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Exhibit 10.1

 
 
 
 Execution Version

PURCHASE AND SALE AGREEMENT
 

 

 
between
 

 
ANTERO RESOURCES CORPORATION
 
as Seller
 
and
 
VANGUARD PERMIAN, LLC
 
as Buyer
 

 
dated
 
June 1, 2012
 

 

 
 
 

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TABLE OF CONTENTS
 

    Page
ARTICLE I
DEFINITIONS AND INTERPRETATION
1
1.1
Defined Terms
1
1.2
References and Rules of Construction
1

ARTICLE II
PURCHASE AND SALE
2
2.1
Purchase and Sale
2
2.2
Excluded Assets
3
2.3
Revenues and Expenses
3

ARTICLE III
PURCHASE PRICE
4
3.1
Purchase Price
4
3.2
Deposit
4
3.3
Adjustments to Purchase Price
4
3.4
Adjustment Methodology
6
3.5
Preliminary Settlement Statement
6
3.6
Interim Settlement Statement
7
3.7
Final Settlement Statement
7
3.8
Disputes
8
3.9
Allocation of Purchase Price / Allocated Values
8
3.10
Post-Closing Adjustments after Final Settlement Statement
8
3.11
Allocation for Imbalances
8

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
9
4.1
Organization, Existence and Qualification
9
4.2
Authority, Approval and Enforceability
9
4.3
No Conflicts
9
4.4
Consents
9
4.5
Bankruptcy
10
4.6
Foreign Person
10
4.7
Litigation
10
4.8
Material Contracts
10
4.9
No Violation of Laws
11
4.10
Preferential Rights
11
4.11
Royalties, Etc
11
4.12
Imbalances
11
4.13
Current Commitments
11
4.14
Environmental
11
4.15
Production Taxes
12
4.16
Brokers’ Fees
12
4.17
No Known Liabilities
12

 
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ARTICLE V
BUYER’S REPRESENTATIONS AND WARRANTIES
12
5.1
Organization, Existence and Qualification
12
5.2
Authority, Approval and Enforceability
12
5.3
No Conflicts
13
5.4
Consents
13
5.5
Bankruptcy
13
5.6
Litigation
13
5.7
Financing
13
5.8
Regulatory
13
5.9
Independent Evaluation
14
5.10
Brokers’ Fees
14
5.11
Accredited Investor
14

ARTICLE VI
CERTAIN AGREEMENTS
14
6.1
Conduct of Business
14
6.2
Successor Operator
15
6.3
HSR Act
15
6.4
Governmental Bonds
16
6.5
Record Retention
16
6.6
Guarantees
16
6.7
Notifications
16
6.8
Amendment of Schedules
16
6.9
Hedges and Novation Agreements
17
6.10
Audit Rights
17
6.11
Shortfall Amounts
17

ARTICLE VII
BUYER’S CONDITIONS TO CLOSING
18
7.1
Representations
18
7.2
Performance
18
7.3
No Legal Proceedings
18
7.4
Title Defects; Environmental Defects; Casualty; Preferential Rights; Consents
18
7.5
HSR Act
18
7.6
Novation Agreements
18
7.7
FERC Approvals
19
7.8
Closing Deliverables
19

ARTICLE VIII
SELLER’S CONDITIONS TO CLOSING
19
8.1
Representations
19
8.2
Performance
19
8.3
No Legal Proceedings
19
8.4
Title Defects; Environmental Defects; Casualty; Consents
19
8.5
HSR Act
19
8.6
Replacement Bonds and Guarantees
20
8.7
FERC Approvals
20
8.8
Closing Deliverables
20

 
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ARTICLE IX
CLOSING
20
9.1
Date of Closing
20
9.2
Place of Closing
20
9.3
Closing Obligations
20
9.4
Records
21

ARTICLE X
ACCESS/DISCLAIMERS
22
10.1
Access
22
10.2
Confidentiality
23
10.3
Disclaimers
23

ARTICLE XI
TITLE MATTERS; CASUALTY; TRANSFER RESTRICTIONS
25
11.1
Seller’s Title
25
11.2
Notice of Title Defects; Defect Adjustments
26
11.3
Casualty Loss
30
11.4
Preferential Purchase Rights and Consents to Assign
31

ARTICLE XII
ENVIRONMENTAL MATTERS
32
12.1
Notice of Environmental Defects
32
12.2
NORM, Wastes and Other Substances
35

ARTICLE XIII
ASSUMPTION; INDEMNIFICATION; SURVIVAL
35
13.1
Assumption by Buyer
35
13.2
Indemnities of Seller
36
13.3
Indemnities of Buyer
37
13.4
Limitation on Liability
37
13.5
Express Negligence
37
13.6
Exclusive Remedy
37
13.7
Indemnification Procedures
38
13.8
Survival
40
13.9
Waiver of Right to Rescission
40
13.10
Insurance, Taxes
41
13.11
Non-Compensatory Damages
41
13.12
Cooperation by Buyer   Retained Litigation
41
13.13
Disclaimer of Application of Anti-Indemnity Statutes
41

ARTICLE XIV
TERMINATION, DEFAULT AND REMEDIES
41
14.1
Right of Termination
41
14.2
Effect of Termination; Remedies
42
14.3
Return of Documentation and Confidentiality
43

 
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ARTICLE XV
MISCELLANEOUS
43
15.1
Appendices, Exhibits and Schedules
43
15.2
Expenses and Taxes
43
15.3
Assignment
44
15.4
Preparation of Agreement
44
15.5
Publicity
44
15.6
Notices
44
15.7
Further Cooperation
46
15.8
Filings, Notices and Certain Governmental Approvals
46
15.9
Entire Agreement; Conflicts
46
15.10
Parties in Interest
46
15.11
Amendment
47
15.12
Waiver; Rights Cumulative
47
15.13
Governing Law; Jurisdiction
47
15.14
Severability
48
15.15
Removal of Name
48
15.16
Counterparts
48

 
 
 

 

 
 
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LIST OF APPENDICES, EXHIBITS AND SCHEDULES
 
 
Appendix I
―
Defined Terms
     
Exhibit A
―
Leases
Exhibit A-1
―
Wells and Undrilled Locations
Exhibit B
―
Form of Assignment and Bill of Sale
Exhibit C
―
Excluded Assets
     
Schedule 2.1(f)
―
Well Meters
Schedule 2.1(h)
―
Hedges
Schedule 3.8
―
Allocated Values
Schedule 4.4
―
Consents
Schedule 4.7
―
Litigation
Schedule 4.8
―
Material Contracts
Schedule 4.9
―
Violation of Laws
Schedule 4.10
―
Preferential Rights
Schedule 4.11
―
Royalties, Etc.
Schedule 4.12
―
Imbalances
Schedule 4.13
―
Current Commitments
Schedule 4.14
―
Environmental
Schedule 4.15
―
Production Taxes
Schedule 6.1
―
Conduct of Business
Schedule 6.6
―
Guarantees
Schedule 8.6
―
Firm Transportation and Other Arrangements
Schedule 13.1
―
Retained Litigation

 

 

 
 
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PURCHASE AND SALE AGREEMENT
 
 
This PURCHASE AND SALE AGREEMENT (this “Agreement”) is executed as of this 1st
day of June 2012, and is between Antero Resources Corporation, a Delaware
corporation (“Seller”) and Vanguard Permian, LLC, a Delaware limited liability
company (“Buyer”).  Seller and Buyer are each a “Party,” and collectively the
“Parties.”
 
RECITALS
 
Seller desires to sell and assign, and Buyer desires to purchase and pay for,
all of Seller’s right, title and interest in and to the Assets (as defined
hereinafter) effective as of the Effective Time (as defined hereinafter).
 
NOW, THEREFORE, for and in consideration of the mutual promises contained
herein, the benefits to be derived by each Party hereunder, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Seller and Buyer agree as follows:
 
ARTICLE I
 
DEFINITIONS AND INTERPRETATION
 
1.1 Defined Terms.  Capitalized terms used herein shall have the meanings set
forth in Appendix I, unless the context otherwise requires.
 
