Exhibit 10.3

Execution Version

CONFIDENTIAL

 

 

 

Purchase and Sale Agreement

Dated August 4, 2020,

By And Between

Riviera Upstream, LLC, and Riviera Operating, LLC,

as Seller,

And

Staghorn Petroleum II, LLC,

as Buyer

 

 

26137104v.11

 

 

 

 

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TABLE OF CONTENTS

Page

ARTICLE 1 DEFINITIONS

1

 

ARTICLE 2 SALE AND TRANSFER OF ASSETS; CLOSING

21

 

 

2.01

Assets21

 

 

2.02

Purchase Price; Deposit Amount21

 

 

2.03

Closing; Preliminary Settlement Statement22

 

 

2.04

Closing Obligations22

 

 

2.05

Allocations and Adjustments23

 

 

2.06

Assumption27

 

 

2.07

Allocation of Purchase Price28

 

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER

28

 

 

3.01

Organization and Good Standing28

 

 

3.02

Authority; No Conflict28

 

 

3.03

Bankruptcy29

 

 

3.04

Taxes29

 

 

3.05

Legal Proceedings30

 

 

3.06

Brokers30

 

 

3.07

Compliance with Legal Requirements30

 

 

3.08

Hydrocarbon Marketing30

 

 

3.09

Imbalances30

 

 

3.10

Material Contracts30

 

 

3.11

Consents and Preferential Purchase Rights31

 

 

3.12

Current Commitments31

 

 

3.13

Environmental Laws31

 

 

3.14

Permits32

 

 

3.15

Wells32

 

 

3.16

Payout Balances33

 

 

3.17

Employee Benefits33

 

 

3.18

Disbursement of Production Revenues; Suspense Funds33

 

 

3.19

Leases34

 

 

3.20

Drilling Obligations34

 

 

3.21

Payment of Expenses34

 

 

3.22

Knowledge Qualifier for Non-Operated Assets34

 

 

3.23

Disclosures with Multiple Applicability; Materiality34

 

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER

35

 

 

4.01

Organization and Good Standing35

 

 

4.02

Authority; No Conflict35

 

 

4.03

Certain Proceedings35

 

 

4.04

Knowledgeable Investor36

 

 

4.05

Qualification36

 

 

4.06

Brokers36

 

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4.07

Financial Ability36

 

 

4.08

Securities Laws36

 

 

4.09

Due Diligence36

 

 

4.10

Basis of Buyer’s Decision37

 

 

4.11

Business Use, Bargaining Position37

 

 

4.12

Bankruptcy37

 

ARTICLE 5 COVENANTS OF SELLER

38

 

 

5.01

Access and Investigation38

 

 

5.02

Ownership of the Assets38

 

 

5.03

Insurance40

 

 

5.04

Consent and Waivers40

 

 

5.05

Amendment to Schedules40

 

ARTICLE 6 OTHER COVENANTS

40

 

 

6.01

Notification and Cure40

 

 

6.02

Satisfaction of Conditions41

 

 

6.03

Replacement of Insurance, Bonds, Letters of Credit, and Guaranties41

 

 

6.04

Governmental Reviews41

 

ARTICLE 7 CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE

42

 

 

7.01

Accuracy of Representations42

 

 

7.02

Seller’s Performance42

 

 

7.03

No Proceedings42

 

 

7.04

No Orders42

 

 

7.05

Necessary Consents and Approvals43

 

 

7.06

Closing Deliverables43

 

 

7.07

Certain Adjustments43

 

ARTICLE 8 CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE

43

 

 

8.01

Accuracy of Representations43

 

 

8.02

Buyer’s Performance44

 

 

8.03

No Proceedings44

 

 

8.04

No Orders44

 

 

8.05

Necessary Consents and Approvals44

 

 

8.06

Closing Deliverables44

 

 

8.07

Qualifications44

 

 

8.08

Certain Adjustments44

 

ARTICLE 9 TERMINATION

44

 

 

9.01

Termination Events44

 

 

9.02

Effect of Termination; Distribution of the Deposit Amount46

 

 

9.03

Return of Records Upon Termination48

 

ARTICLE 10 INDEMNIFICATION; REMEDIES

48

 

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10.01

Survival48

 

 

10.02

Indemnification and Payment of Damages by Seller48

 

 

10.03

Indemnification and Payment of Damages by Buyer50

 

 

10.04

Indemnity Net of Insurance50

 

 

10.05

Limitations on Liability50

 

 

10.06

Procedure for Indemnification‑‑Third Party Claims51

 

 

10.07

Procedure for Indemnification – Other Claims52

 

 

10.08

Indemnification of Group Members52

 

 

10.09

Extent of Representations and Warranties52

 

 

10.10

[RESERVED]53

 

 

10.11

[RESERVED]53

 

 

10.12

Compliance With Express Negligence Test53

 

 

10.13

Limitations of Liability53

 

 

10.14

No Duplication54

 

 

10.15

Disclaimer of Application of Anti-Indemnity Statutes54

 

 

10.16

Waiver of Right to Rescission54

 

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

54

 

 

11.01

Title Examination and Access54

 

 

11.02

Preferential Purchase Rights54

 

 

11.03

Consents55

 

 

11.04

Title Defects56

 

 

11.05

Title Defect Value56

 

 

11.06

Seller’s Cure or Contest of Title Defects57

 

 

11.07

Limitations on Adjustments for Title Defects59

 

 

11.08

Title Benefits59

 

 

11.09

Buyer’s Environmental Assessment60

 

 

11.10

Environmental Defect Notice60

 

 

11.11

Seller’s Exclusion, Cure or Contest of Environmental Defects61

 

 

11.12

Limitations62

 

 

11.13

Exclusive Remedies62

 

 

11.14

Casualty Loss and Condemnation63

 

 

11.15

Expert Proceedings63

 

ARTICLE 12 EMPLOYMENT MATTERS

65

 

 

12.01

Seller Benefit Plans65

 

 

12.02

Employees’ Offers65

 

 

12.03

Non-Solicitation Period65

 

 

12.04

No Third Party Beneficiary Rights65

 

ARTICLE 13 GENERAL PROVISIONS

65

 

 

13.01

Records65

 

 

13.02

Expenses; Tax Allocations and Tax Return Filings66

 

 

13.03

Notices67

 

 

13.04

Governing Law; Jurisdiction; Service of Process; Jury Waiver68

 

 

13.05

Further Assurances69

 

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13.06

Waiver70

 

 

13.07

Entire Agreement and Modification70

 

 

13.08

Assignments, Successors, and No Third Party Rights70

 

 

13.09

Severability71

 

 

13.10

Article and Section Headings, Construction71

 

 

13.11

Counterparts71

 

 

13.12

Press Release72

 

 

13.13

Confidentiality72

 

 

13.14

Name Change73

 

 

13.15

Appendices, Exhibits and Schedules73

 

 

 

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EXHIBITS AND SCHEDULES

Exhibit A

Leases

Exhibit A-1

Fee Minerals

Exhibit A-2

Easements and Surface Interests

Exhibit A-3

Field Offices and Associated Properties

Exhibit A-4

Pipeline and Gathering Systems

Exhibit A-5

Surface Deeds

Exhibit B

Wells

Exhibit C

Personal Property

Exhibit D

Form of Assignment, Bill of Sale, and Conveyance

Exhibit E

Excluded Assets

Exhibit F

Vehicles

Exhibit G

Form of Deed

Exhibit H-1

Form of Seller Certificate

Exhibit H-2

Form of Buyer Certificate

 

 

Schedule 2.05(d)(i)(F)

Specified Receivables

Schedule 2.05(d)(i)(G)

JOA Pre-Payments

Schedule 2.07

Allocation of Purchase Price

Schedule 3.02(b)

No Conflict

Schedule 3.04

Taxes

Schedule 3.05

Assumed and Retained Litigation

Schedule 3.07

Compliance with Legal Requirements

Schedule 3.08

Hydrocarbon Marketing

Schedule 3.09

Imbalances

Schedule 3.10

Material Contracts

Schedule 3.11

Consents and Preferential Purchase Rights

Schedule 3.12

Current Commitments

Schedule 3.13

Environmental Laws

Schedule 3.14

Permits

Schedule 3.15

Wells

Schedule 3.16

Payout Balances

Schedule 3.17(a)

Seller Benefit Plans

Schedule 3.18

Suspense Funds

Schedule 3.19

Leases

Schedule 3.20

Drilling Obligations

Schedule 5.02

Certain Authorized Pre-Closing Actions

Schedule 9.01(f)

Net Leasehold Acres - Specified Counties

 

 

 

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PURCHASE AND SALE AGREEMENT

This PURCHASE AND SALE AGREEMENT (this “Agreement”) is made as of August 4, 2020
(the “Execution Date”), by and between Riviera Upstream, LLC, a Delaware limited
liability company (“Riviera Upstream”), and Riviera Operating, LLC, a Delaware
limited liability company (“Riviera Operating”; and together with Riviera
Upstream, “Seller”), and Staghorn Petroleum II, LLC, a Delaware limited
liability company, (“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, all of Seller’s right,
title and interest in and to certain oil and gas properties and related assets
and contracts, 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:

ARTICLE 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.

“AFE” – as defined in Section 3.12.

“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 two percent (2%) of the
unadjusted Purchase Price.

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

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

 

 

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“Agreement” – as defined in the Preamble to this Agreement.

“Allocated Values” – the values assigned among the Wells 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; joint development agreements; “drillco” agreements; bottom
hole agreements; crude oil, condensate, and natural gas purchase and sale,
gathering, transportation, and other marketing agreements; Hydrocarbon storage
agreements; acreage contribution agreements; operating agreements; balancing
agreements; unit operating 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 based upon the operation or
ownership of the Assets, 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, 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, CO2, injection, and disposal wells located on
any of the Lands or Leases (such interest in such wells, including the wells set
forth in Exhibit B, the “Wells”), and all Hydrocarbons produced therefrom or
allocated thereto, and the proceeds from the sale thereof, from and after the
Effective Time;

(c)all fee mineral interests in, to, and under the Lands described in Exhibit
A-1 (such interest, the “Fee Minerals”);

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

(e)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,

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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, storage, sale or disposal of
Hydrocarbons or produced water from the Properties or any of the Assets,
including those described on Exhibit A-2;

(f)all equipment, machinery, fixtures and other tangible personal property,
movable and mixed property, and improvements located on any of the Properties or
other Assets in each case that is held for or used primarily in connection with
the Properties or for the ownership, operation, and maintenance of the
Properties and the production, gathering, treatment, processing, storage,
transportation, sale, or disposal of Hydrocarbons or water produced therefrom,
including those items listed in Exhibit C, and including all 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 or held for the
operation thereof (collectively, the “Personal Property”);

(g)the real property described on Exhibit A-3 and any Personal Property located
thereon (the “Field Offices and Associated Properties”);

(h)all pipelines and gathering systems described on Exhibit A-4;

(i)all surface deeds described on Exhibit A-5;

(j)the vehicles described on Exhibit F;

(k)all salt water disposal wells and evaporation pits that are located on the
Lands;

(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)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, and in each
case solely to the extent in Seller’s possession and assignable (with consent,
if applicable, but without the payment of any fee unless Buyer agrees in writing
to pay such fee), including: (i) land and title records (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, including daily
drilling records; (v) machinery and equipment maintenance files; (vi) production
and accounting records reflecting current ownership decks, and joint interest
billing and revenue decks and files in the formats maintained by Seller; (vii)
well master files, division of interest files, engineering and/or production
files and reports, AFEs, and all other books, records, data, files,

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maps and accounting records to the extent related to the Assets, or used or held
for use in connection with the maintenance, ownership or operation thereof or
the production and marketing of Hydrocarbons therefrom and maintained by or in
Seller’s control or possession, whether written or electronically stored; (viii)
facility and well records (including well logs; well tests; well files; mud
logs; directional surveys; land surveys; core reports; and non-confidential
logs); and (ix) geological, geophysical, reserve engineering, and other
scientific and technical information, tests, maps, reports, and data (including
seismic data, studies, and information, but excluding interpretive data)
(collectively, “Records”);

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

(q)all Permits applicable to the Properties and held by Seller, to the extent
transferable;

(r)all information technology assets, including desktop computers, laptop
computers, servers, networking equipment and any associated peripherals and
other computer hardware, computer software, all radio and telephone equipment,
SCADA and measurement technology, and other production related mobility devices
(such as SCADA controllers), well communication devices, and any other
information technology systems, in each case only to the extent such assets are
(i) used solely in connection with the Properties, (ii) assignable (with
consent, if applicable, but without the payment of any fee unless Buyer agrees
in writing to pay such fee), (iii) located on the Properties, and (iv) necessary
for the continued and future operation of the Properties; and

(s)all fees, rentals, proceeds, settlement and other payments, revenues, and
other rights and economic benefits of every kind and character accruing or
payable to Seller as the owner of the items listed in this definition that are
attributable to the period at and after the Effective Time or that are
attributable to periods prior to the Effective Time and for which the Purchase
Price is adjusted upward;

To the extent that any of the foregoing are used or relate to both the Assets
(on the one hand) and certain of the Excluded Assets or any Retained Assets (on
the other hand), 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, Bill of Sale, and Conveyance from Seller to
Buyer, pertaining to the Assets (other than the Assets conveyed pursuant to the
Deed), substantially in the form attached to this Agreement as Exhibit D.

“Assumed Liabilities” – as defined in Section 2.06.

“Assumed Litigation” – the litigation set forth in Schedule 3.03 (Part A).

“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)(v) or Section 2.04(b)(v) of this Agreement shall be deemed to
have occurred if there is or has been any

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inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision.

