Exhibit 10.1

 

Execution Version

 

PURCHASE AND SALE AGREEMENT

 

by and between

 

MARATHON OIL COMPANY

 

as Seller

 

and

 

TRIANGLE USA PETROLEUM CORPORATION

 

as Buyer

 

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TABLE OF CONTENTS

 

1.

DEFINITIONS; INTERPRETATION

1

1.1

Definitions

1

1.2

Interpretation

19

2.

PURCHASE AND SALE

20

2.1

Purchase and Sale of Assets

20

2.2

Consideration

20

2.3

Performance Deposit

20

2.4

Triangle Guaranty

21

2.5

Closing Payment

21

2.6

Closing Statement

22

2.7

Withholding

22

2.8

Proration of Costs and Revenues

23

3.

CLOSING

23

3.1

Closing

23

3.2

Effective Date

23

3.3

Buyer Deliverables

23

3.4

Seller Deliverables

24

3.5

Post-Closing Adjustment

25

4.

REPRESENTATIONS AND WARRANTIES OF BUYER

27

4.1

Representations

27

5.

REPRESENTATIONS AND WARRANTIES OF SELLER

29

5.1

Representations

29

6.

COVENANTS

33

6.1

Operations During the Interim Period

33

6.2

Access and Assistance

35

6.3

Further Assurances

36

6.4

Books and Records

36

6.5

Use of Seller Marks

37

6.6

Fees and Expenses

37

6.7

Tax Matters

37

6.8

Insurance

39

6.9

Casualty or Condemnation Loss

39

6.10

Title and Environmental Escrow Account

41

6.11

Replacement of Bonds, Letters of Credit, Guarantees and Security Deposits

41

6.12

Lease Expiration

42

6.13

AFEs

42

6.14

Successor Operator

43

6.15

Financial Statements

44

6.16

Partial Assignment and Release

44

7.

CONSENTS

44

7.1

Third Party Approvals

44

7.2

Preferential Rights to Purchase

44

7.3

Consents

45

8.

TITLE

46

 

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8.1

Exclusive Rights and Obligations

46

8.2

Title Review

46

8.3

Allocated Value

47

8.4

Defect Notice

47

8.5

Cure by Seller

47

8.6

Title Defect Amount

48

8.7

Title Defect Amount Limit

49

8.8

Title Benefit

49

8.9

Individual Title Threshold

50

8.10

No Agreement

50

8.11

Sole and Exclusive Remedy

51

9.

ENVIRONMENTAL MATTERS

51

9.1

Exclusive Rights and Obligations

51

9.2

Environmental Assessment

52

9.3

NORM and Hazardous Materials

52

9.4

Environmental Liability Notice

53

9.5

Environmental Liability Notice - Details

53

9.6

Cure by Seller

53

9.7

Individual Environmental Threshold

54

9.8

No Agreement

54

9.9

Sole and Exclusive Remedy

55

10.

AGGREGATE DEDUCTIBLE

55

11.

ASSUMPTION; INDEMNIFICATION; WAIVERS

56

11.1

Assumption

56

11.2

Indemnification

56

11.3

Express Negligence Rule

58

11.4

Limitations on Liability

58

11.5

Procedures

59

11.6

Waiver of Consequential Damages

62

11.7

Waivers and Disclaimers

62

11.8

Exclusive Remedy and Release

63

12.

CONDITIONS PRECEDENT TO CLOSING

64

12.1

Buyer’s Conditions Precedent

64

12.2

Seller’s Conditions Precedent

65

13.

TERMINATION

66

13.1

Termination Rights

66

13.2

Effect of Termination

67

13.3

Distribution of Deposit upon Termination

67

13.4

Extension Costs

68

14.

MISCELLANEOUS

68

14.1

Notices

68

14.2

Assignment

69

14.3

Rights of Third Parties

69

14.4

Counterparts

69

14.5

Entire Agreement

69

14.6

Disclosure Schedule

70

 

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14.7

Amendments

70

14.8

Publicity

70

14.9

Severability

71

14.10

Governing Law; Jurisdiction

71

14.11

Waivers

72

14.12

Recording

72

14.13

Conspicuous

72

14.14

Time of Essence

72

 

 

Exhibit A — Leases

Exhibit B — Wells

Exhibit C — Intentionally Omitted

Exhibit D — Conveyance

Exhibit E — Escrow Agreement

Exhibit F — Form of Triangle Guaranty

Exhibit G — Form of Partial Assignment and Release

Schedule 1 — Consents

Schedule 2 — Conflicts

Schedule 3 — Litigation

Schedule 4 — Absence of Certain Changes

Schedule 5 — Material Contracts

Schedule 6 — Environmental Matters

Schedule 7 — Current Commitments

Schedule 8 — Taxes

 

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PURCHASE AND SALE AGREEMENT

 

This Purchase and Sale Agreement (this “Agreement”) is entered into as of the
14th day of May, 2014 (the “Execution Date”), by and between Marathon Oil
Company, a corporation organized under the laws of the State of Ohio (“Seller”),
and Triangle USA Petroleum Corporation, a corporation organized under the laws
of the State of Colorado (“Buyer”).  In this Agreement, Buyer and Seller are
each referred to as a “Party” and collectively as the “Parties”.

 

WHEREAS, Seller owns the Assets (as defined below); and

 

WHEREAS, in accordance with the terms and conditions of this Agreement, Buyer
desires to acquire from Seller, and Seller desires to sell to Buyer, the Assets
in exchange for the Base Purchase Price (as defined below).

 

NOW, THEREFORE, in consideration of the above and of the mutual covenants and
promises contained in this Agreement, the Parties agree as follows:

 

1.                                      DEFINITIONS; INTERPRETATION

 

1.1                               Definitions.

 

In this Agreement, the following terms have the given meanings:

 

(a)                                                              “AFE Costs” has
the meaning set forth in Section 6.13(a).

 

(b)                                                              “AFEs” means
authorizations for expenditures.

 

(c)                                                               “Affiliate”
means with respect to any Person, and other Person that, directly or indirectly,
controls, is controlled by or is under common control with, such specified
Person through one or more intermediaries or otherwise.  For purposes of this
definition, “control” shall mean the ownership, legally or beneficially,
directly or indirectly, of fifty percent (50%) or more of the voting shares or
membership interest of any company or corporation or business entity.

 

(d)                                                              “Agreement” has
the meaning set forth in the preamble.

 

(e)                                                               “Aggregate
Deductible” has the meaning set forth in Section 10.

 

(f)                                                                “Allocated
Value” means:

 

(i)                                     for each Well, the dollar value set
forth on Exhibit B for such Well; and

 

(ii)                                  for each Lease, the dollar value set forth
on Exhibit A for such Lease.

 

(g)                                                               “Arbitrator’s
Closing Statement” has the meaning set forth in Section 

 

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3.5(b).

 

(h)                                                              “Assets” means:

 

(i)                                     one hundred percent (100%) of Seller’s
right, title and interest in and to the Leases and any Wells located on the
Leases or the Units, including the interests in the Wells listed on Exhibit B;

 

(ii)                                  a corresponding interest in:

 

(A)                               all Units;

 

(B)                               all Facilities;

 

(C)                               all surface fee interests, easements,
servitudes, rights-of-way, surface leases, and other surface rights or interests
appurtenant to, to the extent used or held for use in connection with, the
Properties (excluding, in each case, Permits, which are addressed in
Section 1.1(h)(ii)(F) below);

 

(D)                               all Hydrocarbons within, produced from or
attributable to the Properties from and including the Effective Date, and all
proceeds or accounts receivable resulting from the sale of any such
Hydrocarbons, but excluding all inventories of Hydrocarbons (i.e., those
Hydrocarbons stored in stock tanks, pipelines or other storage) located on the
Properties as of the Effective Date and all proceeds or accounts receivable
resulting from the sale of any such Hydrocarbons;

 

(E)                                the Contracts to which Seller is a party (or
bound as a successor or assign of another party) and by which the Assets are
bound or subject, including those Contracts  set forth in Schedule 5, but
limited, in each case, to the extent that such Contracts are used in connection
with, or relate to, the Properties or other Assets;

 

(F)                                 to the extent transferable (with consent, if
applicable), all Permits, any variances or waivers related thereto and
applications therefor to the extent relating to the Properties or other Assets;

 

(G)                               to the extent transferable (with consent, if
applicable) and not covered by or included in any indemnity provided by Seller
to Buyer under this Agreement, all rights to claims against, warranties made by,
insurance proceeds held by, and indemnities and releases from, third parties to
the extent relating to the Properties or other Assets or the Assumed
Obligations;

 

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(iii)                               the Records,

 

but excepting, reserving and excluding, in all such instances, the Excluded
Assets.

 

(i)                                                                  “Assumed
Obligations” has the meaning set forth in Section 11.1.

 

(j)                                                                 “Base
Purchase Price” has the meaning set forth in Section 2.2.

 

(k)                                                              “Business Day”
means any day that is not a Saturday, Sunday or legal holiday in the states
where the Assets are located and in the State of Texas, and that is not
otherwise a federal holiday in the United States of America.

 

(l)                                                                  “Buyer” has
the meaning set forth in the preamble.

 

(m)                                                          “Buyer Indemnified
Parties” has the meaning set forth in Section 11.2(a).

 

(n)                                                              “Casualty
Arbitrator” has the meaning set forth in Section 6.9(c).

 

(o)                                                              “Casualty Loss”
has the meaning set forth in Section 6.9(a).

 

(p)                                                              “Casualty Loss
Deductible” has the meaning set forth in Section 6.9(b)(ii).

 

(q)                                                              “Casualty Loss
Threshold” has the meaning set forth in Section 6.9(b)(i).

 

(r)                                                                 “CERCLA” has
the meaning set forth in Section 1.1(mm).

 

(s)                                                                “Claim
Notice” has the meaning set forth in Section 11.5(a)(ii).

 

(t)                                                                 “Clean Air
Act” has the meaning set forth in Section 1.1(mm).

 

(u)                                                              “Closing” has
the meaning set forth in Section 3.1.

 

(v)                                                              “Closing Date”
has the meaning set forth in Section 3.1.

 

(w)                                                            “Closing Payment”
has the meaning set forth in Section 2.5.

 

(x)                                                              “Closing
Statement” has the meaning set forth in Section 2.6.

 

(y)                                                              “Closing
Statement Arbitrator” has the meaning set forth in Section 3.5(b).

 

(z)                                                               “Code” means
the Internal Revenue Code of 1986, as amended.

 

(aa)                                                       “Confidentiality
Agreement” means that certain confidentiality agreement between Seller and Buyer
dated October 22, 2013.

 

(bb)                                                       “Consents” means
those consents to assignment pertaining to the Assets and the transactions
contemplated hereby as set out in Schedule 1.

 

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(cc)                   “Contracts” means any contract, agreement, indenture,
note, bond, mortgage, loan, instrument, lease, license and any legally binding
commitment or other arrangement, understanding, undertaking, commitment or
obligation, whether written or oral.

 

(dd)                  “Conveyance” means the conveyance of the Assets,
substantially similar in form to the form of assignment attached hereto as
Exhibit D.

 

(ee)                   “Cure Period” has the meaning set forth in Section 8.5.

 

(ff)                    “Defect Notice” has the meaning set forth in
Section 8.2.

 

(gg)                   “Defensible Title” means Seller’s title which, as of the
Closing Date and subject to any Permitted Encumbrance, in respect of each Well
or Lease:

 

(i)            entitles Seller to receive and retain throughout the duration of
the productive life of such Well or Lease (as applicable) a Net Revenue Interest
not less than the Net Revenue Interest shown on Exhibit B in respect of such
Well or on Exhibit A in respect of such Lease (as applicable) of all
Hydrocarbons produced, saved and marketed from such Well or Lease (as
applicable); and

 

(ii)           obligates Seller to bear a percentage of the costs and expenses
for the maintenance and development of, and operations relating to, such Well or
Lease (as applicable) not greater than the “Working Interest” or “WI” shown on
Exhibit B in respect of such Well or on Exhibit A in respect of such Lease (as
applicable), without increase throughout the productive life of such Lease or
Well (as applicable), except as shown on Exhibit B in respect of such Well or on
Exhibit A in respect of such Lease (as applicable), unless there is a
corresponding proportionate increase in Seller’s Net Revenue Interest in such
Well or Lease (as applicable);

 

(iii)          as to each Lease only, results in the amount of Net Mineral Acres
covered by or attributable to Seller’s interests in such Lease being not less
than the Net Mineral Acres shown on Exhibit A for such Lease; and

 

(iv)          as to Seller’s interest in such Well or Lease, is free from Liens.

 

(hh)                  “Deficiency Acres” has the meaning set forth in
Section 8.6(e).

 

(ii)                     “Direct Claim” has the meaning set forth in
Section 11.5(d).

 

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(jj)                    “Effective Date” means as of 12:01 am (in the state in
which the relevant Property is located) on January 1, 2014.

 

(kk)                  “Environmental Arbitrator” has the meaning set forth in
Section 9.8(b).

 

(ll)                     “Environmental Assessment” has the meaning set forth in
Section 9.2.

 

(mm)                “Environmental Law” means any Law, legally enforceable
requirements or policy of any Governmental Authority, and any order, decree,
permit, judgment or injunction issued, promulgated, approved or entered
thereunder, relating to the environment, health or safety or the environmental
conditions on, under, or about any Asset, including soil, sediment, surface
water, groundwater, and indoor and ambient air conditions or the reporting,
response to or remediation of environmental contamination required by a
Governmental Authority, including the Clean Air Act, as amended (the “Clean Air
Act”), the Federal Water Pollution Control Act, as amended, the Rivers and
Harbors Act of 1899, as amended, the Oil Pollution Act of 1990, as amended, the
Safe Drinking Water Act, as amended, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (“CERCLA”), the Superfund
Amendments and Reauthorization Act of 1986, as amended, the Resource
Conservation and Recovery Act of 1976, as amended (“RCRA”), the Hazardous and
Solid Waste Amendments Act of 1984, as amended, the Toxic Substances Control
Act, as amended, the Endangered Species Act, as amended, the Occupational Safety
and Health Act, as amended, and the Hazardous Materials Transportation Act, as
amended, any counterparts under state or local laws, and any regulations
promulgated thereunder and including relating to Hazardous Material (including
the use, handling, transportation, production, Release, treatment, storage,
recycling, or disposal thereof).  For the avoidance of doubt and notwithstanding
anything herein to the contrary, the term “Environmental Laws” does not include,
and is not intended to include, Laws relating to Hydrocarbons that are unrelated
to environmental, health or safety matters involving the surface transportation,
storage or Release of Hydrocarbons, or the Release of Hydrocarbons into the
soil, surface water, groundwater or air at any of the Assets.

 

(nn)                  “Environmental Liability” means an alleged violation of
Environmental Law or other liability under Environmental Law with respect to an
Asset.

 

(oo)                  “Environmental Liability Amount” has the meaning set forth
in Section 9.5(d).

 

(pp)                  “Environmental Liability Notice” has the meaning set forth
in Section 9.4.

 

(qq)                  “Environmental Permit” means all permits, licenses,
authorizations, certificates and approvals of Governmental Authorities required
by Environmental Laws for the operation of the Assets.

 

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(rr)                    “Escrow Account” means the account maintained by the
Escrow Agent and initially funded with the Title / Environmental Escrow Deposit.

 

(ss)                    “Escrow Agent” means JPMorgan Chase Bank, N.A.

 

(tt)                    “Escrow Agreement” means an escrow agreement between
Seller, Buyer and Escrow Agent substantially in the form set forth in Exhibit E.

 

(uu)                  “Estimated Closing Payment” has the meaning set forth in
Section 2.6.

 

(vv)                  “Examination Period” has the meaning set forth in
Section 8.2.

 

(ww)                 “Excepted Matters” means Seller’s representations,
warranties, covenants agreements and indemnities set forth in Sections 2.8, 3.5,
5.1(a), 5.1(b), 5.1(c)(ii), 5.1(f), 5.1(h), 6.3, 6.6, 6.7, 11.2(a)(iv) and
11.2(a)(viii).

 

(xx)                  “Excluded Assets” means:

 

(i)            the Excluded Records;

 

(ii)           to the extent (and then only to the extent) not directly related
to any Assumed Obligation, all claims and causes of action of Seller or any of
its Affiliates arising under or with respect to any Contract that is part of the
Assets that are attributable to the period of time prior to the Effective Date;

 

(iii)          to the extent (and then only to the extent) not directly related
to any Assumed Obligation, all rights and interests of Seller or its Affiliates
(A) under any indemnity agreement, (B) under any bond or similar instrument, and
(C) to any condemnation proceeds or awards;

 

(iv)          any Taxes, Tax refunds or Tax carry-forward amounts attributable
to the Assets prior to the Effective Date or to Seller’s business generally;

 

(v)           all tools, equipment, materials and other personal property held
for use in connection with the operation of the Wells and located at the Strand
disposal well site (excluding appurtenances to the Strand disposal Well, such
Well which is set forth on Exhibit B and has API # 33105901850000);

 

(vi)          all of Seller’s proprietary computer software, patents, trade
secrets, copyrights, names, trademarks, logos and other intellectual property;

 

(vii)         all data that cannot be disclosed to Buyer as a result of
confidentiality restrictions under agreements with third parties, provided that
Seller will use its commercially reasonable efforts to obtain waivers of such
confidentiality restrictions prior to Closing;

 

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(viii)        to the extent (and then only to the extent) not related to any
Assumed Obligation, all property, rights and assets of Seller not included
within the definition of Assets; and

 

(ix)          any of the Assets excluded from the transactions contemplated
hereunder pursuant to Section 7.2(b) or Section 7.3(b); and

 

(x)           all of Seller’s insurance policies in force and effect in relation
to the Assets, and all rights and interests thereto.

 

(yy)                  “Excluded Records” means:

 

(i)            all corporate, financial, income and franchise Taxes and legal
records of Seller that relate to Seller’s business generally (whether or not
relating to the Assets);

 

(ii)           any records to the extent disclosure or transfer is restricted by
any third party license agreement, other third party agreement or applicable
Law, provided that Seller will use its commercially reasonable efforts to obtain
waivers of such confidentiality restrictions;

 

(iii)          computer software and data;

 

(iv)          all legal records and legal files of Seller and all other work
product of and attorney-client communications with any of Seller’s legal
counsel, other than copies of:

 

(A)          title opinions;

 

(B)          Contracts constituting part of the Assets; and

 

(C)          records and files relating to any of the Assumed Obligations;

 

(v)           personnel records;

 

(vi)          records relating to the sale of the Assets, including bids
received from and records of negotiations with third parties;

 

(vii)         all geophysical and other seismic and related technical data and
information relating to the Assets to the extent (and only to the extent) such
data and information is not transferable without penalty or payment, if any, or
licensed from a third party; and

 

(viii)        any records with respect to the other Excluded Assets.

 

(zz)                   “Execution Date” has the meaning set forth in the
preamble.

 

(aaa)                “Extension Costs” has the meaning set forth in
Section 6.12(a).

 

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(bbb)                “Facilities” means all facilities, infrastructure, central
processing facilities, equipment, pipe, and other personal property located on
the Leases or used or held for use in connection with the exploration,
development, or operation of the Leases or Wells or the production, treatment,
storage, compression, processing, sale, marketing, or transportation of
Hydrocarbons from the Leases and Wells.

 

(ccc)                 “Final Closing Statement” has the meaning set forth in
Section 3.5(b).

 

(ddd)                “Final Settlement Date” has the meaning set forth in
Section 3.5(a).

 

(eee)                 “GAAP” means generally accepted accounting principles of
the United States, consistently applied.

 

(fff)                  “Governmental Authority” means any national, state,
county or municipal government, domestic or foreign, any agency, board, bureau,
commission, court, department or other instrumentality of any such government,
or any arbitrator in any case that has jurisdiction over a Party or any of its
respective properties or assets.

 

(ggg)                 “Hazardous Material” means: (a) any “hazardous substance,”
as defined by CERCLA; (b) any “hazardous waste” or “solid waste,” in either case
as defined by RCRA or any applicable state counterpart; (c) any solid,
hazardous, dangerous or toxic chemical, material, waste or substance, NORM, or
any contaminant or pollutant, as those or similar terms are defined or regulated
by any Environmental Law; (d) any asbestos containing materials in any form or
condition; (e) any polychlorinated biphenyls in any form or condition; or
(f) any hazardous air pollutant which is so designated by the Clean Air Act or
the U.S. Environmental Protection Agency.

 

(hhh)                “Hedge” means any swap, collar, floor, cap, option or other
Contract that is intended to eliminate or reduce the risk of fluctuations in the
price of Hydrocarbons.

 

(iii)                    “Hydrocarbons” means crude oil, natural gas, casinghead
gas, condensate, sulphur, natural gas liquids, plant products and other liquid
or gaseous hydrocarbons produced in association therewith, including coalbed
methane gas, CO2, helium and all other minerals of every kind and character that
may be covered by or included in any of the Assets.

