Exhibit 10.1

 

EXECUTION VERSION

 

PURCHASE AND SALE AGREEMENT

 

BY AND BETWEEN

 

LAREDO PETROLEUM, INC.,

 

LAREDO PETROLEUM TEXAS, LLC AND

 

LAREDO GAS SERVICES, LLC

 

as Sellers

 

AND

 

ENERVEST ENERGY INSTITUTIONAL FUND XII-WIB, L.P.,

 

ENERVEST ENERGY INSTITUTIONAL FUND XII-WIC, L.P.,

 

ENERVEST ENERGY INSTITUTIONAL FUND XII-A, L.P.,

 

ENERVEST ENERGY INSTITUTIONAL FUND XIII-A, L.P.,

 

ENERVEST ENERGY INSTITUTIONAL FUND XIII-WIB, L.P., AND

 

ENERVEST ENERGY INSTITUTIONAL FUND XIII-WIC, L.P.,

 

as Buyers

 

AND ENERVEST OPERATING, L.L.C.,

 

For the limited purpose stated herein

 

Dated May 20, 2013

 

* - Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

Article 1 Definitions and References

1

 

 

 

1.1

Certain Defined Terms

1

1.2

References, Construction and Joint Drafting

13

 

 

 

Article 2 PURCHASE AND SALE

13

 

 

2.1

Purchase and Sale

14

2.2

Purchase Price

14

2.3

Allocation of the Purchase Price

14

2.4

Adjustments to Purchase Price

16

2.5

Preliminary Settlement Statement

18

 

 

 

Article 3 BUYERS’ INSPECTION; DUE DILIGENCE REVIEW

19

 

 

3.1

Due Diligence

19

3.2

Access to Records

19

3.3

On-Site Inspection

19

3.4

Disclaimer

21

 

 

 

Article 4 TITLE MATTERS

21

 

 

4.1

Sellers’ Title

21

4.2

Title Defects and Title Benefits

24

4.3

Title Dispute Resolution

29

4.4

Preferential Rights and Consents

31

 

 

 

Article 5 ENVIRONMENTAL MATTERS

33

 

 

5.1

Definitions

33

5.2

Exclusive Remedy

35

5.3

Environmental Defects

36

5.4

NORM, Wastes and Other Substances

39

 

 

 

Article 6 SELLERS’ REPRESENTATIONS AND WARRANTIES

40

 

 

6.1

Status

40

6.2

Power

40

6.3

No Conflicts

40

6.4

Authorization and Enforceability

40

6.5

Consents

40

6.6

Preferential Rights

40

6.7

Liability for Brokers’ Fees

41

6.8

Bankruptcy

41

6.9

Litigation

41

6.10

Material Agreements

41

6.11

AFEs

42

6.12

Taxes

42

6.13

Tax Partnerships

43

 

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6.14

Compliance with Law and Government Authorizations

43

6.15

Environmental Matters

43

6.16

Payments for Production; Calls on Production

43

6.17

Well Status and Abandonments

44

6.18

Bonds and Credit Support

44

6.19

Suspense Funds

44

6.20

Imbalances

44

6.21

Insurance

44

6.22

Royalties

44

 

 

 

Article 7 BUYER’S AND EVOC’S REPRESENTATIONS AND WARRANTIES

44

 

 

7.1

Organization and Standing

44

7.2

Power

45

7.3

No Conflicts

45

7.4

Authorization and Enforceability

45

7.5

Consent

45

7.6

Liability for Brokers’ Fees

45

7.7

Bankruptcy

46

7.8

Litigation

46

7.9

Financial Resources and Other Capability

46

7.10

No Benefit Plan Investor

46

7.11

Qualifications

46

7.12

Buyer’s Evaluation

46

7.13

Securities Law Compliance

47

 

 

 

Article 8 COVENANTS AND AGREEMENTS

47

 

 

8.1

Covenants and Agreements of Sellers

47

8.2

Covenants and Agreements of Buyers and EVOC, as Applicable

49

8.3

Covenants and Agreements of the Parties

52

 

 

 

Article 9 TAX MATTERS

54

 

 

9.1

Asset Tax Liability

54

9.2

Transfer Taxes

55

9.3

Asset Tax Returns

55

9.4

Tax Cooperation

55

 

 

 

Article 10 CONDITIONS PRECEDENT TO CLOSING

56

 

 

10.1

Conditions to Obligations of Both Parties

56

10.2

Sellers’ Conditions

56

10.3

Buyers’ Conditions

57

 

 

 

Article 11 RIGHT OF TERMINATION

57

 

 

11.1

Termination

57

11.2

Liabilities Upon Termination

58

11.3

Return of Documentation and Confidentiality

59

 

 

 

Article 12 CLOSING

59

 

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12.1

Date of Closing

59

12.2

Place of Closing

59

12.3

Closing Obligations

59

 

 

 

Article 13 POST-CLOSING OBLIGATIONS

60

 

 

13.1

Post-Closing Adjustments

60

13.2

Records

62

13.3

Further Assurances

62

 

 

 

Article 14 ASSUMPTION AND RETENTION OF OBLIGATIONS AND INDEMNIFICATION;
DISCLAIMERS

62

 

 

14.1

Buyers’ Assumption of Liabilities and Obligations

62

14.2

Indemnification

62

14.3

Claims Procedure

65

14.4

Survival of Warranties, Representations and Covenants

67

14.5

Reservation as to Non-Parties

68

14.6

Tax Treatment of Indemnity Payments

68

 

 

 

Article 15 MISCELLANEOUS

68

 

 

15.1

Schedules and Exhibits

68

15.2

Expenses

68

15.3

Notices

68

15.4

Amendments

69

15.5

Assignment

69

15.6

DISCLAIMERS

69

15.7

Counterparts Signatures

71

15.8

Governing Law

71

15.9

Entire Agreement

72

15.10

Binding Effect

72

15.11

No Third-Party Beneficiaries

72

15.12

Dispute Resolution

72

15.13

Publicity

73

 

List of Exhibits

 

Exhibit A

 

Leases

Exhibit B

 

Wells and Allocated Values

Exhibit C

 

Surface Contracts

Exhibit D

 

Excluded Assets

Exhibit E

 

Form of Assignment

Exhibit F

 

Form of Specified Contracts Assignment and Assumption

Exhibit G

 

Form of Certificate of Non-Foreign Status

 

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List of Schedules

 

Schedule 1.1(a)

Buyer’s Knowledge Representatives

Schedule 1.1(b)

Seller’s Knowledge Representatives

Schedule 1.1(c)

Specified Contracts

Schedule 1.1(d)

Hedge Contracts

Schedule 2.1(a)

Proportionate Shares

Schedule 2.4(c)

Additional Assets

Schedule 6.3

Conflicts

Schedule 6.5

Consents

Schedule 6.6

Preferential Rights

Schedule 6.9

Litigation

Schedule 6.10(a)

Material Agreements

Schedule 6.10(b)

Material Agreement Matters

Schedule 6.11

AFEs

Schedule 6.12

Taxes

Schedule 6.14

Compliance with Laws and Governmental Authorizations

Schedule 6.15

Environmental Matters

Schedule 6.16(b)

Calls on Production

Schedule 6.17

Well Status and Abandonments

Schedule 6.18

Bonds and Credit Support

Schedule 6.19

Suspense Funds

Schedule 6.20

Imbalances

Schedule 6.21

Insurance

Schedule 6.22

Royalties

Schedule 8.1

Conduct of Business

Schedule 8.1(c)

Hedging Transactions

Schedule 8.3(d)

Available Employees

 

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PURCHASE AND SALE AGREEMENT

 

This Purchase and Sale Agreement (this “Agreement”), is dated as of the 20th day
of May, 2013 (the “Execution Date”), by and between Laredo Petroleum, Inc., a
Delaware corporation (“Laredo”), Laredo Petroleum Texas, LLC, a Texas limited
liability company (“Laredo Texas”), and Laredo Gas Services, LLC, a Delaware
limited liability company (“Laredo Gas Services” and, together with Laredo and
Laredo Texas, “Sellers” and each individually, “Seller”), and EnerVest Energy
Institutional Fund XII-WIB, L.P., a Delaware limited partnership, EnerVest
Energy Institutional Fund XII-WIC, L.P., a Delaware limited partnership,
EnerVest Energy Institutional Fund XII-A, L.P., a Delaware limited partnership,
EnerVest Energy Institutional Fund XIII-A, L.P., a Delaware limited partnership,
EnerVest Energy Institutional Fund XIII-WIB, L.P., a Delaware limited
partnership, and EnerVest Energy Institutional Fund XIII-WIC, L.P., a Delaware
limited partnership (collectively, “Buyers” and each individually, “Buyer”), and
EnerVest Operating, L.L.C., a Delaware limited liability company (“EVOC”) which
enters into this Agreement solely for the purposes of providing the referenced
representations, warranties and covenants contained herein.  Buyers and Sellers
are collectively referred to herein as the “Parties” and each individually as a
“Party”.

 

RECITALS

 

WHEREAS, Sellers own certain oil and gas interests and associated assets located
in Oklahoma and Texas (collectively, as more fully defined in Section 1.1 the
“Assets”); and

 

WHEREAS, Sellers desire to sell, and Buyers desire to purchase, the Assets upon
the terms and conditions set forth in this Agreement.

 

NOW THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Buyers and Sellers agree as follows:

 

ARTICLE 1
DEFINITIONS AND REFERENCES

 

1.1                               Certain Defined Terms.  Capitalized terms used
herein and not otherwise defined herein have the respective meanings assigned to
them in this Section 1.1:

 

“AAA” means the American Arbitration Association.

 

“Accounting Expert” has the meaning set forth in Section 13.1(b).

 

“AFE” has the meaning set forth in Section 6.11.

 

“Affected Asset” has the meaning set forth in Section 4.4(b)(1).

 

“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly controls, is controlled by or is under common control with such
Person; provided that for purposes of this Agreement, Warburg Pincus LLC and its
affiliates and all private equity funds and portfolio companies (other than
Sellers) owned or managed by Warburg Pincus LLC or its

 

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affiliates shall not be deemed to be affiliates of Sellers.  For purposes of the
immediately preceding sentence, the term “control” (including, with correlative
meanings, the terms “controlling,” “controlled by” and “under common control
with”), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through ownership of voting securities, by
contract or otherwise.

 

“Aggregate Defect Deductible” means * of the unadjusted Purchase Price.

 

“Agreement” has the meaning set forth in the Preamble.

 

“Allocated Value” has the meaning set forth in Section 2.3(a).

 

“Applicable Contracts” means those Contracts to which Sellers are a party or are
bound and that will be binding on Buyers or any of the Assets following Closing;
provided, however, that such Contracts shall be considered “Applicable
Contracts” to the extent, and only to the extent, such Contracts relate solely
to the Assets.  For the avoidance of doubt, no Excluded Asset shall be an
“Applicable Contract”.

 

“Asset Taxes” means all ad valorem, property, production, excise, severance and
all other similar Taxes assessed against the Assets or based on or measured by
the value or ownership of the Assets, or the production of Hydrocarbons or the
receipt of proceeds therefrom (but, for the avoidance of doubt, shall not
include income, franchise or similar Taxes or Subject Transfer Taxes).

 

“Assets” means all of Sellers’ right, title, and interest in and to the
following (but specifically excluding the Excluded Assets):

 

(a)                                 (1) those oil, gas and mineral leases and
fee mineral interests described in Exhibit A (collectively, the “Leases”),
including all leasehold estates, royalty interests, overriding royalty
interests, net profits interests, or similar interests associated with such oil,
gas and mineral leases and fee mineral interests and (2) the lands covered by
the Leases and all lands pooled or unitized with the lands covered by the Leases
(collectively, the “Lands”);

 

(b)                                 the Hydrocarbons under the Lands and that
may be produced, saved or sold from, or otherwise be allocated or attributed to,
the Lands on or after the Effective Time;

 

(c)                                  the oil, gas, water or injection wells
located on the Lands, whether producing, shut-in, or temporarily or permanently
abandoned, including those described in Exhibit B (the “Wells” and, together
with the Leases and Lands, the “Properties”);

 

(d)                                 all equipment, machinery, fixtures and other
tangible personal property and improvements located on the Lands or primarily
used or primarily held for use (whether on or off the Lands) in connection with
the operation of the Properties or the production, gathering, treatment,
processing, storage, sale, disposal and other handling of

 

2

 

* - Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

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Hydrocarbons attributable thereto, including any tanks, boilers, buildings,
fixtures, injection facilities, saltwater disposal facilities, compression
facilities, pumping units and engines, flow lines, pipelines, gathering systems,
gas and oil treating facilities, machinery, roads, inventory and other
appurtenances, improvements and facilities (all of the foregoing, excluding the
Wells, collectively, “Equipment”);

 

(e)                                  to the extent assignable, all surface
leases, permits, rights-of-way, licenses, easements and other surface rights
agreements primarily used or held for use in connection with the production,
gathering, treatment, processing, storage, sale, disposal and other handling of
Hydrocarbons or produced water from the Properties, including those described in
Exhibit C (collectively, the “Surface Contracts”);

 

(f)                                   to the extent assignable, all existing and
effective Applicable Contracts, including purchase contracts, joint operating
agreements, exploration agreements, development agreements, unitization
agreements, unit operating agreements, balancing agreements, farm-out
agreements, service agreements, transportation, processing, treatment or
gathering agreements, equipment leases and other contracts, agreements and
instruments; and

 

(g)                                  originals (to the extent in Sellers’
possession) or copies of all files, records, and data relating to the Assets
described in clauses (a) through (f) above, which records shall include: lease
records; well records; division order records; well files; title records
(including abstracts of title, title opinions and memoranda, and title curative
documents); engineering records; geological and geophysical data (including
schematics, proprietary 2D and 3D seismic data and/or assignable seismic data
licenses in the possession of Sellers) and all technical evaluations,
interpretive data and technical data and information relating to the other
Assets; maps; production records; electric logs; core data; pressure data;
decline curves and graphical production curves; reserve reports; appraisals,
joint interest billing decks and other partner details, lease operating
statements and Asset Tax records; provided, however, that (1) those items
referenced above in this sub-section (g) that are subject to a valid legal
privilege or to disclosure restrictions owing by any Seller to a Third Party,
(2) those items referenced above in this sub-section (g) that are not
transferable without payment of additional consideration (and Buyers have not
agreed in writing to pay such additional consideration), and (3) all e-mails and
other electronic files on any Seller’s servers and networks relating to the
foregoing items referenced in this sub-section (g) in each case, shall be
excluded (the foregoing items, taking into account the exclusions listed above,
collectively, the “Records”).

 

“Assignment” has the meaning set forth in Section 12.3(a).

 

“Assumed Liabilities” has the meaning set forth in Section 14.1.

 

“Available Employees” has the meaning set forth in Section 8.3(d).

 

“Business Day” means a day other than a Saturday, Sunday or a day on which
commercial banks in Houston, Texas are authorized or required by applicable Law
to be closed for business.

 

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“Buyer” or “Buyers” has the meaning set forth in the Preamble.

 

“Buyer Indemnified Parties” has the meaning set forth in Section 14.2(a).

 

“Buyer Taxes” means (a) all Subject Transfer Taxes, (b) all Taxes imposed on or
asserted against any Buyer in respect of its business for any taxable period or
portion thereof, whether before or after the Closing Date, (c) all Asset Taxes
for any taxable period or portion thereof on and after the Effective Time, and
(d) all other Taxes to the extent attributable to the obligations of any Buyer
hereunder.

 

“Buyer Transaction Costs” means all fees, costs and expenses of any brokers,
financial advisors, consultants, accountants, attorneys or other professionals
payable by Buyers or EVOC in connection with the structuring, negotiation or
consummation of the transactions contemplated by this Agreement.

 

“Buyer’s Knowledge” means the actual knowledge, without any obligation of
investigation or inquiry, of those Persons listed on Schedule 1.1(a).

 

“Cap” has the meaning set forth in Section 14.2(c)(2).

 

“Casualty Loss” has the meaning set forth in Section 8.3(b).

 

“Claim” means any claim, demand, cause of action, petition or similar notice.

 

“Claim Notice” has the meaning set forth in Section 14.3(a).

 

“Closing” has the meaning set forth in Section 12.1.

 

“Closing Amount” means the Preliminary Purchase Price, less the Performance
Deposit.

 

“Closing Date” has the meaning set forth in Section 12.1.

 

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

 

“Condition” has the meaning set forth in Section 5.1(a).

 

“Confidentiality Agreement” means that certain Confidentiality Agreement, dated
March 27, 2013, by and between Laredo and EnerVest, Ltd.

 

“Confidential Information” has the meaning set forth in Section 8.2(c).

 

“Consent” has the meaning set forth in Section 6.5.

 

“Contract” means any written or oral contract or agreement, including farm-in
and farm-out agreements; participation, exploration and development agreements;
crude oil, condensate and natural gas purchase and sale, gathering,
transportation and marketing agreements; joint operating agreements; balancing
agreements; unitization agreements; unit operating agreements; processing
agreements; facilities or equipment leases; and other similar Contracts, but
excluding, however, master service agreements and any other blanket contracts,
the Surface Contracts, the

 

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Leases and any other instrument creating or evidencing any interest in real
property included in Assets.

 

“Control Systems” means equipment, software licenses, communication equipment,
computer hardware, computer software, servers, networks, network connections,
Distributed Control System (DCS) equipment, Programmable Logic Controllers (PLC)
and other associated equipment, to the extent, and only to the extent, the same
are used primarily as part of the process control and safety system of the
production facilities included in the Assets, including, for the avoidance of
doubt, SCADA systems and the supporting equipment required to operate SCADA
systems, but excluding any licenses required to be obtained from any
Governmental Entity for the operation of any of the foregoing or any software
proprietary to any Seller or its Affiliates being used with the Control Systems.

 

“Cure Period” has the meaning set forth in Section 4.2(i).

 

“Customary Post-Closing Consents” means the consents and approvals from
Governmental Entities for the assignment of the Assets to another Person that
are customarily obtained after the assignment of properties similar to the
Assets.

 

“Deductible” has the meaning set forth in Section 14.2(c)(1).

 

“Defect Notice Date” means 5:00 p.m. Tulsa, Oklahoma Time on July 25, 2013.

 

“Defensible Title” has the meaning set forth in Section 4.1(b).

 

“Dispute” means any dispute, claim or controversy of any kind or nature related
to, arising under, or connected with this Agreement or the transactions
contemplated hereby (including disputes as to the creation, validity,
interpretation, breach or termination of this Agreement).

 

“DOJ” means the U.S. Department of Justice.

 

“Due Diligence Period” has the meaning set forth in Section 3.1.

 

“Due Diligence Review” has the meaning set forth in Section 3.1.

 

“Effective Time” means April 1, 2013, at 12:01 a.m. local time where the Assets
are located.

 

“Environment” has the meaning set forth in Section 5.1(b).

 

“Environmental Adjustment Amount” has the meaning set forth in Section 5.3(c).

 

“Environmental Assessment” has the meaning set forth in Section 3.3(a).

 

“Environmental Defect” has the meaning set forth in Section 5.1(c).

 

“Environmental Defect Expert” has the meaning set forth in Section 5.3(f).

 

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“Environmental Defect Notice” has the meaning set forth in Section 5.3(a).

 

“Environmental Defect Property” has the meaning set forth in Section 5.3(a).

 

“Environmental Defect Value” has the meaning set forth in Section 5.3(a).

 

“Environmental Disputed Matters” has the meaning set forth in Section 5.3(f).

 

“Environmental Dispute Notice” has the meaning set forth in Section 5.3(f).

 

“Environmental Law” has the meaning set forth in Section 5.1(d).

 

“Environmental Liabilities” has the meaning set forth in Section 5.1(e).

 

“Equipment” has the meaning set forth in Section 1.1 under the defined term
“Assets”.

 

“Event” has the meaning set forth in the definition of “Material Adverse
Effect”.

 

“EVOC” has the meaning set forth in the Preamble.

 

“Excluded Assets” means (a) (1) all corporate, financial, income, Tax, legal and
other records of Sellers that relate to Sellers’ business generally (whether or
not relating to the Assets) and (2) all books, files and other records to the
extent relating to the Excluded Assets; (b) all rights to any refunds for Taxes
or other costs or expenses borne by Sellers or Sellers’ predecessors in interest
and attributable to periods prior to the Effective Time in accordance with the
principles of Section 9.1; (c)  all production, trade credits, all accounts,
receivables, note receivables, take or pay amounts receivable, other
receivables, proceeds, income or revenues, deposits, cash, checks in process of
collection, cash equivalents and funds attributable to the Assets with respect
to any period of time prior to the Effective Time; (d) any refunds due to
Sellers by a Third Party for any overpayment of rentals, royalties, production
payments or other amounts attributable to the Assets with respect to any period
of time prior to the Effective Time; (e) any causes of action, claims, insurance
or condemnation proceeds and other rights (including for indemnification and
defense) of Sellers to the extent arising prior to the Effective Time; (f) all
of Sellers’ motor vehicles, trailers and associated personal property; (g) all
of Sellers’ radio equipment and associated licenses, other than the Control
Systems; (h) all of Sellers’ computers, computer hardware, software, servers,
networks and network connections and associated information technology
equipment, other than the Control Systems; (i) all of Sellers’ proprietary
technology, patents, trade secrets, copyrights, names, trademarks, logos and
other intellectual property; (j) any geological, geophysical or seismic data,
materials or information, including maps, interpretations, records or other
technical information related to or based upon any such data, materials or
information, and any other asset, data, materials or information, the transfer
of which is restricted or prohibited under the terms of any Third Party license,
confidentiality agreement or other agreement or the transfer of which would
require the payment of a fee or other consideration to any Third Party;
provided, however that if such data, materials or information is transferable
upon payment of a fee or other consideration, such data, materials or
information shall be transferred to Buyers subject to the payment by Buyers of
such fee or other consideration; (k) all Hedge Contracts, except  for any Hedge
Contracts relating to Hedging Transactions pursuant to Section 8.1(c), and all
proceeds, income or other rights relating thereto;

 

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(l) all accounts, proceeds, refunds, income or revenues attributable to
insurance premiums with respect to any period of time prior to the Effective
Time; and (m) those Contracts and other assets described on Exhibit D.

 

“Execution Date” has the meaning set forth in the Preamble.

 

“Final Purchase Price” has the meaning set forth in Section 13.1(a).

 

“Final Section 1060 Allocation Schedule” has the meaning set forth in
Section 2.3(b).

 

“Final Settlement Date” has the meaning set forth in Section 13.1(a).

 

“Final Settlement Statement” has the meaning set forth in Section 13.1(a).

 

“Final Settlement Statement Due Date” has the meaning set forth in
Section 13.1(a).

 

“FTC” means the Federal Trade Commission.

 

“Fundamental Representations” means the representations and warranties of
(a) Sellers contained in Section 6.1 (Status), Section 6.2 (Power), Section 6.4
(Authorization and Enforceability) and Section 6.7 (Liability for Brokers’
Fees), and (b) Buyers and/or EVOC, as applicable, contained in Section 7.1
(Organization and Standing), Section 7.2 (Power), Section 7.4 (Authorization and
Enforceability), Section 7.6 (Liability for Brokers’ Fees), Section 7.9
(Financial Resources and other Capability), Section 7.11 (Qualification) and
Section 7.12 (Buyers’ Evaluation).

 

“GAAP” means generally accepted accounting principles in the United States.

 

“Governing Documents” means the documents governing the formation and internal
operation of a Person, including (a) in the instance of a corporation, the
articles/certificate of incorporation and bylaws of such corporation, and (b) in
the instance of a limited liability company, the certificate of formation and
limited liability company agreement of such limited liability company.

 

“Governmental Authorizations” means any federal, state or local governmental
license, permit, franchise, order, exemption, variance, waiver, authorization or
certificate, or any application therefor.

 

“Governmental Entity” means any instrumentality, subdivision, court,
administrative agency, commission, official or other authority of the United
States or any other country or any state, province, prefect, municipality,
locality or other government or political subdivision thereof, or any
quasi-governmental or private body exercising any administrative, executive,
judicial, legislative, police, regulatory, taxing, importing or other
governmental or quasi-governmental authority.

 

“Hazardous Materials” has the meaning set forth in Section 5.1(f).

 

“Hedge Contracts” means those Contracts listed on Schedule 1.1(d).

 

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“Hedging Transactions” has the meaning set forth in Section 8.1(c).

 

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

 

“Hydrocarbons” means oil, gas, casinghead gas, coal bed methane, condensate and
other gaseous and liquid hydrocarbons or any combination thereof.

 

“Imbalances” means, with respect to the Assets, and subject to the provisions of
any balancing or similar agreement burdening such Assets, any imbalance at
(a) the wellhead between (1) the amount of Hydrocarbons produced from any of the
Wells and allocated to the interests of Sellers therein and (2) the shares of
production from the relevant Well to which Sellers were entitled, or (b) the
pipeline flange (or inlet flange at a processing plant or similar location)
between (1) the amount of Hydrocarbons nominated by or allocated to Sellers and
(2) the Hydrocarbons actually delivered on behalf of Sellers.

 

“Indebtedness” means, with respect to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money; (b) all obligations of such
Person evidenced by notes, bonds, debentures or any other similar debt; (c) all
amounts payable by such Person as deferred purchase price for property; (d) all
obligations of such Person under any futures, hedge, swap, collar, put, call,
floor, cap, option or other similar Contracts that are intended to benefit from,
relate to or reduce or eliminate the risk of fluctuations in the price of
commodities, including Hydrocarbons, securities, foreign exchange rates or
interest rates; (e) all obligations of such Person as lessee under leases that
are recorded as capital leases in accordance with either the past practices of
such Person or GAAP and (f) all guarantees of or by such Person of any of the
items described in clauses (a) through (e) hereof.

 

“Indemnified Party” has the meaning set forth in Section 14.3(a).

 

“Indemnifying Party” has the meaning set forth in Section 14.3(a).

 

“Individual Environmental Threshold” has the meaning set forth in
Section 5.3(b).

 

“Individual Title Threshold” has the meaning set forth in Section 4.2(f).

 

“Lands” has the meaning set forth in Section 1.1 under the defined term
“Assets.”

 

“Law” means any statute, law, principle of common law, rule, regulation,
judgment, order, ordinance, requirement, code, writ, injunction, or decree of
any Governmental Entity.

 

“Laredo” has the meaning set forth in the Preamble.

 

“Laredo Gas Services” has the meaning set forth in the Preamble.

 

“Laredo Texas” has the meaning set forth in the Preamble.

 

“Leases” has the meaning set forth in Section 1.1 under the defined term
“Assets.”

 

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“Lien” means any of the following: mortgage, lien (statutory or other), other
security agreement or interest, hypothecation, pledge or other deposit
arrangement, charge, levy, executory seizure, attachment, garnishment,
encumbrance (including any easement, exception, reservation or limitation),
conditional sale, title retention or other similar agreement, preemptive or
similar right, or any option; provided, however, that the term “Lien” shall not
include any of the foregoing to the extent created by this Agreement.

 

“Losses” has the meaning set forth in Section 14.2.

