be determined without
duplication of any costs or losses included in another Defect Value hereunder;

(vi)           notwithstanding anything herein to the contrary, the Defect Value
of a Title Defect may not exceed the Allocated Value of the affected Asset;

(vii)         Buyer’s right to assert Title Defects hereunder shall not be
diminished or otherwise adversely affected by any materiality qualification
contained in any of Seller’s representations and warranties in Article V hereof;
and

(viii)        such other factors as are reasonably necessary to make a proper
evaluation.

Section 4.04           Remedies for Title Defects.

(a)           Subject to Seller’s right to dispute the existence of a Title
Defect and/or the Defect Value asserted with respect thereto and subject to the
rights of Buyer pursuant to Section 4.04(b) and Section 11.01, in the event that
any Title Defect timely asserted by Buyer in accordance with Section 4.03(a) is
not waived in writing by Buyer or cured on or before Closing, Seller shall
reduce the Purchase Price by the Defect Value for such Title Defect as
determined pursuant to Section 4.03(b) or Article XIV;

 
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(b)           In the event that the Title Defect results from Seller’s average
Net Revenue Interest attributable to the Subject Interests being less than
73.5%, proportionately reduced, and Buyer and Seller cannot agree on an
appropriate reduction to the Purchase Price as a result thereof, then Buyer
shall have the right to cause all or any portion of the Leases in which Seller’s
Net Revenue Interest is less than 73.5% (proportionately reduced) to be excluded
from this Agreement with an appropriate reduction in the Purchase Price based
upon the Allocated Value of the net mineral leasehold acres attributable to such
excluded Leases;

(c)           If any Title Defect is in the nature of an unobtained consent to
assignment or other restriction on assignability, the provisions of Section 4.07
shall apply; and

(d)           If on or before Closing the Parties have not agreed upon the
validity of any asserted Title Defect or have not agreed on the Defect Value
attributable thereto, either Party shall have the right to elect to have the
validity of such Title Defect and/or such Defect Value determined by an
Independent Expert pursuant to Article XIV.  If the validity of any asserted
Title Defect, or the Defect Value attributable thereto, is not determined before
Closing, then the Purchase Price paid at Closing shall be reduced by virtue of
such disputed Title Defect or Defect Value by an amount that is midway between
the amounts asserted by Buyer and Seller, and upon the final resolution of such
dispute Buyer or Seller, as the case may be, shall pay to the other party the
difference between the Defect Value withheld for such Title Defect and the
Defect Value of such Title Defect as finally determined.

Section 4.05           Special Warranty of Title.  The documents to be executed
and delivered by Seller to Buyer transferring title to the Assets as required
hereby, including the Partial Assignment of Oil and Gas Leases attached hereto
as Exhibit C (the “Assignment”), shall provide for a special warranty of title,
subject to the Permitted Encumbrances and the terms of this Agreement.  The term
“Permitted Encumbrances” shall mean any of the following matters to the extent
the same are valid and subsisting and affect the Assets:

(a)           the Leases and Contracts set forth in Exhibit A and Exhibit B, to
the extent complete executed copies of the same (with all exhibits, schedules
and attachments) are included in the Records or provided to Buyer on or prior to
April 15, 2010 and the same do not operate to reduce the average Net Revenue
Interest of Seller in the Subject Interests below 73.5%, proportionately reduced
or materially interfere with, diminish or detract from the operation,
development or ownership of the affected Asset;

(b)           any unfiled materialman’s, mechanics’, repairman’s, employees’,
contractors’, operators’ liens or other similar liens or charges for liquidated
amounts arising in the ordinary course of business where payment of such amounts
is not delinquent, and (i) that Seller has agreed to retain or pay pursuant to
the terms hereof, or (ii) for which Seller is responsible for paying or
releasing at the Closing;

 
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(c)           any current period liens for taxes and assessments affecting the
Assets that are not yet due or delinquent, to the extent Seller has agreed to
pay the same pursuant to the terms hereof or which are to be prorated pursuant
to the terms hereof;

(d)           to the extent that same do not and will not at any time materially
interfere with the ownership, operation, development or value of the Assets, any
(i) easements, rights-of-way, servitudes, permits, surface leases and other
rights in respect of surface operations, pipelines, grazing, hunting, lodging,
canals, ditches, reservoirs or the like, and (ii) easements for streets, alleys,
highways, pipelines, telephone lines, power lines, railways and other similar
rights-of-way on, over or in respect of property owned or leased by Seller or
over which Seller owns rights-of-way, easements, permits or licenses;

(e)           all lessors’ royalties, overriding royalties and other burdens on
or deductions from the proceeds of production created or in existence as of the
Effective Time, provided that such matters do not operate to reduce the average
Net Revenue Interest of Seller in the Subject Interests below 73.5%,
proportionately reduced;

(f)           preferential rights to purchase or similar agreements with respect
to which (i) written waivers or consents are obtained from the appropriate
parties for the transactions contemplated hereby, or (ii) required written
notices have been given for the transactions contemplated hereby to the holders
of such rights and the appropriate period for asserting such rights has expired
without an exercise of such rights;

(g)           required third party consents to assignments or similar agreements
with respect to which written waivers or consents are obtained from the
appropriate parties for the transactions contemplated hereby;

(h)           all rights to consent by, required notices to, filings with, or
other actions by Governmental Authorities (defined below) in connection with the
sale or conveyance of oil and gas leases or interests therein that are
customarily obtained subsequent to such sale or conveyance;

(i)           rights reserved to or vested in any Governmental Authority to
control or regulate any of the Assets and the applicable laws, rules, and
regulations of such Governmental Authorities;

(j)           Title Defects which Buyer has waived or is deemed to have waived
pursuant to the terms of this Agreement; and

(k)           liens and encumbrances which are to be released at Closing
pursuant to Section 10.07 hereof.

Section 4.06           Preferential Rights To Purchase.  Seller shall use all
reasonable efforts to comply with all preferential right to purchase provisions
encumbering any Asset prior to the Closing.  Prior to the Closing, Seller shall
notify Buyer of the existence of any preferential purchase rights and if any
preferential purchase rights are exercised or if the requisite period has
elapsed without said rights having been exercised.  If a third party who has
been offered an interest in any Asset pursuant to a preferential right to
purchase elects prior to the Closing to purchase such Asset pursuant to the
aforesaid offer, the interest so affected will be eliminated from the Assets and
the Purchase Price shall be reduced by the Allocated Value of such
Asset.  Otherwise, the interest offered as aforesaid shall be conveyed to Buyer
at the Closing subject to any preferential right to purchase of any third party
for which notice has been given but the time period for response by the holder
of such preferential right extends beyond the Closing and Buyer shall assume all
duties, obligations and liabilities arising from such preferential right to
purchase.  Without limiting the foregoing, if any such third party timely and
properly elects to purchase an interest in any Asset subject to a preferential
right to purchase after the Closing Date, Buyer shall be obligated to convey
said interest to such third party and shall be entitled to the consideration for
the sale of such interest.

 
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Section 4.07           Consents to Assignment.  Seller shall use all reasonable
efforts to obtain all necessary consents from third parties to assign the Assets
to Buyer prior to Closing (other than governmental approvals that are
customarily obtained after Closing).  To the extent such consents are not
obtained prior to Closing, then such failure shall constitute a Title Defect as
to that portion of the Assets affected thereby.  Notwithstanding anything
contained herein to the contrary Buyer, at its sole option, shall have the right
to exclude any Asset which is subject to a consent to assignment that has not
been obtained prior to Closing.  If Buyer elects to exclude such Asset then the
Purchase Price shall be reduced at Closing by an amount equal to the Allocated
Value of the Asset excluded.  If Buyer elects to acquire such Asset at Closing
even though a consent to assignment has not been obtained, Buyer assumes all
obligations in connection with such failure to obtain such consent, and such
obligations shall be Assumed Obligations (as defined below) hereunder.