 

(jjj)                   “Indemnified Party” has the meaning set forth in
Section 11.5(a).

 

(kkk)                “Indemnifying Party” has the meaning set forth in
Section 11.5(a)(i).

 

(lll)                    “Indemnity Cap” means an amount equal to fifteen
percent (15%) of the Base Purchase Price.

 

(mmm)            “Individual Environmental Threshold” has the meaning set forth
in

 

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Section 9.7.

 

(nnn)                “Individual Title Threshold” has the meaning set forth in
Section 8.9.

 

(ooo)                “Interim Period” means the period from the Execution Date
through and including the Closing Date.

 

(ppp)                “Knowledge” means, with respect to a Party, the actual
knowledge of any of the executive officers or senior management employees of
such Party, after having made due inquiry and investigation of other employees
of such Party or its Affiliates (but not, for the avoidance of doubt, employees
of unaffiliated third parties).

 

(qqq)                “Law” means any federal, state, local or foreign law
(including common law), statute, ordinance, regulation, rule, code, decree or
other requirement or rule of law.

 

(rrr)                   “Leases” means the Hydrocarbon leases listed on Exhibit
A.

 

(sss)                  “Legal Proceeding” means any judicial, administrative or
arbitral action, suit, mediation, investigation, inquiry, proceeding or claim
(including any counterclaim) by or before a Governmental Authority.

 

(ttt)                   “Liens” means any lien, mortgage, security interest,
pledge, deposit, restriction, burden, charge, adverse claim, encumbrance, rights
of a vendor under any title retention or conditional sale agreement, or lease or
other arrangement substantially equivalent thereto, preferential arrangement or
restriction or limitation of any kind, including any restriction on the use,
voting, transfer, receipt of income or other exercise of any attributes of
ownership (including any contract granting any of the foregoing).

 

(uuu)                “Losses” has the meaning set forth in Section 11.2(a).

 

(vvv)                “Lowest Cost Response” means the response required or
allowed under Environmental Laws and any applicable Lease or third party
agreement in effect on the Closing Date (but only to the extent such Lease or
third party agreement expressly requires responding to a standard that is more
stringent or costly than the response required or allowed under Environmental
Laws or the lessor’s or third party’s consent is required for the proposed
response and such lessor or third party does not grant its consent), that
completely addresses and resolves (for current and future use in the same manner
as being currently used) the identified condition in its entirety at the lowest
cost (considered as a whole) as compared to any other response that is required
or allowed under Environmental Laws. The Lowest Cost Response might consist of
or include taking no action, leaving the condition unaddressed, periodic
monitoring, the use of institutional controls, or the recording of notices in
lieu of remediation, (in each case) if such response is allowed

 

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under Environmental Laws and any applicable Lease or third party agreement in
effect as of the Closing Date and such response completely addresses and
resolves (for current and future use in the same manner as being currently used)
the identified condition in its entirety. The Lowest Cost Response shall not
include (a) the costs of Buyer’s and/or its Affiliate’s employees, or, if Seller
is conducting the response, Buyer’s project manager(s) or attorneys,
(b) expenses for matters that are ordinary costs of doing business in the
absence of a violation of Environmental Law or Release of Hazardous Substances
or Hydrocarbons, e.g., those costs that would ordinarily be incurred in the
day-to-day operations of the Assets, or in connection with permit
renewal/amendment activities, maintenance on active RCRA waste management units,
and operation and oversight of active RCRA waste management units, (c) overhead
costs of Buyer and/or its Affiliates, (d) costs and expenses that would not have
been required under Environmental Laws as they exist on the Closing Date or, if
prior to the Closing Date, the date on which the response action is being
undertaken (unless such costs and expenses are required to comply with the
applicable Lease or third party agreement), and/or (e) any costs or expenses
relating to the assessment, remediation, removal, abatement, transportation and
disposal of any asbestos, asbestos containing materials or NORM unless required
to address a violation of Environmental Law.

 

(www)              “Material Adverse Effect” means any event, change,
circumstance, occurrence, condition, fact, result, effect or other matter
(whether foreseen or not) that has had or will have, individually or in the
aggregate with any other events or circumstances, a material adverse effect on
the ownership, operation or value of the Assets, taken as a whole and as
currently operated as of the date of this Agreement; provided, however, that
none of the following, either alone or in combination, will constitute, or be
considered in determining whether there has been, a Material Adverse Effect: any
event, change, circumstance, effect or other matter resulting from or related to
(i) any outbreak or escalation of war or major hostilities or any act of
terrorism, (ii) changes, after the Execution Date, in Laws, GAAP or enforcement
or interpretation thereof, (iii) changes that generally affect the oil and gas
industry and market in the area in which the Assets are located, (iv) changes in
financial markets, general economic conditions (including prevailing interest
rates, exchange rates, commodity prices and fuel costs) or political conditions,
(v) changes generally affecting independent oil and gas exploration and
production companies (including changes in the market price of Hydrocarbons),
(vi) any action taken or failed to be taken as required pursuant to this
Agreement or at the written request of, or consented to in writing by, Buyer (in
each case) so long as such action or inaction does not result in any Casualty
Loss or any loss or damage to Persons or property or any other unintended Loss,
or (vii) the execution or delivery of this Agreement, the consummation of the
transactions contemplated by this Agreement or the public announcement or other
publicity with respect to any of the foregoing, except to the extent such
circumstance, change, effect,

 

10

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occurrence, condition, fact, result, effect or other matter resulting or arising
from clauses (i), (iii), (iv), or (v) above materially and disproportionately
affects such Person relative to other participants in the onshore oil and gas
exploration and production industry in any state where the applicable Asset is
located.

 

(xxx)                “Material Contracts” means any of the following Contracts
to which Seller is a party (or bound as a successor or assign of another party)
and by which Buyer as owner of the Assets would be bound or subject from and
after the Effective Date:

 

(i)            Contracts that can reasonably be expected to involve obligations
of, or payments from the owner of the Assets after the Effective Date in excess
of seven hundred and fifty thousand dollars ($750,000.00);

 

(ii)           participation agreements, joint development agreements, area of
mutual interest agreements, exploration agreements, asset purchase agreements,
farmin and farmout agreements, partnership agreements, joint venture agreements,
operating agreements, unit agreements, data license agreements, area of mutual
interest agreements or acreage dedication agreements; production payment
contracts;

 

(iii)          Contracts for the purchase, sale, gathering, processing, storage
or transportation of production from the Assets or otherwise relating to the
marketing of production from the Assets, other than contracts which will
terminate not more than two (2) months after the Closing Date or are subject to
cancellation on not more than thirty (30) days’ notice, in each case without
penalty or other detriment to Seller or Buyer (as successor to Seller);

 

(iv)          any Contract that constitutes a non-competition agreement or any
agreement that purports to restrict, limit or prohibit the manner in which, or
the locations in which, Seller conducts business with respect to the Assets;

 

(v)           any Contract between Seller and Affiliate of Seller that will not
be terminated prior to Closing;

 

(vi)          any guaranty, bond, letter of credit, credit agreement, loan
agreement, bond or similar instrument:

 

(vii)         any Contract containing a call on production of Hydrocarbons; or

 

(viii)        any Hedges.

 

(yyy)                “Net Mineral Acres” means, with respect to each Lease:

 

(i)            the number of gross acres in the land covered by such Lease;

 

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multiplied by

 

(ii)           the undivided mineral interest in such lands covered by such
Lease; multiplied by

 

(iii)          Seller’s working interest in such Lease.

 

(zzz)                 “Net Revenue Interest” means an interest (expressed as a
percentage or decimal fraction) in and to all Hydrocarbons produced and saved
from a Well or Lease, net of royalty, overriding royalty interest and other
similar burdens.

 

(aaaa)              “NORM” means naturally occurring radioactive material.

 

(bbbb)              “Notice of Disagreement” has the meaning set forth in
Section 3.5(a).

 

(cccc)               “Notices” has the meaning set forth in Section 14.1.

 

(dddd)              “Oneok Agreement” means that certain Gas Purchase Agreement
by and between Bear Paw Energy, LLC and Seller effective as of July 1, 2007, as
amended.

 

(eeee)               “Order” means any order, judgment, injunction, ruling,
sentence, subpoena, writ or award issued, made, entered or rendered by any
court, administrative agency or other Governmental Authority or by any
arbitrator.

 

(ffff)                “Organizational Documents” means, with respect to a
particular Person (other than a natural person), the certificate or articles of
incorporation, by-laws, partnership agreement, regulations, limited liability
company agreement or similar organizational document or agreement, as
applicable, of such Person.

 

(gggg)               “OSHA” means the Occupational Safety and Health Act, as
amended.

 

(hhhh)              “Partial Assignment and Release” means the Partial
Assignment and Release substantially in the form of Exhibit G with such changes
(if any) as to which the Parties mutually agree.

 

(iiii)                   “Party” and “Parties” have the respective meanings
given to such terms in the preamble.

 

(jjjj)                  “Performance Deposit” has the meaning set forth in
Section 2.3.

 

(kkkk)              “Performance Deposit Escrow Agreement” means an escrow
agreement between Seller, Buyer and Escrow Agent covering the Performance
Deposit.

 

(llll)                   “Permits” means authorizations, licenses, permits or
certificates issued by Governmental Authorities.

 

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(mmmm)        “Permitted Encumbrances” means: Liens for Taxes, assessments and
governmental charges or levies not yet due and payable as of the Closing Date;

 

(i)            operators,’ materialmen’s, mechanics,’ carriers,’ workmen’s,
landlords’ and repairmen’s Liens and other similar Liens arising in the ordinary
course of business and with respect to which the underlying obligation is not
delinquent or is being contested in good faith;

 

(ii)           royalties of a lessor, overriding royalties, nonparticipating
royalties, net profits interests, carried interests, production payments,
reversionary interests and other similar burdens, if the net cumulative effect
of such burdens does not operate to individually or in the aggregate:

 

(A)          reduce Seller’s Net Revenue Interest in any Well or Lease below the
amount shown on Exhibit B in respect of such Well or on Exhibit A in respect of
such Lease;

 

(B)          increase Seller’s working interest in any Well above that shown on
Exhibit B in respect of such Well; or

 

(C)          (x) reduce Seller’s Net Mineral Acres for any Lease to an amount
less than the Net Mineral Acres set forth on Exhibit A in respect of such Lease
or (y) increase Seller’s Net Mineral Acres for any Lease (due to an increased
working interest, unless there is a corresponding proportionate increase in
Seller’s net revenue interest in such Lease) more than the Net Mineral Acres set
forth on Exhibit A in respect of such Lease;

 

(iii)          the Material Contracts so long as no such Material Contract
operates to;

 

(A)          reduces Seller’s Net Revenue Interest in any Well or Lease below
the amount shown on Exhibit B in respect of such Well or on Exhibit A in respect
of such Lease;

 

(B)          increases Seller’s working interest in any Well above that shown on
Exhibit B in respect of such Well; or

 

(C)          (x) reduces Seller’s Net Mineral Acres for any Lease to an amount
less than the Net Mineral Acres set forth on

 

13

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Exhibit A in respect of such Lease or (y) increases Seller’s Net Mineral Acres
for any Lease (due to an increased working interest, unless there is a
corresponding proportionate increase in Seller’s net revenue interest in such
Lease) more than the Net Mineral Acres set forth on Exhibit A in respect of such
Lease;

 

(iv)          Preferential Purchase Rights, Consents and required third party
consents to assignment and similar agreements;

 

(v)           all rights to consent by, required notices to, filings with or
other actions by any Governmental Authority in connection with the sale or
conveyance of the Assets or interest therein or sale of production therefrom (in
each case) if the same are customarily obtained subsequent to such sale or
conveyance;

 

(vi)          easements, rights-of-way, servitudes, permits, licenses, surface
leases and other rights in respect of surface operations, pipelines, grazing,
logging, canals, ditches, reservoirs or the like and conditions, covenants or
other restrictions, and easements for streets, alleys, highways, pipelines,
telephone lines, power lines, railways and other easements and rights-of-way on,
over or in respect of any of the Assets, (in each case) which do not operate to
materially interfere with current or anticipated operations on the Assets and
which  do not operate, individually or in the aggregate, to;

 

(A)          reduce Seller’s Net Revenue Interest in any Well or Lease below the
amount shown on Exhibit B in respect of such Well or on Exhibit A in respect of
such Lease;

 

(B)          increase Seller’s working interest in any Well above that shown on
Exhibit B in respect of such Well; or

 

(C)          (x) reduce Seller’s Net Mineral Acres for any Lease to an amount
less than the Net Mineral Acres set forth on Exhibit A in respect of such Lease
or (y) increase Seller’s Net Mineral Acres for any Lease (due to an increased
working interest, unless there is a corresponding proportionate increase in
Seller’s net revenue interest in such Lease) more than the Net Mineral Acres set
forth on Exhibit A in respect of such Lease;

 

(vii)         defects or irregularities arising out of lack of authorization
with respect to documents executed by (i) an officer presumed under applicable
Law to have such authority or (ii) other Person’s presumed

 

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under applicable Law to have such authority (unless, in either case, Buyer
provides evidence that such action was not authorized and results in another
Person’s superior claim of title to the relevant Well or Lease);

 

(viii)        defects or irregularities that have been cured or remedied by
applicable statutes of limitation;

 

(ix)          defects or irregularities in the chain of title consisting of
omissions of heirship proceedings if the matters to be covered by such omitted
heirship proceedings are covered by appropriate affidavits of heirship;

 

(x)           defects or irregularities in the chain of title consisting of the
failure to recite marital status in documents;

 

(xi)          the terms and conditions of the Leases and the contracts,
agreements or other instruments constituting part of the Assets, as well as the
terms and conditions of all assignments and conveyances of any of the Assets to
Seller, (in each case) so long as such Leases, contracts, agreements,  other
instruments, assignments and conveyances do not operate, individually or in the
aggregate, to;

 

(A)          reduce Seller’s Net Revenue Interest in any Well or Lease below the
amount shown on Exhibit B in respect of such Well or on Exhibit A in respect of
such Lease;

 

(B)          increase Seller’s working interest in any Well above that shown on
Exhibit B in respect of such Well; or

 

(C)          (x) reduce Seller’s Net Mineral Acres for any Lease to an amount
less than the Net Mineral Acres set forth on Exhibit A in respect of such Lease
or (y) increase Seller’s Net Mineral Acres for any Lease (due to an increased
working interest, unless there is a corresponding proportionate increase in
Seller’s net revenue interest in such Lease) more than the Net Mineral Acres set
forth on Exhibit A in respect of such Lease;

 

(xii)         any matter waived in writing by Buyer;

 

(xiii)        all Liens released prior to or at Closing;

 

(xiv)        so long as such rights have not been triggered, conventional rights
of reassignment obligating Seller to reassign its interest in any portion of the
Leases to a third party upon final intention to abandon or release such Lease;

 

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(xv)                          the terms and conditions of that certain Farmout
Agreement by and between Marathon Oil Company and HRC Energy, LLC dated
effective as of October 15, 2013; and

 

(xvi)                       all other Liens, defects, instruments, contracts,
agreements, instruments, obligations, defects and irregularities affecting the
Assets (in each case) that, individually or in the aggregate, do not materially
detract from the value of or materially interfere with the operation or use of
the Assets, materially detract from the ability of Seller to obtain access,
produce, gather, treat, transport, process or otherwise market Hydrocarbons and
which do not, individually or in the aggregate:

 

(A)                               reduce Seller’s Net Revenue Interest in any
Well or Lease below the amount shown on Exhibit B in respect of such Well or on
Exhibit A in respect of such Lease;

 

(B)                               increase Seller’s working interest in any Well
above that shown on Exhibit B in respect of such Well; or

 

(C)                               (x) reduce Seller’s Net Mineral Acres for any
Lease to an amount less than the Net Mineral Acres set forth on Exhibit A in
respect of such Lease or (y) increase Seller’s Net Mineral Acres for any Lease
(due to an increased working interest, unless there is a corresponding
proportionate increase in Seller’s net revenue interest in such Lease) more than
the Net Mineral Acres set forth on Exhibit A in respect of such Lease.

 

(nnnn)                                         “Person” means any individual,
firm, corporation, partnership, limited liability company, incorporated or
unincorporated association, joint venture, joint stock company, Governmental
Authority or any other entity of any kind.

 

(oooo)                                         “Preferential Purchase Right” has
the meaning set forth in Section 7.2(a).

 

(pppp)                                         “Proceeding” means any action,
suit, litigation, arbitration, lawsuit, claim, proceeding, hearing, inquiry,
investigation, or dispute commenced, brought, conducted, or heard by or before,
or otherwise involving, any Governmental Authority or any arbitrator.

 

(qqqq)                                         “Production Taxes” means all ad
valorem, property, production, excise, net proceeds, severance, windfall profit,
sales, use, value-added, and withholding taxes and all other similar obligations
assessed against the Assets or based upon or measured by ownership of the Assets
or the production of Hydrocarbons or the receipt of proceeds therefrom,
(excluding franchise, margin, income or similar Taxes) including all estimated
taxes, deficiency assessments, additions to tax, penalties and interest with
respect thereto,

 

16

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whether disputed or otherwise.

 

(rrrr)                                                     “Property Costs”
means all costs, expenses and other expenditures incurred in the ordinary course
of business in respect of owning, developing, operating and maintaining the
Assets (including renewals and extensions of the Leases, subject to Section 
6.12) and in accordance with the relevant operating agreement, where applicable,
including development costs and expenditures related to confirming title,
permitting, drilling, completing, fracturing, testing, deepening, plugging back,
side tracking, reworking and operating Wells, costs associated with gathering,
transporting, processing and marketing production from the Properties; provided,
however, that Property Costs shall not include any costs or expenses
attributable to any curative actions by Seller with respect to Title Defects or
Environmental Liabilities, any costs incurred on account of Seller’s breach of
this Agreement, any costs incurred by Seller outside of the ordinary course of
business, any Extension Costs or any AFE Costs paid by Seller or Buyer.

 

(ssss)                                                 “Properties” means,
collectively, the Facilities, Leases, Wells and Units.

 

(tttt)                                                     “RCRA” has the
meaning set forth in Section 1.1(mm).

 

(uuuu)                                         “Records” has the meaning set
forth in Section 6.4(a).

 

(vvvv)                                         “Release” means any spilling,
leaking, pumping, pouring, emitting, discarding, abandoning, emptying,
discharging, disposing, migrating, injecting, escaping, leaching or dumping into
the environment.

 

(wwww)                                 “Representatives” means a Person’s
directors, officers, partners, members, managers, employees, agents, or advisors
(including attorneys, accountants, consultants, bankers, financial advisors, and
any representatives of those advisors).

 

(xxxx)                                         “SEC” has the meaning set forth
in Section 6.15.

 

(yyyy)                                         “SEC Documents” has the meaning
set forth in Section 6.15.

 

(zzzz)                                             “Secondary Indemnity Cap”
means an amount equal to the Base Purchase Price, as adjusted in accordance with
Section 2.2.

 

(aaaaa)                                  “Seller” has the meaning set forth in
the preamble.

 

(bbbbb)                                  “Seller Indemnified Parties” has the
meaning set forth in Section 11.2(b).

 

(ccccc)                                       “Seller Marks” has the meaning set
forth in Section 6.5.

 

(ddddd)                                  “Suspense Amounts” means all proceeds
from sales of Hydrocarbons relating to the Leases that are payable by Seller to
owners of working interests, royalties or overriding royalties that are held in
suspense by Seller

 

17

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as of the Closing Date (including funds held in suspense for unleased mineral
interests).

 

(eeeee)                                       “Tax Audit” means any audit,
adjustment, claim, examination, assessment, contest, or other proceeding with
respect to Taxes.

 

(fffff)                                            “Tax Returns” means any
report, return, election, document, estimated tax filing, declaration, claim for
refund, information returns, or other filing provided to any Governmental
Authority including any schedules or attachments thereto and any amendment
thereof.

 

(ggggg)                                       “Taxes” means all taxes,
assessments, charges, duties, fees, levies, imposts, or other similar charges
imposed by a Governmental Authority, including all income, franchise, profits,
margins, capital gains, capital stock, transfer, gross receipts, sales, use,
transfer, service, occupation, ad valorem, real or personal property, excise,
severance, windfall profits, customs, premium, stamp, license, payroll,
employment, social security, unemployment, disability, environmental,
alternative minimum, add-on, value-added, withholding and other taxes, any taxes
of another Person for franchise tax in the applicable state arising out of the
Seller’s inclusion in a combined tax report with such Person, and assessments,
charges, duties, fees, levies, imposts, or other similar charges of any kind,
and all estimated taxes, deficiency assessments, additions to tax, penalties and
interest with respect to taxes, whether disputed or otherwise.

 

(hhhhh)                                  “Third Party Claim” has the meaning set
forth in Section 11.5(a).

 

(iiiii)                                                      “Title Arbitrator”
has the meaning set forth in Section 8.10(b).

