Exhibit 10.1

Execution Version

 

 

 

Purchase and Sale Agreement

Dated August 28, 2019,

By And Between

Riviera Upstream, LLC and Riviera Operating, LLC

as Seller,

And

Scout Energy Group V, LP

as Buyer

 

 

 

 

 

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TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS

1

ARTICLE 2 SALE AND TRANSFER OF ASSETS; CLOSING

19

 

2.01

Assets.19

 

 

2.02

Purchase Price; Deposit.19

 

 

2.03

Closing; Preliminary Settlement Statement.20

 

 

2.04

Closing Obligations.20

 

 

2.05

Allocations and Adjustments.21

 

 

2.06

Assumption.25

 

 

2.07

Allocation of Purchase Price.26

 

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER

26

 

3.01

Organization and Good Standing.26

 

 

3.02

Authority; No Conflict.26

 

 

3.03

Bankruptcy.27

 

 

3.04

Taxes.28

 

 

3.05

Legal Proceedings.28

 

 

3.06

Brokers.29

 

 

3.07

Compliance with Legal Requirements.29

 

 

3.08

Prepayments.29

 

 

3.09

Imbalances.29

 

 

3.10

Material Contracts.29

 

 

3.11

Consents and Preferential Purchase Rights.30

 

 

3.12

Permits30

 

 

3.13

Current Commitments.30

 

 

3.14

Plant Personal Property Condition30

 

 

3.15

Environmental Laws.30

 

 

3.16

Wells.30

 

 

3.17

Employee Benefits31

 

 

3.18

Knowledge Qualifier for Non-Operated Assets.31

 

 

3.19

Disclosures with Multiple Applicability; Materiality.31

 

 

3.20

Mayzure Organizational Documents31

 

 

3.21

Equity Interests31

 

 

3.22

No Undisclosed Liabilities32

 

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER

32

 

4.01

Organization and Good Standing.32

 

 

4.02

Authority; No Conflict.32

 

 

4.03

Certain Proceedings.33

 

 

4.04

Knowledgeable Investor.33

 

 

4.05

Qualification.33

 

 

4.06

Brokers.33

 

 

4.07

Financial Ability.34

 

 

4.08

Securities Laws.34

 

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4.09

Due Diligence.34

 

 

4.10

Basis of Buyer’s Decision.34

 

 

4.11

Business Use, Bargaining Position.35

 

 

4.12

Bankruptcy.35

 

ARTICLE 5 COVENANTS OF SELLER

35

 

5.01

Access and Investigation.35

 

 

5.02

Operation of the Assets.36

 

 

5.03

Insurance.37

 

 

5.04

Consent and Waivers.37

 

 

5.05

Amendment to Schedules.37

 

 

5.06

Successor Operator.37

 

ARTICLE 6 OTHER COVENANTS

38

 

6.01

Notification and Cure.38

 

 

6.02

Satisfaction of Conditions.38

 

 

6.03

Replacement of Insurance, Bonds, Letters of Credit, and Guaranties.38

 

 

6.04

Governmental Reviews.39

 

 

6.05

HSR Act.39

 

ARTICLE 7 CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE

40

 

7.01

Accuracy of Representations.40

 

 

7.02

Seller’s Performance.40

 

 

7.03

No Proceedings.40

 

 

7.04

No Orders.40

 

 

7.05

Necessary Consents and Approvals.40

 

 

7.06

HSR Act.40

 

 

7.07

Closing Deliverables.41

 

 

7.08

Title Defect Values, Environmental Defect Values, etc41

 

 

7.09

Gathering Consents.41

 

ARTICLE 8 CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE

41

 

8.01

Accuracy of Representations.41

 

 

8.02

Buyer’s Performance.41

 

 

8.03

No Proceedings.41

 

 

8.04

No Orders.41

 

 

8.05

Necessary Consents and Approvals.42

 

 

8.06

HSR Act.42

 

 

8.07

Closing Deliverables.42

 

 

8.08

Title Defect Values, Environmental Defect Values, etc42

 

 

8.09

Qualifications.42

 

 

8.10

Gathering Consents.42

 

ARTICLE 9 TERMINATION

42

 

9.01

Termination Events.42

 

 

9.02

Effect of Termination; Distribution of the Deposit Amount.43

 

 

9.03

Return of Records Upon Termination.45

 

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ARTICLE 10 INDEMNIFICATION; REMEDIES

45

 

10.01

Survival.45

 

 

10.02

Indemnification and Payment of Damages by Seller.45

 

 

10.03

Indemnification and Payment of Damages by Buyer.46

 

 

10.04

Indemnity Net of Insurance.47

 

 

10.05

Limitations on Liability.47

 

 

10.06

Procedure for Indemnification‑‑Third Party Claims.47

 

 

10.07

Procedure for Indemnification – Other Claims.48

 

 

10.08

Indemnification of Group Members.48

 

 

10.09

Extent of Representations and Warranties.49

 

 

10.10

Compliance With Express Negligence Test.50

 

 

10.11

Limitations of Liability.50

 

 

10.12

No Duplication.50

 

 

10.13

Disclaimer of Application of Anti-Indemnity Statutes.50

 

 

10.14

Waiver of Right to Rescission.50

 

ARTICLE 11 TITLE MATTERS AND ENVIRONMENTAL MATTERS; PREFERENTIAL PURCHASE
RIGHTS; CONSENTS

51

 

11.01

Title Examination and Access.51

 

 

11.02

Preferential Purchase Rights.51

 

 

11.03

Consents.51

 

 

11.04

Title Defects.52

 

 

11.05

Title Defect Value.53

 

 

11.06

Seller’s Cure or Contest of Title Defects.53

 

 

11.07

Limitations on Adjustments for Title Defects.54

 

 

11.08

Title Benefits.55

 

 

11.09

Buyer’s Environmental Assessment.56

 

 

11.10

Environmental Defect Notice.56

 

 

11.11

Seller’s Exclusion, Cure or Contest of Environmental Defects.56

 

 

11.12

Limitations.57

 

 

11.13

Exclusive Remedies.58

 

 

11.14

Casualty Loss and Condemnation58

 

 

11.15

Expert Proceedings.58

 

ARTICLE 12 EMPLOYMENT MATTERS

60

 

12.01

Seller Benefit Plans60

 

 

12.02

Pre-Employee Start Date Claims under Seller Benefit Plans and Accrued Vacation
Balances60

 

 

12.03

Available Employees’ Offers and Post-Employee Start Date Employment and
Benefits60

 

 

12.04

Post-Employee Start Date Employment Claims62

 

 

12.05

Buyer Welfare Plans62

 

 

12.06

WARN Act62

 

 

12.07

No Third Party Beneficiary Rights62

 

ARTICLE 13 GENERAL PROVISIONS.

63

 

13.01

Records.63

 

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13.02

Expenses.63

 

 

13.03

Notices.65

 

 

13.04

Governing Law; Jurisdiction; Service of Process; Jury Waiver.66

 

 

13.05

Further Assurances.67

 

 

13.06

Waiver.67

 

 

13.07

Entire Agreement and Modification.67

 

 

13.08

Assignments, Successors, and No Third Party Rights.68

 

 

13.09

Severability.68

 

 

13.10

Article and Section Headings, Construction.68

 

 

13.11

Counterparts.69

 

 

13.12

Press Release.69

 

 

13.13

Confidentiality.69

 

 

13.14

Name Change.69

 

 

13.15

Preparation of Agreement.70

 

 

13.16

Appendices, Exhibits and Schedules.70

 

 

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EXHIBITS AND SCHEDULES

Exhibit A

Leases

Exhibit A-1

Fee Minerals

Exhibit A-2

Processing Plants

Exhibit A-3

Gathering System

Exhibit A-4

Easements and Surface Interests

Exhibit A-5

Real Property

Exhibit B

Wells

Exhibit C

Personal Property

Exhibit D

Vehicles

Exhibit E

Excluded Assets

Exhibit F

Form of Assignment and Bill of Sale

Exhibit G

Form of Certificates

Exhibit H

Form of Deed

Exhibit I

Available Employee Limits

Exhibit J

Form of Equity Interest Assignment

 

Schedule 2.07

Allocation of Purchase Price

Schedule 3.02(b)

No Conflict

Schedule 3.04

Taxes

Schedule 3.05

Assumed Litigation and Retained Litigation

Schedule 3.07

Compliance with Legal Requirements

Schedule 3.09

Imbalances

Schedule 3.10

Material Contracts

Schedule 3.11

Consents and Preferential Purchase Rights

Schedule 3.12

Permits

Schedule 3.13

Current Commitments

Schedule 3.15

Environmental Laws

Schedule 3.17(a)

Seller Benefit Plans

Schedule 3.22

No Undisclosed Liabilities

Schedule 5.02

Certain Authorized Pre-Closing Actions

 

 

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PURCHASE AND SALE AGREEMENT

This PURCHASE AND SALE AGREEMENT (this “Agreement”) is made as of August 28,
2019 (the “Execution Date”), by and between Riviera Upstream, LLC, a Delaware
limited liability company (“RUL”), and Riviera Operating, LLC, a Delaware
limited liability company (“ROL”, and together with RUL, “Seller”), and Scout
Energy Group V LP, a Texas limited partnership, (“Buyer”).  Seller and Buyer are
sometimes hereinafter referred to individually as a “Party” and collectively as
the “Parties.”

RECITAL

Seller desires to sell, and Buyer desires to purchase, (a) all of Seller’s
collective right, title and interest in and to certain oil and gas properties in
the Hugoton Basin and related assets and contracts and (b) one hundred percent
(100%) of the issued and outstanding shares of equity interests of Mayzure, LLC,
a Delaware limited liability company (“Mayzure”), effective as of the Effective
Time, for the consideration and on the terms set forth in this Agreement.

AGREEMENT

For and in consideration of the promises contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties, intending to be legally bound, agree as follows:

artcile 1

DEFINITIONS

For purposes of this Agreement, in addition to other capitalized terms defined
in this Agreement, the following terms have the meanings specified or referred
to in this Article 1 when capitalized:

“AAA” – the American Arbitration Association.

“Accounting Expert” – as defined in Section 2.05(d).

“AFE” – as defined in Section 3.13.

“Affiliate” – with respect to a Party, any Person directly or indirectly
controlled by, controlling, or under common control with, such Party, including
any subsidiary of such Party and any “affiliate” of such Party within the
meaning of Reg. §240.12b-2 of the Securities Exchange Act of 1934, as
amended.  As used in this definition, “control” means possession, directly or
indirectly, of the power to direct or cause the direction of management,
policies, or action through ownership of voting securities, contract, voting
trust, or membership in management or in the group appointing or electing
management or otherwise through formal or informal arrangements or business
relationships.  The terms “controlled by,” “controlling,” and other derivatives
shall be construed accordingly.

“Aggregate Defect Deductible” – an amount equal to three percent (3%) of the
unadjusted Purchase Price.

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“Aggregate Environmental Defect Value” – as defined in Section 11.12.

“Aggregate Title Defect Value” – as defined in Section 11.07.

“Allocated Values” – the values assigned among the Assets as set forth on
Schedule 2.07.

“Applicable Contracts” –  all Contracts to which Seller is a party or is bound
that primarily relate to any of the Assets and (in each case) that will be
binding on Buyer after the Closing, including:  communitization agreements; net
profits agreements; production payment agreements; area of mutual interest
agreements; joint venture agreements; confidentiality agreements; farmin and
farmout agreements; bottom hole agreements; crude oil, condensate, and natural
gas purchase and sale, gathering, transportation, and marketing agreements;
hydrocarbon storage agreements; acreage contribution agreements; operating
agreements; balancing agreements; pooling declarations or agreements;
unitization agreements; processing agreements; saltwater disposal agreements;
facilities or equipment leases; and other similar contracts and agreements, but
exclusive of any master service agreements and Contracts relating to the
Excluded Assets.

“Asset Taxes” – ad valorem, property, excise, severance, production, sales, real
estate, use, personal property and similar Taxes (including any interest, fine,
penalty or additions to tax imposed by Governmental Bodies in connection with
such taxes) based upon the operation or ownership of the Assets and the assets
of Mayzure, the production of Hydrocarbons or the receipt of proceeds therefrom,
but excluding, for the avoidance of doubt, Income Taxes and Transfer Taxes.

“Assets” – all of Seller’s right, title, and interest in, to, and under the
following, without duplication, except to the extent constituting Excluded
Assets:

(a)all of the oil and gas leases and subleases described in Exhibit A or located
within the Designated Area, together with any and all other right, title and
interest of Seller in and to the leasehold estates created thereby subject to
the terms, conditions, covenants and obligations set forth in such leases or
Exhibit A (such interest in such leases, the “Leases”), all related rights and
interests in the lands covered by the Leases and any lands pooled or unitized
therewith (such lands, the “Lands”), and all Royalties applicable to the Leases
and the Lands;

(b)any and all oil, gas, water, observation, injection, CO2 and disposal wells
located on any of the Lands or located within the Designated Area, whether
producing, shut-in, or temporarily abandoned, (such interest in such wells,
including the wells set forth in Exhibit B, the “Wells”), and all Hydrocarbons
produced therefrom or allocated thereto from and after the Effective Time;

(c)all fee mineral interests related to or located on the Lands or located
within the Designated Area, including those described on Exhibit A-1, (such
interests the “Fee Minerals”);

(d)all rights and interests in, under or derived from all unitization and
pooling agreements, declarations and orders in effect with respect to any of the
Leases or Wells and the units created thereby, (the “Units” and together with
the Leases, the Lands, the Wells, and the Fee Minerals, the “Properties” or
individually, a “Property”);

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(e)all rights and interest in the Jayhawk plant, as described on Exhibit A-2
(the “Jayhawk Plant”) and the Satanta gas plant, as described on Exhibit A-2
(the “Satanta Plant” and, together with the Jayhawk Plant, the “Processing
Plants”);

(f)all pipelines and gathering systems used solely in connection with the
Properties or located within the Designated Area, including the “Gathering
System” as described on Exhibit A-3;

(g)to the extent that they may be assigned, transferred or re-issued by Seller
(with consent, if applicable, but without the payment of any fee unless Buyer
agrees in writing to pay such fee), all permits, licenses, allowances, water
rights, registrations, consents, orders, approvals, variances, authorizations,
servitudes, easements, rights-of-way, surface leases, other surface interests
and surface rights to the extent appurtenant to or used primarily in connection
with the ownership, operation, production, gathering, treatment, processing,
storing, sale or disposal of Hydrocarbons or produced water from the Properties,
the Gathering System, or any of the Assets, including those described on Exhibit
A-4;

(h)all equipment, machinery, fixtures and other personal, movable and mixed
property located on any of the Properties, the Gathering System, the Processing
Plants, or other Assets that is used primarily in connection therewith,
including those items listed on Exhibit C, and including well equipment, casing,
tubing, pumps, motors, machinery, platforms, rods, tanks, boilers, fixtures,
compression equipment, flowlines, pipelines, gathering systems associated with
the Wells, manifolds, processing and separation facilities, pads, structures,
materials, and other items primarily used in the operation thereof
(collectively, the “Personal Property”);

(i)the real property described on Exhibit A-5 and any Personal Property located
thereon;

(j)all vehicles described on Exhibit D, subject to Seller’s right to remove any
of the vehicles from Exhibit D assigned to any Available Employees who are not
made an offer of employment by Buyer in accordance with Section 12.03(c);

(k)all disposal wells and evaporation pits that are located on the Lands or in
the Designated Area;

(l)to the extent assignable (with consent, if applicable, but without the
payment of any fee unless Buyer agrees in writing to pay such fee), all
Applicable Contracts and all rights thereunder insofar as and only to the extent
relating to the Assets;

(m)all Imbalances relating to the Assets;

(n)the Suspense Funds;

(o)the Specified Receivables;

(p)originals (if available, and otherwise copies) and copies in digital form (if
available) of all of the books, files, records, information and data, whether
written or electronically stored, primarily relating to the Assets in Seller’s
possession, including: (i) land and title records

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(including prospect files, maps, lease records, abstracts of title, title
opinions and title curative documents); (ii) Applicable Contract files; (iii)
correspondence; (iv) operations, environmental, production, and accounting
records; (v) facility and well records; (vi) plant maintenance, compliance, and
process safety management records; and (vii) to the extent assignable (with
consent, if applicable, but without the payment of any fee unless Buyer agrees
in writing to pay such fee), geological and seismic data (excluding interpretive
data) (collectively, “Records”);

(q)all Hydrocarbons in storage or existing in stock tanks, pipelines or plants
(including inventory); and

(r)all radio equipment, SCADA and measurement technology, and other production
related mobility devices (such as SCADA controllers), well communication
devices, field office information technology and equipment (including desktop
computers, laptop computers, servers, networking equipment, local area network
equipment and telephone equipment, but excluding in each case, licensed
software, proprietary Seller information or connections that may be located on
such devices or equipment) and any other information technology systems and
licenses associated with the foregoing, in each case only to the extent such
assets and licenses are (i) used or held for use solely in connection with the
operation of the Properties, (ii) assignable (with consent, if applicable, but
without the payment of any fee unless Buyer agrees in writing to pay such fee;
provided Seller shall use commercially reasonable efforts to cause the transfer
of all such rights and interests to Buyer), and (iii) located on the Properties
(the “Production-Related IT Equipment”).

To the extent that any of the foregoing are used or relate to both the Assets
and certain of the Excluded Assets, such as, by way of example but not
limitation, ingress and egress rights and road and pipeline easements, such
assets or rights shall be jointly-owned by Seller, as part of the Excluded
Assets, and by Buyer, as part of the Assets.

“Assignment” – the Assignment and Bill of Sale from Seller to Buyer
substantially in the form attached to this Agreement as Exhibit F.

“Assumed Liabilities” – as defined in Section 2.06.

“Assumed Litigation” – the litigation set forth in Schedule 3.05 Part A.

“Available Employees”– certain employees of Seller or its Affiliates identified
in the Available Employee List to whom Buyer may, but shall not be obligated to,
make an offer of employment; provided, however that Seller may not identify
employees in the Available Employee List beyond the job titles indicated on
Exhibit I or who do not primarily perform services in for the Seller in
connection with the Assets without approval of the Buyer.

“Available Employee List”– as defined in Section 12.03(b).

“Breach” – a “Breach” of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any certificate delivered pursuant to
Section 2.04(a)(iv) or Section 2.04(b)(iii) of this Agreement shall be deemed to
have occurred if there is or has been any inaccuracy in or breach of, or any
failure to perform or comply with, such representation, warranty, covenant,
obligation, or other provision.

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“Business Day” – any day other than a Saturday, Sunday, or any other day on
which commercial banks in the State of Texas are authorized or required by law
or executive order to close.

“Buyer” – as defined in the preamble to this Agreement.

“Buyer’s Closing Documents” – as defined in Section 4.02(a).

“Buyer Group” – Buyer and its Affiliates, and their respective
Representatives.  

“Casualty Loss” – as defined in Section 11.14.

“Closing” – the closing of the Contemplated Transactions.

“Closing Date” – as defined in Section 2.03.

“COBRA” – as defined in Section 12.05.

“Code” – the Internal Revenue Code of 1986, as amended.

“Complete Remediation” – with respect to an Environmental Defect, a remediation
or cure of such Environmental Defect which is substantially completed in
accordance with the Lowest Cost Response.

“Confidentiality Agreement” – that certain confidentiality agreement dated as of
May 16, 2019 by and between Riviera Resources, Inc. and Buyer.

“Consent” – any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization) from any Person that is required to
be obtained in connection with the execution or delivery of this Agreement or
the consummation of the Contemplated Transactions.

“Contemplated Transactions” – all of the transactions contemplated by this
Agreement, including:

(a)the sale of the Assets and Equity Interests by Seller to Buyer;

(b)the performance by the Parties of their respective covenants and obligations
under this Agreement; and

(c)Buyer’s acquisition, ownership, and exercise of control over the Assets and
Equity Interests.

“Continuing Employees” – as defined in Section 12.03(d).

“Contract” – any written or oral contract, agreement or any other legally
binding arrangement, but excluding, however, any Lease, easement, right-of-way,
permit or other instrument creating or evidencing an interest in the Assets or
any real or immovable property related to or used in connection with the
operations of any Assets.

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“Cure” – as defined in Section 11.06.

“Damages” – any and all claims, demands, payments, charges, judgments,
assessments, losses, liabilities, damages, penalties, fines, expenses, costs,
fees, settlements, and deficiencies, including any attorneys’ fees, legal, and
other costs and expenses suffered or incurred therewith.

“De Minimis Environmental Defect Cost” – Fifty Thousand Dollars ($50,000).

“De Minimis Title Defect Cost” – Fifty Thousand Dollars ($50,000) per Well.  

“Defect Notice Date” – as defined in Section 11.04.

“Defensible Title” – title of Seller with respect to the Processing Plants and
Wells that, as of the Closing Date and subject to the Permitted Encumbrances, is
deducible of record or title evidenced by unrecorded instruments or elections,
in each case, made or delivered pursuant to joint operating agreements, pooling
agreements or unitization agreements and:

(a)With respect to the currently producing formation in each Well (in each case,
subject to any reservations, limitations or depth restrictions described in
Schedule 2.07 or Exhibit B), entitles Seller to receive not less than the Net
Revenue Interest set forth in Schedule 2.07 for such Well, except for (i)
decreases in connection with those operations in which Seller or its successors
or assigns may from and after the Effective Time and in accordance with the
terms of this Agreement elect to be a non-consenting co-owner, (ii) decreases
resulting from the establishment or amendment from and after the Effective Time
of pools or units in accordance with this Agreement, and (iii) decreases
required to allow other Working Interest owners to make up past underproduction
or pipelines to make up past under deliveries;

(b)with respect to the currently producing formation in each Well (in each case,
subject to any reservations, limitations or depth restrictions described in
Schedule 2.07 or Exhibit B), obligates Seller to bear not more than the Working
Interest set forth in Schedule 2.07 for such Well, except (i) increases
resulting from contribution requirements with respect to defaulting co-owners
under applicable operating agreements, or (ii) increases to the extent that such
increases are accompanied by a proportionate increase in Seller’s Net Revenue
Interest; and

(c)is free and clear of all Encumbrances.

“Deposit Amount” – Ten percent (10%) of the unadjusted Purchase Price (including
any interest accrued thereon).

“Designated Area” – the area within the following counties in the state of (a)
Kansas: Finney, Grant, Hamilton, Haskill, Kearney, Mead, Morton, Seward,
Stanton, and Stevens, and (b) Oklahoma: Beaver and Texas.

“Dispute Notice” – as defined in Section 2.05(d).

“Disputed Matter” – as defined in Section 11.15(a).

“DOJ” – the Antitrust Division of the U.S. Department of Justice.

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“DTPA” – as defined in Section 4.11.

“Effective Time” – July 1, 2019, at 12:01 a.m. local time at the location of the
Assets.

“Employee Start Date” – the day after Closing.

“Encumbrance” – any charge, equitable interest, privilege, lien, mortgage, deed
of trust, production payment, option, pledge, collateral assignment, security
interest, or other arrangement substantially equivalent thereto.

“Environmental Condition” – any event occurring or condition existing on the
Execution Date with respect to the Units, Leases, Wells or Processing Plants
that causes a Unit, Lease, Well or Processing Plant to be subject to remediation
under, or in violation of, an Environmental Law, other than any such event or
condition to the extent caused by or relating to NORM or that was disclosed to
Buyer (or of which Buyer otherwise had Knowledge) prior to the Execution Date.  

“Environmental Defect” – an Environmental Condition discovered by Buyer or its
Representatives as a result of any environmental diligence conducted by or on
behalf of Buyer pursuant to Section 11.09 of this Agreement.

“Environmental Defect Cure Period” – as defined in Section 11.11(a).

“Environmental Defect Notice” – as defined in Section 11.10.

“Environmental Defect Value” – with respect to each Environmental Defect, the
amount of the Lowest Cost Response for such Environmental Defect.

“Environmental Law” – any applicable Legal Requirement in effect as of the
Execution Date relating to pollution or the protection of the environment,
including those Legal Requirements relating to the storage, handling, and use of
Hazardous Materials and those Legal Requirements relating to the generation,
processing, treatment, storage, transportation, disposal or other management
thereof.  The term “Environmental Law” does not include (a) good or desirable
operating practices or standards that may be voluntarily employed or adopted by
other oil and gas well operators or recommended, but not required, by a
Governmental Body or (b) the Occupational Safety and Health Act of 1970, 29
U.S.C. § 651 et seq., as amended, or any other Legal Requirement governing
worker safety or workplace conditions.