“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 and includes all
successors and permitted assigns of Buyer.

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

“Casualty Loss” – as defined in Section 11.14.

“CERCLA” – as set forth in the definition of “Environmental Law”.

“Closing” – as defined in Section 2.03.

“Closing Date” – as defined in Section 2.03.

“COBRA” – Section 4980B of the Code and any applicable continuation of coverage
requirements under state Legal Requirements.

“Code” – the Internal Revenue Code of 1986, as amended, and any regulations
promulgated thereunder.

“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.

“Confidential Information” – as defined in Section 13.13.

“Confidentiality Agreement” – that certain confidentiality agreement dated as of
May 29, 2020 by and between Riviera Resources, Inc. and Staghorn Petroleum II,
LLC.

“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 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.

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“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.

“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” – Twenty-Five Thousand Dollars ($25,000).

“De Minimis Title Defect Cost” – Twenty-Five Thousand Dollars ($25,000).  

“Deed” – the Deed from Seller to Buyer, pertaining to the applicable surface fee
interests and Fee Minerals included in the Assets, substantially in the form
attached to this Agreement as Exhibit G.

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

“Defensible Title” – title of Seller with respect to the 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 orders,
or unitization agreements and:

(a)with respect to each currently producing formation for each Well (in each
case, subject to any reservations, limitations or depth restrictions described
in Exhibit B or Schedule 2.07), entitles Seller to receive a percentage of all
Hydrocarbons produced from or allocable to such producing formation in such
Well, throughout the productive life of such Well, that is not less than the Net
Revenue Interest set forth in Schedule 2.07 for such producing formation, 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 the provisions of 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 each currently producing formation for each Well (in each
case, subject to any reservations, limitations, or depth restrictions described
in Exhibit B or Schedule 2.07), obligates Seller to bear and pay a percentage of
the costs and expenses of operations on, the maintenance and development of, and
the production of Hydrocarbons from or allocable to such producing formation in
such Well, throughout the productive life of such Well, that is not more than
the Working Interest set forth in Schedule 2.07 for such producing formation,
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

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(c)is free and clear of all Encumbrances (other than Permitted Encumbrances),
defects or irregularities.

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

“Disclosing Party” as defined in Section 13.13.

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

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

“DTPA” – as defined in Section 4.11.

“Effective Time” – July 1, 2020, at 12:01 a.m. local time at the location of the
Assets.

“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 with
respect to the Properties that causes a Well (either currently or with notice,
or both) to require remediation under, be in violation of, or require other
corrective action under, any Environmental Law or any Permit issued under any
Environmental Law, other than any plugging, abandonment, or decommissioning
obligations, and any event or condition to the extent (a) caused by or relating
to NORM or asbestos, (b) relating to subsidence monitoring or remediation, or
(c) that was disclosed to Buyer on Seller’s disclosure Schedules or otherwise in
writing or in written reports (or of which Buyer otherwise had Knowledge) prior
to the Execution Date.  A breach of or inaccuracy in Seller’s representations
and warranties in Section 3.13 shall constitute an Environmental Condition;
provided, however, that to the extent that any matters are listed on Schedule
3.13, none of such scheduled matters shall constitute an Environmental Condition
or may be asserted by Buyer as an Environmental Defect hereunder.

“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” – as the same may have been amended, superseded or replaced
on or prior to the Closing Date, any Legal Requirement, including any rule of
common law, relating to (a) the control of any pollutant or protection of the
environment, including air, water, or land, (b) the generation, handling,
treatment, storage, disposal, or transportation of waste materials, or

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(c) the regulation of or exposure to Hazardous Materials alleged to be harmful,
including the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. § 9601 et seq., as amended by the Superfund Amendments and
Reauthorization Act (“CERCLA”); the Resource Conservation and Recovery Act, 42
U.S.C. § 6901 et seq., as amended by the Hazardous and Solid Waste Amendments of
1984 (“RCRA”); the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et
seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic Substances Control Act,
15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act, 33 U.S.C. § 2701 et seq.;
the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et
seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j; the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq.; the
Occupational Safety and Health Act, 29 U.S.C. § 651 et seq. (regarding Hazardous
Materials); the Atomic Energy Act, 42 U.S.C. § 2011 et seq.; the National
Environmental Policy Act, 42 U.S.C. § 4321, et seq.; all applicable Legal
Requirements in the State of Oklahoma relating to the management or disposal of
oilfield waste; and all applicable Legal Requirements, whether local, state,
territorial, or national, of any Governmental Body having jurisdiction over the
Assets in question addressing pollution or protection of human health and safety
(regarding Hazardous Materials), natural resources, or the environment and all
regulations implementing the foregoing.  The term “Environmental Laws” includes
all legally-binding judicial and administrative decisions, orders, directives,
and decrees issued by a Governmental Body pursuant to the foregoing.  The term
“Environmental Laws” does not include good or desirable operating practices or
standards that may be employed or adopted by other oil and gas well operators or
recommended but not required by a Governmental Body.

“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.

“ERISA” – the Employee Retirement Income Security Act of 1974, as amended, and
any regulations promulgated thereunder.

“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” – JPMorgan Chase Bank, 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 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

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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) in and to any insurance or condemnation proceeds
or awards, arising, in each case, from acts, omissions, events, or damage to or
destruction of property prior to the Effective Time; (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 paid or borne
by Seller or its Affiliates 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, including desktop computers, laptop computers, servers,
networking equipment and any associated peripherals, and other computer
hardware, computer software, all radio and telephone equipment, SCADA and
measurement technology, and other production-related mobility devices (such as
SCADA controllers), well communication devices, and any other information
technology systems, in each case only to the extent such assets are not (i) used
solely in connection with the Properties, (ii) assignable (with consent, if
applicable, but without the payment of any fee unless Buyer agrees in writing to
pay such fee), (iii) located on the Properties, and (iv) necessary for the
continued and future operation of the Properties; (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 the 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 (but excluding title opinions), provided that
Seller shall disclose to Buyer whether any such information is excluded; (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 interpretations of any geophysical or other
seismic and related technical data and information relating to the Assets,
including Seller’s reserve reports; (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 Contemplated Transactions;
(o) except for the Field Offices and Associated Properties, any offices, office
leases, and any personal property located in or on such offices or office
leases; (p) other than any tracts of land described in the Surface Deeds listed
on Exhibit A-5, any fee simple surface estate; (q) any fee mineral interests
that are not Fee Minerals, and any right to production revenues associated
therewith; (r) a copy of all Records; (s) any Contracts that constitute master
services agreements or similar contracts; (t) any Hedge Contracts; (u) any debt
instruments; (v) any of Seller’s assets other than the Assets; (w) all employee
files and related records; (x) any leases, rights, and other assets specifically
listed in Exhibit E; and (y) the Seller Benefit Plans or any other employee
benefit plan and all associated

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assets, including any Contract, other agreement, documentation, or legally
binding arrangement related to or associated with the Seller Benefit Plans or
any other employee benefit plan.

“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”.

“Field Offices and Associated Properties” – as set forth in the definition of
“Assets”.

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

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

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

“Fundamental Representations” – for Sellers, those representations set forth in
Sections 3.01, 3.02, 3.03, 3.06, and 3.17; for Buyer, those representations set
forth in Sections 4.01 4.02, 4.04, 4.05, 4.06, and 4.12.

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

“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, parish, 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.

“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,

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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.

“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 or at or on any
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” – Federal, state and local income and franchise Taxes including
those 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).

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

“Information Group” – as defined in Section 13.13.

“Instruments of Conveyance” – the Assignment and the Deed.  Except for the
special warranty of Defensible Title by, through, and under Seller contained
therein, the 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, except for such special warranty of
Defensible Title, 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: Seller’s President and
Chief Executive Officer, Executive Vice President and Chief Operating Officer,
Executive Vice President and Chief Financial Officer, Executive Vice President,
Finance, Administration and Chief Accounting Officer, and Vice
President–Land.  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: Chief Executive Officer, Chief Financial Officer, Vice
President – Engineering, Vice President – Business Development and Land, and
Land Manager.

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

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

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“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 Execution Date that addresses and resolves (for current
and future use in the same manner as currently used) an Environmental Condition
identified pursuant to Section 11.10 in the most cost-effective manner
(considered as a whole) as compared to any other response that is required or
allowed under Environmental Laws or by a Governmental Body. The Lowest Cost
Response shall include taking no action, leaving the Environmental 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 (a) any costs or expenses relating to the
assessment, remediation, removal, abatement, transportation, and disposal of any
asbestos, asbestos containing materials, or NORM or relating to any obligations
to plug, abandon or decommission wells associated with the Assets; (b) the costs
of Buyer’s or any of its Affiliate’s employees; (c) expenses for matters that
are costs of doing business (e.g., those costs that would ordinarily be incurred
in the day-to-day operations of the Assets, or in connection with Permit
renewal/amendment activities); (d) overhead costs of Buyer or its Affiliates;
(e) costs and expenses that would not have been required under Environmental
Laws as they exist on the Closing Date; and (f) costs or expenses incurred in
connection with remedial or corrective action that is designed to achieve
standards that are more stringent than those required for similar facilities or
that fail to reasonably take advantage of applicable risk reduction or risk
assessment principles allowed under applicable Environmental Laws.

“Marchand Formation” – the stratigraphic equivalent interval correlative to the
subsurface interval from 10,110’ to 10,640’ as reflected in the Neutron-Density
log of the Kidd #1 well (API 3501521561), located in 28-9N-11W, Caddo County,
Oklahoma .

“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 or internationally; (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, regulatory policies, or GAAP; (xi) changes in the stock
price of Buyer or Seller; (xii) matters that are cured or no longer exist by the
earlier of Closing and the termination of this Agreement; or (xiii) matters as
to which an adjustment is provided for under Section 2.05(d) or Seller has
indemnified Buyer hereunder.

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“Material Contracts” – as defined in Section 3.10.

“Mississippi Solid Formation” – the stratigraphic equivalent interval
correlative to the subsurface interval from 8634’ to 9424’, as reflected in the
Schlumberger Compensated Neutron/Formation Density Log, run on 5/26/1977, in the
Warner #1 well (API 3509321235), located in 35-21N-15W, Major County, Oklahoma.

“Net Leasehold Acre” – as to each Lease, the product obtained by multiplying (a)
the number of surface acres of the Lands that are described in such Lease (i.e.
gross acres), by (b) the undivided interest in the fee minerals, non-executive
mineral interests, and other mineral fee interests in the Lands covered by such
Lease, by (c) Seller’s aggregate undivided oil and gas leasehold interest in
such Lease (provided, however, that if item (a), (b), or (c) of this definition
varies with respect to different tracts or parcels covered by such Lease, a
separate calculation shall be performed with respect to each such tract or
parcel).  

“Net Revenue Interest” – with respect to any Well, the interest in and to all
Hydrocarbons produced 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 Exhibit B or Schedule 2.07), after satisfaction of all
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 operating
agreement 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, exemptions, waivers or privileges,
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
ownership, operation, use, access to, or value of any of the Assets (as
currently operated and used), (ii) operate to reduce

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the Net Revenue Interest of Seller with respect to any Well to an amount less
than the Net Revenue Interest set forth in Schedule 2.07 for such Well, (iii)
operate to increase the Working Interest of Seller with respect to any Well to
an amount greater than the Working Interest set forth in Schedule 2.07 for such
Well (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), or (iv) operate to decrease the Net
Leasehold Acres in any Lease within the Target Formation; provided, however,
that any drilling obligations included in the Leases will be considered
Permitted Encumbrances so long as Seller is not in breach of such obligations;

(b)any Preferential Purchase Rights, Consents, and similar agreements, described
in Schedule 3.11 and to which the terms of Section 11.02 and Section 11.03,
respectively, apply;

(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, as
set forth on Schedule 3.04;

(e)all rights to consent by, required notices to, filings with, or other actions
by Governmental Bodies in connection with the conveyance of the Assets, 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 any Legal Requirement, 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, except insofar as arising from a
violation or non-compliance by Seller with a Permit or Legal Requirement; (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 owed to any
Governmental Body with respect to any right, power, franchise, grant, license,
or Permit;

(h)rights of a common owner or co-tenant of any interest currently held by
Seller and such common owner or co-tenant 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,

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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, but only to the
extent the foregoing do not, individually or in the aggregate, materially impair
the ownership, operation, or use of, or access to, 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, pooling orders, or any joint or unit
operating agreements or unit orders 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;

(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 and the Retained Litigation;

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

(p)Royalties, reversionary interests, and similar burdens if the net cumulative
effect of such burdens (i) does not materially interfere with the ownership,
operation, or use of any of the Assets (as currently operated and used), (ii)
does not reduce the Net Revenue Interest of Seller with respect to a Well to an
amount less than the Net Revenue Interest set forth in Schedule 2.07 for such
Well, (iii) does not increase the Working Interest of Seller with respect to a
Well to an amount greater than the Working Interest set forth in Schedule 2.07
for such Well (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), and (iv) does not decrease
the Net Leasehold Acres in any Lease within the Target Formation;

(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 is barred by the

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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 Wells;
(ix) based on a gap in Seller’s chain of title in the county records to any Well
(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; or (x) consisting of
the lack of a lease amendment or consent authorizing pooling or unitization;

(r)Imbalances;

(s)plugging and surface restoration obligations, 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);

(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(e).

“Preferential Purchase Right” – any right or agreement that enables any Person
to purchase or acquire any Property or any interest therein or portion thereof
as a result of or in connection

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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 2.03,
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, arbitrational, or informal) commenced,
brought, conducted, or heard by or before, or otherwise involving, any
Governmental Body or arbitrator.