1.2 References and Rules of Construction.  All references in this Agreement to
Appendices, Exhibits, Schedules, Articles, Sections, subsections and other
subdivisions refer to the corresponding Appendices, Exhibits, Schedules,
Articles, Sections, subsections and other subdivisions of or to this Agreement
unless expressly provided otherwise.  Titles appearing at the beginning of any
Articles, Sections, subsections and other subdivisions of this Agreement are for
convenience only, do not constitute any part of this Agreement, and shall be
disregarded in construing the language hereof.  The words “this Agreement,”
“herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer
to this Agreement as a whole and not to any particular Article, Section,
subsection or other subdivision unless expressly so limited.  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.  Wherever the words “include,” “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without limiting
the foregoing in any respect.” All references to “$” or “dollars” shall be
deemed references to United States Dollars.  Each accounting term not defined
herein will have the meaning given to it under GAAP as interpreted as of the
date of this Agreement.  Pronouns in masculine, feminine or neuter genders shall
be construed to state and include any other gender, and words, terms and titles
(including terms defined herein) in the singular form shall be construed to
include the plural and vice versa, unless the context otherwise
requires.  Appendices, Exhibits and Schedules referred to herein are attached
hereto and by this reference incorporated herein for all purposes.
 
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ARTICLE II
 
PURCHASE AND SALE
 
2.1 Purchase and Sale.  Subject to the terms and conditions of this Agreement,
Seller agrees to sell, and Buyer agrees to purchase and pay for all of Seller’s
right, title and interest in and to the assets described in Section 2.1(a)
through Section 2.1(j) below (such assets, less and except the Excluded Assets,
collectively, the “Assets”):
 
(a) the oil and gas leases and fee mineral interests described in Exhibit A,
subject to any reservations or depth restrictions described in Exhibit A,
together with any and all other right, title and interest of Seller in and to
any leasehold estates created thereby subject to the terms, conditions,
covenants and obligations set forth in such leases and/or Exhibit A, and all
other interests of Seller of any kind or character in such leases and fee
mineral interests, subject (in each case) to any reservation or depth
restrictions described in Exhibit A (such interest in such leases and fee
mineral interests, the “Leases”);
 
(b) all wells located on any of the Leases or on any other lease with which any
Lease has been unitized (such interest in such wells, including the wells set
forth in Exhibit A-1, the “Wells”), and in all Hydrocarbons produced therefrom
or allocated thereto;
 
(c) all rights and interests in, under or derived from all unitization and
pooling agreements in effect with respect to any of the Leases or Wells and the
units created thereby (the “Units”);
 
(d) to the extent that they may be assigned or the extent they may be assigned
upon payment of a fee or other consideration, and Buyer has paid such fee or
other consideration, all Applicable Contracts and all rights thereunder,
including certain firm transportation agreements;
 
(e) to the extent that they may be assigned or the extent they may be assigned
upon payment of a fee or other consideration, and Buyer has paid such fee or
other consideration, all permits, licenses, servitudes, easements and
rights-of-way to the extent used primarily in connection with the ownership or
operation of any of the Leases, Wells, Units or other Assets;
 
(f) all equipment, machinery, fixtures and other personal, moveable and mixed
property, operational and nonoperational, known or unknown, located on any of
the Leases, Wells, Units or other Assets or primarily used in connection
therewith, including pipelines, gathering systems, manifolds, buoys, well
equipment, casing, tubing, pumps, motors, fixtures, machinery, compression
equipment, flow lines, meters (including the meters set forth on Schedule
2.1(f)), processing and separation facilities, structures, materials and other
items primarily used in the operation thereof (collectively, the “Personal
Property”);
 
(g) all Imbalances relating to the Assets;
 
(h) all Hedges;
 
(i) all of the files, records, information and data, whether written or
electronically stored, primarily relating to the Assets in Seller’s or its
Affiliates’ possession, including:  (i) land and title records (including
abstracts of title, title opinions and title curative documents); (ii)
Applicable Contract files; (iii) correspondence; (iv) operations, environmental
and production records; (v) facility and well records; (vi) geologic technical
data, including logs, maps and Seller’s interpretations thereof; and (vii)
copies of any environmental studies that have been prepared with respect to the
Assets, which studies shall be delivered to Buyer in accordance with the
provisions of Section 9.4 (collectively, “Records”); and
 
 
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(j) seismic data which is proprietary to Seller, including any interpretations,
analyses and reports related thereto.
 
2.2 Excluded Assets.  Seller shall reserve and retain all of the Excluded
Assets.
 
2.3 Revenues and Expenses.  Subject to the provisions hereof, Seller shall
remain entitled to all of the rights of ownership (including the right to all
production, proceeds of production (including realized gains on Hedges) and
other proceeds) and shall remain responsible (by payment, through the
adjustments to the Purchase Price hereunder or otherwise) for all Operating
Expenses, in each case, attributable to the Assets for the period of time prior
to the Effective Time.  Subject to the provisions hereof, and subject to the
occurrence of Closing, Buyer shall be entitled to all of the rights of ownership
(including the right to all production, proceeds of production and other
proceeds), and shall be responsible (by payment, through the adjustments to the
Purchase Price hereunder or otherwise) for all Operating Expenses, in each case,
attributable to the Assets for the period of time from and after the Effective
Time.  “Operating Expenses” means all operating expenses (including costs of
insurance and ad valorem, property, severance, production and similar Taxes
based upon or measured by or attributable to the ownership or operation of the
Assets or the production of Hydrocarbons therefrom, but excluding any other
Taxes) and capital expenditures incurred in the ownership and operation of the
Assets in the ordinary course of business and, where applicable, in accordance
with the relevant operating or unit agreement, if any, and overhead costs
charged to the Assets under the relevant operating agreement or unit agreement,
if any, but excluding Liabilities attributable to (i) personal injury or death,
property damage or violation of any Law, (ii) Decommission obligations, (iii)
environmental matters, including obligations to remediate any contamination of
water or Personal Property under applicable Environmental Laws, (iv) obligations
with respect to Imbalances, or (v) obligations to pay Working Interests,
royalties, overriding royalties or other interest owners revenues or proceeds
attributable to sales of Hydrocarbons relating to the Assets, including those
held in suspense.  After Closing, each Party shall be entitled to participate in
all joint interest audits and other audits of Operating Expenses for which such
Party is entirely or in part responsible under the terms of this Section
2.3.  For the avoidance of doubt, Seller shall remain responsible (by payment,
through the adjustments to the Purchase Price hereunder or pursuant to Section
3.10) for all drilling costs, completion costs and other capital expenditures
for work done or services performed prior to the Effective Time in connection
with the operation of the Assets (to the extent actually incurred and billed and
that have not been previously paid, the “Unpaid Capital Costs”), including all
such costs associated with the “Activities Completed, Costs Not Yet Fully Billed
to Antero” noted on Schedule 4.13.
 
 
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ARTICLE III
 
PURCHASE PRICE
 
3.1 Purchase Price.  The purchase price for the Assets shall be $445,000,000.00
(the “Purchase Price”), adjusted in accordance with this Agreement and payable
by Buyer to Seller at Closing by wire transfer in same day funds to a bank
account of Seller (the details of which shall be provided by Seller to Buyer in
the Preliminary Settlement Statement).
 
3.2 Deposit. Concurrently with the execution of this Agreement, Buyer has
deposited by wire transfer in same day funds with Seller the sum of
$22,250,000.00, representing five percent (5%) of the Purchase Price (such
amount, the “Deposit”).  If Closing occurs, the Deposit shall be applied toward
the Adjusted Purchase Price at Closing.
 