 

(jjjjj)                                                 “Title Benefit” means
any right, circumstance or condition that operates to:

 

(i)                                     increase Seller’s Net Revenue Interest
in any Well or Lease above that shown therefor on Exhibit B or Exhibit A (as
applicable) without causing a greater than proportionate increase in Seller’s
“working interest” or “WI” above that shown on Exhibit B or Exhibit A (as
applicable);

 

(ii)                                  decrease Seller’s “Working Interest” or
“WI” below that shown on Exhibit B or Exhibit A (as applicable) without a
proportionate decrease in Seller’s Net Revenue Interest below that shown on
Exhibit B or Exhibit A (as applicable); or

 

(iii)                               in the case of Leases that are currently
held by production or, if not held by production, with a remaining primary term
of at least 12

 

18

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months from the Effective Date (including any Lease term extended in accordance
with Section 6.12), increase Seller’s Net Mineral Acres (other than increases
attributable to an increased Working Interest in the affected Lease, unless
there is a corresponding proportionate increase in Seller’s Net Revenue Interest
in such Lease) for any such Lease above that shown therefor on Exhibit A.

 

(kkkkk)                                  “Title Benefit Amount” has the meaning
set forth in Section 8.8.

 

(lllll)                                                      “Title Defect”
means any matter that would cause Seller to have less than Defensible Title to
the Leases or the Wells

 

(mmmmm)              “Title Defect Amount” has the meaning set forth in
Section 8.6.

 

(nnnnn)                                  “Title / Environmental Escrow Deposit”
has the meaning set forth in Section 6.10(a).

 

(ooooo)                                  “Title Review” has the meaning set
forth in Section 8.2.

 

(ppppp)                                  “TPC” means Triangle Petroleum Corp.,
the ultimate parent company of Buyer.

 

(qqqqq)                                  “Transaction Documents” means those
documents executed pursuant to this Agreement.

 

(rrrrr)                                                 “Triangle Guaranty”
means a payment guaranty from TPC in favor of Seller substantially in the form
set forth in Exhibit F dated as of the Execution Date.

 

(sssss)                                            “Units” means all pooled,
communitized, or unitized acreage which includes all or any part of the Leases,
and all tenements, hereditaments, and appurtenances belonging to the Leases and
Units.

 

(ttttt)                                                 “Wells” means any and
all oil, gas, water, or injection wells located on the Leases or the Units,
including the interests in the wells listed on Exhibit B.

 

1.2                               Interpretation.

 

(a)                                                              In this
Agreement:

 

(i)                                     references to a person include an
individual, a body corporate, a partnership and an unincorporated association of
persons; and

 

(ii)                                  references to a Party include references
to the successors or assigns (immediate or otherwise) of such Party.

 

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(b)                                                              The headings in
this Agreement do not affect its interpretation.  The preamble and recitals to
this Agreement shall form a part hereof.

 

(c)                                                               The Schedules
and Exhibits to this Agreement form part of this Agreement, and any reference to
“Clauses,” “Schedules” or “Exhibits” means a clause, schedule or exhibit to this
Agreement respectively.

 

(d)                                                              The words
“includes” or “including” shall mean “including without limitation”.

 

(e)                                                               If there is
any conflict or inconsistency between a term in the main part of this Agreement
and a term in any of the Schedules or other documents referred to or otherwise
incorporated into this Agreement, the term in the main part of this Agreement
shall prevail to the extent of the conflict or inconsistency.

 

(f)                                                                The words
“this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of
similar import, refer to this Agreement as a whole and not to any particular
Article, Section, subsection or other subdivision unless expressly so limited.

 

(g)                                                               Reference to
any agreement (including this Agreement), document or instrument shall include
such agreement, document or instrument as amended or modified (including any
waiver or consent) and in effect from time to time.

 

2.                                      PURCHASE AND SALE

 

2.1                               Purchase and Sale of Assets.

 

Upon the terms and subject to the conditions set forth in this Agreement, Seller
shall sell, assign, transfer and convey to Buyer, and Buyer shall purchase and
acquire from Seller, at the Closing, the Assets. The Assets shall be transferred
by Seller to Buyer by delivery of the Conveyance at Closing.

 

2.2                               Consideration.

 

In consideration for the purchase of the Assets, Buyer shall pay to Seller One
Hundred Million Dollars ($100,000,000) (the “Base Purchase Price”), as adjusted
in accordance with Sections 2.5, 2.6 and 3.5 herein (as applicable).

 

2.3                               Performance Deposit.

 

Buyer shall pay to the Escrow Agent a deposit of Five Million Dollars
($5,000,000.00) (such amount, together with interest thereon, the “Performance
Deposit”) in cash by wire transfer in immediately available funds no later than
the Execution Date in order to assure Buyer’s performance of its obligations
hereunder.  The Performance Deposit shall be held by the Escrow Agent pursuant
to the Performance Deposit Escrow Agreement

 

20

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and this Agreement until Closing and shall be applied as a credit against the
Closing Payment.  If this Agreement is terminated without a Closing, then the
distribution of the Performance Deposit shall be governed by the provisions of
Section 13.3.

 

2.4                               Triangle Guaranty.

 

Buyer shall deliver to Seller the Triangle Guaranty no later than the Execution
Date.

 

2.5                               Closing Payment.

 

At Closing, Buyer shall pay to Seller by wire transfer of immediately available
funds to the account designated by Seller an amount equal to the Base Purchase
Price:

 

(a)                                                              less the amount
of the Performance Deposit received by Seller on or prior to Closing;

 

(b)                                                              less the amount
of the aggregate of all Title Defect Amounts applicable to all outstanding Title
Defects to the extent not included in the Title / Environmental Escrow Deposit;

 

(c)                                                               less the
amount of the aggregate of the Environmental Liability Amounts applicable to all
outstanding Environmental Liabilities to the extent not included in the Title /
Environmental Escrow Deposit;

 

(d)                                                              less the
Allocated Value of any of the Assets excluded from the transactions contemplated
hereunder pursuant to Section 7.2 or Section 7.3;

 

(e)                                                               less the sum
of all proceeds received by Seller and attributable to the Assets on or after
the Effective Date, including the sale of Hydrocarbons produced from or
attributable to the Properties (other than the sale of inventories of
Hydrocarbons located on the Properties as of the Effective Date);

 

(f)                                                                less the
amount of the aggregate of the Title / Environmental Escrow Deposit;

 

(g)                                                               plus the sum
of Property Costs incurred by or on behalf of Seller in the ordinary course of
business on or after the Effective Date and paid by Seller prior to the Closing
Date, and ad valorem, production and severance taxes;

 

(h)                                                              less, to the
extent that Seller is overproduced as of the Effective Date, an amount equal to
the product of such overproduced volumes times (A) $7.01/MMBtu for gaseous
Hydrocarbons and (B) $91.36/Bbl for liquid Hydrocarbons, as applicable;

 

(i)                                                                  less, to
the extent that Seller has underdelivered any Hydrocarbons as of the Effective
Date, an amount equal to the product of the underdelivered volumes times
(A) $7.01/MMBtu for gaseous Hydrocarbons and (B) $91.36/Bbl for liquid
Hydrocarbons, as applicable;

 

21

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(j)                                                                 plus, to the
extent that Seller is underproduced as of the Effective Date, an amount equal to
the product of such underproduced volumes times (A) $7.01/MMBtu for gaseous
Hydrocarbons and (B) $91.36/Bbl for liquid Hydrocarbons, as applicable;

 

(k)                                                              plus, to the
extent that Seller has overdelivered any Hydrocarbons as of the Effective Date,
an amount equal to the product of the overdelivered volumes times
(A) $7.01/MMBtu for gaseous Hydrocarbons and (B) $91.36/Bbl for liquid
Hydrocarbons, as applicable; and

 

(l)                                                                  less an
amount equal to the Suspense Amounts that are held by Seller or any of its
Affiliates of the Closing Date and are not transferred to Buyer;

 

such amount (without duplication of any amounts described in the foregoing
adjustments), in the aggregate, the “Closing Payment.”

 

2.6                               Closing Statement.

 

Not later than five (5) Business Days prior to the Closing Date, Seller shall
prepare in good faith and deliver to Buyer a statement (the “Closing Statement”)
showing the estimated Closing Payment (using actual numbers and amounts where
available, and using Seller’s good faith estimate of other amounts, where actual
amounts are not available).  Seller shall, at Buyer’s request, supply reasonable
documentation in its and its Affiliates’ possession available to support the
actual revenue, expenses and other items for which adjustments are made.  Within
three (3) Business Days after receipt of the Closing Statement, Buyer shall
prepare in good faith and deliver to Seller a written report containing all
changes that Buyer proposes to be made to the Closing Statement together with
the explanation therefor and the supporting documents thereof, and shall, at
Seller’s request, supply any additional reasonable documentation in its and its
Affiliates’ possession available to support Buyer’s proposed changes.  The
Parties shall in good faith attempt to agree on the Closing Statement as soon as
possible after Seller’s receipt of Buyer’s written report.  The Closing
Statement, as agreed upon by the Parties, will be used to determine the
estimated Closing Payment (the “Estimated Closing Payment”) at Closing; provided
that if the Parties do not agree upon an adjustment set forth in the Closing
Statement, then the amount of such adjustment used to determine the Estimated
Closing Payment shall be the average of the amount set forth in the draft
Closing Statement delivered by Seller to Buyer pursuant to this Section 2.6 and
the amount that Buyer proposed for such adjustment in its written report.

 

2.7                               Withholding.

 

Buyer shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to Seller such amount as Buyer is required to
deduct and withhold under the Code, or any Tax law, with respect to the making
of such payment.  To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the Person in respect of whom such deduction and withholding was made.

 

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2.8                               Proration of Costs and Revenues.

 

Buyer is entitled to all proceeds attributable to the Assets from and after the
Effective Date, and is responsible for all Property Costs incurred from and
after the Effective Date.  Seller is entitled to all proceeds attributable to
the Assets prior to the Effective Date, and is responsible for all Property
Costs incurred prior to the Effective Date.  Should Buyer receive after Closing
any proceeds or other income to which Seller is entitled, Buyer shall fully
disclose, account for and promptly remit the same to Seller.  If, after Closing,
Seller receives any proceeds or other income with respect to the Assets to which
Seller is not entitled, Seller shall fully disclose, account for, and promptly
remit the same to Buyer.  Should Buyer pay after Closing any Property Costs for
which Seller is responsible, Seller shall reimburse Buyer promptly after receipt
of an invoice with respect to such Property Costs, accompanied by copies of the
relevant vendor or other invoice and proof of payment.  Should Seller pay after
Closing any Property Costs for which Seller is not responsible, Buyer shall
reimburse Seller promptly after receipt of an invoice with respect to such
Property Costs, accompanied by copies of the relevant vendor or other invoice
and proof of payment.

 

3.                                      CLOSING

 

3.1                               Closing.

 

Subject to the satisfaction or waiver of all conditions to the obligations of
the Parties set forth in Section 12, the closing of the sale and transfer of the
Assets to Buyer as contemplated by this Agreement (the “Closing”) shall take
place at Seller’s offices, located at 5555 San Felipe, Houston, Texas 77056, on:

 

(a)                                 June 30, 2014; or

 

(b)                                 such other date as the Parties may
determine,

 

the date on which the Closing occurs is referred to herein as the “Closing
Date”.

 

3.2                               Effective Date.

 

Should the Closing occur, Buyer’s acquisition of the Assets will be effective as
of the Effective Date.

 

3.3                               Buyer Deliverables.

 

At Closing, Buyer shall deliver to Seller:

 

(a)                                 an amount equal to the Estimated Closing
Payment;

 

(b)                                 a certificate of Buyer attesting to the
resolutions of Buyer, which, among other items, authorize the purchase of the
Assets;

 

(c)                                  Buyer executed and duly notarized
Conveyance;

 

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(d)                                 Buyer executed Escrow Agreement (if
applicable), and the payment of any amounts due thereunder;

 

(e)                                  evidence of any bonds, letters of credit,
guarantees and security deposits, or evidence such bonds, letters of credit,
guarantees and security deposits are not needed, as set forth in Section 6.11;

 

(f)                                   such other documents, instruments and
agreements as Seller reasonably requests as required to consummate the
transactions contemplated by this Agreement; and

 

(g)                                  Buyer executed joint written instruction
letter to the Escrow Agent directing the Escrow Agent to release the Performance
Deposit to Seller.

 

3.4                               Seller Deliverables.

 

At Closing, Seller shall deliver to Buyer:

 

(a)                                                              an affidavit of
non-foreign status from the Seller that complies with Section 1445 of the Code;

 

(b)                                                              executed
releases of all Liens and security interests created by Seller or its Affiliates
to secure loans for borrowed money affecting the Assets (if any);

 

(c)                                                               on forms
reasonably acceptable to Buyer, executed transfer orders or letters in lieu
thereof directing all purchasers of production to make payment to Buyer of
proceeds attributable to production from the Assets from and after the Effective
Date, for delivery by Buyer to the purchasers of production.

 

(d)                                                              executed
resignation of operatorship letters reasonably acceptable to Buyer relating to
Assets that Seller operates and, to the extent required under any Law or by any
Governmental Authority for any state or federal Lease, state or federal (as
applicable) change of operator forms designating Buyer as the operator of the
Wells and the Leases currently operated by Seller;

 

(e)                                  Seller executed and duly notarized
Conveyance;

 

(f)                                   Seller executed Escrow Agreement (if
applicable);

 

(g)                                  any Consents Seller obtains;

 

(h)                                 such other documents, instruments and
agreements as Buyer reasonably requests as required to consummate the
transactions contemplated by this Agreement;

 

(i)                                     Seller executed joint written
instruction letter to the Escrow Agent directing the Escrow Agent to release the
Performance Deposit to Seller; and

 

(j)                                    copies of the most recent production
reports (including produced amounts of oil, gas and water) attributable to the
Properties and that are in Seller’s possession as

 

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of Closing and have not yet been delivered to Buyer.

 

3.5                               Post-Closing Adjustment.

 

(a)                                                              Revised Closing
Statement.  On or before the date that is one hundred and twenty (120) days
after the Closing Date, Seller shall prepare in good faith and deliver to Buyer
a revised Closing Statement setting forth the Closing Payment as of the Closing
Date.  Seller shall provide to Buyer such data and information as Buyer may
reasonably request supporting the amounts reflected on the revised Closing
Statement (and reasonable access to Seller’s personnel, including internal
accountants) to permit Buyer to perform or cause to be performed an audit of the
Closing Statement, at Buyer’s expense.  The revised Closing Statement shall
become final and binding as to the adjustments identified therein upon the
Parties on the date (the “Final Settlement Date”) that is forty-five (45) days
following receipt thereof by Buyer unless Buyer gives, in good faith, Notice of
its disagreement (“Notice of Disagreement”) to Seller prior to such date.  Any
Notice of Disagreement shall specify in reasonable detail the dollar amount,
nature, and basis of any disagreement so asserted.  If a Notice of Disagreement
is received by Seller by the date specified in the immediately preceding
sentence, then the Closing Statement (as revised in accordance with
Section 3.5(b)) shall become final and binding as to the adjustments identified
therein upon the Parties on, and the Final Settlement Date shall be, the earlier
of:

 

(i)                                     the date upon which Seller and Buyer
agree in writing with respect to all matters specified in the Notice of
Disagreement; or

 

(ii)                                  the date upon which the Arbitrator’s
Closing Statement is issued by the Closing Statement Arbitrator.

 

(b)                                                              Final Closing
Statement.  During the forty-five (45) days following the date upon which Seller
receives a Notice of Disagreement, Seller and Buyer shall use commercially
reasonable efforts to attempt to resolve in writing any differences that they
may have with respect to all matters specified in the Notice of Disagreement. 
If at the end of such forty-five (45) day period (or earlier by mutual
agreement), Buyer and Seller have not reached an agreement on such matters, the
matters that remain in dispute (and only such matters) shall promptly be
submitted to KPMG LLP (subject to the following sentence, the “Closing Statement
Arbitrator”) for review and final and binding resolution as to such matters.  If
KPMG LLP is unable or unwilling to serve as an arbitrator hereunder, then Seller
and Buyer shall, in good faith, mutually agree upon an independent national
accounting firm who has not represented either Party at any time during the five
year period of time immediately preceding its designation hereunder, to serve as
the Closing Statement Arbitrator; provided that if Seller and Buyer cannot agree
on such accounting firm, then the Houston office of the American Arbitration
Association shall appoint such independent national accounting firm.  Buyer

 

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and Seller shall, not later than seven (7) Business Days prior to the hearing
date set by the Closing Statement Arbitrator (which hearing date shall be not
later than ten (10) days following the agreement of such arbitrator to serve or
the appointment of such arbitrator), each submit a written brief to the Closing
Statement Arbitrator (and a copy thereof to the other Party on the same day)
with dollar figures for settlement of the disputes as to the amount of the
adjusted Closing Payment (together with a proposed Closing Statement that
reflects such figures and adjustments previously agreed to by the Parties)
consistent with their respective calculations delivered pursuant to
Section 3.5(a).  The hearing shall be conducted on a confidential basis.  The
Closing Statement Arbitrator shall consider only those items or amounts in the
Closing Statement that were identified in the Notice of Disagreement and that
remain in dispute and the Closing Statement Arbitrator’s decision resolving the
matters in dispute shall be based upon and be consistent with the terms and
conditions in this Agreement.  In deciding any matter, the Closing Statement
Arbitrator (i) shall be bound by the provisions of this Section 3.5 and the
related definitions and (ii) may not assign a value to any disputed item greater
than the greatest value for such item claimed by either Seller or Buyer or less
than the smallest value for such item claimed by Seller or Buyer in their
respective calculations delivered pursuant to Section 3.5(a). The Closing
Statement Arbitrator shall render a decision resolving the matters in dispute
(which decision shall include a written statement of findings and conclusions)
promptly after the conclusion of the hearing, unless the Parties reach agreement
prior thereto and withdraw the dispute from arbitration.  The Closing Statement
Arbitrator shall provide to the Parties explanations in writing of the reasons
for its decisions regarding the adjusted Closing Payment and shall issue the
Final Closing Statement reflecting such decision.  The decision of the Closing
Statement Arbitrator shall be (i) final and binding on the Parties and
(ii) final and non-appealable for all purposes hereunder; provided that such
decision may be reviewed, corrected, or set aside by a court of competent
jurisdiction, but only if and to the extent that the Closing Statement
Arbitrator is found by such court of competent jurisdiction to have made
mathematical errors with respect to its decision.  The cost of any arbitration
(including the fees and expenses of the Closing Statement Arbitrator) under this
Section 3.5(b) shall be borne entirely by the Party whose proposed settlement
amount differed the greatest from the Arbitrator’s Closing Statement. The fees
and disbursements of Seller’s independent auditors and other costs and expenses
incurred in connection with the services performed with respect to the Closing
Statement shall be borne by Seller and the fees and disbursements of Buyer’s
independent auditors and other costs and expenses incurred in connection with
their preparation of the Notice of Disagreement shall be borne by Buyer.  As
used in this Agreement, the term “Final Closing Statement” shall mean the
revised Closing Statement described in Section 3.5(a), as prepared by Seller and
as may be subsequently adjusted to reflect any subsequent written agreement
between the Parties with respect thereto, or if submitted to the

 

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Closing Statement Arbitrator, the Closing Statement containing the adjustments
previously agreed to by the Parties and the disputed adjustments determined by
the Closing Statement Arbitrator (the “Arbitrator’s Closing Statement”) as
described in this Section 3.5(b).

 

(c)                                                               Final
Settlement.  If the amount set forth on the Final Closing Statement exceeds the
Estimated Closing Payment, then, within ten (10) Business Days after the Final
Settlement Date, Buyer shall pay to Seller the amount by which the amount set
forth on the Final Closing Statement exceeds the Estimated Closing Payment.  If
the amount set forth on the Final Closing Statement is less than the Estimated
Closing Payment, then Seller shall pay to Buyer, within ten (10) Business Days
after the Final Settlement Date, the amount by which the Estimated Closing
Payment exceeds the amount set forth on the Final Closing Statement.  Any
post-Closing payment made pursuant to this Section 3.5(c) shall be made by means
of a wire transfer of immediately available funds to a bank account designated
by the Party receiving the funds.

 

4.                                      REPRESENTATIONS AND WARRANTIES OF BUYER

 

4.1                               Representations.

 

Buyer represents and warrants to Seller as of the Execution Date and Closing as
follows:

 

(a)                                 Organization.  Buyer is a corporation,
validly organized and existing in good standing under the laws of the State of
Colorado.

 

(b)                                 Authorization; Enforceability.  Buyer has
full capacity, power and authority to execute and deliver this Agreement and to
perform its obligations hereunder.  The execution, delivery and performance of
this Agreement and the Transactions Documents to which Buyer is a party, and the
performance of the transactions contemplated hereby and thereby, have been duly
and validly authorized by Buyer, and no other proceeding on the part of Buyer is
necessary to authorize this Agreement, such Transaction Documents or the
performance of the transactions contemplated hereby or thereby.  This Agreement
has been duly and validly executed and delivered by Buyer (and all Transaction
Documents required hereunder to be executed and delivered by Buyer at the
Closing will be duly executed and delivered by Buyer), and this Agreement
constitutes, and at the Closing each such Transaction Document will constitute,
a valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar Laws affecting creditors’
rights generally and subject, as to enforceability, to general principles of
equity.