 

“Material Adverse Effect” means any state of facts, condition, change, event,
effect or occurrence (each, an “Event”), when taken together with all other
Events, that has a direct, reasonably determinable negative economic impact in
excess of *, net of any insurance or reinsurance recoverable, on (a) the ability
of Sellers to consummate the transactions contemplated by this Agreement or
(b) the ownership or operation condition of the Assets (as currently owned and
operated), taken as a whole; provided, however, that none of the following
Events shall be deemed to constitute, and none of the following Events shall be
taken into account in determining whether there has been, a “Material Adverse
Effect”: (1) national, international, regional or local business, economic or
political conditions, including the engagement by the United States of America
in hostilities, whether or not pursuant to the declaration of a national
emergency or war, or the occurrence of any military or terrorist attack upon the
United States of America or any of its respective territories, possessions or
diplomatic or consular offices or upon any military installation, equipment or
personnel of the United States of America; (2) events affecting the financial,
banking or securities markets (including any disruption thereof or any decline
in the price of securities generally or any market or index); (3) conditions (or
changes in such conditions) generally affecting the oil and gas and/or
gathering, processing or transportation industry whether as a whole or
specifically in any area or areas where the Assets are located; (4) increases or
decreases in energy, electricity, natural gas and/or oil, or other raw materials
or operating costs; (5) changes in prices of Hydrocarbons, including changes in
price differentials; (6) Acts of God (including, but not limited to, fire,
flood, earthquake, storm, tornado, hurricane or other natural disaster);
(7) civil unrest, rebellions, insurrections, riots, lockouts, strikes or any
other industrial strife; (8) changes or reinterpretations in GAAP or Law;
(9) the taking of any action required by this Agreement; (10) changes as a
result of the negotiation, announcement, execution or performance of this
Agreement, including by reason of the identity of Buyers or EVOC or any
communication by Buyers or any of their Affiliates of their plans or intentions
regarding the operation of the Assets; (11) any actions taken or omitted to be
taken by or at the request or with the prior written consent of any Buyer or
EVOC; (12) effects or changes that are cured or no longer exist by the earlier
of the Closing or the termination of this Agreement pursuant to ARTICLE 11;
(13) the exercise of a preferential right as to any of the Assets;
(14) reclassifications or recalculations of reserves in the ordinary course of
business; (15) natural declines in Well performance; or (16) orders, actions or
inactions of any Governmental Entity.

 

“Material Agreements” has the meaning set forth in Section 6.10(a).

 

“Net Imbalance” means an amount equal to (a) the sum of all Imbalances
attributable to (1) any Seller being underproduced with respect to any Well or
(2) having overdelivered with

 

9

 

* - Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

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respect to any pipeline minus (b) the sum of all Imbalances attributable to
(1) any Seller being overproduced with respect to any Well or (2) having
underdelivered with respect to any pipeline.

 

“Net Mineral Acre” means, as computed separately with respect to each Lease,
(a) the number of gross acres in the lands covered by such Lease, multiplied by
(b) the undivided percentage interest in oil, gas or other minerals covered by
such Lease, as applicable, in such lands, multiplied by (c) the applicable
Seller’s Working Interest in such Lease.

 

“Net Revenue Interest” means, with respect to any Person, the interest of such
Person in and to the Hydrocarbons produced and saved from, or otherwise
attributable to, a Lease or Well, as applicable, after satisfaction of all
royalties, overriding royalties, net profits interests and other similar burdens
on or measured by production of Hydrocarbons therefrom.

 

“NORM”  has the meaning set forth in Section 5.1(h)

 

“Notice of Defective Interests” has the meaning set forth in Section 4.2(c).

 

“Outside Termination Date” means August 30, 2013.

 

“Party” or “Parties has the meaning set forth in the Preamble.

 

“Per Item Threshold” has the meaning set forth in Section 14.2(c)(1).

 

“Performance Deposit” has the meaning set forth in Section 2.2(b).

 

“Performance Deposit Bank” has the meaning set forth in Section 2.2(b).

 

“Permitted Encumbrances” has the meaning set forth in Section 4.1(c).

 

“Person” means any individual or entity, including any corporation, limited
liability company, partnership (general or limited), joint venture, association,
joint stock company, trust, unincorporated organization or Governmental Entity.

 

“Phase I Environmental Site Assessment” means an environmental site assessment
performed pursuant to the American Society for Testing and Materials E1527 - 05,
or any similar environmental assessment.

 

“Plugging and Abandonment Obligations” has the meaning set forth in
Section 5.1(h).

 

“Policies” has the meaning set forth in Section 6.21.

 

“Preferential Right” has the meaning set forth in Section 6.6.

 

“Preliminary Purchase Price” has the meaning set forth in Section 2.5.

 

“Preliminary Settlement Statement” has the meaning set forth in Section 2.5.

 

“Properties” has the meaning set forth in Section 1.1 under the defined term
“Assets.”

 

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“Property Expenses” has the meaning set forth in Section 2.4(b).

 

“Property Taxes” has the meaning set forth in Section 9.1.

 

“Property Valuation Expert” has the meaning set forth in Section 2.3(b).

 

“Proportionate Share” has the meaning set forth in Section 2.1(a).

 

“Proposed Section 1060 Allocation Schedule” has the meaning set forth in
Section 2.3(b).

 

“Purchase Price” has the meaning set forth in Section 2.2.

 

“Records” has the meaning set forth in Section 1.1 under the defined term
“Assets.”

 

“Remediation” or “Remediate” has the meaning set forth in Section 5.1(i).

 

“Representatives” means, with respect to each Party, such Party’s Affiliates and
such Party’s and such Party’s Affiliates’ respective directors, officers,
members, employees, agents, brokers, accountants, consultants, financial
advisors, counsel, financing sources and other representatives.

 

“Rules” has the meaning set forth in Section 15.12.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Seller” or “Sellers” has the meaning set forth in the Preamble.

 

“Seller Indemnified Parties” has the meaning set forth in Section 14.2(b).

 

“Seller Taxes” means (a) all Taxes (other than Asset Taxes and Subject Transfer
Taxes) imposed on or asserted against any Seller in respect of its business or
the disposition of the Assets for any taxable period or portion thereof, whether
before or after the Closing Date, (b) all Asset Taxes for any taxable period or
portion thereof ending immediately prior to the Effective Time, and (c) all
other Taxes to the extent attributable to the obligations of any Seller
hereunder.

 

“Seller Transaction Costs” means all fees, costs and expenses of any brokers,
financial advisors, consultants, accountants, attorneys or other professionals
payable by Sellers in connection with the structuring, negotiation or
consummation of the transactions contemplated by this Agreement.

 

“Seller’s Knowledge” means the actual knowledge, without any obligation of
investigation or inquiry, of the Persons listed on Schedule 1.1(b).

 

“Specified Contracts” means those Applicable Contracts listed on Schedule
1.1(c).

 

“Subject Transfer Taxes” has the meaning set forth in Section 9.2.

 

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“Surface Contracts” has the meaning set forth in Section 1.1 under the defined
term “Assets.”

 

“Tax” means (a) any taxes and assessments imposed by any Governmental Entity,
including net income, gross income, profits, gross receipts, license,
employment, stamp, occupation, premium, alternative or add-on minimum, ad
valorem, real property, personal property, transfer, real property transfer,
value added, sales, use, environmental (including taxes under Code Section 59A),
customs, duties, capital stock, franchise, excise, withholding, social security
(or similar), unemployment, disability, payroll, fuel, excess profits, windfall
profit, severance, estimated or other tax, including any interest, penalty or
addition thereto, whether disputed or not, and any expenses incurred in
connection with the determination, settlement or litigation of the Tax
liability, (b) any obligations to indemnify any other Person under any
agreements or arrangements with respect to Taxes described in clause (a) above,
and (c) any transferee liability in respect of Taxes described in clauses
(a) and (b) above or payable by reason of assumption, transferee liability,
operation of Law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or
successor thereof or any analogous or similar provision under Law) or otherwise.

 

“Tax Partnership” has the meaning set forth in Section 6.13.

 

“Tax Proceeding” has the meaning set forth in Section 9.3.

 

“Tax Return” means any return, report or similar statement required to be filed
with respect to any Taxes (including any attached schedules), including any
information return, claim for refund, amended return and declaration of
estimated Tax.

 

“Third Party” means any Person other than the Parties and their respective
Affiliates.

 

“Third Party Claim” has the meaning set forth in Section 14.3(b).

 

“Third Party Proprietary Data” means all geological, geophysical, technical and
other proprietary data and information, including as may be covered by any
patent or other intellectual property right, that is owned or otherwise held by
a Third Party and licensed to any Seller, with no rights to transfer or disclose
same to Buyers.

 

“Title Adjustment Amount” has the meaning set forth in Section 4.2(h).

 

“Title Benefit” has the meaning set forth in Section 4.2(b).

 

“Title Benefit Amount” has the meaning set forth in Section 4.2(g).

 

“Title Benefit Notice” has the meaning set forth in Section 4.2(d).

 

“Title Benefit Property” has the meaning set forth in Section 4.2(d).

 

“Title Defect” has the meaning set forth in Section 4.2(a).

 

“Title Defect Amount” has the meaning set forth in Section 4.2(e).

 

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“Title Defect Expert” has the meaning set forth in Section 4.3(a).

 

“Title Defect Property” has the meaning set forth in Section 4.2(c).

 

“Title Dispute Notice” has the meaning set forth in Section 4.3.

 

“Title Disputed Matter” has the meaning set forth in Section 4.3.

 

“Transaction Documents” has the meaning set forth in Section 15.9.

 

“Wells” has the meaning set forth in Section 1.1 under the defined term
“Assets.”

 

“Working Interest” means, with respect to any Person, the percentage of the
costs and expenses to be borne by such Person for the maintenance, development
and operation of a Lease or Well without regard to the effect of any and all
royalties, overriding royalties, net profits interests and other similar burdens
on or measured by production.

 

1.2                               References, Construction and Joint Drafting.

 

(a)                                 References and Construction.  When a
reference is made in this Agreement to Articles, Sections, Exhibits or
Schedules, such reference will be to an Article, Section, Exhibit or Schedule to
this Agreement unless otherwise indicated.  Whenever the words “include,”
“includes” or “including” are used in this Agreement, they will be deemed to be
followed by the words “without limitation.”  Unless the context otherwise
requires, (1) words, terms and titles (including terms defined herein) in the
singular include the plural and vice versa, (2) the words “herein,” “hereof,”
“hereby,” “hereunder” and words of similar nature refer to this Agreement as a
whole and not to any particular subdivision unless expressly so limited, (3) the
words “this Article,” “this Section” and “this subsection,” and words of similar
import, refer only to the Article, Section or subsection hereof in which such
words occur, (4) each accounting term not defined herein will have the meaning
given to it under GAAP, (5) the use in this Agreement of a pronoun in reference
to a Party includes the masculine, feminine or neuter, as the context may
require, (6) all references to “$” shall be deemed references to United States
Dollars, (7) the headings of the Articles and Sections of this Agreement are for
guidance and convenience of reference only and shall not limit or otherwise
affect any of the terms or provisions of this Agreement, (8) the words “shall”
and “will” are used interchangeably throughout this Agreement and shall
accordingly be given the same meaning, regardless of which word is used, and
(9) except as expressly provided otherwise in this Agreement, references to any
Law or agreement means such Law or agreement as it may be amended from time to
time.

 

(b)                                 Joint Drafting.  The Parties have
participated jointly in negotiating and drafting this Agreement.  In the event
that an ambiguity or a question of intent or interpretation arises, this
Agreement will be construed as if drafted jointly by the Parties, and no
presumption or burden of proof will arise favoring or disfavoring any Party by
virtue of the authorship of any provision of this Agreement.

 

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ARTICLE 2
PURCHASE AND SALE

 

2.1                               Purchase and Sale.

 

(a)                                 Subject to the terms and conditions of this
Agreement, Buyers agree to purchase from Sellers at Closing their respective
undivided proportionate interests set forth opposite each Buyer’s name in
Schedule 2.1(a) hereto (each Buyer’s “Proportionate Share”), and Sellers agree
to sell, assign and deliver to Buyers, in their respective Proportionate Shares,
at Closing, the Assets for the consideration specified in this ARTICLE 2.

 

(b)                                 Sellers shall retain all of the Excluded
Assets.

 

2.2                               Purchase Price(a)   .

 

(a)                                 The unadjusted purchase price for the Assets
shall be $438,000,000.00 (the “Purchase Price”).

 

(b)                                 On or before the date that is three
(3) Business Days following the Execution Date, Buyers shall pay, by wire
transfer of immediately available funds to a joint signature bank account, with
Wells Fargo Bank, National Association (the “Performance Deposit Bank”), to be
established by Sellers and Buyers, $40,000,000.00 (the “Performance Deposit”). 
The Performance Deposit shall be held and distributed by the Performance Deposit
Bank in order to secure Buyers’ performance of this Agreement.  Subject to
Section 11.2(b) and Section 11.2(c), all interest earned on the Performance
Deposit shall be credited against the Purchase Price.

 

(c)                                  At Closing, Buyers shall pay to Sellers the
Closing Amount by wire transfer of immediately available funds to Sellers’
designated account.

 

(d)                                 After Closing, final adjustments to the
Purchase Price shall be made (1) pursuant to the Final Settlement Statement to
be delivered pursuant to Section 13.1(a) and the payments made by the owing
Party as provided in Section 13.1(a), and (2) upon final resolution of any Title
Disputed Matters and any Environmental Disputed Matters, in accordance with
ARTICLE 4 and Article 5, respectively.

 

2.3                               Allocation of the Purchase Price.

 

(a)                                 On or prior to the Execution Date and solely
for the purposes of ARTICLE 4 and Article 5, Buyers and Sellers have agreed upon
an allocation of the Purchase Price among (1) the Leases as set forth on
Exhibit A, (2) the Wells as set forth on Exhibit B, (3) the Assets owned by
Laredo Gas Services and (4) the Assets not allocated pursuant to (1)-(3) above
as such amounts are listed on Exhibit B (collectively, the “Allocated Values”).

 

(b)                                 Sellers may (but are not obligated to)
prepare an allocation of the Purchase Price on a schedule (the “Proposed
Section 1060 Allocation Schedule”) for purposes of, and in accordance with,
Section 1060 of the Code and the regulations promulgated thereunder, within 30
days after the Final Settlement Date.  Within 60 days after delivery of such
Proposed Section 1060 Allocation Schedule, if so prepared by Sellers in
accordance with the preceding sentence, Buyers and Sellers shall reasonably
endeavor to agree to a final

 

14

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allocation schedule to be used for income Tax reporting purposes (the “Final
Section 1060 Allocation Schedule”); provided that if the Parties are unable to
reach agreement within such 60-day period, then, immediately after the
expiration of such period, either Party may invoke the Dispute resolution
provisions immediately below upon the delivery of written notice thereof to the
other Party and, within ten days thereafter, the Parties shall mutually appoint
an independent expert having the qualifications specified below (the “Property
Valuation Expert”), failing which the Parties shall, within ten days after the
expiration of such foregoing ten day period, request that the AAA, acting
through its offices in Houston, Texas, appoint the Property Valuation Expert. 
The Property Valuation Expert shall be a licensed petroleum engineer, having a
minimum of ten years’ experience with regard to the types of oil and assets
involved in the Proposed Section 1060 Allocation Schedule Dispute, shall be
without any conflicts of interest as to the Parties, and shall not have been
employed by or undertaken more than $50,000 of work, in the aggregate, for any
Party (including its Affiliates) within the five year period preceding the
submission of the Dispute.  Within 15 days following the appointment of the
Property Valuation Expert, Sellers shall provide the Property Valuation Expert
with a copy of this Agreement, and each Party shall provide, both to the
Property Valuation Expert and to each other, a summary of its position with
regard to the Proposed Section 1060 Allocation Schedule in a written document of
ten pages or less.  The Parties shall instruct the Property Valuation Expert
that, within 30 days after receiving the Parties’ respective submissions, the
Property Valuation Expert shall render a written decision, choosing only either
Buyers’ position or Sellers’ position with respect to each Disputed matter.  Any
decision rendered by the Property Valuation Expert pursuant hereto shall be
final, conclusive and binding on Sellers and Buyers, and will be enforceable
against each Party in any court having jurisdiction hereof, but is not
reviewable by, or appealable to, any court except in the event of fraud.  The
Parties shall each bear one-half of the costs of the Property Valuation Expert
and of the associated Dispute resolution process and proceedings.  In the case
of such a Dispute resolution process regarding Sellers’ Proposed Section 1060
Allocation Schedule Dispute, Sellers will issue the Final Section 1060
Allocation Schedule consistent with the Property Valuation Expert’s decision,
within 30 days after receiving the Property Valuation Expert’s decision with
respect thereto.  For the avoidance of doubt, the Property Valuation Expert will
function as an expert in accordance with the foregoing procedure, not as an
arbitrator.  Sellers and Buyers shall file all Tax Returns (including Internal
Revenue Service Form 8594) consistent with any such Final Section 1060
Allocation Schedule.  Sellers and Buyers shall take no position inconsistent
with such allocations on any applicable Tax Return in any audit by or proceeding
before any Governmental Entity related to Taxes, unless required by Law or with
the written consent of the other Party (not to be unreasonably withheld, delayed
or conditioned) provided, however, that nothing contained herein shall prevent
Buyers or Sellers from settling any proposed deficiency or adjustment by any
Governmental Entity based upon or arising out of the allocation, and neither
Buyers nor Sellers shall be required to litigate before any court any proposed
deficiency or adjustment by any Governmental Entity challenging such
allocation.  In the event that the allocation described herein is disputed by
any Governmental Entity, then the Party receiving notice of the dispute shall
promptly notify, consult with and obtain the consent (not to be unreasonably
withheld, conditioned or delayed) of the other Party concerning resolution of
the dispute.  If either (i) Sellers fail to deliver to Buyers a Proposed
Section 1060 Allocation Schedule within 30 days after the Final Settlement Date
or (ii) a Final Section 1060 Allocation Schedule is not agreed by the Parties
(or otherwise determined by a Dispute resolution process

 

15

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in accordance with the foregoing provisions of this Section 2.3(b)), then each
Party shall be responsible for its reporting requirements under Code
Section 1060 and any other provisions that may apply; provided that the Parties
shall reasonably coordinate with each other regarding any such filings, in order
to avoid any material inconsistencies.

 

2.4                               Adjustments to Purchase Price.  The Purchase
Price shall be adjusted according to this Section 2.4 without duplication.  For
purposes of determining the amounts of the adjustments to the Purchase Price
provided for in this Section 2.4, the principles set forth in
Section 2.4(a) shall apply.

 

(a)                                 Proration of Costs and Revenues.

 

(1)                                 Buyers shall be (A) entitled to (i) all
production of Hydrocarbons from or attributable to the Properties from and after
the Effective Time (and all products and proceeds attributable thereto), and
(ii) excluding overhead charges arising under applicable joint operating
agreements, administrative orders or other legal authority related to those
Assets operated by Sellers that are earned prior to Closing, all other income,
proceeds, receipts and credits earned with respect to the Assets from and after
the Effective Time, and (B) responsible for (and entitled to any refunds with
respect to) all Property Expenses incurred from and after the Effective Time.

 

(2)                                 Sellers shall be (A) entitled to (i) all
production of Hydrocarbons from or attributable to the Properties prior to the
Effective Time (and all products and proceeds attributable thereto), (ii) all
other income, proceeds, receipts and credits earned with respect to the Assets
prior to the Effective Time, and (iii) all overhead charges arising under
applicable joint operating agreements, administrative orders or other legal
authority related to the Assets operated by any Seller that are earned prior to
Closing, and (B) responsible for (and entitled to any refunds with respect to)
all Property Expenses incurred prior to the Effective Time.

 

(3)                                 “Earned” and “incurred”, as used in this
Agreement shall be interpreted in accordance with GAAP and Council of Petroleum
Accountants Society standards, except as otherwise specified herein.

 

(4)                                 Sellers have caused the Hydrocarbons in the
storage facilities located on, or utilized in connection with, the Leases to be
measured, gauged or strapped as of the Effective Time.  For purposes of
allocating production (and proceeds and accounts receivable with respect
thereto) under this Section 2.4, (A) liquid Hydrocarbons shall be deemed to be
“from or attributable to” the Properties when they pass through the pipeline
connecting into the storage facilities into which they are run and (B) gaseous
Hydrocarbons shall be deemed to be “from or attributable to” the Properties when
they pass through the royalty measurement meters, delivery point sales meters or
custody transfer meters on the gathering lines or pipelines through which they
are transported (whichever meter is closest to the well).  Sellers shall utilize
reasonable interpolative procedures, consistent with industry practice, to
arrive at an allocation of production when exact meter readings or gauging and
strapping data are not available.

 

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(b)                                 Property Expenses.  The term “Property
Expenses” means all (1) capital expenses attributable to the Assets in the
ordinary course of business, (2) Asset Taxes (as apportioned as of the Effective
Time pursuant to ARTICLE 9), (3) operating expenses incurred in the ownership,
development, operation and production of the Assets in the ordinary course of
business and, where applicable, in accordance with any relevant joint operating
agreement (including lease rentals, if any), (4) overhead costs charged to the
Assets under the applicable joint operating agreement, administrative order or
other legal authority and (5) extension and renewal payments with respect to the
Leases.

 

(c)                                  Upward Adjustments.  To calculate the
Preliminary Purchase Price and the Final Purchase Price, the Purchase Price
shall be adjusted upward, without duplication, by the following:

 

(1)                                 an amount equal to any proceeds received by
Buyers (net of royalties, overriding royalties, net profit interests and other
similar burdens on or measured by production) from the sale of any Hydrocarbons
that were produced from and saved, or attributable to, the Assets prior to the
Effective Time;

 

(2)                                 an amount equal to the cost of all
additional Assets listed on Schedule 2.4(c) and Leases acquired after the
Effective Time;

 

(3)                                 an amount equal to all Property Expenses and
all royalties, overriding royalties, net profit interests and similar burdens on
or measured by production, in each case, attributable to the Assets from and
after the Effective Time that were paid by any Seller;

 

(4)                                 an amount equal to the value of all
Hydrocarbons that were produced and saved from, or attributable to, the Assets
that are in storage or existing in stock tanks, pipelines and/or plants
(including inventory) as of the Effective Time, such value to be based upon the
applicable Contract price in effect as of the Effective Time (or if there is no
Contract price, then the market price in effect as of the Effective Time in the
field in which such Hydrocarbons were produced), net of (A) all amounts payable
as royalties, overriding royalties, net profit interests and other similar
burdens on or measured by production and (B) all applicable severance Taxes;

 

(5)                                 an amount equal to all prepaid expenses
(including pre-paid bonuses, rentals, cash calls and advances to Third Party
operators for expenses not yet incurred, prepaid Taxes, and scheduled payments)
paid by any Seller and attributable to the ownership or operation of the Assets
from and after the Effective Time;

 

(6)                                 an amount equal to the Subject Transfer
Taxes paid by any Seller with respect to the transactions contemplated by this
Agreement;

 

(7)                                 with respect to those Assets operated by any
Seller, an amount equal to all overhead charges arising under applicable joint
operating agreements, administrative orders or other legal authority that are
(A) attributable to such Seller operated Assets and the period of time prior to
Closing and (B) which have been paid by Third Parties and received by any Buyer;

 

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(8)                                 with respect to natural gas, if the Net
Imbalance is positive, an amount equal to (A) the Net Imbalance, multiplied by
(B) $2.55 per Mmbtu; and

 

(9)                                 any other amount provided for in this
Agreement or otherwise agreed to in writing by Buyers and Sellers.

 

(d)                                 Downward Adjustments.  To calculate the
Preliminary Purchase Price and the Final Purchase Price, the Purchase Price
shall be adjusted downward, without duplication, by the following:

 

(1)                                 subject to Section 4.2(f), an amount equal
to the Title Adjustment Amount attributable to Title Defects for which Sellers
have chosen the remedy set forth in Section 4.2(j)(1);

 

(2)                                 subject to Section 5.3(b), an amount equal
to the Environmental Adjustment Amount attributable to Environmental Defects, if
any, for which Sellers have chosen the remedy set forth in Section 5.3(e)(1);

 

(3)                                 an amount equal to the Allocated Value
(without duplication) of those Assets not transferred at Closing in accordance
with Section 4.2(j)(2), Section 4.4(a), Section 4.4(b) or Section 5.3(e)(3);

 

(4)                                 an amount equal to all proceeds received by
Sellers (net of royalties, overriding royalties, net profit interests and
similar burdens on or measured by production and Asset Taxes), from the sale of
any Hydrocarbons produced and saved from, or attributable to, the Assets from
and after the Effective Time;

 

(5)                                 an amount equal to the value of any Casualty
Loss pursuant to Section 8.3(b);

 

(6)                                 with respect to natural gas, if the Net
Imbalance is negative, an amount equal to (i) the absolute value of the Net
Imbalance, multiplied by (ii) $2.55 per Mmbtu;

 

(7)                                 an amount equal to all Property Expenses and
all royalties, overriding royalties, net profit interests and similar burdens on
or measured by production, in each case, attributable to the Assets prior to the
Effective Time that were paid by Buyers;

 

(8)                                 all funds held in suspense by Sellers with
respect to the operation, ownership, production and developments of the Assets,
including those amounts set forth in Schedule 6.19; and

 

(9)                                 any other amount provided in this Agreement
or otherwise agreed to in writing by Buyers and Sellers.

 

2.5                               Preliminary Settlement Statement.  On or
before the day that is two Business Days prior to Closing, Sellers shall deliver
to Buyers a statement (the “Preliminary Settlement

 

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Statement”) setting forth Sellers’ calculations of the adjustments to the
Purchase Price set forth in Section 2.4 (the Purchase Price, as so adjusted
“Preliminary Purchase Price”), the resulting Preliminary Purchase Price and the
Closing Amount, in each case, prepared in good faith using the best information
reasonably available to Sellers at the Closing Date, along with such data in
Sellers’ possession as is reasonably necessary to support such calculations. 
The Preliminary Settlement Statement also shall set forth Sellers’ designated
account for purposes of Buyers’ payment of the Closing Amount.  The Parties
shall attempt to agree in writing upon the Preliminary Purchase Price prior to
Closing, and in the event the Parties cannot agree upon the Preliminary Purchase
Price prior to Closing, Sellers’ calculation of the Preliminary Purchase Price
and the Closing Amount as reasonably calculated and as set forth in the
Preliminary Settlement Statement shall be used by the Parties for purposes of
Closing.

 

ARTICLE 3
BUYERS’ INSPECTION; DUE DILIGENCE REVIEW

 

3.1                               Due Diligence.  Subject to the provisions of
this ARTICLE 3, from and after the Execution Date up to the Defect Notice Date
(the “Due Diligence Period”), Sellers will make the Assets available to Buyers
and their Representatives for inspection and review to permit Buyers, at Buyers’
sole cost and risk, to perform its due diligence with respect to the Assets (the
“Due Diligence Review”).

 

3.2                               Access to Records.  For purposes of the Due
Diligence Review, to the extent the Records are in Sellers’ possession or actual
control and are not (a) Excluded Assets or (b) subject to (1) a valid legal
privilege or (2) disclosure or transfer restrictions owing by any Seller to a
Third Party, Sellers will, upon reasonable (being no less than three Business
Days’) advance notice from Buyers, make the Records available to Buyers for
inspection or copying, at Buyers’ sole cost and expense, at the offices of
Sellers located in Tulsa, Oklahoma during normal business hours.  For the
avoidance of doubt, any and all such Records inspected and/or copied by Buyers
pursuant to this Section 3.2 remain subject to the provisions of Section 8.2(c).
Buyers shall not, during the Due Diligence Period, contact any of the customers
or suppliers of any Seller, or Working Interest co-owners of any Seller,
operators, lessors or surface interest owners, in connection with the
transactions contemplated hereby, whether in person or by telephone, mail or
other means of communication, without the specific prior written consent of such
Seller, which consent shall not be unreasonably withheld.