3.3 Adjustments to Purchase Price.  The Purchase Price shall be adjusted as
follows, and the resulting amount shall be herein called the “Adjusted Purchase
Price”:
 
(a) The Purchase Price shall be adjusted upward by the following amounts
(without duplication):
 
(i) an amount equal to the value of all Hydrocarbons attributable to the Assets
in storage or at plants (including inventory) and upstream of the pipeline
connection or upstream of the sales meter as of the Effective Time, the value to
be based upon the contract price in effect as of the Effective Time (or the
sales price, if there is no contract price, in effect as of the Effective Time),
less (A) Burdens on such production and (B) severance Taxes deducted by the
purchaser of such production;
 
(ii) an amount equal to all Operating Expenses and all other costs and expenses
paid by Seller that are attributable to the ownership of the Assets during the
Interim Period, whether paid before or after the Effective Time, including (A)
bond and insurance premiums paid by or on behalf of Seller with respect to the
Interim Period, (B) Burdens, (C) rentals and other lease maintenance payments
and (D) property, severance and production Taxes and any other Taxes (exclusive
of income Taxes) based upon or measured by the ownership of the Assets, the
production of Hydrocarbons, or the receipt of proceeds therefrom;
 
(iii) the Title Benefit Amounts of any Title Benefits for which the Title
Benefit Amounts have been determined prior to Closing;
 
(iv) the amount of all Taxes allocated to Buyer but paid by Seller in accordance
with Section 15.2;
 
(v) subject to Section 3.11, to the extent that Seller is underproduced as shown
with respect to the net Well Imbalances set forth in Schedule 4.12, as complete
and final settlement of all Well Imbalances attributable to the Assets, the sum
of $372,063.51 which is an amount equal to the product of the underproduced
volumes times (A) $1.95/MMBtu for gaseous Hydrocarbons or (B) $50.00/Bbl for
liquid Hydrocarbons, as applicable;
 
(vi) subject to Section 3.11, to the extent that Seller has overdelivered any
Hydrocarbons as of the Effective Time as shown with respect to the net Pipeline
Imbalances set forth in Schedule 4.12, as complete and final settlement of all
Pipeline Imbalances attributable to the Assets, the sum of $0.00 which is an
amount equal to the product of the overdelivered volumes times (A) $1.95/MMBtu
for gaseous Hydrocarbons or (B) $50.00/Bbl for liquid Hydrocarbons, as
applicable;
 
 
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(vii) to the extent not included as an Operating Expense for which an adjustment
was made pursuant to Section 3.3(a)(ii), any insurance premiums paid by or on
behalf of Seller with respect to the Interim Period; and
 
(viii) any other amount provided for elsewhere in this Agreement or otherwise
agreed upon by Seller and Buyer.
 
(b) The Purchase Price shall be adjusted downward by the following amounts
(without duplication):
 
(i) an amount equal to all proceeds actually received by Seller attributable to
the ownership or operation of the Assets, including the sale of Hydrocarbons
produced therefrom or allocable thereto during the Interim Period, net of (A)
expenses (other than Operating Expenses and other expenses taken into account
pursuant to Section 3.3(a)) directly incurred in earning or receiving such
proceeds, and (B) any sales, excise or similar Taxes in connection therewith not
reimbursed to Seller by a Third Party purchaser; provided, however, that such
amount shall not include any proceeds received from Hedge settlements
attributable to the calendar month of April 2012;
 
(ii) if Seller makes the election under Section 11.2(d)(i) with respect to a
Title Defect, the Title Defect Amount with respect to such Title Defect if the
Title Defect Amount has been determined prior to Closing;
 
(iii) if Seller makes the election under Section 12.1(b)(i) with respect to an
Environmental Defect, the Remediation Amount with respect to such Environmental
Defect if the Remediation Amount has been determined prior to Closing;
 
(iv) the Allocated Value of the Assets excluded from the transactions
contemplated hereby pursuant to Section 11.2(d)(ii), Section 11.4(a)(i), Section
11.4(b)(i), or Section 12.1(b)(iii);
 
(v) the amount of all Taxes allocated to Seller but payable by Buyer in
accordance with Section 15.2;
 
(vi) subject to Section 3.11, to the extent that Seller is overproduced as shown
with respect to the net Well Imbalances set forth in Schedule 4.12, as complete
and final settlement of all Well Imbalances attributable to the Assets, the sum
of $37,617.72 which is an amount equal to the product of the overproduced
volumes times (A) $1.95/MMBtu for gaseous Hydrocarbons or (B) $50.00/Bbl for
liquid Hydrocarbons, as applicable;
 
(vii) subject to Section 3.11, to the extent that Seller has underdelivered any
Hydrocarbons as of the Effective Time as shown with respect to the net Pipeline
Imbalances set forth in Schedule 4.12, as complete and final settlement of all
Pipeline Imbalances attributable to the Assets, the sum of $0.00 which is an
amount equal to the product of the underdelivered volumes times (A) $1.95/MMBtu
for gaseous Hydrocarbons or (B) $50.00/Bbl for liquid Hydrocarbons, as
applicable;
 
 
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(viii) an amount equal to all proceeds from sales of Hydrocarbons relating to
the Assets and payable to owners of Working Interests, royalties, overriding
royalties and other similar interests (in each case) that are held by Seller in
suspense as of the Closing Date;
 
(ix) an amount equal to the aggregate amount of all payments received by Seller
(or any of its Affiliates) with respect to any Hedges settled after the
Effective Time (which for purposes of the Hedges, shall be May 1, 2012) with
respect to production attributable to any period of time from and after the
Effective Time (which for purposes of the Hedges, shall be May 1, 2012) or as
otherwise agreed upon by Seller and Buyer;
 
(x) any amounts calculated pursuant to Section 6.9;
 
(xi) an amount equal to the Unpaid Capital Costs, which, for purposes of
determining the Final Price pursuant to Section 3.7, shall include amounts owing
but not yet billed (through an invoice or a joint interest billing statement);
and
 
(xii) any other amount provided for elsewhere in this Agreement or otherwise
agreed upon by Seller and Buyer.
 
3.4 Adjustment Methodology.  When available, actual figures will be used for the
adjustments to the Purchase Price at Closing.  To the extent actual figures are
not available, estimates will be used subject to final adjustments in accordance
with Section 3.7 and Section 3.8.
 
3.5 Preliminary Settlement Statement.  Not less than six (6) Business Days prior
to Closing, Seller shall prepare and submit to Buyer for review a draft
settlement statement (the “Preliminary Settlement Statement”) that shall set
forth the Adjusted Purchase Price, reflecting each adjustment made in accordance
with this Agreement as of the date of preparation of such Preliminary Settlement
Statement and the calculation of the adjustments used to determine such amount,
together with the designation of Seller’s accounts for the wire transfers of
funds as required by Section 3.1 and Section 9.3(d).  Within two (2) Business
Days of receipt of the Preliminary Settlement Statement, Buyer will deliver to
Seller a written report containing all changes with the explanation therefor
that Buyer proposes to be made to the Preliminary Settlement Statement.  The
Parties shall in good faith attempt to agree on the Preliminary Settlement
Statement as soon as possible after Seller’s receipt of Buyer’s written
report.  The Preliminary Settlement Statement, as agreed upon by the Parties,
will be used to adjust the Purchase Price at Closing; provided that if the
Parties do not agree upon an adjustment set forth in the Preliminary Settlement
Statement, then the amount of such adjustment used to adjust the Purchase Price
at Closing shall be that amount set forth in the draft Preliminary Settlement
Statement delivered by Seller to Buyer pursuant to this Section 3.5.
 
 
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3.6 Interim Settlement Statement.  On or before August 31, 2012, an interim
settlement statement (the “Interim Settlement Statement”) will be prepared by
Seller, based on the Unpaid Capital Costs attributable to and actual income
received and expenses paid during the period of time commencing with the
Effective Time and ending at 7:00 a.m. (Central Time) on August 31, 2012, that
shall set forth an interim Purchase Price adjustment amount, reflecting only
those adjustments to be made to the Purchase Price pursuant to Sections
3.3(a)(ii), 3.3(b)(i) and 3.3(b)(xi) of this Agreement as of the date of
preparation of such Interim Settlement Statement and the calculation of the
adjustments used to determine such amount.  Within two (2) Business Days of
receipt of the Interim Settlement Statement, Buyer will deliver to Seller a
written report containing all changes with the explanation therefor that Buyer
proposes to be made to the Interim Settlement Statement.  The Parties shall in
good faith attempt to agree on the Interim Settlement Statement as soon as
possible after Seller’s receipt of Buyer’s written report.  In the event the
Parties agree to the amounts set forth in the Interim Settlement Statement, the
interim Purchase Price adjustment amount determined pursuant to this Section 3.6
shall be paid by the owing Party within ten (10) days of such agreement as to
such owed amounts to the owed Party.   If the Parties do not agree upon the
interim Purchase Price adjustment amount set forth in the Interim Settlement
Statement by September 15, 2012, then the amount of such adjustment to be paid
to the owed Party shall be that amount set forth in the draft Interim Settlement
Statement delivered by Seller to Buyer pursuant to this Section 3.6, such amount
to be paid by the owing Party by September 25, 2012 to the owed Party. All
amounts paid pursuant to this Section 3.6 shall be delivered in United States
currency by wire transfer of immediately available funds to the account
specified in writing by the relevant Party.
 