 

(c)                                  No Conflict; Consents.  Except as would not
reasonably be expected to prevent, impede, or materially delay the ability of
Buyer to enter into and perform its obligations under this Agreement, the
execution and delivery of this Agreement

 

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by Buyer and the consummation of the transactions contemplated hereby (including
the execution and delivery of the Transaction Documents to which Buyer is a
party) by Buyer do not and shall not:

 

(i)                                     violate any Law applicable to Buyer or
require any filing with, consent, approval or authorization of, or, notice to,
any Governmental Authority;

 

(ii)                                  violate any Organizational Document of
Buyer; or

 

(iii)                               require any filing with or permit, consent
or approval of, or the giving of any notice to, any Person.

 

(d)                                 Litigation.  Except as would not reasonably
be expected to prevent, impede, or materially delay the ability of Buyer to
enter into and perform its obligations under this Agreement, Buyer:

 

(i)                                     is not subject to any outstanding
injunction, judgment, Order, decree, ruling or charge; and

 

(ii)                                  is not a party to or to its knowledge,
threatened by, any Proceeding.

 

(e)                                  Brokers’ Fees.  Neither Buyer nor any of
its Affiliates have entered into any Contract or incurred any liability,
contingent or otherwise, with any Person that would require the payment by
Seller or any of its Affiliates of any brokerage fee, finders’ fee, or other
commission in connection with the transactions contemplated by this Agreement.

 

(f)                                   Financial Ability.  Buyer has and will
maintain, through a combination of cash on hand and funds available (including
funds available under existing lines of credit and funding sources’ commitment
letters), the ability to fund the consummation of the transactions contemplated
by this Agreement and satisfy all other costs and expenses in connection
herewith, to properly maintain and operate the Assets, and to fulfill Buyer’s
obligations pursuant to any Contract, Permit, Environmental Permit or Law in
connection with any Asset.  Buyer is solvent, has not instituted and is not
subject to or threatened by any insolvency, receivership or bankruptcy
proceeding or any other proceeding for the settlement of debts, has not made an
assignment for the benefit of creditors, has not failed to pay any amount due
under any loan, guarantee or security agreement on the due date or within any
applicable grace period, and has not defaulted under any other term of any loan,
guarantee or security agreement which would allow its holder to accelerate an
obligation.

 

(g)                                  Securities Laws Compliance.  Buyer:

 

(i)                                     is acquiring the Assets for its own
account and not with a view to distribution in violation of applicable
securities Laws; and

 

(ii)                                  has sufficient knowledge and experience in
financial and business matters

 

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so as to be able to evaluate the merits and risk of an investment in the Assets
and is able financially to bear the risks thereof.

 

(h)                                 Buyer’s Independent Investigation.  As of
Closing, Buyer and its Representatives have undertaken an independent
investigation and verification of the Assets, except to the extent Seller has
prevented or denied Buyer access to conduct the due diligence contemplated under
Section 6.2, Section 8 (in respect of title matters) and/or Section 9 (in
respect of environmental matters).  Except for the representations and
warranties made by Seller in this Agreement, Buyer acknowledges that there are
no representations or warranties, express or implied, as to the Assets.

 

(i)                                     Bankruptcy.  There are no bankruptcy,
reorganization or receivership proceedings pending, being contemplated by or, to
Buyer’s Knowledge, threatened in writing against Buyer.

 

5.                                      REPRESENTATIONS AND WARRANTIES OF SELLER

 

5.1                               Representations.

 

Seller represents and warrants to Buyer as of the Execution Date and Closing as
follows:

 

(a)                                 Organization.  Seller is a corporation duly
formed, validly existing and in good standing under the laws of the State of
Ohio.

 

(b)                                 Authorization; Enforceability.  Seller has
full capacity, power and authority to execute and deliver this Agreement to
perform its obligations hereunder.  The execution, delivery and performance of
this Agreement and the Transactions Documents to which Seller is a party, and
the performance of the transactions contemplated hereby and thereby, have been
duly and validly authorized by Seller, and no other proceeding on the part of
Seller is necessary to authorize this Agreement, such Transaction Documents or
the performance of the transactions contemplated hereby or thereby.  This
Agreement has been duly and validly executed and delivered by Seller (and all
Transaction Documents required hereunder to be executed and delivered by Seller
at the Closing will be duly executed and delivered by Seller), and this
Agreement constitutes, and at the Closing each such Transaction Document will
constitute, a valid and binding obligation of Seller, enforceable against Seller
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar Laws affecting
creditors’ rights generally and subject, as to enforceability, to general
principles of equity.

 

(c)                                  No Conflict; Consents.  The execution and
delivery of this Agreement by Seller does not and the consummation of the
transactions (including the execution and delivery of the Transaction Documents
to which Seller is a party) by Seller contemplated hereby will not:

 

(i)                                     except as set forth on Schedule 2,

 

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violate any Law applicable to Seller or require any filing with, consent,
approval, or authorization of, or notice to, any Governmental Authority;

 

(ii)                                  violate any Organizational Document of
Seller;

 

(iii)                               except as set forth on Schedule 2, other
than the Consents, require any filing with or permit, consent or approval of, or
the giving of any notice to, any Person; or

 

(iv)                              except as set forth on Schedule 2, the
Permitted Encumbrances and the Consents, result in a default or creation of any
encumbrance or give rise to any right of termination, cancellation, or
acceleration under any of the terms, conditions, or provisions of any note,
bond, mortgage, indenture, license or Contract to which Seller or the Assets may
be bound;

 

except in the case of Section 5.1(c)(i), 5.1(c)(iii), and 5.1(c)(iv) as would
not reasonably be expected to have a Material Adverse Effect.

 

(d)                                 Litigation.  Except as set forth in Schedule
3:

 

(i)                                     Seller is not subject to any outstanding
injunction, judgment, Order, decree, ruling, or charge that would reasonably be
expected to materially impair the ability of Seller to perform its obligations
under this Agreement;

 

(ii)                                  with respect to Seller’s ownership or
operation of the Assets, Seller is not a party to any Proceeding, or to the
Knowledge of Seller, no Proceeding has been threatened;

 

(iii)                               to Seller’s Knowledge, no operator of the
Assets is subject to any Proceedings with respect to its operation of such
Assets for which Seller has received written notice;  and

 

(iv)                              to Seller’s Knowledge, there is no claim for
breach by Seller of a Material Contract for which Seller has received written
notice.

 

(e)                                  Absence of Certain Changes.  Except as
disclosed on Schedule 4, since the Effective Date, to Seller’s Knowledge:

 

(i)                                     there has not been any circumstance,
condition, event, or state of facts (either singly or in the aggregate) which
has had, or would reasonably be expected to have, a Material Adverse Effect; and

 

(ii)                                  except for matters relating to the
transactions contemplated by this Agreement, the Assets have been operated, in
all material respects, only in the ordinary course.

 

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(f)                                   Taxes.  Except as set forth on Schedule 8,
to Seller’s Knowledge:

 

(i)                                     all material Tax Returns required to be
filed by Seller with respect to the Assets prior to the date hereof have been
filed and all such Tax Returns are true, complete and correct in all respects;

 

(ii)                                  all Taxes shown as due and owing on such
Tax Returns have been paid;

 

(iii)                               there are no Liens related to Taxes on any
of the Assets other than Permitted Encumbrances;

 

(iv)                              there is no claim pending by any Governmental
Authority in connection with any Taxes or any Tax Return described in
Section 5.1(f)(i) or Section 5.1(f)(ii);

 

(v)                                 no Tax Returns of Seller described in
Section 5.1(f)(i) are under audit or examination by any Governmental Authority;

 

(vi)                              there are no agreements or waivers currently
in effect or pending that provide for an extension of time with respect to the
filing of any material Tax Return or the assessment or collection of any
material Tax with respect to the Assets;

 

(vii)                           none of the Assets are subject to any tax
partnership agreement or provisions requiring a partnership income tax return to
be filed under Subchapter K of Chapter 1 of Subtitle A of the Code or any
similar state statute, and in the case of any Asset subject to a tax partnership
agreement, the tax partnership has an election in effect under Section 754 of
the Code; and

 

(viii)                        no written claim has been made by any Governmental
Authority in a jurisdiction where Seller does not file a Tax Return that it is
or may be subject to material taxation in that jurisdiction with respect to the
Assets.

 

(g)                                  Material Contracts.  As of the Execution
Date, Schedule 5 includes a list of each Material Contract.  Each Material
Contract constitutes the legal, valid and binding obligation of Seller and, to
Seller’s Knowledge, the counterparties thereto, and is enforceable in accordance
with its terms and conditions in all material respects. Seller is not in, nor is
Seller alleged to be in, in any material respect, breach or default of Seller’s
obligations under any of the Material Contracts.  To Seller’s knowledge:

 

(i)                                     no breach or default in any material
respect by any third party exists under any Material Contract; and

 

(ii)                                  no counterparty to any Material Contract
has canceled, terminated or

 

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modified, or threatened to cancel, terminate or modify, any Material Contract.

 

(h)                                 Brokers’ Fees.  Neither Seller nor any of
its Affiliates have entered into any Contract or incurred any liability,
contingent or otherwise, with any Person that would require the payment by Buyer
after Closing of any brokerage fee, finders’ fee, or other commission in
connection with the transactions contemplated by this Agreement.

 

(i)                                     Environmental Matters.  Except as set
forth in Schedule 6 or as would not reasonably be expected to have a Material
Adverse Effect, to Seller’s Knowledge:

 

(i)                                     Seller has all Environmental Permits
necessary for the ownership and operation of the Assets;

 

(ii)                                  the operations of Seller in respect of the
Assets are in compliance, in all respects, with all Environmental Laws, which
compliance includes the possession and maintenance of, and compliance with, all
Environmental Permits;

 

(iii)                               Seller has not received written notice from
any Person of any Release, or incident concerning any land, facility, asset or
property included in the Assets that:  (i) interferes with or prevents
compliance by Seller or the Assets with any Environmental Laws or the terms of
any permits, licenses, orders, approvals, variances, waivers, franchises, rights
or other authorizations issued pursuant thereto; or (ii) is reasonably expected
to give rise to or results in any common law or other liability of Seller to any
Person;

 

(iv)                              Seller is not subject to any Proceeding or
outstanding Order from any Governmental Authority under any Environmental Laws
(other than Orders of general application to participants in onshore oil and gas
industry in the states in which the Assets are located) and no other claim or
circumstance exists with respect to the Assets which requires the payment of any
fine or penalty under any Environmental Law;

 

(v)                                 Seller is not subject to any action or
investigation pending or threatened in writing, whether judicial or
administrative, and has not received any notice of violation from a Governmental
Authority, alleging or involving any noncompliance with or potential liability
under any Environmental Law; and

 

(vi)                              no adverse environmental condition resulting
from the operation of the Assets by Seller or its Affiliates exists on or under
any of the Assets which violates, in any respect, or which would be reasonably
expected to result in liability under any Environmental Law.

 

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(j)                                                                 Compliance
with Laws.  To Seller’s Knowledge, Seller is in compliance in all material
respects with all applicable Laws (excluding Environmental Laws) with respect to
use and operation of the Assets.  Notwithstanding the foregoing in this
Section 5.1(j) (or any other provision of this Agreement), Section 5.1(f) is
Seller’s exclusive representation and warranty in respect of Taxes and
Section 5.1(i) is Seller’s exclusive representation and warranty in respect of
environmental issues.

 

(k)                                                              Bankruptcy. 
There are no bankruptcy, reorganization or receivership proceedings pending,
being contemplated by or, to Seller’s Knowledge, threatened in writing against
Seller.

 

(l)                                                                  AFEs.  To
Seller’s Knowledge, Schedule 7 sets forth, as of the Execution Date, all AFEs
approved by Seller relating to the Assets which are individually in excess of
fifty thousand dollars ($50,000.00) net to Seller’s interest.

 

(m)                                                          Preferential
Purchase Rights.  To Seller’s Knowledge, there are no Preferential Purchase
Rights, rights of first refusal or other similar rights that are applicable to
the transfer of the Assets in connection with the transactions contemplated
hereby.

 

6.                                      COVENANTS

 

6.1                               Operations During the Interim Period.

 

(a)                                                              Conduct of
Business.  During the Interim Period, Seller will, in all material respects,
conduct its business related to the Assets in the ordinary course and in a
manner substantially consistent with Seller’s past practices in respect of the
Assets.  During the Interim Period, Seller shall:

 

(i)                                     maintain the books of account and
Records relating to the Assets in the usual, regular and ordinary manner, in
accordance with the usual accounting practices of Seller;

 

(ii)                                  forward all AFEs generated by third
Persons relating to the Assets to Buyer as soon as reasonably practicable
following the receipt thereof by Seller or an Affiliate of Seller;

 

(iii)                               use commercially reasonable efforts to
maintain in full force and effect all (x) Leases, subject to Section 6.12, and
(y) all material easements and surface rights and all material Permits;

 

(iv)                              give prompt written notice to Buyer of any
Casualty Loss or other material damage to any of the Assets, any written claim
for breach or damages with respect to the Assets received by Seller during the
Interim Period and of which Seller has Knowledge, and of any action to alter,
terminate, rescind or procure a judicial reformation of any

 

33

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Lease; and

 

(v)                                 in the case of each Well operated by Seller,
provide Buyer with copies of production reports which are provided to North
Dakota Industrial Commission and the Montana Board of Oil and Gas, as
applicable, on a monthly basis.

 

(b)                                                              Restriction on
Operations.  Without the prior written consent of Buyer (such consent not to be
unreasonably withheld, delayed or conditioned), subject to Section 6.1(c),
during the Interim Period Seller shall not:

 

(i)                                     sell, transfer, abandon, farmout, lease,
encumber or create a Lien on (other than Permitted Encumbrances), exchange or
otherwise dispose of any of the Assets other than (a) the sale of Hydrocarbons
produced from Wells in the ordinary course of business, (b) the sale of worn-out
or obsolete equipment, spare parts or minor or insignificant assets that are no
longer necessary in the operation of the Assets or for which replacement
equipment has been obtained, or (c) pooling or unitization of Assets with
properties of unrelated third parties where such pooling or unitization was not
initiated by Seller;

 

(ii)                                  enter into any Contract with respect to
the Assets that would have been a Material Contract if it would have been in
effect as of the Execution Date;

 

(iii)                               materially modify, amend, change the terms,
waive any material right under or terminate prior to its stated expiration or
termination any Material Contract;

 

(iv)                              propose, make or commit to any operation
(other than an operation to drill, fracture stimulate, complete or rework any
well that is proposed by a third party) reasonably anticipated by Seller to
require future individual capital expenditures by Buyer in excess of five
hundred thousand dollars ($500,000.00), except for emergency operations or
operations undertaken avoid a monetary penalty or forfeiture provision of any
applicable agreement or order;

 

(v)                                 subject to Section 6.13, commit to any
operation to drill, fracture stimulate, complete or rework any well that is
proposed by a third party without Buyer’s consent; or

 

(vi)                              commit to do any of the foregoing.

 

(c)                                                               Requests for
Approval.  Seller will deliver requests for approval of any action restricted by
this Section 6.1 to the following individual who has full authority to grant or
deny such requests on behalf of Buyer:

 

Mike Ross

 

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Business Development Manager

Fax: (303) 260-5080

Email: MRoss@trianglepetroleum.com

 

Buyer’s approval of any action restricted by this Section 6.1 shall be
considered granted within ten (10) days (unless a shorter time is required by
circumstances outside of the control of Seller and its Affiliates, and such
shorter time is specified in Seller’s notice) after Seller’s notice to Buyer
requesting such consent unless Buyer notifies Seller to the contrary during such
ten (10) day period.  If the underlying circumstances of an action requested for
approval hereunder reasonably require that such approval be given within a
shorter time period than ten (10) days, Seller will make a good faith effect to
contact Buyer before relying on passage of time only.

 

6.2                               Access and Assistance.

 

(a)                                                              During the
Interim Period, Seller will afford Buyer reasonable access, during normal
business hours and in such manner as not to unreasonably interfere with the
normal operation of Seller’s business, to the Assets and the Records for the
purpose of Buyer conducting a reasonable due diligence review of the Assets, but
only to the extent that Seller may do so without violating any obligations to an
unaffiliated third party and to the extent that Seller has the authority to
grant such access (provided that, upon written request by Buyer, Seller agrees
to use its commercially reasonable effort to obtain waivers of any such
obligation and to obtain authority to grant such access).  Seller shall have the
right to have a Representative present at all times during such review. 
Notwithstanding the foregoing, the only access Buyer will be afforded in respect
of title matters is as set forth in Section 8 and in respect of environmental
matters is as set forth in Section 9.

 

(b)                                                              Notwithstanding
Section 6.2(a), Buyer shall have no right of access to, and Seller shall have no
obligation to provide to Buyer, information relating to:

 

(i)                                     bids received from others in connection
with the transactions contemplated by this Agreement (or similar transactions)
and information and analyses (including financial analyses) relating to such
bids;

 

(ii)                                  any information not directly relating to
the Assumed Obligations the disclosure of which would jeopardize any privilege
available to Seller relating to such information;

 

(iii)                               any information the disclosure of which
would cause Seller to breach a confidentiality obligation;

 

(iv)                              any information the disclosure of which would
result in a violation of Law; or

 

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(v)                                 the Excluded Records.

 

(c)                                                               Buyer shall
hold in confidence all information received or reviewed in accordance with this
Section 6.2 on the terms and subject to the conditions contained in the
Confidentiality Agreement.

 

(d)                                                              This
Section 6.2 does not apply to Buyer’s title or environmental due diligence,
which are to be conducted in accordance with Section 8 in respect of title
matters and Section 9 in respect of environmental matters.

 

6.3                               Further Assurances.

 

Subject to the terms and conditions of this Agreement, each Party will use its
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary or desirable, under applicable Law or
otherwise, to consummate the transactions contemplated by this Agreement;
provided that neither Party shall be required to waive any of its conditions to
Closing (such waiver being in the sole discretion of such Party).  The Parties
agree to execute and deliver such other documents, certificates, agreements, and
other writings and to take such other actions (in each case) as may be
reasonably necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement in accordance with
the terms hereof.

 

6.4          Books and Records.

 

From and after the Closing:

 

(a)                                                              Seller will
deliver to Buyer at or within thirty (30) days’ after the Closing, to the extent
permitted by applicable Laws and Contracts, originals, if available (or copies
if originals are not available) of all of the historical books and records
relating to the Assets, other than and excluding the Excluded Records, (subject
to such exclusion, the “Records”), including copies of all data, information,
software, books, files, and records relating to the Assets, including production
records, operating records, correspondence, Tax Returns (other than Tax Returns
relating to income or franchise Taxes) and records, lease records, well logs,
and other records; prospect files; land and title records (including abstracts
of title, title opinions and memoranda, and title curative documents related to
the Assets); contract files; and maps, electric logs, core data, pressure data,
and decline curves.

 

(b)                                                              Seller may
retain copies of any or all of the data room materials and Records.

 

(c)                                                               Should Seller
require the originals of the Records in order to comply with any obligation,
filing, request or requirement by a Governmental Authority, Buyer will promptly
provide the originals of the applicable Records to Seller. Following the need
for the originals, Seller shall promptly return such to Buyer.

 

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6.5                               Use of Seller Marks.

 

Seller’s name and other trademarks, service marks and trade names owned by
Seller or its Affiliates (“Seller Marks”) may appear on some of the Assets,
including signage on the Assets.  Buyer acknowledges and agrees that Buyer
obtains no right, title, interest, license or any other right whatsoever to use
the Seller Marks.  Buyer shall, no later than ninety (90) days after the Closing
Date, remove the Seller Marks from the Assets, including signage, and provide
written verification thereof to Seller promptly after completing such removal. 
Buyer agrees never to challenge Seller’s or its Affiliates’ ownership of the
Seller Marks or any application for registration thereof.  Buyer will not do any
business or offer any goods or services under the Seller Marks.  Buyer will not
send, or cause to be sent, any correspondence or other materials to any Person
on any stationary that contains any Seller Marks or otherwise operate the Assets
in the any manner which would or might reasonably be expected to confuse any
Person into believing that Buyer has any right, title, interest or license to
use the Seller Marks.

 

6.6                               Fees and Expenses.

 

All fees and expenses, including fees and expenses of counsel, financial
advisors and accountants, incurred in connection with this Agreement and the
transactions contemplated herein, will be paid by the Party incurring such fee
or expense.

 

6.7          Tax Matters.

 

(a)                                                              Responsibility
for Filing Tax Returns and Paying Taxes.