 

3.3                               On-Site Inspection.

 

(a)                                 Sellers hereby consent to Buyers conducting,
during the Due Diligence Period and for purposes of the Due Diligence Review,
upon reasonable (being no less than three Business Days) advance notice to
Sellers and at Buyers’ sole risk and expense, on-site inspections of the Assets
and a Phase I Environmental Site Assessment (each such inspection or assessment,
an “Environmental Assessment”); provided, however, that any Third Party engaged
by Buyers to perform all or any portion of such Environmental Assessment shall
be subject to Sellers’ prior approval; provided, further, that (1) any such
Environmental Assessment will be subject to Section 8.2(c) and (2) if the
consent of any Third Party is required to provide Buyers such access, and such
consent is not granted following the commercially reasonable efforts of Sellers,
Buyers shall not have access to such Assets.  Buyers shall not

 

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conduct any sampling, boring or other invasive activities without prior written
notice to, and the written consent of, Sellers.  In connection with any
Environmental Assessment or other inspection pursuant to this Section 3.3,
Buyers agree to comply with all safety policies and other requirements of
Sellers and the operator of the Assets (whether such operator is a Seller, an
Affiliate of a Seller or a Third Party).  Buyers shall coordinate its access
rights and Environmental Assessments of the Assets with Sellers and any Third
Party operator of the Assets to reasonably minimize any inconvenience to or
interruption of the conduct of business by Sellers or any such Third Party
operator of the Assets.

 

(b)                                 If Buyers or any of their Representatives
prepare a written report with respect to any Environmental Assessment, Buyers
will furnish a copy thereof to Sellers as soon as practicable following the
receipt thereof by Buyers, and in any event by the Defect Notice Date.  The
Parties shall maintain the confidentiality of any Environmental Assessments
conducted hereunder, and any reports created with respect thereto, unless and
only to the extent disclosure of the same is required by a Governmental Entity;
provided that Buyers’ obligations with respect to such confidentiality shall
cease upon the Closing.

 

(c)                                  During all times during the Due Diligence
Period that Buyers and/or any of their Representatives are on the Assets or
conducting Buyers’ Due Diligence Review of the Records, Buyers shall maintain,
at their sole expense and with insurers reasonably satisfactory to Sellers,
policies of insurance of the types and in the amounts reasonably satisfactory to
Sellers.  Coverage under all insurance required to be carried by Buyers
hereunder will (1) be primary insurance, (2) include the Seller Indemnified
Parties as additional insureds, (3) waive subrogation against the Seller
Indemnified Parties and (4) provide for five days prior notice to Sellers in the
event of cancellation or modification of the policy or reduction in coverage. 
Buyers shall provide evidence of such insurance to Sellers prior to entering the
Assets.

 

(d)                                 EXCEPT TO THE EXTENT CAUSED BY THE WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE OF THE SELLER INDEMNIFIED PARTIES, BUYERS HEREBY
WAIVE, RELEASE AND AGREE TO DEFEND, INDEMNIFY AND HOLD HARMLESS SELLERS AND THE
OTHER SELLER INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES ARISING IN
ANY WAY OUT OF OR ATTRIBUTABLE TO THE ACCESS AFFORDED TO BUYERS AND THEIR
REPRESENTATIVES PURSUANT TO THIS ARTICLE 3 OR THE ACTIVITIES (OR ACTS OF
OMISSION) OF BUYERS OR THEIR REPRESENTATIVES RELATED TO SUCH ACCESS, INCLUDING
WITH RESPECT TO ANY ENVIRONMENTAL ASSESSMENT (BUT NOT INCLUDING LOSSES INCURRED
BY BUYERS AFTER CLOSING RELATING TO ANY CONDITION DISCOVERED AS A RESULT OF SUCH
ENVIRONMENTAL ASSESSMENT), IN EACH CASE, EVEN IF SUCH LOSSES ARISE OUT OF OR ARE
ATTRIBUTABLE TO, SOLELY OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF
OR BY ANY OF THE SELLER INDEMNIFIED PARTIES.

 

(e)                                  Upon completion of any Environmental
Assessment, Buyers shall, at their sole cost and expense and without any cost or
expense to Sellers or their Affiliates (1) repair all physical damage, if any,
done to the Assets or to the Environment in connection with

 

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the Environmental Assessment, (2) restore each Asset to the approximate same
physical condition that it was in prior to commencement of the Environmental
Assessment and (3) remove all equipment, tools or other property brought onto,
and any wastes generated on, the Assets in connection with the Environmental
Assessment.  Any disturbance to the Assets (including the real property
associated with the Assets) resulting from the Environmental Assessment will be
promptly corrected by Buyers.

 

3.4                               Disclaimer.  EXCEPT FOR THE SPECIFIC
REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE 6 SELLERS MAKE NO, AND
DISCLAIM ALL, WARRANTIES OR REPRESENTATIONS OF ANY KIND AS TO ANY INFORMATION
OBTAINED BY BUYERS OR THEIR REPRESENTATIVES PURSUANT TO THIS
ARTICLE 3, INCLUDING THE RECORDS AND ANY INFORMATION CONTAINED THEREIN.  BUYERS
AGREE THAT ANY CONCLUSIONS DRAWN FROM, OR ANY ACTIONS (OR INACTIONS) OF BUYERS
FOLLOWING, THEIR DUE DILIGENCE REVIEW SHALL BE THE RESULT OF THEIR OWN
INDEPENDENT REVIEW AND JUDGMENT AND SHALL BE AT BUYERS’ SOLE RISK AND LIABILITY.

 

ARTICLE 4
TITLE MATTERS

 

4.1                               Sellers’ Title.

 

(a)                                 Exclusive Remedy.  Other than Buyers’
remedies for breaches of Sections 8.1(b)(1) or Section 8.1(b)(3), Buyers’ rights
under Section 4.1, Section 4.2 and Section 4.3 shall be the sole and exclusive
rights and remedies of Buyers with respect to any Seller’s failure to have
Defensible Title with respect to the Assets or any other title matter with
respect to the Assets.  OTHER THAN THE SPECIAL WARRANTY SET FORTH IN THE
ASSIGNMENT, SELLERS MAKE NO, AND DISCLAIM ALL, WARRANTIES OR REPRESENTATIONS,
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO THEIR TITLE TO THE
PROPERTIES AND OTHER ASSETS; AND BUYERS HEREBY ACKNOWLEDGE AND AGREE THAT
BUYERS’ SOLE AND EXCLUSIVE REMEDY FOR ANY DEFECT OF TITLE WITH RESPECT TO THE
PROPERTIES AND OTHER ASSETS (OTHER THAN FOR BREACHES OF SECTIONS 8.1(b)(1) OR
SECTION 8.1(b)(3)), INCLUDING ANY TITLE DEFECT, SHALL BE AS PROVIDED FOR IN
SECTION 4.1, SECTION 4.2, SECTION 4.3 AND THE SPECIAL WARRANTY OF TITLE SET
FORTH IN THE ASSIGNMENT.

 

(b)                                 Defensible Title.  The term “Defensible
Title” means such title of Sellers to the Properties immediately prior to the
Effective Time that, subject to and except for Permitted Encumbrances:

 

(1)                                 in the case of any Lease (subject and
defined, for all purposes under this ARTICLE 4, on Exhibit A) or any Well
(subject and defined, for all purposes under this ARTICLE 4, to any limitation
as to the formations(s) owned under the heading “Formation Owned” on Exhibit B),
entitles any Seller to receive a Net Revenue Interest throughout the productive
life of each Lease or Well of not less than the Net Revenue Interest shown in
Exhibit B for such Lease or Well, except (A) as otherwise specifically

 

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set forth in Exhibit B, (B) for decreases in connection with those operations
from and after the Effective Date in which such Seller may be a non-consenting
co-owner, (C) for decreases resulting from the establishment or amendment of
pools or units occurring in the ordinary course of business from and after the
Execution Date and (D) for decreases required under controlling agreements or
applicable Law to allow other Working Interest owners to make up past
underproduction or pipelines to make up past underdeliveries;

 

(2)                                 in the case of any Lease or Well, obligates
any Seller to bear a Working Interest throughout the productive life of such
Lease or Well not greater than the Working Interest shown in Exhibit B for such
Lease or Well, without increase, except (A) as otherwise specifically set forth
in Exhibit B, (B) for increases to the extent that they are accompanied by at
least a proportionate increase in such Seller’s Net Revenue Interest with
respect to such Lease or Well and (C) for increases resulting from contribution
requirements with respect to defaults or non-consent elections by co-owners
under the applicable joint operating agreements; and

 

(3)                                 is free and clear of Liens.

 

(c)                                  Permitted Encumbrances.  The term
“Permitted Encumbrances” means any and all of the following:

 

(1)                                 lessors’ royalties, overriding royalties,
net profits interests, production payments, reversionary interests and similar
burdens on or measured by production if the net cumulative effect of such
burdens does not operate to: (A) reduce the Net Revenue Interest for any Lease
or Well below the Net Revenue Interest set forth on Exhibit B; or (B) obligate a
Seller to bear a Working Interest with respect to any Lease or Well greater than
the Working Interest set forth on Exhibit B with respect to such Lease or Well
(unless the Net Revenue Interest with respect to such Lease or Well is greater
than the Net Revenue Interest set forth in Exhibit B in the same or greater
proportion as any increase in such Working Interest);

 

(2)                                 preferential rights to purchase the Assets
or similar rights;

 

(3)                                 Liens for Taxes that are not yet due and
payable or that are being contested in good faith in the normal course of
business;

 

(4)                                 all rights to consent by, required notices
to, filings with, or other actions by Governmental Entities or other Persons in
connection with the transfer of the Assets or the transactions contemplated
hereby;

 

(5)                                 excepting circumstances where such rights
have already been triggered, rights of reassignment upon final intention to
surrender or abandon any Asset;

 

(6)                                 easements, rights-of-way, servitudes,
permits, surface leases and other rights with respect to surface operations,
pipelines, grazing, logging, canals, ditches, reservoirs or the like, and
easements for streets, alleys, highways, pipelines, telephone lines, power
lines, distribution lines, railways and other easements and rights-of-way, on,

 

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over or in respect of any of the Assets or any restriction on access thereto, in
each case, that do not materially interfere with operations currently conducted
on the affected Asset;

 

(7)                                 the terms and conditions of the Leases,
Applicable Contracts or Surface Contracts or of any compulsory pooling or other
order of any Governmental Entity; provided, however, that the net cumulative
effect of such items does not: (A) reduce the Net Revenue Interest for any Lease
or Well below the Net Revenue Interest set forth on Exhibit B; or (B) obligate a
Seller to bear a Working Interest for any Lease or Well greater than the Working
Interest set forth on Exhibit B with respect to such Lease or Well (unless the
Net Revenue Interest with respect to such Well is greater than the Net Revenue
Interest set forth in Exhibit B in the same or greater proportion as any
increase in such Working Interest);

 

(8)                                 materialmen’s, mechanics’, operators’ or
other similar Liens arising (A) in the ordinary course of business or
(B) incident to the construction or improvement of any property in the ordinary
course of business, in each case for amounts not yet due and payable (including
any amounts being withheld as provided by Law) or that are being contested in
good faith in the normal course of business;

 

(9)                                 such Title Defects and/or breaches of the
special warranty set forth in the Assignment that Buyers have waived in writing
(or has been deemed to have waived pursuant to Section 4.2(c));

 

(10)                          Liens burdening the Assets that will be discharged
or released at or before Closing;

 

(11)                          calls on production under existing Contracts;

 

(12)                          gas balancing and other production balancing
obligations and obligations to balance or furnish make-up Hydrocarbons under
Hydrocarbon sales, gathering, processing or transportation Contracts;

 

(13)                          all rights reserved to or vested in any
Governmental Entities to control or regulate any of the Assets in any manner or
to assess Tax with respect to the Assets, the ownership, use or operation
thereof, or revenue, income or capital gains with respect thereto, and all
obligations and duties under all applicable Laws of any such Governmental Entity
or under any franchise, grant, license or Permit issued by any Governmental
Entity;

 

(14)                          zoning and planning ordinances and municipal
regulations;

 

(15)                          the terms and conditions of this Agreement;

 

(16)                          Liens against landowners (or lessors or mineral
owners under the Leases) that (A) do not materially interfere with the use or
ownership of the Assets subject thereto or affected thereby (as currently used
or owned); and (B) secure amounts not yet due and payable;

 

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(17)                          all other Liens, Contracts, obligations, defects
and irregularities affecting the Assets that do not: (A) reduce the Net Revenue
Interest for any Lease or Well below the Net Revenue Interest set forth on
Exhibit B; (B) obligate any Seller to bear a Working Interest for any Lease or
Well greater than the Working Interest set forth on Exhibit B for such Lease or
Well (unless the Net Revenue Interest for such Lease or Well is greater than the
Net Revenue Interest set forth in on Exhibit B in the same or greater proportion
as any increase in such Working Interest); or (C) materially interfere with
operations currently conducted on the Assets; and

 

(18)                          following Closing, any matter of which any Buyer
was aware prior to the Defect Notice Date that could have been claimed as a
Title Defect pursuant to Section 4.2(c) but for which Buyers failed to deliver a
Notice of Defective Interests with respect thereto in accordance with
Section 4.2(c) prior to the Defect Notice Date.

 

4.2                               Title Defects and Title Benefits.

 

(a)                                 Title Defect.  The term “Title Defect” means
any Lien (other than a Permitted Encumbrance), obligation, defect, or other
matter that causes any Seller not to have Defensible Title to its Property,
provided, however, that none of the following shall be considered Title Defects:

 

(1)                                 defects in the chain of title consisting of
the failure to recite marital status in a document;

 

(2)                                 defects arising out of lack of survey or
lack of metes and bounds description;

 

(3)                                 defects asserting a change in Working
Interest or Net Revenue Interest based on a change in drilling and spacing
units, tract allocation or other changes in pool or unit participation occurring
after the Effective Time by a Person other than such Seller;

 

(4)                                 defects arising out of lack of corporate or
other entity authorization;

 

(5)                                 defects that have been cured by applicable
Laws of limitations, prescription, laches or otherwise;

 

(6)                                 defects asserted by Buyers to the effect
that non-consent interests or farmed-in interests of any Seller in any Lease or
Well are not held of record by such Seller in the official recording situs for
the particular Lease or Well;

 

(7)                                 defects based on a gap in such Seller’s
chain of title in the State of Oklahoma’s or State of Texas’ records as to any
applicable Lease where the State of Oklahoma or State of Texas or any of their
respective agents is the lessor thereunder, or in the applicable county records
in the State of Oklahoma or State of Texas as to other Leases, unless such gap
is affirmatively shown to exist in such records by an abstract of title, title
opinion or landman’s title chain or runsheet, which documents shall be provided
with delivery of a Title Defect Notice with respect to such defects;

 

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(8)                                 defects as a consequence of cessation of
production, insufficient production, or failure to conduct operations on any of
the Properties held by production, or lands pooled, communitized or unitized
therewith, unless Buyers provide affirmative evidence that reasonably
substantiates the cessation of production, insufficient production or failure to
conduct operations, thereby giving rise to a right to terminate the Lease in
question, which evidence shall be provided with delivery of a Title Defect
Notice with respect to such defects;

 

(9)                                 defects or irregularities resulting from or
related to probate proceedings or lack thereof unless same result in a reduction
of Net Revenue Interest or an increase in the Working Interest without a
proportionate increase in the Net Revenue Interest of the affected asset) for
such Lease or Well shown on Exhibit B;

 

(10)                          defects arising from prior oil and gas leases
relating to the Lands that are terminated, expired or invalid but not
surrendered of record;

 

(11)                          any defect that affects only which Person has the
right to receive royalty payments (rather than the amount of such royalty) and
that does not affect the validity of the underlying Lease; and

 

(12)                          defects based on references to lack of information
(unless such information (A) is not reflected in the records of the applicable
county and (B) is not in the Records made available to Buyers).

 

(b)                                 Title Benefit.  The term “Title Benefit”
means any right, circumstance or condition that operates to increase the Net
Revenue Interest of any Seller with respect to any Lease or Well above that
shown in Exhibit B.

 

(c)                                  Notice of Defective Interest.  On or before
the Defect Notice Date, Buyers shall notify Sellers in writing of any matters
that, in Buyers’ reasonable opinion, constitute a Title Defect (such notice, a
“Notice of Defective Interests”).  To be effective, each Notice of Defective
Interests shall be in writing, be received by Sellers prior to or on the Defect
Notice Date and contain the following: (1) a clear description of the alleged
Title Defect, (2) a description of each Property affected by the alleged Title
Defect (each such Property, a “Title Defect Property”), (3) the Allocated Value
of each Title Defect Property, (4) supporting documents reasonably necessary for
Sellers (as well as any title attorney or examiner hired by Sellers) to verify
the existence of the alleged Title Defect, and (5) the amount which Buyers
reasonably believe to be the Title Defect Amount as provided for in
Section 4.2(e), and the computations and information upon which Buyers’ beliefs
are based.  To give Sellers an opportunity to commence reviewing and curing
Title Defects, prior to the Defect Notice Date, Buyers agree to use its
reasonable efforts to give Sellers weekly notices of all Title Defects
discovered by Buyers during the preceding week; provided that any such notice
may be preliminary in nature and supplemented prior to the Defect Notice Date. 
Other than with respect to Buyers’ (A) remedies for breaches of
Section 8.1(b)(1) and Section 8.1(b)(3), and (B) rights under the special
warranty set forth in the Assignment, any matters that may otherwise constitute
a Title Defect, but of which Sellers have not been notified by Buyers in a
Notice of

 

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Defective Interests delivered in accordance with this Section 4.2(c) prior to
the Defect Notice Date, shall be deemed to have been waived by Buyers for all
purposes.

 

(d)                                 Notice of Title Benefits.  On or prior to
the Defect Notice Date, Buyers will promptly furnish Sellers with written notice
(in accordance with the requirements for a Title Benefit Notice below) of any
matters that, in Buyers’ reasonable opinion, could constitute a Title Benefit,
and that is discovered by any of Buyers’ or any of their Representatives (for
the avoidance of doubt, including any title attorneys, landmen or other title
examiners) while conducting Buyers’ Due Diligence Review.  On or before the
Defect Notice Date, Sellers shall advise Buyers in writing of any matters that,
in Sellers’ reasonable opinion, constitute a Title Benefit (each such notice, a
“Title Benefit Notice”).  For purposes of clarity, Buyers shall be obligated to
provide Sellers with a Title Benefit Notice with respect to any Title Benefit
they should discover during their due diligence. However, Buyers are not
obligated to, and may not, conduct due diligence on all Properties. Buyers shall
not be liable for failing to disclose any Title Benefits on Properties for which
they choose, in their sole discretion, not to perform due diligence or on
Properties for which they perform due diligence but, notwithstanding the due
diligence, do not obtain relevant information that would reveal a Title Benefit.
Each Title Benefit Notice shall be in writing and contain the following:  (1) a
clear description of the Title Benefit, (2) a description of each Property
affected by the Title Benefit (each such Property, a “Title Benefit Property”),
(3) the Allocated Value of each Title Benefit Property, (4) supporting documents
reasonably necessary for Buyers or Sellers, as applicable, (as well as any title
attorney or examiner hired by Buyers or Sellers, as applicable) to verify the
existence of the Title Benefit, and (5) the amount which Buyers or Sellers, as
applicable, reasonably believe to be the Title Benefit Amount for each Title
Benefit Property and the computations and information upon which Sellers’ belief
is based.  Subject to Sellers’ remedy for a breach of this Section 4.2(d) by
Buyers, Sellers shall be deemed to have waived all Title Benefits of which it
has not given, or received, notice on or before the Defect Notice Date.

 

(e)                                  Title Defect Amount. Subject to the
provisions of Section 4.2(f), the “Title Defect Amount” means the amount by
which the Allocated Value of a Title Defect Property affected by a Title Defect
is reduced as a result of the existence of such Title Defect, which amount shall
be determined in accordance with the following methodology, terms and
conditions:

 

(1)                                 if Buyers and Sellers agree in writing on
the Title Defect Amount, that amount shall be the Title Defect Amount;

 

(2)                                 if the Title Defect is a Lien that is
undisputed and liquidated in amount, then the Title Defect Amount shall be the
amount of the payment necessary to remove such Title Defect from the Title
Defect Property;

 

(3)                                 for Leases that are undeveloped and
non-producing as of the Execution Date, in the event that an asserted Title
Defect is the actual failure of Sellers to own the number of net leasehold acres
represented on Exhibit A for any such undeveloped Lease, then the Title Defect
Amount shall be an amount equal to the Allocated Value of the affected Lease
multiplied by a fraction, (A) the numerator of which is the difference between
(i) the represented aggregate number of net leasehold acres

 

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covered by the Lease, and (ii) the actual aggregate number of net leasehold
acres covered by such Lease, and (B) the denominator of which shall be the
represented aggregate number of net leasehold acres shown on Exhibit A for such
Lease;

 

(4)                                 in the event that the Title Defect for any
Lease or Well is the actual failure of the applicable Seller to own the
represented Net Revenue Interest with respect to such Lease or Well set forth on
Exhibit B then the Title Defect Amount shall be equal to the Allocated Value of
the Title Defect Property multiplied by a fraction, (A) the numerator of which
is the difference between (i) the actual Net Revenue Interest for the Title
Defect Property, and (ii) the Net Revenue Interest with respect to such Title
Defect Property as set forth on Exhibit B and (B) the denominator of which is
the Net Revenue Interest with respect to such Title Defect Property as set forth
on Exhibit B; and

 

(5)                                 if the Title Defect represents an
obligation, encumbrance, burden or charge upon or other defect in title to the
Title Defect Property of a type not described in subsections (1), (2), (3) or
(4) above, the Title Defect Amount shall be determined by taking into account
the following factors:  (A) any potential discrepancy between (i) the Net
Revenue Interest or Working Interest with respect to such Title Defect Property
and (ii) the Net Revenue Interest or Working Interest with respect to such Title
Defect Property as stated on Exhibit B; (B) the Allocated Value of the Title
Defect Property; (C) the portion of the Title Defect Property affected by the
Title Defect; (D) the legal effect of the Title Defect; (E) the values placed
upon the Title Defect by Buyers and Sellers; (F) the likelihood that the Title
Defect will prevent or impair the timely receipt of production revenues
attributable to the Title Defect Property; and (G) such other reasonable factors
as are necessary to make a proper evaluation.

 

Notwithstanding anything to the contrary in this ARTICLE 4, the aggregate Title
Defect Amounts attributable to the effects of all Title Defects upon any Title
Defect Property shall not exceed the Allocated Value of the Title Defect
Property and if a Title Defect is reasonably susceptible to being cured, the
Title Defect Amount attributable to such Title Defect shall not exceed the cost
and expense to cure such Title Defect.

 

(f)                                   Title Deductibles.  Except as provided in
the last sentence of this Section 4.2(f), notwithstanding anything to the
contrary in this Agreement, (1) in no event shall there be any adjustments to
the Purchase Price or other remedies provided by Sellers in connection with the
transactions contemplated hereby for any Title Defect affecting a Title Defect
Property for which the Title Defect Amount attributable thereto does not exceed
* (“Individual Title Threshold”); and (2) in no event shall there be any
adjustments to the Purchase Price or other remedies provided by Sellers in
connection with the transactions contemplated hereby for any Title Defect Amount
attributable to a Title Defect affecting a Title Defect Property that exceeds
the Individual Title Threshold unless (A) the sum of (i) the aggregate Title
Defect Amounts of all such Title Defects exceeding the Individual Title
Threshold, excluding any Title Defects cured by Sellers, plus (ii) the aggregate
Environmental Defect Values of all Environmental Defects that exceed the
Individual Environmental Threshold, excluding any Environmental Defects
Remediated by Sellers, minus (iii) all Title Benefit Amounts, exceeds (B) the
Aggregate Defect Deductible, after which point, subject to the Individual Title
Threshold, Buyers shall be

 

27

 

* - Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

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entitled to adjustments to the Purchase Price or other remedies only with
respect to the incremental amount of such Title Defect Amounts, in the
aggregate, in excess of such Aggregate Defect Deductible.  If any Asset is
excluded pursuant to Section 4.2(j)(2), the Title Defect Amount relating to such
excluded Asset will not be counted towards the Aggregate Defect Deductible.
Notwithstanding anything to the contrary otherwise set forth in this Agreement,
with respect to any Title Defect discovered, and a Notice of Defective Interests
delivered,  by Buyer during the Due Diligence Period that, if discovered by
Buyer after Closing, would constitute a breach of the special warranty set forth
in Section 2.1 of the Assignment, subject, however, to the Permitted
Encumbrances, the Title Defect Amount for such Title Defect shall not be subject
to the Individual Title Threshold nor the Aggregate Title Defect Deductible.

 

(g)                                  Title Benefit Amount.  The “Title Benefit
Amount” means the amount by which the Allocated Value of a Title Benefit
Property affected by a Title Benefit is increased as a result of the existence
of such Title Benefit.  Each Title Benefit Amount shall be determined in
accordance with the same methodology, terms and conditions for determining each
Title Defect Amount.  With respect to any Title Benefit reported under
Section 4.2(d), provided that the Title Benefit Amount with respect thereto is
in excess of the Individual Title Threshold, the Title Benefit Amount
attributable to such Title Benefit shall be used to reduce the amount of the
aggregate Title Defect Amounts and Environmental Defect Values attributable to
Title Defects and Environmental Defects properly and timely raised by Buyers
after taking into account the Individual Title Threshold and the Individual
Environmental Threshold, as applicable.  If the Parties cannot reach an
agreement on alleged Title Benefits or Title Benefit Amounts by the scheduled
Closing, then (1) the average of Sellers’ and Buyers’ good faith estimate of
such disputed Title Benefit Amount shall be used in calculating the reduction to
the Title Defect Amounts and Environmental Defect Values pursuant to this
Section 4.2(g) to the extent applicable, and (2) the provisions of Section 4.3
shall apply.  For the avoidance of doubt, Sellers shall not be entitled to any
remedy with respect to any claimed Title Benefit if the applicable Title Benefit
Amount with respect thereto is not in excess of the Individual Title Threshold.

 

(h)                                 Title Adjustment Amount.  The amount by
which the Purchase Price is to be adjusted in accordance with this ARTICLE 4 for
Title Defect Amounts (after, for the avoidance of doubt, taking into account the
Aggregate Title Defect Deductible and any offsetting Title Benefit Amounts)
shall be referred to as the “Title Adjustment Amount”.

 

(i)                                     Sellers’ Right to Cure.  Continuing
until one Business Day prior to Closing (such period of time, the “Cure
Period”), Sellers shall have the right, but not the obligation, to attempt, at
their sole cost, to cure or remove any Title Defects timely asserted by Buyers
pursuant to Section 4.2(c).  If Sellers believe that they have cured any
applicable Title Defect, Sellers shall deliver written notice thereof to Buyers,
together with supporting documents available to Sellers and reasonably necessary
for Buyers (as well as any title attorney or examiner hired by Buyers) to verify
the cure of such Title Defect.  Buyers shall, at or prior to the end of the Cure
Period, advise Sellers in writing whether it agrees or (pursuant to a Title
Dispute Notice, as described in Section 4.3) Disputes that any such Title Defect
has been so cured; provided that Buyers’ failure to timely respond to Sellers’
notice of cure shall be deemed Buyers’ agreement that such Title Defect has been
cured and Buyers’ waiver of its Claim with respect to such Title Defect.  If
Buyers timely notify Sellers of a Dispute as to Sellers’

 

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attempted cure of any Title Defect, then (subject to Section 4.2(j)), the
provisions of Section 4.3 shall apply to such Title Defect.