3.7 Final Settlement Statement.  On or before one hundred eighty (180)
days after Closing, a final settlement statement (the “Final Settlement
Statement”) will be prepared by Seller, based on actual income and expenses
during the Interim Period and which takes into account all final adjustments
made to the Purchase Price and shows the resulting final Purchase Price (the
“Final Price”).  The Final Settlement Statement shall set forth the actual
proration of the amounts required by this Agreement.  As soon as practicable,
and in any event within thirty (30) days, after receipt of the Final Settlement
Statement, Buyer shall return to Seller a written report containing any proposed
changes to the Final Settlement Statement and an explanation of any such changes
and the reasons therefor (the “Dispute Notice”).  Any changes not so specified
in the Dispute Notice shall be deemed waived and Seller’s determinations with
respect to all such elements of the Final Settlement Statement that are not
addressed specifically in the Dispute Notice shall prevail.  If Buyer fails to
timely deliver a Dispute Notice to Seller containing changes Buyer proposes to
be made to the Final Settlement Statement, the Final Settlement Statement as
delivered by Seller will be deemed to be correct and will be final and binding
on the Parties and not subject to further audit or arbitration.  If the Final
Price set forth in the Final Settlement Statement is mutually agreed upon by
Seller and Buyer, the Final Settlement Statement and the Final Price, shall be
final and binding on the Parties hereto (other than with respect to amounts not
accounted for therein or settled thereby, which amounts shall be subject to the
provisions of Section 3.10).  Any difference in the Adjusted Purchase Price as
paid at Closing pursuant to the Preliminary Settlement Statement (as adjusted by
any interim Purchase Price adjustment amount paid pursuant to Section 3.6) and
the Final Price shall be paid by the owing Party within ten (10) days of final
determination of such owed amounts in accordance herewith to the owed
Party.  All amounts paid pursuant to this Section 3.7 shall be delivered in
United States currency by wire transfer of immediately available funds to the
account specified in writing by the relevant Party.
 
 
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3.8 Disputes.  If Seller and Buyer are unable to resolve the matters addressed
in the Dispute Notice, each of Buyer and Seller shall within ten (10) Business
Days after the delivery of such Dispute Notice, summarize its position with
regard to such dispute in a written document of twenty pages or less and submit
such summaries to the Denver, Colorado office of Ernst & Young or such other
Person as the Parties may mutually select (the “Accounting Arbitrator”),
together with the Dispute Notice, the Final Settlement Statement and any other
documentation such Party may desire to submit.  Within ten (10) Business Days
after receiving the Parties’ respective submissions, the Accounting Arbitrator
shall render a decision choosing either Seller’s position or Buyer’s position
with respect to each matter addressed in any Dispute Notice, based on the
materials described above.  Any decision rendered by the Accounting Arbitrator
pursuant hereto shall be final, conclusive and binding on Seller and Buyer and
will be enforceable against any of the Parties in any court of competent
jurisdiction.  The costs of such Accounting Arbitrators shall be borne one-half
by Buyer and one-half by Seller.
 
3.9 Allocation of Purchase Price / Allocated Values.  Buyer and Seller agree
that the Purchase Price and any Assumed Obligation or other items treated as
consideration for federal income Tax purposes shall be allocated among the
Assets in accordance with Section 1060 of the Code as set forth in Schedule 3.8
to this Agreement (the “Allocated Values”).  Each Party shall utilize the
Allocated Values, as updated by mutual agreement of the Parties to reflect any
adjustment to the Purchase Price pursuant to this Agreement for purposes of all
federal, state and local Tax returns and reports, including Internal Revenue
Service Form 8594, and neither any Party or its Affiliates shall take any
position on any Tax return that is inconsistent with such Allocated Values, as
adjusted, unless such position is mutually agreed by the Parties or required to
be taken pursuant to a final determination, as defined in Section 1313 of the
Code.  Buyer and Seller agree that such allocation, as adjusted, is reasonable
and shall not take any position inconsistent therewith, including in notices to
Preferential Purchase Right holders.  Seller and Buyer agree to promptly advise
the other regarding the existence of any Tax audit or controversy regarding the
correctness of the Allocated Values or any adjustment thereto.
 
3.10 Post-Closing Adjustments after Final Settlement Statement.  If, during the
period from and after the Parties’ agreement upon the Final Settlement Statement
up until the second (2nd) anniversary of Closing, (a) any Party receives monies
belonging to the other, including proceeds of production, then such amount shall
immediately be paid over to the proper Party, (b) any Party pays monies for
Operating Expenses which are the obligation of the other Party hereto, then such
other Party shall promptly reimburse the Party which paid such Operating
Expenses upon receipt of an invoice from such paying Party, (c) a Party receives
an invoice of an expense or obligation which is owed by the other Party, such
Party receiving the invoice shall promptly forward such invoice to the Party
obligated to pay the same, and (d) if an invoice or other evidence of an
obligation is received by a Party, which is partially an obligation of both
Seller and Buyer, then the Parties shall consult with each other, and each shall
promptly pay its portion of such obligation to the obligee.
 
3.11 Allocation for Imbalances.  If, prior to one hundred eighty (180) days
following Closing, either Party discovers an error in the Imbalances set forth
in Schedule 4.12 or updated amounts are available for those Imbalances set forth
on Schedule 4.12 that are identified as not being current as of the Effective
Time, then the Purchase Price shall be further adjusted either at Closing or
pursuant to the Final Settlement Statement pursuant to Section 3.3(a)(v),
Section 3.3(a)(vi), Section 3.3(b)(vi) or Section 3.3(b)(vii), as applicable,
and Schedule 4.12 will be deemed amended immediately prior to Closing to reflect
the Imbalances for which the Purchase Price is so adjusted.
 
 
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ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES OF SELLER
 
Subject to the matters specifically listed or disclosed in the Schedules to this
Agreement (as added, supplemented or amended pursuant to Section 6.8), Seller
represents and warrants to Buyer the following as of the date of this Agreement
and as of the Closing Date:
 
4.1 Organization, Existence and Qualification.  Seller is a corporation duly
formed and validly existing under the Laws of the State of Delaware.  Seller has
all requisite power and authority to own and operate its property (including,
its interests in the Assets) and to carry on its business as now
conducted.  Seller is duly licensed or qualified to do business as a foreign
corporation in all jurisdictions in which it carries on business or owns assets
and such qualification is required by Law, except where the failure to be so
qualified would not have a Material Adverse Effect.
 
4.2 Authority, Approval and Enforceability.  Seller has full power and authority
to enter into and perform this Agreement, the Transaction Documents to which it
is a party and the transactions contemplated herein and therein.  The execution,
delivery and performance by Seller of this Agreement have been duly and validly
authorized and approved by all necessary corporate action on the part of
Seller.  This Agreement is, and the Transaction Documents to which Seller is a
party when executed and delivered by Seller will be, the valid and binding
obligations of Seller and enforceable against Seller 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).
 
4.3 No Conflicts.  Assuming the receipt of all Consents and the waiver of, or
compliance with, all Preferential Purchase Rights, the execution, delivery and
performance by Seller of this Agreement and the consummation of the transactions
contemplated herein will not (a) conflict with or result in a breach of any
provisions of the organizational documents of Seller, (b) result in a default or
the creation of any Encumbrance or give rise to any right of termination,
cancellation or acceleration under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license or other Material Contract or (c)
violate any Law applicable to Seller or any of the Assets, except in the case of
clauses (b) and (c) where such default, Encumbrance, termination, cancellation,
acceleration or violation would not have a Material Adverse Effect.
 