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

“Property Costs” – all operating expenses (including utilities, payroll, costs
of insurance, rentals, and overhead costs), capital expenditures (including
rentals, options, and other lease maintenance payments, broker fees, 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, (e)
obligations to pay interest owners revenues or proceeds relating to the Assets
but held in suspense, including Suspense Funds, (f) obligations with respect to
a Casualty Loss, (g) Retained Liabilities, and (h) claims for indemnification or
reimbursement from any Third Party with respect to costs of the types described
in the preceding clauses (a) through (g), whether such claims are made pursuant
to contract or otherwise.

“Purchase Price” – as defined in Section 2.02.

“Recipient” – as defined in Section 13.13.

“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, (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 the termination or material impairment of the
applicable Assets to be assigned, or (c) is denied in writing.  For the
avoidance of doubt, “Required Consent” does not include (A) any Consents and
approvals of Governmental Bodies that are customarily obtained after Closing or
(B) any Consent, which, by its terms, cannot be unreasonably withheld.

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“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 directly
attributable to or arising out of (a) the disposal or transportation prior to
the Closing Date 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) and property damage claims attributable to Seller’s or its
Affiliate’s ownership of the Assets prior to the Closing Date; (c) the failure
to properly and timely pay, in accordance with the terms of any Lease, Contract,
or applicable Legal Requirement, all Royalties 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, other than Suspense Funds
and Imbalances; (d) claims relating to Taxes for which Seller is responsible
hereunder; (e) the Retained Litigation; (f) any fine, penalty or criminal
sanction imposed by or assessed by any Governmental Body against Seller
attributable to the ownership or operation of the Assets prior to the Closing
Date; (g) other than as set forth in Article 12, any claim made by an employee
of Seller or any Affiliate of Seller directly relating to such employment with
Seller or any Affiliate of Seller, including any claim under the Seller Benefit
Plans and obligations under COBRA with respect to “M&A qualified beneficiaries”
as defined in Treasury Regulation Section 54.4980B-9; and (h) all liabilities
and obligations associated with the Excluded Assets and the Retained Assets;
provided that, from and after the date that is thirty-six (36) 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.

“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.

“Seller” – as defined in the preamble to this Agreement and includes all
successors and permitted assigns of each Seller Party.

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

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

“Seller Party” – each of Riviera Upstream and Riviera Operating individually.

“Specified Counties” – Blaine, Caddo, Garfield, Major and Woods Counties,
Oklahoma.

“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, which
amounts shall be described, on Schedule 2.05(d)(i)(F) as of the date set forth
on such schedule, for illustrative purposes only.

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

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“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.

“Target Formation” – (i) with respect to Leases in Caddo County, Oklahoma, the
Marchand Formation, and (ii) with respect to Leases in Blaine, Garfield, Major,
and Woods Counties, Oklahoma, the Mississippi Solid Formation.

“Tax” or “Taxes” – (a) any and all federal, state, provincial, local, foreign
and other taxes, levies, fees, imposts, duties, assessments, unclaimed property
and escheat obligations and other governmental charges of a similar nature
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, unemployment, severance, compensation,
utility, stamp, premium, windfall profits, transfer, gains, severance,
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.

“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 of title, irregularity, or other matter
that (i) does not constitute a Permitted Encumbrance, and (ii) causes Seller not
to have Defensible Title in and to the Wells, without duplication; provided that
the following shall not be considered Title Defects:

(1)Preferential Rights and Required Consents;

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(2)defects based upon the failure to record any federal or state Leases in any
applicable county records or any assignments of interests in such Leases in any
applicable public records unless such failure results or would result in another
Person’s actual and superior claim of title to the relevant Asset;

(3)any Encumbrance or loss of title resulting from Seller’s conduct of business
from and after the Execution Date in accordance with the provisions of this
Agreement;

(4)defects arising from any change in applicable Legal Requirements after the
Execution Date;

(5)defects arising from the presence of any prior, primary term-expired oil and
gas lease covering a portion of the Lands, taken more than fifteen (15) years
prior to the Effective Time, that has not been surrendered or released of
record, unless Buyer provides affirmative evidence that a Third Party is
conducting operations on or otherwise asserting ownership of the affected
Property, sufficient proof of which shall include written communication by a
Person with record title to such prior oil and gas lease asserting the continued
effectiveness thereof;

(6)defects that affect only the ownership of the right to receive Royalty
payments rather than the amount or the proper payment of such royalty payment;

(7)defects arising from a mortgage encumbering the oil, gas or mineral estate of
any lessor that has been subordinated to the Lease applicable to such Asset;

(8)defects related to mineral ownership other than Hydrocarbons;

(9)defects arising under circumstances where federal or state oil and gas leases
have not been recorded in the applicable county;

(10)the presence of an acreage commitment or dedication, minimum volume
obligation or commitment and associated deficiency payment obligation, or
similar provisions in a Contract;

(11)defects based on the lack of approval by a Governmental Body of one or more
assignments of interests in federal or state oil and gas leases, to the extent
that the affected assignment has been properly and timely filed with the
appropriate officer of the relevant Governmental Body and the parties to such
assignment have satisfied the regulatory criteria for obtaining such approval;

(12)defects that are cured by adverse possession or prescription under
applicable statutes of limitation; and

(13)defects based solely upon the title of record being held in the name of Linn
Energy Holdings, LLC, Linn Operating, Inc. or Linn Operating, LLC, if Seller
provides certified copies of name changes or certificates of conversion, as
appropriate, showing the relationship between these entities and Seller.

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

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“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.

“Transaction Documents” – as defined in Section 13.07.

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

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

“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, but including
cost-carry obligations with respect to the undivided interests of co-tenants in
a Well.

ARTICLE 2
SALE AND TRANSFER OF ASSETS; CLOSING

Assets

.  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
to Buyer, and Buyer shall purchase, pay for, and accept the Assets from Seller.

Purchase Price; Deposit Amount

.  Subject to any adjustments that may be made under Section 2.05, the purchase
price for the Assets will be FIFTEEN MILLION SEVEN HUNDRED AND EIGHTY THOUSAND
AND NO/100 DOLLARS ($15,780,000) (the “Purchase Price”).  Contemporaneously with
the execution of this Agreement, Buyer has deposited, 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 Deposit Amount shall be held by the
Escrow Agent, and if the Closing timely occurs, 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 (less amounts
retained in escrow pursuant to Section 11.06 and Section 11.11), plus interest
earned thereon, to Seller at the Closing, which Deposit Amount, or portion
thereof, plus interest earned thereon, shall be applied as a credit toward the
Preliminary Amount payable at the Closing 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 9.02 shall apply, and the distribution of
the Deposit Amount, plus interest earned thereon, shall be governed in
accordance therewith.

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Closing; Preliminary Settlement Statement

.  The consummation of the Contemplated Transaction (the “Closing”) shall take
place at the offices of Seller at 717 Texas Avenue, Suite 2000, Houston, Texas
77002, on or before October 1, 2020, or if all conditions to Closing under
Article 7 and Article 8 have not yet been satisfied or waived on that date,
within ten (10) Business Days after such conditions have been satisfied or
waived, subject to the provisions of Article 9 (the “Closing Date”).  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, set forth in the Preliminary
Settlement Statement delivered by Seller in accordance with this Section 2.03
will be the amount to be paid by Buyer to Seller at the Closing.

Closing Obligations

.  

(a)

At the Closing, each Seller Party shall deliver (and execute and acknowledge, as
appropriate), or cause to be delivered (and executed and acknowledged, as
appropriate), to Buyer:

 

(i)

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

 

(ii)

original counterparts of such assignments of federal and state oil and gas
leases and rights-of-way as are necessary to transfer title to all of the Assets
to Buyer, except to the extent customarily delivered after Closing;

 

(iii)

possession of the Assets (except 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(d)(ii)(E));

 

(iv)

an executed counterpart of a joint instruction letter directing the Escrow Agent
to release to Seller an amount equal to the Deposit Amount (less any amounts
retained in the Escrow Account pursuant to Section 11.06 or Section 11.11);

 

(v)

a certificate, in substantially the form set forth in Exhibit H-1 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;

 

(vi)

a Treasury Regulation Section 1.1445-2(b)(2) statement, certifying that such
Seller Party (or its regarded owner, if such Seller Party is an entity
disregarded as separate from its owner) is not a “foreign person” within the
meaning of the Code;

 

(vii)

an executed counterpart of the Preliminary Settlement Statement;

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(viii)

a recordable release in a form reasonably acceptable to Buyer of any deeds of
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 and encumbering the Assets;

 

(ix)

an appropriate form (such as IRS Form W-9) certifying that such Seller Party is
exempt from backup withholding; and

 

(x)

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)

At the Closing, Buyer shall deliver (and execute and acknowledge, as
appropriate) to Seller:

 

(i)

the Preliminary Amount, less the Deposit Amount (reduced by any amounts retained
in the Escrow Account pursuant to Section 11.06 or Section 11.11), by wire
transfer of immediately available U.S. funds 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)

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

 

(iii)

original counterparts of such assignments of federal and state oil and gas
leases and rights-of-way as are necessary to transfer title to all of the Assets
to Buyer, except to the extent customarily delivered after Closing;

 

(iv)

an executed counterpart of a joint instruction letter directing the Escrow Agent
to release to Seller an amount equal to the Deposit Amount (less any amounts
retained in the Escrow Account pursuant to Section 11.06 or Section 11.11) to
Seller;

 

(v)

a certificate, in substantially the form set forth in Exhibit H-2 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;

 

(vi)

an executed counterpart of the Preliminary Settlement Statement;

 

(vii)

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 the Assets; and

 

(viii)

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).

Allocations and Adjustments

.  If the Closing occurs:

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(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, 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 production set forth in Section
2.05(a), for each Well operated by Seller or its Affiliate, Seller or its
Affiliate shall retain overhead charges and rates received by Seller or its
Affiliate in its capacity as “Operator” under any operating agreement, pooling
order, or COPAS accounting procedure attributable to such Well for time periods
between the Effective Time and the Closing Date.

(c)

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 which were 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 shall be prorated in accordance with Section
13.02(b).

(d)

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, fees, rentals, revenues, and
amounts received by Buyer with respect to the Assets to which Seller is
otherwise 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;

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(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 of
the Assets after the Effective Time (including prepayments paid before the
Effective Time that relate to operations to be conducted during 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 merchantable Hydrocarbons attributable to
the Assets in storage or existing in stock tanks above the load line as of the
Effective Time, such value to be based on the contract price(s) applicable to
such Hydrocarbons as of the Effective Time (or, if there is no contract price,
the market value thereof at the applicable custody transfer points as of the
Effective Time);

 

(F)

the lesser of (x) the amount of the Specified Receivables and (y) forty-five
thousand dollars ($45,000);

 

(G)

the amount of all scheduled pre-payments set forth on Schedule 2.05(d)(i)(G);

 

(H)

the amount of Twenty-Five Thousand Dollars ($25,000) for Imbalances as of the
Effective Time; and

 

(ii)

decreased by the following amounts:

 

(A)

the aggregate amount of (i) proceeds received by Seller (or received by a
Third-Party operator and netted or set off against amounts due or alleged to be
due to such operator) 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, (y) gathering,
processing, transportation, and other midstream costs, and (z) production and
severance Taxes to the extent withheld by the purchasers of production) and (ii)
other proceeds, fees, rentals, revenues, and amounts received by Seller with
respect to the Assets to which Buyer is otherwise 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 of the Assets prior to the
Effective Time (excluding prepayments with respect to any period after the
Effective Time) and paid by Buyer;

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(E)

the amount of the Suspense Funds; and

 

(F)

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

(e)

As soon as practicable after the Closing, but no later than ninety (90) 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
attributable to the Assets conveyed at the Closing.  On or before thirty (30)
days after Buyer’s receipt of a Final Settlement Statement, Buyer shall deliver
to Seller a written report containing any changes that Buyer proposes to be made
to such 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 to the Final
Settlement Statement 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 a Final Settlement Statement, then such
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
the delivery of a Dispute Notice, the Parties shall undertake to agree with
respect to any disputed amounts identified therein by the date that is one
hundred twenty (120) days after the Closing Date (the “Post-Closing
Date”).  Except for Title Defect and Environmental Defect adjustments pursuant
to Section 2.05(d)(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 the independent accounting firm of Deloitte Touche Tohmatsu
Limited a written notice of such dispute along with reasonable supporting detail
for the position of Buyer and Seller, respectively, and the independent
accounting firm shall finally determine such disputed item in accordance with
the terms of this Agreement.  The independent accounting firm 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 independent
accounting firm shall not increase the Purchase Price more than the increase
proposed by Seller or decrease the Purchase Price more than the decrease
proposed by Buyer, as applicable.  The decision of such independent accounting
firm shall be binding on the Parties, and the fees and expenses of such
independent accounting firm 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 a Final
Settlement Statement are agreed to (or deemed agreed to) or fully and finally
determined by the independent accounting firm as set forth in this
Section 2.05(e) shall be called the “Final Settlement Date,” and the portion of
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 Days after the Final Settlement Date by
wire transfer of

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immediately available U.S. funds to the accounts specified pursuant to wire
instructions delivered in advance by Seller or Buyer, as applicable.