 

(i)                                     Seller shall file all Tax Returns for
Production Taxes required to be filed with respect to the Assets for any tax
period that ends on or before the Closing Date.  Buyer shall file all other Tax
Returns for Production Taxes required to be filed with respect to the Properties
for tax periods that end after the Closing Date.

 

(ii)                                  All Production Taxes shall be prorated
between Buyer and Seller as of the Effective Date, for all taxable periods that
include the Effective Date, based on the relative days of ownership of the
Properties during the relevant taxable period.  Each Party shall promptly
furnish to the other copies of any ad valorem tax assessments and tax statements
(or invoices therefore from the operator of the Assets) received by it
pertaining to the respective Asset.  Each Party shall timely pay all ad valorem
taxes for which it has liability under this Section 6.7(a) and shall furnish to
the other Party evidence of such payment.  Buyer shall pay and shall indemnify,
defend and hold harmless Seller and its Affiliates from and against all
Production Taxes attributable to Hydrocarbons produced on or after the Effective
Date.  Seller shall pay and shall indemnify, defend and hold harmless Buyer and
its Affiliates from and against all Production Taxes attributable to
Hydrocarbons produced before the Effective Date.

 

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(iii)                               For purposes of this Agreement, liability
for Production Taxes with respect to the Assets shall be apportioned as follows:
(i) property and similar ad valorem Taxes shall be apportioned on a ratable
daily basis; (ii) Taxes measured by units of production, severance Taxes and
similar Taxes shall be prorated based on the amount of Hydrocarbons actually
produced, purchased or sold, as applicable, before, on and after the Effective
Date.  Buyer and Seller shall each timely provide the other with all information
and cooperation reasonably requested by the other to prepare any tax return
relating to the Properties or the transactions contemplated by this Agreement.

 

(b)                                                              Transfer
Taxes.  All transfer, stamp, documentary, sales, use, registration, value-added
and other similar Taxes (including all applicable real estate transfer Taxes)
incurred in connection with this Agreement and the transactions contemplated
hereby will be borne by Buyer.

 

(c)                                                               Responsibility
for Tax Audits.  Seller shall control any tax audit relating to the Assets for
any period for which the Seller is liable pursuant to Section 6.7(a), and Buyer
shall control any other tax audit relating to the Properties after the Effective
Date; provided, however, that if a tax audit relates to Taxes covering a tax
period for which both Parties could be liable under this Agreement, to the
extent practicable, the Tax items with respect to such tax audit will be
distinguished, and each Party will have the option to control the defense and
settlement of those Taxes for which it could be so liable.  However, if any Tax
item cannot be identified as being a liability of only one Party or cannot be
separated from a Tax item for which the other Party is liable, Buyer, at its
expense, shall have the option to control the defense and settlement of the tax
audit; provided that Buyer shall keep Seller notified of any developments in
such tax audit and Seller shall have the right to participate in such tax audit
at its own expense; and provided further that no such matter shall be settled
without the written consent of Seller, not to be unreasonably withheld, delayed,
or conditioned.  Buyer and Seller shall each timely provide the other with all
information and cooperation reasonably requested to conduct a tax audit with
respect to Taxes relating to the Assets or the transactions contemplated by this
Agreement.  Each Party shall provide the other with notice of any pending or
threatened tax audits that could adversely affect the other.

 

(d)                                                              Tax Refunds. 
The Parties shall be entitled to any refund with respect to Taxes for which the
Party is responsible pursuant to Section 6.7(a).  If a Party receives a refund
to which the other Party is entitled, the Party receiving the refund shall pay
it to the Party entitled to the refund within thirty (30) Business Days after
receipt.

 

(e)                                                               Survival and
Conflict.  The obligations set forth in Section 6.7(a) shall survive Closing
until the expiration of the applicable statute of limitation for such Taxes.

 

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(f)                                                                Treatment of
Certain Payments.  Any payments made to any party pursuant to Section 11 shall
constitute an adjustment of the Base Purchase Price for Tax purposes and shall
be treated as such by Buyer and Seller on their Tax Returns to the extent
permitted by law.

 

6.8                               Insurance.

 

Throughout the Interim Period and in respect of the Assets, Seller will maintain
insurance coverage or self-insure in amounts and on terms Seller reasonably
believes to be appropriate.  Except with respect to the net proceeds related to
any claims associated with an occurrence prior to Closing, all of Seller’s
insurance will cease to cover the Assets effective at Closing.

 

6.9                               Casualty or Condemnation Loss.

 

(a)                                                              If, during the
Interim Period, any portion of the Assets is destroyed by a fire or other
casualty or is taken in condemnation or under right of eminent domain (each a
“Casualty Loss”), Buyer will nevertheless be required to close and Seller will,
at Seller’s sole election, elect to:

 

(i)                                     reduce the Base Purchase Price by an
amount agreed upon in writing by the Parties as being a reasonable estimate of
such Casualty Loss; or

 

(ii)                                  agree with Buyer to cause the Assets
affected by any Casualty Loss to be repaired or restored, at Seller’s sole cost,
as promptly as reasonably practicable (which work may extend after the Closing
Date).

 

(b)                                                              Notwithstanding
anything to the contrary (but subject to the insurance obligations of Seller
under this Agreement):

 

(i)                                     in no event shall there be any
adjustments to the Base Purchase Price or other remedies provided by Seller for
an individual Casualty Loss that does not exceed seven hundred and fifty
thousand dollars ($750,000.00) (the “Casualty Loss Threshold”); and

 

(ii)                                  in no event shall there be any adjustments
to the Base Purchase Price or other remedies provided by Seller for an
individual Casualty Loss unless the sum of each amount in excess of the Casualty
Loss Threshold for each such qualified Casualty Losses, added together,
excluding any Casualty Losses repaired or restored by Seller prior to Closing,
exceeds a deductible in an amount equal to 1% of the Base Purchase Price (the
“Casualty Loss Deductible”), after which point Buyer will be entitled to an
adjustment to the Base Purchase Price or other remedies only to the extent such
sum exceeds the Casualty Loss Deductible.

 

(c)                                                               In the event
that Seller elections to proceed under Section 6.9(a)(i) and the

 

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Parties have failed to agree in good faith by Closing on the reduction to the
Base Purchase Price, then no adjustment to the Base Purchase Price (if
applicable) shall be made therefor at Closing and either Party may submit the
dispute to a Casualty Arbitrator post-Closing.  In such event, the following
shall be applicable:

 

(i)                                     The Casualty Arbitrator will be selected
by agreement of the Parties.  If the Parties are unable to agree on the Casualty
Arbitrator no later than thirty (30) days after the end of the Cure Period, then
the Casualty Arbitrator will be selected by the office of the American
Arbitration Association located in Houston, Texas (such arbitrator as so
selected by the Parties or the American Arbitration Association, the “Casualty
Arbitrator”).

 

(ii)                                  Unless otherwise agreed by the Parties,
the Casualty Arbitrator may not have worked as an employee or outside counsel
for either Party or its Affiliates during the five (5) year period immediately
preceding the end of the Cure Period or have any financial interest in the
dispute.

 

(iii)                               The arbitration proceeding will be held in
Harris County, Texas, and will be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, to the extent that
such rules do not conflict with the terms of this Section 6.9.

 

(iv)                              The Casualty Arbitrator’s determination will
be made no later than fifteen (15) days after the date of submission of the
matters in dispute and will be final and binding on the Parties without right of
appeal.  In making his decision, the Casualty Arbitrator will be bound by the
rules set forth in this Section 6.9 and this Agreement and may consider such
other matters as in the opinion of the Casualty Arbitrator are reasonably
necessary or helpful to make a proper determination.  Additionally, the Casualty
Arbitrator may consult with and engage disinterested third parties to advise the
Casualty Arbitrator, including petroleum engineers.  The Casualty Arbitrator
will act as an expert for the limited purpose of determining the existence of a
value of the Casualty Loss submitted by any Party and may not award damages,
interest or penalties to either Party with respect to any other matter.

 

(v)                                 Each of the Parties will bear its own legal
fees and other costs of presenting its case.  The costs and expenses of the
Casualty Arbitrator will be borne by the Parties in inverse proportion as the
Parties prevail (by dollar amounts) in all matters in dispute.

 

(vi)                              Promptly following the determination by the
Casualty Arbitrator of the disputed value of any Casualty Loss, subject to the
Casualty

 

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Threshold and Casualty Deductible, Seller shall reimburse to Buyer, by wire
transfer of immediately available funds, the amount of such Casualty Loss as
determined by the Casualty Arbitrator.

 

6.10                        Title and Environmental Escrow Account.

 

(a)                                                              Deposit.  The
sum of:

 

(i)                                     all Title Defect Amounts reflected in a
Title Defect Notice that was timely submitted by Buyer hereunder and not finally
determined under Section 8 or cured by Seller (in each case) on or before the
Closing Date (as reduced by any Title Benefit Amounts); and

 

(ii)                                  the value of all Environmental Liabilities
reflected in an Environmental Liability Notice that was timely submitted
hereunder and not finally determined under Section 9 or cured by Seller (in each
case) on or before the Closing Date,

 

(the “Title / Environmental Escrow Deposit”) shall be delivered by Buyer to the
Escrow Agent at Closing in cash by wire transfer of immediately available funds
for deposit into the Escrow Account, to be held and distributed subject to the
terms and conditions of the Escrow Agreement and this Agreement.

 

(b)                                                              Disbursement. 
Within two (2) Business Days of the final determination hereunder (by mutual
agreement of the Parties following Closing or by the Title Arbitrator or
Environmental Arbitrator, as applicable) of any such Title Defect Amounts (and
any Title Benefit Amounts) and Environmental Liabilities (whichever occurs
later), the Parties shall jointly instruct the Escrow Agent:

 

(i)                                     to disburse to Buyer that portion of the
Title / Environmental Escrow Deposit, if any, that the Parties agree, or the
Title Arbitrator or Environmental Arbitrator determines, should be paid to Buyer
less the Aggregate Deductible (unless such Aggregate Deductible has already been
satisfied); and

 

(ii)                                  upon final determination (or agreement by
the Parties) of all such Title Defect Amounts (and any Title Benefit Amounts)
and Environmental Liabilities, to disburse the balance of the Title /
Environmental Escrow Deposit (together with any interest thereon), if any, to
Seller.

 

6.11                        Replacement of Bonds, Letters of Credit, Guarantees
and Security Deposits.

 

The Parties understand that none of the bonds, letters of credit, guarantees and
security deposits, if any, posted by Seller with any Governmental Authority or
third party in relation to the Assets are to be transferred to Buyer.

 

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(a)                                                              On or before
the Closing Date, Buyer shall obtain, or cause to be obtained in the name of
Buyer, replacements for such bonds, letters of credit, guarantees and security
deposits, and shall cause, effective as of the Closing Date, the cancellation or
return to Seller of the bonds, letters of credit, guarantees and security
deposits posted (or supported) by Seller in respect of the Assets.  Buyer shall
thereafter maintain such bonds, letters of credit, guarantees and security
deposits in a manner and amounts as required by Law.

 

(b)                                                              In the case of
Section 6.11(a), Buyer may also provide evidence that such replacements are not
necessary as a result of existing bonds, letters of credit, guarantees or
security deposits that Buyer has previously posted as long as such existing
bonds, letters of credit, guarantees or security deposits are adequate to secure
the release of those posted (or supported) by Seller and are acknowledged in
writing as sufficient by the relevant Government Authority.

 

6.12                        Lease Expiration.

 

(a)                                                              The Parties
acknowledge that certain Leases will expire prior to Closing.  Should Buyer
desire such Leases to be extended in accordance with the terms and conditions of
such Leases, Buyer shall prepay Seller for the cost and expense of such Lease
extensions (the “Extension Costs”), and Seller agrees to extend such Leases
promptly after timely receipt of such prepayment in full by Buyer.

 

(b)                                                              The Parties
agree and acknowledge that the payment of Buyer of any Extension Costs will not
reduce the amount of the Base Purchase Price.

 

(c)                                                              
Notwithstanding the foregoing in this Section 6.12, Buyer agrees that Seller
will have no liability to Buyer in respect of such Lease extensions, and Buyer
hereby irrevocably and unconditionally releases Seller from any and all such
liability; provided however Seller will promptly remit to Buyer any such
prepayment made by Buyer to Seller should Seller fail to pay the lessor.

 

6.13                        AFEs.

 

(a)                                                              In the event
that Buyer consents to Seller’s participation in an operation to drill, fracture
stimulate, complete or rework any well that is proposed by a third party
pursuant to Section 6.1(b)(v), then Buyer will pay Seller the amount due and
owing under the applicable third party invoice under the applicable AFE or joint
interest billing (the “AFE Costs”) within ten (10) days following Buyer’s
receipt of an invoice from Seller therefor (together with all reasonable
supporting documentation), and Seller will promptly pay such funds received to
the applicable operator after such timely prepayment in full by Buyer.

 

(b)                                                              The Parties
agree and acknowledge that the payment of Buyer of any AFE Costs will not reduce
the amount of the Base Purchase Price.

 

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(c)                                                              
Notwithstanding anything to the contrary in this Agreement, in the event that
Closing does not occur and this Agreement is terminated pursuant to
Section 13.1, then (i) with respect to each well for which Buyer has paid any
AFE Costs, Seller shall, within five (5) Business Days of such termination, at
Seller’s option either (A) reimburse to Buyer all AFE Costs advanced by Buyer
with respect to such well, or (B) convey to Buyer pursuant to a form of
assignment in substantially the same form as the Conveyance, all of Seller’s
interest in such well (and Seller shall resign as operator of any such well and
use its commercially reasonable efforts to assist Buyer in becoming successor
operator of such well, if applicable), or (ii) with respect to each well for
which Buyer has consented to operations under Section 6.1(b)(v) but has not paid
any applicable AFE Costs, at Seller’s option (which option shall be exercised by
written notice to Buyer delivered on or before five (5) Business Days after such
termination and the failure to give such notice will be deemed an election by
Seller of the option under subsection (y) below), (x) within five (5) Business
Days of such termination Buyer will reimburse Seller such AFE Costs and,
contemporaneously therewith Seller will convey to Buyer pursuant to a form of
assignment in substantially the same form as the Conveyance, all of Seller’s
interest in such well (and Seller shall resign as operator of any such well and
use its commercially reasonable efforts to assist Buyer in becoming successor
operator of such well, if applicable) or (y) Seller shall retain such well and
Buyer has have no obligation to reimburse Seller for such AFE Costs.

 

(d)                                                              Notwithstanding
the foregoing in this Section 6.13, but subject to Seller’s compliance with
Section 6.13(c), Buyer agrees that Seller will have no liability to Buyer in
respect of such payments in respect of such AFE Costs, and Buyer hereby
irrevocably and unconditionally releases Seller from any and all such liability;
provided, however, Seller will promptly remit to Buyer any such prepayment made
by Buyer to Seller should Seller fail to pay the applicable operator.

 

6.14                        Successor Operator.

 

While Buyer acknowledges that it desires to succeed Seller as operator of those
Assets or portions thereof that Seller presently operates, Buyer acknowledges
and agrees that Seller cannot and does not covenant or warrant that Buyer shall
become successor operator of such Assets since the Assets or portions thereof
may be subject to operating or other agreements that control the appointment of
a successor operator.  Seller agrees, however, that as to the Assets that Seller
operates, Seller shall use commercially reasonable efforts to support Buyer’s
efforts to become successor operator of such Assets (to the extent permitted
under any applicable joint operating agreement) effective as of Closing and to
designate or appoint, to the extent legally possible and permitted under any
applicable joint operating agreement, Buyer as successor operator of such Assets
effective as of Closing.  In addition, Seller agrees not to oppose Buyer as
successor operator of such Assets effective as of Closing.

 

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6.15                        Financial Statements.

 

Seller acknowledges that Buyer and its Affiliates may be required to include
statements of revenues and direct operating expenses and other financial
information relating to the transactions contemplated by this Agreement in
documents filed by Buyer and its Affiliates with the Securities Exchange
Commission (the “SEC”) pursuant to the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended, and that such financial
statements may be required to be audited.  Accordingly, from and after the
Execution Date, Seller shall use commercially reasonable efforts to, at Buyer’s
expense, (a) provide Buyer with such information currently in Seller’s
possession about the Assets as may be reasonably required to be included in the
documents filed by Buyer and its Affiliates with the SEC (the “SEC Documents”),
(b) provide, and shall cause its Affiliates, officers and employees to provide,
reasonable cooperation in connection with the preparation of such SEC Documents,
including (i) providing reasonable access to auditors, auditor work papers,
employees, books and records, and any financial data reasonably requested by
Buyer in connection therewith and (ii) use its commercially reasonable efforts
to cause its independent public accountants to provide any consent necessary for
the filing of such documents and to deliver a customary comfort letter to Buyer
(in each case, at Buyer’s expense) with respect to financial information
relating to the transactions contemplated by this Agreement included as part of
such SEC Documents; provided, however, in no event shall Seller or its
Affiliates be required to make or provide any representations to Buyer regarding
such SEC Documents nor shall Seller’s auditors be required to prepare any
financial statements with respect to the Assets.

 

6.16        Partial Assignment and Release.

 

The Parties shall use commercially reasonable efforts to obtain the Partial
Assignment and Release.

 

7.                                      CONSENTS

 

7.1                               Third Party Approvals.

 

Each Party shall (and shall cause its respective Affiliates to) use commercially
reasonable efforts to obtain all material consents and approvals of third
parties that such Party or its Affiliates are required to obtain in order for
such Party to perform its obligations hereunder and to consummate the
transactions contemplated under this Agreement; provided no Party or its
Affiliates shall be required to make payments or undertake obligations to or for
the benefit of any Person in order to obtain any such consents and approvals.

 

7.2                               Preferential Rights to Purchase.

 

(a)                                                              With respect to
each preferential purchase right, right of first refusal or similar right (each,
a “Preferential Purchase Right”) in respect of the Assets and the transactions
contemplated hereby, Seller, prior to the Closing, shall send to the holder of
each such Preferential Purchase Right a notice, in

 

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compliance with the contractual provisions applicable to such right.

 

(b)                                                              If, prior to
the Closing, any holder of a Preferential Purchase Right notifies Seller that it
intends to consummate the purchase of the Asset to which its Preferential
Purchase Right applies or if the time for exercising such Preferential Purchase
Right has not expired, then such Asset shall be excluded from the Assets to be
acquired by Buyer to the extent of the interest affected by the right, and the
Base Purchase Price shall be deemed to be reduced by the Allocated Value of such
Asset.  Seller shall be entitled to all proceeds paid by a Person exercising a
Preferential Purchase Right prior to the Closing.  If such holder of such
Preferential Purchase Right thereafter fails to consummate the purchase of the
Asset covered by such Preferential Purchase Right on or before one hundred and
twenty (120) days following the Closing Date or the time for exercising such
Preferential Purchase Right expires without exercise by the holders thereof,
then Seller will notify Buyer, and, subject to Buyer’s satisfaction that such
Preferential Purchase Right has been waived or the time for exercising such
right has expired and the satisfaction of the conditions of Closing set forth in
Section 12.1 in connection with the acquisition of such Asset, Buyer shall
purchase, on or before the date that is ten (10) days following receipt of such
notice such Asset from Seller, such Asset under the terms of this Agreement for
the Allocated Value of such Asset (as such Allocated Value is adjusted in
accordance with Section 2.5 through the date of such purchase).

 

7.3                               Consents.

 

(a)                                                              No later than
ten (10) days after:

 

(i)                                     the Execution Date, Seller shall send to
each holder of a Consent, other than those Governmental Authorities holding a
Consent in respect of Indian oil and gas leases and state leases, a notice
seeking such holder’s consent to the transactions contemplated hereby; and

 

(ii)                                  the Closing Date, Seller shall send to
each Governmental Authority holding a Consent in respect of an Indian oil and
gas lease or state lease, a notice seeking such holder’s consent to the
transactions contemplated hereby.

 

(b)                                                              If Seller fails
to obtain a Consent prior to Closing and (i) the failure to obtain such Consent
would render the transfer of the affected Asset void or voidable or could cause
the termination of the Asset, (ii) such Consent has been denied in writing by
the holder thereof, (iii) the holder of such Consent is a Governmental Authority
(and such consent is not customarily obtained after the closing of transactions
similar to this transaction; and the Parties agree and acknowledge that it is
customary to receive consents from applicable Government Authorities in respect
of state leases post-Closing) or (iv) such Consent is applicable to an Indian
oil and gas lease, then such affected Asset

 

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shall not be conveyed to Buyer at Closing but shall be withheld from this
transaction and the Base Purchase Price will be reduced by the Allocated Value
of such Asset.  After Closing Seller shall continue to use its reasonable
efforts to obtain such Consent, provided that Seller shall be under no
obligation to make any payment or incur any material expenses in order to obtain
such Consent.  If Seller is able to obtain such Consent for the Asset, then
Seller shall notify Buyer and provide a copy of such Consent and, within ten
(10) days after Buyer’s receipt of such notice from Seller and subject to the
satisfaction of the conditions of Closing set forth in Section 12.1 in
connection with the acquisition of such Asset, Seller shall execute and deliver
to Buyer a conveyance of the affected Asset in form substantially similar to the
Conveyance and Buyer shall pay to Seller the Allocated Value of such Asset (as
such Allocated Value is adjusted in accordance with Section 2.5 through the date
of such purchase).  If Seller has been unable to obtain any such Consent for any
such withheld Asset within twelve (12) months after the Closing, then neither
Party shall have any further obligation or liability to the other Party in
connection with such withheld Asset.