 

(j)                                    Remedies for Title Defects.  Subject to
Sellers’ continuing right to Dispute the existence of a Title Defect and/or the
Title Defect Amount asserted with respect thereto and subject to Section 4.2(f),
in the event that any Title Defect timely asserted by Buyers in accordance with
Section 4.2(c) is not waived in writing by Buyers or cured by Sellers prior to
the end of the Cure Period, then Sellers shall elect one of the following
remedies with respect to such Title Defect:

 

(1)                                 reduce the Purchase Price by the Title
Defect Amount applicable to such Title Defect;

 

(2)                                 retain the entirety of the Title Defect
Property that is subject to such Title Defect (together with all related Assets)
and reduce the Purchase Price by an amount equal to the Allocated Value of the
Assets so retained; or

 

(3)                                 with Buyers’ reasonable consent, indemnify
Buyers against all Losses resulting from such Title Defect with respect to the
applicable Title Defect Property pursuant to an indemnity agreement mutually
acceptable to the Parties.

 

As to any Title Defect timely asserted by Buyers in accordance with
Section 4.2(c) which remains uncured by Sellers prior to the end of the Cure
Period and for which a corresponding Title Defect Amount is included in the
Title Adjustment Amount at Closing (including, for the avoidance of doubt, any
Title Defect which Sellers have chosen to dispute pursuant to Section 4.3),
Sellers also shall retain the right, but not the obligation, to attempt to cure
each such Title Defect after Closing at Sellers’ sole cost and expense; provided
that Sellers shall furnish notice to Buyers of Sellers’ belief that they have
cured any such Title Defect (together with supporting documents available to
Sellers and reasonably necessary for Buyers, as well as any title attorney or
examiner hired by them, to verify the cure of any such Title Defect), by no
later 15 days prior to the Final Settlement Statement Due Date.  If Buyers
disagree that the Title Defect has been cured, it shall so advise Sellers in
writing within five Business Days after receipt of Sellers’ notice as provided
above, following which the provisions of Section 4.3 will apply to resolve such
Dispute, and the Final Settlement Statement Due Date shall be extended to the
extent necessary to complete the Dispute resolution procedure as provided for in
Section 4.3.  Should Buyers (A) fail to respond to Sellers’ notice of cure in
such five Business Day period, then Buyers shall be deemed to have (i) agreed
that the Title Defect has been cured and (ii) waived its Claim with respect to
such Title Defect, or (B) agree that the Title Defect has been cured, and then,
in each case, the Title Defect Amount attributable thereto and included in the
Title Adjustment Amount used to adjust the Purchase Price at Closing shall be
credited to Sellers in the Final Settlement Statement.

 

4.3                               Title Dispute Resolution.  If prior to the
Closing or, with respect to the adequacy of Sellers’ Title Defect curative
actions after Closing, after the Closing, the Parties are unable to resolve any
Title Disputed Matter, then either Party shall have the right, upon the delivery
of written notice to the other Party (each, a “Title Dispute Notice”), to
Dispute such Title Disputed Matter and to invoke the Dispute resolution
provisions below in this Section 4.3 in order to

 

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resolve any such Dispute.  As used herein, the term “Title Disputed Matter”
means a Dispute regarding any of the following: (w) the existence and scope of a
Title Defect or Title Benefit; (x) any Title Defect Amount or Title Benefit
Amount, as the case may be; (y) the Title Adjustment Amount, if any; and (z) the
adequacy of Sellers’ Title Defect curative actions.  As to any Dispute regarding
the adequacy of Sellers’ Title Defect curative actions after Closing as provided
for in Section 4.2(j), the Final Settlement Statement Due Date shall be extended
to the extent necessary to complete the Dispute resolution procedure as provided
for below in this Section 4.3.  Any Title Dispute Notice must be delivered on or
before the tenth Business Day after Closing except with respect to Disputes
relating to any of Sellers’ Title Defect curative actions conducted
post-Closing.  Any Title Dispute Notice relating to any of Sellers’ Title Defect
curative actions conducted post-Closing must be delivered within ten Business
Days following Buyers’ receipt of notice from Sellers that they have cured the
applicable Title Defect.  In no event will Closing be delayed on account of any
Title Disputed Matter and, if the Title Defect Property affected thereby is
transferred to Buyers at Closing, the average of the Parties’ respective good
faith estimates of the Title Defect Amounts attributable to such Title Defect
Property shall be used in the calculation and determination of the Title
Adjustment Amount to be used at Closing.

 

(a)                                 The Parties shall attempt to resolve all
Title Disputed Matters through good faith negotiations for a period of 20 days
after the delivery of a Title Dispute Notice by either Party.  Following such
negotiation period, if the Title Disputed Matter at issue remains in Dispute,
such Title Disputed Matter shall be resolved pursuant to this Section 4.3 and
the Parties shall mutually appoint an independent expert having the
qualifications specified below (the “Title Defect Expert”).  If the Parties are
unable to mutually agree upon the Title Defect Expert, then the Parties shall,
within ten days after the expiration of such foregoing negotiation period,
request that the AAA, acting through its offices in Houston, Texas, appoint the
Title Defect Expert.  The Title Defect Expert shall be a licensed title attorney
having a minimum of ten years’ experience with regard to the types of title
defects affecting the Properties involved in the Title Disputed Matter, shall be
without any conflicts of interest as to the Parties, and shall not have been
employed by or undertaken more than $50,000 of work, in the aggregate, for
either Party or its Affiliates within the five year period preceding the
submission of the Dispute.  For the avoidance of doubt, the Title Defect Expert
will function as an expert in accordance with the procedures set forth in this
Section 4.3, and not as an arbitrator.

 

(b)                                 Within 30 days following the appointment of
the Title Defect Expert, Sellers shall provide the Title Defect Expert with a
copy of this Agreement, and each Party shall provide, both to the Title Defect
Expert and each other, a summary of its position with regard to each such
outstanding Title Disputed Matter in a written document of five pages or less
per Title Disputed Matter.  The Parties shall instruct the Title Defect Expert
that, within 30 days after receiving the Parties’ respective submissions, the
Title Defect Expert shall render a written decision.  In rendering its decision,
the Title Defect Expert shall not award (1) a higher Title Defect Amount than
the lower of (A) the Allocated Value of the applicable Property or (B) the
amount claimed by Buyers in their summary, (2) a higher Title Benefit Amount
than the amount claimed by Sellers in their summary, (3) a lower Title Benefit
Amount than the amount claimed by Buyers in their summary or (4) a lower Title
Defect Amount than that amount claimed by Sellers in their summary, as
applicable.  The Title Defect Expert shall determine the specific disputed Title
Defect, Title Benefit, Title Defect Amount, Title Benefit Amount or the adequacy

 

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of Sellers’ Title Defect curative actions, as the case may be, submitted by
either Party and may not award damages, interest or penalties to either Party
with respect to any other matter.  Any decision rendered by the Title Defect
Expert pursuant hereto shall be final, conclusive, and binding on Sellers and
Buyers, and will be enforceable against each Party in any court having
jurisdiction hereof, but is not reviewable by, or appealable to, any court
except in the event of fraud.  The Parties shall each bear one-half of the costs
of the Title Defect Expert and of any associated dispute resolution process and
proceedings.

 

(c)                                  If the Title Defect Expert determines that
a Title Defect did not exist or that a Title Defect existed but was cured by
Sellers, then any Title Defect Amount attributable thereto that was included in
the Title Adjustment Amount used at Closing, if any, shall be credited to
Sellers in the Final Settlement Statement.

 

(d)                                 If the Title Defect Expert determines that a
Title Defect exists, but that the Title Defect Amount attributable thereto is a
lesser amount than any Title Defect Amount with respect thereto that was
included in the Title Adjustment Amount used at Closing, if any, then the
difference thereof shall be credited to Sellers in the Final Settlement
Statement.

 

(e)                                  If the Title Defect Expert determines that
a Title Defect exists, such Title Defect has not been cured by Sellers and the
Title Defect Amount attributable thereto is a greater amount than any Title
Defect Amount with respect thereto that was included in the Title Adjustment
Amount used at Closing, if any, then the difference thereof shall be credited to
Buyers in the Final Settlement Statement.

 

(f)                                   Any such adjustments to the amount of the
Purchase Price will be reflected in the Final Settlement Statement as
applicable.

 

4.4                               Preferential Rights and Consents.

 

(a)                                 Preferential Purchase Rights.  Promptly
following the Execution Date, and in any event within five Business Days
following the Execution Date, Sellers shall send notices to the holder of each
Preferential Right listed on Schedule 6.6 in accordance with the terms of the
instruments giving rise to such Preferential Rights.  Sellers shall promptly
provide a copy of each such notice to Buyers following the delivery thereof by
Sellers.  Sellers shall use commercially reasonable efforts to cause waivers of
such Preferential Rights to be obtained and delivered prior to Closing; provided
that Sellers shall not be required to make payments or undertake other
obligations to or for the benefit of the holders of such Preferential Rights in
order to obtain the required waivers.  Buyers shall reasonably cooperate with
Sellers in seeking to obtain such waivers of Preferential Rights; provided that
Buyers shall not be required to make payments or undertake other obligations to
or for the benefit of the holders of such Preferential Rights in order to obtain
the required waivers.  Any Preferential Right must be exercised subject to all
terms and conditions set forth in this Agreement (including all thresholds,
deductibles and other amounts except for the cash consideration, which shall
equal the Allocated Value for such property), including the successful Closing
of this Agreement pursuant to ARTICLE 12 as to those Assets for which
Preferential Rights have not been exercised.  The consideration payable under
this Agreement for any particular Asset for purposes of Preferential Rights
notices shall be the Allocated Value for such Asset, subject to

 

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adjustment pursuant to Section 2.4 and Section 13.1.  If, prior to the Closing
Date, either Party discovers any required Preferential Right for which notices
have not been delivered pursuant to the first sentence of this Section 4.4(a),
then (x) the Party making such discovery shall provide the other Party with
written notification of such Preferential Right, (y) Sellers, following delivery
or receipt of such written notification, as applicable, will promptly send
notices to the holders of such Preferential Rights in accordance with the terms
of the instrument giving rise to such Preferential Right, and (z) the terms and
conditions of this Section 4.4(a) shall apply to the Assets subject to such
Preferential Right.

 

(1)                                 If, prior to Closing, any holder of a
Preferential Right notifies Sellers that it intends to consummate the purchase
of the Assets to which its Preferential Right applies or if the time for
exercising such Preferential Right has not expired, then the Assets subject to
such Preferential Right (together with all related Assets) shall be excluded
from the Assets to be assigned to Buyers at Closing, and the Purchase Price
shall be reduced by the sum of the Allocated Values of such Assets so excluded.

 

(2)                                 Sellers shall be entitled to all proceeds
paid by any Person exercising a Preferential Right prior to Closing.  If such
holder of such Preferential Right thereafter fails to consummate the purchase of
the Assets subject to such Preferential Right (together with all related Assets)
on or before the end of the time period for closing such sale or the time for
exercising such Preferential Right expires without exercise by the holder
thereof, then (A) Sellers shall so notify Buyers, (B) Sellers shall assign to
Buyers, on the tenth Business Day following the end of such time period or
termination of such right without exercise, such Assets that were so excluded at
Closing pursuant to an instrument in substantially the same form as the
Assignment, and (C) Buyers shall pay to Sellers, by wire transfer of immediately
available funds, the amount by which the Purchase Price was reduced at Closing
with respect to such excluded Assets, as adjusted pursuant to Section 2.4 and
Section 13.1.

 

(3)                                 All Assets for which any applicable
Preferential Right has been waived in writing, or as to which the time for
exercising the applicable Preferential Right has expired, in each case, prior to
Closing, shall be transferred to Buyers at Closing, subject to the other
provisions of this Agreement.

 

(b)                                 Consents.  Promptly following the execution
of this Agreement, and in any event within five Business Days following the
Execution Date, Sellers shall send notices to the holder of each Consent listed
on Schedule 6.5 requesting such holder’s applicable written Consent to the
transactions contemplated hereby.  Sellers shall use commercially reasonable
efforts to cause such Consents to be obtained and delivered prior to Closing;
provided that Sellers shall not be required to make payments or undertake other
obligations to or for the benefit of the holders of such Consents in order to
obtain the required Consents.  Buyers shall reasonably cooperate with Sellers in
seeking to obtain such Consents to assignment; provided that Buyers shall not be
required to make payments or undertake other obligations to or for the benefit
of the holders of such Consents in order to obtain the required Consents.  If,
prior to the Closing Date, either Party discovers any Consents for which notices
have not been delivered pursuant to the first sentence of this Section 4.4(b),
then (x) the Party making such discovery shall provide the other Party with
written notification of such Consents, (y) Sellers, following

 

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delivery or receipt of such written notification, as applicable, will promptly
send notices to the holders of Consents requesting such Consents, and (z) the
terms and conditions of this Section 4.4(b) shall apply to the Assets subject to
such Consents.

 

(1)                                 If (A) Sellers fail to obtain any such
Consent prior to Closing and the failure to obtain such Consent would (i) cause
the assignment of the Assets affected thereby to Buyers to be void or (ii) give
the holder of such Consent the right to terminate the applicable underlying
Lease, Surface Contract or Applicable Contract under the express terms thereof,
(B) Sellers fail to obtain a Consent held by a Governmental Entity prior to
Closing, or (C) a Consent requested by Sellers is denied in writing, then, in
each case, the Assets affected by such un-obtained Consent (together with all
related Assets, the “Affected Assets”) shall be excluded from the Assets to be
assigned to Buyers at Closing, and the Purchase Price shall be reduced by the
sum of the Allocated Value of such Affected Assets.

 

(2)                                 If any such Consent relating to Affected
Assets that was not obtained prior to Closing is obtained within 45 days
following the Closing, then (A) on the fifteenth Business Day after such Consent
is obtained, Sellers shall assign such Affected Assets to Buyers pursuant to an
instrument in substantially the same form as the Assignment, and (B) Buyers
shall pay to Sellers, by wire transfer of immediately available funds, the
amount by which the Purchase Price was reduced at Closing with respect to such
Affected Assets, as adjusted pursuant to Section 2.4 and Section 13.1.

 

(3)                                 If Sellers fail to obtain any such Consent
prior to Closing and (A) the failure to obtain such Consent would not (i) cause
the assignment of the Assets affected thereby to Buyers to be void or (ii) give
the holder of such Consent the right to terminate the applicable underlying
Lease, Surface Contract or Applicable Contract under the express terms thereof,
(B) the holder of such Consent is not a Governmental Entity and (C) such Consent
requested by Sellers is not denied in writing by the holder thereof, then
(I) the Assets subject to such un-obtained Consent shall nevertheless be
assigned by Sellers to Buyers at Closing as part of the Assets and without
reduction to the Purchase Price, (II) Buyers shall have no claim against
Sellers, and Sellers shall have no liability for, the failure to obtain any such
Consent and (III) Buyers shall be responsible from and after the Closing for any
and all Losses arising from the failure to obtain such Consent.

 

ARTICLE 5
ENVIRONMENTAL MATTERS

 

5.1                               Definitions.  For the purposes of this
Agreement, the following terms shall have the following meanings:

 

(a)                                 “Condition” means any circumstance, status
or defect that, with notice to the Governmental Entity with jurisdiction, would
currently require Remediation under Environmental Laws.

 

(b)                                 “Environment” means all or any of the
following media: land (whether on or below the surface of the earth or beneath
the surface of any waters); air or water,

 

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whether on or below the surface of the earth or whether contained within
buildings or other natural or man-made structures above or below ground or below
any waters; and any living organism (including man) supported by the foregoing
media.

 

(c)                                  “Environmental Defect” means a Condition of
or affecting the Environment in, on, under or relating to a particular Asset
(including air, land, soil, surface and subsurface strata, surface water,
groundwater, or sediments), but excluding any Plugging and Abandonment
Obligations (which shall not constitute an Environmental Defect).

 

(d)                                 “Environmental Law” or “Environmental Laws”
means any federal, tribal, state, local or foreign law (including common law),
statute, rule, regulation, requirement, ordinance and any writ, decree, bond,
authorization, approval, license, permit, registration, binding criteria,
standard, consent decree, settlement agreement, judgment, order, directive or
binding policy issued by or entered into with a Governmental Entity pertaining
or relating to: (1) pollution or pollution control, including, without
limitation, storm water; (2) protection of the Environment or of human health,
including from exposure to Hazardous Materials; (3) employee safety in the
workplace; or (4) the management, presence, use, generation, processing,
extraction, treatment, recycling, refining, reclamation, labeling, transport,
storage, collection, distribution, disposal or release or threat of release of
Hazardous Materials.  “Environmental Laws” shall include, without limitation,
the Comprehensive Environmental Response, Compensation, and Liability Act,
42 U.S.C. § 9601 et seq., the Solid Waste Disposal Act (as amended by the
Resource Conservation and Recovery Act), 42 U.S.C. § 6901 et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. § 1801 et seq., the Toxic Substances
Control Act, 15 U.S.C. § 2601 et seq., the Federal Water Pollution Control Act,
33 U.S.C. § 1251 et seq., the Federal Safe Drinking Water Act, 42 U.S.C.
§§ 300f-300, the Federal Air Pollution Control Act, 42 U.S.C. § 7401 et seq.,
the Oil Pollution Act, 33 U.S.C. § 2701 et seq., the Occupational Safety and
Health Act, 29 U.S.C. § 651 et seq., the Endangered Species Act,
16 U.S.C. § 1531 et seq., the National Historic Preservation Act, 16 U.S.C. §470
et seq. and the regulations and orders respectively promulgated thereunder, each
as amended, or any equivalent or analogous state or local statutes, laws or
ordinances, any regulation promulgated thereunder and any amendments thereto.

 

(e)                                  “Environmental Liabilities” means all
Losses involving any pollution of or other harm to or destruction of the
Environment or any natural resources, including the payment of natural resource
damages that are assessed by any Governmental Entity and any Losses attributable
to the Remediation of any such damage, brought or assessed by or in favor of any
Persons, including any Governmental Entity, to the extent any of the foregoing
directly or indirectly involves the Assets or the presence, disposal or release
of any Hazardous Materials of any kind in, on or under the Assets or any other
premises to the extent directly or indirectly relating to operations involving
the Assets or the transportation, disposal or other handling of Hazardous
Materials generated by or otherwise attributable to operations involving the
Assets, whether any of the foregoing is created, arises or otherwise relates or
is attributable to any period of time, whether before

 

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or after Sellers acquired ownership of the Assets and whether before, on or
after the Effective Time.

 

(f)                                   “Hazardous Materials” means, without
limitation, any waste, substance, product, or other material (whether solid,
liquid, gas or mixed), which is or becomes identified, listed, published, or
defined as a hazardous substance, hazardous waste, hazardous material, toxic
substance, radioactive material, oil, or petroleum waste, or which is subject to
regulation, investigation, control or remediation pursuant to any Environmental
Law.

 

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

 

(h)                                 “Plugging and Abandonment Obligations” means
any and all responsibility and liability, in accordance with all applicable
Laws, Leases, Surface Contracts and other Contracts, permits or any orders,
directives or other requirements of any applicable Governmental Entities or
otherwise as required for reasonable and prudent oilfield operations, for all of
the following, arising out of or otherwise relating to the ownership or
operation of the Assets, directly or indirectly, whether attributable to any
period of time before, on or after the Effective Time: (1) the necessary and
proper plugging, replugging and abandonment of all Wells; (2) the necessary and
proper removal, closure, abandonment, decontamination and disposal, as
applicable, of all structures, facilities, pits, pipelines, Equipment, operating
inventory, abandoned property, trash, refuse, wastes and junk located on,
comprising part of or otherwise attributable to the Assets in connection with
any activities referenced in this item (2) or the foregoing item (1); (3) the
necessary and proper capping and burying of all associated flow lines and other
pipelines located on or comprising part of the Assets, including in connection
with any of the activities referenced in the foregoing items (1) or (2); and
(4) the necessary and proper restoration of the surface and subsurface of the
Properties to the condition as required pursuant to all applicable Laws, Leases,
Surface Contracts and Contracts, in connection with any of the activities
referenced in the foregoing items (1), (2) or (3).

 

(i)                                     “Remediation” or “Remediate” means
investigation, assessment, characterization, delineation, monitoring, sampling,
analysis, response action, removal, corrective action, mitigation,
decontamination, treatment, cleanup and disposal of Hazardous Materials and
restoration of any harm or damage to, or replacement of any destruction of, the
Environment or any natural resources (including the payment of natural resource
damages that are assessed by any Governmental Entity, including for the loss of
use thereof), in each case, to the extent required by applicable Environmental
Laws or Governmental Entity.

 

5.2                               Exclusive Remedy.  Other than Buyers’ remedies
for breaches of Section 6.15, Section 5.3 shall constitute the sole and
exclusive rights and remedies of Buyers with respect to any Environmental
Defect, the existence of any Condition with respect to the Assets, the
Remediation of any such Environmental Defect or Condition, or Sellers’ or their
respective predecessors’ failure to comply with Environmental Laws.

 

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5.3          Environmental Defects.

 

(a)           Environmental Defect Notices.  On or before the Defect Notice
Date, Buyers shall notify Sellers in writing of any matters that, in Buyers’
reasonable opinion, constitute an Environmental Defect (such notice, an
“Environmental Defect Notice”).  To be effective, each Environmental Defect
Notice shall be in writing, be received by Sellers prior to or on the Defect
Notice Date and contain the following: (1) a detailed description of the alleged
Environmental Defect, (2) each Asset affected by the alleged Environmental
Defect (each such Asset, an “Environmental Defect Property”), (3) the Allocated
Value, if any, of each Environmental Defect Property, (4) supporting documents
reasonably necessary for Seller (as well as any environmental consultant hired
by Seller) to verify the existence of the alleged Environmental Defect, and
(5) the amount that Buyers reasonably believe is the most cost-effective manner
reasonably available to Remediate each alleged Environmental Defect, consistent
with Environmental Laws and the requirements of the applicable Governmental
Entity, taking into account that non-permanent remedies (such as mechanisms to
contain or stabilize Hazardous Materials, including monitoring site conditions,
natural attenuation, risk-based corrective action, institutional controls or
other appropriate restrictions on the use of property, caps, dikes,
encapsulation, leachate collection systems, etc.) may be the most cost-effective
manner reasonably available, net to Sellers’ interest in the applicable Assets
(the “Environmental Defect Value”), and the computations and information upon
which Buyers’ belief is based.  To give Sellers an opportunity to commence
reviewing and curing Environmental Defects, prior to the Defect Notice Date
Buyers agree to use their reasonable efforts to give Sellers weekly written
notices of all Environmental Defects discovered by Buyers during the preceding
week; provided that any such notice may be preliminary in nature and
supplemented prior to or on the Defect Notice Date.  Other than with respect to
Buyers’ remedies for breaches of Section 6.15, any matters that may otherwise
constitute an Environmental Defect, but of which Sellers have not been notified
by Buyers in an Environmental Defect Notice delivered in accordance with this
Section 5.3(a) prior to the Defect Notice Date, shall be deemed to have been
waived by Buyers for all purposes.

 

(b)           Environmental Deductibles.  Notwithstanding anything to the
contrary in this Agreement, (1) in no event shall there be any adjustments to
the Purchase Price or other remedies provided by Sellers in connection with the
transactions contemplated hereby for any Environmental Defect affecting an
Environmental Defect Property for which the Environmental Defect Value
attributable thereto does not exceed * (“Individual Environmental Threshold”);
and (2) in no event shall there be any adjustments to the Purchase Price or
other remedies provided by Sellers in connection with the transactions
contemplated hereby for any Environmental Defect Value attributable to an
Environmental Defect affecting an Environmental Defect Property that exceeds the
Individual Environmental Threshold unless (A) the sum of (i) the aggregate
Environmental Defect Values of all such Environmental Defects exceeding the
Individual Environmental Threshold, excluding any Environmental Defects
Remediated by Sellers, plus (ii) the aggregate Title Defect Amounts of all Title
Defects that exceed the Individual Title Threshold, excluding any Title Defects
cured by Sellers, minus (iii) all Title Benefit Amounts, exceeds (B) the
Aggregate Defect Deductible, after which point, subject to the Individual
Environmental Threshold, Buyers shall be entitled to adjustments to

 

36

 

* - Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

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

 

the Purchase Price or other remedies only with respect to the incremental amount
of such Environmental Defect Values, in the aggregate, in excess of such
Aggregate Defect Deductible.

 

If any Asset is excluded pursuant to Section 5.3(e)(3), the Environmental Defect
Value relating to such excluded Asset will not be counted towards the Aggregate
Defect Deductible.

 

(c)           Environmental Adjustment Amount.  The amount by which the Purchase
Price is to be adjusted in accordance with this ARTICLE 5 for Environmental
Defect Values shall be referred to as the “Environmental Adjustment Amount”.

 

(d)           Sellers’ Right to Remediate.  Continuing until the end of the Cure
Period, Sellers shall have the right, but not the obligation, to attempt, at its
sole cost, to Remediate any Environmental Defects timely asserted by Buyers
pursuant to Section 5.3(a).  If Sellers believe that they have Remediated any
applicable Environmental Defect, Sellers shall deliver written notice thereof to
Buyers, together with supporting documents available to Sellers and reasonably
necessary for Buyers (as well as any environmental consultant hired by Buyers)
to verify the Remediation of the Environmental Defects.  Buyers shall, at or
prior to the end of the Cure Period, advise Sellers in writing whether they
agree or (pursuant to an Environmental Dispute Notice, as described in
Section 5.3(f)) dispute that the Environmental Defect has been so Remediated;
provided that Buyers’ failure to timely respond to Sellers’ notice of
Remediation shall be deemed Buyers’ irrevocable agreement that the Environmental
Defect has been Remediated and Buyers’ irrevocable waiver of its Claim with
respect to such Environmental Defect.  If Buyers timely notify Sellers in
writing of a Dispute as to Sellers’ attempted Remediation of any Environmental
Defect, then (subject to Section 5.3(e)) the provisions of Section 5.3(f) shall
apply to such Environmental Defect.

 

(e)           Remedies for Environmental Defects.  Subject to Sellers’
continuing right to dispute the existence of an Environmental Defect and/or the
Environmental Defect Value asserted with respect thereto and subject to
Section 5.3(b), in the event that any Environmental Defect timely asserted by
Buyers in accordance with Section 5.3(a) is not waived in writing by Buyers or
Remediated by Sellers prior to the end of the Cure Period, then Sellers shall
elect one of the following remedies with respect to such Environmental Defect:

 

(1)           reduce the Purchase Price by the Environmental Defect Value
applicable to such Environmental Defect;

 

(2)           with Buyers’ reasonable consent, indemnify Buyers against all
Losses resulting from such Environmental Defect and associated Remediation
pursuant to an indemnity agreement mutually agreed by the Parties; or

 

(3)           retain the entirety of the Asset that is subject to such
Environmental Defect (together with all related Assets), and reduce the Purchase
Price by an amount equal to the sum of the Allocated Value of the Assets so
retained.