Assumption

.  If the Closing occurs, from and after the Closing Date, Buyer shall assume,
fulfill, perform, pay, and discharge the following liabilities of Seller arising
from, based upon, related to, or associated with the Assets and only to the
extent not constituting Retained Liabilities (collectively, the “Assumed
Liabilities”), subject to Seller’s indemnity obligations under Section 10.02,
and further subject to the limitations and restrictions in Article 10, including
any and all Damages and obligations, known or unknown, allocable to the Assets
and: (a) attributable to or resulting from the use, maintenance, or ownership of
the Assets, including the performance of all covenants and the discharge of all
duties, obligations, responsibilities, and liabilities arising under the terms
of the Leases and the Applicable Contracts (other than obligations to pay money)
for all periods before, at, and after the Closing Date, except for all
obligations and liabilities for the payment of amounts owed in connection with
the Assets (including the payment of Property Costs and Royalties), which shall
be allocated between Seller and Buyer as of the Effective Time as provided in
Section 2.05; (b) imposed by any Legal Requirement or Governmental Body relating
to the Assets regardless of whether arising before, at, or and after the Closing
Date; (c) for plugging, abandonment, decommissioning, and surface restoration of
the Assets, including 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,
regardless of whether such Environmental Liabilities arose before, at, or after
the Closing Date; (h) related to the conveyance of the Assets to Buyer at
Closing; (i) attributable to claims relating to Taxes and assessments for which
Buyer is responsible hereunder; (j) attributable to the failure to obtain a
Consent that is not a Required Consent as provided in Section 11.03(a)(i); and
(k) 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
Properties; (iv) it is the intent of the Parties that, except for Retained
Liabilities, 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 Closing Date 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 Date, but effective, to the extent provided
above, as of the Effective Time, and subject to Seller’s indemnity obligations
under Section 10.02 (and further subject to the limitations and restrictions in
Article 10), Buyer shall assume, with respect to the Assets, all responsibility
and liability (except for Retained Liabilities) for any assessment,

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remediation, removal, transportation, and disposal of these materials and
associated activities in accordance with all Legal Requirements and requirements
of Governmental Bodies.  

Allocation of Purchase Price

.  The Purchase Price shall be allocated among the Wells 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 jointly to 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 this 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
again as of the Closing Date, the following:

Organization and Good Standing

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

Authority; No Conflict

.  

(a)

The execution, delivery, and performance of this Agreement, the other
Transaction Documents to which such Seller is a party, 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
other Transaction Documents executed and delivered by such Seller Party at or in
connection with such Closing shall have been duly executed and delivered by such
Seller Party.  This Agreement and the other Transaction Documents to which such
Seller is a party constitute the legal, valid, and binding obligations of such
Seller Party, enforceable against such Seller Party in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency,

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reorganization, moratorium, or other 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), neither the execution and delivery of
this Agreement nor any other Transaction Document 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 (B) any resolution adopted by
the board of directors, managers, or officers of such Seller Party;

 

(ii)

assuming the receipt of all Consents and the waiver of all Preferential Purchase
Rights (in each case) applicable to the Contemplated Transactions, contravene,
conflict with, or result in a Breach of or default under, or give rise to a
right to terminate, accelerate, or modify any terms of, or a right to exercise
any remedy or obtain any relief under, any credit agreement, note, bond,
mortgage, indenture, license, Lease, Contract, or other agreement or document 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 any Legal Requirement or Order, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization, that, in either case, relates to such Seller Party
or the Assets, or otherwise challenge the Contemplated Transactions; or

 

(iv)

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

Bankruptcy

.  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 September
27, 2018, 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. Seller is not insolvent.

Taxes

.  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 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.  There are no administrative or judicial
proceedings by any taxing authority pending against Seller relating to or in
connection with any Asset Taxes.  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.  There are no actual, pending, or
Threatened Tax liens covering the Assets,

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except for Tax liens that are Permitted Encumbrances.  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.

Legal Proceedings

.  Other than the Assumed Litigation and the Retained Litigation, such Seller
Party has not been served with any Proceeding, and there is otherwise no pending
or, to such Seller Party’s Knowledge, Threatened, Proceeding against such Seller
Party or any of its Affiliates, or the Assets, in each case, that (a) relates to
or concerns the Assets, or (b) challenges, or may have the effect of preventing,
delaying, making illegal, materially hindering, or otherwise interfering with,
any of the Contemplated Transactions.

Brokers

.  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.

Compliance with Legal Requirements

.  To such Seller Party’s Knowledge, except as set forth in Schedule 3.07, there
is no uncured material violation by such Seller Party of any Legal Requirements
(other than Environmental Laws and Legal Requirements related to Taxes, which
are addressed in other provisions of this Article 3) with respect to such Seller
Party’s use, ownership, and operation of the Assets.  

Hydrocarbon Marketing

.  Except as set forth on Schedule 3.08, there are no calls on production,
options to purchase, or similar rights binding on such Seller Party in effect
with respect to any portion of the Hydrocarbons produced from or allocable to
the Properties.  Except as disclosed on Schedule 3.08, such Seller Party is not
obligated by any production payment, material prepayment arrangement, or
“take-or-pay” requirement to sell, gather, deliver, process, or transport any
Hydrocarbons without then or thereafter receiving full payment therefor.  Except
as set forth on Schedule 3.08, none of the Properties is subject to any contract
or agreement that contain acreage commitment or dedication provisions, minimum
volume obligations or commitments and associated deficiency payment obligations,
requirements obligations, or similar obligations or provisions that will be
binding on Buyer.

Imbalances

. 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 dates reflected thereon.

Material Contracts

.  To such Seller Party’s Knowledge, Schedule 3.10 sets forth all Applicable
Contracts of the types described below to which such Seller Party is a party or
is otherwise bound as of the Execution Date (collectively, the “Material
Contracts”):

(a)

any Applicable Contract that contains a call on production or option to purchase
production or 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, including all
such Applicable Contracts that contain an acreage commitment or dedication
provision, minimum volume obligation or commitment and associated

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deficiency payment obligation, requirements obligation, or similar obligation
that will be binding on Buyer;

(b)

any Applicable Contract that can reasonably be expected to result in aggregate
payments or liabilities by such Seller Party of more than One Hundred Thousand
Dollars ($100,000) net to such Seller Party’s interest during the current or any
subsequent fiscal year or more than Two Hundred Fifty Thousand Dollars
($250,000) 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);

(c)

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;

(d)

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

(e)

any Applicable Contract between Seller and any Affiliate of Seller or Seller
Party that will not be terminated prior to Closing.

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, and to the Knowledge of such Seller Party, there has occurred no event,
fact, or circumstance that, with the lapse of time, the giving of notice, or
both, would constitute such a Breach or default by such Seller Party, or any
Third Party under the terms of any Material Contract.  To such Seller Party’s
Knowledge such Material Contracts are in full force and effect.  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 the Closing.

Consents and Preferential Purchase Rights

.  To such Seller Party’s Knowledge, except as set forth in Schedule 3.11, none
of the Assets 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 and (b) Applicable Contracts
that are terminable upon not greater than sixty (60) days’ notice without
payment of any fee.

Current Commitments

. Schedule 3.12 sets forth, as of the Execution Date, all approved
authorizations for expenditures and other approved capital commitments
individually equal to or greater than One Hundred Thousand Dollars ($100,000)
(net to such Seller Party’s interest) (the “AFEs”) relating to operations to
drill or rework any Wells or for other capital expenditures on the Assets
pursuant to any of the Applicable Contracts for which all of the activities
anticipated in such AFEs have not been completed by the Execution Date.

Environmental Laws

.  Except as set forth in Schedule 3.13, to such Seller Party’s Knowledge, on
the Execution Date, the Properties are in compliance in all material respects
with all applicable Environmental Laws and all Permits required under
Environmental Laws relating to the ownership and operation of the Properties and
the production and disposition of Hydrocarbons

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therefrom, except for prior instances of noncompliance that have been resolved
in accordance with the standard of the Lowest Cost Response. To such Seller
Party’s Knowledge, except as set forth in Schedule 3.13, on the Execution Date,
such Seller Party and each Third Party operator of the Properties, as
applicable, has all Permits required under Environmental Laws in connection with
the ownership and operation of the Properties and the production and disposition
of Hydrocarbons therefrom, except when the failure to obtain or maintain such an
environmental Permit would not reasonably be expected to be material, and no
such Seller Party has received written notice that any of such environmental
Permits are not in full force and effect.  Except as set forth in Schedule 3.13,
(a) there are no Proceedings pending or, to such Seller Party’s Knowledge,
Threatened in writing before any Governmental Body with respect to the
Properties alleging material violations of, or material liabilities under, any
Environmental Law, or claiming any remediation obligation, and (b) such Seller
Party has received no notice from any Governmental Body of any alleged or actual
material violation of, or material non-compliance with, or material liability
under, any Environmental Law or of any material non-compliance with the terms of
any Permit required under Environmental Laws, in each case arising from, based
upon, associated with, or related to the Properties, or the ownership or
operation thereof, or the production and marketing of Hydrocarbons therefrom,
the subject matter of which notice is unresolved.  To the extent that Buyer
asserts or could have asserted a Breach of or inaccuracy in the representations
and warranties contained in this Section 13.13 as an Environmental Defect under
Section 11.10, Buyer’s sole and exclusive remedy for such Breach shall be
pursuant to the Environmental Defect process in Article 11.

Permits

.  To such Seller Party’s Knowledge, except as set forth in Schedule 3.14, (a)
such Seller Party, with respect to any Assets currently operated by such Seller
Party or any of its Affiliates, and each Third Party operator, with respect to
all Non-Operated Assets, has acquired all Permits (excluding Permits required
under Environmental Laws, which are addressed in Section 3.13) 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; (c) no Proceeding is pending or Threatened to suspend, revoke, or
terminate any such Permit or declare any such Permit invalid; and (d) to such
Seller Party’s Knowledge, such Seller Party is in compliance in all material
respects with all such Permits.

Wells

.  

(a)

To such Seller Party’s Knowledge, as of the Execution Date, the Wells described
on Exhibit B include, inter alia, all Hydrocarbon wells located on the Leases,
the Lands, and the Units that are (i) currently capable of producing
Hydrocarbons, (ii) currently being drilled, or (iii) have been drilled and are
awaiting completion.  Except as disclosed on Schedule 3.15, (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 Seller is
currently obligated by applicable Legal Requirements or contract to plug or
abandon or that are currently subject to exceptions to a requirement to plug or
abandon issued by a Governmental Body.

(b)

To the Knowledge of such Seller Party, all Hydrocarbon wells located on the
Leases, Lands, and Units that have been plugged and abandoned were plugged and
abandoned in accordance with all applicable Legal Requirements.

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Payout Balances

. Schedule 3.16 sets forth, to such Seller Party’s Knowledge, the payout
balances as of the Execution Date for each Well subject to payout.

Employee Benefits

.

(a)

For purposes of this Agreement, “Seller Benefit Plan” means each “employee
benefit plan,” as defined in Section 3(3) of ERISA, and all other welfare,
retirement, pension, deferred compensation, bonus, incentive, severance,
executive life insurance, vacation or paid time off, fringe benefit, stock
purchase, stock option, phantom stock, equity or equity-based awards,
employment, profit sharing, retention, stay bonus, change of control and other
material compensation or benefit plans, programs, policies, agreements or
arrangements, in each case whether or not reduced to writing, whether funded or
unfunded, whether or not tax-qualified, and whether or not subject to ERISA,
which is or has been maintained, sponsored or contributed to, or required to be
contributed to, by a Seller Party for the benefit of any employee of such Seller
Party (or any spouse or dependent of such individual), or under which a Seller
Party or any of its ERISA Affiliates has or may have any liability.  Schedule
3.17(a) contains a true and complete list of all Seller Benefit Plans.

(b)

Each Seller Benefit Plan has been established, funded, administered, and
maintained in all material respects in accordance with its terms and in all
material respects in compliance with all applicable Legal Requirements,
including ERISA and the Code, and any premiums due or contributions required to
be made under the terms of any Seller Benefit Plan have been timely made in all
material respects.  

(c)

No Seller Benefit Plan is, and no Seller Party has any Liability, including on
account of an ERISA Affiliate, under any employee benefit plan that is subject
to Section 302 of ERISA, Title IV of ERISA or Section 412 of the Code or any
“multiemployer plan,” as defined in Section 3(37) of ERISA. No Seller Benefit
Plan is an employee benefit plan which provides health, medical, or life
insurance benefits to any current or former employee after termination of
employment with a Seller Party, except to the extent required by COBRA.  Each
Seller Benefit Plan which is an “employee welfare benefit plan” (as defined in
Section 3(1) of ERISA) and a “group health plan” (within the meaning of Section
5000(b)(1) of the Code) complies with and has been maintained and operated in
accordance with COBRA.

(d)

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.

Disbursement of Production Revenues; Suspense Funds

.  To such Seller Party’s Knowledge, all Hydrocarbon proceeds payable by such
Seller Party to Working Interest owners, Royalty owners, and other interest
owners in the Properties have been and will be timely disbursed in accordance
with the terms of the Leases, applicable Legal Requirements, and applicable
division orders, pooling agreements and orders, and other applicable contractual
arrangements, or if not so disbursed, are being properly held in suspense or
otherwise contested in good faith in the normal

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course of business, except, in each case, to the extent any failure would not
cause a Lease to terminate.  To such Seller Party’s Knowledge, all material
Suspense Funds held by such Seller Party and owed to Third Parties for
disbursement to Working Interest, Royalty, and other interest owners in the
Properties operated by such Seller Party are set forth on Schedule 3.18 as of
the date or dates reflected thereon.

Leases

.  Except as set forth on Schedule 3.19, within the one-year period preceding
the Execution Date, no lessor under any Lease has given, or Threatened to give,
notice of any action to terminate, cancel, rescind, repudiate, or procure a
judicial reformation of any Lease or any provision thereof.