Section 4.08           Environmental Review.

(a)           Buyer shall have the right to conduct or cause its environmental
consultant (“Buyer’s Environmental Consultant”) to conduct an environmental
review of the Assets prior to the expiration of the Defects Deadline (“Buyer’s
Environmental Review”).  The cost and expense of Buyer’s Environmental Review,
if any, shall be borne solely by Buyer.  Buyer shall (and shall cause Buyer’s
Environmental Consultants to): (i) consult with Seller before conducting any
work comprising Buyer’s Environmental Review, (ii) perform all such work in a
safe and workmanlike manner and so as to not unreasonably interfere with
Seller’s operations, and (iii) comply with all applicable laws, rules, and
regulations.  Seller will assist Buyer in obtaining any third party consents
that are required in order to perform any work comprising Buyer’s Environmental
Review.  Seller shall have the right to have a representative or representatives
accompany Buyer and Buyer’s Environmental Consultant at all times during Buyer’s
Environmental Review, and Buyer shall give Seller notice not less than 24 hours
before any visits by Buyer or Buyer’s Environmental Consultant to the
Assets.  With respect to any samples taken in connection with Buyer’s
Environmental Review, Buyer shall take split samples, providing one of each such
sample, properly labeled and identified, to Seller.  BUYER HEREBY AGREES TO
RELEASE, DEFEND, INDEMNIFY AND HOLD HARMLESS SELLER, ITS AFFILIATES, AND THEIR
RESPECTIVE PARTNERS, SHAREHOLDERS, OWNERS, OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS AND REPRESENTATIVES, FROM AND AGAINST ALL CLAIMS, LOSSES, DAMAGES, COSTS,
EXPENSES, CAUSES OF ACTION AND JUDGMENTS OF ANY KIND OR CHARACTER (INCLUDING
THOSE RESULTING FROM SELLER’S JOINT, COMPARATIVE OR CONCURRENT NEGLIGENCE OR
STRICT LIABILITY BUT EXPRESSLY NOT INCLUDING THOSE RESULTING FROM SELLER’S SOLE
NEGLIGENCE, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) ARISING OUT OF OR RELATING
TO BUYER’S ENVIRONMENTAL REVIEW.

 
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(b)           Unless otherwise required by applicable law, Buyer shall (and
shall cause Buyer’s Environmental Consultant to) treat confidentially any
matters revealed by Buyer’s Environmental Review and any reports or data
generated from such review (the “Environmental Information”), and unless
required by law Buyer shall not (and shall cause Buyer’s Environmental
Consultant to not) disclose any Environmental Information to any Governmental
Authority or other third party without the prior written consent of
Seller.  Unless otherwise required by law, Buyer may use the Environmental
Information only in connection with the transactions contemplated by this
Agreement.  If Buyer, Buyer’s Environmental Consultant, or any third party to
whom Buyer has provided any Environmental Information become legally compelled
to disclose any of the Environmental Information, Buyer shall provide Seller
with prompt notice sufficiently prior to any such disclosure so as to allow
Seller to file any protective order, or seek any other remedy, as it deems
appropriate under the circumstances.

Section 4.09           Environmental Definitions.

(a)           Environmental Defect.  For purposes of this Agreement, the term
“Environmental Defect” means an Asset has been cited by Governmental Authority
for a violation of an Environment Law (defined below), or Buyer has discovered a
condition on or affecting an Asset which violates an Environment Law, Lease,
Contract or other agreement, unless such violation has been cured to Buyer’s
reasonable satisfaction or has been waived by Buyer.

(b)           Governmental Authority.  For purposes of this Agreement, the term
“Governmental Authority” shall mean, as to any given Asset, the United States
and the state, county, parish, city and political subdivisions in which such
Asset is located and that exercises jurisdiction over such Asset, and any
commission, agency, department, board or other instrumentality thereof that
exercises jurisdiction over such Asset.

(c)           Environmental Laws.  For purposes of this Agreement, the term
“Environmental Laws” shall mean all laws, statutes, ordinances, court decisions,
rules and regulations of any Governmental Authority pertaining to health or the
environment as may be interpreted by applicable court decisions or
administrative orders, including, without limitation, the Clean Air Act, as
amended, the Comprehensive Environmental Response, Compensation and Liability
Act, as amended (“CERCLA”), the Federal Water Pollution Control Act, as amended,
the Occupational Safety and Health Act, as amended, the Resource Conservation
and Recovery Act of 1976, as amended, the Safe Drinking Water Act, as amended,
the Toxic Substances Control Act, as amended, the Superfund Amendment and
Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation
Act, as amended, the Rivers and Harbors Act of 1899, as amended, the Hazardous
and Solid Waste Amendments Act of 1984, as amended, the Occupational Safety and
Health Act, as amended, and any other federal, state and local law whose purpose
is to conserve or protect human health, the environment, wildlife or natural
resources.

 
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(d)           Environmental Defect Value.  For purposes of this Agreement, the
term “Environmental Defect Value” shall mean, with respect to any Environmental
Defect, the amount of the estimated costs and expenses to correct or remediate
such Environmental Defect in a manner consistent with Environmental Laws and
applicable Leases, Contracts and agreements.

Section 4.10           Notice of Environmental Defects.  If Buyer discovers any
Environmental Defect affecting the Assets, Buyer shall notify Seller prior to
the Defects Deadline of such alleged Environmental Defect.  To be effective,
such notice must (i) be in writing, (ii) be received by Seller prior to the
Defects Deadline, (iii) describe the Environmental Defect in reasonable detail,
(iv) to the extent known, identify the specific Assets affected by such
Environmental Defect, (v) identify the procedures recommended to correct the
Environmental Defect, and (vi) include Buyer’s reasonable estimate of the
Environmental Defect Value of the Environmental Defect.  Upon the receipt of
such effective notice from Buyer, Seller shall have the option, but not the
obligation, to attempt to cure any such Environmental Defect at any time prior
to the Closing.

Section 4.11           Remedies for Environmental Defects.  If any Environmental
Defect described in a notice delivered in accordance with Section 4.10 is not
cured to Buyer’s reasonable satisfaction on or before the Closing and Buyer and
Seller cannot agree on an appropriate reduction to the Purchase Price as a
result thereof, then Buyer shall have the right to cause the Assets affected by
such Environmental Defect to be excluded from this Agreement with an appropriate
reduction in the Purchase Price based upon the Allocated Value of such excluded
Assets.

ARTICLE V
Representations and Warranties of Seller

Seller represents and warrants to Buyer that:

Section 5.01           Existence.  Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
is qualified to conduct business and in good standing in the State of
Texas.  Seller has full legal power, right and authority to carry on its
business as such is now being conducted and as contemplated to be conducted.

Section 5.02           Legal Power.  Seller has the legal power and right to
enter into and perform this Agreement and the transactions contemplated
hereby.  The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement will not violate, nor be in
conflict with (a) any provision of Seller’s organizational documents; (b) any
material agreement or instrument to which Seller is a party or by which Seller
or the Assets are bound; or (c) any judgment, order, ruling or decree applicable
to Seller or the Assets, or any law, rule or regulation applicable to Seller or
the Assets.

 
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Section 5.03           Execution.  The execution, delivery and performance of
this Agreement and the transactions contemplated hereby are duly and validly
authorized by all requisite action on the part of Seller.  This Agreement
constitutes, and the documents to be executed and delivered by Seller at the
Closing will constitute, the legal, valid and binding obligations of Seller
enforceable in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, debtor relief or similar laws
affecting the rights of creditors generally and general equitable principles.