“Environmental Liabilities” – all costs, Damages, expenses, liabilities,
obligations, and other responsibilities arising from or under either
Environmental Laws or Third Party claims relating to the environment, and which
relate to the Assets or the ownership or operation of the same.

“Equity Interests” – one hundred percent (100%) of the issued and outstanding
shares of equity interests of Mayzure.

“Equity Interests Assignment” – the Assignment from RUL to Buyer of the Equity
Interests in substantially the form of Exhibit J.

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“ERISA” – the Employee Retirement Security Act of 1974, as amended.

“ERISA Affiliate” – with respect to any entity, any other entity, trade or
business that is a member of a group described in Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b)(1) of ERISA that includes such first entity,
or that is a member of the same “controlled group” as such first entity pursuant
to Section 4001(a)(14) of ERISA.

“Escrow Account” – as defined in Section 2.02.

“Escrow Agent” – Citibank, N.A.

“Escrow Agreement” – as defined in Section 2.02.

“Excluded Assets” –  with respect to Seller, (a) all of Seller’s corporate
minute books, financial records and other business records that relate to
Seller’s business generally (including the ownership and operation of the
Assets); (b) except to the extent related to any Assumed Liabilities, all trade
credits, all accounts, all receivables of Seller and all other proceeds, income
or revenues of Seller attributable to the Assets and attributable to any period
of time prior to the Effective Time (other than the Suspense Funds and Specified
Receivables); (c) except to the extent related to any Assumed Liabilities all
claims and causes of action of Seller or its Affiliates that are attributable to
periods of time prior to the Effective Time (including claims for adjustments or
refunds); (d) except to the extent related to any Assumed Liabilities subject to
Section 11.14, all rights and interests of Seller (i) under any policy or
agreement of insurance or indemnity, (ii) under any bond, or (iii) to any
insurance or condemnation proceeds or awards arising, in each case, from acts,
omissions or events or damage to or destruction of property; (e) Seller’s rights
with respect to all Hydrocarbons produced and sold from the Assets with respect
to all periods prior to the Effective Time; (f) all claims of Seller or any of
its Affiliates for refunds of, rights to receive funds from any Governmental
Body, or loss carry forwards or credits with respect to (i) Asset Taxes
attributable to any period (or portion thereof) prior to the Effective Time,
(ii) Income Taxes paid by Seller or its Affiliates, or (iii) any Taxes
attributable to the Excluded Assets; (g) all information technology assets,
other than the Production-Related IT Equipment; (h) all rights, benefits and
releases of Seller or its Affiliates under or with respect to any Contract that
are attributable to periods of time prior to Closing; (i) all of Seller’s
proprietary computer software, patents, trade secrets, copyrights, names,
trademarks, logos and other intellectual property; (j) all documents and
instruments of Seller that may be protected by an attorney-client privilege or
any attorney work product doctrine; (k) all data that cannot be disclosed to
Buyer as a result of confidentiality arrangements under existing written
agreements; (l) all audit rights or obligations of Seller for which Seller bears
responsibility arising under any of the Applicable Contracts or otherwise with
respect to any period prior to the Effective Time or to any of the Excluded
Assets, except for any Imbalances assumed by Buyer; (m) Seller’s reserve reports
and Seller’s interpretations of any geophysical or other seismic and related
technical data and information relating to the Assets; (n) documents prepared or
received by Seller or its Affiliates with respect to (i) lists of prospective
purchasers for such transactions compiled by Seller, (ii) bids submitted by
other prospective purchasers of the Assets, (iii) analyses by Seller or its
Affiliates of any bids submitted by any prospective purchaser, (iv)
correspondence between or among Seller, its Representatives, and any prospective
purchaser other than Buyer, and (v) correspondence between Seller or any of its
Representatives with respect to any of the bids, the prospective purchasers or
the transactions contemplated by this Agreement;

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(o) a copy of all Records so long as originals or a copy thereof are delivered
to Buyer; (p) any Contracts that constitute master services agreements or
similar contracts; (q) any Hedge Contracts; (r) any debt instruments; (s) any of
Seller’s assets other than the Assets; (t) any records or data related to
Available Employees other than the data to be provided in the Available Employee
List; and (u) any leases, rights and other assets specifically listed in Exhibit
E.  To the extent any Excluded Assets are owned by Mayzure, then prior to
Closing, RUL shall cause Mayzure to assign or distribute any such Excluded
Assets to Seller or its Affiliates (other than Mayzure) or one or more Third
Parties.

“Execution Date” – as defined in the preamble to this Agreement.

“Expert” – as defined in Section 11.15(b).

“Expert Decision” – as defined in Section 11.15(d).

“Expert Proceeding Notice” – as defined in Section 11.15(a).

“Fee Minerals” – as set forth in the definition of “Assets”.

“Final Amount” – as defined in Section 2.05(d).

“Final Settlement Date” – as defined in Section 2.05(d).

“Final Settlement Statement” – as defined in Section 2.05(d).

“FTC” – the Federal Trade Commission.

“Fundamental Representations” – those representations set forth in Sections
3.01, 3.02, 3.03, and 3.06.

“GAAP” – generally accepted accounting principles in the United States as
interpreted as of the Execution Date.

“Gathering System” – as set forth in the definition of “Assets”.

“Governmental Authorization” – any approval, consent, license, permit,
registration, variance, exemption, waiver, or other authorization issued,
granted, given, or otherwise made available by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.

“Governmental Body” – any (a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign, or other government; (c) governmental or quasi-governmental
authority of any nature (including any governmental agency, branch, department,
official, or entity and any court or other tribunal); (d) multi-national
organization or body; or (e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.

“Group” – either Buyer Group or Seller Group, as applicable.

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“Hazardous Materials” – any (a) chemical, constituent, material, pollutant,
contaminant, substance, or waste that is regulated by any Governmental Body or
may form the basis of liability under any Environmental Law; and (b) petroleum,
Hydrocarbons, or petroleum products.

“Hedge Contract” – any Contract to which Seller or any of its Affiliates is a
party with respect to any swap, forward, future or derivative transaction or
option or similar agreement, whether exchange traded, “over-the-counter” or
otherwise, involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial or
pricing indices or measures of economic, financial or pricing risk or value or
any similar transaction or any combination of these transactions.

“HSR Act” – the Hart-Scott-Rodino-Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.

“Hydrocarbons” – oil and gas and other hydrocarbons (including condensate)
produced or processed in association therewith (whether or not such item is in
liquid or gaseous form), or any combination thereof, and any minerals produced
in association therewith.

“Imbalances” – over-production or under-production or over-deliveries or
under-deliveries with respect to Hydrocarbons produced from or allocated to the
Assets, regardless of whether such over-production or under-production or
over-deliveries or under-deliveries arise at the wellhead, pipeline, gathering
system, transportation system, processing plant, or other location, including
any imbalances under gas balancing or similar agreements, imbalances under
production handling agreements, imbalances under processing agreements,
imbalances under the Leases, and imbalances under gathering or transportation
agreements.

“Income Taxes” – income or franchise Taxes based upon, measured by, or
calculated with respect to net income, profits, capital, or similar measures (or
multiple bases, including corporate, franchise, business and occupation,
business license, or similar Taxes, if net income, profits, capital, or a
similar measure is one of the bases on which such Tax is based, measured, or
calculated), but excluding ad valorem, property, excise, severance, production,
sales, use, real or personal property transfer or other similar Taxes.

“Individual Claim Threshold” – as defined in Section 10.05.

“Instruments of Conveyance” – the Assignment, Equity Interest Assignment and
Deed.  Except for the special warranty of Defensible Title by, through and under
Seller contained therein, the foregoing Instruments of Conveyance shall be
without warranty of title, whether express, implied, statutory, or otherwise, it
being understood that Buyer shall have the right to conduct pre-Closing title
due diligence as described below in Article 11, and that the rights and remedies
set forth in Article 11 shall be Buyer’s sole rights and remedies with respect
to title.

“Knowledge” – an individual will be deemed to have “Knowledge” of a particular
fact or other matter if such individual is actually aware of such fact or other
matter, without any duty of inquiry.  A Seller Party will be deemed to have
“Knowledge” of a particular fact or other matter if any of the following
individuals has Knowledge of such fact or other matter: David B. Rottino,
President and Chief Executive Officer, Daniel Furbee, Executive Vice President
and Chief

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Operating Officer, James G. Frew, Executive Vice President and Chief Financial
Officer, Darren Schluter, Executive Vice President, Administration, Finance and
Chief Accounting Officer, and Allen Rambar, Vice President, Operations.  Buyer
will be deemed to have “Knowledge” of a particular fact or other matter if any
of the following individuals has Knowledge of such fact or other matter: Todd
Flott, Managing Director, Jon Piot, Managing Director, John Baschab, Managing
Director, Juan Nevarez, Senior Vice President, Business Development, Kevin
Rathke, Vice President, Operations, and Mike Mercer, Vice President, Operations.

“Jayhawk Plant” - as set forth in the definition of “Assets”.

“Lands” – as set forth in the definition of “Assets”.

“Leases” – as set forth in the definition of “Assets”.

“Legal Requirement” – any federal, state, local, municipal, foreign,
international, or multinational law, Order, constitution, ordinance, or rule,
including rules of common law, regulation, statute, treaty, or other legally
enforceable directive or requirement.

“Lowest Cost Response” – the response required or allowed under Environmental
Laws in effect on the date this Agreement is executed that addresses and
resolves in compliance with Environmental Laws (for current and future use in
the same manner as currently used) the identified Environmental Condition in the
most cost-effective manner (considered as a whole) as compared to any other
response that is required or allowed under Environmental Laws. The Lowest Cost
Response shall include taking no action, leaving the condition unaddressed,
periodic monitoring or the recording of notices in lieu of remediation, if such
responses are allowed under Environmental Laws. The Lowest Cost Response shall
not include any costs or expenses relating to the assessment, remediation,
removal, abatement, transportation and disposal of any asbestos, asbestos
containing materials or NORM.

“Material Adverse Effect” – any change, inaccuracy, effect, event, result,
occurrence, condition or fact (for the purposes of this definition, each, an
“event”) (whether foreseeable or not and whether covered by insurance or not)
that has had or would be reasonably likely to have, individually or in the
aggregate with any other event or events, a material adverse effect on the
ownership, operation or financial condition of the Assets, taken as a whole;
provided, however, that the term “Material Adverse Effect” shall not include
material adverse effects resulting from (i) entering into this Agreement or the
announcement of the Contemplated Transactions; (ii) changes in Hydrocarbon
prices; (iii) any action or omission of Seller taken in accordance with the
terms of this Agreement or with the prior consent of Buyer; (iv) any effect
resulting from general changes in industry, economic or political conditions in
the United States; (v) civil unrest, any outbreak of disease or hostilities,
terrorist activities or war or any similar disorder; (vi) acts or failures to
act of any Governmental Body (including any new regulations related to the
upstream industry), except to the extent arising from Seller’s action or
inaction; (vii) acts of God, including hurricanes and storms; (viii) any
reclassification or recalculation of reserves in the ordinary course of
business; (ix) natural declines in well performance; (x) general changes in
Legal Requirements, in regulatory policies, or in GAAP; (xi) changes in the
stock price of Buyer; (xii) matters that are cured or no longer exist by the
earlier of Closing and the termination of this Agreement; or (xiii)

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matters as to which an adjustment is provided for under Section 2.05(c) or
Seller has indemnified Buyer hereunder.

“Material Contracts” – as defined in Section 3.10.

“Mayzure” – as defined in the recitals.

“MMMF” – asbestos and other man-made material fibers.

“Net Revenue Interest” – with respect to any Well, the interest in and to all
Hydrocarbons produced, saved and sold from or allocated to such Well (in each
case, limited to the applicable currently producing formation as described in
the definition of “Defensible Title” and subject to any reservations,
limitations or depth restrictions described in Schedule 2.07 or Exhibit B, after
satisfaction of all other Royalties).

“Non-Operated Assets” – Assets operated by any Person other than Seller or its
Affiliates.

“NORM” – naturally occurring radioactive material.

“Order” – any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.

“Organizational Documents” – (a) the articles or certificate of incorporation
and the bylaws of a corporation; (b) the articles of organization and
resolutions of a limited liability company; (c) the certificate of limited
partnership and limited partnership agreement of a limited partnership; and
(d) any amendment to any of the foregoing.

“Outside Date” – as defined in Section 9.01(d).

“Party” or “Parties” – as defined in the preamble to this Agreement.

“Permits” – all environmental and other governmental (whether federal, state,
local or tribal) certificates, consents, permits (including conditional use
permits), licenses, orders, authorizations, franchises and related instruments
or rights solely relating to the ownership, operation or use of the Assets.

“Permitted Encumbrance” – any of the following:

(a)the terms and conditions of all Leases and Contracts if the net cumulative
effect of such Leases and Contracts does not (i) materially interfere with the
operation or use of any of the Assets (as currently operated and used), (ii)
operate to reduce the Net Revenue Interest of Seller with respect to the
currently producing formation of any Well to an amount less than the Net Revenue
Interest set forth in Schedule 2.07, or (iii) obligate Seller to bear a Working
Interest with respect to the currently producing formation of any Well in any
amount greater than the Working Interest set forth in Schedule 2.07 (unless the
Net Revenue Interest for such Well is greater than the Net Revenue Interest set
forth in Schedule 2.07 in the same or greater proportion as any increase in such
Working Interest);

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(b)any Preferential Purchase Rights, Consents and similar agreements;

(c)excepting circumstances where such rights have already been triggered prior
to the Effective Time, rights of reassignment arising upon final intention to
abandon or release the Assets;

(d)liens for Taxes not yet due or delinquent or, if delinquent, that are being
contested in good faith by appropriate proceedings by or on behalf of Seller;

(e)all rights to consent by, required notices to, filings with, or other actions
by Governmental Bodies in connection with the conveyance of the Leases, if the
same are customarily sought and received after the Closing;

(f)Encumbrances or defects that Buyer has waived or is deemed to have waived
pursuant to the terms of this Agreement or Title Defects that were not properly
asserted by Buyer prior to the Defect Notice Date;

(g)all Legal Requirements and all rights reserved to or vested in any
Governmental Body (i) to control or regulate any Asset in any manner; (ii) by
the terms of any right, power, franchise, grant, license or permit, or by any
provision of law, to terminate such right, power, franchise, grant, license or
permit or to purchase, condemn, expropriate or recapture or to designate a
purchaser of any of the Assets; (iii) to use such property in a manner which
does not materially impair the use of such property for the purposes for which
it is currently owned and operated; or (iv) to enforce any obligations or duties
affecting the Assets to any Governmental Body with respect to any right, power,
franchise, grant, license or permit;

(h)rights of a common owner of any interest currently held by Seller and such
common owner as tenants in common or through common ownership to the extent that
the same does not materially impair the use or operation of the Assets as
currently used and operated;

(i)easements, conditions, covenants, restrictions, servitudes, permits,
rights-of-way, surface leases, and other rights in the Assets for the purpose of
operations, facilities, roads, alleys, highways, railways, pipelines,
transmission lines, transportation lines, distribution lines, power lines,
telephone lines, removal of timber, grazing, logging operations, canals,
ditches, reservoirs and other like purposes, or for the joint or common use of
real estate, rights-of-way, facilities and equipment, which, in each case, do
not materially impair the operation or use of the Assets as currently operated
and used;

(j)vendors, carriers, warehousemen’s, repairmen’s, mechanics’, workmen’s,
materialmen’s, construction or other like liens arising by operation of law in
the ordinary course of business or incident to the construction or improvement
of any property in respect of obligations which are not yet due or which are
being contested in good faith by appropriate proceedings by or on behalf of
Seller;

(k)Encumbrances created under Leases or any joint operating agreements
applicable to the Assets or by operation of law in respect of obligations that
are not yet due or that are being contested in good faith by appropriate
proceedings by or on behalf of Seller;

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(l)with respect to any interest in the Assets acquired through compulsory
pooling, failure of the records of any Governmental Body to reflect Seller as
the owner of any Assets;

(m)any Encumbrance affecting the Assets that is discharged by Seller or waived
(or deemed to be waived) by Buyer pursuant to the terms of this Agreement at or
prior to Closing;

(n)the Assumed Litigation;

(o)defects based solely on assertions that Seller’s files lack information
(including title opinions);

(p)lessor’s royalties, overriding royalties, production payments, net profits
interests, reversionary interests, and similar burdens if the net cumulative
effect of such burdens (i) does not materially interfere with the operation or
use of any of the Assets (as currently operated and used), (ii) operate to
reduce the Net Revenue Interest of Seller with respect to the currently
producing formation of any Well to an amount less than the Net Revenue Interest
set forth in Schedule 2.07, or (iii) obligate Seller to bear a Working Interest
with respect to the producing formation of any Well in any amount greater than
the Working Interest set forth in Schedule 2.07 (unless the Net Revenue Interest
for such Well is greater than the Net Revenue Interest set forth in Schedule
2.07 in the same or greater proportion as any increase in such Working
Interest);

(q)defects or irregularities of title (i) as to which the relevant statute(s) of
limitations or prescription would bar any attack or claim against Seller’s
title; (ii) arising out of lack of evidence of, or other defects with respect
to, authorization, execution, delivery, acknowledgment, or approval of any
instrument in Seller’s chain of title absent reasonable evidence of an actual
claim of superior title from a Third Party attributable to such matter; (iii)
consisting of the failure to recite marital status or omissions of heirship
proceedings in documents; (iv) resulting from lack of survey, unless a survey is
expressly required by applicable Legal Requirements; (v) resulting from failure
to record releases of liens, production payments, or mortgages that have expired
by their own terms or the enforcement of which are barred by the applicable
statute(s) of limitations or prescription; (vi) arising out of lack of entity
authorization unless Buyer provides affirmative evidence that such entity action
was not authorized and results in another Person’s actual and superior claim of
title; (vii) resulting from or related to probate proceedings or the lack
thereof that have been outstanding for five (5) years or more; (viii) resulting
from unreleased instruments (including leases covering Hydrocarbons), absent
specific evidence that such instruments continue in force and effect and
constitute a superior claim of title with respect to the Leases or Wells; (ix)
based on a gap in Seller’s chain of title to any Well or Lease (A) so long as
such gap does not provide a Third Party with a superior claim or (B) unless
Buyer affirmatively shows such gap to exist in such records by an abstract of
title, title opinion or landman’s title chain; (x) consisting of the lack of a
lease amendment or consent authorizing pooling or unitization, or (xi) that have
been cured by prescription or limitations;

(r)Imbalances;

(s)plugging and surface restoration obligations related directly to the Assets,
but only to the extent such obligations do not interfere in any material respect
with the use or operation of any Assets (as currently used or operated);

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(t)calls on Hydrocarbon production under existing Contracts;

(u)any matters referenced or set forth on Exhibit A, Exhibit B, or Schedule
2.07;

(v)mortgages on the lessor’s interest under a Lease, whether or not subordinate
to such Lease, that have expired on their own terms or the enforcement of which
are barred by applicable statute(s) of limitations or prescription; and

(w)any maintenance of uniform interest provision in an operating agreement if
waived with respect to the Contemplated Transactions by the party or parties
having the right to enforce such provision or if the violation of such provision
would not give rise to the unwinding of the sale of the affected Asset from
Seller to Buyer.

“Person” – any individual, firm, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.

“Personal Property” – as set forth in the definition of “Assets”.

“Phase I Environmental Site Assessment” – a Phase I environmental property
assessment of the Assets that satisfies the basic assessment requirements set
forth under the current ASTM International Standard Practice for Environmental
Site Assessments (Designation E1527-13) or any other visual site assessment or
review of records, reports or documents.

“Post-Closing Date” – as defined in Section 2.05(d).

“Preferential Purchase Right” – any right or agreement that enables any Person
to purchase or acquire any Asset or the Equity Interests or any interest therein
or portion thereof as a result of or in connection with the execution or
delivery of this Agreement or the consummation of the Contemplated Transactions.

“Preliminary Amount” – the Purchase Price, adjusted as provided in Section
2.05(b), based upon the best information available at the time of the Closing.

“Preliminary Settlement Statement” – as defined in Section 2.03.

“Proceeding” – any proceeding, action, arbitration, audit, hearing,
investigation, request for information, litigation, or suit (whether civil,
criminal, administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any Governmental Body
or arbitrator.

“Processing Plant” - as set forth in the definition of “Assets”.

“Production-Related IT Equipment” – as set forth in the definition of “Assets”.

“Property” or “Properties” – as set forth in the definition of “Assets”.

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“Property Costs” – all operating expenses (including utilities, payroll, costs
of insurance, rentals, title examination and curative actions, and overhead
costs), capital expenditures (including rentals, options and other lease
maintenance payments, broker fees (but expressly excluding any broker fees owed
by Seller Group related to the transaction contemplated by this Agreement) and
other property acquisition costs and costs of acquiring equipment), and Asset
Taxes, respectively, incurred in the ordinary course of business attributable to
the use, operation, and ownership of the Assets, but excluding Damages
attributable to (a) personal injury or death, property damage, torts, breach of
contract, or violation of any Legal Requirement, (b) Environmental Liabilities,
(c) obligations with respect to Imbalances, (d) obligations to pay Royalties or
other interest owners revenues or proceeds relating to the Assets but held in
suspense, and (e) claims for indemnification or reimbursement from any Third
Party with respect to costs of the types described in the preceding clauses (a)
through (e), whether such claims are made pursuant to contract or otherwise.

“Purchase Price” – as defined in Section 2.02.

“Records” – as set forth in the definition of “Assets”.

“Representative” – with respect to a particular Person, any director, officer,
manager, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.

“Required Consent” – any Consent with respect to which (a) there is a provision
within the applicable instrument that such Consent may be withheld in the sole
and absolute discretion of the holder, or (b) there is a provision within the
applicable instrument expressly stating that an assignment in violation thereof
(i) is void or voidable, (ii) triggers the payment of specified liquidated
damages, or (iii) causes termination of the applicable Assets to be
assigned.  For the avoidance of doubt, “Required Consent” does not include any
Consent, which, by its terms, cannot be unreasonably withheld.

“Retained Assets” – any rights, titles, interests, assets, and properties that
are originally included in the Assets under the terms of this Agreement, but
that are subsequently excluded from the Assets or sale under this Agreement
pursuant to the terms of this Agreement at any time before or after the Closing.

“Retained Liabilities” – Damages, liabilities and obligations arising out of (a)
the disposal or transportation prior to Closing of any Hazardous Materials
generated or used by Seller and taken from the Assets to any location that is
not an Asset; (b) personal injury (including death) claims attributable to
Seller’s or its Affiliate’s operation of the Assets prior to Closing; (c)
failure to properly and timely pay, in accordance with the terms of any Lease,
Contract or applicable Legal Requirement, all Royalties and any other Working
Interest amounts (in each case) with respect to the Assets that are due by
Seller or any of its Affiliates and attributable to Seller’s ownership of the
Assets prior to the Effective Time; (d) the Retained Litigation; (e) any claim
made by an employee of Seller or any Affiliate of Seller directly relating to
such employment; and (f) disposal wells plugged prior to the Effective Time;
provided that, from and after the date that is twenty-four (24) months following
the Closing Date, all Damages, liabilities and obligations arising out of
clauses (a), (b) and (c) shall no longer be Retained Liabilities and shall be
deemed Assumed Liabilities.

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“Retained Litigation” – the litigation set forth in Schedule 3.05 Part B.

“Royalties” – royalties, overriding royalties, production payments, carried
interests, net profits interests, reversionary interests, back-in interests and
other burdens upon, measured by or payable out of production.

“Satanta Plant” - as set forth in the definition of “Assets”.

“Seller” – as defined in the preamble to this Agreement.

“Seller Benefit Plans” – as defined in Section 3.17(a).

“Seller Closing Documents” – as defined in Section 3.02(a).

“Seller Group” – Seller and its Affiliates (other than Mayzure), and their
respective Representatives.

“Seller Party” – each of RUL and ROL, individually.

“Specified Receivables” – accounts receivable owed to Seller as operator of any
Wells to satisfy previous overpayments by Seller to Third Parties, and the right
to recoup same out of proceeds of production in respect of such Wells.

“Straddle Period” – any tax period beginning before and ending after the
Effective Time.

“Suspense Funds” – proceeds of production and associated penalties and interest
in respect of any of the Wells that are payable to any Third Party and are being
held in suspense by Seller as the operator of such Wells.