Drilling Obligations

.  Except as set forth on Schedule 3.20, to such Seller Party’s Knowledge, and
except for such optional drilling operations as may be necessary to maintain a
Lease beyond the end of its primary term and drilling operations required for
such Seller Party to comply with any implied covenant applicable to a Lease,
none of the Leases contains, and none of the Leases is subject to or burdened
contractually by, a continuous drilling or other obligation that requires the
drilling of a Hydrocarbon well.

Payment of Expenses

.  To the Knowledge of such Seller Party, such Seller Party has paid, or such
Seller Party will pay in accordance with past practices, its proportionate share
of all amounts owed by such Seller Party in connection with the Properties for
which such Seller Party has received invoices from the operator(s) thereof or
the relevant vendors, and there are no past due cash calls or payments due from
such Seller Party under the terms of the Material Contracts or otherwise with
respect to the Properties for which a vendor has filed or is entitled to file a
lien following the Execution Date.

Knowledge 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.”

Disclosures 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.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER

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

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Organization and Good Standing

.  Buyer is a limited liability company duly organized, validly existing, and in
good standing under the laws of the State of Delaware and is duly qualified to
do business as such and is in good standing in each jurisdiction in which the
Assets are located.

Authority; No Conflict

.  

(a)

This Agreement constitutes, and, upon their execution and delivery at the
Closing, the other Transaction Documents to which Buyer is a party 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, insolvency,
reorganization, moratorium, or other 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)

Neither the execution and delivery of this Agreement or the other Transaction
Documents 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 by Buyer of this Agreement or the other
Transaction Documents, 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 breach or default under, or give rise to any right
to terminate, accelerate, or modify any terms of, or a right to exercise any
remedy or obtain any relief under, any credit agreement, note, bond, mortgage,
indenture, license, or other contract or any Legal Requirement or Order to which
Buyer may be subject, or otherwise give any Governmental Body or other Person
the right to challenge any of the Contemplated Transactions.

(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 and the other Transaction Documents or the consummation or performance
of any of the Contemplated Transactions.

Certain Proceedings

.  There is no Proceeding pending or, to Buyer’s Knowledge, Threatened 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.

Knowledgeable 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 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
Closing.  Buyer is acquiring the Assets for its own account and not for sale or

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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.

Qualification

.  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 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 oil and gas leases, rights-of-way, and
other rights issued or controlled by (or on behalf of) any applicable
Governmental Body having jurisdiction in the State of Oklahoma and will be
qualified under applicable Legal Requirements to own the Assets.  Buyer has, or
as of the Closing Date 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.

Brokers

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

Financial 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
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 the other Transaction Documents to which Buyer is a party.  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.

Securities Laws

.  The solicitation of offers and the sale of the Assets 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 with the intent of distributing fractional, undivided interests that
would be subject to regulation by federal or state securities laws, and if Buyer
sells, transfers, or otherwise disposes of the Assets or fractional undivided
interests therein, Buyer agrees to do so in compliance with applicable federal
and state securities laws.

Due Diligence

.  Without limiting or impairing any representation, warranty, covenant or
agreement of Seller contained in this Agreement and the other Transaction
Documents to which Seller is a party, or Buyer’s right to rely thereon, Buyer
and its Representatives have (a) been permitted full and complete access to all
materials relating to the Assets, (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 (d) had the opportunity to take such other actions and make such other
independent investigations as Buyer deems necessary to evaluate the Assets and
understand the merits and risks of an investment therein and to verify the
truth, accuracy, and completeness of the materials, documents, and other

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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.

Basis 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 from Seller and has formed an opinion based
solely on Buyer’s knowledge and experience, Buyer’s due diligence, and Seller’s
representations, warranties, covenants, and agreements contained in this
Agreement and the other Transaction Documents, 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 other Transaction Documents) in making its decision to
enter into this Agreement or to close the Contemplated Transactions.  Buyer
understands and acknowledges that neither the United States Securities and
Exchange Commission nor any other Governmental Body has passed upon the Assets
or made any finding or determination as to the fairness of an investment in the
Assets 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, pay
the Purchase Price, or otherwise.

Business Use, Bargaining Position

.  Buyer is purchasing the Assets 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 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.  Buyer further recognizes that
Seller, in determining to proceed with entering into this Agreement, has
expressly relied on the provisions of this Article 4.

Bankruptcy

.  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

Access and Investigation

.  

(a)

Between the Execution Date and the Defect Notice Date, to the extent that doing
so would not violate applicable Legal Requirements, Seller’s obligations to any
Third Party, or other

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restrictions on Seller, Seller shall afford Buyer and its Representatives
reasonable access, by appointment only, during Seller’s regular hours of
business, to appropriate Seller’s personnel, any contracts, books and records,
and other documents and data related to the Assets (including, for avoidance of
doubt, the Wells), 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 Non-Operated Assets; 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 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.

(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.

(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 on the Closing Date (in each case,
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 Closing Date.

Ownership 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 Date, Seller shall
operate its business with respect to its ownership of the Assets as a reasonably
prudent operator, in a good and workmanlike manner, in material compliance with
all applicable Legal Requirements, and otherwise consistent with past
practices.  Without limiting the foregoing, Seller shall:

(a)

not, without Buyer’s prior written consent, transfer, sell, pledge, mortgage,
hypothecate, encumber, or otherwise dispose of any of the Assets, except as
required under any Leases or Contracts, and except for sales of Hydrocarbons,
equipment, and inventory in the ordinary course of business;

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(b)

shall pay and discharge, when due, Seller’s share of all Royalties, delay
rentals, shut-in royalties, and other lease maintenance payments, Asset Taxes
(to the extent such Asset Taxes become due and payable prior to the Closing
Date, subject to reimbursement by Buyer if required under Sections 13.02(b) and
13.02(c)), costs, expenses, and other obligations in connection with or relating
to the Assets, and keep the Assets free of Encumbrances and claims that do not
constitute Permitted Encumbrances;

(c)

not, without Buyer’s written consent, amend, modify, release, terminate, or
abandon any Lease, Well, or other personal property constituting part of the
Assets unless required to do so by applicable Legal Requirement;

(d)

not, without Buyer’s prior written consent, propose, or agree to participate, in
any single operation with respect to the Wells or Leases with an anticipated
cost in excess of Fifty Thousand Dollars ($50,000) net to Seller’s interest,
except for any emergency operations;

(e)

not, without Buyer’s prior written consent, execute, terminate, cancel, extend,
or materially amend or modify any Applicable 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
sixty (60) days’ or shorter notice; and

(f)

shall provide Buyer with copies of any and all correspondence received from any
Governmental Body with respect to the Assets as soon as practicable, but in any
event within fifteen (15) days after receipt thereof;

(g)

shall not waive, compromise, or settle any material right or material claim with
respect to any of the Assets; and

(h)

not commit to do any of the actions in subsections (a) through (g).

Buyer acknowledges that Seller owns undivided interests in certain of the
Properties, 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; provided further that no such action
materially impairs the value of the applicable Asset.  Further, no action or
inaction of any Third Party operator with respect to any 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 shall provide Buyer with
written notice of such Third Party action or inaction within two (2) Business
Days of Seller’s Knowledge thereof.  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 is reasonably necessary
and shall notify Buyer of such action promptly

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thereafter, but in no event later than three (3) days after Seller acquires
Knowledge of such emergency.  Any matter approved in writing (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.

Insurance

.  Seller shall maintain in force during the period from the Execution Date
until the Closing Date insurance 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 between the Effective Time and the Closing Date will constitute
Property Costs.

Consent 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 to Buyer; provided that, in the event
Seller is unable to obtain all such Consents or waivers of all such Preferential
Purchase Rights 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 reasonably cooperate with Seller in seeking to obtain such Consents.

Amendment to Schedules

.  Until the fifth (5th) Business Day before the Closing Date, Seller shall have
the right (but not the obligation) to supplement the Schedules to this Agreement
with respect to any matters discovered or occurring subsequent to the Execution
Date and on or before the Closing 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 the 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 the 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.  

ARTICLE 6
OTHER COVENANTS

Notification and Cure

.  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 hereunder 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 representation, warranty,
or covenant of such other Party hereunder 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)

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be cured by the Closing (or, if the Closing does not timely 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.

Satisfaction 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; provided, however, that if Seller or
Buyer, as applicable, is unable to satisfy such conditions after using such
commercially reasonable efforts, and such other Party agrees in writing to a
waiver of such conditions, such failure to satisfy shall not constitute a Breach
of this Agreement.

Replacement 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 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 the Assets that are to be
conveyed to Buyer at the Closing.  

(b)

Promptly (but in no event later than thirty (30) days) after the Closing, Buyer
shall, at its sole cost and expense, make all filings with Governmental Bodies
necessary to assign and transfer title to the Assets conveyed to Buyer at the
Closing 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 Governmental Authorizations of the Contemplated
Transactions.

Governmental Reviews

.  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.

ARTICLE 7
CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE

Buyer’s obligations to purchase the Assets and to take the other actions
required to be taken by Buyer at the Closing are subject to the satisfaction or
fulfillment, 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), in

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each case, insofar as such conditions pertain to the Assets to be conveyed from
Seller to Buyer at the Closing:

Accuracy of Representations

.  

(a)

Each and every Fundamental Representation of Seller must have been true in all
respects (except for de minimis inaccuracies) as of the Execution Date and must
be true in all respects (except for de minimis inaccuracies) as of the Closing
Date as if made on the Closing Date.

(b)

All of Seller’s representations and warranties in this Agreement (other than its
Fundamental Representations) 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;
provided, however, that solely for purposes of determining whether Seller has
satisfied or fulfilled the condition set forth in this Section 7.01(b) in order
to ascertain whether Buyer is entitled to terminate this Agreement under
Section 9.01(b), a Breach or inaccuracy of the representation and warranty
contained in Section 3.13 shall be disregarded, to the extent such Breach or
inaccuracy is asserted as an Environmental Defect in a timely and proper manner
under Section 11.10, and such Environmental Defect is addressed in accordance
with the procedures contained in Sections 11.11 through 11.13.

Seller’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.

No Proceedings

.  Since the Execution Date, there must not have been commenced or Threatened
against Seller, the Assets, or 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.

No 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.

Necessary Consents and Approvals

.  All Governmental Authorizations required for the Contemplated Transactions,
except Consents and approvals of Instruments of Conveyance by Governmental
Bodies that are customarily obtained after the Closing, shall have been granted,
or

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the necessary waiting period shall have expired, or early termination of the
waiting period shall have been granted.

Closing Deliverables

.  Seller shall have (a) 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); and (b) otherwise taken all actions required to be
taken by Seller on or prior to the Closing Date.

Certain Adjustments

.  The sum of (i) all Title Defect Values asserted by Buyer in good faith and
without taking into account the Aggregate Defect Deductible (less the sum of all
Title Benefit Value and excluding Title Defect Values for Title Defects
requiring the release or discharge of a lien or other Encumbrance that Seller is
obligated to deliver at the Closing), plus (ii) the Aggregate Environmental
Defect Values asserted by Buyer in good faith and without taking into account
the Aggregate Defect Deductible, plus (iii) the aggregate downward Purchase
Price adjustments under Section 11.02, plus (iv) the aggregate downward Purchase
Price adjustments under Section 11.03, shall not exceed twenty-five percent
(25%) of the unadjusted Purchase Price.

ARTICLE 8
CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE

Seller’s obligations to sell the Assets and to take the other actions required
to be taken by Seller at the Closing are subject to the satisfaction or
fulfillment, 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), in each case,
insofar as such conditions pertain to the Assets to be conveyed from Seller to
Buyer at the Closing:

Accuracy of Representations

.  

(a)

Each and every Fundamental Representation of Buyer must have been true in all
respects (except for de minimis inaccuracies) as of the Execution Date and must
be true in all respects (except for de minimis inaccuracies) as of the Closing
Date as if made on the Closing Date.

(b)

All of Buyer’s representations and warranties in this Agreement (other than its
Fundamental Representations) 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.

Buyer’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.

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No 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.

No 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.

Necessary Consents and Approvals

.  All Governmental Authorizations required for the Contemplated Transactions,
except Consents and approvals of Instruments of Conveyance 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.

Closing Deliverables

.  Buyer shall have (a) 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); and (b) otherwise taken all actions required to be
taken by Buyer on or prior to the Closing Date.

Qualifications

.  Buyer shall have obtained all authorizations, qualifications, and approvals
required to be obtained prior to the Closing under Section 6.03(a).

Certain Adjustments

.  The sum of (i) all Title Defect Values asserted by Buyer in good faith and
without taking into account the Aggregate Defect Deductible (less the sum of
Title Benefit Values and excluding Title Defect Values for Title Defects
requiring the release or discharge of a lien or other Encumbrance that Seller is
obligated to deliver at the Closing), plus (ii) all Environmental Defect Values
asserted by Buyer in good faith and without taking into account the Aggregate
Defect Deductible, plus (iii) the aggregate downward Purchase Price adjustments
under Section 11.02, plus (iv) the aggregate downward Purchase Price adjustments
under Section 11.03, shall not exceed twenty-five percent (25%) of the
unadjusted Purchase Price.