Section 5.04           Brokers.  No broker or finder is entitled to any
brokerage or finder’s fee, or to any commission, based in any way on agreements,
arrangements or understandings made by or on behalf of Seller or any affiliate
of Seller for which Buyer has or will have any liabilities or obligations
(contingent or otherwise).

Section 5.05           Bankruptcy.  There are no bankruptcy, reorganization or
liquidation proceedings pending against Seller or being contemplated by Seller,
or to the knowledge of Seller, threatened against Seller.

Section 5.06           Taxes.  Seller has paid and discharged all ad valorem,
property, production, severance, excise and other taxes and assessments based on
or measured by the ownership of the Leases and other Assets, the production of
Hydrocarbons therefrom or the receipt of proceeds therefrom as are due and
payable.  No taxing authority or agency, domestic or foreign, has asserted or is
now asserting or, to the knowledge of Seller, threatening to assert against the
Assets or Seller any deficiency or claim for additional taxes or interest
thereon or penalties in connection therewith.

Section 5.07           Environmental Matters.  Except as set forth in
Schedule 5.07 attached hereto, to the best of Seller’s knowledge (i) no
environmental or physical condition of any Lease or other Asset violates any
Environmental Laws, Lease, Contract or other agreement in any material respect;
(ii)  no condition or event has occurred with respect to any Lease or other
Asset that, with notice or the passage of time, or both, would constitute a
violation requiring action by Seller or, after Closing, Buyer to remedy,
stabilize, neutralize, clean up or otherwise alter the environmental or physical
condition of any such Lease or other Asset; and (iii) Seller has not disposed of
any produced water, hazardous substances or solid waste materials generated on
the Leases or used on the Leases at sites off the Leases, except in compliance
with Environmental Laws.  Except as set forth in Schedule 5.07, there are no
civil, criminal or administrative actions, lawsuits, demands, litigation, claims
or hearings pending, or to Seller’s knowledge threatened, relating to an alleged
breach of Environmental Laws on or with respect to any Lease or other Asset, and
Seller has not received any notice from any Governmental Authority or any other
person that the operation of any Lease or other Asset is in violation of any
Environmental Laws or agreement or that Seller or any predecessor in title of
Seller is responsible (or potentially responsible) for remedying, stabilizing,
neutralizing or cleaning up any pollutants, contaminants, or hazardous or toxic
waste, substances or materials at, on, or beneath any Lease or other Asset.

Section 5.08           Violations and Defaults.  Seller is not in violation of,
or in default in any material respect under, and no event has occurred that
(with notice or the lapse of time or both) could constitute a violation of or
default under (i) any applicable law, rule, regulation, ordinance, order, writ,
decree or judgment of any Governmental Authority related to the Leases or other
Assets, or (ii) any Lease, Easement, Permit or Contract.

 
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Section 5.09           Litigation.  Except as set forth in
Schedule 5.09:  (i) no litigation, arbitration, investigation or other
proceeding of any Governmental Authority or other party is pending or, to the
knowledge of Seller, threatened against Seller affecting the Leases or other
Assets, nor are there any facts or circumstances existing which could reasonably
be expected to give rise to any such litigation, arbitration, investigation or
proceeding; and (ii) Seller is not subject to any outstanding injunction,
judgment, order, decree, settlement agreement, conciliation agreement, letter of
commitment, deficiency letter or ruling affecting the Leases or other Assets
(other than routine oil and gas field regulatory orders applicable generally to
the oil and gas industry).

Section 5.10           Leases.  Seller is not in default with respect to any of
its material obligations under any of the Leases.  Seller has not received,
either verbally or in writing, any notice of default or breach under any of the
Leases which default or breach has not been cured or remedied to the
satisfaction of the applicable lessor.  All royalties and other payments due
under the Leases have been timely and properly paid, except for those which
Seller has a legal right to suspend.

Section 5.11           Material Contracts.  Except for the Contracts listed in
Exhibit B, there are no Contracts affecting the Leases or other Assets with
respect to which a breach by any party thereto could reasonably be expected to
have or result in a material adverse effect on any of the Leases or other
Assets.  Each Contract listed in Exhibit B is in full force and effect and
constitutes a legal, valid and binding obligation of Seller and, to the
knowledge of Seller, each other party thereto.  Seller has not received from any
other party to a Contract listed in Exhibit B any notice, whether written or
oral, of termination or intention to terminate such Contract and, to the
knowledge of Seller, no event has occurred which (with notice or lapse of time,
or both) would constitute a default under any such Contract or give Seller or
any other party to any such Contract the right to terminate or modify such
Contract.

Section 5.12           Hydrocarbon Sales Agreements.  There are no Hydrocarbon
sales agreements pertaining to the Assets that provide for a fixed price and
that cannot be cancelled at any time upon ninety (90) days (or less) prior
notice.

Section 5.13           Preferential Rights and Consents.  To the knowledge of
Seller, except as set forth in Schedule 5.13, there are no preferential rights
to purchase or consents to assignment that are applicable to the Assets and the
transactions contemplated hereby.

Section 5.14           Access.  Seller has a legal right of access to all of the
Leases, and following the Closing Buyer will have a legal right of access to all
of the Leases.

Section 5.15           Area of Mutual Interest and Other Agreements.  Except as
set forth in Schedule 5.15, none of the Assets are subject to (i) any area of
mutual interest agreement, or (ii) any farmout agreement, farmin agreement or
similar agreement under which any party thereto is entitled to receive
assignments not yet made, or could earn additional assignments after the
Effective Time.

 
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Section 5.16           Expenses.  Seller has paid all lease operating expenses,
capital expenses, joint interest billings and other costs and expenses
attributable to the ownership and operation of the Leases and other Assets in a
timely manner before becoming delinquent.

ARTICLE VI
Representations and Warranties of Buyer

Buyer represents and warrants to Seller that:

Section 6.01           Existence.  Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of the State of
Texas.  Buyer has full legal power, right and authority to carry on its business
in the State of Texas as such is now being conducted and as contemplated to be
conducted.

Section 6.02           Legal Power.  Buyer has the legal power and right to
enter into and perform this Agreement and the transactions contemplated
hereby.  The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement will not violate, nor be in
conflict with (a) any provision of Buyer’s organizational documents, (b) any
material agreement or instrument to which Buyer is a party or by which Buyer is
bound; or (c) any judgment, order, ruling or decree applicable to Buyer as a
party in interest or any law, rule or regulation applicable to Buyer.

Section 6.03           Execution.  The execution, delivery and performance of
this Agreement and the transactions contemplated hereby are duly and validly
authorized by all requisite company action on the part of Buyer.  This Agreement
constitutes, and the documents to be executed and delivered by Buyer at the
Closing will constitute, the legal, valid and binding obligations of Buyer
enforceable in accordance with their terms, except as enforceable that may be
limited by bankruptcy, insolvency, reorganization, debtor relief or similar laws
affecting the rights of creditors generally.

Section 6.04           Brokers.  No broker or finder is entitled to any
brokerage or finder’s fee, or to any commission, based in any way on agreements,
arrangements or understandings made by or on behalf of Buyer or any affiliate of
Buyer for which Seller has or will have any liabilities or obligations
(contingent or otherwise).

Section 6.05           Bankruptcy.  There are no bankruptcy, reorganization or
liquidation proceedings pending against Buyer, being contemplated by Buyer or,
to the knowledge of Buyer, threatened against Buyer.