“Tax” or “Taxes” – (a) any and all federal, state, provincial, local, foreign
and other taxes, levies, fees, imposts, duties, assessments, and other
governmental charges imposed by any Governmental Body, including income,
profits, franchise, alternative or add-on minimum, gross receipts, environmental
(including taxes under Section 59A of the Code), registration, withholding,
employment, social security (or similar), disability, occupation, ad valorem,
property, value added, capital gains, sales, goods and services, use, real or
personal property, capital stock, license, branch, payroll, estimated,
unemployment, severance, compensation, utility, stamp, premium, windfall
profits, transfer, gains, production and excise taxes, and customs duties,
together with any interest, penalties, fines or additions thereto and (b) any
successor or transferee liability in respect of any items described in
clause (a) above.

“Tax Allocation” – as defined in Section 2.07.

“Tax Returns” – any and all reports, returns, declarations, claims for refund,
elections, disclosures, estimates, information reports or returns or statements
supplied or required to be supplied to a Governmental Body in connection with
Taxes, including any schedule or attachment thereto or amendment thereof.  

“Third Party” – any Person other than a Party or an Affiliate of a Party.

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“Threatened” – a claim, Proceeding, dispute, action, or other matter will be
deemed to have been “Threatened” if any demand or statement has been made in
writing to a Party or any of its officers, directors, or employees that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.

“Title Benefit” – as defined in Section 11.08.

“Title Benefit Notice” – as defined in Section 11.08.

“Title Benefit Properties” – as defined in Section 11.08.

“Title Benefit Value” – as defined in Section 11.08.

“Title Defect” – any Encumbrance, defect or other matter that causes Seller not
to have Defensible Title in and to any of the Well or Processing Plants, without
duplication; provided that the following shall not be considered Title Defects:

(a)defects arising out of the lack of corporate or other entity authorization
unless Buyer provides affirmative evidence that such corporate or other entity
action was not authorized and results in another Person’s actual and superior
claim of title to the relevant Assets;

(b)defects based on a gap in Seller’s chain of title in the county or parish
records, unless Buyer affirmatively shows such gap to exist in such records by
an abstract of title, title opinion or landman’s title chain, which documents
(if any) shall be included in a Title Defect Notice (for the avoidance of doubt,
a non-certified, cursory or limited title chain will satisfy this requirement);

(c)defects based upon the failure to record any federal or state Leases or any
assignments of interests in such Leases in any applicable public records;

(d)any Encumbrance or loss of title resulting from Seller’s conduct of business
between the Effective Time and the Closing that is permitted by this Agreement;

(e)defects arising from any change in applicable Legal Requirement after the
Execution Date;

(f)defects arising from any prior oil and gas lease taken more than ten (10)
years prior to the Effective Time relating to the lands covered by a Lease not
being surrendered of record, unless Buyer provides affirmative evidence that a
Third Party has conducted operations on, or asserted ownership of, the Assets in
the past five (5) years;

(g)defects that affect only which non-Seller Person has the right to receive
royalty payments rather than the amount or the proper payment of such royalty
payment;

(h)defects based solely on the lack of information in Seller’s files;

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(i)defects arising from a mortgage encumbering the oil, gas or mineral estate of
any lessor unless a complaint of foreclosure has been duly filed or any similar
action taken by the mortgagee thereunder and in such case such mortgage has not
been subordinated to the Lease applicable to such Asset;

(i)defects based on the Assets being held of record in the name Linn Energy
Holdings, LLC or Linn Operating, LLC; and

(j)defects or irregularities that would customarily be waived by a reasonably
prudent owner or operator of oil and gas properties in the same geographic area
where the Assets are located.

“Title Defect Cure Period” – as defined in Section 11.06(a).

“Title Defect Notice” – as defined in Section 11.04.

“Title Defect Property” – as defined in Section 11.04.

“Title Defect Value” – as defined in Section 11.04.

“Transfer Tax” – all transfer, documentary, sales, use, stamp, registration and
similar Taxes (but excluding Income Taxes) and fees arising out of, or in
connection with, the transfer of the Assets or the Equity Interests.

“Wells” – as set forth in the definition of “Assets”.

“Working Interest” – with respect to any Well, the interest in and to such Well
that is burdened with the obligation to bear and pay costs and expenses of
maintenance, development and operations on or in connection with such Well (in
each case, limited to the applicable currently producing formation as described
in the definition of “Defensible Title” and subject to any reservations,
limitations or depth restrictions described in Exhibit B or Schedule 2.07), but
without regard to the effect of any Royalties or other burdens.  

ARTICLE 2

SALE AND TRANSFER OF ASSETS; CLOSING

2.01Assets.  Subject to the terms and conditions of this Agreement, at the
Closing, Seller shall sell and transfer (or shall cause to be sold and
transferred) the Assets and the Equity Interests to Buyer, and Buyer shall
purchase, pay for, and accept the Assets and the Equity Interests from Seller.

2.02Purchase Price; Deposit.  Subject to any adjustments that may be made under
Section 2.05, the purchase price for the Assets and the Equity Interests will be
Two Hundred Ninety-Five Million Dollars $295,000,000 (the “Purchase
Price”).  Within two (2) Business Days after the execution of this Agreement,
Buyer will deposit by wire transfer in same day funds into an escrow account
(the “Escrow Account”) established pursuant to the terms of a mutually agreeable
Escrow Agreement (the “Escrow Agreement”) an amount equal to the Deposit
Amount.  The entire Deposit Amount shall be held by the Escrow Agent, and if the
Closing timely occurs,

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on or before the Closing Date, the Parties shall execute and deliver to the
Escrow Agent a joint instruction letter directing the Escrow Agent to release
the Deposit Amount to Seller at Closing, which Deposit Amount shall be applied
as a credit toward the Preliminary Amount as provided in Section 2.05(a).  If
this Agreement is terminated prior to the Closing in accordance with Section
9.01, then the provisions of Section 9.01(h) shall apply and the distribution of
the Deposit Amount shall be governed in accordance therewith.

2.03Closing; Preliminary Settlement Statement.  The Closing shall take place at
the offices of Seller at 600 Travis Street, Suite 1700, Houston, Texas 77002 on
or before October 31, 2019, or if all conditions to Closing under Article 7 and
Article 8 have not yet been satisfied or waived, within ten (10) Business Days,
after such conditions have been satisfied or waived, subject to the provisions
of Article 9 (the “Closing Date”).  Subject to the provisions of Articles 7, 8,
and 9, failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.03 shall not, in and of itself, result in the termination of this
Agreement and shall not relieve either Party of any obligation under this
Agreement.  Not later than five (5) Business Days prior to the Closing Date,
Seller will deliver to Buyer a statement setting forth in reasonable detail
Seller’s reasonable determination of the Preliminary Amount based upon the best
information available at that time (the “Preliminary Settlement Statement”).  As
part of the Preliminary Settlement Statement, Buyer shall provide to Seller such
data as is reasonably necessary to support any estimated allocation, for
purposes of establishing the Preliminary Amount.  Within two (2) Business Days
after its receipt of the Preliminary Settlement Statement, Buyer may submit to
Seller in writing any objections or proposed changes thereto and Seller shall
consider all such objections and proposed changes in good faith.  The estimate
agreed to by Seller and Buyer, or, absent such agreement, delivered in the
Preliminary Settlement Statement by Seller in accordance with this Section 2.03,
will be the Preliminary Amount to be paid by Buyer to Seller at the Closing.  

2.04Closing Obligations.  At the Closing:

(a)

Each Seller Party shall deliver (and execute, as appropriate), or cause to be
delivered (and executed, as appropriate), to Buyer:

 

(i)

the Instruments of Conveyance in the appropriate number for recording in the
real property records where the Assets are located;

 

(ii)

possession of the Assets (except the Specified Receivables and the Suspense
Funds, which shall be conveyed to Buyer by way of one or more adjustments to the
Purchase Price as provided in Section 2.05(c)(i)(F) and Section 2.05(c)(ii)(E));

 

(iii)

possession of the Assets;

 

(iv)

a certificate, in substantially the form set forth in Exhibit G executed by an
officer of such Seller Party, certifying on behalf of such Seller Party that the
conditions to Closing set forth in Sections 7.01 and 7.02 have been fulfilled;

 

(v)

a Treasury Regulation Section 1.1445-2(b)(2) statement, certifying that such
Seller Party is not a “foreign person” within the meaning of the Code;

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(vi)

an executed counterpart of the Preliminary Settlement Statement;

 

(vii)

for each Well operated by such Seller Party or its Affiliate on the Closing
Date, such regulatory documentation on forms prepared by Buyer as is necessary
to designate Buyer as operator of such Wells;

 

(viii)

a recordable release in a form reasonably acceptable to Buyer of any trust,
mortgages, financing statements, fixture filings and security agreements, in
each case, securing indebtedness for borrowed money made by such Seller Party or
its Affiliates (other than Mayzure) affecting the Assets, other than mortgages
from Seller in favor of Mayzure; and

 

(ix)

such documents as Buyer or counsel for Buyer may reasonably request, including
letters-in-lieu of transfer order to purchasers of production from the Wells
(which shall be prepared and provided by Buyer and reasonably satisfactory to
Seller).

(b)

Buyer shall deliver (and execute, as appropriate) to Seller:

 

(i)

the Preliminary Amount (less the Deposit Amount) by wire transfer to the
accounts specified by Seller in written notices given by Seller to Buyer at
least two (2) Business Days prior to the Closing Date;

 

(ii)

the Instruments of Conveyance in the appropriate number for recording in the
real property records where the Assets are located;

 

(iii)

a certificate, in substantially the form set forth in Exhibit G executed by an
officer of Buyer, certifying on behalf of Buyer that the conditions to Closing
set forth in Sections 8.01 and 8.02 have been fulfilled;

 

(iv)

an executed counterpart of the Preliminary Settlement Statement;

 

(v)

for each Well operated by any Seller Party or its Affiliate on the Closing Date,
such regulatory documentation as is necessary to designate Buyer as operator of
such Wells and the other Assets;

 

(vi)

evidence of replacement bonds, guarantees, and other sureties pursuant to
Section 6.03(a) and evidence of such other authorizations and qualifications as
may be necessary for Buyer to own and operate the Assets; and

 

(vii)

such other documents as Seller or counsel for Seller may reasonably request,
including letters-in-lieu of transfer order to purchasers of production from the
Wells (which shall be prepared and provided by Buyer and reasonably satisfactory
to Seller).

2.05Allocations and Adjustments.  If the Closing occurs:

(a)

Buyer shall be entitled to all production and products from or attributable to
the Assets from and after the Effective Time and the proceeds thereof, and to
all other income,

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proceeds, receipts, and credits earned with respect to the Assets on or after
the Effective Time, and shall be responsible for (and entitled to any refunds
with respect to) all Property Costs attributable to the Assets and incurred from
and after the Effective Time.  Seller shall be entitled to all production and
products from or attributable to the Assets prior to the Effective Time and the
proceeds thereof, and shall be responsible for (and entitled to any refunds with
respect to) all Property Costs attributable to the Assets and incurred prior to
the Effective Time.  “Earned” and “incurred,” as used in this Agreement, shall
be interpreted in accordance with generally accepted accounting principles and
Council of Petroleum Accountants Society (COPAS) standards.  

(b)

Without limiting the allocation of costs and receipts set forth in Section
2.05(a), (i) for each Well or Unit operated by Seller or its Affiliate, (A)
Seller or its Affiliate shall retain overhead charges and rates received in its
capacity as “Operator” under any operating agreement or COPAS accounting
procedure attributable to such Well or Unit; provided that Seller and its
Affiliates shall not retain payments related to Seller’s overhead and operation
of the Gathering System except as a reimbursement of Property Costs, (thereby
reducing the upward adjustment of the Purchase Price pursuant to Section
2.05(c)(i)(C)), and (B) Seller or its Affiliate shall be entitled to deduct and
retain as overhead charges for Seller’s operation of the Assets an amount equal
$$275,000 per month.  The charges and deductions under this Section 2.05(b)
shall accrue from the Effective Time through the month in which the physical
transfer of operations occurs (as distinguished from the later regulatory
approval of such transfer); provided however, that the overhead charges for the
month in which the physical transfer of operations (as opposed to regulatory
approval of the transfer of operations) occurs shall be prorated based upon the
number of days in such month prior to such transfer of operations.  For purposes
of allocating revenues, production, proceeds, income, accounts receivable, and
products under this Section 2.05, (A) liquid Hydrocarbons produced into storage
facilities will be deemed to be “from or attributable to” the Wells when they
pass through the pipeline connecting into the storage facilities into which they
are run, and (B) gaseous Hydrocarbons and liquid Hydrocarbons produced into
pipelines will be deemed to be “from or attributable to” the Wells when they
pass through the receipt point sales meters on the pipelines through which they
are transported.  In order to accomplish the foregoing allocation of production,
the Parties shall rely upon the gauging, metering, and strapping procedures, if
any, conducted by Seller on or about the Effective Time and, unless demonstrated
to be inaccurate, shall utilize reasonable interpolating procedures to arrive at
an allocation of production when exact gauging, metering, and strapping data is
not available on hand as of the Effective Time.  Asset Taxes for 2019 shall be
prorated in accordance with Section 13.02(b).

(c)

The Purchase Price shall be, without duplication,

 

(i)

increased by the following amounts:

 

(A)

the aggregate amount of (i) proceeds received by Buyer from the sale of
Hydrocarbons produced from and attributable to the Assets during any period
prior to the Effective Time to which Seller is entitled under Section 2.05(a)
(net of any (x) Royalties and (y) gathering, processing, transportation and
other midstream costs) and (ii) other proceeds received

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with respect to the Assets for which Seller would otherwise be entitled under
Section 2.05(a);

 

(B)

the amount of all Asset Taxes allocable to Buyer pursuant to Section 13.02(b)
but paid or economically borne by Seller;

 

(C)

the aggregate amount of all non-reimbursed Property Costs (other than Asset
Taxes) that have been paid by Seller that are attributable to the ownership and
operation of the Assets after the Effective Time (including prepayments with
respect to any period after the Effective Time);

 

(D)

the amount of any other upward adjustment specifically provided for in this
Agreement or mutually agreed upon by the Parties;

 

(E)

to the extent that proceeds for such volumes have not been received by Seller,
an amount equal to the value of all Hydrocarbons attributable to the Wells in
storage facilities, stock tanks, pipelines or plants (including inventory) as of
the Effective Time;

 

(F)

the amount of all Specified Receivables attributable to any period prior to the
Effective Time;

 

(G)

if applicable, the amount, if any, of Imbalances in favor of Seller, multiplied
by $2.00 per Mcf, or, to the extent that the applicable Contracts provide for
cash balancing, the actual cash balance amount determined to be due to Seller as
of the Effective Time; and

 

(ii)

decreased by the following amounts:

 

(A)

the aggregate amount of (i) proceeds received by Seller from the sale of
Hydrocarbons produced from and attributable to the Assets from and after the
Effective Time to which Buyer is entitled under Section 2.05(a) (net of any (x)
Royalties and (y) gathering, processing, transportation and other midstream
costs) and (ii) other proceeds received by Seller with respect to the Assets for
which Buyer would otherwise be entitled under Section 2.05(a);

 

(B)

the amount of all Asset Taxes allocable to Seller pursuant to Section 13.02(b)
but paid or economically borne by Buyer;

 

(C)

the aggregate amount of all downward adjustments pursuant to Article 11;

 

(D)

the aggregate amount of all non-reimbursed Property Costs (other than Asset
Taxes) that are attributable to the ownership or operation of the Assets prior
to the Effective Time (excluding prepayments with respect to any period after
the Effective Time) and paid by Buyer;

 

(E)

the amount of the Suspense Funds;

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(F)

the amount of any other downward adjustment specifically provided for in this
Agreement or mutually agreed upon by the Parties; and

 

(G)

if applicable, the amount, if any, of Imbalances owing by Seller, multiplied by
$2.00 per Mcf, or, to the extent that the applicable Contracts provide for cash
balancing, the actual cash balance amount determined to be owed by Seller as of
the Effective Time.

(d)

As soon as practicable after the Closing, but no later than one hundred twenty
(120) days following the Closing Date, Seller shall prepare and submit to Buyer
a statement (the “Final Settlement Statement”) setting forth each adjustment or
payment which was not finally determined as of the Closing Date and showing the
values used to determine such adjustments to reflect the final adjusted Purchase
Price.  On or before thirty (30) days after receipt of the Final Settlement
Statement, Buyer shall deliver to Seller a written report containing any changes
that Buyer proposes be made to the Final Settlement Statement and an explanation
of any such changes and the reasons therefor together with any supporting
information (the “Dispute Notice”).  During such thirty (30)-day period, Buyer
shall be given reasonable access to Seller’s books and records relating to the
matters required to be accounted for in the Final Settlement Statement.  Any
changes not included in the Dispute Notice shall be deemed waived.  If Buyer
fails to timely deliver a Dispute Notice to Seller containing changes Buyer
proposes to be made to the Final Settlement Statement, the Final Settlement
Statement as delivered by Seller will be deemed to be mutually agreed upon by
the Parties and will be final and binding on the Parties.  Upon delivery of the
Dispute Notice, the Parties shall undertake to agree with respect to any
disputed amounts identified therein by the date that is one hundred eighty (180)
days after the Closing Date (the “Post-Closing Date”).  Except for Title Defect
and Environmental Defect adjustments pursuant to Section 2.05(c)(ii)(C), which
shall be subject to the arbitration provisions of Section 11.15, if the Parties
are still unable to agree regarding any item set forth in the Dispute Notice as
of the Post-Closing Date, then the Parties shall submit to a nationally
recognized independent accounting firm mutually agreed upon by the Parties (the
“Accounting Expert”) a written notice of such dispute along with reasonable
supporting detail for the position of Buyer and Seller, respectively, and the
Accounting Expert shall finally determine such disputed item in accordance with
the terms of this Agreement.  The Accounting Expert shall act as an expert and
not an arbitrator.  In determining the proper amount of any adjustment to the
Purchase Price related to the disputed item, the Accounting Expert shall not
increase the Purchase Price more than the increase proposed by Seller nor
decrease the Purchase Price more than the decrease proposed by Buyer, as
applicable.  The decision of such Accounting Expert shall be binding on the
Parties, and the fees and expenses of such Accounting Expert shall be borne
one-half (1/2) by Seller and one-half (1/2) by Buyer.  The date upon which all
adjustments and amounts in the Final Settlement Statement are agreed to (or
deemed agreed to) or fully and finally determined by the Accounting Expert as
set forth in this Section 2.05(d) shall be called the “Final Settlement Date,”
and the final adjusted Purchase Price shall be called the “Final Amount.”  If
(a) the Final Amount is more than the Preliminary Amount, Buyer shall pay to
Seller an amount equal to the Final Amount, minus the Preliminary Amount; or (b)
the Final Amount is less than the Preliminary Amount, Seller shall pay to Buyer
an amount equal to the Preliminary Amount, minus the Final Amount.  Such payment
shall be made within five (5) Business

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Days after the Final Settlement Date by wire transfer of immediately available
funds to the accounts specified pursuant to wire instructions delivered in
advance by Seller or Buyer, as applicable.

2.06Assumption.  If the Closing occurs, from and after the Closing Date, Buyer
shall assume, fulfill, perform, pay, and discharge the following liabilities
arising from, based upon, related to, or associated with the Assets and the
Equity Interests and only to the extent not constituting Retained Liabilities
(collectively, the “Assumed Liabilities”) subject to Seller’s indemnity
obligations under Section 10.02 (further subject to the limitations and
restrictions in Article 10): any and all Damages and obligations, known or
unknown, allocable to the Assets and the Equity Interests prior to, at, or after
the Effective Time, including any and all Damages and obligations: (a)
attributable to or resulting from the use, maintenance, ownership, or operation
of the Assets, regardless whether arising before, at or after the Effective
Time, except for Property Costs which shall have been accounted for as provided
under Section 2.05; (b) imposed by any Legal Requirement or Governmental Body
relating to the Assets and the Equity Interests; (c) for plugging, abandonment,
decommissioning, and surface restoration of the Assets, including oil, gas,
injection, water, or other wells and all surface facilities; (d) subject to
Buyer’s rights and remedies set forth in Article 11 and the special warranty of
Defensible Title set forth in the Instruments of Conveyance, attributable to or
resulting from lack of Defensible Title to the Assets; (e) attributable to the
Suspense Funds, to the extent actually received by Buyer (or for which a
reduction to the Purchase Price was made); (f) attributable to the Imbalances;
(g) subject to Buyer’s rights and remedies set forth in Article 11, attributable
to or resulting from all Environmental Liabilities relating to the Assets; (h)
related to the conveyance of the Assets or the Equity Interests to Buyer at
Closing (including arising from the conveyance thereof without consent or in
violation of a preferential purchase right or any maintenance of uniform
interest provision); (i) attributable to or resulting from Asset Taxes and
assessments attributable to the Assets to the extent attributable to periods (or
portions thereof) from and after the Effective Time; (j) attributable to or
resulting from Transfer Taxes, together with any interest, additions or
penalties with respect thereto and any interest in respect of such additions or
penalties, if any, imposed or required in connection with the sale of the Assets
or Equity Interests to Buyer or the filing or recording of all assignments
related to the sale of the Assets to Buyer; (k) attributable to the Leases and
the Applicable Contracts; (l) attributable to the Assumed Litigation.  Buyer
acknowledges that: (i) the Assets have been used in connection with the
exploration for, and the development, production, treatment, and transportation
of, Hydrocarbons; (ii) spills of wastes, Hydrocarbons, produced water, Hazardous
Materials, and other materials and substances may have occurred in the past or
in connection with the Assets; (iii) there is a possibility that there are
currently unknown, abandoned wells, plugged wells, pipelines, and other
equipment on or underneath the property underlying the Assets; (iv) it is the
intent of the Parties that all liability associated with the above matters as
well as any responsibility and liability to decommission, plug, or replug such
wells (including the Wells) in accordance with all Legal Requirements and
requirements of Governmental Bodies be passed to Buyer effective as of the
Effective Time and that Buyer shall assume all responsibility and liability for
such matters and all claims and demands related thereto; (v) the Assets may
contain asbestos, Hazardous Materials, or NORM; (vi) NORM may affix or attach
itself to the inside of wells, materials, and equipment as scale or in other
forms; (vii) wells, materials, and equipment located on the Assets may contain
NORM; and (viii) special procedures may be required for remediating, removing,
transporting, and disposing of asbestos, NORM, Hazardous Materials, and other
materials from the Assets.  From and after the Closing, but effective as of the
Effective Time,

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subject to Seller’s indemnity obligations under Section 10.02 (subject to the
limitations and restrictions in Article 10), Buyer shall assume, with respect to
the Assets, all responsibility and liability for any assessment, remediation,
removal, transportation, and disposal of these materials and associated
activities in accordance with all Legal Requirements and requirements of
Governmental Bodies.  

2.07Allocation of Purchase Price.  The Purchase Price shall be allocated among
the Assets as set forth in Schedule 2.07  hereto.  Seller and Buyer agree to be
bound by the Allocated Values set forth in Schedule 2.07 for purposes of Article
11 hereof.  Seller and Buyer further agree that for the purpose of making the
requisite filings under Section 1060 of the Code, and the regulations
thereunder, the Purchase Price and any liabilities assumed by Buyer under this
Agreement that are treated as consideration for Tax purposes shall be allocated
among the Assets in a manner consistent with the Allocated Values, as set forth
on Schedule 2.07 (the “Tax Allocation”).  Seller and Buyer each agree to report,
and to cause their respective Affiliates to report, the federal, state, and
local income and other Tax consequences of the Contemplated Transactions, and in
particular to report the information required by Section 1060(b) of the Code,
and to jointly prepare Form 8594 (Asset Acquisition Statement under Section 1060
of the Code) as promptly as possible following the Closing Date and in a manner
consistent with the Tax Allocation as revised to take into account subsequent
adjustments to the Purchase Price, including any adjustments pursuant to the
Agreement to determine the Final Amount, and shall not take any position
inconsistent therewith upon examination of any tax return, in any refund claim,
in any litigation, investigation or otherwise, unless required to do so by any
Legal Requirement after notice to and discussions with the other Party, or with
such other Party’s prior consent.

article 3

REPRESENTATIONS AND WARRANTIES OF SELLER

Each Seller Party represents and warrants to Buyer as of the Execution Date and
the Closing Date, the following:

3.01Organization and Good Standing.  Such Seller Party and Mayzure are each a
Delaware limited liability company, and are duly organized, validly existing,
and in good standing under the laws of the State of Delaware and, where
required, are duly qualified to do business and is in good standing in each
jurisdiction in which the Assets (or, in the case of Mayzure, any of its assets)
are located, with full limited liability company power and authority to conduct
its business as it is now being conducted, and to own or use the properties and
assets that it purports to own or use.  Such Seller Party is not a “foreign
person” for purposes of Section 1445 of the Code.

3.02Authority; No Conflict.