 

If Sellers elect the option set forth in clause (1) above, then Buyers shall be
deemed to have assumed responsibility for all costs and expenses attributable to
the Remediation of the applicable Environmental Defect and all Losses with
respect thereto, and Buyers’ obligations with respect thereto shall be deemed to
constitute Assumed Obligations.  If Sellers elect the

 

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option set forth in clause (2) above, Sellers shall additionally have the right
to elect to assume responsibility for the Remediation of such Environmental
Defect following Closing and, if Sellers so elect (A) Sellers shall use their
reasonable efforts to implement such Remediation in a manner which is consistent
with the requirements of Environmental Laws in a timely fashion for the type of
Remediation that Sellers elect to undertake and (B) Buyers, effective as of the
Closing, hereby grant to Sellers and their representatives access to the Assets
to conduct such Remediation.

 

(f)            Environmental Dispute Resolution Procedure.  If prior to the
Closing the Parties are unable to resolve any Environmental Disputed Matter,
then either Party shall have the right, upon the delivery of written notice to
the other Party (each, an “Environmental Dispute Notice”), to Dispute such
Environmental Disputed Matter and to invoke the Dispute resolution provisions
below in this Section 5.3(f) in order to resolve any such Dispute.  As used
herein, the term “Environmental Disputed Matter” means a Dispute regarding any
of the following:  (w) the existence and scope of an Environmental Defect;
(x) any Environmental Defect Value; (y) the Environmental Adjustment Amount, if
any; and (z) the adequacy of Sellers’ Environmental Defect Remediation actions. 
Any Environmental Dispute Notice must be delivered on or before the tenth
Business Day after Closing.  In no event will Closing be delayed on account of
any Environmental Disputed Matter and if the Environmental Defect Property
affected thereby is transferred to Buyers at Closing, the average of the
Parties’ respective good faith estimates of the Environmental Defect Values
attributable to such Environmental Defect Property shall be used in the
calculation and determination of the Environmental Adjustment Amount to be used
at Closing

 

(1)           The Parties shall attempt to resolve all Environmental Disputed
Matters through good faith negotiations for a period of 20 days after the
delivery of an Environmental Dispute Notice by either Party.  Following such
negotiation period, if the Environmental Disputed Matter at issue should remain
in Dispute, such Environmental Disputed Matter shall be resolved pursuant to
this Section 5.3(f) and the Parties shall mutually appoint an independent expert
having the qualifications specified below (the “Environmental Defect Expert”). 
If the Parties are unable to mutually agree upon the Environmental Defect
Expert, then the Parties shall, within ten days after the expiration of such
negotiation period, request that the AAA, acting through its offices in Houston,
Texas, appoint the Environmental Defect Expert.  The Environmental Defect Expert
shall be a certified environmental professional having a minimum of ten years’
experience with regard to the types of environmental defects affecting the
Properties involved in the Environmental Disputed Matter, shall be without any
conflicts of interest as to the Parties, and shall not have been employed by or
undertaken more than $50,000 of work, in the aggregate, for either Party or its
Affiliates within the five year period preceding the submission of the Dispute. 
For the avoidance of doubt, the Environmental Defect Expert will function as an
expert in accordance with the procedures set forth in this Section 5.3(f), and
not as an arbitrator.

 

(2)           Within 30 days following the appointment of the Environmental
Defect Expert, Sellers shall provide the Environmental Defect Expert with a copy
of this Agreement, and each Party shall provide, both to the Environmental
Defect Expert and each other, a summary of its position with regard to each such
outstanding Environmental

 

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Disputed Matter in a written document of five pages or less per Environmental
Disputed Matter.  The Parties shall instruct the Environmental Defect Expert
that, within 30 days after receiving the Parties’ respective submissions, the
Environmental Defect Expert shall render a written decision.  In rendering its
decision, the Environmental Defect Expert shall not award a higher Environmental
Defect Value than the amount claimed by Buyers in their summary or a lower
Environmental Defect Value than the amount claimed by Sellers in their summary,
as applicable.  Any decision rendered by the Environmental Defect Expert
pursuant hereto shall be final, conclusive, and binding on Sellers and Buyers,
and will be enforceable against each Party in any court having jurisdiction
hereof, but is not reviewable by, or appealable to, any court except in the
event of fraud.  The Parties shall each bear one-half of the costs of the
Environmental Defect Expert and of any associated Dispute resolution process and
proceedings.

 

(3)           If the Environmental Defect Expert determines that an
Environmental Defect did not exist or that an Environmental Defect existed but
was Remediated by Sellers, then any Environmental Defect Value attributable
thereto that was included in the Environmental Adjustment Amount used at
Closing, if any, shall be credited to Sellers in the Final Settlement Statement.

 

(4)           If the Environmental Defect Expert determines that an
Environmental Defect exists, but that the Environmental Defect Value
attributable thereto is a lesser amount than any Environmental Defect Value with
respect thereto that was included in the Environmental Adjustment Amount used at
Closing, if any, then the difference thereof shall be credited to Sellers in the
Final Settlement Statement.

 

(5)           If the Environmental Defect Expert determines that an
Environmental Defect exists, such Environmental Defect has not been Remediated
by Sellers and the Environmental Defect Value attributable thereto is a greater
amount than the Environmental Defect Value with respect thereto that was
included in the Environmental Adjustment Amount used at Closing, if any, then
the difference thereof shall be credited to Buyers in the Final Settlement
Statement.

 

(6)           Any such adjustments to the amount of the Purchase Price will be
reflected in the Final Settlement Statement as applicable.

 

5.4          NORM, Wastes and Other Substances.  Buyers acknowledge that the
Assets have been used for exploration, development and production of oil and gas
and that there may be petroleum, produced water, wastes or other substances or
materials located in, on or under the Assets or associated with the Assets. 
Equipment and sites included in the Assets may contain asbestos, NORM or other
Hazardous Materials.  NORM may affix or attach itself to the inside of wells,
materials and equipment as scale, or in other forms.  The wells, materials and
equipment located on the Assets or included in the Assets may contain NORM and
other wastes or Hazardous Materials.  NORM containing material and/or other
wastes or Hazardous Materials may have come in contact with various
environmental media, including water, soils or sediment.  Special procedures may
be required for the assessment, remediation, removal, transportation or disposal
of environmental media, wastes, asbestos, NORM and other Hazardous Materials
from the Assets.  Notwithstanding anything herein to the contrary, Buyer shall
not be permitted to

 

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claim any Environmental Defect on the account of the presence of NORM on the
Assets and the properties underlying the Assets.

 

ARTICLE 6
SELLERS’ REPRESENTATIONS AND WARRANTIES

 

Each Seller represents and warrants, on its own behalf and solely with respect
to itself, to Buyers as follows:

 

6.1          Status.  Such Seller is an entity duly formed, validly existing and
in good standing under the Laws of the jurisdiction of its incorporation or
formation, as applicable, and is duly qualified to carry on its business in such
other jurisdictions as may be necessary, except where the failure to be so
qualified would not have a Material Adverse Effect.

 

6.2          Power.  Such Seller has all requisite entity power and authority to
carry on its business as presently conducted, to enter into this Agreement and
the other documents to be delivered by such Seller at Closing pursuant to this
Agreement and to perform its obligations hereunder and thereunder.

 

6.3          No Conflicts.  Except as disclosed in Schedule 6.3 and assuming the
receipt of all Consents and the waiver of all Preferential Rights, the
execution, delivery and performance by such Seller of this Agreement and the
other documents to be delivered by such Seller at Closing pursuant to this
Agreement and the consummation of the transactions contemplated herein and
therein does not and will not (a) conflict with or result in a breach of any
provisions of the Governing Documents of such Seller, (b) result in a default or
the creation of any Lien (other than a Permitted Encumbrance), or give rise to
any right of termination, cancellation or acceleration under any of the terms,
conditions, or provisions of any Lease, Surface Contract or Applicable Contract
to which such Seller is a party or by which such Seller or the Assets may be
bound or (c) violate any Law applicable to such Seller or any of the Assets,
except in the case of clauses (b) and (c) where such default, Lien, termination,
cancellation, acceleration or violation would not have a Material Adverse
Effect.

 

6.4          Authorization and Enforceability.  Assuming the due authorization,
execution and delivery by the Buyers of this Agreement and the other documents
to be delivered by Buyers at Closing pursuant to this Agreement, this Agreement
constitutes, and the other documents to be delivered by such Seller at Closing
pursuant to this Agreement will constitute, such Seller’s legal, valid and
binding obligations, enforceable in accordance with their respective terms,
subject to the effects of bankruptcy, insolvency, reorganization, moratorium and
similar Laws, as well as to principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

 

6.5          Consents.  Except as set forth on Schedule 6.5 and for Customary
Post-Closing Consents, no consent, approval or authorization of any applicable
Governmental Entity or other Third Party is required to be obtained in
connection with the consummation of the transactions contemplated by this
Agreement (each such required consent, a “Consent”) by such Seller.

 

6.6          Preferential Rights.  Except as set forth on Schedule 6.6, there
are no preferential rights to purchase or similar rights with respect to the
Assets that are applicable to the

 

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transactions contemplated by this Agreement (each such applicable preferential
right listed on Schedule 6.6, a “Preferential Right”).

 

6.7          Liability for Brokers’ Fees.  Such Seller has not incurred any
liability, contingent or otherwise, for investment bankers’, brokers’ or
finders’ fees relating to the transactions contemplated by this Agreement for
which Buyers shall have any responsibility whatsoever.

 

6.8          Bankruptcy.  There are no bankruptcy or insolvency proceedings
pending by or against, being contemplated by or, to Seller’s Knowledge,
threatened against such Seller.

 

6.9          Litigation.  Except as set forth on Schedule 6.9, as of the
Execution Date there are no actions, suits or proceedings pending by or against
such Seller with respect to the Assets, or, to Seller’s Knowledge, threatened
against such Seller with respect to the Assets, in each case, in any court,
arbitration proceeding or other Dispute resolution venue by or before any
Governmental Entity, which, if determined adversely to such Seller, would have a
Material Adverse Effect.

 

6.10        Material Agreements.

 

(a)           Schedule 6.10(a) lists all of the following types of Applicable
Contracts in effect as of the Execution Date (the “Material Agreements”):

 

(1)           any Applicable Contract between such Seller, on the one hand, and
any Affiliate of such Seller, on the other hand;

 

(2)           any Applicable Contract for (A) the sale, exchange, or other
disposition of Hydrocarbons produced from or attributable to the Assets or
(B) the purchase, sale, processing, transportation or other disposal of any such
Hydrocarbons, in each case, that is not cancelable without penalty or other
payment on not more than 60 days’ prior written notice, other than terms of
joint operating agreements or gas balancing agreements which permit an operator
or other co-owner to take or market production of a non-taking co-owner;

 

(3)           any Applicable Contract requiring such Seller to sell, lease,
farm-out, or otherwise dispose of any interest in any of the Properties after
the Execution Date, other than non-consent penalties for non-participation in
operations under joint operating agreements or conventional rights of
reassignment arising in connection with such Seller’s surrender or release of
any of the Properties;

 

(4)           any Applicable Contract that creates any area of mutual interest
or similar provision with respect to the Assets or contains any material
restrictions on the ability of such Seller to compete with any other Person;

 

(5)           any Applicable Contract that can reasonably be expected to result
in aggregate payments by, or revenues to, such Seller, in each case, only with
respect to the Assets, of more than $250,000 during the current fiscal year or
$500,000 in the aggregate over the term of such Contract;

 

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(6)           any Applicable Contract that is an agreement for Indebtedness;

 

(7)           any Applicable Contract that is a drilling contract, unitization
agreement, unit operating agreement, joint operating agreement, exploration
agreement, development agreement, participation agreement, joint venture
agreement or similar agreement;

 

(8)           any Applicable Contract that contains any rights allowing a Third
Party to participate in any sales or purchases of any of the Assets that are
triggered by or applicable to the transactions contemplated by this Agreement;
and

 

(9)           any Applicable Contract that constitutes a lease under which such
Seller is the lessor or the lessee of personal property which lease (A) cannot
be terminated by such Person without penalty upon 60 days or less notice and
(B) involves an annual base rental of more than $50,000.

 

(b)           Except as otherwise set forth on Schedule 6.10(b), such Seller is
in default in any material respect under any Material Agreement and, to Seller’s
Knowledge, no other party to any Material Agreement is in default in any
material respect thereunder.  To Seller’s Knowledge, no event has occurred that,
with notice, lapse of time or both, would constitute a default in any material
respect under any Material Agreement.  During the Due Diligence Period for
purposes of the Due Diligence Review, such Seller has or will make available to
Buyers prior to Closing, true and complete copies of the Material Agreements.

 

6.11        AFEs.  As of the Execution Date, all outstanding authorizations for
expenditures or other similar capital commitments relating to the Assets to
drill or rework Wells or build gathering systems or other facilities (“AFEs”),
that in each case, will be binding upon Buyers or the Assets as of the Effective
Time, are set forth in Schedule 6.11.  For the avoidance of doubt, the amounts
shown on Schedule 6.11 with respect to such AFEs are estimates.

 

6.12        Taxes.  Except as disclosed on Schedule 6.12, (a) all Tax Returns
relating to or in connection with such Seller’s acquisition, ownership, or
operation of the Assets required to be filed have been timely filed and all such
Tax Returns are correct and complete in all material respects; (b) subject to
any Taxes which such Seller disputes in good faith and which are listed on
Schedule 6.12, all material Taxes relating or applicable to such Seller’s
acquisition, ownership or operation of the Assets that are or have become due
have been timely paid, and such Seller is not delinquent in the payment of any
such material Taxes; (c) 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 Tax of such Seller relating to such Seller’s
acquisition, ownership or operation of the Assets; (d) there are no
administrative or judicial proceedings pending or threatened in writing against
the Assets or against such Seller relating to or in connection with the Assets
by any taxing authority with respect to Taxes; (e) there are no Liens on any of
the Assets that arose in connection with such Seller’s failure (or alleged
failure) to pay any Tax other than Permitted Encumbrances; (f) such Seller is
not a foreign person within the meaning of Section 1445(f) of the Code; and
(g) all Tax withholding and deposit requirements imposed by applicable Law with
respect to any of the Assets or the business of such Seller have been satisfied
in all material respects.

 

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6.13        Tax Partnerships.  None of the Assets are held by or are subject to
any arrangement between such Seller and any other Persons, whether owning
undivided interests therein or otherwise, that is treated as or constitutes a
partnership for purposes of Subchapter K of Chapter 1 of Subtitle A of the Code
(a “Tax Partnership”).

 

6.14        Compliance with Law and Government Authorizations.

 

(a)           Except as would not have a Material Adverse Effect, such Seller
(if such Seller is the operator of the Assets) or, to Seller’s Knowledge, any
Third Party operator of the Assets has obtained and is maintaining all
Governmental Authorizations that are presently necessary or required by it to
own and operate the Assets as the Assets are presently owned and operated.

 

(b)           Except as provided on Schedule 6.14, no written notice of
violation of Law or a Governmental Authorization has been received by such
Seller from a Governmental Entity with respect to the Assets.

 

(c)           Except as would not have a Material Adverse Effect with respect to
the Assets operated by Seller, and to Seller’s Knowledge with respect to the
Assets not operated by the Seller, the Assets are being operated in compliance
with all applicable Laws.

 

Notwithstanding the foregoing, this Section 6.14 does not relate to any Tax
matters, which are exclusively addressed in Section 6.12 and Section 6.13, or
Environmental Laws, which are exclusively addressed in ARTICLE 5 and in
Section 6.15.

 

6.15        Environmental Matters.  Except as referenced in Schedule 6.15 or as
would not have a Material Adverse Effect:

 

(a)           such Seller has not entered into any agreements, orders, decrees,
judgments, license or permit conditions, or other directives of any Governmental
Entity in existence as of the Execution Date based on any prior violations of
Environmental Laws that materially impairs the future ownership or use of any of
the Assets or that currently requires any Remediation as to any of the Assets.

 

(b)           As of the Execution Date, neither such Seller (if such Seller is
the operator of the Assets), nor to Seller’s Knowledge any Third Party operator
of the Assets, has received written notice from any Governmental Entity of any
Condition concerning any Asset that (1) materially interferes with or prevents
compliance by such Seller or the Assets with any Environmental Law or the terms
of any Governmental Authorization relating to Environmental Laws, or (2) gives
rise to or results in any common Law or other liability of such Seller to any
Person.

 

6.16        Payments for Production; Calls on Production.

 

(a)           such Seller has not: (1) received any advance, “take-or-pay” or
other similar payments under production sales Contracts applicable to the Assets
that entitle the purchasers to “make up” or otherwise receive deliveries of
Hydrocarbons without paying at such time the contract price therefor; or
(2) other than in accordance with gas balancing

 

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arrangements and non-consent provisions in Contracts, received any advance
payment or other similar payment to deliver Hydrocarbons produced from, or
attributable to, the Assets, or proceeds from the sale thereof, at some future
time, without receiving payment therefor at or after the time of delivery.

 

(b)           To the Seller’s Knowledge, no Person has any call upon, option to
purchase or similar rights with respect to the Hydrocarbon production from the
Assets, except as set forth on Schedule 6.16(b).

 

6.17        Well Status and Abandonments.  Except as referenced on Schedule 6.17
and as would not have a Material Adverse Effect (a) to Seller’s Knowledge, all
Wells that have been permanently abandoned were abandoned in accordance with all
applicable Laws; and (b) such Seller has not received any written notices from
any applicable Governmental Entities that: (1) any such permanently abandoned
Wells were not abandoned in accordance with all applicable Laws; or (2) there
are any Wells for which permanent abandonment is presently required for
compliance with applicable Laws.

 

6.18        Bonds and Credit Support.  Except as referenced on Schedule 6.18,
there are no bonds, letters of credit and other similar credit support
instruments maintained by such Seller or its Affiliates with respect to such
Seller’s ownership and operation of the Assets.

 

6.19        Suspense Funds.  Except as set forth in Schedule 6.19, as of the
date set forth on such Schedule, such Seller does not hold any Third Party funds
in suspense with respect to production of Hydrocarbons from any of the
Properties other than amounts less than the statutory minimum amount that such
Seller is permitted to accumulate prior to payment.

 

6.20        Imbalances.  Schedule 6.20 sets forth all material Imbalances
associated with the Assets as of the Effective Time.

 

6.21        Insurance.  Schedule 6.21 lists each material insurance policy
maintained by such Seller that relates or provides coverage to the Assets (the
“Policies”).  Except as set forth on Schedule 6.21, there are no claims pending
with respect to any Policies.

 

6.22        Royalties.  Except as disclosed on Schedule 6.22 and for such items
that are not yet due or are being held in suspense as permitted pursuant to
applicable Law, to Seller’s Knowledge, such Seller has paid, in all material
respects, all royalties, overriding royalties and other burdens on production
due by such Seller with respect to the Properties.

 

ARTICLE 7
BUYER’S AND EVOC’S REPRESENTATIONS AND WARRANTIES

 

Each Buyer and EVOC represents and warrants to Sellers as follows:

 

7.1          Organization and Standing.

 

(a)           Buyer is a limited partnership duly organized, validly existing
and in good standing under the Laws of the State of Delaware, and is duly
qualified to carry on its business in Oklahoma, Texas and such other
jurisdictions as may be necessary, except where

 

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the failure to be so qualified would not have a material adverse effect on the
ability of Buyer to consummate the transactions contemplated by this Agreement
and perform its obligations hereunder.

 

(b)           EVOC 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 carry on its business in Oklahoma, Texas and such other
jurisdictions as may be necessary, except where the failure to be so qualified
would not have a material adverse effect on the ability of Buyers to consummate
the transactions contemplated by this Agreement and perform their obligations
hereunder.

 

7.2          Power.  Buyer/EVOC, has all requisite entity power and authority to
carry on its business as presently conducted, to enter into this Agreement and
the other documents to be delivered by Buyer/EVOC at Closing pursuant to this
Agreement and to perform its obligations hereunder and thereunder.

 

7.3          No Conflicts.  The execution, delivery and performance by
Buyer/EVOC of this Agreement and the other documents to be delivered by
Buyer/EVOC at Closing pursuant to this Agreement and the consummation of the
transactions contemplated herein and therein does not and will not (a) conflict
with or result in a breach of any provisions of the Governing Documents of
Buyer/EVOC, (b) result in a default or the creation of any Lien or give rise to
any right of termination, cancellation or acceleration under any of the terms,
conditions, or provisions of any note, bond, mortgage or indenture to which
Buyer/EVOC is a party or by which Buyer/EVOC or any of its property may be bound
or (c) violate any Law applicable to Buyer/EVOC or any of its property, except
in the case of clauses (b) and (c) where such default, Lien, termination,
cancellation, acceleration or violation would not have a material adverse effect
upon the ability of Buyer/ EVOC to consummate the transactions contemplated by
this Agreement or perform its obligations hereunder.

 

7.4          Authorization and Enforceability.  Assuming the due authorization,
execution and delivery by Sellers of this Agreement and the other documents to
be delivered by Sellers at Closing pursuant to this Agreement, this Agreement
constitutes, and the other documents to be delivered by Buyer/EVOC at Closing
pursuant to this Agreement will constitute, Buyer’s/ EVOC’s legal, valid and
binding obligations, enforceable in accordance with their respective terms,
subject to the effects of bankruptcy, insolvency, reorganization, moratorium and
similar Laws, as well as to principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

 

7.5          Consent.  No Consent is required to be obtained with respect to the
consummation the transactions contemplated by this Agreement by Buyer/EVOC.

 

7.6          Liability for Brokers’ Fees.  Buyer/EVOC has not incurred any
liability, contingent or otherwise, for investment bankers’, brokers’ or
finders’ fees relating to the transactions contemplated by this Agreement for
which Sellers shall have any responsibility whatsoever.

 

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7.7                               Bankruptcy.  There are no bankruptcy or
insolvency proceedings pending by or against, being contemplated by or, to
Buyer’s Knowledge, threatened against Buyer/EVOC or its Affiliates.

 

7.8                               Litigation.  There is no action, suit,
proceeding, Claim or investigation by any Governmental Entity, court, arbitral
authority or other Person pending by or against Buyer/EVOC or, to Buyer’s
Knowledge, threatened against Buyer/EVOC, in each case, in any court,
arbitration proceeding or other Dispute resolution venue by or before any
Governmental Entity that impedes or is likely to impede Buyer’s ability to
consummate the transactions contemplated by this Agreement and to perform its
obligations hereunder.

 

7.9                               Financial Resources and Other Capability. 
Buyer has the financial resources available to consummate the transactions
contemplated by this Agreement, to pay the Purchase Price and to pay any and all
fees and expenses incurred by Buyer in connection with the transactions
contemplated by this Agreement.  Buyer has the financial, technical and other
capabilities to perform all of Buyer’s other obligations under this Agreement
and all of the obligations assumed from Sellers under the Assets.

 

7.10                        No Benefit Plan Investor. Buyer acknowledges that it
is not a “benefit plan investor” and none of the assets of Buyer include “plan
assets” (as such terms are defined under Department of Labor Regulation
Section 2510.3-101, as modified by Section 3(42) of the Employee Retirement
Income Security Act of 1974, as amended).

 

7.11                        Qualifications. Buyers are qualified to own, and
EVOC is qualified to operate the Assets in all jurisdictions where such Assets
are located, and the consummation of the transactions contemplated by this
Agreement will not cause Buyer to be disqualified as such owner or EVOC to be
disqualified as such operator. Buyer currently has lease bonds and any other
surety bonds as may be required by, and in accordance with, all applicable Laws
governing the ownership and operation of the Assets. To Buyer’s and EVOC’s
knowledge, there are no matters or circumstances applicable to Buyer or to EVOC
that would preclude or inhibit unconditional approval by Governmental
Authorities of the assignment of the Assets from Seller to Buyer.

 

7.12                        Buyer’s Evaluation.

 

(a)                                 Review.  Buyer is an experienced and
knowledgeable investor in the oil and gas industry and is aware of the
possibility of risks in the acquisition of oil and gas assets.  Buyer
acknowledges that Sellers have not made any representations or warranties as to
the Assets except as expressly and specifically provided in ARTICLE 6, the
affirmations of such representations and warranties contained in the certificate
to be delivered by Sellers at Closing pursuant to Section 12.3(g) and the
special warranty set forth in the Assignment, and that Buyer may not rely on any
other representations or warranties made by Sellers or Sellers’ Representatives
or on any of Sellers’ estimates with respect to reserves or the value of the
Assets, or any projections as to future events or other analyses or forward
looking statements.

 

(b)                                 Independent Evaluation.  In entering into
this Agreement, except for the representations and warranties expressly and
specifically provided in ARTICLE 6, the

 

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affirmations of such representations and warranties contained in the certificate
to be delivered by Sellers at Closing pursuant to Section 12.3(g) and the
special warranty set forth in the Assignment, Buyer acknowledges and affirms
that it has relied and will rely solely on the terms of this Agreement and the
Assignment and upon its independent analysis, evaluation and investigation of,
and judgment with respect to, the business, economic, legal, environmental, tax
or other consequences of this transaction, including its own estimate and
appraisal of the extent and value of the Hydrocarbon reserves or other value of
the Assets.  As of Closing, Buyers have been afforded full access to the books
and records, facilities and personnel of Sellers for purposes of conducting a
due diligence investigation and has conducted a full due diligence investigation
of Sellers and the Assets.

 

7.13                        Securities Law Compliance.  Buyer is acquiring the
Assets for its own account for use in its trade or business, and not with a view
toward or for sale associated with any distribution thereof, nor with any
present intention of making a distribution thereof within the meaning of the
Securities Act and applicable state securities Laws.  Buyer is an “accredited
investor” within the meaning of Regulation D of the Securities Act.

 

ARTICLE 8
COVENANTS AND AGREEMENTS

 

8.1                               Covenants and Agreements of Sellers.  Except
(w) as set forth in Schedule 2.4(c) or Schedule 8.1, (x) for and in connection
with the operations pursuant to any AFE listed on Schedule 6.11, (y) as required
pursuant to the terms of any Material Agreement, Lease or Surface Contract, or
(z) as consented to in writing by Buyers (such consent not to be unreasonably
withheld, delayed or conditioned):

 

(a)                                 Operations Prior to Closing.  Sellers shall:

 

(1)                                 cause the Assets operated by Sellers, and
use their commercially reasonable efforts to cause the Assets operated by Third
Parties, to be operated in a manner consistent in all material respects with
past practice;

 

(2)                                 notify Buyers if Sellers obtain Knowledge of
any Third Party Claim materially affecting the Assets or notice from a Third
Party of any default by Sellers under any Material Agreement; and

 

(b)                                 Restriction on Operations.  Without Buyers’
approval, Sellers shall not:

 

(1)                                 convey, sell, transfer or abandon any part
of the Assets except, upon two Business Days prior notice to Buyers, (A) Leases
that have terminated in the ordinary course of business based upon the
expiration of the primary terms of such Leases, (B) Leases that are, in Sellers’
good faith and reasonable opinion, no longer capable of production in paying
quantities, (C) sales of Equipment or facilities in the ordinary course of
business, or (D) sales of Hydrocarbons produced from, or attributable to, the
Assets in the ordinary course of business;

 

(2)                                 approve or propose any operations
anticipated in any instance to cost the owner of the Assets more than $250,000,
net to the Assets, per activity or per any

 

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series of related activities, except for (A) any operations in the ordinary
course of business, (B) emergency operations, (C) any operations required under
applicable Laws, or (D) any operations necessary to avoid a material monetary
penalty or forfeiture provision under any applicable Lease, Surface Contract,
Applicable Contract or Law; provided, however, that Sellers shall forward to
Buyers the applicable AFE with respect to any operation that does not require
approval pursuant to this Section 8.1(b)(2);

 

(3)                                 enter into any farm-out, farm-in or other
similar Contract affecting the Assets;

 

(4)                                 let lapse any of Sellers’ insurance now in
force with respect to the Assets;

 

(5)                                 modify or terminate any Material Agreement,
other than any such Material Agreement that terminates according to its terms;

 

(6)                                 enter into any Contract that, if in
existence as of the Execution Date, would be a Material Agreement;

 

(7)                                 waive, release, assign, settle or compromise
any claim, action or proceeding relating to the Assets, other than waivers,
releases, assignments, settlements or compromises that involve only the payment
of monetary damages not in excess of $250,000 individually or in the aggregate,
net to the Assets, (excluding amounts to be paid under insurance policies);
provided, however, that the restrictions contained in this
Section 8.1(b)(7) shall not apply to any of the claims, actions or proceedings
listed on Schedule 6.9; or

 

(8)                                 authorize or agree, in writing or otherwise,
to take any of the actions prohibited by this Section 8.1(b).