ARTICLE 9
TERMINATION

Termination Events

.  This Agreement may, by written notice given prior to or at on the Closing
Date, 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 the Closing set forth in Article 7 not to
be satisfied or fulfilled (or, if prior to the 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

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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 the 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 the Closing have been satisfied or waived, then the
refusal or willful or negligent delay by Seller to close the Contemplated
Transactions in a timely manner 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 the Closing set forth in Article 8 not to
be satisfied or fulfilled (or, if prior to the 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, 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 the 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 the Closing have been satisfied or waived, then
the refusal or willful or negligent delay by Buyer to close the Contemplated
Transactions in a timely manner shall constitute a material Breach of this
Agreement;

(d)

by either Seller or Buyer if the Closing has not occurred on or before November
1, 2020 (the “Outside Date”), or such later date as the Parties may agree upon
in writing; provided that (i) no Party shall be entitled to terminate this
Agreement pursuant to this Section 9.01(d) if such Party’s failure to comply
with its obligations under this Agreement caused the Closing not to occur by the
Outside Date; and (ii) neither Party shall be permitted to terminate this
Agreement under this Section 9.01(d) if, prior to such an attempted termination,
Buyer has become entitled, and commenced appropriate proceedings, to enforce its
right of specific performance hereunder and, thereafter, uses commercially
reasonable efforts to prosecute such proceedings to conclusion;

(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 or other action has become final and
nonappealable;

(f)

by Buyer if the aggregate number of Net Leasehold Acres within the applicable
Target Formation underlying Lands located in the Specified Counties to be
delivered by Seller at the Closing (free and clear of all defects or
irregularities of title or Encumbrances other than Permitted Encumbrances) is
less than seventy-five percent (75%) of the aggregate number of Net Leasehold
Acres within the applicable Target Formation underlying Lands located in the
Specified Counties as described on Schedule 9.01(f);

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provided, further, that:

 

(x)

Buyer shall not be entitled to terminate this Agreement under Section 9.01(b) or
Section 9.01(d) if (i) Buyer is in material Breach of Buyer’s representations,
warranties, or covenants set forth herein, and such Breach or Breaches,
individually or in the aggregate, result in the conditions precedent to the
obligations of Sellers to close set forth in Article 8 not being fulfilled or
satisfied; or (ii) Buyer is the party who obtains the order (if any) referred to
in Section 7.04; and

 

(y)

Seller shall not be entitled to terminate this Agreement under Section 9.01(c)
or Section 9.01(d) if (i) a Seller Party is in material Breach of Seller’s
representations, warranties, or covenants set forth herein, and such Breach or
Breaches, individually or in the aggregate, result in the conditions precedent
to the obligations of Buyer to close set forth in Article 7 not being fulfilled
or satisfied; or (ii) a Seller Party is the party who seeks and obtains the
order (if any) referred to in Section 8.04.

Effect 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), and (b) the following provisions shall survive the termination: Article
1, this Section 9.02, and Sections 10.03(c), 10.06, 10.07, 10.12, 10.13, 10.14,
and Article 13 (other than Section 13.01).  If this Agreement is terminated
pursuant to Section 9.01 in any circumstance other than by Seller for the
reasons stated in Section 9.02(b)(i), Seller and Buyer shall jointly instruct
the Escrow Agent to return the Deposit Amount, plus all interest earned thereon,
to Buyer; provided, however, that if Buyer becomes entitled to enforce its
remedy of specific performance under Section 9.02(b)(ii), then upon the entry by
a court of competent jurisdiction of a final order requiring Seller’s
performance of this Agreement, Seller and Buyer shall jointly instruct the
Escrow Agent to disburse the Deposit Amount, plus all interest earned thereon,
to Seller.  If this Agreement is terminated pursuant to Section 9.01(a) or
Section 9.01(f) or as the result of the occurrence of the circumstances
described in Section 7.07 and Section 8.08, then other than such return of the
Deposit Amount, plus interest earned thereon, to Buyer, neither Party shall have
any further liability to any other Party as the result of such termination.

(b)

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

 

(i)

If (A) Seller has the right to terminate this Agreement (1) pursuant to
Section 9.01(c) or (2) 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), and (B) all of the conditions precedent
to Buyer’s obligation to close set forth in Article 7 have been fulfilled or
satisfied, or (C) if Buyer otherwise wrongfully fails, for any reason, to
perform and discharge its obligation to close the Contemplated Transactions, the
sole and exclusive remedy of Seller with the respect to the failure of the
Closing to occur as the result of

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Buyer’s Breach or other failure to satisfy or fulfill such conditions shall be
the right to terminate this Agreement and receive the Deposit Amount (including
accrued interest) 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 (including accrued interest) 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 (A) Buyer has the right to terminate this Agreement (1) pursuant to
Section 9.01(b) or (2) pursuant to Section 9.01(d), if at such time Buyer could
have terminated this Agreement pursuant to Section 9.01(b) (without regard to
any cure periods contemplated therein), (B) all of the conditions precedent to
Seller’s obligation to close set forth in Article 8 have been fulfilled or
satisfied, or (C) if Seller otherwise wrongfully fails, for any reason, to
perform and discharge its obligation to close the Contemplated Transactions, the
sole and exclusive remedies of Buyer with the respect to the failure of the
Closing to occur as the result of Seller’s Breach or other failure to satisfy or
fulfill such conditions shall be, in Buyer’s sole discretion, either (1) to
enforce the remedy of specific performance of this Agreement against Seller,
without posting any bond or the necessity of proving the inadequacy as a remedy
of monetary damages, in which event the Deposit Amount (including accrued
interest) will be applied as called for herein, or (2) if Buyer does not seek
and successfully enforce the remedy of specific performance, to terminate this
Agreement and (in addition to retention of the Deposit Amount, including accrued
interest) seek to recover damages from Seller in an amount up to, but not
exceeding, the Deposit Amount (including accrued interest), 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 (including accrued interest) 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 (including accrued interest) 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 in the case of Seller, on damages in
the amount of the Deposit Amount in the case of Buyer, would, in either case, be
a reasonable liquidated damages amount for such material Breach.  

(d)

If Buyer elects to enforce its right to the remedy of specific performance of
this Agreement in accordance with the terms of Section 9.02(b)(ii), the Parties
agree that Buyer would be irreparably harmed by the unexcused failure of Seller
to consummate the Closing or other

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Breach or failure to perform its obligations under this Agreement, and that any
such breach or failure to perform may not be compensated in all cases by money
damages alone.  In that event, Buyer shall be entitled to seek temporary,
preliminary, and permanent injunctive relief in connection with the enforcement
of its right to specific performance under Section 9.02(b)(ii).

Return 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 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 (b) an officer of Buyer shall certify
Buyer’s compliance with the preceding clause (a) to Seller in writing.

ARTICLE 10
INDEMNIFICATION; REMEDIES

Survival

.  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 and the covenants and agreements in Section 2.07 and
Section 13.02(b)-(e) shall survive for the period of the applicable statute of
limitations or prescription 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 the Closing Date; (d) all other representations
and warranties of Seller and Buyer shall survive for twelve (12) months after
the Closing Date; and (e) all other covenants and agreements of Buyer shall
survive until fully performed.  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) and Section 10.02(d) shall continue for thirty-six (36)
months following the Closing Date. All other indemnities, and all other
provisions of this Agreement, shall survive Closing without time limit except as
may otherwise be expressly provided herein.

Indemnification 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 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
the other Transaction Documents, or in any certificate delivered by Seller
pursuant to this Agreement; provided, however, that for purposes of determining
the existence of a Breach and calculating the amount of any Damages in
connection therewith, all qualifications

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relating to materiality, and the requirement of a Material Adverse Effect
contained in such representations and warranties shall be disregarded; and
provided, further, that the indemnity of Seller provided in this Section
10.02(a) shall not include any Damages arising out of Seller’s Breach of the
representation and warranty contained in Section 3.13 to the extent asserted by
Buyer as an Environmental Defect in a timely and proper manner under Section
11.10 that is addressed in accordance with the procedures contained in
Sections 11.11 through 11.13;

(b)

any Breach by Seller of any covenant, obligation, or agreement of Seller in this
Agreement or the other Transaction Documents;

(c)

any Damages caused by Seller or Seller Group to the extent arising out of or
relating to efforts by Seller or Seller Group to cure or remediate Environmental
Defects in accordance with the terms of Section 11.11;

(d)

the Retained Liabilities;

(e)

the use and ownership of the Excluded Assets; and

(f)

the use and ownership of the Retained Assets (unless and until such time as such
Retained Assets are conveyed to Buyer as Assets under the terms of this
Agreement).

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 or the other Transaction Documents, and the Contemplated Transactions,
including Breaches of the representations, warranties, covenants, obligations,
and agreements of the Parties contained in this Agreement or the other
Transaction Documents or the affirmations of such representations, warranties,
covenants, obligations, and agreements contained in the certificate delivered by
Seller at the Closing pursuant to Section 2.04, and 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 or the other Transaction Documents, the Contemplated Transactions, the
ownership, use, or operation of the Assets prior to the Closing, or the
condition, quality, status, or nature of the Assets 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.

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Indemnification 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
the other Transaction Documents, or in any certificate delivered by Buyer
pursuant to this Agreement; provided, however, that for purposes of determining
the existence of a Breach and calculating the amount of any Damages in
connection therewith, all qualifications relating to materiality, and the
requirement of a Material Adverse Effect contained in such representations and
warranties shall be disregarded;

(b)

any Breach by Buyer of any covenant, obligation, or agreement of Buyer in this
Agreement or the other Transaction Documents;

(c)

any Damages caused by Buyer or Buyer Group arising out of or relating to access
to the Assets and contracts, books and records and other documents and data
relating thereto 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; and

(d)

the Assumed Liabilities.

Notwithstanding anything to the contrary contained in this Agreement, after the
Closing, the remedies provided in this Article 10 are Seller Group’s exclusive
legal remedies for Breaches by Buyer of this Agreement and the other Transaction
Documents, 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.

Indemnity 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).

Limitations on Liability

.  Except with respect to the Fundamental Representations, claims based on
actual fraud by Seller or Seller’s willful misconduct, 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 that do not,
individually, exceed Fifty Thousand Dollars ($50,000) 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

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such Damages exceed two percent (2%) of the unadjusted Purchase Price.  Except
with respect to the Fundamental Representations, claims based on actual fraud by
Seller or Seller’s willful misconduct, 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-five
percent (25%) 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.

Procedure 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 effectively to 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 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.  If reasonably requested by
the indemnifying Party, the indemnified Party agrees to cooperate in contesting
any Proceeding which the indemnifying Party elects to contest (at the expense of
the indemnifying Party); provided that the indemnified Party shall not be
required to pursue any cross-claim or counter-claim.  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) such Proceeding has or would reasonably be expected to result in
Damages in excess of twenty-five percent (25%) 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

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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 (1) 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, (2) the sole relief provided is monetary damages
that are paid in full by the indemnifying Party and (3) 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.

Procedure 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.

Indemnification of Group Members

.  The indemnities in favor of Buyer and Seller provided in Section 10.02 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 Person
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.

Extent of Representations and Warranties

.  

(a)

Notwithstanding anything to the contrary contained in this Agreement, except as
and to the extent expressly set forth in this Agreement, Seller’s certificate to
be delivered in accordance with Section 2.04(a)(iii) or in the Instruments of
Conveyance, Seller makes no representations or 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, Seller’s
certificate to be delivered in accordance with Section 2.04(a)(iii), 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, (b) the condition of
the Assets (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 are being sold “As
Is,” “Where Is,” and “With All

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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 other mineral reserves,
the recoverability of such reserves, any product pricing assumptions, and the
ability to sell Hydrocarbon production after the Closing), (e) the environmental
condition and other condition of the Assets and any potential liability arising
from or related to the Assets, and (f) the presence or absence of asbestos,
norm, or other wastes or hazardous materials in or on the Assets in quantities
typical for oilfield operations in the area where the Assets are located.

(b)

Buyer acknowledges and affirms that it has made its own independent
investigation, analysis, and evaluation of the Contemplated Transactions and the
Assets (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).  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
Transaction 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.

[RESERVED]

.

[RESERVED]

.

Compliance 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 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.

Limitations 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, lost profits, or other business interruption damages, in tort, in
contract, under any indemnity provision, arising by operation of law (including
strict liability), or otherwise, relating to or arising out of the Contemplated
Transactions or this Agreement; provided, however, that any consequential,
special,

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indirect, exemplary, punitive damages, lost profits, and other business
interruption 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.  

No 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.

Disclaimer 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.

Waiver 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 consummated at the Closing.  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

Title 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, correspondence, maps, data, reports,
plats, abstracts of title, lease files, well files, unit files, division order
files, production marketing files, title opinions and title curative, 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.

Preferential Purchase Rights

.  Seller shall use its commercially reasonable efforts to provide all notices
necessary to comply with or obtain the waiver of all Preferential Purchase
Rights, the operation of which is triggered by the Contemplated Transactions, no
later than ten (10) Business Days after the Execution Date and in accordance
with Section 5.04.  To the extent a Preferential Purchase Right is exercised by
the holders thereof prior to the Closing Date, then the Properties subject to
such Preferential Purchase Right shall not be sold to Buyer and shall be
excluded from the Assets sold under this Agreement, and shall be considered
Retained Assets.  The Purchase Price shall be reduced by the full Allocated
Value of the Properties so retained.  All

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Properties for which any applicable Preferential Purchase Right has been waived,
or as to which the period to exercise the applicable Preferential Purchase Right
has expired without exercise by the holder thereof, in each case, prior to the
Closing Date, shall be sold to Buyer at the Closing pursuant to the provisions
of this Agreement. On the Closing Date, if the time period for exercising a
Preferential Purchase Right has not expired, but no notice of waiver (or of the
exercise of such Preferential Purchase Right) has been received by Seller from
the holder thereof, then the Property subject to such Preferential Purchase
Right shall be excluded from the Assets conveyed to Buyer at the Closing, Buyer
shall receive a reduction of the Purchase Price equal to the full Allocated
Value of the affected Property, and Seller shall be entitled to retain all
proceeds paid for the affected Property by the Person exercising such
Preferential Purchase Right.  If any holder of a Preferential Purchase Right
initially elects to exercise a Preferential Purchase Right prior to the Closing,
but after the Closing Date, fails for any reason to consummate the purchase of
the affected Property, or the time for the exercise of a Preferential Purchase
Right expires after the Closing Date without the exercise thereof, then, subject
to the Parties’ respective rights and remedies as to the obligation to
consummate the Contemplated Transactions, Buyer shall purchase such Property
from Seller 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 Property 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 Property at the
Closing in accordance with the terms of this Agreement.