Section 6.06           Litigation.  There is no suit, action, claim,
investigation or inquiry by any person or entity or by any administrative agency
or Governmental Authority and no legal, administrative or arbitration proceeding
pending or, to Buyer’s knowledge, threatened against Buyer or any affiliate of
Buyer that has materially affected or will materially affect Buyer’s ability to
consummate the transactions contemplated herein.

 
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ARTICLE VII
Covenants

Section 7.01           Operation of the Leases Prior to the Closing.

(a)           From the date of this Agreement until Closing (the “Interim
Period”), Seller shall (i) operate and administer the Leases in a good and
workmanlike manner consistent with its past practices, and in material
compliance with all applicable Leases, Contracts, laws, rules, regulations and
Permits, (ii) carry on its business with respect to the Assets in substantially
the same manner as before execution of this Agreement, (iii) give prompt written
notice to Buyer of any notice of asserted default or violation received or given
by Seller under any Leases, Contracts, laws, rules, regulations or Permits
affecting any Asset, (iv) give Buyer the opportunity to discuss matters related
to the Assets with such officers, accountants, consultants and counsel of Seller
as Buyer deems reasonably necessary or appropriate for the purpose of
familiarizing itself with the Assets, and (v) cause its employees to furnish
Buyer with such data, records and other information with respect to the Assets
as Buyer may from time to time reasonably request.  Notwithstanding the
foregoing, during the Interim Period, without the prior written consent of
Buyer, which consent will not be unreasonably withheld or delayed, Seller will
not (i) cause the Assets to be developed, maintained or operated in a manner
substantially inconsistent with prior operations; (ii) abandon any part of the
Assets; (iii) propose, agree to or commence any drilling or other operations on
the Assets; (iv) convey, encumber, relinquish or dispose of any part of the
Assets or any operating or other rights related thereto; (v) enter into any
agreement amending, modifying, relinquishing or terminating all or any part of
the Assets; or (vi) enter into any agreements affecting the Assets or the
ownership, development or operation thereof.

(b)           During the Interim Period, Seller will promptly pay, when due, all
expenses, taxes, revenues, royalties, overriding royalties and other obligations
attributable to the Assets and will not, without the prior written consent of
Buyer waive any rights accruing after the Effective Time with respect to any of
the Assets.

Section 7.02           Operation of the Assets After the Closing.  On the
Closing Date Seller will tender operation of the Assets to Buyer’s general
partner, Hilcorp Energy Company.

Section 7.03           Seller's Knowledge.  If after the date of this Agreement,
Seller obtains knowledge of any fact which results in any representation or
warranty of Buyer contained herein being inaccurate in any respect, Seller will
promptly provide Buyer with written notice thereof.

Section 7.04           Excluded Wellbores.  Seller shall not deepen or sidetrack
any of the Excluded Wellbores or attempt to produce or complete any of the
Excluded Wellbores in the Eagle Ford Shale Formation.  If Seller takes any
action in violation of this Section 7.04(a), Buyer shall be entitled to 85% of
Seller’s interest in any Hydrocarbons produced from such Excluded Wellbores and
to enforce any other rights or remedies available to Buyer at law or in equity,
and (b) Seller shall execute any such assignments or other documents or take any
such other action as Buyer may request in order to evidence Buyer’s rights to
such Hydrocarbons. Seller shall also immediately notify Buyer if any other
working interest owner in any Excluded Wellbore proposes a deepening, sidetrack
or Eagle Ford shale recompletion operation for such Excluded Wellbore.

 
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ARTICLE VIII
Conditions to Obligations of Seller

The obligations of Seller to consummate the transaction provided for in this
Agreement are subject, at the option of Seller, to the fulfillment on or prior
to the Closing Date of each of the following conditions:

Section 8.01           Representations.  The representations and warranties of
Buyer in this Agreement shall be true and correct in all material respects as of
the Closing Date as though made on and as of such date, except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date.

Section 8.02           Performance.  Buyer shall have performed all material
obligations, covenants and agreements contained in this Agreement to be
performed or complied with by it at or prior to the Closing.

Section 8.03           Pending Matters.  No suit, action or other proceeding
shall be pending or threatened that seeks to restrain, enjoin or otherwise
prohibit the consummation of the transactions contemplated by this Agreement.

ARTICLE IX
Conditions to Obligations of Buyer

The obligations of Buyer to consummate the transaction provided for in this
Agreement are subject, at the option of Buyer, to the fulfillment on or prior to
the Closing Date of each of the following conditions:

Section 9.01           Representations.  The representations and warranties of
Seller in this Agreement shall be true and correct in all material respects as
of the Closing Date as though made on and as of such date, except that those
representations and warranties which address matters only as of a particular
date shall remain true and correct as of such date.

Section 9.02           Performance.  Seller shall have performed all material
obligations, covenants and agreements contained in this Agreement to be
performed or complied with by it at or prior to the Closing.

Section 9.03           Pending Matters.  No suit, action or other proceeding
shall be pending or threatened that seeks to restrain, enjoin, or otherwise
prohibit the consummation of the transactions contemplated by this Agreement.

 
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ARTICLE X
The Closing

Section 10.01        Time and Place of the Closing.  If the conditions referred
to in Articles VIII and IX of this Agreement have been satisfied, the
transactions contemplated by this Agreement (the “Closing”) shall take place at
the offices of Buyer, whose address is 1201 Louisiana, Suite 1400, Houston,
Texas 77002, at 9:00 a.m. on April 29, 2010, or at such other time as the
Parties might hereafter mutually agree in writing (the “Closing Date”).

Section 10.02         Adjustments to Purchase Price at the Closing.

(a)           At the Closing, the Purchase Price shall be increased by any
amount provided for in this Agreement or agreed upon by Buyer and Seller.

(b)           At the Closing, the Purchase Price shall be decreased by the
following amounts:

(i)             the Allocated Value of any Subject Interests sold prior to the
Closing to the holder of a preferential right pursuant to Section 4.06;

(ii)            all downward Purchase Price adjustments for Title Defects and
Environmental Defects determined in accordance with Article IV;

(iii)           the amount of the Deposit; and

(iv)           any other amount provided for in this Agreement or agreed upon by
Buyer and Seller.

(c)           The adjustments described in Sections 10.02(a) and (b) are
hereinafter referred to as the “Purchase Price Adjustments.”

Section 10.03         Pre-Closing Allocations/Statement.  Not later than three
(3) Business Days prior to the Closing Date, Buyer shall prepare and deliver to
Seller a statement of the estimated Purchase Price Adjustments taking into
account the foregoing principles (the “Closing Statement”).  Buyer shall make
available to Seller in Buyer’s office all documents supporting the estimated
Purchase Price Adjustments.  The Purchase Price paid by Buyer to Seller at
Closing shall be the Purchase Price, as adjusted by the estimated Purchase Price
Adjustments set forth in the Closing Statement; provided that if Seller notifies
Buyer on or before the Closing Date that it disputes Buyer’s estimate of the
Purchase Price Adjustments and the Parties cannot agree otherwise, then the
Purchase Price paid at Closing shall be the amount that is midway between
Seller’s and Buyer’s estimated amounts.

Section 10.04         Post-Closing Adjustments to Purchase Price.  To the extent
the Parties determine following the Closing that the Purchase Price Adjustments
set forth in the Closing Statement were incorrect, the Party owing monies shall
make the appropriate payment or reimbursement to the other Party within five (5)
Business Days.  The Closing Statement shall become final and binding upon the
parties on the sixtieth (60th) day following the Closing (the “Final Settlement
Date”), unless a Party gives written notice of its disagreement (a “Notice of
Disagreement”) to the other Party prior to such date.  Any Notice of
Disagreement shall specify in detail the dollar amount, nature and basis of any
disagreement so asserted.  If a Notice of Disagreement is received by a Party in
a timely manner and the Parties are unable to otherwise resolve the dispute
evidenced by the Notice of Disagreement, then either Party may elect to have the
dispute evidenced by the Notice of Disagreement resolved by arbitration in
accordance with Article XIV.