 

(c)                                  Derivative Transactions. To the extent that
doing so would not cause any Seller to be in violation of any provision of any
agreement (including, without limitation, any credit agreement, indenture, other
loan or similar document) to which it is a party or otherwise cause any Seller
to be in breach of any representation and warranty contained in this Agreement,
Laredo shall use its reasonable efforts to enter into, but only to the extent as
mutually agreed upon by Sellers and Buyers, hedging transactions (which are
capable of being transferred to, or novated in favor of, Buyers) covering that
portion of production from the Assets as described on Schedule 8.1(c).  Upon
execution of this Agreement, Laredo shall, in consultation with Buyers, obtain
quotations from counterparties with whom Laredo has current ISDA agreements for
straight swaps for quantities of production from the future proved developed
producing oil and gas reserves attributable to the Assets.  Upon receipt of
written instruction from the Buyers directing Laredo which swaps to enter into
and with which counterparty, subject to the indemnities set forth herein, Laredo
shall use its reasonable efforts to execute, for the benefit and liability of
Buyers, such transactions with the counterparty providing the terms acceptable
to the Buyers as set forth in such instruction (the “Hedging Transactions”). 
Buyers shall promptly reimburse the Sellers for all costs and expenses
associated with the execution of the Hedging Transactions.  At Closing, all such
Hedging Transactions shall be transferred to, or novated in

 

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favor of, Buyers.  Whether or not the Closing occurs, Buyers shall pay, be
responsible for, release, defend, indemnify and hold Sellers and the other
Seller Indemnified Parties harmless from and against any and all (i) costs and
expenses of entering into the Hedging Transactions, (ii) costs and expenses
related to transferring to, or novating in favor of, Buyers and (iii) costs,
expenses and other liabilities arising from or attributable to the Hedging
Transactions.  In the event that this Agreement is terminated prior to Closing,
Laredo may, at its sole election, unwind any or all of the Hedging Transactions;
but in any event, Buyers shall release, defend, indemnify and hold Sellers and
the other Seller Indemnified Parties harmless from and against any and all
losses, costs, expenses or other liabilities arising from or related to the
Hedging Transactions, and shall make any required payments to Sellers and the
other Seller Indemnified Parties within ten Business Days after receipt of an
invoice with respect thereto.

 

(d)                                 Consents.  For the purposes of obtaining the
written consents for AFEs required in Section 8.1(b)(2), Buyers designate the
following contact Person:  Bill Page, at the address and telephone number for
Buyers set forth in Section 15.3.  Such consents may be obtained in writing by
overnight courier or given by .pdf or facsimile transmission.  Buyers agree that
they will (1) timely respond to any written request for consent pursuant to
Section 8.1(b)(2), and (2) consent to any written request for approval of any
AFE that the officers of Sellers reasonably consider to be economically viable. 
Buyers’ consent shall be considered granted within ten days (unless a shorter
time, not to be less than 48 hours, is reasonably required by the circumstances
and the applicable joint operating agreement and such shorter time is specified
in Sellers’ request for consent) after Buyers’ receipt of such request for such
consent, unless Buyers notify Sellers to the contrary during that period.

 

(e)                                  Disclaimer.  Buyers acknowledge that
Sellers own undivided interests in certain of the Assets with respect to which
they are not the operator, and Buyers agree that the acts or omissions of the
other Working Interest owners (including the operators) who are not Sellers or
any of Sellers’ Affiliates and which Sellers do not have the contractual right
to control shall not constitute a breach of the provisions of Section 8.1, nor
shall any action required by a vote of Working Interest owners in and of itself
constitute such a breach so long as Sellers have voted their interest in a
manner that complies with the provisions of Section 8.1.

 

8.2                               Covenants and Agreements of Buyers and EVOC,
as Applicable.

 

(a)                                 Change of Name.  As promptly as practicable,
but in any case within 120 days after the Closing Date, Buyers and EVOC shall
use their reasonable efforts to (1) eliminate the name “Laredo” and any variants
thereof from the Assets, (2) cease using in any way the word “Laredo” with
respect to the Assets, and (3) remove and cease to use all trademarks associated
with Sellers or their Affiliates with respect to the Assets.  Except with
respect to such grace period for eliminating existing usage, for the avoidance
of doubt, Buyers and EVOC shall have no right to use any logos, trademarks or
trade names belonging to Sellers or any of their Affiliates.  FROM AND AFTER THE
CLOSING, BUYERS HEREBY WAIVE, RELEASE AND AGREE TO JOINTLY AND SEVERALLY,
DEFEND, INDEMNIFY AND HOLD HARMLESS SELLERS AND THE OTHER SELLER INDEMNIFIED
PARTIES FROM AND AGAINST ANY LOSSES ARISING OUT OF, OR IN ANY WAY ATTRIBUTABLE
TO, THE USE OF THE WORD “LAREDO” WITH RESPECT TO THE ASSETS OR OTHERWISE IN
RELATION TO ANY BREACH BY BUYERS OR EVOC OF THEIR

 

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OBLIGATIONS UNDER THIS SECTION 8.2(A), EVEN IF SUCH LOSSES ARISE OUT OF OR
RESULT FROM, SOLELY OR IN PART, THE SOLE, ACTIVE, GROSS, PASSIVE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF
OR BY ANY OF THE SELLER INDEMNIFIED PARTIES.

 

(b)                                 Governmental Bonds.  Buyers and EVOC
acknowledge that none of the bonds, letters of credit and guarantees, if any,
posted by Sellers or their Affiliates with Governmental Entities and relating to
the Assets are transferable to Buyers or EVOC.  On or before the Closing Date,
Buyers and EVOC shall obtain, or cause to be obtained in the name of the Buyers
and EVOC, replacements for such bonds, letters of credit and guarantees to the
extent such replacements are necessary (1) for Buyers’ ownership and EVOC’s
operation of the Assets and (2) to permit the cancellation of the bonds, letters
of credit and guarantees posted by Sellers and/or their Affiliates with respect
to the Assets.  In addition, at or prior to Closing, Buyers and EVOC shall
deliver to Sellers evidence of the posting of bonds or other security with all
applicable Governmental Entities meeting the requirements of such authorities to
own and, where appropriate, operate, the Assets.

 

(c)                                  Confidentiality.  As used herein, the term
“Confidential Information” means all proprietary information of whatever nature,
in whatever form (including oral, written, graphic, digital, electronic or
otherwise), which may be disclosed by Sellers or their Representatives to Buyers
or their Representatives, or otherwise obtained by Buyers or their
Representatives, regarding the Assets (whether pursuant to Buyers’ Due Diligence
Review or otherwise), including the following types of information, documents
and other materials: (w) geological, geophysical, drilling, engineering,
production, operational, reserve, reservoir and other technical, leasehold,
land, environmental, financial, commercial and other data, plats, models, plans,
analyses, reports, contracts and other materials; (x) the existence and contents
of any proposal, discussion, negotiation, understanding or agreement involving
the Parties in respect of the Assets, including with respect to the transactions
contemplated by this Agreement; (y) all reproductions, transcriptions, reports,
summaries, extracts, restatements, analyses, interpretations, sketches, notes
and other materials, in whatever form, which may be generated by Buyers from any
Confidential Information previously received by Buyers; and (z) Third Party
Proprietary Data.

 

(1)                                 Subject to Section 8.2(c)(2) and
Section 8.2(c)(3), Buyers agree that all Confidential Information shall, in
accordance with the Confidentiality Agreement and this Agreement, be kept
strictly confidential and shall not be sold, traded, published, transferred or
otherwise disclosed to any other Person in any manner whatsoever, including
electronically or by any other means of reproduction or transmittal, without
Sellers’ specific prior written consent.  Without limiting the scope of Buyers’
obligations under the immediately preceding sentence, Buyers shall take
protective measures for the Confidential Information which are at least as
stringent as for its own confidential and proprietary information.

 

(2)                                 Buyers may disclose Confidential Information
without Sellers’ prior written consent only to the extent that such disclosed
Confidential Information: (A) at the time disclosed, is part of the public
domain other than through the act or omission of

 

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Buyers or their Representatives in violation of the provisions of this
Section 8.2(c); (B) was, prior to the Effective Time, acquired independently by
Buyers from a Third Party who (i) lawfully obtained such Confidential
Information, and (ii) did not derive such Confidential Information directly or
indirectly from Sellers or its Representatives; (C) is developed by Buyers or
any of their Affiliates independently, and without the use of or reference to,
any of the Confidential Information; or (D) is required to be disclosed by
Buyers under applicable Law, including any recognized securities exchange on
which the shares of Buyers or any of their Affiliates are actively traded;
provided that Buyers will make all reasonable efforts to give Sellers prior
written notice of any such required disclosure and the opportunity to seek a
protective order if Sellers wish, all to the extent permitted by applicable Law;
provided further, if Sellers wish, but are unable, to obtain such protective
order prior to any such required disclosure, then (I) Buyers may disclose to the
appropriate Governmental Entity or other authority that portion of the
Confidential Information which Buyers are legally required to disclose and
Buyers shall use all reasonable efforts to obtain assurances that confidential
treatment will be accorded to the Confidential Information and (II) Buyers shall
not be liable to Sellers for such disclosure to the extent made in accordance
with this Section.

 

(3)                                 Notwithstanding the foregoing, Buyers may
disclose Confidential Information to any of their Affiliates and other
Representatives without Sellers’ prior written consent, provided that Buyers
shall remain liable hereunder for any failure of such Affiliate or other
Representative to maintain such Confidential Information as strictly
confidential in accordance with the terms of this Section 8.2(c).  Buyers shall
ensure that each such Affiliate and other Representative is aware of Buyers’
obligations under this Section 8.2(c) and shall ensure compliance by each such
Affiliate and other Representative with all such obligations.

 

(d)                                 Qualifications. Buyers shall continue to be
qualified to own, and EVOC shall continue to be qualified to operate the Assets
in all jurisdictions where such Assets are located. Buyers and/or EVOC, as
applicable, will continue to maintain lease bonds and any other surety bonds as
may be required by, and in accordance with, all applicable Laws governing the
ownership and operation of the Assets.

 

(e)                                  Future Assumption of Liabilities.  In the
event that (i) any Buyer or any of its successors or assigns conveys, assigns,
or otherwise transfers all or substantially all of their properties or assets to
any Person; (ii) any Buyer or any of its successors or assigns conveys, assigns,
or otherwise transfers all or any portion of the Assets to any Person; or
(iii) any dissolution, liquidation, termination, merger, consolidation or other
reorganization of any Buyer occurs, then, and in each such case, such
assignment, conveyance, transfer, or change shall expressly provide that the
successors, assigns and transferees of any Buyer and any of its successors,
assigns or transferees shall assume and continue to be responsible for the
Assumed Liabilities set forth in this Agreement.  Each Buyer agrees that the
covenants set forth in this Section 8.2(e) shall run with title to the
Leases/Lands and shall be incorporated at Closing into each Assignment conveying
the Leases/Lands to such Buyer.  Each Buyer hereby acknowledges Sellers’
reliance on this Section 8.2(e) and that same is a material part of this
Agreement, agrees that the Purchase Price reflects Buyers’ agreement to the
covenants set forth in this Section 8.2(e), and acknowledges further that,
without this Section 8.2(e), Sellers would not have entered

 

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into this Agreement.  The provisions contained in this Section 8.2(e) shall
expressly survive Closing and delivery and recording of each Assignment.

 

8.3                               Covenants and Agreements of the Parties.

 

(a)                                 Communication Between the Parties Regarding
Breach.  If Buyers or Sellers obtain Knowledge prior to Closing that leads
either Party to believe that the other Party has breached a representation or
warranty or failed to perform a covenant or agreement under this Agreement, the
non-breaching Party shall inform the alleged breaching Party in writing of such
potential breach as soon as reasonably practicable so that the breaching Party
may attempt to remedy or cure such breach prior to the Closing.  If such breach
or failure is thereafter cured to the reasonable satisfaction of the
non-breaching Party by the Closing (or, if the Closing does not occur, by the
date this Agreement terminates), then such breach or failure shall be deemed not
to have occurred for all purposes of this Agreement.

 

(b)                                 Casualty Loss.  Prior to Closing, if a
portion of the Assets is destroyed or materially damaged by fire or other
casualty or if a material portion of the Assets is taken or threatened to be
taken in condemnation or under the right of eminent domain (each, a “Casualty
Loss”), Sellers shall promptly advise Buyers in writing of such Casualty Loss
and shall elect, by the delivery of written notice to Buyers at least five
Business Days prior to the Closing Date (or, if the Casualty Loss occurs after
such date and prior to Closing, as soon as reasonably practicable prior to the
Closing Date), either of the following: (1) to retain the Asset affected by the
Casualty Loss and reduce the Purchase Price by the Allocated Value of such
Asset; or (2) with the consent of Buyers, such consent not to be unreasonably
withheld, conditioned or delayed, to assign such Asset to Buyers without any
reduction of the Purchase Price, subject to the assignment to Buyers of all
insurance proceeds received by Sellers (net of any Taxes incurred thereon by
Sellers) as to such Casualty Loss.

 

(c)                                  Successor Operator.  Sellers are designated
as operator of certain Assets pursuant to joint operating agreements with Third
Parties included in the Applicable Contracts.  Buyers acknowledge that such
Third Parties may not agree to allow EVOC to succeed Sellers as operator under
such joint operating agreements or may exercise other rights that they may have
which would preclude EVOC from succeeding Sellers as operator.  Buyers and EVOC
specifically acknowledge and agree that Sellers have made no representation,
warranty or other guarantee that EVOC will succeed Sellers as operator under any
joint operating agreement; provided that Sellers shall use their commercially
reasonably efforts, if requested by Buyers and/or EVOC, to support EVOC’s
succession of Sellers as operator as to any of the Assets currently operated by
Sellers, subject to the provisions of any applicable joint operating agreement
and subject to the payment by Buyers and/or EVOC of any required fee or other
consideration.  It is expressly understood and agreed that neither Sellers nor
any of their Affiliates shall be obligated to continue operating any of the
Assets following the Closing, and Buyers assume full responsibility for
operating (or causing the operation of) all Assets following Closing.  Without
implying any obligation on Sellers’ part to continue operating any Assets after
the Closing, if Sellers or any of their Affiliates continue to operate any
Assets following the Closing at the request of Buyers or any third party working
interest owner, due to constraints of applicable joint operating agreements,
failure of a successor operator to take over operations or other reasonable
cause, such continued operation by such Person shall be for the

 

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account of Buyers and at the sole risk, cost and expense of Buyers (including
such Person’s overhead) and Buyers release and indemnify Sellers and the other
Seller Indemnified Parties from any liabilities in connection with such
operations, except to the extent caused by gross negligence or willful
misconduct of Sellers or any of their Affiliates.

 

(d)                                 Employees of Sellers.  Buyers and EVOC agree
that, without Sellers’ prior written consent and excepting only as expressly
otherwise provided below, until one year after the Closing Date, Buyers and EVOC
will not, directly or indirectly, solicit for employment any employee of Sellers
or any of their Affiliates who have provided services in relation to the Assets
or with whom Buyers or EVOC have had contact or who became known to Buyers or
EVOC in connection with Buyers’ consideration of the transactions contemplated
by this Agreement, except as to the Available Employees (as defined below);
provided that, so long as Buyers and EVOC have not breached their obligations
hereunder, Buyers and EVOC shall not be precluded from hiring any such employee
or other Person who (1) responds to any advertisement to the public or the
industry generally that is not directly or indirectly targeted at employees of
the Sellers or any of their Affiliates, or (2) has been terminated (and not
rehired) by Sellers or any of their Affiliates at least six months prior to
commencement of employment discussions between Buyers or EVOC and such employee
or other Person.  Buyers, EVOC or their Affiliates, in their sole discretion,
may make offers of employment to those certain of the Sellers’ employees listed
in Schedule 8.3(d) (the “Available Employees”).  From and after the Execution
Date until the Closing Date, Sellers shall reasonably cooperate with Buyers and
EVOC in permitting Buyers, EVOC or their Affiliates, upon reasonable notice to
Sellers, reasonable access to the Available Employees to interview such
Available Employees during normal business hours and to communicate any
information concerning employment offers and employment with Buyers, EVOC or
their Affiliates.  Without limitation to the foregoing, however, Sellers shall
have the right to make competing offers to the Available Employees to remain
employees of Sellers.

 

(e)                                  Government Reviews.  In a timely manner,
the Parties and EVOC shall (1) make all required filings, prepare all required
applications and conduct negotiations with each Governmental Entity as to which
such filings, applications or negotiations are necessary or appropriate in the
consummation of the transactions contemplated hereby and (2) provide such
information as each may reasonably request to make such filings, prepare such
applications and conduct such negotiations.  Each Party and EVOC shall
reasonably cooperate with and use all commercially reasonable efforts to assist
the other with respect to such filings, applications, and negotiations.  Without
limiting the foregoing, if the Parties determine that a filing under the HSR Act
is required, then, within ten Business Days following the Execution Date, the
Parties will prepare and file with the DOJ and the FTC the notification and
report form required by the HSR Act for the transactions contemplated by this
Agreement, and request early termination of the waiting period thereunder.  Each
of the Parties agree to respond promptly to any inquiries from the DOJ or the
FTC concerning such filings and to comply in all material respects with the
filing requirements of the HSR Act.  The Parties shall cooperate with each other
and shall promptly furnish all information to the other Parties that is
necessary in connection with Buyers’ compliance with the HSR Act.  The Parties
shall use their commercially reasonable efforts to take all actions reasonably
necessary and appropriate in connection with any HSR Act filing to consummate
the transactions consummated hereby.  All filing fees incurred in

 

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connection with the HSR Act filings made pursuant to this Section 8.3(e) shall
be borne one-half by Buyers and one-half by Sellers.

 

(f)                                   Amendment of Schedules.  Buyers agree that
Sellers shall have the continuing right until Closing to add, supplement or
amend the Schedules and Exhibits with respect to any matter hereafter arising or
discovered which, if existing or known as of the Execution Date or thereafter,
would have been required to be set forth or described in such Schedules. 
Simultaneously with any such addition, supplement or amendment, Sellers shall
provide copies thereof to Buyers.  For purposes of determining whether the
conditions set forth in ARTICLE 10 have been fulfilled, the Schedules to
Sellers’ representations and warranties contained in ARTICLE 6 shall be deemed
to include only that information contained therein on the Execution Date and
shall be deemed to exclude all information contained in any addition, supplement
or amendment thereto; provided, however, that if Closing shall occur, then all
matters disclosed pursuant to any such addition, supplement or amendment at or
prior to Closing which relate to events, actions or omissions which arose or
relate to periods of time between the Execution Date and Closing shall be waived
and deemed part of the Schedules for all purposes and Buyers shall not be
entitled to make any Claim with respect thereto pursuant to the terms of this
Agreement or otherwise.  For the avoidance of doubt and notwithstanding anything
in the foregoing to the contrary (1) Buyers shall be entitled to make a Claim
pursuant to Section 14.2(a)(1) with respect to any addition, supplement or
amendment of the Schedules to Sellers’ representations and warranties contained
in ARTICLE 6 pursuant to this Section 8.3(f) to the extent (and only to the
extent) that the event, action or omission which gave rise to such addition,
supplement or amendment arose or related to periods of time prior to the
Execution Date, and (2) Sellers shall be entitled to supplement, modify and/or
amend Schedule 1.1(c) prior to Closing, and such Schedule (as so supplemented,
modified and/or amended) shall, for all purposes under this Agreement (including
ARTICLE 10 and Section 12.3), be deemed to include all the information contained
therein on the Closing Date.

 

(g)                                  Confidentiality Agreement.  Upon the
Closing Date, the Parties agree that the Confidentiality Agreement shall
terminate.

 

ARTICLE 9
TAX MATTERS

 

9.1                               Asset Tax Liability.  Subject to the treatment
of real property Taxes, personal property Taxes and similar ad valorem Taxes
(“Property Taxes”) provided below, all Asset Taxes for Tax periods that begin
before and end on or after the Effective Time shall be allocated between Buyers
and Sellers as of the Effective Time for all taxable periods that include the
Effective Time.  All Asset Taxes that are not Property Taxes shall be allocated
to Sellers to the extent they relate to Hydrocarbon production prior to the
Effective Time and to Buyers to the extent they relate to Hydrocarbon production
on or after the Effective Time.  No liability for Asset Taxes shall duplicate an
adjustment to Purchase Price made pursuant to Section 2.4.  Property Taxes for
each assessment period shall be allocated to Sellers based on the percentage of
the assessment period occurring before the Effective Time and to Buyers based on
the percentage of the assessment period occurring on or after the Effective
Time.  Each Party shall promptly furnish to the other Party copies of any Asset
Tax assessments and statements (or invoices therefor from any applicable Third
Party operator of the Assets) received by it, to the

 

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extent such assessment, statement, or invoice relates to an Asset Tax allocable
to the other Party under this Section 9.1.  Sellers shall estimate all Asset
Taxes asserted against it that are attributable to the ownership or operation of
the Assets to the extent relating to the period on and after the Effective Time
and through the Closing Date, together with all Subject Transfer Taxes, and
incorporate such estimates into the Preliminary Settlement Statement.  The
actual amounts (to the extent the actual amounts differ from the estimates
included in the Preliminary Settlement Statement and are known at the time of
the Final Settlement Statement) shall be accounted for in the Final Settlement
Statement. If the actual amounts are not known at the time of the Final
Settlement Statement, the amounts shall be re-estimated, as necessary, based on
the best information available at the time of the Final Settlement Statement.

 

9.2                               Transfer Taxes.  All sales, use, transfer,
stamp, documentary, registration, value-added and other similar Taxes (including
all applicable real estate transfer Taxes but excluding Taxes on gross income,
net income, gross receipts or margin), duties, levies, recording fees or other
governmental charges incurred by or imposed with respect to the property
transfers undertaken pursuant to this Agreement (“Subject Transfer Taxes”) shall
be the responsibility of, and shall be paid by, Buyers.  The Parties shall
reasonably cooperate in taking steps that would minimize or eliminate any
Subject Transfer Taxes.  Buyers agree to file all Subject Transfer Tax Returns
relating to such Subject Transfer Taxes and to reasonably consult with Sellers
regarding any such filing. Upon filing, Buyers shall promptly provide Sellers
with a copy of all Subject Transfer Tax Returns.

 

9.3                               Asset Tax Returns.  Sellers shall provide
Buyers with any information Sellers have that is reasonably necessary for Buyers
to file any required Tax Return with respect to Asset Taxes that are due after
the Closing Date.  All such Tax Returns shall be prepared by Buyers in a manner
consistent with the prior practice of Sellers, to the extent permitted by Law
and in a manner consistent with the allocation described in Section 2.3(a),
Section 2.3(b) and, if applicable, the final Section 1060 Allocation Schedule. 
Buyers shall provide Sellers with copies of completed drafts of such Tax Returns
at least 20 days prior to the due date for filing thereof, to the extent
reasonably practicable, along with supporting work papers, for Sellers’ review. 
Buyers shall consider in good faith any comment that Sellers submit to Buyers no
less than ten days prior to the due date of such Tax Returns.  Buyers shall file
all such Tax Returns and, subject to the provisions of Section 9.1, pay all
Asset Taxes due and payable with respect to such Tax Returns.  To the extent
Buyers make any payment of Asset Taxes pursuant to this Section 9.3 for which
Sellers are liable pursuant to Section 9.1 and which exceeds the amount taken
into account in the Final Settlement Statement, Sellers shall reimburse Buyers
for such excess amount no later than ten days after Buyers deliver a statement
to Sellers setting forth the amount of reimbursement to which Buyers are
entitled along with such supporting evidence as is reasonably necessary to
calculate the amount of reimbursement.

 

9.4                               Tax Cooperation.  Buyers and Sellers shall
each cooperate fully as and to the extent reasonably requested by the other
Party, in connection with the filing of any Tax Returns and any audit,
litigation or other proceeding (each, a “Tax Proceeding”) with respect to Taxes
relating to or in connection with the Assets.  Such cooperation shall include
the retention and (upon the other Party’s request) the provision of such Records
and information which are reasonably relevant to any such Tax Return or Tax
Proceeding and making employees available

 

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on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder.

 

ARTICLE 10
CONDITIONS PRECEDENT TO CLOSING

 

10.1                        Conditions to Obligations of Both Parties.  The
obligations of each Party at the Closing are subject to the satisfaction (or
written waiver by both Parties) at or prior to the Closing of the following
conditions precedent:

 

(a)                                 Governmental Entity Consents.  All consents
and approvals of any Governmental Entity (including those required by the HSR
Act, if applicable) required for the consummation of the transactions
contemplated hereby, except for Customary Post-Closing Consents, shall have been
granted, or the necessary waiting period shall have expired, or early
termination of the waiting period shall have been granted.

 

(b)                                 No Governmental Injunctions or Restraints. 
No temporary restraining order, preliminary or permanent injunction, or other
legal restraint, prohibition or order issued by any court of competent
jurisdiction or Governmental Entity preventing the consummation of the
transactions contemplated by this Agreement will be in effect; and

 

(c)                                  No Action.  No action will have been taken,
nor any statute, rule, or regulation will have been enacted, by any Governmental
Entity that makes the consummation of the transactions contemplated by this
Agreement illegal.

 

10.2                        Sellers’ Conditions.  The obligations of Sellers at
the Closing are subject, at the option of Sellers, to the satisfaction or waiver
at or prior to the Closing of the following conditions precedent:

 

(a)                                 All representations and warranties of Buyers
and EVOC contained in ARTICLE 7 will be true and correct in all material
respects (other than those representations and warranties qualified with respect
to materiality, which shall be true and correct in all respects) as of the
Closing Date as though made on and as of the Closing Date (except to the extent
that such representations and warranties are made as of another specified date,
in which case such representations and warranties shall be true and correct in
all material respects (other than those representations and warranties qualified
with respect to materiality, which shall be true and correct in all respects) as
of such specified date);

 

(b)                                 Buyers and EVOC shall have performed and
satisfied in all material respects all covenants and agreements required by this
Agreement to be performed and satisfied by Buyers and EVOC (individually or as
to its share of any joint obligations with Sellers) at or prior to the Closing;
and

 

(c)                                  Buyers and EVOC shall have delivered, or be
ready, willing and able to deliver, to Sellers the deliverables set forth in
Section 12.3.