Consents

.  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.  If there exist any Consents that are not obtained from the holders of
such rights prior to the Closing Date, Seller shall continue, during the period
of one hundred eighty (180) days after the Closing Date, to use reasonable
commercial efforts (which in no event shall include any obligation to pay money
to the holders of such Consents or undertake any legal obligation) to obtain all
such outstanding Consents as promptly thereafter as possible.  During the period
of one hundred eighty (180) days after the Closing Date until such Consent is
obtained, (i) the Parties shall cooperate with each other in any reasonable and
lawful arrangements designed to provide to Buyer the economic benefits, and to
cause Buyer to bear the economic burdens, of the Assets subject to such Consent,
and (ii) without the consent of Buyer, Seller shall neither take action to
extend the term of, nor shall Seller terminate or take any action that would
give rise to a right of termination under, any Contract burdened by such an
outstanding Consent.

(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 to Buyer at the Closing as part of the Assets with no
reduction in the Purchase Price.  Any Damages that arise due to the failure to
obtain such Consent shall be borne by Buyer as an Assumed Liability.

 

(ii)

If the Consent is a Required Consent, the Purchase Price (or portion thereof
payable at such Closing) shall be reduced by the Allocated Value of the affected
Assets

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(which affected Assets shall include all Wells affected by the Applicable
Contract or Lease for which a Consent is refused), and the affected Assets shall
be excluded from the Assets conveyed to Buyer at the Closing and treated as
Retained Assets.

(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 Date, then Seller shall promptly deliver conveyances or
assignments 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).

Title Defects

.  Buyer shall notify Seller of all Title Defects (“Title Defect Notice(s)”)
promptly after the discovery thereof, but in no event later than 5:00 p.m.,
Central Time on September 15, 2020 (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 Well or portion thereof (including the
currently producing formation, as applicable) 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 (including
email correspondence) 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.  Failure to provide such preliminary weekly notice shall not waive Buyer’s
right to assert Title Defects.  Notwithstanding anything herein to the contrary,
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
this Section 11.04 by 5:00 p.m., Central Time, on the Defect Notice Date, except
for Title Defects that would, after the Closing, (x) constitute breaches of
Seller’s special warranty of Defensible Title contained in each Instrument of
Conveyance, (y) that were not asserted as Title Defects in a timely manner as
provided in this Section 11.04, and (z) as to which claims are asserted by Third
Parties within twenty-four (24) months after the Closing Date.

Title 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 (other than the Permitted Encumbrances)
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

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Property in Schedule 2.07, 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 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 in Schedule 2.07, and then
calculating the adjustment in the manner set forth in Section 11.05(c) above;
and

(e)

if the Title Defect represents an obligation or 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 productive 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.

Seller’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, at Seller’s sole cost and expense, to cure any
Title Defect on or before sixty (60) days after the Defect Notice 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

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(ii)

does not Cure the Title Defect prior to the Closing, then Seller shall convey
the affected Asset to Buyer at the Closing, and (only to the extent in excess of
the Aggregate Defect Deductible) retain out of the Deposit Amount the applicable
Title Defect Value (or, if such Title Defect Value exceeds the balance of the
Deposit Amount in the Escrow Account, Buyer shall deliver the amount of such
excess to the Escrow Agent at the Closing), which amount shall remain on deposit
in the Escrow Account subject to the terms of the Escrow Agreement as provided
hereinafter; provided, however that (A) if Seller Cures the Title Defect within
the time provided in this Section 11.06, then the Parties will instruct the
Escrow Agent to release to Seller from the Escrow Account the applicable Title
Defect Value (together with any interest thereon) within two (2) Business Days
after Seller provides Buyer the evidence of such Cure; and (B) if Seller is
unable to Cure the Title Defect within the time provided in this Section 11.06,
then the Parties will instruct the Escrow Agent to release to Buyer from the
Escrow Account the applicable Title Defect Value (together with any interest
thereon), unless the Title Defect or Title Defect Value is disputed, in which
case Section 11.06(b), below, shall apply.

(b)

Seller and Buyer shall attempt to agree on the existence of 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
Title Defect Value to arbitration in accordance with the procedures set forth in
Section 11.15.  If a contested Title Defect or Title Defect Value cannot be
resolved prior to the Closing, except as otherwise provided herein, the Asset
affected by such Title Defect shall nevertheless be conveyed to Buyer at the
Closing, and an amount equal to the Title Defect Value (only to the extent in
excess of the Aggregate Defect Deductible) asserted by Buyer in connection with
the disputed Title Defect will be retained out of the Deposit Amount at Closing
(or, if such Title Defect Value exceeds the balance of the Escrow Account, Buyer
shall deliver the amount of such excess to the Escrow Agent at the Closing) and
remain on deposit in the Escrow Account subject to the terms of the Escrow
Agreement as provided hereinafter.  Subject to Seller’s right to Cure a Title
Defect prior to the expiration of the Title Defect Cure Period, if Seller is
unable to Cure or elects not to Cure the applicable Title Defect, then within
two (2) Business Days after such final decision or determination, the Parties
will instruct the Escrow Agent to release to Buyer from the Escrow Account an
amount equal to the finally determined or decided Title Defect Value (together
with any interest earned thereon), and to Seller, the excess (if any) of the
finally agreed or determined or decided Title Defect Value over the asserted
Title Defect Value (together with any interest earned thereon).  If Seller
elects to Cure a Title Defect after any such final determination, then within
two (2) Business Days after the expiration of the Title Defect Cure Period, the
Parties will instruct the Escrow Agent to release to Buyer from the Escrow
Account an amount equal to the finally determined Title Defect Value (together
with any interest earned thereon), and to Seller, the excess (if any) of the
finally agreed or determined or decided Title Defect Value over the asserted
Title Defect Value (together with any interest earned thereon).

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Limitations 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 (a) 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 (b) the Aggregate
Environmental Defect Value exceeds the Aggregate Defect Deductible.  In
addition, if the Title Defect Value for any single Title Defect is less than the
De Minimis Title Defect Cost, such Title Defect Value shall not be considered in
calculating the Aggregate Title Defect Value.  

Title Benefits

. If Seller discovers any right, circumstance, or condition that operates (a) to
increase the Net Revenue Interest for a 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, by an amount that is proportionately greater than the corresponding
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 Benefit (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 Wells(s) affected, the particular
Title Benefit claimed, and Seller’s good faith estimate of the amount that the
additional interest increases the value of the affected Well(s) over and above
the Allocated Value(s) of such Well(s) (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 examiners.  The Title Benefit Value of any
Title Benefit shall be determined by the following methodology (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, 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; (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 (with respect to any
Well), 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, and then
calculating the adjustment in the manner set forth in clause (ii) above; 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 productive 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.

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Seller and Buyer shall attempt to agree on the existence of 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 Benefit; 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 amount of the Title Benefit Value as determined in such contest (which
adjustment shall be made on the Final Settlement Statement).

Buyer’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, examinations, and investigations.  No sampling or other
invasive inspections of the Assets may be conducted prior to the Closing without
Seller’s prior written consent.  Buyer’s access shall be in accordance with, and
subject to the limitations in, Section 5.01.

Environmental 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(s)
affected; (ii) a 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.  To give Seller an opportunity to commence reviewing and curing
alleged Environmental Defects asserted by Buyer, Buyer shall use reasonable
efforts to give Seller, on or before the end of each calendar week prior to the
Defect Notice Date, written notice of all alleged Environmental Defects
discovered by Buyer during such calendar week, which notice may be preliminary
in nature and supplemented prior to the Defect Notice Date.  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 by 5:00 p.m., Central Time, on the Defect Notice
Date.  

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Seller’s Exclusion, Cure or Contest of Environmental Defects

. Seller, in its sole discretion, (x) may elect to exclude at Closing any Well
(which will become a Retained Asset) affected by an asserted Environmental
Defect if the Environmental Defect Value with respect to such Environmental
Defect equals or exceeds the Allocated Value of the affected Well(s) and reduce
the Purchase Price by the Allocated Value(s) thereof, (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, at Seller’s sole cost and expense, to remediate or
cure an Environmental Defect to the extent of the Lowest Cost Response on or
before the Closing 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.  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 Section 11.11(a), Seller shall implement such remediation or cure in a
manner that is in compliance with all applicable Legal 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 the relevant Environmental Defect prior to
the Closing Date, the affected Well(s) shall be included in the Assets conveyed
at the Closing, and no Purchase Price adjustment will be made for such
Environmental Defect;  

 

(ii)

subject to Section 11.11(b), does not complete such a Complete Remediation prior
to the Closing, then unless Seller is entitled and elects to exclude such
Asset(s) in accordance with this Section 11.11, Seller shall convey the affected
Asset(s) to Buyer at the Closing, and the Purchase Price paid at Closing shall
be reduced by an amount equal to the relevant Environmental Defect Value set
forth in the Environmental Defect Notice (only to the extent in excess of the
Aggregate Defect Deductible).

(b)

Seller and Buyer shall attempt to agree on the existence of, and Environmental
Defect Value for, 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 or Environmental Defect Value cannot be resolved prior to
the Closing, the affected Well(s), together with any other Assets appurtenant
thereto, shall be included with the Assets conveyed to Buyer at the Closing, and
an amount equal to the Environmental Defect Value (only to the extent in excess
of the Aggregate Defect Deductible) asserted by Buyer in connection with the
disputed Environmental Defect will be retained out of the Deposit Amount at
Closing (or, if such Environmental Defect Value exceeds the balance of the
Escrow Account, Buyer shall

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deliver the amount of such excess to the Escrow Agent at Closing) and remain on
deposit in the Escrow Account as provided hereinafter, and the final
determination of the Environmental Defect and/or Environmental Defect Value
shall be resolved pursuant to Section 11.15.  Subject to Seller’s right to Cure
an Environmental Defect prior to the expiration of the Environmental Defect Cure
Period, if Seller is unable to Cure or elects not to Cure the applicable
Environmental Defect, then within five (5) Business Days after such final
decision or determination, the Parties will instruct the Escrow Agent to release
to Buyer from the Escrow Account the amount equal to the finally determined
Environmental Defect Value (together with any interest earned thereon), and to
Seller, the excess (if any) of the finally determined Environmental Defect Value
over the asserted Environmental Defect Value (together with any interest earned
thereon).  If Seller elects to Cure an Environmental Defect after any such final
decision or determination, then within five (5) Business Days after the
expiration of the Environmental Defect Cure Period, the Parties will instruct
the Escrow Agent to release to Buyer from the Escrow Account an amount equal to
the finally determined Environmental Defect Value (together with any interest
earned thereon), and to Seller, the excess (if any) of the finally determined
Environmental Defect Value over the asserted Environmental Defect Value
(together with any interest earned thereon).

Limitations

.  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 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.  If the Environmental Defect Value with respect to any single
Environmental Defect is less than the De Minimis Environmental Defect Cost, such
cost shall not be considered in calculating the Aggregate Environmental Defect
Value.

Exclusive Remedies

.  

(a)

Except for the special warranty of Defensible Title in the Instruments of
Conveyance, and without limiting Buyer’s remedies for Title Defects set forth in
this Article 11, Article 3 and Article 5, Seller makes no warranty or
representation, express, implied, statutory or otherwise with respect to
Seller’s title to any of the Assets, and Buyer hereby acknowledges and agrees
that Buyer’s sole remedy for any defect of title, including any Title Defect,
with respect to any of the Assets (a) before the Closing, shall be as set forth
in Section 11.06 or, if applicable, Section 8.08 and (b) after the Closing,
shall be pursuant to the special warranty of Defensible Title in the Instruments
of Conveyance.  Buyer shall not be entitled to protection under Seller’s special
warranty of Defensible Title in the Instruments of Conveyance against any Title
Defect reported by Buyer under Section 11.06.

(b)

The rights and remedies granted to Buyer in this Article 11 and, if applicable,
in Section 8.08, and the representations and warranties in Section 3.13 are the
exclusive rights and remedies against Seller related to any Environmental
Condition, or Damages related thereto.  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

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risk among the Parties, which the Parties agree and acknowledge satisfies the
express negligence rule and conspicuousness requirement under Texas law.

Casualty Loss and Condemnation

. If, after the Execution Date but prior to the Closing Date, any portion of the
Assets is damaged or 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 the
Closing Date 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 Casualty Loss, even if such Casualty Loss shall have resulted from
or shall have arisen out of the sole or concurrent negligence, or fault of, or
the violation of a Legal Requirement by, Seller or any member of Seller Group.

Expert 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 of Louisiana 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,
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,

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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 to the Houston
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.

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ARTICLE 12
EMPLOYMENT MATTERS

Seller Benefit Plans

.  Buyer shall not assume any of the Seller Benefits Plans.  The Seller Parties
shall retain and shall be solely responsible for all obligations and liabilities
under the Seller Benefit Plans, including obligations under COBRA with respect
to “M&A qualified beneficiaries”, as defined in Treasury Regulation Section
54.4980B-9, whose qualifying event occurs in connection with the sale of the
Assets as contemplated by this Agreement (except to the extent the Seller
Parties and their ERISA Affiliates cease to maintain a group health plan and in
such case, Buyer and its Affiliates shall assume any such COBRA obligation,
liability, or responsibility for such M&A qualified beneficiaries).  