(a)

The execution, delivery, and performance of this Agreement and the Contemplated
Transactions have been duly and validly authorized by all necessary limited
liability company action on the part of such Seller Party.  This Agreement has
been duly executed and delivered by such Seller Party and at the Closing, all
instruments executed and delivered by such Seller Party at or in connection with
the Closing shall have been duly executed and delivered by such Seller
Party.  This Agreement constitutes the legal, valid, and binding obligation of
such Seller Party, enforceable against such Seller Party in

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accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy or other similar laws affecting the rights and remedies of
creditors generally and by general principles of equity (regardless of whether
such enforceability is considered in a Proceeding in equity or at law).  Upon
execution and delivery by such Seller Party of the Instruments of Conveyance at
the Closing, such Instruments of Conveyance shall constitute legal, valid and
binding transfers and conveyances of the Assets.  Upon the execution and
delivery by such Seller Party of any other documents at the Closing
(collectively with the Instruments of Conveyance, such Seller Party’s “Seller
Closing Documents”), such Seller Closing Documents shall constitute the legal,
valid, and binding obligations of such Seller Party, enforceable against such
Seller Party in accordance with their terms, except as such enforceability may
be limited by applicable bankruptcy or other similar laws affecting the rights
and remedies of creditors generally and by general principles of equity
(regardless of whether such enforceability is considered in a Proceeding in
equity or at law).

(b)

Except as set forth in Schedule 3.02(b), and assuming the receipt of all
Consents and the waiver of all Preferential Purchase Rights (in each case)
applicable to the Contemplated Transactions, and assuming compliance with the
HSR Act, neither the execution and delivery of this Agreement by such Seller
Party nor the consummation or performance of any of the Contemplated
Transactions by such Seller Party shall, directly or indirectly (with or without
notice or lapse of time):

 

(i)

contravene, conflict with, or result in a violation of (A) any provision of the
Organizational Documents of such Seller Party or Mayzure, or (B) any resolution
adopted by the board of directors, managers or officers of such Seller Party or
Mayzure;

 

(ii)

contravene, conflict with, or result in a violation of, or give any Governmental
Body or other Person the right to challenge any of the Contemplated
Transactions, to terminate, accelerate, or modify any terms of, or to exercise
any remedy or obtain any relief under, any Contract or agreement or any Legal
Requirement or Order to which such Seller Party, or any of the Assets, may be
subject;

 

(iii)

contravene, conflict with, or result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental Authorization that
relates to the Assets; or

 

(iv)

result in the imposition or creation of any Encumbrance upon or with respect to
any of the Assets, except for Permitted Encumbrances.

3.03Bankruptcy.  Except for claims or matters related to the bankruptcy case of
Linn Energy, LLC and its subsidiaries commenced on May 11, 2016 and concluded on
February 28, 2017, for which the United States Bankruptcy Court for the Southern
District of Texas retains jurisdiction, there are no bankruptcy, reorganization,
receivership, or arrangement proceedings pending or being contemplated by such
Seller Party or, to such Seller Party’s Knowledge, Threatened against such
Seller Party.

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3.04Taxes.

 

(a)

All material Tax Returns required to be filed by such Seller Party with respect
to Asset Taxes have been timely filed and all such Tax Returns are correct and
complete in all material respects.  All material Asset Taxes required to be paid
by such Seller Party with respect to the Assets that are or have become due have
been timely paid in full, and such Seller Party is not delinquent in the payment
of any such Asset Taxes.  There is not currently in effect any extension or
waiver of any statute of limitations of any jurisdiction regarding the
assessment or collection of any Asset Taxes relating to the Assets.  There are
no administrative or judicial proceedings by any taxing authority pending
against Seller relating to or in connection with a material amount of Asset
Taxes relating to the Assets.  All Tax withholding and deposit requirements
imposed by applicable Legal Requirements with respect to any of the Assets have
been satisfied in all material respects.  Except as disclosed on Schedule 3.04,
no Asset is 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.  Notwithstanding anything
in this Agreement to the contrary, this Section 3.04(a) contains all of the
representations and warranties with respect to the Assets regarding Taxes.  

(b)

All material Tax Returns required to be filed by Mayzure with respect to Asset
Taxes attributable to the assets of Mayzure have been timely filed and all such
Tax Returns are correct and complete in all material respects.  All material
Asset Taxes attributable to the assets of Mayzure required to be paid by Mayzure
that are or have become due have been timely paid in full, and Mayzure is not
delinquent in the payment of any such Asset Taxes.  There is not currently in
effect any extension or waiver of any statute of limitations of any jurisdiction
regarding the assessment or collection of any Asset Taxes attributable to the
assets of Mayzure.  There are no administrative or judicial Proceedings by any
taxing authority pending against Mayzure relating to or in connection with a
material amount of Asset Taxes attributable to the assets of Mayzure.  All Tax
withholding and deposit requirements imposed by applicable Legal Requirements
with respect to any of the assets of Mayzure have been satisfied in all material
respects.  Except as disclosed on Schedule 3.04, Mayzure is classified as an
entity that is disregarded as separate from its owner for U.S. federal (and
applicable state and local) Income Tax purposes, and no asset of Mayzure is
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.  Notwithstanding anything in this
Agreement to the contrary, this Section 3.04(b) contains all of the
representations and warranties with respect to Mayzure regarding Taxes.

3.05Legal Proceedings.  Other than the Assumed Litigation and Retained
Litigation, such Seller Party has not been served with any Proceeding, and, to
such Seller Party’s Knowledge, there is no pending or Threatened Proceeding
(except for immaterial or frivolous claims) against such Seller Party or any of
its Affiliates, in each case, that (a) relates to such Seller Party’s ownership
or operation of any of the Assets or the Equity Interests, or (b) challenges, or
may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions.

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3.06Brokers.  Neither such Seller Party nor its Affiliates have incurred any
obligation or liability, contingent or otherwise, for broker’s or finder’s fees
with respect to the Contemplated Transactions other than obligations that are
and will remain the sole responsibility of such Seller Party and its Affiliates.

3.07Compliance with Legal Requirements.  To such Seller Party’s Knowledge,
except as set forth in Schedule 3.07 or where lack of compliance would not have
a Material Adverse Effect, there is no uncured violation by such Seller Party of
any Legal Requirements (other than Environmental Laws) with respect to such
Seller Party’s ownership and operation of the Assets or the Equity Interests.  

3.08Prepayments.  Except for any Imbalances, such Seller Party has not received
payment under any Contract for the sale of Hydrocarbons produced from the Assets
which requires delivery in the future to any party of Hydrocarbons previously
paid for and not yet delivered.

3.09Imbalances. To such Seller Party’s Knowledge, except as set forth in
Schedule 3.09, there are no Imbalances with respect to such Seller Party’s
obligations relating to the Wells as of the Effective Time.

3.10Material Contracts.  To such Seller Party’s Knowledge, Schedule 3.10 sets
forth all Applicable Contracts with respect to such Seller Party of the type
described below as of the Execution Date (collectively, the “Material
Contracts”):

(a)

any Applicable Contract that is a Hydrocarbon purchase and sale, transportation,
gathering, treating, processing, or similar Applicable Contract that is not
terminable without penalty on ninety (90) days’ or less notice;

(b)

any Applicable Contract that is a Hydrocarbon purchase and sale, transportation,
gathering, treating, processing, or similar Applicable Contract in connection
with the Processing Plants, each of which has been previously provided to Buyer
and listed on Schedule 3.10;

(c)

any Applicable Contract that can reasonably be expected to result in aggregate
payments by such Seller Party of more than Two Hundred Thousand Dollars
($200,000) net to such Seller Party’s interest during the current or any
subsequent fiscal year or more than Five Hundred Thousand ($500,000) in the
aggregate net to such Seller Party’s interest over the term of such Applicable
Contract (based on the terms thereof and contracted (or if none, current)
quantities where applicable);

(d)

any Applicable Contract that is an indenture, mortgage, loan, credit agreement,
sale-leaseback, guaranty of any obligation, bond, letter of credit, or similar
financial Contract; and

(e)

any Applicable Contract that constitutes a partnership agreement, joint venture
agreement, area of mutual interest agreement, joint development agreement, joint
operating agreement, farmin or farmout agreement or similar Contract where the
primary obligation has not been completed prior to the Effective Time (in each
case, excluding any tax partnership).  

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Neither such Seller Party, nor to the Knowledge of such Seller Party, any other
party is in default under any Material Contract, except as set forth in Schedule
3.10.  Except as set forth in Schedule 3.10, there are no Contracts with
Affiliates of such Seller Party that will be binding on the Assets after
Closing.

3.11Consents and Preferential Purchase Rights.  To such Seller Party’s
Knowledge, except as set forth in Schedule 3.11, none of the Assets or the
Equity Interests is subject to any Preferential Purchase Rights or Consents
required to be obtained by such Seller Party which may be applicable to the
Contemplated Transactions, except for (a) Consents and approvals of Governmental
Bodies that are customarily obtained after Closing, (b) Contracts that are
terminable upon not greater than ninety (90) days’ notice without payment of any
fee, and (c) compliance with the HSR Act.

3.12Permits.  To such Seller Party’s Knowledge, except as set forth in Schedule
3.12, (a) with respect to Assets currently operated by such Seller Party or any
of its Affiliates, such Seller Party or its Affiliate (as applicable) has
acquired all Permits from appropriate Governmental Bodies to conduct operations
on such Assets in material compliance with all applicable Legal Requirements;
(b) all such Permits are in full force and effect and no Proceeding is pending
or Threatened to suspend, revoke or terminate any such Permit or declare any
such Permit invalid; and (c) such Seller Party is in compliance in all material
respects with all such Permits.

3.13Current Commitments.  Schedule 3.13 sets forth, as of the Execution Date,
all approved authorizations for expenditures and other approved capital
commitments, individually equal to or greater than Two Hundred Thousand Dollars
($200,000) (net to such Seller Party’s interest) (the “AFEs”) relating to the
Assets to drill or rework any Wells or for other capital expenditures pursuant
to any of the Material Contracts for which all of the activities anticipated in
such AFEs have not been completed by the Execution Date.

3.14Plant Personal Property Condition.  With respect to Personal Property used
in connection with the Processing Plants, the Personal Property is sufficient
and in satisfactory working condition in order to allow the operations of the
plant to continue in a manner that is materially consistent with practices
during the ninety (90) day period before the Execution Date at the Processing
Plants, and no Personal Property has been, or will be, removed from the
Processing Plants between the Effective Time and Closing.

3.15Environmental Laws.  Except as disclosed on Schedule 3.15, (a) there are no
actions, suits or proceedings pending, or to such Seller Party’s Knowledge,
threatened in writing, before any Governmental Body with respect to the Assets
alleging material violations of, or material liabilities under, Environmental
Laws, or claiming remediation obligations, and (b) such Seller Party has
received no notice from any Governmental Body of any alleged or actual material
violation or non-compliance with, or material liability under, any Environmental
Law or of material non-compliance with the terms or conditions of any
environmental permits, arising from, based upon, associated with or related to
the Assets or the ownership or operation of any thereof.

3.16Wells.  Except as disclosed on Schedule 3.16 (a) no Well is subject to
material penalties on allowable production after the Effective Time because of
any overproduction, and (b) there are no Wells that such Seller Party is
obligated by applicable Legal Requirement or contract

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to plug or abandon or that are currently subject to exceptions to a requirement
to plug or abandon issued by a Governmental Body

3.17Employee Benefits.  

(a)

Schedule 3.17(a) contains a true and complete list of each “employee benefit
plan,” as defined in Section 3(3) of ERISA, and all other retirement, pension,
deferred compensation, bonus, incentive, severance, executive life insurance,
vacation, stock purchase, stock option, phantom stock, equity, employment,
profit sharing, retention, stay bonus, change of control and other compensation
or benefit plans, programs, agreements or arrangements maintained, sponsored or
contributed to by such Seller Party or any of its ERISA Affiliates for the
benefit of any Available Employee (collectively, such Seller Party’s “Seller
Benefit Plans”).  

(b)

THIS SECTION 3.17 CONTAINS THE EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF SUCH
SELLER PARTY WITH RESPECT TO EMPLOYEE BENEFITS MATTERS.  NO OTHER PROVISION OF
THIS AGREEMENT SHALL BE CONSTRUED AS CONSTITUTING A REPRESENTATION OR WARRANTY
REGARDING SUCH MATTERS.

3.18Knowledge Qualifier for Non-Operated Assets.  To the extent that such Seller
Party has made any representations or warranties in this Article 3 in connection
with matters relating to Non-Operated Assets, each and every such representation
and warranty shall be deemed to be qualified by the phrase, “To such Seller
Party’s Knowledge.”

3.19Disclosures with Multiple Applicability; Materiality.  If any fact,
condition, or matter disclosed in Seller’s disclosure Schedules applies to more
than one Section of this Article 3, a single disclosure of such fact, condition,
or matter on Seller’s disclosure Schedules shall constitute disclosure with
respect to all sections of this Article 3 to which such fact, condition, or
other matter applies, regardless of the section of Seller’s disclosure Schedules
in which such fact, condition, or other matter is described.  Inclusion of a
matter on Seller’s disclosure Schedules with respect to a representation or
warranty that is qualified by “material” or “Material Adverse Effect” or any
variant thereof shall not necessarily be deemed an indication that such matter
does, or may, be material or have a Material Adverse Effect.  Matters may be
disclosed on a Schedule to this Agreement for purposes of information only.

3.20Mayzure Organizational Documents.  RUL has delivered to Buyer true and
complete copies of the Organizational Documents of Mayzure, each as amended to
date, and has made available for inspection minute book of Mayzure.

3.21Equity Interests.  The Equity Interests constitute one hundred percent
(100%) of the total issued and outstanding membership interests or other equity
interests in Mayzure.  RUL has legal, beneficial and record title to all of the
Equity Interests free and clear of any Encumbrances other than Mayzure’s
Organizational Documents and, except for this Agreement and any debt instruments
that will be released at Closing, there are no Contracts or commitments that
could require RUL to sell, transfer or otherwise dispose of the Equity
Interests, other than this Agreement, or issue any other membership interests in
Mayzure.  There are no voting trusts,

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proxies or other agreements or understandings with respect to the voting of the
Equity Interests.  Immediately upon consummation of the Contemplated
Transactions, Buyer will own all of the Equity Interests free and clear of all
Encumbrances, other than Mayzure’s Organizational Documents or any Encumbrances
created by, through or under Buyer or its Affiliates, or any restrictions on
transfer that may be imposed by federal or state securities laws.

3.22No Undisclosed Liabilities.  Except to the extent associated with proceeds
of helium produced from the Wells, or as otherwise disclosed on Schedule 3.22
(none of which have or will have arisen as a result of negligence, gross
negligence, strict liability, tort, toxic tort, environmental liabilities,
violations of law, or default under any material contract attributable to
Mayzure or for which Mayzure shall be responsible), Mayzure does not have any
material debts, liabilities, or obligations of any kind or character whatsoever,
whether accrued, absolute, contingent, matured, not matured, known, unknown, or
otherwise, and whether or not of a character as would be required to be
reflected in a balance sheet of Mayzure.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF BUYER

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

4.01Organization and Good Standing.  Buyer is a limited partnership and duly
organized, validly existing, and in good standing under the laws of Texas and is
duly qualified to do business and is in good standing in each jurisdiction in
which the Assets are located.  Buyer’s Affiliate Scout Energy Management, LLC is
a limited liability company and duly organized, validly existing, and in good
standing under the laws of Texas and is duly qualified to do business and is in
good standing in each jurisdiction in which the Assets are located.  

4.02Authority; No Conflict.

(a)

This Agreement constitutes the legal, valid, and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy or other similar laws
affecting the rights and remedies of creditors generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).  Upon the execution and delivery by Buyer of
the Instruments of Conveyance and any other documents executed and delivered by
Buyer at the Closing (collectively, “Buyer’s Closing Documents”), Buyer’s
Closing Documents shall constitute the legal, valid, and binding obligations of
Buyer enforceable against Buyer in accordance with their respective terms,
except as such enforceability may be limited by applicable bankruptcy or other
similar laws affecting the rights and remedies of creditors generally and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).  Buyer has the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and Buyer’s Closing Documents, and to perform its obligations under
this Agreement and Buyer’s Closing Documents.

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(b)

Neither the execution and delivery of this Agreement by Buyer nor the
consummation or performance of any of the Contemplated Transactions by Buyer
shall give any Person the right to prevent, delay, or otherwise interfere with
any of the Contemplated Transactions.

(c)

Neither the execution and delivery of this Agreement by Buyer nor the
consummation or performance of any of the Contemplated Transactions by Buyer
shall (i) contravene, conflict with, or result in a violation of any provision
of the Organizational Documents of Buyer, (ii) contravene, conflict with, or
result in a violation of any resolution adopted by the board of managers, or
members of Buyer, or (iii) contravene, conflict with, or result in a violation
of, or give any Governmental Body or other Person the right to challenge any of
the Contemplated Transactions, to terminate, accelerate, or modify any terms of,
or to exercise any remedy or obtain any relief under, any agreement or any Legal
Requirement or Order to which Buyer may be subject.

(d)

Buyer is not and shall not be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.

4.03Certain Proceedings.  There is no Proceeding pending against Buyer that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions.  To Buyer’s
Knowledge, no such Proceeding has been Threatened.

4.04Knowledgeable Investor.  Buyer is an experienced and knowledgeable investor
in the oil and gas business.  Prior to entering into this Agreement, Buyer was
advised by its own legal, tax, and other professional counsel concerning this
Agreement, the Contemplated Transactions, the Equity Interests, the Assets, and
their value, and it has relied solely thereon and on the representations and
obligations of Seller in this Agreement and the documents to be executed by
Seller in connection with this Agreement at the Closing.  Buyer is acquiring the
Assets and the Equity Interests for its own account and not for sale or
distribution in violation of the Securities Act of 1933, as amended, the rules
and regulations thereunder, any applicable state blue sky laws, or any other
applicable Legal Requirements.

4.05Qualification.  Buyer is an “accredited investor,” as such term is defined
in Regulation D of the Securities Act of 1933, as amended.  Buyer is not
acquiring the Assets or Equity Interests in connection with a distribution or
resale thereof in violation of federal or state securities laws and the rules
and regulations thereunder.  Without limiting Section 6.02, Buyer is, or as of
the Closing will be, qualified under applicable Legal Requirements to hold
leases, rights-of-way, and other rights issued or controlled by (or on behalf
of) any applicable Governmental Body and will be qualified under applicable
Legal Requirements to own and operate the Assets.  Buyer has, or as of the
Closing will have, posted such bonds as may be required for the ownership or,
where applicable, operatorship by Buyer of the Assets.  To Buyer’s Knowledge, no
fact or condition exists with respect to Buyer or the Assets which may cause any
Governmental Body to withhold its approval of the Contemplated Transactions.

4.06Brokers.  Neither Buyer nor its Affiliates have incurred any obligation or
liability, contingent or otherwise, for broker’s or finder’s fees with respect
to the Contemplated

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Transactions other than obligations that are or will remain the sole
responsibility of Buyer and its Affiliates.

4.07Financial Ability.  Buyer has sufficient cash, available lines of credit, or
other sources of immediately available funds to enable it to (a) deliver the
amounts due at the Closing, (b) take such actions as may be required to
consummate the Contemplated Transactions, and (c) timely pay and perform Buyer’s
obligations under this Agreement and Buyer’s Closing Documents.  Buyer expressly
acknowledges that the failure to have sufficient funds shall in no event be a
condition to the performance of its obligations hereunder, and in no event shall
the Buyer’s failure to perform its obligations hereunder be excused by failure
to receive funds from any source.

4.08Securities Laws.  The solicitation of offers and the sale of the Assets and
the Equity Interests by Seller have not been registered under any securities
laws.  At no time has Buyer been presented with or solicited by or through any
public promotion or any form of advertising in connection with the Contemplated
Transactions.  Buyer is not acquiring the Assets or the Equity Interests with
the intent of distributing fractional, undivided interests that would be subject
to regulation by federal or state securities laws, and that if it sells,
transfers, or otherwise disposes of the Assets or the Equity Interests or
fractional undivided interests therein, it shall do so in compliance with
applicable federal and state securities laws.

4.09Due Diligence.  Without limiting or impairing any representation, warranty,
covenant or agreement of Seller contained in this Agreement and the Seller
Closing Documents, or Buyer’s right to rely thereon, subject to Buyer’s rights
to access the Assets to conduct a due diligence review in accordance with this
Agreement, at Closing, Buyer and its Representatives have (a) been permitted
full and complete access to all materials relating to the Assets and the Equity
Interests, (b) been afforded the opportunity to ask all questions of Seller (or
Seller’s Representatives) concerning the Assets, (c) been afforded the
opportunity to investigate the condition of the Assets and the Equity Interests,
and (d) had the opportunity to take such other actions and make such other
independent investigations as Buyer deems necessary to evaluate the Assets and
the Equity Interests and understand the merits and risks of an investment
therein and to verify the truth, accuracy, and completeness of the materials,
documents, and other information provided or made available to Buyer (whether by
Seller or otherwise).  Buyer hereby waives any claims arising out of any
materials, documents, or other information provided or made available to Buyer
(whether by Seller or otherwise), whether under this Agreement, at common law,
by statute, or otherwise.

4.10Basis of Buyer’s Decision.  By reason of Buyer’s knowledge and experience in
the evaluation, acquisition, and operation of oil and gas properties, Buyer has
evaluated the merits and the risks of purchasing the Assets and the Equity
Interests from Seller and has formed an opinion based solely on Buyer’s
knowledge and experience, Seller’s representations, warranties, covenants, and
agreements contained in this Agreement and the Seller Closing Documents, and as
of Closing, Buyer’s due diligence, and not on any other representations or
warranties by Seller.  Buyer has not relied and shall not rely on any statements
by Seller or its Representatives (other than those representations, warranties,
covenants, and agreements of Seller contained in this Agreement and the Seller
Closing Documents) in making its decision to enter into this Agreement or to
close the Contemplated Transactions.  Buyer understands and acknowledges that

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neither the United States Securities and Exchange Commission nor any other
Governmental Body has passed upon the Assets or the Equity Interests or made any
finding or determination as to the fairness of an investment in the Assets or
the Equity Interests or the accuracy or adequacy of the disclosures made to
Buyer, and, except as set forth in Article 9, Buyer is not entitled to cancel,
terminate, or revoke this Agreement, whether due to the inability of Buyer to
obtain financing or pay the Purchase Price, or otherwise.

4.11Business Use, Bargaining Position.  Buyer is purchasing the Assets and the
Equity Interests for commercial or business use.  Buyer has sufficient knowledge
and experience in financial and business matters that enables it to evaluate the
merits and the risks of transactions such as the Contemplated Transactions, and
Buyer is not in a significantly disparate bargaining position with
Seller.  Buyer expressly acknowledges and recognizes that the price for which
Seller has agreed to sell the Assets and the Equity Interests and perform its
obligations under the terms of this Agreement has been predicated upon the
inapplicability of the Texas Deceptive Trade Practices - Consumer Protection
Act, V.C.T.A. BUS & COMM Ann. § 17.41 et seq. (the “DTPA”), to the extent
applicable, or any similar Legal Requirement, and the waiver of the DTPA, and
any similar Legal Requirement, by Buyer contained in Section 13.04.  Buyer
further recognizes that Seller, in determining to proceed with entering into
this Agreement, has expressly relied on the provisions of this Article 4.

4.12Bankruptcy.  There are no bankruptcy, reorganization, receivership, or
arrangement proceedings pending or being contemplated by Buyer or, to Buyer’s
Knowledge, Threatened against Buyer.  Buyer is, and will be immediately after
giving effect to the Contemplated Transactions, solvent.

ARTICLE 5

COVENANTS OF SELLER

5.01Access and Investigation.  

(a)

Between the Execution Date and the Defect Notice Date, to the extent doing so
would not violate applicable Legal Requirements, Seller’s obligations to any
Third Party or other restrictions on Seller, Seller shall afford Buyer and its
Representatives access, by appointment only, during Seller’s regular hours of
business to reasonably appropriate Seller’s personnel, any Seller operated
Assets, contracts, books and records, and other documents and data related to
the Assets and the Equity Interests, except any such contracts, books and
records, or other documents and data that are Excluded Assets or that cannot,
without unreasonable effort or expense, be separated from any contracts, books
and records, or other documents and data that are Excluded Assets (and upon
Buyer’s request, Seller shall use reasonable efforts to obtain the consent of
Third Party operators to give Buyer and its Representatives reasonable access to
similar information with respect to Assets not operated by Seller or its
Affiliates; provided that Seller shall not be required to make payments or
undertake obligations in favor any Third parties in order to obtain such
consent); provided further that, except as expressly provided in this Agreement
or in the Instruments of Conveyance, Seller makes no representation or warranty,
and expressly disclaims all representations and warranties as to the accuracy or
completeness of the documents, information, books, records, files, and other
data that it may provide or disclose to Buyer.  