 

8.                                      TITLE

 

8.1                               Exclusive Rights and Obligations.

 

Except in connection with Buyer’s rights arising hereunder with respect to any
breach of Seller’s covenants set forth in Sections 2.5, 3.5, 6.1(b)(i) and/or
6.10 and except for Buyer’s rights pursuant to Section 13.1(d) and under the
special warranty of title set forth in the Conveyance, this Section 8 sets forth
the Parties’ rights and obligations with respect to all title matters relating
to the Leases and Wells.

 

8.2          Title Review.

 

Subject to the other provisions of this Section 8, Buyer shall have the right
during the period beginning on the date hereof and continuing until 5:00 p.m.,
Central Standard Time, ten (10) business days prior to the Closing Date (the
“Examination Period”) to conduct land and title work on the Leases and Wells,
independently on its own behalf and account (“Title Review”), and may, by
delivery of written notice to Seller on or before the end of the Examination
Period, assert the existence of an alleged Title Defect with respect to any of
the Leases and Wells (such notice, the “Defect Notice”).  No claims for Title
Defects may be submitted after the Examination Period, and any matters that may
otherwise constitute Title Defects, but for which Buyer has not delivered a
Defect Notice to Seller prior to the expiration of the Examination Period, shall
be deemed to have been waived by Buyer for all purposes; provided, however that
the foregoing shall not affect or diminish Buyer’s rights arising hereunder with
respect to any breach of Seller’s covenants set forth in Sections 2.5, 3.5,
6.1(b)(i) and/or 6.10 or Buyer’s rights pursuant to Section 13.1(d) and under
the special warranty of title set forth in the Conveyance.  During the
Examination Period, Seller shall give, and shall cause each of its officers,
employees and agents to give, Buyer and its Representatives reasonable access
during

 

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normal business hours to Seller’s facilities, properties, books and records in
connection with the Title Review, and Buyer shall conduct such Title Review in a
manner that does not unreasonably interfere with the operations of Seller. 
Buyer shall use its commercially reasonable efforts to provide Seller, on or
before the end of each calendar week prior to the expiration of the Examination
Period, written notice of all alleged Title Defects  reported to Buyer by any of
Buyer’s or any of its Affiliates’ employees, title attorneys, landmen or other
title examiners conducting Buyer’s Title Review during the preceding calendar
week, which notice may be preliminary in nature and supplemented prior to the
expiration of the Examination Period, provided that failure to provide
preliminary notice of a Title Defect shall not prejudice Buyer’s right to assert
such Title Defect hereunder.  The fees, costs and expenses incurred by Buyer in
conducting its Title Review or any other due diligence investigation will be
borne by Buyer for its sole account.

 

8.3                               Allocated Value.

 

The Parties have accepted the Allocated Values for purposes of determining any
Title Defect Amounts, but otherwise make no representation or warranty as to the
accuracy of such values.

 

8.4                               Defect Notice.

 

Each Defect Notice asserting a claim for a Title Defect must be in writing and
include the following:

 

(a)                                                              a description
of the alleged Title Defect;

 

(b)                                                              the Wells and
Leases affected by the Title Defect;

 

(c)                                                               the Allocated
Values of the Wells or Leases subject to the alleged Title Defect;

 

(d)                                                              if the Title
Defect involves Deficiency Acres, the number of Deficiency Acres;

 

(e)                                                               if the Title
Defect is a Lien, Buyer’s reasonable best estimate of the cost to remove the
Lien;

 

(f)                                                                supporting
documents, as available to Buyer, reasonably necessary for Seller (as well as
any experienced title attorney or examiner hired by Seller) to verify the
existence of the alleged Title Defect; and

 

(g)                                                               the estimated
Title Defect Amount of the alleged Title Defect and the computations of such
Title Defect Amount.

 

8.5                               Cure by Seller.

 

Seller has the right, but not the obligation, at Seller’s sole cost and expense,
to cure any Title Defect asserted in a Defect Notice, during the period
following the date upon which

 

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Seller receives such Defect Notice until the date which falls sixty (60) days
after the Closing Date (such period, the “Cure Period”) by:

 

(a)                                                              removing or
otherwise curing the matter causing the Title Defect, at Seller’s sole cost and
expense; or

 

(b)                                                              to the extent
of a Title Defect under Section 1.1(gg)(iii), obtaining and assigning to Buyer
such renewal or replacement oil and gas leases as are necessary for Buyer to
receive the Deficiency Acres in the same tract covered by the Lease to which
such Title Defect applies (subject to such renewal or replacement lease having
(i) the same or greater Net Revenue Interest as set forth in Exhibit A therefor,
and (ii) terms and conditions that are not materially more onerous (in Buyer’s
reasonable opinion) than the Lease affected by such Title Defect), in which case
the newly acquired renewal or replacement leases shall be deemed to be part of
the Assets for the purposes hereof.

 

No later than the third Business Day prior to the Closing Date, Seller will
deliver to Buyer a notice indicating Seller’s election to dispute any of the
Title Defects properly asserted by Buyer as set forth in this Section 8.

 

8.6                               Title Defect Amount.

 

If Seller elects not to cure a Title Defect or is unable to cure such Title
Defect within the Cure Period, then, subject to Section 8.9 and Section 10, the
Base Purchase Price shall be adjusted by the Title Defect Amount attributable to
the Title Defect and the amount of such Title Defect (the “Title Defect Amount”)
will be determined as follows:

 

(a)                                                              if the Parties
agree on the Title Defect Amount, the amount so agreed by the Parties will be
the Title Defect Amount;

 

(b)                                                              if the Title
Defect is a Lien, then the Title Defect Amount shall be the amount reasonably
necessary to remove such Lien;

 

(c)                                                               if the Title
Defect represents a discrepancy whereby the Net Revenue Interest for any Well is
less than the Net Revenue Interest stated in Exhibit B, with respect to such
Well, the Title Defect Amount will be the (x) Allocated Value of such Well,
multiplied by (y) a fraction, the numerator of which is the Net Revenue Interest
decrease and the denominator of which is the Net Revenue Interest stated in
Exhibit B in respect of such Well; provided that if the Title Defect does not
affect the Well throughout its entire productive life, such Title Defect Amount
will be reduced to take into account the applicable time period only;

 

(d)                                                              if the Title
Defect represents a discrepancy whereby the Net Revenue Interest for a Lease is
less than the Net Revenue Interest stated in Exhibit A with respect to such
Lease, the Title Defect

 

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Amount will be the (x) Allocated Value of such Lease, multiplied by (y) a
fraction, the numerator of which is the Net Revenue Interest decrease and the
denominator of which is the Net Revenue Interest stated in Exhibit A in respect
of such Lease; provided that if the Title Defect does not affect the Lease
throughout its entire productive life, such Title Defect Amount will be reduced
to take into account the applicable time period only;

 

(e)                                                               if the Title
Defect is that the aggregate Net Mineral Acres covered by a Lease is less than
the Net Mineral Acres shown for such Lease in Exhibit A (the difference being
the “Deficiency Acres”), then the Title Defect Amount will be the product of
(x) the Allocated Value for such Lease, multiplied by (y) a fraction, the
numerator of which is the number of Deficiency Acres for such Lease and the
denominator of which is the Net Mineral Acres shown for such Lease in Exhibit A;
or

 

(f)                                                                if the Title
Defect represents an obligation, encumbrance, burden or charge upon or other
defect in title to the Lease or Well of a type not described in this
Section 8.6, the Title Defect Amount will be determined by taking into account
the Allocated Value of the affected Lease or Well, the portion of the affected
Lease or Well adversely 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 Lease or Well, the values placed upon the Title Defect by each
Party and such other factors as are necessary to make a proper evaluation.

 

8.7                               Title Defect Amount Limit.

 

Notwithstanding anything to the contrary in this Section 8, the Title Defect
Amount:

 

(a)                                                              may not exceed:

 

(i)                                     with respect to each Well, the Allocated
Value of such Well; and

 

(ii)                                  with respect to each Lease, the Allocated
Value for such Lease; and

 

(b)                                                              with respect to
a Title Defect will be determined without duplication of any costs or losses
included in another Title Defect Amount hereunder, or amounts for which Buyer
otherwise receives credit in the calculation of the Base Purchase Price.

 

8.8                               Title Benefit.

 

Seller has the right, but not the obligation, to notify Buyer in the Examination
Period of any Title Benefit discovered by Seller, such notice which must
include:

 

(a)                                                              a description
of the Title Benefit;

 

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(b)                                                              the Lease or
Well affected;

 

(c)                                                               the Allocated
Value of the Lease or Well subject to such Title Benefit;

 

(d)                                                              supporting
documents reasonably necessary for Buyer to verify the existence of the alleged
Title Benefit; and

 

(e)                                                               the amount by
which Seller reasonably believes the Allocated Value of each such Lease or Well
is increased by such Title Benefit, and the computations upon which Seller’s
belief is based.

 

With respect to each Lease or Well affected by a Title Benefit, an amount (the
“Title Benefit Amount”) equal to the increase in the Allocated Value for such
Lease or Well caused by such Title Benefit will be exclusively used to offset
and reduce Title Defect Amounts hereunder.  Seller will be deemed to have waived
all Title Benefits of which it has not given notice to Buyer in the Examination
Period or promptly following Seller’s receipt of the last Defect Notice.

 

8.9                               Individual Title Threshold.

 

Notwithstanding anything to the contrary in this Section 8, Buyer may not and
has no right to assert or recover for, and there will be no adjustment to the
Base Purchase Price or other remedy for, any individual Title Defect where the
applicable Title Defect Amount therefor does not exceed fifty thousand dollars
($50,000.00) (each such amount (as applicable), the “Individual Title
Threshold”).

 

8.10                        No Agreement.

 

If the Parties are unable to agree upon the existence of a Title Defect or Title
Benefit, or are unable to agree upon any Title Defect Amount or Title Benefit
Amount, on or before the end of the Cure Period, then such dispute will be
exclusively and finally resolved as follows:

 

(a)                                                              No later than
five (5) days after the end of the Cure Period, the Parties shall meet and
attempt to mutually agree on a resolution to the dispute.

 

(b)                                                              If the Parties
are unable to resolve the dispute within no later than fifteen (15) days after
the end of the Cure Period, then the dispute will be resolved by a title
attorney with at least ten (10) years’ experience in oil and gas title matters
in the region where the affected Well or Lease is located (such title attorney,
the “Title Arbitrator”).

 

(c)                                                               The Title
Arbitrator will be selected by agreement of the Parties.  If the Parties are
unable to agree on the Title Arbitrator no later than thirty (30) days after the
end of the Cure Period, then the Title Arbitrator will be selected by the office
of the American Arbitration Association located in Houston, Texas.

 

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(d)                                                         Unless otherwise
agreed by the Parties, the Title Arbitrator may not have worked as an employee
or outside counsel for either Party or its Affiliates during the five (5) year
period immediately preceding the end of the Cure Period or have any financial
interest in the dispute.

 

(e)                                                            The arbitration
proceeding will be held in Harris County, Texas, and will be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, to the extent that such rules do not conflict with the terms of
this Section 8.10.

 

(f)                                                             The Title
Arbitrator’s determination will be made no later than fifteen (15) days after
the date of submission of the matters in dispute and will be final and binding
on the Parties without right of appeal.  In making his decision, the Title
Arbitrator will be bound by the rules set forth in this Section 8 and this
Agreement and may consider such other matters as in the opinion of the Title
Arbitrator are reasonably necessary or helpful to make a proper determination. 
Additionally, the Title Arbitrator may consult with and engage disinterested
third parties to advise the Title Arbitrator, including landmen, other title
attorneys and petroleum engineers.  The Title Arbitrator will act as an expert
for the limited purpose of determining the existence of a Title Defect or Title
Benefit and the specific disputed Title Defect Amount and Title Benefit Amount
submitted by any Party and may not award damages, interest or penalties to
either Party with respect to any other matter.

 

(g)                                                            Each of the
Parties will bear its own legal fees and other costs of presenting its case. 
The costs and expenses of the Title Arbitrator will be borne by the Parties in
inverse proportion as the Parties prevail (by dollar amounts) in all matters in
dispute.

 

8.11                        Sole and Exclusive Remedy.

 

Except in connection with Buyer’s rights arising hereunder with respect to any
breach of Seller’s covenants pursuant to Sections 2.5, 3.5, 6.1(b)(i) and/or
6.10 and except for Buyer’s rights pursuant to Section 13.1(d) and under the
special warranty of title set forth in the Conveyance, (a) this Section 8
represents Buyer’s sole and exclusive remedies with respect to title to the
Leases and Wells and (b) any and all rights of Buyer with respect to other
representations, warranties or covenants of title by Seller (other than pursuant
to this Section 8) of any kind or nature, either express, implied or statutory,
with respect to the Assets are hereby waived and disclaimed in their entirety by
Buyer.

 

9.                                      ENVIRONMENTAL MATTERS

 

9.1                               Exclusive Rights and Obligations.

 

Except in connection with Buyer’s rights arising hereunder with respect to any
breach by Seller of Sections 2.5, 3.5, 5.1(i), 6.10 and/or the first sentence in
Section 6.1 and except for Buyer’s rights under Section 11.2(a)(v) and
Section 13.1(d), this

 

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Section 9 sets forth the Parties’ rights and obligations with respect to all
environmental matters relating to the Assets.

 

9.2                               Environmental Assessment.

 

Subject to the other provisions of this Section 9, Buyer will have the right
during the Examination Period to conduct a Phase I Environmental Assessment as
provided in ASTM E1527-05, independently on its own behalf and account
(“Environmental Assessment”), and in connection therewith shall have the right
to enter the Leases that Seller operates and inspect the Assets thereon;
provided, however, that Seller does not warrant and Buyer does not have the
right to enter the Leases that are operated by outside parties and are not
operated by Seller.  Buyer must obtain permission from such outside parties in
order for Buyer to gain access to perform an Environmental Assessment of such
Leases, and Seller will use Seller’s commercially reasonable efforts to assist
Buyer in obtaining such permission.  Seller or its respective designee shall
have the right to accompany Buyer and Buyer’s Representatives whenever they are
onsite on Assets.  Buyer shall perform the Environmental Assessment in a safe
and workmanlike manner and so as to not unreasonably interfere with Seller’s
operations and in compliance with all applicable Laws and customary industry
practices.  Buyer shall provide Seller with no less than forty-eight (48) hours
prior notice of any inspection as part of the Environmental Assessment, and
Seller has the right, but not the obligation, to witness all such inspections. 
Prior to Closing, Buyer shall keep the results of the Environmental Assessment
confidential in accordance with the terms of the Confidentiality Agreement and
shall not use such results for any purpose other than for the purpose of
exercising Buyer’s right under this Agreement; provided Buyer shall not disclose
the results of the Environmental Assessment in respect of any Assets not
actually acquired by Buyer.

 

9.3                               NORM and Hazardous Materials.

 

Without modifying any obligations or remedies under this Agreement, Buyer
acknowledges that the Assets have been used for exploration, development, and
production of Hydrocarbons and that there may be Hydrocarbons, produced water,
wastes, Hazardous Materials or other materials located on or under the Assets or
associated with the Assets.  Equipment and sites included in the Assets, and the
materials and equipment located on the Assets or included in the Assets may
contain wastes, Hazardous Materials and/or NORM.  NORM may affix or attach
itself to the inside of Wells, materials and equipment as scale or in other
forms.  Hazardous Materials, NORM containing material, and/or wastes may have
come in contact with soil or other environmental media.  Special procedures may
be required for the remediation, removal, transportation, disposal or other
management or handling of soil, water, wastes, Hazardous Materials, and NORM
from the Assets.  Notwithstanding anything contained in this Agreement to the
contrary, the existence of NORM associated with the Assets shall not be an
Environmental Liability, unless action is required to address a violation of
Environmental Law.

 

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9.4                               Environmental Liability Notice.

 

Buyer may, by delivery of written notice to Seller on or before the end of the
Examination Period, assert the existence of an alleged Environmental Liability
(such notice, the “Environmental Liability Notice”) reasonably disclosed by the
Environmental Assessment, if any, that Buyer reasonably believes in good faith
may constitute an Environmental Liability.  Except in connection with
(a) Buyer’s rights on account of any breach by Seller of its representations and
warranties set forth in Section 5.1(i), (b) Buyer’s rights arising hereunder
with respect to any breach by Seller of Sections 2.5, 3.5, 6.10 and/or the first
sentence in Section 6.1 and (c) Buyer’s rights under Section 11.2(a)(v) and
Section 13.1(d), (a) no claims for Environmental Liability may be submitted
after the Examination Period and (b) any matters that may otherwise constitute
Environmental Liabilities, but for which Buyer has not delivered an
Environmental Liability Notice to Seller prior to the expiration of the
Examination Period, shall be deemed to have been waived by Buyer for all
purposes.  Buyer shall use its commercially reasonable efforts to provide
Seller, on or before the end of each calendar week prior to the expiration of
the Examination Period, written notice of all alleged Environmental Liabilities 
reported to Buyer by any of Buyer’s or any of its Affiliates’ employees or
environmental consultants conducting Buyer’s Environmental Assessment during the
preceding calendar week, which notice may be preliminary in nature and
supplemented prior to the expiration of the Examination Period, provided that
failure to provide preliminary notice of an Environmental Liability shall not
prejudice Buyer’s right to assert such Environmental Liability hereunder.  The
fees, costs and expenses incurred by Buyer in conducting its Environmental
Assessment or any other due diligence investigation will be borne by Buyer for
its sole account.  Additionally, where Seller has a permit application that was
timely filed and complete and accurate in all material respects pending before
the applicable Governmental Authority, failure of Seller to not have such permit
will not be an Environmental Liability, provided that such permit when issued
provides permit coverage relating back to the date such permit was required.

 

9.5                               Environmental Liability Notice - Details.

 

Each Environmental Liability Notice asserting a claim for an Environmental
Liability must be in writing and include the following:

 

(a)                                                         a description of the
alleged Environmental Liability;

 

(b)                                                         the Assets affected
by the Environmental Liability;

 

(c)                                                          supporting
documents reasonably necessary for Seller to verify the existence of the alleged
Environmental Liability; and

 

(d)                                                           the estimated
amount of the Lowest Cost Response for the alleged Environmental Liability (the
“Environmental Liability Amount”) and the computations upon which Buyer’s belief
is based.

 

9.6                               Cure by Seller.

 

Seller has the right, but not the obligation, at Seller’s sole cost and expense,
to cure any Environmental Liability asserted in an Environmental Liability
Notice, during the Cure

 

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Period.  If, by the end of the Cure Period, an Environmental Liability which was
the subject of an Environmental Liability Notice has not been so cured, then the
Base Purchase Price shall be reduced by an amount agreed upon in writing between
the Parties as being a reasonable estimate of the Lowest Cost Response
applicable to such Environmental Liability; provided the validity or Lowest Cost
Response of such Environmental Liability shall be resolved pursuant to
Section 9.8 in the event the Parties do not agree on the validity of such
Environmental Liability or the Parties cannot reach agreement on the Lowest Cost
Response.

 

9.7                               Individual Environmental Threshold.

 

Notwithstanding anything to the contrary in this Section 9, Buyer may not and
has no right to assert or recover for, and there will be no adjustment to the
Base Purchase Price or other remedy for, any individual Environmental Liability
unless and until the applicable Environmental Liability Amount exceeds fifty
thousand dollars ($50,000.00) (the “Individual Environmental Threshold”).

 

9.8                               No Agreement.

 

If the Parties are unable to agree upon the validity of an alleged Environmental
Liability or the Parties cannot reach agreement on the Environmental Liability
Amount on or before the end of the Cure Period, then such dispute will be
exclusively and finally resolved as follows:

 

(a)                                                          No later than five
(5) days after the end of the Cure Period, the Parties shall meet and attempt to
mutually agree on a resolution to the dispute.

 

(b)                                                           If the Parties are
unable to resolve the dispute within no later than fifteen (15) days after the
end of the Cure Period, then the dispute will be resolved by an environmental
attorney with at least ten (10) years’ experience in oil and gas environmental
matters in the region where the affected Asset is located (such title attorney,
the “Environmental Arbitrator”).

 

(c)                                                           The Environmental
Arbitrator will be selected by agreement of the Parties.  If the Parties are
unable to agree on the Environmental Arbitrator no later than thirty (30) days
after the end of the Cure Period, then the Environmental Arbitrator will be
selected by the office of the American Arbitration Association located in
Houston, Texas.