4.4 Consents.  Except (a) as set forth in Schedule 4.4, (b) for Customary
Post-Closing Consents, (c) under Contracts that are terminable upon not greater
than sixty (60) days notice without payment of any fee, and (d) for Preferential
Purchase Rights, there are no restrictions on assignment, including requirements
for consents from Third Parties to any assignment (in each case), that Seller is
required to obtain in connection with the transfer of the Assets by Seller to
Buyer or the consummation of the transactions contemplated by this Agreement by
Seller (each, a “Consent”).
 
 
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4.5 Bankruptcy.  There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by or, to Seller’s Knowledge, threatened
in writing against Seller or any Affiliate of Seller.
 
4.6 Foreign Person.  Seller is not a “foreign person” within the meaning of
Section 1445 of the Code.
 
4.7 Litigation.  Except as set forth in Schedule 4.7, there is no suit, action
or litigation by any Third Party before any Governmental Authority, and no
legal, administrative or arbitration proceeding, (in each case) pending or, to
Seller’s Knowledge, threatened in writing against Seller or the Assets that
would have a Material Adverse Effect.
 
4.8 Material Contracts.
 
(a) Except for forced pooling orders, integration orders and any pre-pooling
letter agreements associated therewith and Contracts entered into in accordance
with Section 6.1, Schedule 4.8 sets forth all Applicable Contracts of the type
described below (collectively, the “Material Contracts”):
 
(i) any Applicable Contract that can reasonably be expected to result in
aggregate payments by Seller of more than $250,000 during the current or any
subsequent calendar year (based solely on the terms thereof and current volumes,
without regard to any expected increase in volumes or revenues);
 
(ii) any Applicable Contract that can reasonably be expected to result in
aggregate revenues to Seller of more than $250,000 during the current or any
subsequent calendar year (based solely on the terms thereof and current volumes,
without regard to any expected increase in volumes or revenues);
 
(iii) any Hydrocarbon purchase and sale, transportation, processing or similar
Applicable Contract that is not terminable without penalty upon sixty (60) days
or less notice;
 
(iv) any indenture, mortgage, loan, credit or sale-leaseback or similar
Applicable Contract that can reasonably be expected to result in aggregate
payments by Seller of more than $100,000 during the current or any subsequent
calendar year;
 
(v) any Applicable Contract that constitutes a lease under which Seller is the
lessor or the lessee of real or Personal Property which lease (A) cannot be
terminated by Seller without penalty upon sixty (60) days or less notice and (B)
involves an annual base rental of more than $100,000;
 
(vi) each Hedge agreement;
 
 
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(vii) any farmout agreement, participation agreement, exploration agreement,
development agreement, joint operating agreement, unit agreement or similar
Applicable Contract; and
 
(viii) any Applicable Contract between Seller and any Affiliate of Seller that
will not be terminated prior to Closing.
 
(b) Except as set forth in Schedule 4.8 and except for such matters that would
not have a Material Adverse Effect, there exists no default under any Material
Contract by Seller or, to Seller’s Knowledge, by any other Person that is a
party to such Material Contract, and no event has occurred that with notice or
lapse of time or both would constitute any default under any such Contract by
Seller or, to Seller’s Knowledge, any other Person who is a party to such
Material Contract.
 
4.9 No Violation of Laws.  To Seller’s Knowledge, except as set forth in
Schedule 4.9, as of the date of this Agreement Seller is not in violation of any
applicable Laws with respect to its ownership and operation of the Assets.  This
Section 4.9 does not include any matters with respect to Environmental Laws,
such matters being addressed exclusively in Section 4.14.
 
4.10 Preferential Rights.  Except as set forth in Schedule 4.10, there are no
preferential purchase rights, rights of first refusal or other similar rights
that are applicable to the transfer of the Assets in connection with the
transactions contemplated hereby (each a “Preferential Purchase Right”).
 
4.11 Royalties, Etc.  Except for such items that are being held in suspense for
which the Purchase Price is adjusted pursuant to Section 3.3(b)(viii), to
Seller’s Knowledge, Seller has paid all Burdens with respect to the Assets due
by Seller, or if not paid, is contesting such Burdens in good faith in the
normal course of business.  To Seller’s Knowledge, Schedule 4.11 sets forth all
Burdens with respect to the Assets that are being contested and all items that
are being held in suspense as of March 31, 2012.
 
4.12 Imbalances.  To Seller’s Knowledge, Schedule 4.12 sets forth all material
Imbalances associated with the Assets as of the Effective Time or such other
date stated in Schedule 4.12.
 
4.13 Current Commitments.  Schedule 4.13 sets forth, as of the date of this
Agreement, all authorities for expenditures (“AFEs”) relating to the Assets to
drill or rework wells or for other capital expenditures pursuant to any of the
Material Contracts for which all of the activities anticipated in such AFEs or
commitments have not been completed by the date of this Agreement.
 
4.14 Environmental.
 
(a) With respect to the Assets, Seller has not entered into, and is not subject
to, any agreements, consents, orders, decrees, judgments, license or permit
conditions, or other directives of any Governmental Authority that are in
existence as of the date of this Agreement, are based on any Environmental Laws,
that relate to the future use of any of the Assets and that require any change
in the present conditions of any of the Assets.
 
 
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(b) Except as set forth in Schedule 4.14, as of the date of this Agreement,
Seller has not received written notice from any Person of any release or
disposal of any Hazardous Substance concerning any land, facility, asset or
property included in the Assets that:  (i) interferes with or prevents
compliance by Seller with any Environmental Law or the terms of any license or
permit issued pursuant thereto; or (ii) gives rise to or results in any common
Law or other liability of Seller to any Person which, in the case of either
clause (i) or (ii) hereof, would have a Material Adverse Effect.
 
4.15 Production Taxes.  Except as set forth in Schedule 4.15, during the period
of Seller’s ownership of the Assets, all Taxes based on or measured by the
ownership of the Assets, the production of Hydrocarbons or the receipt of
proceeds therefrom that have become due and payable have been timely paid, other
than Taxes which are being contested in good faith. Schedule 4.15 sets forth all
Taxes based on or measured by the ownership of the Assets, the production of
Hydrocarbons or the receipt of proceeds therefrom, in each case, that are being
contested.
 
4.16 Brokers’ Fees.  Seller has incurred no liability, contingent or otherwise,
for brokers’ or finders’ fees relating to the transactions contemplated by this
Agreement for which Buyer or any Affiliate of Buyer shall have any
responsibility.
 
4.17 No Known Liabilities.  Except for those Liabilities for which Buyer will
have no responsibility pursuant to the terms of this Agreement, to Seller’s
Knowledge, Seller has no Liabilities from, based upon, related to or associated
with the ownership and operation of the Assets prior to the date of this
Agreement that would be required to be included on the balance sheet of Seller
prepared in accordance with GAAP consistent with past practices, except for
Operating Expenses and except for Liabilities otherwise described in the
Schedules to this Agreement, as the same may be amended in accordance herewith.
 
ARTICLE V
 
BUYER’S REPRESENTATIONS AND WARRANTIES
 
Buyer represents and warrants to Seller the following as of the date of this
Agreement and as of the Closing Date:
 
5.1 Organization, Existence and Qualification.  Buyer is a limited liability
company duly formed, validly existing, and in good standing under the Laws of
the State of Delaware and has all requisite power and authority to own and
operate its property and to carry on its business as now conducted.  Buyer is
duly licensed or qualified to do business as a foreign limited liability company
in all jurisdictions in which it carries on business or owns assets and such
qualification is required by Law except where the failure to be so qualified
would not have a material adverse effect upon the ability of Buyer to consummate
the transactions contemplated by this Agreement.
 
5.2 Authority, Approval and Enforceability.  Buyer has full power and authority
to enter into and perform this Agreement, the Transaction Documents to which it
is a party and the transactions contemplated herein and therein.  The execution,
delivery and performance by Buyer of this Agreement have been duly and validly
authorized and approved by all necessary limited liability company action on the
part of Buyer.  This Agreement is, and the Transaction Documents to which Buyer
is a party when executed and delivered by Buyer will be, the valid and binding
obligation of Buyer and enforceable against Buyer 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).
 