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(b)

Notwithstanding the provisions of Section 5.01(a), (i) Buyer’s investigation
shall be conducted in a manner that minimizes interference with the operation of
the business of Seller and any applicable Third Parties, and (ii) Buyer’s right
of access shall not entitle Buyer to operate equipment or conduct subsurface or
other invasive testing or sampling.  Environmental review shall not exceed the
review contemplated by a Phase I Environmental Site Assessment without Seller’s
prior written permission, which may be withheld in Seller’s sole discretion,
subject to the provisions of Section 11.09.

(c)

Buyer acknowledges that, pursuant to its right of access to the Records and the
Assets, Buyer will become privy to confidential and other information of Seller
and Seller’s Affiliates and the Assets and that such confidential information
shall be held confidential by Buyer and Buyer’s Representatives in accordance
with the terms of the Confidentiality Agreement.  If the Closing should occur,
the foregoing confidentiality restriction on Buyer, including the
Confidentiality Agreement, shall terminate (except as to the Excluded Assets);
provided that such termination of the Confidentiality Agreement shall not
relieve any party thereto from any liability thereunder for the breach of such
agreement prior to the Execution Date.

5.02Operation of the Assets.  Except as set forth on Schedule 5.02, or as
required by applicable Legal Requirements, between the Execution Date and the
Closing, Seller shall operate its business with respect to its ownership and
operation of the Assets in the ordinary course, and, without limiting the
generality of the preceding, shall:

(a)

not transfer, sell, hypothecate, encumber, or otherwise dispose of any of the
Assets or Equity Interests, except as required under any Leases or Contracts,
and except for sales of Hydrocarbons, equipment and inventory in the ordinary
course of business;

(b)

not abandon any Asset (except the abandonment or expiration of Leases in
accordance with their terms, including with respect to leases not capable of
producing in paying quantities after the expiration of their primary terms or
for failure to pay delay rentals or shut-in royalties or similar types of lease
maintenance payments, which shall, in each case, be at Seller’s sole
discretion);

(c)

not commence, propose, or agree to participate in any single operation with
respect to the Wells or Leases with an anticipated cost in excess of Two Hundred
Thousand Dollars ($200,000) net to Seller’s interest, except for any emergency
operations;

(d)

not execute, terminate, cancel, extend, or materially amend or modify any
Material Contract or Lease other than the execution or extension of a Contract
for the sale, exchange, transportation, gathering, treating, or processing of
Hydrocarbons terminable without penalty on ninety (90) days’ or shorter notice.

Buyer acknowledges that Seller owns undivided interests in certain of the
properties comprising the Assets, and Buyer agrees that the acts or omissions of
the other working interest owners who are not Seller or an Affiliate of Seller
shall not constitute a Breach of the provisions of this Section 5.02, nor shall
any action required by a vote of working interest owners constitute such a
Breach so long as Seller or its Affiliate has voted its interest in a manner
that complies with the provisions of this Section 5.02.  Further, no action or
inaction of any Third Party operator with respect to any

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Asset shall constitute a Breach of this Section 5.02 to the extent Seller uses
commercially reasonable efforts to cause such Third Party operator to operate
such applicable Asset in a manner consistent with this Section 5.02.  Seller may
seek Buyer’s approval to perform any action that would otherwise be restricted
by this Section 5.02, and Buyer’s approval of any such action shall not be
unreasonably withheld, conditioned, or delayed, and shall be considered granted
ten (10) days (unless a shorter time is reasonably required by the circumstances
and such shorter time is specified in Seller’s notice) after delivery of notice
from Seller to Buyer requesting such consent unless Buyer notifies Seller to the
contrary during such ten (10)-day period.  Notwithstanding the foregoing
provisions of this Section 5.02, in the event of an emergency, Seller may take
such action as reasonably necessary and shall notify Buyer of such action
promptly thereafter.  Any matter approved (or deemed approved) by Buyer pursuant
to this Section 5.02 that would otherwise constitute a Breach of one of Seller’s
representations and warranties in Article 3 shall be deemed to be an exclusion
from all representations and warranties for which it is relevant.

5.03Insurance.  Seller shall maintain in force during the period from the
Execution Date until the Closing, all of Seller’s insurance policies pertaining
to the Assets in the amounts and with the coverages currently maintained by
Seller.  The daily pro-rated annual premiums for insurance that accrue after the
Effective Time and are attributable to the insurance coverage for the period
after the Effective Time until the Closing will constitute Property Costs.

5.04Consent and Waivers.  Seller shall use commercially reasonable efforts to
obtain prior to the Closing written waivers of all Preferential Purchase Rights
and all Consents necessary for the transfer of the Assets and the Equity
Interests to Buyer; provided that in the event Seller is unable to obtain all
such waivers of Preferential Purchase Rights and Consents after using such
commercially reasonable efforts, such failure to satisfy shall not constitute a
Breach of this Agreement.  Seller shall not be required to make any payments to,
or undertake any obligations for the benefit of, the holders of such rights in
order to obtain the Required Consents.  Buyer shall cooperate with Seller in
seeking to obtain such Consents.

5.05Amendment to Schedules.  Until the fifth (5th) Business Day before Closing,
Seller shall have the right (but not the obligation) to supplement the Schedules
relating to the representations and warranties set forth in Article 3 with
respect to any matters occurring subsequent to the Execution Date.  Except to
the extent such updates are a direct result of actions taken with Buyer’s
consent pursuant to Section 5.02, prior to Closing, any such supplement shall
not be considered for purposes of determining if Buyer’s Closing conditions have
been met under Section 7.01 or for determining any remedies available under this
Agreement; provided, however, that if Closing occurs, then such supplements
shall be incorporated into Seller’s disclosure Schedules and any claim related
to such matters disclosed in the supplements shall be deemed waived and Buyer
shall not be entitled to make a claim thereon under this Agreement or otherwise
with respect to such matters.

5.06Successor Operator.  While Buyer acknowledges that it desires to succeed
Seller (or its Affiliates) as operator of those Assets or portions thereof that
Seller (or its Affiliates) may presently operate, Buyer acknowledges and agrees
that Seller cannot and does not covenant or warrant that Buyer shall become
successor operator of such Assets because 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 any Seller
Party or its Affiliate operates,

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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 operating agreement) effective as of the Closing (at Buyer’s sole
cost and expense) and to designate or appoint, to the extent legally possible
and permitted under any applicable operating agreement, Buyer as successor
operator of such Assets effective as of Closing.  

article 6

OTHER COVENANTS

6.01Notification and Cure.  If Buyer has Knowledge as of the Execution Date of
any Breach of any Seller Party’s representations and warranties, Buyer shall
have no remedy under this Agreement, including under Section 9.01 and Article
10, with respect to such Breach.  Between the Execution Date and the Closing
Date, Buyer shall promptly notify Seller in writing and Seller shall promptly
notify Buyer in writing if Seller or Buyer, as applicable, obtains Knowledge of
any Breach, in any material respect, of the other Party’s representations and
warranties or covenants as of the Execution Date, or of an occurrence after the
Execution Date that would cause or constitute a Breach, in any material respect,
of any such representation and warranty or covenant had such representation and
warranty or covenants been made as of the time of occurrence or discovery of
such fact or condition.  If any of Buyer’s or Seller’s representations or
warranties are untrue or shall become untrue in any material respect between the
Execution Date and the Closing Date, or if any of Buyer’s or Seller’s covenants
or agreements to be performed or observed prior to or on the Closing Date shall
not have been so performed or observed in any material respect, and if such
breach of representation, warranty, covenant or agreement shall (if curable) be
cured by the Closing (or, if the Closing does not occur, by the date set forth
in Section 9.01(d)), then such breach shall be considered not to have occurred
for all purposes of this Agreement.

6.02Satisfaction of Conditions.  Between the Execution Date and the Closing Date
(a) Seller shall use commercially reasonable efforts to cause the conditions in
Article 7 to be satisfied, and (b) Buyer shall use commercially reasonable
efforts to cause the conditions in Article 8 to be satisfied.

6.03Replacement of Insurance, Bonds, Letters of Credit, and Guaranties.  

(a)

The Parties understand that none of the insurance currently maintained by Seller
or Seller’s Affiliates covering the Assets, nor any of the bonds, letters of
credit, or guaranties, if any, posted by Seller or Seller’s Affiliates with
Governmental Bodies or co-owners and relating to the Assets will be transferred
to Buyer.  On or before the Closing Date, Buyer (and, as applicable, its
Affiliate Scout Energy Management LLC, to the extent Buyer appoints Scout Energy
Management LLC as its agent to operate any of the Assets) shall obtain, and
deliver to Seller evidence of, all necessary replacement bonds, letters of
credit, and guaranties, and evidence of such other authorizations,
qualifications, and approvals as may be necessary for Buyer to own and, with
respect to Assets currently operated by Seller or its Affiliates, operate the
Assets.  Promptly following the Closing, Buyer shall obtain or cause to be
obtained in the name of Buyer or, as applicable, its Affiliate Scout Energy
Management LLC, such insurance covering the Assets as would be obtained by a
reasonably prudent operator in a similar situation.

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(b)

Promptly (but in no event later than thirty (30) days) after Closing, Buyer
shall, at its sole cost and expense, make all filings with Governmental Bodies
necessary to assign and transfer the Assets and the Equity Interests and title
thereto and to comply with applicable Legal Requirements, and Seller shall
reasonably assist Buyer with such filings.  Buyer shall indemnify, defend, and
hold harmless Seller Group from and against all Damages arising out of Buyer’s
holding of such title or operatorship of the Assets after the Closing and prior
to the securing of any necessary Consents and approvals of the Contemplated
Transactions from Governmental Bodies.

6.04Governmental Reviews.  Except for the HSR Act, Seller and Buyer shall (and
shall cause their respective Affiliates to), in a timely manner, make all other
required filings (if any) with, prepare applications to, and conduct
negotiations with Governmental Bodies as required to consummate the Contemplated
Transactions.  Each Party shall, to the extent permitted pursuant to applicable
Legal Requirements, cooperate with and use all reasonable efforts to assist the
other with respect to such filings, applications and negotiations.  Buyer shall
bear the cost of all filing or application fees payable to any Governmental Body
with respect to the Contemplated Transactions, regardless of whether Buyer,
Seller, or any Affiliate of any of them is required to make the payment.

6.05HSR Act. If applicable, within ten (10) Business Days following the
execution by Buyer and Seller of this Agreement, Buyer and Seller will each
prepare and simultaneously file with the DOJ and the FTC the notification and
report form required for the transactions contemplated by this Agreement by the
HSR Act and request early termination of the waiting period thereunder.  Buyer
and Seller agree to respond promptly to any inquiries or requests for
information or documentary material from the DOJ or the FTC concerning such
filings and to comply in all material respects with the filing requirements of
the HSR Act.  Buyer and Seller shall cooperate with each other and, subject to
the terms of the Confidentiality Agreement, shall promptly furnish all
information to the other Party that is necessary in connection with Buyer’s and
Seller’s compliance with the HSR Act.  Buyer and Seller shall keep each other
fully advised with respect to any requests from or communications with the DOJ
or FTC concerning such filings and shall consult with each other with respect to
all responses thereto.  Each of Seller and Buyer shall use its commercially
reasonable efforts to take all actions reasonably necessary and appropriate in
connection with any HSR Act filing to satisfy the conditions to the Closing and
consummate Contemplated Transactions as promptly as practicable and in any event
not later than the Outside Date; provided, however, nothing in this Agreement
shall require Buyer or Seller to propose, negotiate, effect or agree to, the
sale, divestiture, license or other disposition of any assets or businesses of
Buyer or Seller (including the Assets) or otherwise take any action that limits
the freedom of action with respect to, or its ability to retain or operate any
of the businesses of the Buyer or Seller or the Assets.  The filing fees
associated with any such HSR Act filing shall be borne by
Buyer.  Notwithstanding any provision of this Section 6.05, no Party shall be
required to provide the other Party with information regarding the value of the
transaction or subject to the attorney client privilege, work product doctrine
or other similar privilege absent entering into a mutually acceptable joint
defense agreement.

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article 7

CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE

Buyer’s obligation to purchase the Assets and the Equity Interests and to take
the other actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):

7.01Accuracy of Representations.  All of Seller’s representations and warranties
in this Agreement must have been true and correct in all material respects (or,
with respect to representations and warranties qualified by materiality or
Material Adverse Effect, true and correct in all respects) as of the Execution
Date, and must be true and correct in all material respects (or, with respect to
representations and warranties qualified by materiality or Material Adverse
Effect, true and correct in all respects) as of the Closing Date as if made on
the Closing Date, other than any such representation and warranty that refers to
a specified date, which need only be true and correct in all material respects
(or, if qualified by materiality or Material Adverse Effect, true and correct in
all respects) on and as of such specified date.

7.02Seller’s Performance.  All of the covenants and obligations that Seller is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been duly performed and complied with in all material
respects.

7.03No Proceedings.  Since the Execution Date, there must not have been
commenced or Threatened against Seller, or against any of Seller’s Affiliates,
any Proceeding (other than any matter initiated by either Buyer or its
Affiliates) seeking to restrain, enjoin, or otherwise prohibit or make illegal,
or seeking to recover material damages on account of, any of the Contemplated
Transactions.

7.04No Orders.  On the Closing Date, there shall be no Order pending or
remaining in force of any Governmental Body having appropriate jurisdiction that
attempts to restrain, enjoin, or otherwise prohibit the consummation of the
Contemplated Transactions, or that grants material damages in connection
therewith.

7.05Necessary Consents and Approvals.   All Consents from Governmental Bodies
and all approvals from Governmental Bodies required for the Contemplated
Transactions, except Consents and approvals of assignments by Governmental
Bodies that are customarily obtained after closing, shall have been granted, or
the necessary waiting period shall have expired, or early termination of the
waiting period shall have been granted.

7.01HSR Act.  Any waiting period applicable to the consummation of the
Contemplated Transactions under the terms of this Agreement under the HSR Act
shall have expired or been terminated.

7.07Closing Deliverables.  Seller shall have delivered (or be ready, willing and
able to deliver at the Closing) to Buyer the documents and other items required
to be delivered by Seller under Section 2.04(a).

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7.08Title Defect Values, Environmental Defect Values, etc.  The sum of (i) all
Title Defect Values agreed on by the Parties or finally determined pursuant to
Article 11, plus (ii) the Aggregate Environmental Defect Values agreed on by the
Parties or finally determined pursuant to Article 11, plus (iii) the aggregate
downward Purchase Price adjustments under Section 11.09, plus (iv) the aggregate
downward Purchase Price adjustments under Section 11.03, does not exceed
twenty-five percent (25%) of the unadjusted Purchase Price.

7.09Gathering Consents.  All applicable consents to the assignment of Seller’s
operating rights and obligations relating to the Gathering System shall have
been granted or the Parties shall have entered in to the operating agreement
described in Section 11.03(c).

article 8

CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE

Seller’s obligation to sell the Assets and the Equity Interests and to take the
other actions required to be taken by Seller at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Seller, in whole or in part):

8.01Accuracy of Representations.  All of Buyer’s representations and warranties
in this Agreement must have been true and correct in all material respects (or,
with respect to representations and warranties qualified by materiality or
Material Adverse Effect, true and correct in all respects) as of the Execution
Date, and must be true and correct in all material respects (or, with respect to
representations and warranties qualified by materiality or Material Adverse
Effect, true and correct in all respects) as of the Closing Date as if made on
the Closing Date, other than any such representation and warranty that refers to
a specified date, which need only be true and correct in all material respects
(or, if qualified by materiality or Material Adverse Effect, true and correct in
all respects) on and as of such specified date.

8.02Buyer’s Performance.  All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been duly performed and complied with in all material
respects.

8.03No Proceedings.  Since the Execution Date, there must not have been
commenced or Threatened against Buyer or against any of its Affiliates, any
Proceeding (other than any matter initiated by Seller or an Affiliate of Seller)
seeking to restrain, enjoin, or otherwise prohibit or make illegal, or seeking
to recover material damages on account of, any of the Contemplated Transactions.

8.04No Orders.  On the Closing Date, there shall be no Order pending or
remaining in force of any Governmental Body having appropriate jurisdiction that
attempts to restrain, enjoin, or otherwise prohibit the consummation of the
Contemplated Transactions, or that grants material damages in connection
therewith.

8.05Necessary Consents and Approvals.   All Consents from Governmental Bodies
and all approvals from Governmental Bodies required for the Contemplated
Transactions, except Consents and approvals of assignments by Governmental
Bodies that are customarily obtained after closing, shall have been granted, or
the necessary waiting period shall have expired, or early termination of the
waiting period shall have been granted.

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8.06HSR Act. Any waiting period applicable to the consummation of the
Contemplated Transactions under the HSR Act shall have expired or been
terminated.

8.07Closing Deliverables.  Buyer shall have delivered (or be ready, willing and
able to deliver at the Closing) to Seller the documents and other items required
to be delivered by Buyer under Section 2.04(b).

8.08Title Defect Values, Environmental Defect Values, etc.  The sum of (i) all
Title Defect Values agreed on by the Parties or finally determined pursuant to
Article 11, plus (ii) the Aggregate Environmental Defect Values agreed on by the
Parties or finally determined pursuant to Article 11, plus (iii) the aggregate
downward Purchase Price adjustments under Section 11.02, plus (iv) the aggregate
downward Purchase Price adjustments under Section 11.09, plus (v) the aggregate
downward Purchase Price adjustments under Section 11.03, does not exceed
twenty-five percent (25%) of the unadjusted Purchase Price.

8.09Qualifications.  Buyer shall have obtained or, where applicable caused its
Affiliate Scout Energy Management LLC to obtain, all authorizations,
qualifications, and approvals required to be obtained prior to Closing under
Section 6.03(a).

8.10Gathering Consents.  All applicable consents to the assignment of Seller’s
operating rights and obligations relating to the Gathering System shall have
been granted or the Parties shall have entered in to the operating agreement
described in Section 11.03(c).

article 9

TERMINATION

9.01Termination Events.  This Agreement may, by written notice given prior to or
at the Closing, be terminated:

(a)

by mutual written consent of Seller and Buyer;

(b)

by Buyer, if Seller has committed a material Breach of this Agreement and such
Breach causes any of the conditions to Closing set forth in Article 7 not to be
satisfied (or, if prior to Closing, such Breach is of such a magnitude or effect
that it will not be possible for such condition to be satisfied); provided,
however, that in the case of a Breach that is capable of being cured, Seller
shall have a period of ten (10) Business Days following receipt of such notice
to attempt to cure the Breach and the termination under this Section 9.01(b)
shall not become effective unless Seller fails to cure such Breach prior to the
end of such ten (10) Business Day period; provided, further, if (i) Seller’s
conditions to Closing have been satisfied or waived in full, (ii) Seller is not
in material Breach of the terms of this Agreement and (iii) all of Buyer’s
conditions to Closing have been satisfied or waived, then the refusal or willful
or negligent delay by Seller to timely close the Contemplated Transactions shall
constitute a material Breach of this Agreement;

(c)

by Seller, if Buyer has committed a material Breach of this Agreement and such
breach causes any of the conditions to Closing set forth in Article 8 not to be
satisfied (or, if prior to Closing, such Breach is of such a magnitude or effect
that it will not be possible for such condition to be satisfied); provided,
however, that in the case of a Breach that is capable of

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being cured, Buyer shall have a period of ten (10) Business Days following
receipt of such notice to attempt to cure the Breach and the termination under
this Section 9.01(c) shall not become effective unless Buyer fails to cure such
Breach prior to the end of such ten (10) Business Day period; provided, further,
if (i) Buyer’s conditions to Closing have been satisfied or waived in full, (ii)
Buyer is not in material Breach of the terms of this Agreement and (iii) all of
Seller’s conditions to Closing have been satisfied or waived, then the refusal
or willful or negligent delay by Buyer to timely close the Contemplated
Transactions shall constitute a material Breach of this Agreement;

(d)

by either Seller or Buyer if the Closing has not occurred on or before December
31, 2019 (the “Outside Date”), or such later date as the Parties may agree upon
in writing; provided that such failure does not result primarily from the
terminating Party’s material Breach of this Agreement;

(e)

by either Seller or Buyer if (i) any Legal Requirement has made the consummation
of the Contemplated Transactions illegal or otherwise prohibited, or (ii) a
Governmental Body has issued an Order, or taken any other action permanently
restraining, enjoining, or otherwise prohibiting the consummation of the
Contemplated Transactions, and such order, decree, ruling, or other action has
become final and non-appealable;

(f)

by Seller if the Closing condition in Section 8.08 is not satisfied (or not
possible of being satisfied at Closing);

(g)

by Buyer if the Closing condition in Section 7.08 is not satisfied (or not
possible of being satisfied at Closing); or

(h)

by Seller if Buyer fails to deposit the Deposit Amount pursuant to Section 2.02
of this Agreement.

9.02Effect of Termination; Distribution of the Deposit Amount.  

(a)

If this Agreement is terminated pursuant to Section 9.01, all further
obligations of the Parties under this Agreement shall terminate; provided that
(a) such termination shall not impair nor restrict the rights of either Party
against the other with respect to the Deposit Amount pursuant to Section
9.02(b), (b) except to the extent either Party has received the Deposit Amount
(or, with respect to Buyer, damages in an amount up to the Deposit Amount) as
liquidated damages pursuant to Section 9.02(b), the termination of this
Agreement shall not relieve any Party from liability for any failure to perform
or observe in any material respect any of its agreements or covenants contained
herein which are to be performed or observed at or prior to Closing, (c) except
to the extent either Party has received the Deposit Amount (or, with respect to
Buyer, damages in an amount up to the Deposit Amount) as liquidated damages
pursuant to Section 9.02(b), to the extent such termination results from the
material Breach by a Party of any of its covenants or agreements hereunder, the
other Party shall be entitled to all remedies available at law or in equity with
respect to such Breach and shall be entitled to recover court costs and
reasonable attorneys’ fees in addition to any other relief to which such Party
may be entitled, and (d) the following provisions shall survive the termination:
Article 1, Sections 9.01(h), 10.02(c), 10.03(c), 10.06, 10.07, 10.10, 10.11,
10.12, Article 13 (other than Section 13.01) and any such terms as set forth in
this Agreement that are necessary to give context to any of the foregoing
surviving Sections.

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(b)

Notwithstanding anything to the contrary in Section 9.02(a):

 

(i)

If Seller has the right to terminate this Agreement (A) pursuant to Section
9.01(c) or (B) pursuant to Section 9.01(d), if at such time Seller could have
terminated this Agreement pursuant to Section 9.01(c) (without regard to any
cure periods contemplated therein), then, in either case, Seller shall have the
right, at its sole discretion, to receive the Deposit Amount as liquidated
damages (and not as a penalty).  If Seller elects to terminate this Agreement
pursuant to this Section 9.02(b)(i) and receive the Deposit Amount as liquidated
damages, (x) the Parties shall, within two (2) Business Days of Seller’s
election, execute and deliver to the Escrow Agent a joint instruction letter
directing the Escrow Agent to release the Deposit Amount to Seller and (y)
Seller shall be free to enjoy immediately all rights of ownership of the Assets
and to sell, transfer, encumber, or otherwise dispose of the Assets to any
Person without any restriction under this Agreement.

 

(ii)

If Buyer has the right to terminate this Agreement (A) pursuant to Section
9.01(b) or (B) pursuant to Section 9.01(d), if at such time Seller could have
terminated this Agreement pursuant to Section 9.01(b) (without regard to any
cure periods contemplated therein), then, in either case, Buyer shall have the
right, at its sole discretion, to either (1) enforce specific performance by
Buyer of this Agreement, without posting any bond or the necessity of proving
the inadequacy as a remedy of monetary damages, in which event the Deposit
Amount will be applied as called for herein, or (2) if Buyer does not seek and
successfully enforce specific performance, terminate this Agreement and (in
addition to retention of the Deposit Amount) seek to recover damages from Seller
in an amount up to, but not exceeding the Deposit Amount, as liquidated damages
(and not as a penalty).  If Buyer elects to terminate this Agreement pursuant to
this Section 9.02(b)(ii) and seek damages in an amount up to the Deposit Amount
as liquidated damages, the Parties shall, within two (2) Business Days of
Buyer’s election, (x) execute and deliver to the Escrow Agent a joint
instruction letter directing the Escrow Agent to release the Deposit Amount to
Buyer and (y) Seller shall be free to enjoy immediately all rights of ownership
of the Assets and to sell, transfer, encumber, or otherwise dispose of the
Assets to any Person without any restriction under this Agreement.