 

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10.3                        Buyers’ Conditions.  The obligations of Buyers at
the Closing are subject, at the option of Buyers, to the satisfaction or waiver
at or prior to the Closing of the following conditions precedent:

 

(a)                                 All representations and warranties of
Sellers contained in ARTICLE 6 will be true and correct in all material respects
(other than those representations and warranties qualified with respect to
materiality, which shall be true and correct in all respects) as of the Closing
Date as though made on and as of the Closing Date (except to the extent that
such representations and warranties are made as of another specified date, in
which case such representations and warranties shall be true and correct in all
material respects (other than those representations and warranties qualified
with respect to materiality, which shall be true and correct in all respects) 
as of such specified date); provided, that the foregoing condition shall be
deemed to have been satisfied unless the individual or aggregate impact of all
inaccuracies of such representations and warranties would constitute a Material
Adverse Effect;

 

(b)                                 Sellers shall have performed and satisfied
in all material respects all covenants and agreements required by this Agreement
to be performed and satisfied by Sellers (individually or as to its share of any
joint obligations with Buyers) at or prior to the Closing; and

 

(c)                                  Sellers shall have delivered, or be ready,
willing and able to deliver, to Buyers the deliverables set forth in
Section 12.3.

 

ARTICLE 11
RIGHT OF TERMINATION

 

11.1                        Termination.  This Agreement may be terminated prior
to Closing as follows:

 

(a)                                 by the mutual written agreement of Sellers
and Buyers;

 

(b)                                 by Buyers, if any of the conditions set
forth in Section 10.3 have not been satisfied by Sellers on or before the
Outside Termination Date;

 

(c)                                  by Sellers, if any of the conditions set
forth in Section 10.2 have not been satisfied by Buyers or EVOC on or before the
Outside Termination Date;

 

(d)                                 by Buyers, if all of the conditions set
forth in Section 10.1, Section 10.2 and Section 10.3 have been satisfied (or,
with respect to the conditions set forth in Section 10.3, waived in writing by
Buyers), in each case, on or before the Outside Termination Date and Sellers
nevertheless refuse or fail to close the transactions contemplated by this
Agreement;

 

(e)                                  by Sellers, if all of the conditions set
forth in Section 10.1, Section 10.2 and Section 10.3 have been satisfied (or,
with respect to the conditions set forth in Section 10.2, waived in writing by
Sellers), in each case, on or before the Outside Termination Date and Buyers
nevertheless refuse or fail to close the transactions contemplated by this
Agreement;

 

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(f)                                   by Sellers or Buyers if any of the
conditions set forth in Section 10.1 are not satisfied on or before the Outside
Termination Date; or

 

(g)                                  by either Sellers or Buyers, if the sum of
(1) the Title Adjustment Amount, (2) the Environmental Adjustment Amount and
(3) the Allocated Value of any Assets removed from the transactions contemplated
by this Agreement pursuant to Section 4.2(j)(2), Section 4.4(a),
Section 4.4(b) or Section 5.3(e)(3), exceeds, in the aggregate (i.e.
collectively as to clauses (1) and (2) above), 25% of the unadjusted Purchase
Price;

 

provided, however, that neither Buyers nor Sellers shall have the right to
terminate this Agreement pursuant to Section 11.1(b) or Section 11.1(c) if such
Party is at such time in material breach of any provision of this Agreement.

 

11.2                        Liabilities Upon Termination.  If this Agreement is
terminated pursuant to any provision of Section 11.1, then, except (x) for the
provisions of Sections 1.1, 1.2, 3.3(b),3.3(c), 3.3(d), 3.3(e), 3.4, 8.1(c),
8.2(c), 8.3(d), 11.2, 11.3, and 14.2(e) and ARTICLE 15, this Agreement shall
forthwith terminate and become void, and (y) as is expressly provided in this
Section 11.2, the Parties shall have no further liability or obligation
hereunder and each Party waives all remedies available at law or in equity on
account of the termination of this Agreement.

 

(a)                                 If Sellers terminate this Agreement pursuant
to (1) Section 11.1(c) due to a willful breach of this Agreement by Buyers or
EVOC or (2) Section 11.1(e), then, in each case, Sellers shall be entitled
(A) to terminate this Agreement and to the Performance Deposit together with all
interest accrued thereon, free and clear of any Claims thereon by Buyers or
their Affiliates, as liquidated damages, or (B) to seek enforcement of specific
performance of this Agreement, in either case, as Sellers’ sole remedy
hereunder.  Buyers, EVOC and Sellers each agree to waive any requirement for the
posting of a bond in connection with any such equitable relief in favor of the
other Party.

 

(b)                                 If Buyers terminate this Agreement pursuant
to (1) Section 11.1(b) due to a willful breach of this Agreement by Sellers or
(2) Section 11.1(d), then, in each case, Buyers shall be entitled (A) to
terminate this Agreement and to a return of the Performance Deposit together
with all interest accrued thereon, free and clear of any Claims thereon by
Sellers or their Affiliates, as liquidated damages, or (B) to seek enforcement
of specific performance of this Agreement, in either case, as Buyers’ sole
remedy hereunder.  Buyers and Sellers each agree to waive any requirement for
the posting of a bond in connection with any such equitable relief in favor of
the other Party.

 

(c)                                  If this Agreement is terminated for any
reason other than as set forth in Section 11.2(a) or Section 11.2(b), then the
Performance Deposit together with all interest accrued thereon shall be returned
to Buyers, free and clear of any claims thereon by Sellers or their Affiliates,
and Sellers shall have no further liability hereunder.

 

(d)                                 Pursuant to the terms of this Section 11.2,
Buyers and Sellers shall deliver to the Performance Deposit Bank a signature to
release to Sellers or Buyers, as

 

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applicable, from escrow an amount equal to the Performance Deposit together with
all interest accrued thereto.

 

11.3                        Return of Documentation and Confidentiality.  Upon
termination of this Agreement, Buyers and EVOC shall promptly return to Sellers
or destroy all title, engineering, geological and geophysical data,
environmental assessments and/or reports, maps and other information whatsoever
furnished by Sellers to Buyers or EVOC or prepared by or on behalf of Buyers or
EVOC in connection with the Due Diligence Review or the transactions
contemplated hereby.  An officer of each Buyer or EVOC, as applicable, shall
certify same to Sellers in writing.

 

ARTICLE 12
CLOSING

 

12.1                        Date of Closing.  Subject to the conditions stated
in this Agreement, the consummation of the transactions contemplated by this
Agreement (the “Closing”) shall occur on (a) August 1, 2013, provided that if
the conditions set forth in Section 10.1, Section 10.2, and Section 10.3 (other
than any such conditions that by their nature cannot be satisfied until the
Closing Date) have not been satisfied or waived in writing as of such date, then
on the fifth Business Day after satisfaction (or waiver) of such conditions, or
(b) such other date as Buyers and Sellers may agree upon in writing.  The date
Closing occurs shall be the “Closing Date”.

 

12.2                        Place of Closing.  The Closing shall be held at the
offices of Sellers at 10:00 a.m. Tulsa, Oklahoma time or at such other time and
place as Buyers and Sellers may agree in writing.

 

12.3                        Closing Obligations.  At Closing, the following
events shall occur, each being a condition precedent to the others and each
being deemed to have occurred simultaneously with the others:

 

(a)                                 Sellers and Buyers shall each execute and
deliver counterparts of the Assignment, Bill of Sale and Conveyance of the
Assets and the Specified Contracts, effective as of the Effective Time,
substantially in the form of Exhibit E (the “Assignment”), for recordation in
each jurisdiction in which the Assets are located;

 

(b)                                 Sellers shall deliver possession of the
Assets.

 

(c)                                  Sellers and Buyers shall each execute and
deliver an Assignment and Assumption Agreement with respect to the Specified
Contracts, effective as of the Effective Time, substantially in the form of
Exhibit F;

 

(d)                                 Each Buyer (and EVOC with respect to a
certificate certifying to the satisfaction on the conditions contained in
Section 10.2(b)) shall deliver to Sellers a certificate executed by an
authorized officer of such Buyer or EVOC, as applicable, certifying to the
satisfaction of the conditions contained in Section 10.2(a) and Section 10.2(b),
as applicable;

 

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(e)                                  Sellers and Buyers shall execute and
deliver counterparts of such other assignments, bills of sale, certificates of
title, or deeds necessary to transfer the Assets to Buyers, including any
federal and state forms of assignment, as applicable;

 

(f)                                   Sellers and Buyers shall each execute and
deliver an acknowledgment of the Preliminary Settlement Statement;

 

(g)                                  Each Seller shall deliver to Buyers a
certificate executed by an authorized officer of such Seller certifying to the
satisfaction by such Seller of the conditions contained in Section 10.3(a) and
Section 10.3(b);

 

(h)                                 Sellers and Buyers shall deliver to the
Performance Deposit Bank a jointly executed directive to release to Sellers from
the jointly controlled account an amount equal to the Performance Deposit
together with all interest accrued thereon;

 

(i)                                     Sellers shall transfer to Buyers all
rights, benefits and obligations relating to Hedging Transactions;

 

(j)                                    Buyers shall cause the Closing Amount to
be paid to Sellers by wire transfer of immediately available funds to an account
designated by Sellers in the Preliminary Settlement Statement;

 

(k)                                 Sellers shall execute and deliver transfer
orders or letters in lieu thereof (on a form reasonably acceptable to Buyers),
notifying all purchasers of production of the change in ownership of the Assets
and directing all purchasers of production to make payment to Buyers of proceeds
attributable to production from the Assets;

 

(l)                                     Each Seller shall execute and deliver to
Buyers and EVOC (and to the other working interest owners of the Assets which
such Seller operates, if any) all documents necessary for such Seller to resign
as operator of all those Assets which it currently operates;

 

(m)                             Each Seller shall execute and deliver to Buyers
an affidavit of non-foreign status under Section 1445 of the Code in the form of
Exhibit G; and

 

(n)                                 Sellers, EVOC and Buyers shall take such
other actions and deliver such other documents as are contemplated by this
Agreement.

 

ARTICLE 13
POST-CLOSING OBLIGATIONS

 

13.1                        Post-Closing Adjustments.

 

(a)                                 Final Settlement Statement.  As soon as
practicable after the Closing, but in no event later than 120 days after Closing
except as may be otherwise expressly provided herein, (the “Final Settlement
Statement Due Date”), Sellers will cause to be prepared and delivered to Buyers,
in accordance with GAAP and customary industry accounting practices, a
settlement statement setting forth each adjustment to the Purchase Price in
accordance with

 

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Section 2.4 and showing the calculation of such adjustments and the resulting
final purchase price (the “Final Purchase Price” and such statement, the “Final
Settlement Statement”).  Within 30 days after its receipt of the Final
Settlement Statement, Buyers shall deliver to Sellers a written report
containing any changes that Buyers propose to make to the Final Settlement
Statement.  Buyers’ failure to deliver to Sellers a written report detailing
proposed changes to the Final Settlement Statement by such date shall be deemed
to be an acceptance by Buyers of the Final Settlement Statement delivered by
Sellers.  The Parties shall endeavor to agree in writing with respect to the
changes proposed by Buyers, if any, by no later than 60 days after Buyers’
receipt of Sellers’ proposed Final Settlement Statement.  Should the Parties
fail to agree on the Final Settlement Statement and Final Purchase Price by such
date, either Party may invoke the Dispute resolution procedures provided for in
Section 13.1(b).  The date upon which such agreement is reached or upon which
the Final Purchase Price is determined pursuant to Section 13.1(b) shall be
herein called the “Final Settlement Date.”  If such agreed or determined Final
Purchase Price is more than the Preliminary Purchase Price, Buyers shall pay to
Sellers the amount of such difference by wire transfer in immediately available
funds no later than five Business Days after the Final Settlement Date.  If such
agreed or determined Final Purchase Price is less than the Preliminary Purchase
Price, Sellers shall pay the amount of such difference to Buyers by wire
transfer in immediately available funds no later than five Business Days after
the Final Settlement Date.

 

(b)                                 Dispute Resolution.  Within ten days after
either Party invokes the Dispute resolution procedures of this
Section 13.1(b) pursuant to Section 13.1(a), the Parties shall mutually appoint
an independent expert having the qualifications specified below (the “Accounting
Expert”).  If the Parties are unable to mutually agree upon the Accounting
Expert within such ten day period, then the Parties shall, within ten days after
the expiration of such foregoing ten day period, request that the AAA, acting
through its offices in Houston, Texas, appoint the Accounting Expert.  The
Accounting Expert shall be a certified public accountant having a minimum of ten
years’ experience with regard to the types of matters involved in the Dispute,
shall be without any conflicts of interest as to the Parties, and shall not have
been employed by or undertaken more than $50,000 of work, in the aggregate, for
either Party or its Affiliates within the five year period preceding the
submission of the Dispute.  For the avoidance of doubt, the Accounting Expert
will function as an expert in accordance with the foregoing procedure, not as an
arbitrator.

 

(c)                                  Within 15 days following the appointment of
the Accounting Expert, Sellers shall provide the Accounting Expert with a copy
of this Agreement, and each Party shall provide, both to the Accounting Expert
and to each other, a summary of its position with regard to each such
outstanding matter involving the Final Settlement Statement in a written
document of five pages or less per outstanding Disputed matter.  The Parties
shall instruct the Accounting Expert that, within 30 days after receiving the
Parties’ respective submissions, the Accounting Expert shall render a decision,
choosing only either Buyers’ position or Sellers’ position with respect to each
Disputed matter.

 

(d)                                 Any decision rendered by the Accounting
Expert pursuant hereto shall be final, conclusive and binding on Sellers and
Buyers, and will be enforceable against each Party in any court having
jurisdiction hereof, but is not reviewable by, or appealable to, any court
except in the event of fraud.  The Parties shall each bear one-half of the costs
of the Accounting

 

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Expert and of any associated Dispute resolution proceedings.  The Final
Settlement Statement shall be re-issued by Sellers if and as necessary to
conform to the Accounting Expert’s decision.

 

13.2                        Records.  Sellers shall make the Records available
for pick up by Buyers within 60 days following the Closing Date.  Sellers may
retain copies of the Records, and Sellers shall have the right to review and
copy the original Records during standard business hours and upon reasonable
notice to Buyers for so long as Buyers retain the Records, which shall be a
minimum of six years after the Closing Date.  Buyers agree that the Records will
be maintained in compliance with all applicable Laws governing document
retention.

 

13.3                        Further Assurances.  From time to time after
Closing, Sellers, Buyers and EVOC shall each execute, acknowledge and deliver to
each other such further instruments and take such other action as may be
reasonably requested by such other Party or EVOC, as applicable, at such
requesting Party’s or EVOC’s cost, as applicable, and as are commercially
reasonable to be performed in order to accomplish more effectively the purposes
of the transactions contemplated by this Agreement, including those post-Closing
actions contemplated by Section 4.4(a) and Section 4.4(b).  Promptly after
Closing, Buyers shall:  (a) record the Assignments of the Assets and all state
and federal assignments executed at the Closing in all applicable real property
records and/or, if applicable, all state and federal Governmental Entities, and
Buyers shall provide to Sellers copies of such recorded documents; (b) actively
pursue the approval of all Customary Post-Closing Consents from the applicable
Governmental Entities; and (c) actively pursue all other consents and approvals
that may be required in connection with the assignment of the Assets to Buyers
and the assumption of the rights, interests, obligations and liabilities assumed
by Buyers hereunder that have not been obtained prior to Closing, provided that
Sellers shall reasonably cooperate with Buyers in obtaining such other consents
and approvals, at Buyers’ cost.

 

ARTICLE 14
ASSUMPTION AND RETENTION OF OBLIGATIONS AND INDEMNIFICATION; DISCLAIMERS

 

14.1                        Buyers’ Assumption of Liabilities and Obligations. 
Upon Closing, but without limiting Buyers’ rights to indemnification pursuant to
Section 14.2(a), Buyers shall, jointly and severally, assume and pay, perform,
fulfill and discharge all Claims, costs, expenses, and other obligations and
liabilities whatsoever accruing or relating to (a) * (b) all Plugging and
Abandonment Obligations and Environmental Liabilities involving the Assets; and
(c) * (all of the foregoing, collectively, the “Assumed Liabilities”).

 

14.2                        Indemnification.  For purposes hereof, “Losses”
shall mean any and all costs (including court costs, reasonable fees and
expenses of attorneys, technical experts and expert

 

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* - Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

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witnesses and the costs of investigation), expenses (including interest),
charges, judgments, awards, settlements, damages, penalties, fines,
prosecutions, duties, obligations and other liabilities of any type, including
those incurred pursuant to or otherwise involving any Claim, and including those
pertaining to or in any way derivative from any personal injury, illness or
death, damage, loss or destruction of real or personal property or of any
natural resources, any pollution of other harm to or destruction of the
Environment or infringement upon or other impairment of any intellectual
property rights.

 

(a)                                 Sellers’ Indemnification of Buyers. 
Effective as of Closing, Sellers, jointly and severally, hereby release, defend,
indemnify, and save and hold harmless Buyers, their Affiliates and their and
their Affiliates’ respective officers, directors, members, managers, employees,
representatives and agents (the “Buyer Indemnified Parties”) from and against
all Losses, to the extent attributable to or arising out of (1) any breach by
Sellers of any of Sellers’ representations and warranties contained in ARTICLE 6
(or the corresponding affirmations of such representations and warranties made
by Sellers in the certificate delivered pursuant to Section 12.3(g)); (2) any
breach by Sellers of its covenants and agreements hereunder; (3) Seller Taxes;
(4) any Claims for bodily injury, illness or death accruing prior to the
Effective Time but only to the extent attributable to, arising out of, incident
to or in connection with the operation of the Assets by Sellers prior to the
Effective Time; and (5) any Claims pertaining to the Excluded Assets.

 

(b)                                 Buyers’ Indemnification of Sellers. 
Effective as of Closing, Buyers, jointly and severally, release, defend,
indemnify, and save and hold harmless Sellers, their Affiliates, Warburg Pincus
LLC and Sellers’, their Affiliates’ and Warburg Pincus LLC’s respective
officers, directors, members, managers, employees, representatives and agents
(the “Seller Indemnified Parties”) from and against all Losses to the extent
attributable to or arising out of: (1) the Assumed Liabilities; (2) any breach
by Buyers or EVOC of any of their representations or warranties in ARTICLE 7 (or
the corresponding affirmations of such representations and warranties made by
Buyers and EVOC in their respective certificates delivered pursuant to
Section 12.3(d)); (3) any breach by Buyers or EVOC of their covenants and
agreements hereunder; or (4) Buyer Taxes, EVEN IF SUCH LOSSES ARE ATTRIBUTABLE
TO OR ARISE OUT OF, SOLELY OR IN PART, THE SOLE, ACTIVE, GROSS, PASSIVE,
CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR
VIOLATION OF LAW OF OR BY ANY OF THE SELLERS INDEMNIFIED PARTIES.

 

(c)                                  Limitations on Indemnity.

 

(1)                                 Notwithstanding anything to the contrary set
forth herein, Sellers shall have no liability for defense and indemnification
hereunder or for any Loss pursuant to Section 14.2(a) unless (A) the amount of
an applicable indemnifiable Loss exceeds * (the “Per Item Threshold”) and
(B) the total value of all such Losses in excess of the Per Item Threshold, in
the aggregate, exceeds * of the unadjusted Purchase Price (the “Deductible”),
after which point the Buyer Indemnified Parties shall be entitled to defense and
indemnification pursuant to Section 14.2(a) only to the incremental extent of
the value of any such Losses in excess of the Deductible.

 

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* - Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

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(2)                                 The maximum liability of Sellers for all of
their obligations hereunder and under any Transaction Document, including for
defense and indemnification pursuant to Section 14.2(a) with respect to Losses
suffered by the Buyer Indemnified Parties (including Losses for which the
Deductible applies), shall not exceed, in the aggregate, * (the “Cap”).

 

(3)                                 Notwithstanding the foregoing or anything to
the contrary in this Section 14.2(c), the Per Item Threshold, Deductible and Cap
will not apply to the indemnification obligations of Sellers (A) with respect to
any breach by Sellers of any of their Fundamental Representations, (B) under
Section 14.2(a)(3), (C) under Section 14.2(a)(5) or (D) with respect to any
breach by Sellers of their obligations under Section 13.1; provided, however,
that in no event shall Sellers’ aggregate liability under the aforementioned
provisions of this Agreement and the Transaction Documents, together with all
other liabilities of Sellers under this Agreement and the Transaction Documents,
exceed 100% of the Purchase Price; provided, however, except for liabilities
attributable to Section 14.2(a)(5).

 

(d)                                 Sole Remedy.  Notwithstanding anything to
the contrary contained in this Agreement, from and after Closing, Sellers’ and
Buyers’ and EVOC’s sole and exclusive remedies against each other with respect
to any and all Claims for breaches of the representations, warranties, covenants
and agreements contained in this Agreement or under any other agreement,
contract or instrument contemplated herein (including the affirmations of the
representations and warranties contained in the certificates delivered by each
Party and EVOC at Closing pursuant to Section 12.3(d) and Section 12.3(g), as
applicable) or otherwise in connection with the transactions contemplated
hereby, are exclusively set forth in Section 3.3(d), Section 8.2(a) and this
Section 14.2, and if no such right of defense or indemnification or to be held
harmless is expressly provided in Section 3.3(d), Section 8.2(a) and this
Section 14.2, then such Claims are hereby waived by the Parties to the fullest
extent permitted by Law.  Except for the remedies contained in Section 3.3(d),
Section 8.2(a) and this Section 14.2, each Party and EVOC (including as to its
respective Indemnified Parties) releases, remises, and forever discharges the
other Party (including as to its respective Indemnified Parties) and EVOC, as
applicable, from any and all suits, legal or administrative proceedings, Claims,
demands, damages, Losses, costs, liabilities, interest, causes of action and
other obligations whatsoever, in Law or in equity, known or unknown, which such
Parties might now or subsequently may have, based on, relating to, or arising
out of this Agreement or any other agreement, contract or instrument
contemplated herein, Sellers’ ownership, use, or operation of the Assets, or the
condition, quality, status, or nature of the Assets, INCLUDING RIGHTS TO
CONTRIBUTION OR COST RECOVERY UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE,
COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED, BREACHES OF STATUTORY AND
IMPLIED WARRANTIES, NUISANCE OR OTHER TORT ACTIONS, RIGHTS TO PUNITIVE DAMAGES,
COMMON LAW RIGHTS OF CONTRIBUTION, ANY RIGHTS UNDER INSURANCE POLICIES ISSUED OR
UNDERWRITTEN BY THE OTHER PARTY OR ANY OF ITS AFFILIATES (IN EACH CASE) EVEN IF
CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER ACTIVE OR PASSIVE, SIMPLE
OR GROSS, SOLE, JOINT OR CONCURRENT), STRICT

 

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* - Confidential Information has been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested
with respect to this omitted information.

 

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LIABILITY OR OTHER LEGAL FAULT OF ANY RELEASED PERSON, INVITEE OR THIRD PERSON,
OR BY A PREEXISTING CONDITION.

 

(e)                                  Waiver of Non-Compensatory Damages.  None
of the Buyer Indemnified Parties or Seller Indemnified Parties shall be entitled
to recover from Sellers, Buyers, or their respective Affiliates or other
Representatives, any special, indirect, consequential, punitive, exemplary,
remote or speculative damages, including damages for lost profits of any kind,
arising under or in connection with this Agreement, any other agreement,
contract or instrument contemplated herein or the transactions contemplated
hereby, except to the extent any such Party suffers such damages (including
costs of defense and reasonable attorney’s fees incurred in connection with
defending of such damages) to a Third Party, which damages (including costs of
defense and reasonable attorney’s fees incurred in connection with defending
against such damages) shall not be excluded by this provision as to recovery
hereunder.  Subject to the preceding sentence, Buyers, on behalf of each of the
Buyer Indemnified Parties, and Sellers, on behalf of each of Seller Indemnified
Parties, waive any right to recover any special, indirect, consequential,
punitive, exemplary, remote or speculative damages, including damages for lost
profits of any kind, arising in connection with or with respect to this
Agreement, any other agreement, contract or instrument contemplated herein or
the transactions contemplated hereby.

 

14.3                        Claims Procedure.  The defense, indemnification and
hold harmless obligations contained in Section 3.3(a), Section 8.2(a) and
Section 14.2 shall be implemented as follows:

 

(a)                                 Claim Notice.  The Party seeking defense and
indemnification under the terms of this Agreement (“Indemnified Party”) shall
submit a written “Claim Notice” to the other Party (“Indemnifying Party”) which,
to be effective, must be delivered prior to the end of the survival period
applicable under Section 14.4 to the particular Loss that is the subject of such
Claim Notice and must state, to the extent of the information reasonably
available to the Indemnified Party:  (1) the amount of each payment or other
obligation claimed by an Indemnified Party to be owing or other Loss for which
the Indemnified Party is seeking defense, indemnification and to be held
harmless, (2) the basis for such Claim, with supporting documentation if
available, and (3) a list identifying, to the extent reasonably possible, each
separate item of Loss for which payment or any other obligation is so Claimed. 
Within 30 days of receipt of a Claim Notice, the Indemnifying Party may provide
written notice to the Indemnified Party that it accepts, contests or rejects the
Losses identified in such Claim Notice or its responsibility for same.  Any
failure of the Indemnifying Party to provide such notice within such time period
shall be deemed to be a rejection by such Indemnifying Party of such Losses and
its responsibility for same.  If the Indemnifying Party objects to a Claim
Notice on the basis that it lacks sufficient information, it shall promptly
request from the Indemnified Party any specific additional information
reasonably necessary for it to assess such indemnification Claim, and the
Indemnified Party shall provide the additional information reasonably requested
to the extent reasonably available to it.  Upon receipt of such additional
information, the Indemnifying Party shall notify the Indemnified Party of any
withdrawal or modification of the objection.  All disputed defense,
indemnification and hold harmless Claims shall be resolved by Buyers and Sellers
in accordance with either (A) a mutual agreement between Buyers and Sellers,
which shall be memorialized in writing, or (B) final arbitration in accordance
with Section 15.12, which may be

 

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invoked by either Party at any time when it reasonably believes that the Parties
are unable to reach mutual agreement as to any defense, indemnification and hold
harmless Claim arising under this Agreement.