 
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5.3 No Conflicts.  The execution, delivery and performance by Buyer of this
Agreement and the consummation of the transactions contemplated herein will not
(a) conflict with or result in a breach of any provisions of the organizational
documents of Buyer, (b) result in a default or the creation of any Encumbrance
or give rise to any right of termination, cancellation or acceleration under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license or other agreement to which Buyer is a party or by which Buyer or any of
its property may be bound or (c) violate any Law applicable to Buyer or any of
its property, except in the case of clauses (b) and (c) where such default,
Encumbrance, termination, cancellation, acceleration or violation would not have
a material adverse effect upon the ability of Buyer to consummate the
transactions contemplated by this Agreement or perform its obligations
hereunder.
 
5.4 Consents.  There are no consents or other restrictions on assignment,
including requirements for consents from Third Parties to any assignment, (in
each case) that Buyer is required to obtain in connection with the consummation
of the transactions contemplated by this Agreement by Buyer.
 
5.5 Bankruptcy.  There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by or, to Buyer’s knowledge, threatened
in writing against Buyer or any Affiliate of Buyer.
 
5.6 Litigation.  There is no suit, action or litigation by any Person by or
before any Governmental Authority, and no legal, administrative or arbitration
proceeding, (in each case) pending, or to Buyer’s knowledge, threatened in
writing against Buyer that would have a material adverse effect upon the ability
of Buyer to consummate the transactions contemplated by this Agreement.
 
5.7 Financing.  Buyer shall have as of the Closing Date, sufficient cash in
immediately available funds with which to pay the Purchase Price, consummate the
transactions contemplated by this Agreement and perform its obligations under
this Agreement and the Transaction Documents.
 
5.8 Regulatory.  As of the Closing Date, Buyer will be qualified per applicable
Law to own and assume operatorship of the Assets in all jurisdictions where the
Assets are located, and the consummation of the transactions contemplated by
this Agreement will not cause Buyer to be disqualified as such an owner or
operator.  To the extent required by any applicable Laws, Buyer has, and will
hereafter continue to maintain, lease bonds, area-wide bonds or any other surety
bonds as may be required by, and in accordance with, all applicable Laws
governing the ownership and operation of such leases and has filed any and all
required reports necessary for such ownership and operation with all
Governmental Authorities having jurisdiction over such ownership and operation.
 
 
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5.9 Independent Evaluation.  Buyer is sophisticated in the evaluation, purchase,
ownership and operation of oil and gas properties and related facilities.  In
making its decision to enter into this Agreement and to consummate the
transactions contemplated hereby, Buyer (a) has relied or shall rely solely on
its own independent investigation and evaluation of the Assets and the advice of
its own legal, Tax, economic, environmental, engineering, geological and
geophysical advisors and the express provisions of this Agreement and not on any
comments, statements, projections or other materials made or given by any
representatives or consultants or advisors of Seller, and (b) has satisfied or
shall satisfy itself through its own due diligence as to the environmental and
physical condition of and contractual arrangements and other matters affecting
the Assets.  Buyer has no knowledge of any fact that results in the breach of
any representation, warranty or covenant of Seller given hereunder.
 
5.10 Brokers’ Fees.  Buyer has incurred no liability, contingent or otherwise,
for brokers’ or finders’ fees relating to the transactions contemplated by this
Agreement for which Seller or Seller’s Affiliates shall have any responsibility.
 
5.11 Accredited Investor.  Buyer is an “accredited investor,” as such term is
defined in Regulation D of the Securities Act of 1933, as amended, and will
acquire the Assets for its own account and not with a view to a sale or
distribution thereof in violation of the Securities Act of 1933, as amended, and
the rules and regulations thereunder, any applicable state blue sky Laws or any
other applicable securities Laws.
 
ARTICLE VI
 
CERTAIN AGREEMENTS
 
6.1 Conduct of Business.
 
(a) Except (w) as set forth in Schedule 6.1, (x) for the operations covered by
the AFEs and other capital commitments described in Schedule 4.13, (y) for
actions taken in connection with emergency situations and (z) as expressly
contemplated by this Agreement or as expressly consented to in writing by Buyer
(which consent shall not be unreasonably delayed, withheld or conditioned),
Seller shall from and after the date hereof until Closing:
 
(i) operate the Assets in the usual, regular and ordinary manner consistent with
past practice; and
 
(ii) maintain the books of account and Records relating to the Assets in the
usual, regular and ordinary manner, in accordance with the usual accounting
practices of each such Person.
 
(b) Except (x) as set forth in Schedule 6.1, (y) for the operations covered by
the AFEs and other capital commitments described in Schedule 4.13, and (z) as
expressly contemplated by this Agreement or as expressly consented to in writing
by Buyer (which consent shall not be unreasonably delayed, withheld or
conditioned), Seller shall, from and after the date hereof until Closing:
 
 
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(i) not enter into an Applicable Contract that, if entered into on or prior to
the date of this Agreement, would be required to be listed in a Schedule
attached to this Agreement, or materially amend or change the terms of any
Material Contract;
 
(ii) not transfer, sell, mortgage, pledge or dispose of any material portion of
the Assets other than the sale and/or disposal of Hydrocarbons in the ordinary
course of business and sales of equipment that is no longer necessary in the
operation of the Assets or for which replacement equipment has been obtained;
and
 
(iii) not commit to do any of the foregoing.
 
(c)           Buyer acknowledges Seller owns undivided interests in certain of
the properties comprising the Assets that it is not the operator thereof, and
Buyer agrees that the acts or omissions of the other Working Interest owners
(including the operators) who are not Seller or any Affiliate of Seller shall
not constitute a breach of the provisions of this Section 6.1, and no action
required by a vote of Working Interest owners shall constitute such a breach so
long as Seller has voted its interest in a manner that complies with the
provisions of this Section 6.1.
 
6.2 Successor Operator.  While Buyer acknowledges that it desires to succeed
Seller as operator of those Assets or portions thereof that Seller may presently
operate, Buyer acknowledges and agrees that Seller cannot and does not covenant
or warrant that Buyer shall become successor operator of such Assets since the
Assets or portions thereof may be subject to operating or other agreements that
control the appointment of a successor operator.  Seller agrees, however, that
as to the Assets it operates, it shall use its commercially reasonable efforts
to support Buyer’s efforts to become successor operator of such Assets (to the
extent permitted under any applicable joint operating agreement) effective as of
Closing (at Buyer’s sole cost and expense) and to designate and/or appoint, to
the extent legally possible and permitted under any applicable joint operating
agreement, Buyer as successor operator of such Assets effective as of Closing.
 
6.3 HSR Act.  If applicable, within five (5) Business Days following the
execution by Buyer and Seller of this Agreement, Buyer and Seller will each
prepare and simultaneously file with the DOJ and the FTC the notification and
report form required for the transactions contemplated by this Agreement by the
HSR Act, and request early termination of the waiting period thereunder.  Buyer
and Seller agree to respond promptly to any inquiries from the DOJ or the FTC
concerning such filings and to comply in all material respects with the filing
requirements of the HSR Act.  Buyer and Seller shall cooperate with each other
and, subject to the terms of the Confidentiality Agreement, shall promptly
furnish all information to the other Party that is necessary in connection with
Buyer’s and Seller’s compliance with the HSR Act.  Buyer and Seller shall keep
each other fully advised with respect to any requests from or communications
with the DOJ or FTC concerning such filings and shall consult with each other
with respect to all responses thereto.  Each of Seller and Buyer shall use its
reasonable efforts to take all actions reasonably necessary and appropriate in
connection with any HSR Act filing to consummate the transactions consummated
hereby. Each Party shall pay its own fees and expenses related to filings
required by this Section 6.3.
 