(c)

The Parties recognize that the actual damages for a Party’s material Breach of
this Agreement would be difficult or impossible to ascertain with reasonable
certainty and agree that the Deposit Amount would be a reasonable liquidated
damages amount for such material Breach.  

(d)

If this Agreement is terminated by either Buyer or Seller pursuant to Section
9.01 for any reason other than as described in Section 9.02(b), then, in any
such case, the Parties shall, within two (2) Business Days of such termination,
execute and deliver to the Escrow Agent a joint instruction letter directing the
Escrow Agent to release the Deposit Amount to Buyer.

9.03Return of Records Upon Termination. Upon termination of this Agreement, (a)
Buyer shall promptly return to Seller or destroy (at Seller’s option) all title,
engineering, geological

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and geophysical data, environmental assessments and reports, maps, documents and
other information furnished by Seller to Buyer in connection with its due
diligence investigation of the Assets and the Equity Interests and (b) an
officer of Buyer shall certify Buyer’s compliance with the preceding clause (a)
to Seller in writing.

article 10

INDEMNIFICATION; REMEDIES

10.01Survival.  The survival periods for the various representations,
warranties, covenants and agreements contained herein shall be as follows: (a)
Fundamental Representations shall survive indefinitely; (b) the representations
and warranties in Section 3.04 shall survive for the applicable statute of
limitations plus sixty (60) days; (c) the special warranty of Defensible Title
set forth in the Instruments of Conveyance shall survive for twenty-four (24)
months after Closing; (d) all covenants and agreements of Seller to be performed
at or following the Closing shall survive until fully performed; (e) all other
representations, warranties, covenants and agreements of Seller shall survive
for twelve (12) months after Closing; provided, that the covenants of Buyer and
Seller set forth in Section 13.02 shall survive for the applicable statute of
limitations plus sixty (60) days; and (f) all other representations, warranties,
covenants and agreements of Buyer shall survive indefinitely.  Representations,
warranties, covenants and agreements shall be of no further force and effect
after the date of their expiration; provided that there shall be no termination
of any bona fide claim asserted pursuant to this Agreement with respect to such
a representation, warranty, covenant or agreement prior to its expiration
date.  The indemnities in Sections 10.02(a), 10.02(b), 10.03(a) and 10.03(b)
shall terminate as of the termination date of each respective representation,
warranty, covenant or agreement that is subject to indemnification thereunder,
except in each case as to matters for which a specific written claim for
indemnity has been delivered to the indemnifying person on or before such
termination date.  The indemnities in Section 10.02(c) shall continue for
twenty-four (24) months following the Closing Date. All other indemnities, and
all other provisions of this Agreement, shall survive the Closing without time
limit except as may otherwise be expressly provided herein.

10.02Indemnification and Payment of Damages by Seller.  Except as otherwise
limited in this Article 10, from and after the Closing, Seller shall defend,
release, indemnify, and hold harmless Buyer Group from and against, and shall
pay to the Buyer Group the amount of, any and all Damages, whether or not
involving a Third Party claim or incurred in the investigation or defense of any
of the same or in asserting, preserving, or enforcing any of their respective
rights under this Agreement arising from, based upon, related to, or associated
with:

(a)

any Breach of any representation or warranty made by Seller in this Agreement,
or in any certificate delivered by Seller pursuant to this Agreement;

(b)

any Breach by Seller of any covenant, obligation, or agreement of Seller in this
Agreement;

(c)

the Retained Liabilities;

(d)

the use, ownership or operation of the Excluded Assets; and

(e)

the use, ownership or operation of the Retained Assets.

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Notwithstanding anything to the contrary contained in this Agreement, after the
Closing, the remedies provided in this Article 10 and Article 11, along with the
special warranty of Defensible Title set forth in the Instruments of Conveyance,
are Buyer Group’s exclusive legal remedies against Seller with respect to this
Agreement and the Contemplated Transactions, including breaches of the
representations, warranties, covenants, obligations, and agreements of the
Parties contained in this Agreement or the affirmations of such representations,
warranties, covenants, obligations, and agreements contained in the certificate
delivered by Seller at Closing pursuant to Section 2.04, and except for the
remedies provided in this Article 10 and Article 11, along with the special
warranty of Defensible Title set forth in the Instruments of Conveyance, Buyer
releases Seller Group from any and all claims, causes of action, Proceedings, or
other legal rights and remedies of Buyer Group, known or unknown, which Buyer
might now or subsequently have, based on, relating to or in any way arising out
of this Agreement, the Contemplated Transactions, the ownership, use or
operation of the Assets or the Equity Interests prior to the Closing, or the
condition, quality, status, or nature of the Assets or the Equity Interests
prior to the Closing, including any and all claims related to environmental
matters or liability or violations of environmental laws and including rights to
contribution under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, breaches of statutory or implied warranties,
nuisance, or other tort actions, rights to punitive damages, common law rights
of contribution, and rights under insurance maintained by Seller or any of
Seller’s Affiliates.  Seller shall have no obligation to indemnify any of the
Buyer Group for any Damages for which Buyer is obligated to indemnify Seller
Group pursuant to Section 10.03.

10.03Indemnification and Payment of Damages by Buyer.  Except as otherwise
limited in this Article 10 and Article 11, from and after the Closing, Buyer
shall assume, be responsible for, pay on a current basis, and shall defend,
release, indemnify, and hold harmless Seller Group from and against, and shall
pay to Seller Group the amount of any and all Damages, whether or not involving
a Third Party claim or incurred in the investigation or defense of any of the
same or in asserting, preserving, or enforcing any of their respective rights
under this Agreement arising from, based upon, related to, or associated with:

(a)

any Breach of any representation or warranty made by Buyer in this Agreement or
in any certificate delivered by Buyer pursuant to this Agreement;

(b)

any Breach by Buyer of any covenant, obligation, or agreement of Buyer in this
Agreement;

(c)

any Damages arising out of or relating to Buyer’s or its Affiliate’s access to
the Assets and contracts, books and records and other documents and data
relating to the Assets and Equity Interests prior to the Closing, including
Buyer’s title and environmental inspections pursuant to Sections 11.01 and
11.10, including Damages attributable to personal injury, illness or death, or
property damage;

(d)

the Assumed Liabilities; and

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(e)

(i) the ownership of the Equity Interests and of Mayzure from and after the
Closing Date and (ii) the business of Mayzure from and after the Closing Date.

Notwithstanding anything to the contrary contained in this Agreement, and except
for Seller’s termination rights under Article 9 of this Agreement, the remedies
provided in this Article 10 are Seller Group’s exclusive legal remedies for
Buyer’s Breaches, all other legal rights and remedies being expressly waived by
Seller Group; provided that Seller is entitled to any equitable remedies
available under applicable Legal Requirements in connection with any Breach by
Buyer of Article 13.

10.04Indemnity Net of Insurance.  The amount of any Damages for which an
indemnified Party is entitled to indemnity under this Article 10 shall be
reduced by the amount of insurance or indemnification proceeds realized by the
indemnified Party or its Affiliates with respect to such Damages (net of any
collection costs, and excluding the proceeds of any insurance policy issued or
underwritten, or indemnity granted, by the indemnified Party or its Affiliates).

10.05Limitations on Liability.  Except with respect to the Fundamental
Representations and the representations and warranties included in Section 3.04,
if the Closing occurs, Seller shall not have any liability for any
indemnification under Section 10.02(a): (a) for any Damages with respect to any
occurrence, claim, award or judgment with respect to that do not individually
exceed One Hundred Thousand Dollars ($100,000) net to Seller’s interest (the
“Individual Claim Threshold”); or (b) unless and until the aggregate Damages for
which claim notices for claims meeting the Individual Claim Threshold are
delivered by Buyer exceed two percent (2%) of the unadjusted Purchase Price, and
then only to the extent such Damages exceed two percent (2%) of the unadjusted
Purchase Price.  Except with respect to the Fundamental Representations and the
representations and warranties included in Section 3.04, in no event will Seller
be liable for Damages indemnified under Section 10.02(a) to the extent such
damages, exceed twenty percent (20%) of the unadjusted Purchase
Price.  Notwithstanding anything herein to the contrary, in no event will
Seller’s aggregate liability under this Agreement exceed one hundred percent
(100%) of the unadjusted Purchase Price.

10.06Procedure for Indemnification‑‑Third Party Claims.

(a)

Promptly after receipt by an indemnified party under Section 10.02 or 10.03 of a
Third Party claim for Damages or notice of the commencement of any Proceeding
against it, such indemnified party shall, if a claim is to be made against an
indemnifying Party under such Section, give notice to the indemnifying Party of
the commencement of such claim or Proceeding, together with a claim for
indemnification pursuant to this Article 10.  The failure of any indemnified
party to give notice of a Third Party claim or Proceeding as provided in this
Section 10.06 shall not relieve the indemnifying Party of its obligations under
this Article 10 except to the extent such failure results in insufficient time
being available to permit the indemnifying Party to effectively defend against
the Third Party claim or participate in the Proceeding or otherwise prejudices
the indemnifying Party’s ability to defend against the Third Party claim or
participate in the Proceeding.

(b)

If any Proceeding referred to in Section 10.06(a) is brought against an
indemnified party and the indemnified party gives notice to the indemnifying
Party of the commencement of such Proceeding, the indemnifying Party shall be
entitled to participate in such Proceeding

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and, to the extent that it wishes (unless (i) the indemnifying Party is also a
party to such Proceeding and the indemnified party determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying Party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
reasonably satisfactory to the indemnified party, and, after notice from the
indemnifying Party to the indemnified party of the indemnifying Party’s election
to assume the defense of such Proceeding, the indemnifying Party shall not, as
long as it diligently conducts such defense, be liable to the indemnified party
under this Article 10 for any fees of other counsel or any other expenses with
respect to the defense of such Proceeding, in each case subsequently incurred by
the indemnified party in connection with the defense of such
Proceeding.  Notwithstanding anything to the contrary in this Agreement, the
indemnifying Party shall not be entitled to assume or continue control of the
defense of any such Proceeding if (A) such Proceeding relates to or arises in
connection with any criminal proceeding, (B) such Proceeding seeks an injunction
or equitable relief against any indemnified Party, (C) if the indemnified party
is Buyer and such Proceeding has or would reasonably be expected to result in
Damages in excess of the amount set forth in Section 10.05 (i.e., twenty percent
(20%) of the unadjusted Purchase Price), or (D) the indemnifying Party has
failed or is failing to defend in good faith such Proceeding.  If the
indemnifying Party assumes the defense of a Proceeding, no compromise or
settlement of such Third Party claims or Proceedings may be effected by the
indemnifying Party without the indemnified party’s prior written consent unless
(A) there is no finding or admission of any violation of Legal Requirements or
any violation of the rights of any Person and no effect on any other Third Party
claims that may be made against the indemnified party, and (B) the sole relief
provided is monetary damages that are paid in full by the indemnifying Party,
and (C) the indemnified party shall have no liability with respect to any
compromise or settlement of such Third Party claims or Proceedings effected
without its consent.

10.07Procedure for Indemnification – Other Claims.  A claim for indemnification
for any matter not involving a Third Party claim may be asserted by notice to
the Party from whom indemnification is sought.

10.08Indemnification of Group Members.  The indemnities in favor of Buyer and
Seller provided in Section 10.08 and Section 10.03, respectively, shall be for
the benefit of and extend to such Party’s present and former Group members.  Any
claim for indemnity under this Article 10 by any Group member other than Buyer
or Seller must be brought and administered by the relevant Party to this
Agreement.  No indemnified party other than Buyer and Seller shall have any
rights against either Seller or Buyer under the terms of this Article 10 except
as may be exercised on its behalf by Buyer or Seller, as applicable, pursuant to
this Section 10.08. Each of Seller and Buyer may elect to exercise or not
exercise indemnification rights under this Section on behalf of the other
indemnified party affiliated with it in its sole discretion and shall have no
liability to any such other indemnified party for any action or inaction under
this Section.

10.09Extent of Representations and Warranties.  

(a)

Except as and to the extent expressly set forth in this Agreement or in the
Instruments of Conveyance, Seller makes no representations or

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warranties whatsoever, and disclaims all liability and responsibility for any
representation, warranty, statement, or information made or communicated (orally
or in writing) to Buyer (including any opinion, information, or advice that may
have been provided to Buyer or its affiliates or representatives by any
Affiliates or Representatives of Seller or by any investment bank or investment
banking firm, any petroleum engineer or engineering firm, Seller’s counsel, or
any other agent, consultant, or Representative of Seller).  Without limiting the
generality of the foregoing, except as and to the extent expressly set forth in
this Agreement or in the Instruments of Conveyance, Seller expressly disclaims
and negates any representation or warranty, express, implied, at common law, by
statute, or otherwise, relating to (a) the title to any of the Assets and the
Equity Interests, (b) the condition of the Assets and the Equity Interests
(including any implied or express warranty of merchantability, fitness for a
particular purpose, or conformity to models or samples of materials), it being
distinctly understood that the Assets and the Equity Interests are being sold
“As Is,” “Where Is,” and “With All Faults As To All Matters,” (c) any
infringement by Seller of any patent or proprietary right of any Third Party,
(d) any information, data, or other materials (written or oral) furnished to
Buyer by or on behalf of Seller (including the existence or extent of
Hydrocarbons or the mineral reserves, the recoverability of such reserves, any
product pricing assumptions, and the ability to sell Hydrocarbon production
after the Closing), and (e) the environmental condition and other condition of
the Assets and the Equity Interests and any potential liability arising from or
related to the Assets and the Equity Interests.

(b)

Buyer acknowledges and affirms that it has made its own independent
investigation, analysis, and evaluation of the Contemplated Transactions, the
Assets and the Equity Interests (including Buyer’s own estimate and appraisal of
the extent and value of Seller’s Hydrocarbon reserves attributable to the Assets
and an independent assessment and appraisal of the environmental risks
associated with the acquisition of the Assets and the Equity Interests).  Buyer
acknowledges that in entering into this Agreement, it has relied on the
aforementioned investigation and the express representations and warranties of
Seller contained in this Agreement and the Seller Closing Documents.  Buyer
hereby irrevocably covenants to refrain from, directly or indirectly, asserting
any claim, or commencing, instituting, or causing to be commenced, any
Proceeding of any kind against Seller or its Affiliates, alleging facts contrary
to the foregoing acknowledgment and affirmation.

10.10Compliance With Express Negligence Test.  The Parties agree that any
indemnity, defense, and/or release obligation arising under this Agreement shall
apply without regard to the negligence, strict liability, or other fault of the
indemnified party, whether active, passive, joint, concurrent, comparative,
contributory or sole, or any pre-existing condition, any breach of contract or
breach of warranty, or violation of any legal requirement, except to the extent
such damages were occasioned by the gross negligence or willful misconduct of

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the indemnified party or any group member thereof, it being the Parties’
intention that Damages to the extent arising from the gross negligence or
willful misconduct of the indemnified party or any group member thereof not be
covered by the release, defense, or indemnity obligations in this
Agreement.  The foregoing is a specifically bargained for allocation of risk
among the Parties, which the Parties agree and acknowledge satisfies the express
negligence rule and conspicuousness requirement under Texas law.

10.11Limitations of Liability.  Notwithstanding anything to the contrary
contained in this Agreement, in no event shall Seller or Buyer ever be liable
for, and each Party releases the other from, any consequential, special,
indirect, exemplary, or punitive damages or claims relating to or arising out of
the Contemplated Transactions or this Agreement; provided, however, that any
consequential, special, indirect, exemplary, or punitive damages recovered by a
Third Party (including a Governmental Body, but excluding any Affiliate of any
Group member) against a Person entitled to indemnity pursuant to this Article 10
shall be included in the Damages recoverable under such
indemnity.  Notwithstanding the foregoing, lost profits shall not be excluded by
this provision as to recovery hereunder to the extent constituting direct
Damages.

10.12No Duplication.  Any liability for indemnification hereunder shall be
determined without duplication of recovery by reason of the state of facts
giving rise to such liability constituting a Breach of more than one
representation, warranty, covenant, obligation, or agreement herein.  Neither
Buyer nor Seller shall be liable for indemnification with respect to any Damages
based on any sets of facts to the extent the Purchase Price is being or has been
adjusted pursuant to Section 2.05 by reason of the same set of facts.

10.13Disclaimer of Application of Anti-Indemnity Statutes.  Seller and Buyer
acknowledge and agree that the provisions of any anti-indemnity statute relating
to oilfield services and associated activities shall not be applicable to this
Agreement and/or the Contemplated Transactions.

10.14Waiver of Right to Rescission.  Seller and Buyer acknowledge that,
following the Closing, the payment of money, as limited by the terms of this
Agreement, shall be adequate compensation for Breach of any representation,
warranty, covenant or agreement contained herein or for any other claim arising
in connection with or with respect to the Contemplated Transactions.  As the
payment of money shall be adequate compensation, following Closing, Seller and
Buyer waive any right to rescind this Agreement or any of the transactions
contemplated hereby.

article 11

TITLE MATTERS AND ENVIRONMENTAL MATTERS; PREFERENTIAL PURCHASE RIGHTS; CONSENTS

11.01Title Examination and Access.  Buyer may make or cause to be made at its
expense such examination as it may desire of Seller’s title to the Assets.  For
such purposes, until the Defect Notice Date, Seller shall give to Buyer and its
Representatives access during Seller’s regular hours of business to originals
or, in Seller’s sole discretion, copies (which copies may, at Seller’s sole
discretion, be in electronic format), of all of the files, records, contracts,

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correspondence, maps, data, reports, plats, abstracts of title, lease files,
well files, unit files, division order files, production marketing files, title
opinions, title files, title records, ownership maps, surveys, and any other
information, data, records, and files that Seller has relating in any way to the
title to the Assets, the past or present operation thereof, and the marketing of
production therefrom, in accordance with, and subject to the limitations in,
Section 5.01.

11.02Preferential Purchase Rights.  Seller shall provide all notices necessary
to comply with or obtain the waiver of all Preferential Purchase Rights which
are applicable to the Contemplated Transactions prior to the Closing Date and in
accordance with Section 5.04.  To the extent any such Preferential Purchase
Rights are exercised by any holders thereof, then the Asset(s) subject to such
Preferential Purchase Rights shall not be sold to Buyer and shall be excluded
from the Assets and sale under this Agreement and shall be considered Retained
Assets.  The Purchase Price shall be adjusted downward by the Allocated Value of
the Asset(s) so retained.  On the Closing Date, if the time period for
exercising any Preferential Purchase Right has not expired, but no notice of
waiver (nor of the exercise of such Preferential Purchase Right) has been
received from the holder thereof, then the Asset(s) subject to such Preferential
Purchase Right shall be included in the Closing, with no adjustment to the
Purchase Price.  After the Closing, if the holder of such Preferential Purchase
Right exercises the Preferential Purchase Right, then Buyer shall convey the
affected Asset(s) to such party, and shall receive the consideration for such
affected Asset(s) directly from such party.  If any holder of a Preferential
Purchase Right initially elects to exercise that Preferential Purchase Right,
but after the Closing Date, refuses to consummate the purchase of the affected
Asset(s), then, subject to the Parties’ respective rights and remedies as to the
obligation to consummate the Contemplated Transactions, Buyer shall purchase
such Asset(s) for the Allocated Value thereof (subject to the adjustments
pursuant to Section 2.05), and the closing of such transaction shall take place
on a date designated by Seller not more than one hundred eighty (180) days after
the Closing Date.  If such holder’s refusal to consummate the purchase of the
affected Asset(s) occurs prior to the Closing Date, then, subject to the
Parties’ respective rights and remedies as to the obligation to consummate the
Contemplated Transactions, Buyer shall purchase the affected Asset(s) at the
Closing in accordance with the terms of this Agreement.

11.03Consents.  Seller shall initiate all procedures required to comply with or
obtain all Consents required for the transfer of the Assets in accordance with
Section 5.04.

(a)

If Seller fails to obtain any Consent necessary for the transfer of any Asset to
Buyer, Seller’s failure shall be handled as follows:

 

(i)

If the Consent is not a Required Consent, then the affected Assets shall
nevertheless be conveyed at the Closing as part of the Assets.  Any Damages that
arise due to the failure to obtain such Consent shall be borne by Buyer, and
Buyer shall defend, release, indemnify and hold harmless Seller Group from and
against the same.

 

(ii)

If the Consent is a Required Consent, the Purchase Price shall be adjusted
downward by the Allocated Value of the affected Assets (which affected Assets
shall include all Leases and Wells affected by the Applicable Contract or Lease
for which a Consent is refused), and the affected Assets shall be treated as
Retained Assets.

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(b)

Notwithstanding the provisions of Section 11.03(a), if Seller obtains a Required
Consent described in Section 11.03(a)(ii) within one hundred eighty (180) days
after the Closing, then Seller shall promptly deliver conveyances of the
affected Asset(s) to Buyer and Buyer shall pay to Seller an amount equal to the
Allocated Value of the affected Asset(s) in accordance with wire transfer
instructions provided by Seller (subject to the adjustments set forth in Section
2.05).

(c)

If Seller fails to obtain the consents applicable to the assignment of Seller’s
operating rights and obligations relating to the Gathering System on or before
the Closing, the Parties shall enter into an operating agreement whereby Buyer
is obligated to assume and perform all obligations of Seller pertaining to the
Gathering System and Buyer is entitled to all rights and proceeds of Seller
pertaining to the Gathering System.

11.04Title Defects.  Buyer shall notify Seller of Title Defects (“Title Defect
Notice(s)”) promptly after the discovery thereof, but in no event later than
5:00 p.m. Central Time on October 19, 2019 (the “Defect Notice Date”).  To be
effective, each Title Defect Notice shall be in writing and include (a) a
description of the alleged Title Defect and the Processing Plant, Well or
portion thereof affected by such alleged Title Defect (each, a “Title Defect
Property”), (b) the Allocated Value of each Title Defect Property, (c)
supporting documents reasonably necessary for Seller to verify the existence of
the alleged Title Defect, (d) Buyer’s preferred manner of curing such Title
Defect, and (e) the amount by which Buyer reasonably believes the Allocated
Value of each Title Defect Property is reduced by such alleged Title Defect and
the computations upon which Buyer’s belief is based (the “Title Defect
Value”).  To give Seller an opportunity to commence reviewing and curing Title
Defects, Buyer agrees to use reasonable efforts to give Seller, on a weekly
basis prior to the Defect Notice Date, written notice of all alleged Title
Defects (as well as any claims that would be claims under the special warranty
of Defensible Title set forth in the Instruments of Conveyance) discovered by
Buyer during the preceding week.  Notwithstanding anything herein to the
contrary, subject to Buyer’s rights under the special warranty of Defensible
Title in the Instruments of Conveyance, Buyer forever waives, and Seller shall
have no liability for, Title Defects not asserted by a Title Defect Notice
meeting all of the requirements set forth in the preceding sentence no later
than 5:00 p.m. Central Time on the Defect Notice Date.  

11.05Title Defect Value.  The Title Defect Value shall be determined pursuant to
the following guidelines, where applicable:

(a)

if the Parties agree on the Title Defect Value, then that amount shall be the
Title Defect Value;

(b)

if the Title Defect is an Encumbrance that is undisputed and liquidated in
amount, then the Title Defect Value shall be the amount necessary to be paid to
remove the Title Defect from the Title Defect Property;

(c)

if the Title Defect represents a discrepancy between (i) Seller’s Net Revenue
Interest for the Title Defect Property and (ii) the Net Revenue Interest set
forth for such Title Defect Property in Schedule 2.07, and there is also a
proportionate reduction in Working Interest for such Title Defect Property, then
the Title Defect Value shall be the product of the Allocated Value of such Title
Defect Property, multiplied by a fraction, the numerator of

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which is the Net Revenue Interest decrease and the denominator of which is the
Net Revenue Interest set forth for such Title Defect Property in Schedule 2.07;

(d)

if the Title Defect represents an increase of (i) Seller’s Working Interest for
any Title Defect Property over (ii) the Working Interest set forth for such
Title Defect Property in Schedule 2.07 (in each case, except (A) increases
resulting from contribution requirements with respect to defaulting co-owners
under applicable operating agreements, or (B) increases to the extent that such
increases are accompanied by a proportionate increase in Seller’s Net Revenue
Interest), then the Title Defect Value shall be determined by calculating the
Net Revenue Interest that results from such larger Working Interest, determining
what the Net Revenue Interest would be using such calculated Net Revenue
Interest and the Working Interest set forth for such Well in Schedule 2.07 and
then calculating the adjustment in the manner set forth in clause (c) above; and

(d)

if the Title Defect represents an obligation or if the Title Defect represents
an Encumbrance upon or other defect in title to the Title Defect Property of a
type not described above, then the Title Defect Value shall be determined by
taking into account the Allocated Value of the Title Defect Property, the
portion of the Title Defect Property 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 Title Defect Property, the values placed upon the Title
Defect by Buyer and Seller and such other reasonable factors as are necessary to
make a proper evaluation.