 
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Section 10.05         Transfer Taxes and Costs.  All sales, use or other taxes
(other than taxes on gross income, net income or gross receipts) and duties,
levies or other governmental charges incurred by or imposed with respect to the
property transfers undertaken pursuant to this Agreement shall be the
responsibility of, and shall be collected, remitted and paid by, Buyer.  Buyer
agrees to reimburse Seller for all reasonable third party costs incurred by
Seller and associated with assigning the Permits and Contracts to Buyer.

Section 10.06         Ad Valorem and Similar Taxes.  All ad valorem, property,
severance and similar taxes and assessments based upon or measured by the value
of the Assets shall be divided or prorated between Seller and Buyer as of the
Effective Time.  Seller shall retain responsibility for such taxes attributable
to the period of time prior to the Effective Time and Buyer shall assume
responsibility for the period of time from and after the Effective Time.

Section 10.07         Actions of Seller at the Closing.  At the Closing, Seller
shall execute (where applicable) and deliver to Buyer the following, all of
which shall be in form and content reasonably satisfactory to Buyer:

(a)           the Assignment;

(b)           a Participation Agreement between Seller and Buyer substantially
in the form attached hereto as Exhibit D (the “Participation Agreement”);

(c)           an Operating Agreement between Hilcorp Energy Company, as
Operator, and Buyer and Seller, as Non-Operators, covering the Leases and
substantially in the form attached to the Participation Agreement (the
“Operating Agreement”);

(d)           possession of the Assets;

(e)           a Closing Certificate executed by a principal executive officer of
Seller certifying that all of Seller’s representations and warranties are true
and correct in all material respects as of the Closing Date, and that Seller has
performed in all material respects all of the covenants required of Seller in
this Agreement as of the Closing Date;

(f)            a “non-foreign person” affidavit establishing that the
transaction contemplated by this Agreement does not subject Buyer to the
withholding requirement of the Foreign Investment Real Property Tax Act of 1980;

(g)           a Request for Taxpayer Identification and Certification on
Form W-9 certifying Seller’s federal employer identification number;

 
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(h)           any necessary change of operator forms on those Assets operated by
Seller or its affiliates;

(i)            recorded or recordable releases of all mortgage liens, security
interests, financing statements and other similar liens and encumbrances granted
by Seller to its lenders or other parties which encumber the Assets; and

(j)            any other documents provided for herein or necessary or desirable
to effectuate the transactions contemplated hereby.

Section 10.08         Actions of Buyer at the Closing.  At the Closing, Buyer
shall take possession of the Assets and execute (where applicable) and deliver
to Seller the following, all of which shall be in form and content reasonably
satisfactory to Seller:

(a)           the Purchase Price (as adjusted pursuant to the provisions of this
Agreement and net of the Deposit) by wire transfer to an account designated in
writing by Seller;

(b)           the Participation Agreement;

(c)           the Operating Agreement;

(d)           a Closing Certificate, executed by a principal executive officer
of the general partner of Buyer, certifying that all of Buyer’s representations
and warranties are true and correct in all material respects as of the Closing
Date, and that Buyer has performed in all material respects all of the covenants
required of it in this Agreement as of the Closing Date; and

(e)           the Assignment and any other documents provided for herein or
necessary or desirable to effectuate the transactions contemplated hereby.

Section 10.09         Further Cooperation.

(a)           Seller shall make the Records available to be picked up by Buyer
at the offices of Seller during normal business hours on the Closing Date and on
any date thereafter.

(b)           After the Closing Date, each Party, at the request of the other
and without additional consideration, shall execute and deliver, or shall cause
to be executed and delivered, from time to time such further instruments of
conveyance and transfer and shall take such other action as the other Party may
reasonably request to convey and deliver the Assets to Buyer and to accomplish
the orderly transfer of the Assets to Buyer in the manner contemplated by this
Agreement.

(c)           To the extent that any G&G Data relating to the Subject Interests
cannot be transferred to Buyer at Closing without the consent of or payment to a
third party, Seller shall, subject to any confidentiality requirements related
to such data, allow Buyer to review such data in Seller’s offices during normal
business hours following the Closing.

 
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ARTICLE XI
Termination

Section 11.01         Right of Termination.  This Agreement may be terminated at
any time at or prior to the Closing:

(a)           by mutual written consent of the Parties;

(b)           by Seller on the Closing Date if the conditions set forth in
Article VIII have not been satisfied in all material respects by Buyer or waived
by Seller in writing by the Closing Date;

(c)           by Buyer on the Closing Date if the conditions set forth in
Article IX have not been satisfied in all material respects by Seller or waived
by Buyer in writing by the Closing Date;

(d)           by either Party if the Closing shall not have occurred on or
before May 15, 2010;

(e)           by either Party if any Governmental Authority shall have issued an
order, judgment or decree or taken any other action challenging, delaying,
restraining, enjoining, prohibiting or invalidating the consummation of any of
the transactions contemplated herein;

(f)           by Buyer or Seller if (i) the aggregate amount of the Purchase
Price Adjustments asserted by Buyer pursuant to this Agreement with respect to
all Title Defects, plus (ii) the aggregate Allocated Value of all Assets
excluded from the transactions contemplated by this Agreement pursuant to
Section 4.06 and Section 4.11, exceeds $6,375,000.00; or

(g)           as otherwise provided herein;

provided, however, that no Party shall have the right to terminate this
Agreement pursuant to clause (b), (c), or (d) above if such Party is at such
time in material breach of any provision of this Agreement.

Section 11.02         Effect of Termination.  In the event that the Closing does
not occur as a result of any Party exercising its right to terminate pursuant to
Section 11.01, then except as set forth in Section 2.02, this Agreement shall be
null and void and no Party shall have any further rights or obligations under
this Agreement.

Section 11.03         Attorneys’ Fees, Etc. If either Party to this Agreement
resorts to legal proceedings to enforce this Agreement, the prevailing Party in
such proceedings shall be entitled to recover all costs incurred by such Party,
including reasonable attorneys’ fees, in addition to any other relief to which
such Party may be entitled.  Notwithstanding anything to the contrary in this
Agreement, in no event shall either Party be entitled to receive any punitive,
indirect or consequential damages unless same are a part of a third party claim
for which a Party is seeking indemnification hereunder, REGARDLESS OF WHETHER
CAUSED OR CONTRIBUTED TO BY THE SOLE, JOINT, COMPARATIVE OR CONCURRENT
NEGLIGENCE OR STRICT LIABILITY OF THE OTHER PARTY.

 
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ARTICLE XII
Obligations and Indemnification

Section 12.01         Seller’s Retained Obligations.  Provided that the Closing
occurs, Seller hereby retains all costs, expenses, liabilities and obligations
of any kind or character related, applicable or attributable to (a) the
ownership or operation of the Leases, insofar as they cover depths from the
surface to the base of the Austin Chalk Formation, whether attributable to
periods before, on or after the Effective Time; (b) the ownership or operation
of the Assets for all periods of time prior to the Effective Time; and (c) the
ownership or operation of Seller’s retained 15% interest in the Leases, insofar
as they cover depths below the base of the Austin Chalk Formation, whether
attributable to periods before, on or after the Effective Time (collectively,
the “Retained Obligations”).

Section 12.02         Buyer’s Assumed Obligations.  Provided that the Closing
occurs, except to the extent Seller has an indemnity obligation under
Section 12.04 and except for the Retained Obligations, Buyer hereby assumes a
proportionate share of all duties, obligations and liabilities of every kind and
character related, applicable or attributable to the ownership or operation of
Buyer’s interest in the Assets from and after the Effective Time (collectively,
the “Assumed Obligations”).