 

(d)                                                          Unless otherwise
agreed by the Parties, the Environmental Arbitrator may not have worked as an
employee or outside counsel for either Party or its Affiliates during the five
(5) year period immediately preceding the end of the Cure Period or have any
financial interest in the dispute.

 

(e)                                                           The arbitration
proceeding will be held in Harris County, Texas, and will be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, to the extent that such rules do not conflict with the terms of
this Section 9.8.

 

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(f)                                                            No later than ten
(10) days after the appointment of the Environmental Arbitrator, each of Buyer
and Seller shall submit to the Environmental Arbitrator its proposed resolution
of the disputed environmental matter which proposed resolution shall include the
best offer of the submitting Party in a single monetary amount that such Party
is willing to pay or accept (as applicable) to settle the disputed environmental
matter.  The Environmental Arbitrator’s determination will be made no later than
fifteen (15) days after the date of submission of the matters in dispute and
will be final and binding on the Parties without right of appeal.  In making his
decision, the Environmental Arbitrator will be bound by the rules set forth in
this Section 9 and this Agreement and may consider such other matters as in the
opinion of the Environmental Arbitrator are reasonably necessary or helpful to
make a proper determination.  Additionally, the Environmental Arbitrator may
consult with and engage disinterested third parties to advise the Environmental
Arbitrator.  The Environmental Arbitrator will act as an expert for the limited
purpose of determining validity of an alleged Environmental Liability or the
Environmental Liability Amount and may not award damages, interest or penalties
to either Party with respect to any other matter.

 

(g)                                                           Each of the
Parties will bear its own legal fees and other costs of presenting its case. 
The costs and expenses of the Environmental Arbitrator will be borne by the
Parties in inverse proportion as the Parties prevail (by dollar amounts) in all
matters in dispute.

 

9.9                               Sole and Exclusive Remedy.

 

Except in connection with Buyer’s rights arising hereunder with respect to any
breach by Seller of Sections 2.5, 3.5, 5.1(i), 6.10 and/or the first sentence in
Section 6.1 and except for Buyer’s rights under Section 11.2(a)(v) and
Section 13.1(d), the only representation, warranty and covenants being made by
Seller with respect to Seller’s Environmental Liability in respect of the Assets
are set forth in this Section 9 and represent Buyer’s sole and exclusive
remedies with respect to title to such Environmental Liability.  Except in
connection with Buyer’s rights arising hereunder with respect to any breach by
Seller of Sections 2.5, 3.5, 5.1(i), 6.10 and/or the first sentence in
Section 6.1 and except for Buyer’s rights under Section 11.2(a)(v) and
Section 13.1(d), any and all other environmental or similar representations,
warranties or covenants by Seller, of any kind or nature, either express,
implied or statutory, with respect to the Assets are hereby waived and
disclaimed in their entirety by Buyer.

 

10.                               AGGREGATE DEDUCTIBLE

 

Notwithstanding anything to the contrary in Section 8 or Section 9, Buyer may
not and has no right to assert or recover for, and there will be no adjustment
to the Base Purchase Price or other remedy for, any Title Defect that exceeds
the Individual Title Threshold or any Environmental Liability that exceeds the
Individual Environmental Threshold unless and until the aggregate sum of all
Title Defect Amounts and all Environmental Liability

 

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Amounts exceeds two percent (2%) of the Base Purchase Price (the “Aggregate
Deductible”), after which point Buyer will be entitled to adjustments to the
Base Purchase Price as set forth in Section 8 and in Section 9 for any amounts
which have been finally determined in excess of the Aggregate Deductible only.

 

11.                               ASSUMPTION; INDEMNIFICATION; WAIVERS

 

11.1                        Assumption.

 

Without limiting Buyer’s rights to indemnity under this Section 11, from and
after the Closing, Buyer:

 

(a)                                                          assumes and hereby
agrees to fulfill, perform, pay, and discharge (or cause to be fulfilled,
performed, paid, and discharged) all obligations and liabilities, known or
unknown, with respect to the Assets, regardless of whether such obligations or
liabilities arose prior to, on, or after the Effective Date, including
obligations and liabilities relating in any manner to the Material Contracts or
the condition, use, ownership, or operation of the Assets; and

 

(b)                                                          without limiting
the generality of Section 11.1(a), shall be solely liable and responsible for
the proper plugging and abandoning of all wells now located on or hereafter
drilled on the Property, and any surface restoration or environmental clean-up
or Environmental Liability associated therewith,

 

all of said obligations and liabilities, subject to the exclusions below, herein
being referred to as the “Assumed Obligations”); provided that Buyer does not
assume (and the term “Assumed Obligations” shall not include) any obligations or
liabilities of Seller to the extent that they are attributable or relate to any
Excluded Asset or any Taxes specifically allocated to Seller in
Section 6.7(a)(ii).

 

11.2                        Indemnification.

 

(a)                                                          Seller’s
Indemnity.  From and after Closing, Seller shall indemnify, defend, and hold
harmless Buyer, its Affiliates and each of their respective officers, members,
managers, partners, directors, employees and representatives (the “Buyer
Indemnified Parties”) against any and all liabilities, damages, losses, costs,
and expenses (including reasonable attorneys’ and consultants’ fees and
expenses) (“Losses”), incurred or suffered by any of the Buyer Indemnified
Parties as a result of, relating to or arising out of any of the following:

 

(i)                                    any breach of any representation or
warranty made by Seller herein; and

 

(ii)                                 breach of any covenant or agreement made or
to be performed by Seller under this Agreement;

 

(iii)                              mispayment or nonpayment of amounts to
co-working interest owners

 

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and/or owners of royalties and other burdens on production with respect to the
Assets and the periods of time prior to the Effective Date, which liabilities
exceed $500,000 in the aggregate; but expressly excluding any such mispayment or
nonpayment in respect of the litigation described in Schedule 3 and for which
Buyer is indemnified under Section 11.2(a)(viii);

 

(iv)                             the payment, underpayment or nonpayment of
Taxes for which Seller is responsible hereunder and any Taxes imposed on or with
respect to any Excluded Asset or any other assets excluded from the transactions
contemplated hereby pursuant to the terms of this Agreement;

 

(v)                                offsite waste disposal relating to Assets
operated by Seller occurring prior to the Effective Date;

 

(vi)                             Third Party Claims in respect of personal
injury or death claims relating to (A) violations of OSHA by Seller in
connection with the ownership or operation of the Assets prior to Closing and/or
(B) incidents reportable under OSHA arising in connection with the ownership or
operation of the Assets prior to Closing;

 

(vii)                          Third Party Claims relating Seller’s gross
negligence or willful misconduct in connection with its operation of the Assets
prior to Closing; and

 

(viii)                       the litigation described in Schedule 3, limited to
any claims thereunder to the extent relating to events or claims attributable to
periods prior to the Effective Date.

 

(b)                                                              Buyer
Indemnity.  From and after Closing, Buyer shall indemnify, defend, and hold
harmless Seller, its Affiliates and each of their respective officers, members,
managers, partners, directors, employees, and representatives (the “Seller
Indemnified Parties”) against any and all Losses incurred or suffered by any of
the Seller Indemnified Parties as a result of, relating to or arising out of any
of the following:

 

(i)                                    any breach of any representation or
warranty made by Buyer herein;

 

(ii)                                 the breach of any covenant or agreement
made or to be performed by Buyer under this Agreement;

 

(iii)                              the Assumed Obligations; and

 

(iv)                             obligations under the Oneok Agreement to the
extent (and then only to the extent) pertaining to the Assets (and not to any
other asset or property now owned or hereinafter acquired by Buyer).

 

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11.3                       Express Negligence Rule.

 

The indemnification and waiver provisions in this Section 11 shall be
enforceable regardless of whether any Person (including the Person from whom
indemnification is sought) alleges or proves the sole, concurrent, contributory,
or comparative negligence of the Person seeking indemnification or the sole or
concurrent strict liability imposed upon the Person seeking indemnification,
except in the case of gross negligence or willful misconduct by such Person.

 

11.4                        Limitations on Liability.

 

(a)                                                              Limitation.  If
a Buyer Indemnified Party is entitled to indemnity under Section 11.2(a), any
such claim shall be satisfied solely and exclusively against the Indemnity Cap;
provided (i) that such limitation shall not apply to Losses resulting from any
Excepted Matter, and (ii) that such limitation shall not apply to Losses
resulting from any breach of any covenant, agreement or indemnity of Seller set
forth in any of Sections 6.1, 6.9, 6.10, 7.2, 7.3, 8.6, 8.10, 9.6, 9.8,
11.2(a)(iii), 11.2(a)(v), 11.2(a)(vi) or 11.2(a)(vii) (each a “Secondary Cap
Matter”).  If a Buyer Indemnified Party is entitled to indemnity under
Section 11.2(a) with respect to any Secondary Cap Matter, any such claim shall
be satisfied solely and exclusively against the Secondary Indemnity Cap. 
Therefore (A) except with respect to the Excepted Matters and the Secondary Cap
Matters, (1) the maximum aggregate liability of Seller under
Section 11.2(a) shall not exceed the Indemnity Cap, and (2) the Buyer
Indemnified Parties shall have no further right to such indemnity under
Section 11.2(a) at such time as funds paid by Seller for such indemnity exceeds
the Indemnity Cap, and (B) the maximum aggregate liability of Seller under
Section 11.2(a) for the Secondary Matters shall not exceed the Secondary
Indemnity Cap and the Buyer Indemnified Parties shall have no further right to
indemnity under Section 11.2(a) for such Secondary Indemnity Matters at such
time as funds paid by Seller for such indemnity exceed the Secondary Indemnity
Cap.

 

(b)                                                              Survival of
Buyer Representations, Warranties, Covenants and Agreements.  The
representations, warranties, covenants and agreements of Buyer under this
Agreement will survive Closing without limitation or such shorter period if
expressly set forth in this Agreement.

 

(c)                                                               Survival of
Seller Representations, Warranties, Covenants and Agreements.  The
representations, warranties, covenants and agreements of Seller under this
Agreement will survive Closing as follows:

 

(i)                                    Seller’s covenants and agreements in
Sections 6.1 will survive for a period of three (3) months after Closing;

 

(ii)                                 Seller’s covenants and agreements in
Section 7.3 will survive for a period of nine (9) months after Closing;

 

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(iii)                              Seller’s covenants and agreements in
Section 6.15 shall survive for a period of twenty-four (24) months after
Closing;

 

(iv)                             Seller’s covenants and agreements in Sections
6.9, 6.10, 8.6, 8.10, 9.6 and 9.8 shall survive in accordance with their terms
until fully satisfied;

 

(v)                                Seller’s indemnities and covenants in
Sections 11.2(a)(iii), 11.2(a)(v), and 11.2(a)(vi) will survive for a period of
twelve (12) months after Closing;

 

(vi)                             Seller’s representations, warranties,
covenants, agreements and indemnities in respect of the Sections 6.4, 6.12(c),
6.13(c), 6.13(d), 14 and the Excepted Matters shall survive Closing without
limitation; and

 

(vii)                          except as set forth in Section 11.4(c)(i) through
11.4(c)(vi), all other covenants and agreements of Seller, and Seller’s
representations and warranties under this Agreement, will survive for a period
of six (6) months after Closing.

 

(d)                                                              Reductions. 
The amount of any Losses subject to indemnification under this Section 11 shall
be reduced or reimbursed, as the case may be, by any third party insurance
proceeds and third party recoveries actually received by the Indemnified Party
with respect to such Losses (provided that no Party shall have no obligation to
seek any such proceeds or recoveries).  If an Indemnified Party receives an
amount under insurance coverage or from such third party with respect to Losses
that were the subject of indemnification provided by the other Party under this
Section 11 at any time subsequent to indemnification provided thereunder, then
such Indemnified Party promptly reimburse such other Party.

 

(e)                                                               Mitigation.
Each Indemnified Party shall make commercially reasonable efforts to mitigate or
minimize Losses under this Agreement upon and after becoming aware of any event
or condition that would reasonably be expected to give rise to any Losses that
are indemnifiable under this Section 11; provided that such Indemnified Party
shall not be required to incur material expense or risk to mitigate or minimize
any such Losses.  If an Indemnified Party fails to so mitigate an indemnifiable
loss under the preceding sentence, the Indemnifying Party shall have no
liability for any portion of such loss that reasonably could have been avoided
had the Indemnified Party made such efforts.

 

11.5                        Procedures.

 

Claims for indemnification under this Agreement shall be asserted and resolved
as follows.

 

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(a)                                                              Third Party
Claim.  If any Person entitled to seek indemnification under Section 11.2 (an
“Indemnified Party”) receives notice of the assertion or commencement of any
claim asserted against an Indemnified Party by a third party (“Third Party
Claim”) in respect of any matter that is subject to indemnification under
Section 11.2, the Indemnified Party shall promptly:

 

(i)                                     notify the Party obligated to the
Indemnified Party pursuant to Section 11.2 (the “Indemnifying Party”) of the
Third Party Claim; and

 

(ii)                                  transmit to the Indemnifying Party a
Notice (a “Claim Notice”) describing in reasonable detail the nature of the
Third Party Claim, a copy of all papers served with respect to such claim (if
any), the Indemnified Party’s best estimate of the amount of Losses attributable
to the Third Party Claim and the basis of the Indemnified Party’s request for
indemnification under this Agreement.  Failure to timely provide such Claim
Notice shall not affect the right of the Indemnified Party’s indemnification
hereunder, except to the extent (and then only to the extent) the Indemnifying
Party is prejudiced by such delay or omission.

 

(b)                                                              Indemnifying
Party.  Except with respect to Tax Audits described in Section 6.7(c), the
Indemnifying Party shall have the right to defend the Indemnified Party against
such Third Party Claim if the Indemnifying Party notifies the Indemnified Party
within thirty (30) days from its receipt of a Claim Notice.  If the Indemnifying
Party timely notifies the Indemnified Party that the Indemnifying Party elects
to assume the defense of the Third Party Claim (such election to be without
prejudice to the right of the Indemnifying Party to dispute whether such claim
is an identifiable Loss under this Section 11), then the Indemnifying Party
shall have the right to defend such Third Party Claim in good faith with counsel
selected by the Indemnifying Party (who shall be reasonably satisfactory to the
Indemnified Party), by all appropriate proceedings, to a final conclusion or
settlement at the discretion of the Indemnifying Party in accordance with this
Section 11.5(b).  The Indemnifying Party shall have full control of such defense
and proceedings, including any compromise or settlement thereof; provided that
the Indemnifying Party shall not enter into any settlement agreement or consent
to the entry of any judgment with respect thereto without the written consent of
the Indemnified Party (which consent shall not be unreasonably withheld,
conditioned, or delayed) that (i) does not result in a final resolution of the
Indemnified Parties’ liability to the third party with respect to the claim
(including, in the case of a settlement, an unconditional written release of the
Indemnified Party from all further liability in respect of such claim) or
(ii) may materially and adversely affect the Indemnified Party (other than as a
result of money damages covered by the indemnity). If requested by the
Indemnifying Party, the Indemnified Party agrees, at the sole cost and expense
of the Indemnifying Party, to cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim which the Indemnifying

 

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Party elects to contest pursuant to this Section 11.5(b), including the making
of any related counterclaim against the Person asserting the Third Party Claim
or any cross complaint against any Person.  The Indemnified Party may
participate in, but not control, any defense or settlement of any Third Party
Claim controlled by the Indemnifying Party pursuant to this Section 11.5(b), and
the Indemnified Party shall bear its own costs and expenses with respect to such
participation.

 

(c)                                                               Indemnified
Party.  Except with respect to Tax Audits described in Section 6.7(c), if the
Indemnifying Party does not notify the Indemnified Party that the Indemnifying
Party elects to defend the Indemnified Party pursuant to Section 11.5(b), then
the Indemnified Party shall have the right to defend, and be reimbursed for its
reasonable cost and expense (but only if the Indemnified Party is actually
entitled to indemnification hereunder) in regard to the Third Party Claim with
counsel selected by the Indemnified Party (who shall be reasonably satisfactory
to the Indemnifying Party), by all appropriate proceedings, which proceedings
shall be prosecuted diligently by the Indemnified Party.  In such circumstances,
the Indemnified Party shall defend any such Third Party Claim in good faith and
have full control of such defense and proceedings; provided, however, that the
Indemnified Party may not enter into any compromise or settlement of such Third
Party Claim if indemnification is to be sought hereunder, without the
Indemnifying Party’s consent (which consent shall not be unreasonably withheld,
conditioned or delayed).  The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party pursuant
to this Section 11.5(c), and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation.

 

(d)                                                              Direct Claim. 
Any claim by an Indemnified Party on account of Losses that does not result from
a Third Party Claim (a “Direct Claim”) will be asserted by giving the
Indemnifying Party reasonably prompt Notice thereof, but in any event not later
than thirty (30) days after the Indemnified Party becomes aware of the events
that gave rise to such Direct Claim.  Such Notice by the Indemnified Party will
describe the Direct Claim in reasonable detail, will include copies of all
available material written evidence thereof and will indicate the estimated
amount, if reasonably practicable, of damages that have been or may be sustained
by the Indemnified Party.  The Indemnifying Party will have a period of ten
(10) Business Days within which to respond in writing to such Direct Claim.  If
the Indemnifying Party does not so respond within such ten (10) Business Day
period, the Indemnifying Party will be deemed to have rejected such Direct
Claim, in which event the Indemnified Party will be free to pursue such remedies
as may be available to the Indemnified Party on the terms and subject to the
provisions of this Agreement.

 

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11.6                        Waiver of Consequential Damages.

 

With respect to any and all Losses for which indemnification may be available
hereunder, no Indemnifying Parties shall have any liability for any
consequential, indirect, punitive, exemplary, and special damages with respect
to any claim for which an Indemnifying Party may have liability pursuant to this
Agreement; provided, however, that this waiver shall not apply to the extent
such consequential, indirect, punitive, exemplary, or special damages are
awarded in a proceeding brought or asserted by a third party against an
Indemnified Party.

 

11.7                        Waivers and Disclaimers.

 

(a)                                                              Title Matters. 
The only representations, warranties, or covenants being made by Seller with
respect to Seller’s title to the Assets are in the applicable Conveyance and
Section 8 and all other representations, warranties, or covenants of title of
any kind or nature, either express, implied, or statutory, are hereby waived and
disclaimed in their entirety; provided, however, nothing in this Section 11.7
shall operate to waive Buyer’s rights arising hereunder with respect to any
breach of Seller’s covenants set forth in Sections 2.5, 3.5, 6.1(b)(i) and/or
6.10  or Buyer’s rights under Section 13.1(d) and under the special warranty of
title set forth in the Conveyance.

 

(b)                                                              No Reliance. 
As of Closing, Buyer has reviewed and had access to all contracts, documents,
records, and information that Buyer has desired to review in connection with its
decision to consummate the transactions contemplated under this Agreement,
except to the extent Seller has prevented or denied Buyer access to conduct the
due diligence contemplated under Section 6.2, Section 8 (in respect of title
matters) and/or Section 9 (in respect of environmental matters). Buyer has not
relied upon any representation, warranty, statement, advice, document,
projection, or other information of any type provided by Seller or its
Affiliates or any of their Representatives, except for the representations and
warranties of Seller set forth in this Agreement.  In deciding to enter into
this Agreement, and to consummate the transactions contemplated hereby, Buyer
has relied and will rely solely upon its own knowledge, investigation, and
analysis (and that of its Representatives) and not on any disclosure or
representation made by, or any duty to disclose on the part of, Seller or its
Affiliates or any of their Representatives, other than the representations and
warranties of Seller set forth in this Agreement.

 

(c)                                                               Limited
Duties.  Any and all duties and obligations which either Party may have to the
other Party with respect to or in connection with the Assets, this Agreement, or
the transactions contemplated hereby are limited to those in this Agreement. 
The Parties do not intend that:

 

(i)                                     the duties or obligations of either
Party, or the rights of either Party, will be expanded beyond the terms of this
Agreement on the basis of any legal or equitable principle or on any other basis
whatsoever; or

 

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(ii)                                  any equitable or legal principle or any
implied obligation of good faith or fair dealing or any other matter requires
either Party to incur, suffer, or perform any act, condition, or obligation
contrary to the terms of this Agreement and that it would be unfair, and that
they do not intend, to increase any of the obligations of any Party under this
Agreement on the basis of any implied obligation or otherwise.

 

(d)                                                              Defects. 
Except for representations and warranties of Seller expressly set forth herein
and the special warranty of title set forth in the Conveyance, the Assets are
being conveyed and assigned to and accepted by Buyer in their “as is, where is”
condition and state of repair, and with all faults and defects, without any
representation, warranty, or covenant of any kind or nature, express, implied,
or statutory, including warranties of marketability, quality, condition,
conformity to samples, merchantability, or fitness for a particular purpose, all
of which are expressly disclaimed by Seller and waived by Buyer.  Buyer
recognizes that the Assets have been used for oil and gas drilling, production,
gathering, pipeline, transportation, storage, and related operations.  Physical
changes in the Assets and in the lands included therein may have occurred as a
result of such uses.  The Assets also may include buried pipelines and other
equipment, the locations of which may not be known by Seller or readily apparent
by a physical inspection of the Assets.  It is understood and agreed that,
subject to Seller’s compliance with its covenants in Section 6.2 and
Section 9.2, Buyer shall have inspected prior to Closing (or shall be deemed to
have waived its right to inspect) the leases, equipment, pipelines, and the
associated premises included in the Assets and satisfied itself as to their
physical and environmental condition, both surface and subsurface, and that,
subject to the representations and warranties of Seller set forth in this
Agreement, Buyer shall accept all of the same in their “as is, where is”
condition and state of repair, and with all faults and defects, including the
presence of NORM and man-made material fibers.