In no event, however, shall the total of the Title Defect Values related to a
particular Asset exceed the Allocated Value of such Asset.  The Title Defect
Value with respect to a Title Defect shall be determined without any duplication
of any costs or losses included in any other Title Defect Value hereunder, or
for which Buyer otherwise receives credit in the calculation of the Purchase
Price.

11.06Seller’s Cure or Contest of Title Defects.  

Seller may contest any asserted Title Defect or Buyer’s good faith estimate of
the Title Defect Value as described in Section 11.06(b) and may seek to cure any
asserted Title Defect as described in Section 11.06(a).  

(a)

Seller shall have the right to cure any Title Defect on or before sixty (60)
days after the Closing Date or, if later, after the date of resolution of such
Title Defect or the Title Defect Value by an Expert pursuant to Section 11.15
(the “Title Defect Cure Period”) by giving written notice to Buyer of its
election to cure prior to the Closing Date or, if later, after the applicable
Expert Decision date.  If Seller elects to cure and:  

 

(i)

actually cures the Title Defect (“Cure”), prior to the Closing, then the Asset
affected by such Title Defect shall be conveyed to Buyer at the Closing, and no
Purchase Price adjustment will be made for such Title Defect; or

 

(ii)

does not cure the Title Defect prior to the Closing, then Seller shall:

 

(A)

convey the affected Asset to Buyer and Buyer shall pay for the affected Asset at
the Closing; provided, however that if Seller is unable to Cure the Title Defect
within the time provided in this Section 11.06, then Seller shall

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include a downward adjustment in the Final Settlement Statement equal to the
Title Defect Value for such Asset; or

 

(B)

if and only if Buyer agrees to this remedy in its sole discretion, indemnify
Buyer against all Damages (up to the Allocated Value of the applicable Title
Defect Property) resulting from such Title Defect with respect to such Title
Defect Property pursuant to an indemnity agreement prepared by Seller in a form
and substance reasonably acceptable to Buyer.

(b)

Seller and Buyer shall attempt to agree on the existence and Title Defect Value
for all Title Defects.  Representatives of the Parties, knowledgeable in title
matters, shall meet during the Title Defect Cure Period for this
purpose.  However, either Party may at any time prior to the final resolution of
the applicable Title Defect hereunder submit any disputed Title Defect or the
Title Defect Value to arbitration in accordance with the procedures set forth in
Section 11.15.  If a contested Title Defect cannot be resolved prior to Closing,
except as otherwise provided herein, the Asset affected by such Title Defect
shall nevertheless be conveyed to Buyer at the Closing, and the Purchase Price
will be adjusted downward in an amount equal to the Title Defect Value for such
Asset; provided, however, that if the Title Defect Value as finally decided
between the Parties or by the Expert, as applicable, is less than the Title
Defect Value used for the Purchase Price adjustment, then Buyer shall include an
upward adjustment in the Final Settlement Statement equal to the amount that the
Title Defect Value (as of Closing) exceeds the Title Defect Value as finally
determined.

11.07Limitations on Adjustments for Title Defects.  Notwithstanding the
provisions of Sections 11.04, 11.05 and 11.06, Seller shall be obligated to
adjust the Purchase Price to account for uncured Title Defects only to the
extent that the sum of (x) the aggregate Title Defect Values of all uncured
Title Defects (the “Aggregate Title Defect Value”) (after taking into account
any offsetting Title Benefit Values) plus (y) the Aggregate Environmental Defect
Value exceeds the Aggregate Defect Deductible.  In addition, no Title Defect
Value will be considered in calculating the Aggregate Title Defect Value unless
the Title Defect Value with respect to a single Well is equal to or greater than
the De Minimis Title Defect Cost.  

11.08Title Benefits. If Seller discovers any right, circumstance or condition
that operates (a) to increase the Net Revenue Interest for any Well above that
shown in Schedule 2.07, to the extent the same does not cause a greater than
proportionate increase in Seller’s Working Interest therein above that shown in
Schedule 2.07, or (b) to decrease the Working Interest of Seller in any Well
below that shown in Schedule 2.07, as applicable, to the extent the same causes
a decrease in Seller’s Working Interest that is proportionately greater than the
decrease in Seller’s Net Revenue Interest therein below that shown in Schedule
2.07 (each, a “Title Benefit”), then Seller shall, from time to time and without
limitation, have the right, but not the obligation, to give Buyer written notice
of any such Title Benefits (a “Title Benefit Notice”), as soon as practicable
but not later than 5:00 p.m. Central Time on the Defect Notice Date, stating
with reasonable specificity the Assets affected, the particular Title Benefit
claimed, and Seller’s good faith estimate of the amount the additional interest
increases the value of the affected Assets over and above that Asset’s Allocated
Value (the “Title Benefit Value”).  Buyer shall also promptly furnish Seller
with written notice of any Title Benefit (including a description of such Title
Benefit and the Assets affected thereby with reasonable specificity (the “Title
Benefit Properties”)) which is discovered by any of Buyer’s or any of its
Affiliates’ Representatives, employees, title attorneys, landmen, or other title

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examiners.  The Title Benefit Value of any Title Benefit shall be determined by
the following methodology, terms and conditions (without duplication): (i) if
the Parties agree on the Title Benefit Value, then that amount shall be the
Title Benefit Value; (ii) if the Title Benefit represents a discrepancy between
(A) Seller’s Net Revenue Interest for any Title Benefit Property and (B) the Net
Revenue Interest set forth for such Title Benefit Property in Schedule 2.07, and
there is also a proportionate increase in Working Interest for such Title
Benefit Property as applicable, then the Title Benefit Value shall be the
product of the Allocated Value of such Title Benefit Property multiplied by a
fraction, the numerator of which is the Net Revenue Interest increase and the
denominator of which is the Net Revenue Interest set forth for such Title
Benefit Property in Schedule 2.07, as applicable; (iii) if the Title Benefit
represents a decrease of (A) Seller’s Working Interest for any Title Benefit
Property below (B) the Working Interest set forth for such Title Benefit
Property in Schedule 2.07, as applicable, then the Title Benefit Value shall be
determined by calculating the Net Revenue Interest that results from such
reduced Working Interest, determining what the Net Revenue Interest would be
using such calculated Net Revenue Interest and the Working Interest set forth in
Schedule 2.07, as applicable; and (iv) if the Title Benefit is of a type not
described above, then the Title Benefit Value shall be determined by taking into
account the Allocated Value of the Title Benefit Property, the portion of such
Title Benefit Property affected by such Title Benefit, the legal effect of the
Title Benefit, the potential economic effect of the Title Benefit over the life
of such Title Benefit Property, the values placed upon the Title Benefit by
Buyer and Seller and such other reasonable factors as are necessary to make a
proper evaluation.

Seller and Buyer shall attempt to agree on the existence and Title Benefit Value
for all Title Benefits on before the end of the Title Defect Cure Period.  If
Buyer agrees with the existence of the Title Benefit and Seller’s good faith
estimate of the Title Benefit Value, then the Aggregate Title Defect Value shall
be offset by the amount of the Title Benefit Value.  If the Parties cannot reach
agreement by the end of the Title Defect Cure Period, the Title Benefit or the
Title Benefit Value in dispute shall be submitted to arbitration in accordance
with the procedures set forth in Section 11.15. Notwithstanding the foregoing,
the Parties agree and acknowledge that there shall be no upward adjustment to
the Purchase Price for any Title Benefit.  If a contested Title Benefit cannot
be resolved prior to the Closing, Seller shall convey the affected Asset to
Buyer and Buyer shall pay for the Asset at the Closing in accordance with this
Agreement as though there were no Title Benefits; provided, however, if the
Title Benefit contest results in a determination that a Title Benefit exists,
then the Aggregate Title Defect Value shall be adjusted downward by the Title
Benefit Value as determined in such contest (which adjustment shall be made on
the Final Settlement Statement).

11.09Buyer’s Environmental Assessment.  Beginning on the Execution Date and
ending at 5:00 p.m. Central Time on the Defect Notice Date, Buyer shall have the
right, at its sole cost, risk, liability, and expense, to conduct a Phase I
Environmental Site Assessment of the Assets.  During Seller’s regular hours of
business and after providing Seller with written notice of any such activities
no less than two (2) Business Days in advance (which written notice shall
include the written permission of the operator (if other than Seller) and any
applicable Third Party operator or other Third Party whose permission is legally
required, which Seller shall reasonably cooperate with Buyer in securing), Buyer
and its representatives shall be permitted to enter upon the Assets, inspect the
same, review all of Seller’s files and records (other than those for which
Seller has an attorney-client privilege) relating to the Assets, and generally
conduct visual, non-invasive tests,

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examinations, and investigations.  No sampling or other invasive inspections of
the Assets may be conducted prior to Closing without Seller’s prior written
consent.  Buyer’s access shall be in accordance with, and subject to the
limitations in, Section 5.01.  Notwithstanding anything in this Agreement to the
contrary, if (a) Buyer is not granted access to any Asset to conduct its Phase I
Environmental Site Assessment of the Assets or (b) Buyer determines in good
faith that (based on the results of its Phase I Environmental Site Assessment)
sampling or testing of environmental media or operation of equipment is
recommended on an Asset and Buyer is not granted permission and access to
conduct such activities, then Buyer may elect to exclude such Asset, together
with all associated Assets, and reduce the Purchase Price by the Allocated Value
of such Assets (which will become Retained Assets).

11.10Environmental Defect Notice.  Buyer shall notify Seller in writing of any
Environmental Defect (an “Environmental Defect Notice”) promptly after the
discovery thereof, but in no event later than 5:00 p.m. Central Time on the
Defect Notice Date.  To be effective, an Environmental Defect Notice shall
include: (i) the Well, Lease, Unit or Processing Plant affected; (ii) a complete
and detailed description of the alleged Environmental Defect and the basis for
such assertion under the terms of this Agreement; (iii) Buyer’s good faith
estimate of the Environmental Defect Value with respect to such Environmental
Defect; and (iv) appropriate documentation reasonably necessary for Seller to
substantiate Buyer’s claim and calculation of the Environmental Defect
Value.  Notwithstanding anything herein to the contrary, Buyer forever waives
Environmental Defects not asserted by an Environmental Defect Notice meeting all
of the requirements set forth in the preceding sentence no later than 5:00 p.m.
Central Time on the Defect Notice Date.  

11.11Seller’s Exclusion, Cure or Contest of Environmental Defects.   Seller, in
its sole discretion, (x) may elect to (A) exclude at Closing any Asset affected
by an asserted Environmental Defect together with any Assets whose ownership
cannot be practically separated from the affected Asset (the “Integral Assets”),
which excluded Assets and Integral Assets will become a Retained Asset if the
Environmental Defect Value with respect to such Environmental Defect equals or
exceeds the Allocated Value of the affected Asset(s) and the Allocated Value of
the Integral Assets and (B) reduce the Purchase Price by the Allocated Value(s)
of the affected Asset(s) and any Integral Asset(s), (y) may contest any asserted
Environmental Defect or Buyer’s good faith estimate of the Environmental Defect
Value as described in Section 11.11(b) and/or (z) may seek to remediate or cure
any asserted Environmental Defect to the extent of the Lowest Cost Response as
described in Section 11.11(a).  

(a)

Seller shall have the right to remediate or cure an Environmental Defect to the
extent of the Lowest Cost Response on or before sixty (60) days after the Defect
Notice Date or, if later, after the date of resolution of such Environmental
Defect or the Environmental Defect Value by an Expert (the “Environmental Defect
Cure Period”) by giving written notice to Buyer to that effect prior to the
Closing Date or, if later, after the applicable Expert Decision date, together
with Seller’s proposed plan and timing for such remediation, and Seller shall
remain liable for all Damages arising out of or in connection with such
Environmental Defect until such time as such remediation or cure is
completed.  If Seller elects to pursue remediation or cure as set forth in this
clause (a), Seller shall implement such remediation or cure in a manner that is
in compliance with all applicable Legal

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Requirements in a prompt and timely fashion for the type of remediation or cure.
If Seller elects to pursue remediation or cure and:

 

(i)

completes a Complete Remediation of an Environmental Defect prior to the Closing
Date, the affected Unit(s), Lease(s) or Well(s) shall be included in the Assets
conveyed at Closing, and no Purchase Price adjustment will be made for such
Environmental Defect;  

 

(ii)

does not complete a Complete Remediation prior to the Closing, unless Seller
elects to exclude such Asset(s) in accordance with this Section 11.11, then
Seller shall convey the affected Asset(s) to Buyer and Buyer shall pay for the
affected Asset(s) at the Closing; provided, however that if Seller is unable to
complete a Complete Remediation of the Environmental Defect within the time
provided in this Section 11.11, then Seller shall include a downward adjustment
in the Final Settlement Statement equal to the Environmental Defect Value for
such Asset(s).

(b)

Seller and Buyer shall attempt to agree on the existence and Environmental
Defect Value of all Environmental Defects.  Representatives of the Parties,
knowledgeable in environmental matters, shall meet for this purpose.  However, a
Party may at any time prior to the final resolution of the applicable
Environmental Defect hereunder elect to submit any disputed item to arbitration
in accordance with the procedures set forth in Section 11.15.  If a contested
Environmental Defect cannot be resolved prior to the Closing, the affected
Asset(s) (together with any other Assets appurtenant thereto) shall be included
with the Assets conveyed to Buyer at Closing and the Purchase Price shall be
reduced by the estimated Environmental Defect Value set forth in the
Environmental Defect Notice for such contested Environmental Defect, and the
final determination of the Environmental Defect and/or Environmental Defect
Value shall be resolved pursuance to Section 11.15.  

11.12Limitations.  Notwithstanding the provisions of Sections 11.10 and 11.11,
no adjustment to the Purchase Price for Environmental Defect Values shall be
made unless and until the sum of (x) the aggregate value of all Environmental
Defect Values (the “Aggregate Environmental Defect Value”) plus (y) the
Aggregate Title Defect Value (after taking into account any offsetting Title
Benefit Values) exceeds the Aggregate Defect Deductible.  Only Environmental
Defect Values that are equal to or greater than the De Minimis Environmental
Defect Cost with respect to any single Environmental Defect for a Well, Lease or
Unit shall be considered in calculating the Aggregate Environmental Defect
Value.

11.13Exclusive Remedies.  The rights and remedies granted to Buyer in this
Agreement are the exclusive rights and remedies against Seller related to any
Environmental Condition, or Damages related thereto.  Except as set forth in
this Agreement, Buyer expressly waives, and releases Seller Group from, any and
all other rights and remedies it may have under Environmental Laws against
Seller regarding Environmental Conditions, whether for contribution, indemnity,
or otherwise.  The foregoing is a specifically bargained for allocation of risk
among the Parties, which the Parties agree and acknowledge satisfies the express
negligence rule and conspicuousness requirement under Texas law.  

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11.14Casualty Loss and Condemnation.  If, after the Execution Date but prior to
Closing Date, any portion of the Assets is destroyed by fire or other casualty
or is expropriated or taken in condemnation or under right of eminent domain (a
“Casualty Loss”), this Agreement shall remain in full force and effect, and
Buyer shall nevertheless be required to close the Contemplated Transactions.  In
the event that the amount of the costs and expenses associated with repairing or
restoring the Assets affected by such Casualty Loss exceeds One Million Dollars
($1,000,000) net to Seller’s interest, Seller must elect by written notice to
Buyer prior to Closing either to (a) cause the Assets affected by such 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), or (b)
indemnify Buyer under an indemnification agreement mutually acceptable to the
Parties against any costs or expenses that Buyer reasonably incurs to repair or
restore the Assets subject to such Casualty Loss.  In each case, Seller shall
retain all rights to insurance and other claims against Third Parties with
respect to the applicable Casualty Loss except to the extent the Parties
otherwise agree in writing.  Seller shall have no other liability or
responsibility to Buyer with respect to a condemnation or Casualty Loss, even if
such Casualty Loss shall have resulted from or shall have arisen out of the sole
or concurrent negligence, fault, or violation of a Legal Requirement of Seller
or any member of Seller Group.

11.15Expert Proceedings.  

(a)

Each matter referred to this Section 11.15 (a “Disputed Matter”) shall be
conducted in accordance with the Commercial Arbitration Rules of the AAA as
supplemented to the extent necessary to determine any procedural appeal
questions by the Federal Arbitration Act (Title 9 of the United States Code),
but only to the extent that such rules do not conflict with the terms of this
Section 11.15.  Any notice from one Party to the other referring a dispute to
this Section 11.15 shall be referred to herein as an “Expert Proceeding Notice”.

(b)

The arbitration shall be held before a one member arbitration panel (the
“Expert”), mutually agreed by the Parties.  The Expert must (a) be a neutral
party who has never been an officer, director or employee of or performed
material work for a Party or any Party’s Affiliate within the preceding five
(5)-year period and (b) agree in writing to keep strictly confidential the
specifics and existence of the dispute as well as all proprietary records of the
Parties reviewed by the Expert in the process of resolving such dispute.  The
Expert must have not less than ten (10) years’ experience as a lawyer in the
state in which the affected Assets are located with experience in exploration
and production issues.  If disputes exist with respect to both title and
environmental matters, the Parties may mutually agree to conduct separate
arbitration proceedings with the title disputes and environmental disputes being
submitted to separate Experts.  If disputes exist with respect to Assets located
in multiple states, either Party may elect to conduct separate arbitration
proceedings with the disputes being submitted to separate Experts.  If, within
five (5) Business Days after delivery of an Expert Proceeding Notice, the
Parties cannot mutually agree on an Expert, then within seven (7) Business Days
after delivery of such Expert Proceeding Notice, each Party shall provide the
other with a list of three (3) acceptable, qualified experts, and within ten
(10) Business Days after delivery of such Expert Proceeding Notice, the Parties
shall each separately rank from one through six in order of preference each
proposed expert on the combined lists, with a rank of one being the most
preferred expert and the rank of six being the least preferred expert, and
provide their respective rankings

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to the Dallas office of the AAA.  Based on those rankings, the AAA will appoint
the expert with the combined lowest numerical ranking to serve as the Expert for
the Disputed Matters.  If the rankings result in a tie or the AAA is otherwise
unable to determine an Expert using the Parties’ rankings, the AAA will appoint
an arbitrator from one of the Parties’ lists as soon as practicable upon
receiving the Parties’ rankings.  Each Party will be responsible for paying
one-half (1/2) of the fees charged by the AAA for the services provided in
connection with this Section 11.15(b).

(c)

Within five (5) Business Days following the receipt by either Party of the
Expert Proceeding Notice, the Parties will exchange their written description of
the proposed resolution of the Disputed Matters.  Provided that no resolution
has been reached, within five (5) Business Days following the selection of the
Expert, the Parties shall submit to the Expert the following: (i) this
Agreement, with specific reference to this Section 11.15 and the other
applicable provisions of this Article 11, (ii) Buyer’s written description of
the proposed resolution of the Disputed Matters, together with any relevant
supporting materials, (iii) Seller’s written description of the proposed
resolution of the Disputed Matters, together with any relevant supporting
materials, and (iv) the Expert Proceeding Notice.

(d)

The Expert shall make its determination by written decision within fifteen (15)
days following receipt of the materials described in Section 11.15(c) above (the
“Expert Decision”).  The Expert Decision with respect to the Disputed Matters
shall be limited to the selection of the single proposal for the resolution of
the aggregate Disputed Matters proposed by a Party that best reflects the terms
and provisions of this Agreement, i.e., the Expert must select either Buyer’s
proposal or Seller’s proposal for resolution of the aggregate Disputed Matters.

(e)

The Expert Decision shall be final and binding upon the Parties, without right
of appeal, absent manifest error.  In making its determination, the Expert shall
be bound by the rules set forth in this Article 11.  The Expert may consult with
and engage disinterested Third Parties to advise the Expert, but shall disclose
to the Parties the identities of such consultants.  Any such consultant shall
not have worked as an employee or consultant for either Party or its Affiliates
during the five (5)-year period preceding the arbitration nor have any financial
interest in the dispute.

(f)

The Expert shall act as an expert for the limited purpose of determining the
specific matters submitted for resolution herein and shall not be empowered to
award damages, interest, or penalties to either Party with respect to any
matter.  Each Party shall bear its own legal fees and other costs of preparing
and presenting its case.  All costs and expenses of the Expert shall be borne by
the non-prevailing Party in any such arbitration proceeding.

article 12

EMPLOYMENT MATTERS

12.01Seller Benefit Plans.  Effective as of his or her Employee Start Date, each
Continuing Employee shall cease to accrue further benefits and shall cease to be
an active participant under the Seller Benefit Plans.  Buyer shall not assume
any of the Seller Benefit Plans.  From and after each Continuing Employee’s
Employee Start Date, Seller and its ERISA Affiliates

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shall retain and shall be solely responsible for all obligations and liabilities
under the Seller Benefit Plans or related to changes by Seller thereto, and
neither Buyer nor its Affiliates shall have any obligation, liability or
responsibility from and after such Continuing Employee’s Employee Start Date to
or under the Seller Benefit Plans, whether such obligation, liability or
responsibility arose before, on or after such Continuing Employee’s Employee
Start Date.

12.02Pre-Employee Start Date Claims under Seller Benefit Plans and Accrued
Vacation Balances.  

(a)To the extent that an Available Employee was a participant in a Seller
Benefit Plan, the Seller Benefit Plans shall be responsible for providing
welfare benefits (including medical, hospital, dental, accidental death and
dismemberment, life, disability and other similar benefits) to any participating
Available Employees for all claims incurred prior to his or her Employee Start
Date under and subject to the terms and conditions of such plans.  For purposes
of this Section 12.02, a claim is incurred with respect to (i) accidental death
and dismemberment, disability, life and other similar benefits when the event
giving rise to such claim occurred and (ii) medical, hospital, dental and other
similar benefits when the services with respect to such claim are rendered;
provided, that all services related to a continuous period of hospitalization
shall be deemed to be rendered upon the commencement of such period.  

(b)Seller shall pay each Continuing Employee’s accrued and unused vacation
balance (the “Accrued Vacation Balances”), in each case, to the extent such
Accrued Vacation Balance existed immediately prior to such Continuing Employee’s
Employee Start Date, in accordance with applicable Legal Requirements.

12.03Available Employees’ Offers and Post-Employee Start Date Employment and
Benefits.

(a)Following the Execution Date, Seller shall provide Buyer reasonable access to
the Available Employees.

(b)Within two (2) Business Days of the Execution Date, Seller will provide Buyer
with a list that sets forth the name of each Available Employee, and for each
such individual, his or her name, job title, annualized salary or hourly wage,
bonus eligibility/target, long-term incentive eligibility/target, vacation
eligibility, hire date/start date, leave status (including expected duration of
any leave), details of any visa, and any vehicle described on Exhibit D assigned
to the Available Employee by Seller (the “Available Employee List”).

(c)Beginning seven (7) Business Days following the Execution Date, Buyer or its
Affiliate may make written offers of employment to any of the Available
Employees to whom Buyer or its Affiliate elects to make an offer of employment,
with such offers providing for an Employee Start Date the day after
Closing.  Each offer of employment shall provide the applicable Available
Employee at least five (5) Business Days to either accept or reject such
offer.  No later than the date that is three (3) Business Days prior to the
anticipated Closing Date, Buyer shall notify Seller as to each Available
Employee who has accepted an offer from Buyer or any of its Affiliates, which
acceptance shall be conditioned upon the occurrence of the Closing and effective
as of the Employee Start Date and may be conditioned on other typical hiring
policies, and each Available Employee who has rejected Buyer’s or its
Affiliate’s offer of employment.  BUYER

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SHALL INDEMNIFY AND HOLD HARMLESS SELLER AND ITS AFFILIATES WITH RESPECT TO ALL
CLAIMS AND LIABILITIES RELATING TO OR ARISING OUT OF BUYER’S OR ITS AFFILIATE’S
EMPLOYEE SELECTION AND EMPLOYMENT OFFER PROCESS DESCRIBED IN THIS SECTION 12.03
(INCLUDING ANY CLAIM OF DISCRIMINATION OR OTHER ILLEGALITY IN SUCH SELECTION AND
OFFER PROCESS).