 

(b)                                 Information.  Promptly after the Indemnified
Party receives notice of a Claim or legal action by a Third Party that may
result in a Loss for which defense, indemnification and the right to be held
harmless may be sought under this ARTICLE 14 (a “Third Party Claim”), the
Indemnified Party shall give written notice of such Third Party Claim to the
Indemnifying Party.  If the Indemnifying Party or its counsel so requests, the
Indemnified Party shall furnish the Indemnifying Party with copies of all
pleadings and other material information reasonably available to the Indemnified
Party with respect to such Third Party Claim.  At the election of the
Indemnifying Party, made within 30 days after receipt of such notice, the
Indemnified Party shall permit the Indemnifying Party to assume sole management
and control of such Third Party Claim (to the extent only that such Third Party
Claim relates to a Loss for which the Indemnifying Party is liable), including
the determination of all appropriate actions, the negotiation of settlements on
behalf of the Indemnified Party, and the conduct of litigation through attorneys
of the Indemnifying Party’s choice; provided, however, that no such settlement
can result in any cost or other liability to the Indemnified Party for which it
is entitled to be defended, indemnified or held harmless hereunder, without its
consent.  If the Indemnifying Party elects to assume such control, (i) any and
all expense incurred by the Indemnified Party thereafter for investigation,
defense or other handling of the matter shall be borne by the Indemnified Party,
except as to those reasonable expenses incurred in responding to any request or
instruction by the Indemnifying Party and (ii) the Indemnified Party shall give
all reasonable information and assistance, other than pecuniary, that the
Indemnifying Party shall reasonably request as necessary for the proper defense
of such Third Party Claim.  In the absence of such an election, the Indemnified
Party will reasonably endeavor to defend, at the Indemnifying Party’s expense,
any Third Party Claim to which such Indemnifying Party’s defense,
indemnification and hold harmless obligation under this ARTICLE 14 applies until
the Indemnifying Party assumes such defense, and, if the Indemnifying Party
fails to assume such defense within the time period provided above, settle or
otherwise resolve the same in the Indemnified Party’s reasonable discretion at
the Indemnifying Party’s expense and liability, subject to the Indemnifying
Party’s consent, which shall not be unreasonably withheld, conditioned or
delayed; provided, further, that if the Indemnifying Party fails to grant such
consent, it shall immediately assume such defense, indemnification and hold
harmless obligation from the Indemnified Party and reimburse the Indemnified
Party for all expenses and other obligations and liabilities incurred by it
prior to such point in time.  If any such Third Party Claim requires immediate
action, both the Indemnified Party and the Indemnifying Party will cooperate in
good faith to take appropriate action so as not to jeopardize the defense of
such Third Party Claim or either Party’s position with respect to such Third
Party Claim.  If the Indemnifying Party is entitled to, and does, assume the
defense of any such Third Party Claim, the Indemnified Party shall have the
right to employ separate counsel at its own expense and to participate in the
defense thereof, subject to the Indemnifying Party’s sole management and control
of the defense of any such Third Party Claim in its sole good faith judgment;
provided, however, that, notwithstanding the foregoing, the Indemnifying Party
shall pay the reasonable attorneys’

 

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fees of the Indemnified Party if the Indemnified Party’s counsel shall have
advised the Indemnified Party in writing that there is a conflict of interest
that could make it inappropriate under applicable standards of professional
conduct to have common counsel for the Indemnifying Party and the Indemnified
Party (provided that the Indemnifying Party shall not be responsible for paying
for more than one separate firm of attorneys and one local counsel to represent
all of the Indemnified Parties subject to such Third Party Claim).  In the event
that the Indemnifying Party has any Dispute regarding whether it is obligated to
defend, indemnify and hold harmless the Indemnified Party as to any Third Party
Claim or other Claim or any Dispute as to the scope of any such defense,
indemnity and hold harmless obligation as to a Third Party Claim or other Claim,
such Dispute shall be resolved in accordance with Section 15.12, which Dispute
resolution process may be invoked by either Party at any time when it reasonably
believes that the Parties are unable to reach mutual agreement as to any
defense, indemnification or hold harmless Claim arising under this Agreement.

 

14.4                        Survival of Warranties, Representations and
Covenants.

 

(a)                                 Subject to Section 14.4(c), (1) the
representations and warranties of the Parties and EVOC, as applicable, in
ARTICLE 6 and ARTICLE 7 (other than, in each case, the Fundamental
Representations) and the affirmations of such representations and warranties
contained in the certificates to be delivered at Closing pursuant to
Section 12.3(d) and Section 12.3(g), as applicable) shall, in each case, survive
the Closing for a period of six months, (2) the Fundamental Representations and
ARTICLE 9 (and the affirmations of such representations, warranties and
covenants contained in the certificate to be delivered at Closing pursuant to
Section 12.3(d) and Section 12.3(g), as applicable) shall survive the Closing
until 30 days after the expiration of the statute of limitations applicable
thereto, and if there is no applicable statute of limitations, such Fundamental
Representations and affirmations shall survive the Closing for a period of five
years, (3) the covenants of Sellers contained in Section 8.1 shall survive the
Closing for a period of six months, except the obligations of Buyers pursuant to
Section 8.1(c) shall survive the Closing without time limit, (4) the covenants
of each Buyer contained in Section 8.2(c) shall terminate at Closing, (5) the
obligations of each Buyer pursuant to Section 8.2(e) shall survive the Closing
without time limit and (6) the remaining covenants and agreements of the Parties
contained herein (other than those contained in Section 14.1 and Section 14.2,
which shall survive as specified in Section 14.4(c)), shall survive the Closing
for a period of 12 months.  Except for Section 14.4(a)(5), it is the intent of
the Parties to shorten the application of the statute of limitations as set
forth in this Section 14.4(a).

 

(b)                                 Representations, warranties, covenants and
agreements (and any certificate related thereto) 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 through a Claim Notice delivered
pursuant to Section 14.3 with respect to such a warranty, covenant or agreement
prior to its expiration date.

 

(c)                                  The indemnities in (1) Section 14.2(a)(1),
Section 14.2(a)(2), Section 14.2(b)(2) and Section 14.2(b)(3) shall terminate as
of the termination date of each respective representation, warranty, covenant or
agreement that is subject to indemnification,

 

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except in each case as to matters for which a Claim Notice has been delivered to
the Indemnifying Party on or before such termination date, (2)
Section 14.2(a)(4) shall survive the Closing for a period of six months, (3)
Section 14.2(a)(3) and Section 14.2(b)(4), shall survive the Closing until 30
days after the expiration of the statute of limitations applicable thereto, and
(4) Section 14.2(b)(1) and Section 14.2(a)(5), shall survive the Closing without
time limit.

 

14.5                        Reservation as to Non-Parties.  Nothing herein is
intended to limit or otherwise waive any recourse Buyers, EVOC or Sellers may
have against any Third Party for any obligations or liabilities that may be
incurred with respect to the Assets.

 

14.6                        Tax Treatment of Indemnity Payments.  Any payment
pursuant to this ARTICLE 14 shall be treated for Tax purposes as an adjustment
to the Purchase Price, except to the extent otherwise required by applicable
Law.

 

ARTICLE 15
MISCELLANEOUS

 

15.1                        Schedules and Exhibits.  The Schedules and Exhibits
hereto constitute a part of this Agreement. A matter set forth in one section of
a Schedule need not be set forth in any other section of such Schedule so long
as its relevance to such other section of the Schedule is reasonably apparent on
the face of the information disclosed therein to Buyers. The disclosure of any
matter or item in the Schedules shall not be deemed to constitute an
acknowledgment that any such matter is required to be disclosed or is material
or that such matter would or would reasonably be expected to result in a
Material Adverse Effect.

 

15.2                        Expenses.  Except as may be otherwise specifically
provided herein, all fees, costs and expenses incurred by Buyers, EVOC or
Sellers in negotiating this Agreement or in consummating the transactions
contemplated by this Agreement shall be paid by the Party incurring the same,
including engineering, land, title, legal and accounting fees, costs and
expenses.  Notwithstanding any other provision of this Agreement, Sellers shall
pay all Seller Transaction Costs and Buyers shall pay all Buyer Transaction
Costs.

 

15.3                        Notices.  All notices and communications required or
permitted under this Agreement shall be in writing and addressed as set forth
below.  Any communication or delivery hereunder shall be deemed to have been
duly made and the receiving Party or EVOC, as applicable, charged with notice as
follows: (a) if personally delivered, when received; (b) if sent by facsimile,
with electronic confirmation of delivery, if sent during normal business hours
on a Business Day, and if not sent during normal business hours on a Business
Day, on the next subsequent Business Day; (c) if mailed certified mail, return
receipt requested, on the day such notice is received, and if such day is not a
Business Day, on the next subsequent Business Day, or (d) if sent by overnight
courier, the next Business Day after placement into the custody of the overnight
courier.  All notices shall be addressed as follows:

 

If to Buyers or EVOC:

If to Sellers:

 

 

EnerVest, Ltd.

Laredo Petroleum, Inc.

1001 Fannin, Suite 800

15 W. Sixth Street, Suite 1800,

Houston, TX 77002

Tulsa, Oklahoma 74119

 

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Attn: 

Phil DeLozier

Attn: 

Kenneth. E. Dornblaser

 

Senior Vice President, Operations

 

Senior Vice President & General

Phone: (713) 659-3500

 

Counsel

Fax:  (713) 659-3556

Phone:  (918) 513 - 4570

Email:pdelozier@enervest.net

Fax:  (918) 513 - 4571

 

 

With a copy to:

With a copy to:

(which shall not constitute notice hereunder)

(which shall not constitute notice hereunder)

 

 

EnerVest, Ltd.

Akin Gump Strauss Hauer & Feld LLP

1001 Fannin, Suite 800

1111 Louisiana Street, 44th Floor

Houston, TX  77002

Houston, Texas 77002

Attn:

Fabené J. Welch

Attn: Christine B. LaFollette

 

Senior Vice President and General

Phone: (713) 220-5800

 

Counsel

Fax: (713) 236-0822

Phone: (713) 495-5386

 

Email:  fwelch@enervest.net

 

 

Any Party or EVOC may, by three Business Days’ prior written notice so delivered
to the other Party or EVOC, change the address or individual to which delivery
shall thereafter be made.

 

15.4                        Amendments.  This Agreement may not be amended
except by an instrument expressly modifying this Agreement signed by each of the
Parties.  Except for waivers specifically provided for in this Agreement, no
waiver by either Party of any breach of any provision of this Agreement shall be
binding unless made expressly in writing.  No waiver of any of the provisions of
this Agreement shall be deemed, or shall constitute, a waiver of any other
provision hereof (regardless of whether similar), and no such waiver shall
constitute a continuing waiver unless expressly so provided.  Delay in the
exercise, or non-exercise, of any such right is not a waiver of that right.

 

15.5                        Assignment.  Neither Party shall assign all or any
portion of its respective rights or delegate all or any portion of its
respective duties and obligations hereunder without the prior written consent of
the other Party.  Any such attempted assignment which does not comply with the
foregoing provisions shall be deemed null and void.

 

15.6                        DISCLAIMERS.

 

(a)                                 EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN ARTICLE 6, THE AFFIRMATIONS OF SUCH REPRESENTATIONS AND
WARRANTIES CONTAINED IN THE CERTIFICATES TO BE DELIVERED BY SELLERS AT CLOSING
PURSUANT TO SECTION 12.3(g) AND THE SPECIAL WARRANTY SET FORTH IN THE
ASSIGNMENT, NEITHER SELLERS NOR ANY OTHER PERSON MAKE (AND BUYERS AND EVOC ARE
NOT RELYING UPON) ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY WITH
RESPECT TO THE ASSETS (INCLUDING THE VALUE, CONDITION OR USE OF ANY ASSET) OR
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AND SELLERS DISCLAIM ANY OTHER
REPRESENTATIONS OR WARRANTIES (WHETHER

 

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EXPRESS, IMPLIED, STATUTORY OR OTHERWISE) OR OTHER UNDERTAKINGS NOT CONTAINED IN
THIS AGREEMENT, WHETHER MADE BY SELLERS, ANY AFFILIATE OF SELLERS OR ANY OF
THEIR RESPECTIVE OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES, AGENTS, CONSULTANTS
OR OTHER REPRESENTATIVES.

 

(b)                                 EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN ARTICLE 6, THE AFFIRMATIONS OF SUCH REPRESENTATIONS AND
WARRANTIES CONTAINED IN THE CERTIFICATES TO BE DELIVERED BY SELLERS AT CLOSING
PURSUANT TO SECTION 12.3(g) AND THE SPECIAL WARRANTY SET FORTH IN THE
ASSIGNMENT, SELLERS DISCLAIM ALL LIABILITY AND RESPONSIBILITY FOR ANY
REPRESENTATION, WARRANTY, PROJECTION, FORECAST, STATEMENT OR INFORMATION MADE,
COMMUNICATED OR FURNISHED (ORALLY OR IN WRITING) TO BUYERS OR ANY OF THEIR
AFFILIATES OR ANY OF ITS REPRESENTATIVES, INCLUDING ANY OPINION, INFORMATION,
PROJECTION OR ADVICE THAT MAY HAVE BEEN OR MAY BE PROVIDED TO BUYERS BY ANY
REPRESENTATIVE OF SELLERS OR ANY OF THEIR AFFILIATES.

 

(c)                                  EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN ARTICLE 6, THE AFFIRMATIONS OF SUCH REPRESENTATIONS AND
WARRANTIES CONTAINED IN THE CERTIFICATES TO BE DELIVERED BY SELLERS AT CLOSING
PURSUANT TO SECTION 12.3(g) AND THE SPECIAL WARRANTY SET FORTH IN THE
ASSIGNMENT, AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLERS
EXPRESSLY DISCLAIM ANY REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, STATUTORY
OR OTHERWISE, AS TO (1) SELLERS’ TITLE TO ANY OF THE ASSETS, (2) THE CONTENTS,
CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY
PETROLEUM ENGINEERING OR OTHER CONSULTANT, ANY GEOLOGICAL OR SEISMIC DATA OR
INTERPRETATION, OR ANY OTHER TECHNICAL, FINANCIAL, COMMERCIAL OR OTHER ANALYSIS
OR EVALUATION RELATING TO THE ASSETS, (3) THE QUANTITY, QUALITY OR
RECOVERABILITY OF HYDROCARBONS IN OR FROM THE ASSETS, (4) ANY ESTIMATES OF THE
VALUE OF THE ASSETS OR PAST, PRESENT OR FUTURE REVENUES OR PROFITS GENERATED BY
THE ASSETS, (5) THE PRODUCTION OF HYDROCARBONS FROM THE ASSETS, OR WHETHER
PRODUCTION FROM THE ASSETS HAS BEEN CONTINUOUS OR IN PAYING QUANTITIES, (6) THE
MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF
THE ASSETS, OR (7) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN OR THAT
MAY BE MADE AVAILABLE OR COMMUNICATED TO BUYERS, EVOC OR THEIR AFFILIATES, OR
ITS OR THEIR RESPECTIVE REPRESENTATIVES IN CONNECTION WITH THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING
THERETO.

 

(d)                                 EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN ARTICLE 6, THE AFFIRMATIONS OF SUCH REPRESENTATIONS AND
WARRANTIES CONTAINED IN THE CERTIFICATES TO BE DELIVERED BY

 

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SELLERS AT CLOSING PURSUANT TO SECTION 12.3(g) AND THE SPECIAL WARRANTY SET
FORTH IN THE ASSIGNMENT, SELLERS FURTHER DISCLAIM ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY OF THE ASSETS, IT
BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES THAT BUYERS SHALL BE DEEMED
TO BE OBTAINING THE ASSETS IN THEIR PRESENT STATUS, CONDITION AND STATE OF
REPAIR, “AS IS” AND “WHERE IS”, WITH ALL FAULTS AND THAT BUYERS HAVE MADE OR
CAUSED TO BE MADE SUCH INSPECTIONS AS BUYERS DEEM APPROPRIATE.

 

(e)                                  EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES CONTAINED IN ARTICLE 7, THE AFFIRMATIONS OF SUCH REPRESENTATIONS AND
WARRANTIES CONTAINED IN THE CERTIFICATES TO BE DELIVERED BY BUYERS AND EVOC AT
CLOSING PURSUANT TO SECTION 12.3(d), NEITHER BUYERS, EVOC NOR ANY AFFILIATE OF
ANY BUYER OR EVOC MAKES (AND SELLERS ARE NOT RELYING UPON) ANY OTHER EXPRESS OR
IMPLIED REPRESENTATION OR WARRANTY WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT, AND BUYERS AND EVOC DISCLAIM ANY OTHER REPRESENTATIONS OR
WARRANTIES (WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE) OR OTHER
UNDERTAKINGS NOT CONTAINED IN THIS AGREEMENT, WHETHER MADE BY BUYERS, EVOC, ANY
AFFILIATE OF ANY BUYER OR EVOC OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS,
MANAGERS, EMPLOYEES, AGENTS, CONSULTANTS OR OTHER REPRESENTATIVES.

 

15.7                        Counterparts Signatures.  This Agreement may be
executed and delivered in one or more counterparts, each of which when executed
and delivered shall be an original, and all of which when executed shall
constitute one and the same instrument.  The exchange of copies of this
Agreement and of signature pages by facsimile or by electronic transmission in
.pdf format shall constitute effective execution and delivery of this Agreement
as to the Parties and EVOC and may be used in lieu of the original Agreement for
all purposes.  Signatures of the Parties and EVOC transmitted by facsimile or
electronic image scan transmission in .pdf format shall be deemed to be their
original signatures for all purposes.  Any Party and EVOC, as applicable, that
delivers an executed counterpart signature page by facsimile or by electronic
scan transmission in .pdf format shall promptly thereafter deliver a manually
executed counterpart signature page to the other Party and EVOC; provided,
however, that the failure to do so shall not affect the validity,
enforceability, or binding effect of this Agreement.

 

15.8                        Governing Law.  THIS AGREEMENT, ALL ISSUES ARISING
HEREUNDER, ALL TRANSACTIONS CONTEMPLATED HEREBY AND ANY ARBITRATION OR EXPERT
DISPUTE RESOLUTION PROCEDURE CONDUCTED PURSUANT HERETO SHALL BE CONSTRUED
EXCLUSIVELY IN ACCORDANCE WITH, AND EXCLUSIVELY GOVERNED BY, THE LAWS OF THE
STATE OF TEXAS, WITHOUT REGARD TO ANY CONFLICTS OF LAWS OR CHOICE OF LAW
PRINCIPLES OR RULES WHICH MAY REFER ANY MATTER TO ANOTHER JURISDICTION FOR
RESOLUTION.

 

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15.9                        Entire Agreement.  This Agreement, the Exhibits, the
Schedules, the Confidentiality Agreement and the documents delivered at Closing
by or on behalf of each Party, EVOC and their Affiliates (collectively, the
“Transaction Documents”) constitutes the entire agreement and understanding
between the Parties and their respective members, shareholders, officers,
directors and employees with respect to the subject matter hereof, superseding
all prior negotiations, discussions, agreements and understandings relating to
such subject matter.

 

15.10                 Binding Effect.  This Agreement shall be binding upon, and
shall inure to the benefit of, the Parties, EVOC and their respective successors
and permitted assigns.

 

15.11                 No Third-Party Beneficiaries.  This Agreement is intended
to benefit only the Parties and their respective Indemnified Parties and their
respective successors and permitted assigns; provided that only each of the
Parties will have the right (but not the obligation) to enforce the provisions
of this Agreement on its own behalf or on behalf of any of its respective
Indemnified Parties.

 

15.12                 Dispute Resolution.  Except as otherwise provided in
Section 2.3(b), Section 4.3, Section 5.3(f) and Section 13.1(b), any Dispute
shall be determined by arbitration administered by the AAA in accordance with
its Commercial Arbitration Rules (the “Rules”) and the provisions of this
Section 15.12.

 

(a)                                 The arbitration shall be conducted by three
arbitrators.  The place of arbitration shall be Houston, Texas.  Within 30 days
of either Party providing notice to the other Party of a Dispute, each Party to
such Dispute shall appoint one arbitrator, and the two arbitrators so appointed
shall select the third and presiding arbitrator within 30 days following
appointment of the second Party-appointed arbitrator.  If either Party fails to
appoint an arbitrator within the permitted time period, then the missing
arbitrator shall be selected by the AAA as appointing authority in accordance
with the AAA Rules.  Any arbitrator nominated or appointed by the AAA shall be a
member of the Large, Complex Commercial Case Panel of the AAA.  In addition to
the rules of the AAA and applicable Law on arbitrator neutrality, no arbitrator
shall have been an employee or consultant to either Party or any of its
Affiliates within the five year period preceding the arbitration, or have any
financial interest in the Dispute.

 

(b)                                 All awards of the arbitral tribunal shall be
final and binding, subject only to grounds and procedures for vacating,
modifying or correcting such under the Federal Arbitration Act (9 U.S.C. § 1 et
seq.).  Judgment on the award may be entered and enforced by any court of
competent jurisdiction hereunder.

 

(c)                                  Notwithstanding the agreement to arbitrate
Disputes in this Section 15.12 (except as provided in Section 2.3(b),
Section 4.3, Section 5.3(f) or Section 13.1(b)), either Party may apply to a
court for interim measures pending appointment of the arbitration tribunal,
including injunction, attachment and conservation orders.  The Parties agree
that seeking and obtaining such court-ordered interim measures shall not waive a
Party’s right to arbitration.  Additionally, the arbitrators (or in an emergency
the chairperson acting alone in the event one or more of the other arbitrators
is unable to be involved in a timely fashion) may grant interim measures
including injunctions, attachments and conservation orders in appropriate

 

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circumstances, which measures may be immediately enforced by court order. 
Hearings on requests for interim measures may be held in person, by telephone or
video conference or by other means that permit the Parties to present evidence
and arguments.  The arbitrators (or chairperson, as the case may be) may require
either Party to provide appropriate security in connection with such measures.

 

(d)                                 The arbitral tribunal is authorized to award
costs, attorneys’ fees and expert witness fees and to allocate such costs and
fees between the Parties.  The award may include interest from the date of any
default, breach or other accrual of a claim until the arbitral award is paid in
full.  The arbitrators may not award indirect, consequential, special, punitive
or exemplary damages except to the extent allowed under the terms of
Section 14.2(e).  Unless otherwise directed by the arbitral tribunal, each Party
shall pay its own expenses in connection with the arbitration.  The cost of the
arbitrators shall be split evenly between the Parties.

 

(e)                                  All negotiations, mediation, arbitration
and expert determinations relating to a Dispute (including a settlement
resulting from negotiation or mediation, an arbitral award, documents exchanged
or produced during a mediation or arbitration proceeding, and memorials, briefs
or other documents prepared for the arbitration) are confidential and may not be
disclosed by the Parties, their respective Affiliates or any of their respective
employees, officers, directors, counsel, consultants and expert witnesses,
except to the extent necessary to enforce any settlement agreement, arbitration
award or expert determination, to enforce other rights of a Party as required by
Law or for a bona fide business purpose, such as disclosure to accountants,
shareholders or Third Party purchasers; provided, however, that breach of this
Section 15.12(e) shall not void any settlement, expert determination or award.

 

(f)                                   Any papers, notices or process necessary
or proper for an arbitration hereunder, or any court action in connection with
an arbitration or an award, may be served on a Party in the manner set forth in
Section 15.13.

 

15.13                 Publicity.  Neither Buyers nor EVOC nor Sellers nor any of
their respective Representatives shall issue or cause the publication of any
press release or other announcement with respect to the transactions
contemplated by this Agreement without the prior written consent of the other
Party (which shall not be unreasonably withheld, conditioned, or delayed),
except as may be required by applicable Law or by the applicable rules,
regulations or orders of any Governmental Entity or stock exchange, in which
case, each Party shall provide the other Party a draft of such release or other
announcement prior to the issuance thereof, and give reasonable consideration to
such comments as the other Party may have, prior to such release or other
announcement.

 

[Signature pages follow]

 

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IN WITNESS WHEREOF, the Parties and EVOC have duly executed this Agreement as of
the day and year first above written.

 

 

 

SELLERS:

 

 

 

 

 

 

 

 

LAREDO PETROLEUM, INC.

 

 

 

 

 

 

 

 

By:

/s/ Randy A. Foutch

 

 

Name:

Randy A. Foutch

 

 

Title:

Chairman and Chief Executive Officer

 

 

 

 

 

 

 

 

LAREDO PETROLEUM TEXAS, LLC

 

 

 

 

 

 

 

 

By:

/s/ Randy A. Foutch

 

 

Name:

Randy A. Foutch

 

 

Title:

Chairman and Chief Executive Officer

 

 

 

 

 

 

 

 

LAREDO GAS SERVICES, LLC

 

 

 

 

 

 

 

 

By:

/s/ Randy A. Foutch

 

 

Name:

Randy A. Foutch

 

 

Title:

Chairman and Chief Executive Officer

 

SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT

 

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BUYERS:

 

 

 

 

 

ENERVEST ENERGY INSTITUTIONAL FUND XII—WIB, L.P.

 

 

 

 

 

By:

EnerVest, Ltd.,

 

 

 

its General Partner

 

 

 

 

 

 

By:

EnerVest Management GP, L.C.,

 

 

 

its General Partner

 

 

 

 

 

 

 

 

 

 

By:

/s/ John B. Walker

 

 

 

John B. Walker

 

 

 

President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

ENERVEST ENERGY INSTITUTIONAL FUND XII—WIC, L.P.

 

 

 

 

 

By:

EnerVest Holding, LLC

 

 

 

its General Partner

 

 

 

 

 

 

By:

EnerVest, Ltd.,

 

 

 

its Sole Member

 

 

 

 

 

 

By:

EnerVest Management GP, L.C.,

 

 

 

its General Partner

 

 

 

 

 

 

 

 

 

 

By:

/s/ John B. Walker

 

 

 

John B. Walker

 

 

 

President and Chief Executive Officer

 

 

 

 

 

 

 

 

ENERVEST ENERGY INSTITUTIONAL FUND XII—A, L.P.

 

 

 

 

 

By:

EnerVest, Ltd.,

 

 

 

its General Partner

 

 

 

 

 

 

By:

EnerVest Management GP, L.C.,

 

 

 

its General Partner

 

 

 

 

 

 

 

 

 

 

By:

/s/ John B. Walker

 

 

 

John B. Walker

 

 

 

President and Chief Executive Officer

 

SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT

 

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ENERVEST ENERGY INSTITUTIONAL FUND XIII—A, L.P.

 

 

 

 

 

By:

EnerVest, Ltd.,

 

 

 

its General Partner

 

 

 

 

 

 

By:

EnerVest Management GP, L.C.,

 

 

 

its General Partner

 

 

 

 

 

 

 

 

 

 

By:

/s/ James M. Vanderhider

 

 

 

James M. Vanderhider

 

 

 

Executive Vice President and

 

 

 

Chief Financial Officer

 

 

 

 

 

 

 

 

ENERVEST ENERGY INSTITUTIONAL FUND XIII—WIB, L.P.

 

 

 

 

 

By:

EnerVest, Ltd.,

 

 

 

its General Partner

 

 

 

 

 

 

By:

EnerVest Management GP, L.C.,

 

 

 

its General Partner

 

 

 

 

 

 

 

 

 

 

By:

/s/ James M. Vanderhider

 

 

 

James M. Vanderhider

 

 

 

Executive Vice President and

 

 

 

Chief Financial Officer

 

SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT

 

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ENERVEST ENERGY INSTITUTIONAL FUND XIII—WIC, L.P.

 

 

 

 

 

By:

EnerVest Holding XIII, LLC,

 

 

 

its General Partner

 

 

 

 

 

 

By:

EnerVest, Ltd.,

 

 

 

its Sole Member

 

 

 

 

 

 

By:

EnerVest Management GP, L.C.,

 

 

 

its General Partner

 

 

 

 

 

 

 

 

 

 

By:

/s/ James M. Vanderhider

 

 

 

James M. Vanderhider

 

 

 

Executive Vice President and

 

 

 

Chief Financial Officer

 

 

 

 

 

 

 

 

For the limited purposes stated herein:

 

 

 

 

 

ENERVEST OPERATING, L.L.C.

 

 

 

 

 

 

 

 

By:

/s/ John B. Walker

 

 

 

John B. Walker

 

 

 

Executive Chairman

 

SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT

 

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