 

(e)                                                               Additional
Disclaimers.  Seller makes no representation, covenant, or warranty, express,
implied, or statutory:

 

(i)                                     as to the accuracy or completeness of
any data or records delivered to Buyer with respect to the Assets; or

 

(ii)                                  concerning the quality or quantity of
Hydrocarbon reserves, if any, attributable to the Assets, or the ability of the
Assets to produce Hydrocarbons, or the product prices which Seller is or will be
entitled to receive from the sale of any such Hydrocarbons.

 

11.8                        Exclusive Remedy and Release.

 

Absent fraud, except as set forth in Sections 2.8, 3.5, 6.10, 8.6, 8.10, 9.6,
and 9.8 and except for Buyer’s rights with respect to the special warranty of
title contained in the Conveyance, the indemnification and remedies set forth in
this Section 11 shall

 

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constitute the sole and exclusive post-Closing remedies of the Parties with
respect to any breach of representation or warranty or non-performance of any
covenant or agreement contained in this Agreement.  Absent fraud, except for the
remedies of the Parties under this Section 11 and Buyer’s rights with respect to
the special warranty of title contained in the Conveyance and except with
respect to the rights of the Parties under Sections 2.8, 3.5, 6.10, 8.6, 8.10,
9.6, and 9.8, if the Closing occurs, each Party hereby waives, releases,
acquits, and forever discharges the other Party, its partners, their Affiliates,
and its and their officers, directors, members, managers, partners, employees,
or agents, or any other Person acting on behalf of such other Party, of and from
any and all claims, actions, causes of action, demands, rights, damages, costs,
expenses, Losses, or compensation whatsoever, whether direct or indirect, known
or unknown, foreseen or unforeseen, which Buyer or Seller, as applicable, may
have or which may arise in the future directly or indirectly arising out of the
condition, use, ownership or operation of the Assets or the transactions
contemplated hereby, including any of the foregoing that is from or relating to
the possession, use, handling, management, disposal, investigation, remediation,
cleanup, or release of any Hazardous Material or any Environmental Law
applicable thereto.

 

12.                               CONDITIONS PRECEDENT TO CLOSING

 

12.1                        Buyer’s Conditions Precedent.

 

The obligation of Buyer to consummate the transactions contemplated by this
Agreement is subject to the fulfillment, on or prior to the Closing Date, of
each of the following conditions (any or all of which may be waived by Buyer in
whole or in part to the extent permitted by applicable Law):

 

(a)                                                              Representations
and Warranties.  The representations and warranties of Seller qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects as of the Execution Date and as of the
Closing Date as though made at and as of the Closing Date, except to the extent
such representations and warranties expressly relate to an earlier date (in
which case such representations and warranties qualified as to materiality shall
be true and correct, and those not so qualified shall be true and correct in all
material respects, on and as of such earlier date).

 

(b)                                                              Performance of
Covenants and Agreements by Seller.  Seller shall have performed and complied in
all material respects with all other obligations and agreements required in this
Agreement to be performed or complied with by them, in each case, on or prior to
the Closing Date.

 

(c)                                                               Material
Adverse Effect.  There shall not have been any Material Adverse Effect since the
Execution Date that has not been cured (at Seller’s sole cost and expense,
unless otherwise set forth in this Agreement) prior to the Closing Date.

 

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(d)                                                              No Injunctions
or Restraints.  No Legal Proceedings (exclusive of Legal Proceedings initiated
by Buyer or any of its Affiliates) have been instituted or threatened or claim
or demand made against Seller or Buyer, seeking to restrain or prohibit, or to
obtain substantial damages with respect to, the consummation of the transactions
contemplated hereby, and there is not in effect any Order by a Governmental
Authority of competent jurisdiction restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated hereby.

 

(e)                                                               Approvals. 
Seller shall have obtained or made any consent, approval, Order or authorization
of, or registration, declaration or filing with, any Governmental Authority
required to be obtained or made in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.

 

(f)                                                                Deliveries. 
Seller shall have delivered (or be ready, willing and able to deliver at
Closing) to Buyer the documents and other items required to be delivered by
Seller under Section 3.4.

 

(g)                                                               Oneok
Agreement.  Oneok shall have executed the Partial Assignment and Release.

 

12.2                        Seller’s Conditions Precedent.

 

The obligations of Seller to consummate the transactions contemplated by this
Agreement are subject to the fulfillment, prior to or on the Closing Date, of
each of the following conditions (any or all of which may be waived by Seller in
whole or in part to the extent permitted by applicable Law):

 

(a)                                                              Representations
and Warranties.  The representations and warranties of Buyer set forth in this
Agreement qualified as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material respects, in each case,
as of the Execution Date and as of the Closing Date as though made at and as of
the Closing Date, except to the extent such representations and warranties
expressly relate to an earlier date (in which case such representations and
warranties qualified as to materiality shall be true and correct, and those not
so qualified shall be true and correct in all material respects, on and as of
such earlier date).

 

(b)                                                              Performance of
Covenants and Agreements by Buyer.  Buyer shall have performed and complied in
all material respects with all obligations and agreements required by this
Agreement to be performed or complied with by Buyer on or prior to the Closing
Date.

 

(c)                                                               No Injunctions
or Restraints.  No Legal Proceedings (exclusive of Legal Proceedings initiated
by Seller or any of their Affiliates) have been instituted or threatened or
claim or demand made against Seller or Buyer seeking to restrain or prohibit, or
to obtain substantial damages with respect to, the

 

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consummation of the transactions contemplated hereby, and there is not in effect
any Order by a Governmental Authority of competent jurisdiction restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated hereby.

 

(d)                                                              Approvals. 
Buyer shall have obtained or made any consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Authority
required to be obtained or made by it in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby.

 

(e)                                                               Deliveries. 
Buyer shall have delivered (or be ready, willing and able to deliver at Closing)
to Seller the documents and other items required to be delivered by Buyer under
Sections 3.3 and 6.11.

 

13.                               TERMINATION

 

13.1                        Termination Rights.

 

This Agreement may be terminated at any time prior to the Closing:

 

(a)                                                              by mutual
written consent of Buyer and Seller;

 

(b)                                                              by either
Seller or Buyer if:

 

(i)                                     Closing has not occurred by September 1,
2014; provided, however, that the right to terminate this Agreement pursuant to
this Section 13.1(b)(i) shall not be available to any Party whose breach of any
representation or warranty or failure to perform any covenant or agreement under
this Agreement has been the cause of or resulted in the failure of Closing to
occur on or before such date; or

 

(ii)                                  any Governmental Authority has issued an
order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting Closing and such order, decree, ruling or
other action shall have become final and nonappealable;

 

(c)                                                               by Buyer if
Seller has failed to materially comply with its respective covenants and
agreements contained in this Agreement, or by Seller if Buyer has failed to
materially comply with its respective covenants and agreements contained in this
Agreement, and, in each case, such failure has not been, or cannot be, cured
within ten (10) days after notice and demand for cure thereof; provided,
however, that a Party may not terminate this Agreement pursuant to this
Section 13.1(c) if such Party is then in breach of any of its representations,
warranties or covenants contained in this Agreement, which breach or breaches or
failure or failures to perform would, individually or in the aggregate, give
rise to the failure of a condition described in Section 12.1 or 12.2, as
applicable;

 

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(d)                                                              by either
Seller or Buyer, upon written notice to the other, if the sum of (i) all Title
Defect Amounts (asserted by Buyer in good faith), plus (ii) the Environmental
Liability Amount (asserted by Buyer in good faith), plus (iii) the sum of all
Casualty Losses (determined by Seller in good faith), (iv) plus the sum of all
adjustments pursuant to Section 7.3(b) (except for Consents customarily received
post-Closing from Governmental Authorities, including those Consents to be
requested pursuant to Section 7.3(a)(ii)) exceeds twenty-five percent (25%) of
the Base Purchase Price.

 

13.2                        Effect of Termination.

 

If this Agreement is terminated by either Seller or Buyer pursuant to the
provisions of Section 13.1, this Agreement shall forthwith become void except
for, and there shall be no further obligation on the part of any Party or its
respective Affiliates, directors, managers, officers, members or stockholders,
except pursuant to the provisions of, Section 2.3, Section 6.6, 11.6, this
Section 13, Section 14 (other than 14.12), and the Confidentiality Agreement
(which shall continue pursuant to its terms); provided, however, that, subject
to Section 13.3, a termination of this Agreement will not relieve any Party from
any liability for damages incurred as a result of a breach by such Party of its
covenants, agreements or other obligations hereunder occurring prior to such
termination.  If this Agreement is terminated, Buyer will continue to be bound
by the Confidentiality Agreement.

 

13.3                        Distribution of Deposit upon Termination.

 

(a)                                                              If Seller
terminates this Agreement:

 

(i)                                     pursuant to Section 13.1(c); or

 

(ii)                                  pursuant to Section 13.1(b)(i) as the
result of a material default or material breach by Buyer of Buyer’s obligations
hereunder, then Seller shall be entitled to the Performance Deposit as
liquidated damages, free of any claims by Buyer or any other Person with respect
thereto (and the Parties shall deliver to the Escrow Agent joint written
instructions to deliver the Performance Deposit to Seller).  The Performance
Deposit shall be Seller’s sole and exclusive remedy and as full and complete
satisfaction of any losses that may be suffered by Seller as a result of such
termination and Seller shall be deemed to have waived any and all other rights
and remedies available to Seller in respect of such termination (including
liability for breach of this Agreement before such termination).  It is
expressly stipulated by the Parties that the actual amount of damages resulting
from such a termination would be difficult if not impossible to determine
accurately because of the unique nature of this Agreement, the unique nature of
the Assets, the uncertainties of applicable commodity markets and differences of
opinion with respect to such matters, and that the liquidated

 

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damages provided for herein are a reasonable estimate by the Parties of such
damages under the circumstances and does not constitute a penalty.

 

(b)                                                              If this
Agreement is terminated for any reason other than the reasons set forth in
Section 13.3(a), then the Parties shall promptly deliver joint written
instructions to the Escrow Agent to deliver the Performance Deposit to Buyer.

 

13.4                        Extension Costs.

 

If this Agreement is terminated for any reason, then Seller may retain any
Extension Costs prepaid by Buyer and any rights or interest thereto, as
liquidated damages, free of any claims by Buyer or any other Person with respect
thereto.  The Extension Costs prepaid by Buyer and any rights or interest
thereto shall be Seller’s sole and exclusive remedy and as full and complete
satisfaction of any losses that may be suffered by Seller as a result of such
termination in respect of the Lease extensions, and Seller shall be deemed to
have waived any and all other rights and remedies available to Seller in respect
of such termination (including liability for breach of this Agreement before
such termination).  It is expressly stipulated by the Parties that the actual
amount of damages resulting from such a termination would be difficult if not
impossible to determine accurately because of the unique nature of this
Agreement, the unique nature of the Assets, the uncertainties of applicable
commodity markets and differences of opinion with respect to such matters, and
that the liquidated damages provided for herein are a reasonable estimate by the
Parties of such damages under the circumstances and does not constitute a
penalty.

 

14.                               MISCELLANEOUS

 

14.1                        Notices.

 

All notices and other communications between the Parties pursuant to this
Agreement (“Notices”) must be in writing and properly addressed as set forth
below, and will be deemed to have been duly given when (i) received if during
normal business hours (or if delivered or transmitted after normal business
hours on a Business Day or on a day other than a Business Day, then on the next
Business Day), in delivered in person or by United States mail, with all postage
and other charges fully prepaid, having been sent registered or certified mail
return receipt requested or Federal Express overnight delivery (or other
reputable overnight delivery service), or (iii) delivered by facsimile or e-mail
and promptly confirmed by delivery in person or post as aforesaid in each case
if received during the recipient’s normal business hours (or if delivered or
transmitted after normal business hours on a Business Day or on a day other than
a Business Day, then on the next Business Day):

 

(a)                                                              If to Seller,
to:

 

Marathon Oil Company

5555 San Felipe

 

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Houston, Texas 77056

Fax: (713) 513-4486

E-mail: benwalker@marathonoil.com

Attention: Ben Walker

 

(b)                                                              If to Buyer,
to:

 

Triangle USA Petroleum Corporation

1200 17th Street, Suite 2600

Denver, CO 80202

Fax:  (303) 260-5080

E-mail:  MRoss@trianglepetroleum.com

Attention:  Mike Ross

 

or to such other address or addresses as the Parties may from time to time
designate in writing.

 

14.2                        Assignment.

 

Neither Party shall assign this Agreement or any part hereof without the prior
written consent of the other Party.  Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the Parties and their
respective permitted successors and assigns.

 

14.3                        Rights of Third Parties.

 

Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement, expressed or implied, is intended to confer on any Person other
than the Parties or their successors and permitted assigns or the Parties’
respective related Indemnified Parties hereunder, any rights, remedies,
obligations or Liabilities under or by reason of this Agreement; provided that
only a Party and its successors and assigns will have the right to enforce the
provisions of this Agreement on its own behalf or on behalf of any of its
related Indemnified Parties (but shall not be obligated to do so).

 

14.4                        Counterparts.

 

This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.  Any facsimile or email copies hereof or signature hereon
shall, for all purposes, be deemed originals.  No Party shall be bound until
such time as all of the Parties have executed and delivered counterparts of this
Agreement.

 

14.5                        Entire Agreement.

 

This Agreement (together with the schedules and exhibits to this Agreement), the
Transaction Documents and the Confidentiality Agreement constitute the entire
agreement among the Parties and supersede any other agreements, whether written
or

 

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oral, which may have been made or entered into by or among any of the Parties or
any of their respective Affiliates relating to the transactions contemplated
hereby.

 

14.6                        Disclosure Schedule.

 

Unless the context otherwise requires, all capitalized terms used in the
schedules hereto shall have the respective meanings assigned in this Agreement. 
No reference to or disclosure of any item or other matter in the schedules
hereto shall be construed as an admission or indication that such item or other
matter is material or that such item or other matter is required to be referred
to or disclosed in the schedules.  No disclosure in the schedules relating to
any possible breach or violation of any agreement or Law shall be construed as
an admission or indication that any such breach or violation exists or has
actually occurred. The inclusion of any information in the schedules shall not
be deemed to be an admission or acknowledgment by Seller, in and of itself, that
such information is material to or outside the ordinary course of the business
of Seller or required to be disclosed on the schedules.  To the extent
reasonably inferable from the reference that it would qualify another
representation or warranty, each disclosure in the Schedules will be deemed to
qualify such representation or warranty of Seller notwithstanding the lack of a
specific cross reference.

 

14.7                        Amendments.

 

This Agreement may be amended or modified in whole or in part, and terms and
conditions may be waived, only by a duly authorized agreement in writing which
makes reference to this Agreement executed by each Party.

 

14.8                        Publicity.

 

Buyer or Seller may make any press release or other public communication or
announcement in connection with the execution and Closing of transactions under
this Agreement; provided that the Person making such release, communication, or
announcement provides the other Party reasonable opportunity to review and
comment on any such release, communication, or announcement.  Except for the
foregoing, all press releases or other public communications of any nature
whatsoever relating to the transactions contemplated by this Agreement, and the
method of the release for publication thereof, shall be subject to the prior
written consent of Buyer and Seller, which consent shall not be unreasonably
withheld, conditioned, or delayed by such Party; provided, however, that nothing
herein shall prevent a Party from publishing such press releases or other public
communications as is necessary to satisfy such Party’s obligations at Law or
under the rules of any stock or commodities exchange after consultation with the
other Party.  In the event that a Party believes it is required to issue or make
any press release or announcement, such Party shall (i) give prompt notice
thereof to the other Party, (ii) allow such other Party reasonable opportunity
to review and provide comments with respect to the content of such press release
or announcement, and (iii) use commercially reasonable efforts to incorporate
any reasonable comment from any other Party prior to any release or
announcement.

 

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14.9                        Severability.

 

If any provision of this Agreement is held invalid or unenforceable by any court
of competent jurisdiction, the other provisions of this Agreement shall remain
in full force and effect.  The Parties further agree that if any provision
contained herein is, to any extent, held invalid or unenforceable in any respect
under the Laws governing this Agreement, they shall take any actions necessary
to render the remaining provisions of this Agreement valid and enforceable to
the fullest extent permitted by Law and, to the extent necessary, shall
negotiate in good faith to amend or otherwise modify this Agreement in an
acceptable manner to replace any provision contained herein that is held invalid
or unenforceable with a valid and enforceable provision giving effect to the
intent of the Parties to the greatest extent legally permissible.

 

14.10                 Governing Law; Jurisdiction.

 

(a)                                                              Law.  This
Agreement shall be governed and construed in accordance with the Laws of the
State of Texas, without regard to the Laws that might be applicable under
conflicts of laws principles.

 

(b)                                                              Forum.  The
Parties agree, apart from arbitration as set forth herein, that the appropriate,
exclusive, and convenient forum for any disputes between any of the Parties
arising out of this Agreement or the transactions contemplated hereby shall be
in any state or federal court in Harris County, Texas, and each of the Parties
irrevocably submits to the jurisdiction of such courts solely in respect of any
legal proceeding arising out of or related to this Agreement.  The Parties
further agree that the Parties shall not bring suit with respect to any disputes
arising out of this Agreement or the transactions contemplated hereby in any
court or jurisdiction other than the above specified courts.  The Parties
further agree, to the extent permitted by Law, that a final and nonappealable
judgment against a Party in any action or proceeding contemplated above shall be
conclusive and may be enforced in any other jurisdiction within or outside the
United States by suit on the judgment, a certified or exemplified copy of which
shall be conclusive evidence of the fact and amount of such judgment.  Except to
the extent that a different determination or finding is mandated due to the
applicable law being that of a different jurisdiction, the Parties agree that
all judicial determinations or findings by a state or federal court in Harris
County, Texas with respect to any matter under this Agreement shall be binding.

 

(c)                                                               Jurisdiction. 
To the extent that any Party has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, each such Party hereby
irrevocably (i) waives such immunity in respect of its obligations with respect
to this Agreement, and (ii) submits to the personal jurisdiction of any court
described in Section 14.10(b).

 

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(d)                                                              Waiver.  The
Parties agree that they hereby irrevocably waive the right to trial by jury in
any action to enforce or interpret the provisions of this Agreement.

 

14.11                 Waivers.

 

Any failure by either Party to comply with any of its obligations, agreements or
conditions herein contained may be waived by the Party to whom such compliance
is owed by an instrument signed by such Party and expressly identified as a
waiver, but not in any other manner.  No waiver of, or consent to a change in,
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of, or consent to a change in, other provisions hereof (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.

 

14.12                 Recording.

 

As soon as practicable after the Closing, Buyer shall record the Conveyances and
other assignments, if any, delivered at Closing in the appropriate counties as
well as with any appropriate governmental agencies and provide Seller with
copies of all recorded or approved instruments.

 

14.13                 Conspicuous.

 

The Parties agree that, to the extent required by applicable Law to be effective
or enforceable, the provisions of this Agreement in bold-type font are
“conspicuous” for the purpose of any applicable Law.

 

14.14                 Time of Essence.

 

This Agreement contains a number of dates and times by which performance or the
exercise of rights is due, and the Parties intend that each and every such date
and time be the firm and final date and time, as agreed.  For this reason, each
Party hereby waives and relinquishes any right it might otherwise have to
challenge its failure to meet any performance or rights election date applicable
to it on the basis that its late action constitutes substantial performance, to
require the other Party to show prejudice, or on any equitable grounds.  Without
limiting the foregoing, time is of the essence in this Agreement.  If the date
specified in this Agreement for giving any notice or taking any action is not a
Business Day (or if the period during which any notice is required to be given
or any action taken expires on a date which is not a Business Day), then the
date for giving such notice or taking such action (and the expiration date of
such period during which notice is required to be given or action taken) shall
be the next day which is a Business Day.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, Buyer and Seller have duly executed this Agreement as of the
Execution Date.

 

SELLER:

 

BUYER:

 

 

 

MARATHON OIL COMPANY

 

TRIANGLE USA PETROLEUM  

 

 

CORPORATION

 

 

 

 

 

 

By:

/s/ Patrick J. Wagner

 

By:

/s/ Jonathan Samuels

Name:

Patrick J. Wagner

 

Name:

Jonathan Samuels

Title:

Vice President Corporate Development

 

Title:

President

 

Signature Page to Purchase and Sale Agreement

 

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