(d)As to each Available Employee to whom Buyer does not made an offer of
employment at least seven (7) Business Days prior to Closing, Buyer agrees that
it and its Affiliates shall not employ such Available Employee prior to the date
that is six (6) months after Closing, and during such six (6) month period,
Buyer will not solicit an employment relationship or negotiate employment terms
with such Available Employee.  Notwithstanding the foregoing, in the event an
Available Employee to whom Buyer does not made an offer of employment at least
seven (7) Business Days prior to Closing becomes employed by a Third Party, this
Section 12.03(d) shall not prevent Buyer or its Affiliates from contracting for
services from such Third Party so long as the contractor relationship does not
resemble or otherwise create an employer-employee relationship.

(e)Each Available Employee who is actively at work as of Closing or is on a
previously scheduled and approved (by Seller or its Affiliates) short-term
disability, long-term disability, workers’ compensation or other approved leave
of absence and accepts an offer of employment from Buyer or its Affiliate and,
in each instance, assumes employment with Buyer or its Affiliate is referred to
as a “Continuing Employee.”  The date that a Continuing Employee begins
employment with Buyer or its Affiliate is referred to as his or her “Employee
Start Date.” Buyer or its Affiliate will provide each Continuing Employee with
the same or similar benefits as similarly situated current employees of Buyer or
its Affiliate; provided that nothing in the foregoing shall affect the right of
Buyer or its Affiliates to terminate the employment of a Continuing Employee for
any reason or at any time.  Seller retains the right to terminate the employment
of a Continuing Employee for any reason or at any time prior to the Employee
Start Date.  On or before the Employee Start Date of each Continuing Employee,
Seller shall take all necessary action to fully vest as of such date such
Continuing Employee’s account balances and other benefits under all Seller
Benefit Plans, if any, that are employee pension benefit plans (as such term is
defined in Section 3(2) of ERISA).

(f)Buyer or its Affiliate shall cause each Continuing Employee and his or her
eligible dependents (including all such employee’s dependents covered
immediately prior to the Employee Start Date by a group health plan maintained
by Seller or its Affiliates) to be eligible to be covered under a group health
plan maintained by Buyer or its Affiliate that (i) provides medical and dental
benefits coverage to such Continuing Employee and such eligible dependents
effective as of the first day of the calendar month following such Continuing
Employee’s Employee Start Date (unless such Continuing Employee’s Employee Start
Date is the first day of a calendar month, in which case, such coverage shall be
effective immediately as of such Continuing Employee’s Employee Start Date).

12.04Post-Employee Start Date Employment Claims.  Buyer shall indemnify, defend
and hold Seller and its Affiliates harmless from and against any and all
liability of any kind or nature involving or related to the employment of each
Continuing Employee by Buyer or its

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Affiliate after his or her Employee Start Date, including any liability related
to any employee benefit plan sponsored or maintained by Buyer or its ERISA
Affiliates after the Employee Start Date.  Seller shall indemnify, defend and
hold Buyer and its Affiliates harmless from and against any and all liability of
any kind or nature or related to (a) the employment of any Available Employee
who does not become a Continuing Employee, including any liability related to
any Seller Benefit Plan and (b) the employment of the Continuing Employees by
Seller or its Affiliate before his or her Employee Start Date, including any
liability related to any employee benefit plan sponsored, maintained or changed
by any Seller Party or any of their respective ERISA Affiliates before the
Employee Start Date. 

12.05Buyer Welfare Plans.  Buyer shall cause the waiver of all limitations as to
pre-existing conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Continuing
Employees.  Buyer shall provide continuation health care coverage to Continuing
Employees and their qualified beneficiaries who incur a qualifying event, in
accordance with the continuation health care coverage requirements of Section
4980B of the Code and Title I, Subtitle B, Part 6 of ERISA (“COBRA”) or any
similar provisions of state Legal Requirement, on or after the Employee Start
Date.

12.06WARN Act.  From the date of this Agreement until the final Employee Start
Date, Seller shall not and shall cause its Affiliates not to, terminate the
employment of any Available Employees such that a “plant closing” or “mass
layoff” (as those terms are defined in the WARN Act or any similar state Legal
Requirement) occurs prior to the final Employee Start Date without complying
with the WARN Act.  Buyer agrees to provide any notice to each Continuing
Employee required under the WARN Act or any similar state Legal Requirement with
respect to any “plant closing” or “mass layoff” affecting such Continuing
Employee that may occur on or after his or her Employee Start Date.

12.07No Third Party Beneficiary Rights.  NOTHING HEREIN, EXPRESSED OR IMPLIED,
SHALL CONFER UPON ANY AVAILABLE EMPLOYEES (OR ANY OF THEIR BENEFICIARIES OR
ALTERNATE PAYEES) ANY RIGHTS OR REMEDIES (INCLUDING ANY RIGHT TO EMPLOYMENT OR
CONTINUED EMPLOYMENT, OR ANY RIGHT TO COMPENSATION OR BENEFITS FOR ANY PERIOD)
OF ANY NATURE OR KIND WHATSOEVER, UNDER OR BY REASON OF THIS AGREEMENT OR
OTHERWISE.  IN ADDITION, THE PROVISIONS OF THIS ARTICLE 12, ARE FOR THE SOLE
BENEFIT OF THE PARTIES AND ARE NOT FOR THE BENEFIT OF ANY THIRD PARTY.  NOTHING
IN THIS ARTICLE 12, EXPRESS OR IMPLIED, SHALL BE (A) DEEMED AN AMENDMENT OF ANY
SELLER BENEFIT PLAN PROVIDING BENEFITS TO ANY AVAILABLE EMPLOYEE, OR (B)
CONSTRUED TO PREVENT BUYER OR ITS AFFILIATES FROM TERMINATING OR MODIFYING TO
ANY EXTENT OR IN ANY RESPECT ANY EMPLOYEE BENEFIT PLAN THAT BUYER OR ITS
AFFILIATES MAY ESTABLISH OR MAINTAIN.

article 13

GENERAL PROVISIONS.

13.01Records.  Seller, at Buyer’s cost and expense, shall deliver originals of
all Records to Buyer (FOB Seller’s office) within fifteen (15) days after the
Closing.  With respect to any

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original Records delivered to Buyer, (a) Seller shall be entitled to retain
copies of such Records, and (b) Buyer shall retain any such original Records for
at least seven (7) years beyond the Closing Date, during which seven (7)-year
period Seller shall be entitled to obtain access to such Records, at reasonable
business hours and upon prior notice to Buyer, so that Seller may make copies of
such original Records, at its own expense, as may be reasonable or necessary for
tax purposes or in connection with any Proceeding or Threatened Proceeding
against Seller.

13.02Expenses.

(a)

Except as otherwise expressly provided in this Agreement, each Party to this
Agreement shall bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants.  However, the prevailing Party in any Proceeding
brought under or to enforce this Agreement, excluding any expert proceeding
pursuant to Section 11.15 or Section 2.05(d), shall be entitled to recover court
costs and arbitration costs, as applicable, and reasonable attorneys’ fees from
the non-prevailing Party or Parties, in addition to any other relief to which
such Party is entitled.

(b)

All Transfer Taxes and all required documentary, filing and recording fees and
expenses in connection with the filing and recording of the assignments,
conveyances or other Instruments of Conveyance required to convey title to the
Assets and the Equity Interests to Buyer shall be borne by Buyer.  Seller shall
retain responsibility for, and shall bear, all Asset Taxes and Taxes imposed on
Mayzure for (i) any period ending prior to the Effective Time and (ii) the
portion of any Straddle Period ending immediately prior to the Effective
Time.  All Asset Taxes and Taxes imposed on Mayzure arising on or after the
Effective Time (including the portion of any Straddle Period beginning at the
Effective Time) shall be allocated to and borne by Buyer.  For purposes of
allocation between the Parties of Asset Taxes assessed for any Straddle Period,
(A) Asset Taxes that are attributable to the severance or production of
Hydrocarbons (other than Asset Taxes described in clause (C) below) shall be
allocated based on severance or production occurring before the Effective Time
(which shall be Seller’s responsibility) and from and after the Effective Time
(which shall be Buyer’s responsibility); (B) Asset Taxes that are based upon or
related to sales or receipts or imposed on a transactional basis (other than
such Asset Taxes described in clause (A) or (C)) shall be allocated based on
revenues from sales occurring before the Effective Time (which shall be Seller’s
responsibility) and from and after the Effective Time (which shall be Buyer’s
responsibility); and (C) Asset Taxes that are ad valorem, property or other
Asset Taxes imposed on a periodic basis with respect to a Straddle Period shall
be allocated pro rata per day between the portion of the Straddle Period ending
immediately prior to the Effective Time (which shall be Seller’s responsibility)
and the portion of the Straddle Period beginning at the Effective Time (which
shall be Buyer’s responsibility).  For purposes of the preceding sentence, any
exemption, deduction, credit or other item that is calculated on an annual basis
shall be allocated pro rata per day between the portion of the Straddle Period
ending immediately prior to the Effective Time and the portion of the Straddle
Period beginning at the Effective Time.  Any other Taxes imposed on Mayzure
shall be allocated using a “closing of the books” methodology.  To the extent
the actual amount of any Asset Taxes described in this Section 13.02(b) is not
determinable at Closing or the Final Settlement Date, Buyer and Seller shall
utilize the most recent information available in estimating the amount of such
Asset Taxes for purposes of Section 2.05.  Upon determination of the actual
amount of such Asset Taxes,

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timely payments will be made from one Party to the other to the extent necessary
to cause each Party to bear the amount of such Asset Tax that is allocable to
such Party under this Section 13.02(b).  Any allocation of Asset Taxes between
the Parties shall be in accordance with this Section 13.02(b).

(c)

Except as required by applicable Legal Requirements, in respect of Asset Taxes,
(i) Seller shall be responsible for timely remitting all (A) Asset Taxes due
(excluding Ad Valorem and Property Taxes) for periods ending prior to the
Closing Date, (B) Ad Valorem and Property Taxes due with respect to the Assets
and the Equity Interests for periods ending prior to the Effective Time (no
matter when due), and (C) Ad Valorem and Property Taxes due with respect to the
Assets and the Equity Interests due prior to the Closing Date (subject, in each
case, to Seller’s right to reimbursement by Buyer under Section 13.02(b)), (ii)
Buyer shall be responsible for timely remitting all (A) Asset Taxes (excluding
Ad Valorem and Property Taxes) for periods ending on or after the Closing Date,
and (B) all Ad Valorem and Property Taxes due on or after the Closing Date
(subject, in each case, to Buyer’s right to reimbursement by Seller under
Section 13.02(b)), in each case, to the applicable taxing authority, (iii)
Seller shall prepare and timely file any (A) Tax Return for Asset Taxes
(excluding Ad Valorem and Property Taxes) required to be filed for periods
ending prior to the Closing Date, and (B) Tax Return for Ad Valorem and Property
Taxes with respect to the Assets and the Equity Interests due prior to the
Closing Date, and (iv) Buyer shall prepare and timely file any (A) Tax Return
for Asset Taxes (excluding Ad Valorem and Property Taxes) required to be filed
for periods ending on or after the Closing Date, and (B) Tax Return for Ad
Valorem and Property Taxes in respect to the Assets and the Equity Interests
required to be filed on or after the Closing Date (including Tax Returns related
to any Straddle Period).  Each Party shall indemnify and hold the other Party
harmless for any failure to file such Tax Returns and to make such payments. 
Buyer shall prepare all such Tax Returns relating to any Straddle Period on a
basis consistent with past practice except to the extent otherwise required by
applicable Legal Requirements.  Buyer shall provide Seller with a copy of any
Tax Return relating to any Straddle Period for Seller’s review at least ten (10)
days prior to the due date for the filing of such Tax Return (or within a
commercially reasonable period after the end of the relevant Taxable period, if
such Tax Return is required to be filed less than ten (10) days after the close
of such Taxable period), and Buyer shall incorporate all reasonable comments of
Seller provided to Buyer in advance of the due date for the filing of such Tax
Return.

(d)

Buyer and Seller agree to furnish or cause to be furnished to the other, upon
request, as promptly as practicable, such information and assistance relating to
the Assets, including access to books and records, as is reasonably necessary
for the filing of all Tax Returns by Buyer or Seller, the making of any election
relating to taxes, the preparation for any audit by any taxing authority and the
prosecution or defense of any claim, suit or proceeding relating to any
tax.  The Parties agree to retain all books and records with respect to Tax
matters pertinent to the Assets relating to any Tax period beginning before the
Closing Date until sixty (60) days after the expiration of the statute of
limitations of the respective Tax periods (taking into account any extensions
thereof) and to abide by all record retention agreements entered into with any
taxing authority.

(e)

Seller shall be entitled to any and all refunds of Taxes allocated to Seller
pursuant to Section 13.02(b), and Buyer shall be entitled to any and all refunds
of Taxes allocated to Buyer

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pursuant to Section 13.02(b).  If a Party receives a refund of Taxes to which
the other Party is entitled pursuant to this Section 13.02(e), the first Party
shall promptly pay such amount to the other Party, net of any reasonable costs
or expenses incurred by the first Party in procuring such refund.

13.03Notices.  All notices, consents, waivers, and other communications under
this Agreement must be in writing and shall be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
electronic mail with receipt acknowledged, with the receiving Party
affirmatively obligated to promptly acknowledge receipt, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate recipients, addresses, and
fax numbers set forth below (or to such other recipients, addresses, or fax
numbers as a Party may from time to time designate by notice to the other
Party):

NOTICES TO BUYER:

Scout Energy Group V, LP

4901 LBJ FWY, STE 300

Dallas, Texas 75244

Attention: Jon Piot

Email Address: jpiot@scoutep.com

NOTICES TO SELLER:

c/o Riviera Upstream, LLC
600 Travis Street, Suite 1700

Houston, Texas 77002
Attention: General Counsel
E-mail: Handerson@RVRAresources.com and legal@RVRAresources.com

 

With a copy (which shall not constitute notice) to:

 

Kirkland & Ellis LLP

609 Main Street, 45th Floor

Houston, TX 77002

Attention:  Anthony Speier, P.C.

 

Rahul Vashi

 

Email:

anthony.speier@kirkland.com

 

rahul.vashi@kirkland.com

 

13.04Governing Law; Jurisdiction; Service of Process; Jury Waiver.   THIS
AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE RIGHTS, DUTIES AND THE
LEGAL RELATIONS AMONG THE PARTIES HERETO AND THERETO SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY
CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION

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OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION; PROVIDED, HOWEVER, THAT
ANY MATTERS RELATED TO REAL PROPERTY SHALL BE GOVERNED BY THE LAWS OF THE STATE
WHERE SUCH REAL PROPERTY IS LOCATED.  WITHOUT LIMITING THE PARTIES’ AGREEMENT TO
ARBITRATE IN SECTION 11.15 OR THE DISPUTE RESOLUTION PROCEDURE PROVIDED IN
SECTION 2.05(d) WITH RESPECT TO DISPUTES ARISING THEREUNDER, THE PARTIES HERETO
CONSENT TO THE EXERCISE OF JURISDICTION IN PERSONAM BY THE FEDERAL COURTS OF THE
UNITED STATES LOCATED IN HOUSTON, TEXAS OR THE STATE COURTS LOCATED IN HOUSTON,
TEXAS FOR ANY ACTION ARISING OUT OF THIS AGREEMENT, ANY TRANSACTION DOCUMENTS,
OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.  ALL ACTIONS OR PROCEEDINGS
WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF,
RELATED TO, OR FROM THIS AGREEMENT, ANY TRANSACTION DOCUMENTS OR ANY TRANSACTION
CONTEMPLATED HEREBY OR THEREBY SHALL BE EXCLUSIVELY LITIGATED IN SUCH COURTS
DESCRIBED ABOVE HAVING SITES IN HOUSTON, TEXAS AND EACH PARTY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF SUCH COURTS SOLELY IN RESPECT OF ANY PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT.  EACH PARTY HERETO VOLUNTARILY,
INTENTIONALLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LEGAL REQUIREMENTS, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY TRANSACTION DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR
THEREBY.  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.  TO THE EXTENT THAT A PARTY OR ANY OF ITS
AFFILIATES HAS ACQUIRED, 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, SUCH PARTY (ON ITS OWN
BEHALF AND ON BEHALF OF ITS AFFILIATES) 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 THIS SECTION
13.04.

13.05Further Assurances.  The Parties agree (a) to furnish upon request to each
other such further information, (b) to execute, acknowledge, and deliver to each
other such other documents, and (c) to do such other acts and things, all as the
other Party may reasonably request for the purpose of carrying out the intent of
this Agreement and the documents referred to in this Agreement.

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13.06Waiver.  The rights and remedies of the Parties are cumulative and not
alternative.  Neither the failure nor any delay by either Party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement shall operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege shall
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege.  To the maximum extent
permitted by applicable Legal Requirement, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one Party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other Party, (b) no waiver that may be
given by a Party shall be applicable except in the specific instance for which
it is given, and (c) no notice to or demand on one Party shall be deemed to be a
waiver of any obligation of such Party or of the right of the Party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.

13.07Entire Agreement and Modification.  This Agreement supersedes all prior
discussions, communications, and agreements (whether oral or written) between
the Parties with respect to its subject matter and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of
the terms of the agreement between the Parties with respect to its subject
matter.  This Agreement may not be amended or otherwise modified except by a
written agreement executed by both Parties.  No representation, promise,
inducement, or statement of intention with respect to the subject matter of this
Agreement has been made by either Party that is not embodied in this Agreement
together with the documents, instruments, and writings that are delivered
pursuant hereto, and neither Party shall be bound by or liable for any alleged
representation, promise, inducement, or statement of intention not so set
forth.  In the event of a conflict between the terms and provisions of this
Agreement and the terms and provisions of any Schedule or Exhibit hereto, the
terms and provisions of this Agreement shall govern, control, and prevail.

13.08Assignments, Successors, and No Third Party Rights.  Except for Buyer’s
right to direct that all or a portion of the Processing Plants be assigned by
Seller to an Affiliate of Buyer at Closing, neither Party may assign any of its
rights, liabilities, covenants, or obligations under this Agreement (as
distinguished from an assignment of the Assets after Closing) without the prior
written consent of the other Party (which consent may be granted or denied at
the sole discretion of the other Party), and (a) any assignment made without
such consent shall be void, and (b) in the event of such consent, such
assignment nevertheless shall not relieve such assigning Party of any of its
obligations under this Agreement without the prior written consent of the other
Party.  Subject to the preceding sentence, this Agreement shall apply to, be
binding in all respects upon, and inure to the benefit of the successors and
permitted assigns of the Parties.  Nothing expressed or referred to in this
Agreement shall be construed to give any Person other than the Parties or any
other agreement contemplated herein (and Buyer Group and Seller Group who are
entitled to indemnification under Article 10), any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of
this Agreement.  Subject to the preceding sentence, this Agreement, any other
agreement contemplated herein, and all provisions and conditions hereof and
thereof, are for the sole and exclusive benefit of the Parties and such other
agreements (and Buyer Group and Seller Group who are entitled to indemnification
under Article 10), and their respective successors and permitted assigns.

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13.09Severability.  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.  Any provision of this
Agreement held invalid or unenforceable only in part or degree shall remain in
full force and effect to the extent not held invalid or unenforceable.  Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the Parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the Parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.

13.10Article and Section Headings, Construction.  The headings of Sections,
Articles, Exhibits, and Schedules in this Agreement are provided for convenience
only and shall not affect its construction or interpretation.  All references to
“Section,” “Article,” “Exhibit,” or “Schedule” refer to the corresponding
Section, Article, Exhibit, or Schedule of this Agreement.  Unless expressly
provided to the contrary, the words “hereunder,” “hereof,” “herein,” and words
of similar import are references to this Agreement as a whole and not any
particular Section, Article, Exhibit, Schedule, or other provision of this
Agreement.  Each definition of a defined term herein shall be equally applicable
both to the singular and the plural forms of the term so defined.  All words
used in this Agreement shall be construed to be of such gender or number, as the
circumstances require.  Unless otherwise expressly provided, the word
“including” does not limit the preceding words or terms and (in its various
forms) means including without limitation.  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 (or 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.  Each Party has had substantial input into the drafting
and preparation of this Agreement and has had the opportunity to exercise
business discretion in relation to the negotiation of the details of the
Contemplated Transactions.  This Agreement is the result of arm’s-length
negotiations from equal bargaining positions.  This Agreement shall not be
construed against either Party, and no consideration shall be given or
presumption made on the basis of who drafted this Agreement or any particular
provision hereof or who supplied the form of Agreement.

13.11Counterparts.  This Agreement may be executed and delivered (including by
facsimile or e-mail transmission) in one or more counterparts, each of which
shall be deemed to be an original copy of this Agreement and all of which, when
taken together, shall be deemed to constitute one and the same agreement.

13.12Press Release.    If any Party wishes to make a press release or other
public announcement respecting this Agreement or the Contemplated Transactions
(unless the subject matter of such release has previously been made public
pursuant to the terms of this Section 13.12), such Party will provide the others
with a draft of the press release or other public announcement for review at
least one (1) Business Day prior to the time that such press release or other
public announcement is to be made.  The Parties will attempt in good faith to
expeditiously reach agreement on such press release or other public announcement
and the contents thereof.  Failure to provide comments back to the other Party
within one (1) Business Day of receipt of the draft release or announcement will
be deemed consent to the public disclosure of such press release or other public
announcement and the content thereof, so long as the reviewing Party’s name is
not included in the release or announcement.  Seller and Buyer shall each be
liable for the compliance

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of their respective Affiliates with the terms of this Section 13.12.
Notwithstanding anything to the contrary in this Section 13.12, no Party shall
issue a press release or other public announcement that includes the name of a
non-releasing Party or its Affiliates without the prior written consent of such
non-releasing Party (which consent may be withheld in such non-releasing Party’s
sole discretion); provided that such restriction shall not apply if the subject
matter of such release has previously been made public pursuant to the terms of
this Section 13.12.  

13.13Confidentiality.  The Confidentiality Agreement shall terminate on the
Closing Date and will thereafter be of no further force or effect.  Each Party
shall keep confidential, and cause its Affiliates and instruct its
Representatives to keep confidential, all terms and provisions of this
Agreement, except (a) as required by Legal Requirements or any standards or
rules of any stock exchange to which such Party or any of its Affiliates is
subject, (b) for information that is available to the public on the Closing
Date, or thereafter becomes available to the public other than as a result of a
breach of this Section 13.13, (c) to the extent required to be disclosed in
connection with complying with or obtaining a waiver of any Preferential
Purchase Right or Consent, and (d) to the extent that such Party must disclose
the same in any Proceeding brought by it to enforce its rights under this
Agreement.  This Section 13.13 shall not prevent either Party from recording the
Instruments of Conveyance delivered at the Closing or from complying with any
disclosure requirements of Governmental Bodies that are applicable to the
transfer of the Assets.  The covenant set forth in this Section shall terminate
two (2) years after the Closing Date.

13.14Name Change.  As promptly as practicable, but in any event within sixty
(60) days after the Closing Date, Buyer shall eliminate, remove or paint over
the use of the name “Linn”, “Riviera” or variants thereof from the Assets, and,
except with respect to such grace period for eliminating the existing usage,
shall have no right to use any logos, trademarks, or trade names belonging to
Seller or any of its Affiliates.  Buyer shall be solely responsible for any
direct or indirect costs or expenses resulting from the change in use of name
and any resulting notification or approval requirements.

13.15Preparation of Agreement.  Both Seller and Buyer and their respective
counsel participated in the preparation of this Agreement.  In the event of any
ambiguity in this Agreement, no presumption shall arise based on the identity of
the draftsman of this Agreement.

13.16Appendices, Exhibits and Schedules.  All of the Appendices, Exhibits and
Schedules referred to in this Agreement are hereby incorporated into this
Agreement by reference and constitute a part of this Agreement.  Each Party to
this Agreement and its counsel has received a complete set of Appendices,
Exhibits and Schedules prior to and as of the execution of this Agreement.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement as of
the date first written above.

 

SELLER:

Riviera Upstream, LLC

 

By:      /s/ David B. Rottino

Name: David B. Rottino

Title:   President and Chief Executive Officer

 

Riviera Operating, LLC

 

By:       /s/ David B. Rottino

Name: David B. Rottino

Title:   President and Chief Executive Officer

 

 

Signature Page to Purchase and Sale Agreement

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BUYER:

Scout Energy Group V, LP

 

By Scout Energy Group V GP, LLC,

its general partner

 

 

By:     /s/ Jon Piot

Name: Jon Piot

Title:   Managing Director

 

 

 

 

Signature Page to Purchase and Sale Agreement