 
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6.4 Governmental Bonds.  Buyer acknowledges that none of the bonds, letters of
credit and guarantees, if any, posted by Seller or its Affiliates with
Governmental Authorities and relating to the Assets are transferable to
Buyer.  On or before the Closing Date, Buyer shall obtain, or cause to be
obtained in the name of the Buyer, replacements for such bonds, letters of
credit and guarantees to the extent such replacements are necessary (a) for
Buyer’s ownership of the Assets and (b) to permit the cancellation of the bonds,
letters of credit and guarantees posted by Seller and/or its Affiliates with
respect to the Assets.  In addition, at or prior to Closing, Buyer shall deliver
to Seller evidence of the posting of bonds or other security with all applicable
Governmental Authorities meeting the requirements of such authorities to own
and, where appropriate, operate, the Assets.
 
6.5 Record Retention.  Buyer shall and shall cause its successors and assigns
to, for a period of seven (7) years following Closing (a) retain the Records,
(b) provide Seller, its Affiliates and its and their officers, employees and
representatives with access to the Records (to the extent that Seller has not
retained the original or a copy) during normal business hours for review and
copying at Seller’s expense, and (c) provide Seller, its Affiliates and its and
their officers, employees and representatives with access, during normal
business hours, to materials received or produced after Closing relating to any
indemnity claim made under Section 13.2 for review and copying at Seller’s
expense.  At the end of such seven (7) year period and prior to destroying any
of the Records, Buyer shall notify Seller in advance of such destruction and
provide Seller an opportunity to copy such Records at Seller’s sole cost and
expense.
 
6.6 Guarantees.  Buyer shall cooperate with Seller in order to cause Seller and
its Affiliates to be released, as of the Closing Date, from all guarantees,
including any performance bonds previously put in place by Seller, set forth in
Schedule 6.6, which shall describe the security posted (the
“Guarantees”).  Without limiting the foregoing, if required by the counterparty
to any Guarantee, Buyer shall provide, effective as of the Closing Date,
substitute arrangements of Buyer or its Affiliates covering all periods covered
by the Guarantees, such substitute arrangements to be equivalent or better in
terms of type of security and creditworthiness of the party providing the
security as compared to the Guarantees, as set forth in Schedule 6.6.  In the
event that any counterparty to any such Guarantee does not release Seller and
its Affiliates, then, from and after Closing, Buyer shall indemnify Seller or
its relevant Affiliate against all amounts incurred by Seller or its relevant
Affiliate under such Guarantee (and all costs incurred in connection with such
Guarantee) if applicable to Assets acquired by Buyer.  Notwithstanding anything
to the contrary contained in this Agreement, any cash placed in escrow by Seller
or any Affiliate of Seller pursuant to the Guarantees must be returned to
Seller, and shall be deemed an Excluded Asset.
 
6.7 Notifications.  Buyer will notify Seller promptly after any officer of Buyer
obtains actual knowledge that any representation or warranty of Seller contained
in this Agreement is, becomes or will be untrue in any material respect on or
before the Closing Date.
 
6.8 Amendment of Schedules.  Buyer agrees that, with respect to the
representations and warranties of Seller contained in this Agreement, Seller
shall have the continuing right until Closing to add, supplement or amend the
Schedules to its representations and warranties with respect to any matter
hereafter arising or discovered which, if existing or known at the date hereof
or thereafter, would have been required to be set forth or described in such
Schedules.  For all purposes of this Agreement, including for purposes of
determining whether the conditions set forth in Article VII have been fulfilled,
the Schedules to Seller’s representations and warranties contained in this
Agreement shall be deemed to include only that information contained therein on
the date of this Agreement 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 shall be waived and
Buyer shall not be entitled to make a claim with respect thereto pursuant to the
terms of this Agreement or otherwise.
 
 
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6.9 Hedges and Novation Agreements.  Seller and Buyer shall use their
commercially reasonable efforts to take, on or prior to Closing, all steps
necessary to effectuate the novation of all Hedges to Buyer or Buyer’s
designated financial institution pursuant to Novation Agreement(s) (including
Buyer entering into ISDA Master Agreement(s) with each Hedge
Counterparty).  Subject to Sections 7.6 and Section 8.7, in the event a Hedge
Counterparty refuses to novate any Hedge to Buyer at Closing pursuant to a
Novation Agreement, there shall be a downward Purchase Price adjustment
calculated based on the current strip price on June 29, 2012 for the respective
index, discounted to the June 29, 2012 PV-10 value.
 
6.10 Audit Rights.  Buyer, at Buyer’s expense, may engage an auditing firm to
conduct an audit of the revenues and expenses of Seller attributable to the
Assets for the period of three (3) calendar years prior to the Effective Time
through the Closing Date.  Seller agrees, from the date of this Agreement until
one hundred eighty (180) days after Closing, that Seller will cooperate and
assist such auditors, including making available (at Buyer’s sole cost and
expense) books, records and personnel of Seller reasonably requested by such
auditing firm; provided, however, that in no event shall Seller or its
Affiliates be required to provide any representation letters to any Person as a
result of its obligations under this Section 6.10; and provided further,
however, that nothing in this Section 6.10 shall require any such cooperation or
assistance on the part of Seller to the extent it would interfere unreasonably
with the business or operations of Seller.
 
6.11 Shortfall Amounts.  Seller hereby agrees to pay Buyer any “Shortfall
Amounts” (as such term is defined in the G&T Agreement, each a “Shortfall
Amount”) due and owing by “Producer” (as such term is defined in the G&T
Agreement) pursuant to the terms of that certain Gas Gathering & Treating
Agreement, dated as of October 1, 2010, by and between Seller and Antero
Resources Midstream Corporation (Cardinal Midstream, LLC) (as amended,
supplemented or restated from time to time, the “G&T Agreement”) and relating to
the period of time beginning on April 1, 2012 and extending to December 31,
2012, in each case, by wire transfer in immediately available funds on or prior
to the last day of the calendar month following the calendar month in which such
amount accrued or is otherwise attributable under the terms of the G&T
Agreement; provided, however, that the Shortfall Amount attributable to April
2012 shall be paid by Seller along with the May 2012 Shortfall Amount on June
30, 2012; provided, further, however, if, following the Closing Date, Buyer
permanently or temporarily shuts in any well or wells capable of production that
are subject to such G&T Agreement, for any months during which such well or
wells are shut in, Seller shall only be obligated to pay Buyer an amount equal
to the Shortfall Amount due for the calendar month previous to the shut in.
 
 
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ARTICLE VII
 
BUYER’S CONDITIONS TO CLOSING
 
The obligations of Buyer to consummate the transactions provided for herein are
subject, at the option of Buyer, to the fulfillment by Seller or waiver by
Buyer, on or prior to Closing of each of the following conditions:
 
7.1 Representations.  The representations and warranties of Seller set forth in
Article IV shall be true and correct in all respects on and as of the Closing
Date, with the same force and effect as though such representations and
warranties had been made or given on and as of the Closing Date (other than
representations and warranties that refer to a specified date, which need only
be true and correct on and as of such specified date), except for those
breaches, if any, of such representations and warranties that would not have a
Material Adverse Effect.
 
7.2 Performance.  Seller shall have materially performed or complied with all
obligations, agreements and covenants contained in this Agreement as to which
performance or compliance by Seller is required prior to or at the Closing Date.
 
7.3 No Legal Proceedings.  No material suit, action, litigation or other
proceeding by any Third Party shall be pending before any Governmental Authority
seeking to restrain, prohibit, enjoin or declare illegal, or seeking substantial
damages in connection with, the transactions contemplated by this Agreement.
 
7.4 Title Defects; Environmental Defects; Casualty; Preferential Rights;
Consents.  In each case subject to the Individual Title Defect Threshold, the
Individual Environmental Threshold and the Aggregate Deductible, as applicable,
the sum of (a) all Title Defect Amounts determined under Section 11.2(h) prior
to Closing, less the sum of all Title Benefit Amounts determined under
Section 11.2(i) prior to Closing, plus (b) all Remediation Amounts for
Environmental Defects determined under Article XII prior to Closing, plus (c)
the amount of all uninsured Casualty Loss, plus (d) the Allocated Value of any
Assets excluded from the transactions contemplated hereby pursuant to Section
11.4(a)(i) and Section 11.4(b)(i), shall be less than twenty-five percent (25%)
of the Purchase Price.
 