Employees’ Offers

.  Buyer and its Affiliates may, but shall have no obligation to, make offers of
employment to any employee of a Seller Party performing services with respect to
the Assets at any time on or after the Closing Date on terms determined in the
sole discretion of Buyer.  Through the Closing Date, the Buyer will conduct its
diligence in coordination with each Seller Party’s executives and officers, and
will not directly contact any employees of either Seller Party without Seller’s
express written permission. 

Non-Solicitation Period

. Between the Execution Date and the Closing Date, the Buyer will not directly
or indirectly (including through any Affiliate), solicit to employ any employee
of a Seller Party, provided that this prohibition will not apply to general
solicitations for employees of the public (through search firms, public
advertising, or otherwise).  From the day after the Closing Date through the
ninetieth (90th) day after the Closing Date, Buyer may solicit and hire any
employee of a Seller Party so long as Buyer pays Seller a sum equal to the
actual severance paid or to be paid in connection with Seller’s termination of
such person within two (2) days of the date upon which such individual commences
employment with Buyer or an Affiliate.

No Third Party Beneficiary Rights

.  Nothing herein, expressed or implied, shall confer upon any employee of a
Seller Party (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 other Person.  Nothing in this Article 12, express or
implied, shall be (a) deemed an amendment of any Seller Benefit Plan providing
benefits to any employee of any Seller Party 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

Records

.  On the Closing Date, Seller shall cause to be delivered (in electronic
format) to Buyer the accounting Records that are maintained for the Assets in
electronic form.  As soon as reasonably practicable following the Closing Date
(but in any event within thirty (30) days after the Closing Date), Seller, at
Buyer’s cost and expense, shall deliver originals of all other Records to Buyer
(FOB Seller’s office).  Until the records are delivered to Buyer after the
Closing, Seller

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shall provide to Buyer reasonable access to the Records at Seller’s offices
during normal business hours.  With respect to any 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 three (3) years after
the Closing Date (or seven (7) years thereafter with respect to those Records
relevant for Tax audit purposes), during which time period Seller shall be
entitled to obtain access to such Records, during normal business hours and upon
reasonable 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.

Expenses; Tax Allocations and Tax Return Filings

.  

(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, accountants, engineers, independent landmen, and other
consultants.  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(e), 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 to Buyer shall be borne by Buyer.  Seller shall retain responsibility
for, and shall bear, all Asset Taxes 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 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 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 income or receipts or imposed on a transactional basis (other
than such Asset Taxes described in clause (A)) 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 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.  To the extent the actual amount of any Asset
Taxes described in this Section 13.02(b) is not determinable at Closing, Buyer
and Seller shall utilize the most recent information available in estimating

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the amount of such Asset Taxes for purposes of Section 2.05.  Upon determination
of the actual amount of such Asset Taxes, 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 Asset Taxes due on or
prior to the Closing Date (subject to Seller’s right to reimbursement by Buyer
under Section 13.02(b)), and Buyer shall be responsible for timely remitting all
Asset Taxes due after the Closing Date (subject to Buyer’s right to
reimbursement by Seller under Section 13.02(b)), in each case, to the applicable
taxing authority, and (ii) Seller shall prepare and timely file any Tax Return
for Asset Taxes required to be filed on or before the Closing Date, and Buyer
shall prepare and timely file any Tax Return for Asset Taxes required to be
filed after the Closing Date (including Tax Returns relating 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)

Seller shall be responsible for all Income Taxes arising out of the sale of the
Assets and shall timely pay and file all Tax Returns for such Income Taxes.

(e)

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 Legal Requirements for record retention.

Notices

.  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 U.S. mail, postage prepaid with return receipt requested, or by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate recipients, addresses, and emails set forth below (or to such other
recipients, addresses, or email

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addresses as a Party may from time to time designate by notice to the other
Party); provided, however, that if any such notice is not received on a Business
Day or after normal business hours on a Business Day, the notice will be deemed
to have been given on the next succeeding Business Day:

NOTICES TO BUYER:

Staghorn Petroleum II, LLC
One West Third Street, Suite 1000
Tulsa, Oklahoma  74103
Attention: Richard Eby
E-mail: reby@staghornpetro.com
Telephone: 918-584-2558

With a copy (which shall not constitute notice) to:
Jackson Walker LLP
1401 McKinney St., Suite 1900
Houston, Texas 77010
Attention: Michael P. Pearson
Telephone: 713-752-4311
Email: mpearson@jw.com

NOTICES TO SELLER:

Riviera Operating, LLC
Riviera Upstream, LLC
717 Texas Avenue, Suite 2000
Houston, Texas 77002
Attention: General Counsel
E-mail: Handerson@Rvraresources.com

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

Kirkland & Ellis LLP
609 Main Street, Suite 4500
Houston, Texas  77002
Attention:Rahul D. Vashi, P.C.
R.J. Malenfant
Email: rahul.vashi@kirkland.com
rj.malenfant@kirkland.com

Governing Law; Jurisdiction; Service of Process; Jury Waiver

.  THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED
TO THIS AGREEMENT OR THE CONTEMPLATED TRANSACTIONS OR THE RIGHTS, DUTIES, AND
THE LEGAL RELATIONS AMONG THE PARTIES HERETO AND THERETO SHALL BE GOVERNED BY
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
EXCLUDING ANY

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CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION 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 OF
OKLAHOMA.  WITHOUT LIMITING THE PARTIES’ AGREEMENT TO ARBITRATE IN SECTION 11.15
OR THE DISPUTE RESOLUTION PROCEDURE PROVIDED IN SECTION 2.05(e) 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, HARRIS COUNTY, TEXAS, OR THE STATE COURTS LOCATED IN HOUSTON, HARRIS
COUNTY, TEXAS, FOR ANY ACTION ARISING OUT OF THIS AGREEMENT, ANY TRANSACTION
DOCUMENTS, OR ANY CONTEMPLATED TRANSACTION.  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 CONTEMPLATED
TRANSACTION SHALL BE EXCLUSIVELY LITIGATED IN SUCH COURTS DESCRIBED ABOVE HAVING
SITUS IN HOUSTON, HARRIS COUNTY, 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 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 CONTEMPLATED TRANSACTION.  THE PARTIES FURTHER
AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENT, 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.

Further 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.  If, after the Closing Date,
either Party receives monies belonging to the other Party, such amounts

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shall be disbursed to the Party entitled to receive them within thirty (30) days
after receipt.  If, during the one (1) year period following the Closing Date,
an invoice or other evidence of an obligation is received by a Party, which is
either an obligation assumed by the other Party or partially an obligation of
both Seller and Buyer, Seller and Buyer shall consult with each other, and an
adjustment for such amount will be made either on the Final Settlement
Statement, or, if the evidence of the obligation is not received until after the
completion of the final accounting pursuant to Section 2.05(e), in cash as the
Parties may agree.

Waiver

.  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.

Entire Agreement and Modification

.  This Agreement, together with the Confidentiality Agreement, the Escrow
Agreement, the Instruments of Conveyance, and all other documents and
instruments executed or delivered by any of the Parties pursuant hereto
(collectively, the “Transaction Documents”), supersede all prior discussions,
communications, and agreements (whether oral or written) between the Parties
with respect to their subject matter and constitute 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
or the other Transaction Documents, 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.

Assignments, Successors, and No Third Party Rights

.  Neither Party may assign or delegate any of its rights, liabilities,
covenants, or obligations under this Agreement without the prior written consent
of the other Party (which consent may be granted or denied at the sole
discretion of the other Party). Any assignment made without such consent shall
be void.  Any such assignment of rights shall provide expressly for the
assumption by the transferee of the obligations of the assigning party under
this Agreement.  Notwithstanding the non-transferring Party’s consent to such an
assignment, no such assignment shall relieve the assigning Party of any of its
obligations under this Agreement unless specifically consented to and approved
by the non-transferring Party.  In the absence of such a consent or approval by
the non-transferring Party, the assigning party shall remain jointly and
severally liable with its permitted transferee for the future performance of the

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assigning Party’s obligations under this Agreement.  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.

Severability

.  If any provision of this Agreement is held invalid, illegal, 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 a
determination that any term or other provision is invalid, illegal, or
unenforceable, 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 Contemplated Transactions
are fulfilled to the greatest extent possible.

Article 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 otherwise specified.  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 this Agreement.

Counterparts

.  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

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and the same agreement.  At the Parties’ election, this Agreement may be
executed by the Parties in different locations and shall become binding upon
both Parties upon the exchange by the Parties of executed signature pages by
portable document format (PDF) by email.

Press Release

. If any Party wishes to make a press release or other public announcement
respecting this Agreement or specific to the Contemplated Transactions, such
Party will provide a courtesy copy to the other Party of the language relevant
to the transaction prior to the release or public announcement.  Neither Party
will 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).  Seller and Buyer shall each be liable for the
compliance of their respective Affiliates with the terms of this Section
13.12.  

Confidentiality

.  If the Closing occurs, and the Confidentiality Agreement is terminated
pursuant to Section 5.01(c), Seller’s and Buyer’s respective obligations under
the Confidentiality Agreement shall terminate as of the Closing Date.  After the
Closing Date, except as provided hereinafter, (i) Seller agrees not to disclose,
and to keep confidential, for a period of one (1) year after the Closing Date,
the material business terms of this Agreement, each other Transaction Document,
and the Records, reports, title opinions, abstracts, notices and other
information provided hereunder as such relate to the Assets, including all
environmental information regarding the Leases, Units, and Wells obtained by
Buyer pursuant to its operational and environmental assessment of the Assets
under Section 5.01 and Article 11 (as to which, for purposes of this Section
13.13, Buyer shall be deemed to be the “Disclosing Party,” and Seller shall be
deemed to be the “Recipient”); and (ii) Buyer agrees not to disclose, and to
keep confidential, for a period of one (1) year after the Closing Date, the
amounts of the Purchase Price, the other material business terms of this
Agreement and each other Transaction Document, and the Records, reports, and
other information provided by Seller to Buyer hereunder that relate to any
assets or liabilities not included in the Assets (as to which, for purposes of
this Section 13.13, Seller shall be deemed to be the Disclosing Party, and Buyer
shall be deemed to be the Recipient).  For purposes of this Agreement, the data
and information to be kept confidential by, respectively, Seller and Buyer as
provided in the preceding sentence shall be referred to herein as “Confidential
Information.”  With respect to the Confidential Information:

(a)

Recipient shall not disclose, disseminate, or otherwise publish or communicate
Confidential Information received hereunder to any Third Party without the prior
written consent of the Disclosing Party, except to (A) Affiliates and its and
their shareholders, directors, members, managers, partners, trustees, officers,
and employees, as well as Recipient’s financial advisors, lenders, investment
bankers, attorneys, auditors, engineers, and other consultants and
representatives, potential and actual sources of financing and, in the case of
Buyer, bona fide potential purchasers of all or any of the Assets (collectively,
its “Information Group”) who have a “need to know” and who have been advised of
the confidentiality obligations herein and have previously agreed to be bound by
the terms hereof with regard to the Confidential Information, and (B) Persons to
whom disclosure is necessary in order to obtain a Required Consent or give
notice with respect to a Preferential Purchase Right.  Recipient shall be
responsible for the actions of its Information Group with respect to the
Confidential Information.  Recipient shall protect the Confidential Information
received hereunder from disclosure to any Third Party by using the same

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degree of care that it uses to prevent the unauthorized disclosure of its own
confidential or proprietary information of like nature, but in no event less
than a reasonable degree of care.

(b)

This Agreement imposes no obligations with respect to information that: (A) was
in Recipient’s possession without a duty of confidentiality to the Disclosing
Party before receipt from the Disclosing Party; (B) is or becomes a matter of
public knowledge through no act or omission of Recipient; (C) is rightfully
received by Recipient from a Third Party without a duty of confidentiality; (D)
is disclosed by Recipient with the Disclosing Party’s prior written approval or
for reasons described in Section 13.13(c).

(c)

If Recipient is required to disclose Confidential Information by operation of aw
(including as required under state or federal securities laws or applicable
stock exchange or quotation system requirements), or under compulsion of
judicial process (including a Proceeding to enforce its rights under this
Agreement), no breach of this Section 13.13 shall occur by reason of such a
disclosure; provided that, Recipient will disclose only such information as is
legally required by applicable law or order of a court of competent jurisdiction
or other Governmental Body, and will use reasonable efforts to obtain
confidential treatment for any Confidential Information that is so
disclosed.  Recipient will provide the Disclosing Party as much notice of such
possible disclosure as is reasonably practicable prior to disclosure to give the
Disclosing Party an opportunity to seek a protective order or take other
appropriate action.

Name 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 names
“Linn” or “Riviera” and 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.

Appendices, 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 Rottino

 

Name:

David Rottino

 

Title:

President and Chief Executive Officer

 

 

 

 

 

Riviera Operating, LLC

 

 

 

 

 

By:

/s/ David Rottino

 

Name:

David Rottino

 

Title:

President and Chief Executive Officer

 

[Signature Page to Purchase and Sale Agreement]

--------------------------------------------------------------------------------

 

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

 

BUYER:

 

 

 

Staghorn Petroleum II, LLC

 

 

 

 

 

By:

/s/ Frank G. Eby

 

Name:

Frank G. Eby

 

Title:

Chief Executive Officer

 

[Signature Page to Purchase and Sale Agreement]