Section 12.03        Buyer’s Indemnification.  PROVIDED THAT THE CLOSING OCCURS,
EXCEPT TO THE EXTENT SELLER HAS AN INDEMNITY OBLIGATION UNDER SECTION 12.04,
BUYER SHALL RELEASE, DEFEND, INDEMNIFY AND HOLD HARMLESS SELLER, ITS AFFILIATES,
AND ITS AND THEIR RESPECTIVE OWNERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
PARTNERS, REPRESENTATIVES, MEMBERS, SHAREHOLDERS, AFFILIATES, SUBSIDIARIES,
SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “SELLER INDEMNITEES”) FROM AND AGAINST
ANY AND ALL CLAIMS, DAMAGES, LIABILITIES, LOSSES, CAUSES OF ACTION, COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, INVOLVING THEORIES OF NEGLIGENCE OR
STRICT LIABILITY AND INCLUDING COURT COSTS AND ATTORNEYS’ FEES) (“LOSSES”) AS A
RESULT OF, ARISING OUT OF, OR RELATED TO THE ASSUMED OBLIGATIONS OR ANY
INACCURACY OR BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT OF BUYER
CONTAINED IN THIS AGREEMENT THAT SURVIVES THE CLOSING, REGARDLESS OF WHETHER
CAUSED OR CONTRIBUTED TO BY THE SOLE, JOINT, COMPARATIVE OR CONCURRENT
NEGLIGENCE OR STRICT LIABILITY OF ANY OF THE SELLER INDEMNITEES EXCLUDING ANY
SELLER INDEMNITEE’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

 
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Section 12.04        Seller’s Indemnification.  PROVIDED THAT THE CLOSING
OCCURS, SELLER SHALL RELEASE, DEFEND, INDEMNIFY AND HOLD HARMLESS BUYER, ITS
AFFILIATES, AND ITS AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
PARTNERS, REPRESENTATIVES, MEMBERS, SHAREHOLDERS, AFFILIATES AND SUBSIDIARIES
(COLLECTIVELY, THE “BUYER INDEMNITEES”) FROM AND AGAINST ANY AND ALL LOSSES AS A
RESULT OF, ARISING OUT OF, OR RELATED TO (A) THE RETAINED OBLIGATIONS, OR
(B) ANY INACCURACY OR BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT OF
SELLER CONTAINED IN THIS AGREEMENT THAT SURVIVES THE CLOSING, OR (C) CLAIMS OF
SELLER OR ITS SUCCESSORS OR ASSIGNS IN CONNECTION WITH BUYER FRACING INTO THE
AUSTIN CHALK FORMATION WHILE FRACING IN A WELLBORE LOCATED IN THE EAGLE FORD
SHALE FORMATION OR IN ANY OTHER FORMATION OR DEPTH BELOW THE BASE OF THE AUSTIN
CHALK FORMATION OR WHILE FRACING IN THAT PORTION OF ANY WELLBORES FOR HORIZONTAL
WELLS AFTER SUCH WELLBORES FIRST ENCOUNTER THE EAGLE FORD SHALE FORMATION, OR
(D) CLAIMS OF SELLER OR ITS SUCCESSORS OR ASSIGNS IN CONNECTION WITH BUYER
ENCOUNTERING THE AUSTIN CHALK FORMATION “D” ZONE IN THAT PORTION OF ANY
WELLBORES FOR HORIZONTAL WELLS AFTER SUCH WELLBORES FIRST ENCOUNTER THE EAGLE
FORD SHALE FORMATION, OR (E) CLAIMS OF SELLER OR ITS SUCCESSORS OR ASSIGNS IN
CONNECTION WITH BUYER PRODUCING HYDROCARBONS FROM THE AUSTIN CHALK FORMATION
FROM A WELLBORE DRILLED BY BUYER IN THE EAGLE FORD SHALE FORMATION OR IN ANY
OTHER FORMATION OR DEPTH BELOW THE BASE OF THE AUSTIN CHALK FORMATION OR FROM
THAT PORTION OF ANY WELLBORES FOR HORIZONTAL WELLS AFTER SUCH WELLBORES FIRST
ENCOUNTER THE EAGLE FORD SHALE FORMATION, INSOFAR AS SUCH WELLBORES DO NOT
SUBSEQUENTLY ENCOUNTER ANY DEPTH ABOVE THE AUSTIN CHALK FORMATION “D” ZONE, IN
THE CASE OF ITEMS (C), (D) AND (E) ABOVE, TO THE EXTENT SUCH WELLBORES ARE IN
AND UNDER LANDS COVERED BY THE LEASES AND WHETHER OR NOT THE WELLBORES ARE IN
NEW WELLS DRILLED BY BUYER OR EXISTING WELLS SUBSEQUENTLY ASSIGNED BY SELLER TO
BUYER, AND, IN EACH CASE, REGARDLESS OF WHETHER CAUSED OR CONTRIBUTED TO BY THE
SOLE, JOINT, COMPARATIVE OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF ANY OF
THE BUYER INDEMNITEES EXCLUDING ANY BUYER INDEMNITEE’S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.

Section 12.05         Indemnification Procedures.  All claims for
indemnification under this Agreement shall be asserted and resolved as follows:

(a)           For purposes of this Section 12.05, the term “Indemnifying Party”
when used in connection with particular Losses shall mean the party or parties
having an obligation to indemnify another party or parties with respect to such
Losses pursuant to this Agreement, and the term “Indemnified Party” when used in
connection with particular Losses shall mean the party or parties having the
right to be indemnified with respect to such Losses by another party or parties
pursuant to this Agreement.

(b)           To make claim for indemnification under this Agreement, an
Indemnified Party shall notify the Indemnifying Party of its claim under this
Section 12.05, including the specific details of and specific basis under this
Agreement for its claim (the “Claim Notice”).  In the event that the claim for
indemnification is based upon a claim by a third party against the Indemnified
Party (a “Claim”), the Indemnified Party shall provide its Claim Notice promptly
after the Indemnified Party has actual knowledge of the Claim and shall enclose
a copy of all papers (if any) served with respect to the Claim; provided that
the failure of an Indemnified Party to give notice of a  Claim as provided in
this Section 12.05 shall not relieve the Indemnifying Party of its obligations
under this  Agreement except to the extent such failure results in insufficient
time being available to permit the Indemnifying Party to effectively defend
against the Claim or otherwise materially prejudices the Indemnifying Party’s
ability to defend against the Claim.

 
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(c)           In the case of a claim for indemnification based upon a Claim, the
Indemnifying Party shall have thirty (30) days from its receipt of the Claim
Notice to notify the Indemnified Party whether it admits or denies its
responsibility to defend the Indemnified Party against such Claim at the sole
cost and expense of the Indemnifying Party.  The Indemnified Party is
authorized, prior to and during such thirty (30) day period, to file any motion,
answer or other pleading that it shall deem necessary or appropriate to protect
its interests or those of the Indemnifying Party and that is not prejudicial to
the Indemnifying Party.

(d)           If the Indemnifying Party admits its responsibility to defend the
Indemnified Party against such Claim, it shall have the right and obligation to
diligently defend the Claim, at its sole cost and expense.  The Indemnifying
Party shall have full control of such defense and proceedings, including any
compromise or settlement thereof.  If requested by the Indemnifying Party, the
Indemnified Party agrees to cooperate in contesting any Claim which the
Indemnifying Party elects to contest.  The Indemnified Party may participate in,
but not control, any defense or settlement of any Claim controlled by the
Indemnifying Party pursuant to this Section 12.05.  An Indemnifying Party shall
not, without the written consent of the Indemnified Party, (i) settle any Claim
or consent to the entry of any judgment with respect thereto which does not
include an unconditional written release of the Indemnified Party from all
liability in respect of such Claim or (ii) settle any claim or consent to the
entry of any judgment with respect thereto in any manner that may materially and
adversely affect the Indemnified  Party (other than as a result of money damages
covered by the indemnity).

(e)           If the Indemnifying Party does not admit its responsibility to
defend the Indemnified Party against such Claim or admits its responsibility but
fails to diligently prosecute or settle the Claim, then the Indemnified Party
shall have the right to defend against the Claim at the sole cost and expense of
the Indemnifying Party, with counsel of the Indemnified Party’s choosing,
subject to the right of the Indemnifying Party to admit its liability and assume
the defense of the Claim at any time prior to settlement or final determination
thereof.  If the Indemnifying Party has not yet admitted its responsibility for
a Claim, the Indemnified Party shall send written notice to the Indemnifying
Party of any proposed settlement and the Indemnifying Party shall have the
option for ten (10) days following receipt of such notice to (i) admit in
writing its responsibility for the Claim and (ii) if responsibility is so
admitted, reject, in its reasonable judgment, the proposed settlement.

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

 
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ARTICLE XIII
Limitations on Representations and Warranties; and Casualty Losses

Section 13.01         Disclaimers of Representations and Warranties.  The
express representations and warranties of Seller contained in this Agreement and
the Assignment are exclusive and are in lieu of all other representations and
warranties, express, implied or statutory.

Section 13.02         Survival.  Except as otherwise provided in Section 15.11,
the representations, warranties, covenants and obligations of the Parties under
this Agreement shall survive the Closing.

ARTICLE XIV
Arbitration

Section 14.01         Arbitrator.

(a)           Either Party may submit disputes regarding Title Defects, Defect
Values or calculation of the Final Statement or revisions thereto (each a
“Dispute”), to an independent arbitrator appointed in accordance with this
Section 14.01 (each, an “Independent Arbitrator”), who shall serve as sole
arbitrator.  The Independent Arbitrator shall be appointed by mutual agreement
of the Parties from among candidates with experience and expertise in the area
that is the subject of such Dispute, and failing such agreement, such
Independent Arbitrator for such Dispute shall be selected as would a single
arbitrator in accordance with the Rules (as hereinafter defined).

(b)           Disputes to be resolved by an Independent Arbitrator shall be
resolved in accordance with mutually agreed procedures and rules and failing
such agreement, in accordance with the rules and procedures for arbitration
provided in Section 14.02.  The Independent Arbitrator shall be instructed by
the Parties to resolve such Dispute as soon as reasonably practicable in light
of the circumstances.  The decision and award of the Independent Arbitrator
shall be binding upon the Parties as an award under the Federal Arbitration Act
and final and nonappealable to the maximum extent permitted by law, and judgment
thereon may be entered in a court of competent jurisdiction and enforced by any
Party as a final judgment of such court.

Section 14.02         Rules and Procedures.

(a)           Such arbitration shall be conducted pursuant to the Federal
Arbitration Act, except as expressly provided otherwise in this Agreement.  The
validity, construction, and interpretation of this Section 14.02, and all
procedural aspects of the arbitration conducted pursuant hereto shall be decided
by the Independent Arbitrator.  The arbitration shall be administered by the
American Arbitration Association (the “AAA”), and shall be conducted pursuant to
the Commercial Arbitration Rules of the AAA (the “Rules”), except as expressly
provided otherwise in this Agreement.  The arbitration proceedings shall be
subject to any optional rules contained in the Rules for emergency measures and,
in the case of Disputes with respect to amounts in excess of $1 million,
optional rules for large and complex cases.

 
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(b)           Venue.  All arbitration proceedings hereunder shall be conducted
in Houston, Texas or such other mutually agreeable location.

(c)           Substantive Law.  In deciding the substance of the Dispute, the
Independent Arbitrator shall refer to the substantive laws of the State of Texas
for guidance (excluding choice-of-law principles that might call for the
application of the laws of another jurisdiction).  Matters relating to
arbitration shall be governed by the Federal Arbitration Act.

(d)           Fees and Awards.  The fees and expenses of the Independent
Arbitrator shall be borne equally by the Parties, but the decision of the
Independent Arbitrator may include such award of the Independent Arbitrator’s
fees and expenses and of other costs and attorneys’ fees as the Independent
Arbitrator determines appropriate (provided that such award of costs and fees
may not exceed the amount of such costs and fees incurred by the winning Party
in the arbitration).

(e)           Binding Nature.  The decision and award of the Independent
Arbitrator shall be binding upon the Parties and final and nonappealable to the
maximum extent permitted by law, and judgment thereon may be entered in a court
of competent jurisdiction and enforced by any Party as a final judgment of such
court.

ARTICLE XV
Miscellaneous

Section 15.01         Recording Expenses.  Buyer shall pay all recording fees
arising from the recordation of the Assignment and the other documents delivered
at Closing, except that Seller shall pay all recording fees arising from the
recordation of the lien release documents delivered by Seller at Closing.  Each
Party shall be solely responsible for all expenses, including due diligence
expenses, incurred by it in connection with this transaction, and neither Party
shall be entitled to any reimbursement for such expenses from the other Party.

Section 15.02         Entire Agreement.  This Agreement, the documents to be
executed hereunder, and the exhibits attached hereto constitute the entire
agreement between the Parties pertaining to the subject matter hereof and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties pertaining to the subject matter
hereof.  No supplement, amendment, alteration, modification or waiver of this
Agreement shall be binding unless executed in writing by the Parties and
specifically referencing this Agreement.

Section 15.03         Waiver.  Unless it is a waiver which is deemed to have
been made automatically at the expiration of a time limit under this Agreement,
any waiver must be in writing executed by the waiving party and no waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.

 
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Section 15.04         Publicity.  Seller and Buyer shall consult with each other
with regard to all publicity and other disclosures concerning this Agreement or
the documents to be executed hereunder (including any term or condition hereof),
the transactions contemplated hereby, the status of such transactions and the
negotiations related thereto, and, except as required by applicable law or the
applicable rules or regulations of any Governmental Authority or stock exchange,
neither Seller nor Buyer shall issue any publicity or press release without the
prior written consent of the other Party, such consent not to be unreasonably
withheld.

Section 15.05         Construction.  The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement.  The Parties
acknowledge that they have participated jointly in the negotiation and drafting
of this Agreement and as such the Parties agree that if an ambiguity or question
of intent or interpretation arises hereunder, this Agreement shall not be
construed more strictly against one Party than another on the grounds of
authorship.

Section 15.06         No Third Party Beneficiaries.  Except as provided in
Sections 12.03 and 12.04, nothing in this Agreement shall provide any benefit to
any third party or entitle any third party to any claim, cause of action, remedy
or right of any kind, it being the intent of the Parties that this Agreement
shall otherwise not be construed as a third party beneficiary contract.

Section 15.07         Assignment.  Neither Party may assign or delegate any of
its rights or obligations hereunder without the prior written consent of the
other Party and any assignment made without such consent shall be void.  Except
as otherwise provided herein, this Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their respective permitted successors,
assigns and legal representatives.

Section 15.08         GOVERNING LAW; VENUE; JURY WAIVER.  THIS AGREEMENT, THE
OTHER DOCUMENTS DELIVERED PURSUANT HERETO AND THE LEGAL RELATIONS BETWEEN THE
PARTIES SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW, RULE OR PRINCIPLE THAT MIGHT REFER
CONSTRUCTION OF THIS AGREEMENT AND SUCH OTHER DOCUMENTS TO THE LAWS OF ANOTHER
JURISDICTION.  ALL OF THE PARTIES HERETO CONSENT TO THE EXERCISE OF JURISDICTION
IN PERSONAM BY THE COURTS OF THE STATE OF TEXAS FOR ANY ACTION ARISING OUT OF
THIS AGREEMENT OR THE OTHER DOCUMENTS EXECUTED PURSUANT TO OR IN CONNECTION WITH
THIS AGREEMENT.  ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR
INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS AGREEMENT OR THE
OTHER DOCUMENTS EXECUTED PURSUANT TO OR IN CONNECTION WITH THIS AGREEMENT SHALL
BE EXCLUSIVELY LITIGATED IN COURTS HAVING SITES IN HOUSTON, HARRIS COUNTY,
TEXAS.  EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY A JURY IN RESPECT OF ANY ACTION, SUIT
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.

 
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Section 15.09         Notices.  Any notice, communication, request, instruction
or other document required or permitted hereunder shall be given in writing and
delivered in person or sent by U.S. Mail postage prepaid, return receipt
requested, overnight courier, facsimile or electronic mail to the addresses of
Seller and Buyer set forth below.  Any such notice shall be effective only upon
receipt.
 

 
Addressed to:
 
With copy to:
Seller:
Lucas Energy, Inc.
6800 West Loop South, Suite 415
Bellaire, Texas  77401
Attention:  William A. Sawyer
Fax No.:  713-337-1510
Email:  wsawyer@lucasenergy.com
Lucas Energy, Inc.
6800 West Loop South, Suite 415
Bellaire, Texas  77401
Attention:  Don Sytsma
Fax No.:  713-337-1510
Email:  dsytsma@lucasenergy.com
       
Addressed to:
 
With copy to:
Buyer:
Hilcorp Energy I, L.P.
c/o Hilcorp Energy Company
1201 Louisiana, Suite 1400
Houston, Texas  77002
Attention: Curtis Smith
Fax No.:  713-209-2420
Email:  csmith@hilcorp.com
Hilcorp Energy I, L.P.
c/o Hilcorp Energy Company
1201 Louisiana, Suite 1400
Houston, Texas  77002
Attention: William P. Swenson
Fax No.:  713-289-2650
Email: bswenson@hilcorp com

Either Party may, by written notice so delivered to the other Party, change its
address for notice purposes hereunder.

Section 15.10         Severability.  If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect and the Parties shall negotiate in
good faith to modify this Agreement so as to effect their original intent as
closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.

Section 15.11         Survival.  The representations and warranties of Seller
set forth in Sections 5.06 through 5.16 hereof shall survive the Closing for a
period of one (1) year.  All other representations, warranties, covenants and
agreements contained in this Agreement shall survive the Closing indefinitely.

 
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Section 15.12         Time of the Essence.  Time shall be of the essence with
respect to all time periods and notice periods set forth in this Agreement.

Section 15.13         Counterpart Execution.  This Agreement may be executed in
any number of counterparts, and each counterpart hereof shall be effective as to
each Party that executes the same whether or not all of such parties execute the
same counterpart.  If counterparts of this Agreement are executed, the signature
pages from various counterparts may be combined into one composite instrument
for all purposes.  All counterparts together shall constitute only one
Agreement, but each counterpart shall be considered an original.

Section 15.14         Attorney Fees.  If any Party institutes an action or
proceeding against any other Party relating to the provisions of this Agreement,
including arbitration, the Party to such action or proceeding which does not
prevail will reimburse the prevailing Party therein for the reasonable expenses
of attorneys' fees and disbursements incurred by the prevailing Party.

Section 15.15         Interpretation.  This Agreement shall be deemed and
considered for all purposes to have been jointly prepared by the Parties, and
shall not be construed against any one Party (nor shall any inference or
presumption be made) on the basis of who drafted this Agreement or any
particular provision hereof, who supplied the form of Agreement, or any other
event of the negotiation, drafting or execution of this Agreement.  Each Party
agrees that this Agreement has been purposefully drawn and correctly reflects
its understanding of the transaction that it contemplates.  In construing this
Agreement, the following principles will apply:

(a)           A defined term has its defined meaning throughout this Agreement
and in each Exhibit and Schedule to this Agreement, regardless of whether it
appears before or after the place where it is defined.

(b)           If there is any conflict or inconsistency between the provisions
of the main body of this Agreement and the provisions of any Appendix, Exhibit
or Schedule hereto, the provisions of this Agreement shall take precedence.  If
there is any conflict between the provisions of any of the Assignment or other
transaction documents attached to this Agreement as an Exhibit and the
provisions of any Assignment and other transaction documents actually executed
by the parties, the provisions of transaction documents actually executed shall
take precedence.

(c)           The Exhibits and Schedules referred to herein are hereby
incorporated and made a part of this Agreement for all purposes by such
reference.

(d)           The omission of certain provisions of this Agreement from the
Assignment does not constitute a conflict or inconsistency between this
Agreement and the Assignment, and will not effect a merger of the omitted
provisions.  To the fullest extent permitted by law, all provisions of this
Agreement are hereby deemed incorporated into the Assignment by reference.

(e)           The word “includes” and its derivatives means “includes, but not
limited to” and corresponding derivative meanings.

 
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(f)           The Article, Section, Exhibit and Schedule references in this
Agreement refer to the Articles, Sections, Exhibits and Schedules of this
Agreement.  The headings and titles in this Agreement are for convenience only
and shall have no significance in interpreting or otherwise affect the meaning
of this Agreement.

(g)           The plural shall be deemed to include the singular, and vice
versa.

(h)           As used in this Agreement, the phrases “to Seller’s knowledge,”
“to the knowledge of Seller,” and similar phrases shall mean to the actual or
constructive knowledge of any officer or employee of Seller actively involved in
the management or operation of any of the Assets, in each case, after due
inquiry.

Section 15.16         Tax-Deferred Exchange.

(a)           Notwithstanding any other provision of this Agreement, in the
event either Party so elects, the other Party shall accommodate such Party in
effecting a tax-deferred exchange under Internal Revenue Code section 1031, as
amended.  Either Party shall have the right to elect this tax-deferred exchange
at any time prior to the Closing Date.  If either Party elects to effect a
tax-deferred exchange, the other Party shall execute such escrow instructions,
documents, agreements or instruments to effect an exchange, as the electing
Party may reasonably request, it being understood that the other Party shall not
be required to incur additional costs, expenses, fees or liabilities, not
reimbursed or indemnified by the electing Party, as a result of or connection
with an exchange.

(b)           Either Party may assign its rights and delegate its duties under
this Agreement in whole or in part to a third party in order to effect such an
exchange; provided that the electing Party shall remain responsible to the other
Party for the full and prompt performance of any delegated duties.  The electing
Party shall indemnify and hold the other Party and its affiliates harmless from
and against all claims, expenses (including reasonable attorneys’ fees), loss
and liability resulting from the other Party’s participation in any exchange
undertaken pursuant to this Section 15.16.

[SIGNATURE PAGE TO FOLLOW]

 
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IN WITNESS WHEREOF, Seller and Buyer have executed and delivered this Agreement
as of the date first set forth above.

 
SELLER:
       
LUCAS ENERGY, INC.
         
/ s / William A. Sawyer
 
By:
     
William A. Sawyer
   
President and Chief Executive Officer
       
BUYER:
       
HILCORP ENERGY I, L.P.
 
By:
Hilcorp Energy Company,
   
its general partner
         
/ s / Curtis D. Smith
 
By:
     
Curtis D. Smith
   
Vice President - Land

 
 

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