7.5 HSR Act.  If applicable, the waiting period under the HSR Act applicable to
the consummation of the transactions contemplated hereby shall have expired,
notice of early termination shall have been received or a consent order issued
(in form and substance satisfactory to Seller) by or from applicable
Governmental Authorities.
 
7.6 Novation Agreements.  The Hedges with JP Morgan Chase Bank, N.A., Wells
Fargo Bank, N.A. and Credit Agricole Corporate & Investment Bank shall have been
novated to Buyer or Buyer’s designated financial institution pursuant to the
Novation Agreement(s).
 
 
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7.7 FERC Approvals.  If applicable, Buyer and Seller shall have obtained any
necessary waivers from the Federal Energy Regulatory Commission regarding such
commission’s capacity release policies.
 
7.8 Closing Deliverables.  Seller shall have delivered (or be ready, willing and
able to deliver at Closing) to Buyer the documents and other items required to
be delivered by Seller under Section 9.3.
 
ARTICLE VIII
 
SELLER’S CONDITIONS TO CLOSING
 
The obligations of Seller to consummate the transactions provided for herein are
subject, at the option of Seller, to the fulfillment by Buyer or waiver by
Seller on or prior to Closing of each of the following conditions:
 
8.1 Representations.  The representations and warranties of Buyer set forth in
Article V shall be true and correct in all respects on and as of the Closing
Date, with the same force and effect as though such representations and
warranties had been made or given on and as of the Closing Date (other than
representations and warranties that refer to a specified date, which need only
be true and correct on and as of such specified date) except for those breaches,
if any, of such representations and warranties that 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.
 
8.2 Performance.  Buyer shall have materially performed or complied with all
obligations, agreements and covenants contained in this Agreement as to which
performance or compliance by Buyer is required prior to or at the Closing Date.
 
8.3 No Legal Proceedings.  No material suit, action, litigation or other
proceeding by any Third Party shall be pending before any Governmental Authority
seeking to restrain, prohibit or declare illegal, or seeking substantial damages
in connection with, the transactions contemplated by this Agreement.
 
8.4 Title Defects; Environmental Defects; Casualty; Consents.  In each case
subject to the Individual Title Defect Threshold, the Individual Environmental
Threshold and the Aggregate Deductible, as applicable, the sum of (a) all Title
Defect Amounts determined under Section 11.2(h) prior to Closing, less the sum
of all Title Benefit Amounts determined under Section 11.2(i) prior to Closing,
plus (b) all Remediation Amounts for Environmental Defects determined under
Article XII prior to Closing, plus (c) the amount of all uninsured Casualty
Loss, plus (d) the Allocated Value of any Assets excluded from the transactions
contemplated hereby pursuant to Section 11.4(b)(i), shall be less than
twenty-five percent (25%) of the Purchase Price.
 
8.5 HSR Act.  If applicable, the waiting period under the HSR Act applicable to
the consummation of the transactions contemplated hereby shall have expired,
notice of early termination shall have been received, or a consent order issued
(in form and substance satisfactory to Seller) by or from applicable
Governmental Authorities.
 
 
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8.6 Replacement Bonds and Guarantees.  Buyer shall have obtained, in the name of
Buyer (a) replacements for Seller’s and/or its Affiliates’ bonds, letters of
credit and guarantees, to the extent required by Section 6.4 and (b) substitute
arrangements for the Guarantees to the extent required by Section 6.6, and shall
have obtained documentation releasing and discharging Seller from all
post-Closing obligations and Liabilities under the agreements, bonds, letters of
credit or guarantees set forth on Schedule 8.6, in each case duly executed by
the applicable counterparties thereto.
 
8.7 FERC Approvals.  If applicable, Buyer and Seller shall have obtained any
necessary waivers from the Federal Energy Regulatory Commission regarding such
commission’s capacity release policies.
 
8.8 Closing Deliverables.  Buyer shall have delivered (or be ready, willing and
able to deliver at Closing) to Seller the documents and other items required to
be delivered by Buyer under Section 9.3.
 
ARTICLE IX
 
CLOSING
 
9.1 Date of Closing.  Subject to the conditions stated in this Agreement, the
sale by Seller and the purchase by Buyer of the Assets pursuant to this
Agreement (the “Closing”) shall occur on or before June 29, 2012, or if all
conditions to Closing in Article VII have not yet been satisfied or waived by
that date, then five (5) Business Days after such conditions have been satisfied
or waived, or such other date as Buyer and Seller may agree upon in
writing.  The date Closing actually occurs shall be the “Closing Date”.
 
9.2 Place of Closing.  Closing shall be held at the offices of Vinson & Elkins
L.L.P., 1001 Fannin Street, Suite 2500, Houston, Texas 77002, or such other
place as mutually agreed upon by the Parties.
 
9.3 Closing Obligations.  At Closing, the following documents shall be delivered
and the following events shall occur, the execution of each document and the
occurrence of each event being a condition precedent to the others and each
being deemed to have occurred simultaneously with the others:
 
(a) Seller and Buyer shall execute, acknowledge and deliver the Assignment in
sufficient counterparts to facilitate recording in the applicable counties
covering the Assets.
 
(b) Seller and Buyer shall execute and deliver assignments, on appropriate
forms, of federal Leases and state Leases included in the Assets in sufficient
counterparts to facilitate filing with the applicable Governmental Authority.
 
(c) Seller and Buyer shall execute and deliver the Preliminary Settlement
Statement.
 
(d) Buyer shall deliver to Seller, to the accounts designated in the Preliminary
Settlement Statement, by direct bank or wire transfer in same day funds, the
Adjusted Purchase Price after giving effect to the Deposit.
 
 
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(e) Seller shall deliver, on forms supplied by Buyer and reasonably acceptable
to Seller, transfer orders or letters in lieu thereof directing all purchasers
of production to make payment to Buyer of proceeds attributable to production
from the Assets from and after the Effective Time, for delivery by Buyer to the
purchasers of production.
 
(f) Seller shall deliver an executed statement described in Treasury Regulation
§1.1445-2(b)(2) certifying that Seller is not a “foreign person” within the
meaning of Section 144 of the Code.
 
(g) To the extent required under any applicable Law or Governmental Authority
for any federal or state Lease, Buyer shall deliver designation of operator
forms designating the current operator as operator of those Leases that such
Person currently operates.
 
(h) An authorized officer of Seller shall execute and deliver a certificate,
dated as of Closing Date, certifying that the conditions set forth in Section
7.1 and Section 7.2 have been fulfilled and, if applicable, any exceptions to
such conditions that have been waived by Buyer.
 
(i) An authorized officer of Buyer shall execute and deliver a certificate,
dated as of Closing, certifying that the conditions set forth in Section 8.1 and
Section 8.2 have been fulfilled and, if applicable, any exceptions to such
conditions that have been waived by Seller.
 
(j) Seller and Buyer shall have delivered fully executed originals of the
Novation Agreement(s) to each other Party and the Hedge Counterparties.
 
(k) Seller shall deliver executed releases of any and all liens, mortgages and
other encumbrances on the Assets incurred by Seller or its Affiliates in
connection with borrowed monies.
 
(l) At the option of Buyer, Seller and Buyer shall execute and deliver a
Transition Services Agreement, in form and substance to be agreed upon by Seller
and Buyer under which Seller will continue as the operator of the Assets and
Seller will agree to facilitate the transition of the operation of, and
accounting for, the Assets for a period not to exceed two (2) months following
the Closing Date, for the consideration of $40,000.00 per month.
 
(m) Seller and Buyer shall execute and deliver any other agreements, instruments
and documents which are required by other terms of this Agreement to be executed
and/or delivered at Closing.
 
9.4 Records.  In addition to the obligations set forth under Section 9.3 above,
but notwithstanding anything herein to the contrary, no later than thirty (30)
Business Days after the Closing Date, Seller shall make available to Buyer the
Records for pickup from Seller’s offices during normal business hours.
 
 
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ARTICLE X
 
ACCESS/DISCLAIMERS
 
10.1 Access.
 
(a) From and after the date hereof and up to and including the Closing Date (or
earlier termination of this Agreement) but subject to the other provisions of
this Section 10.1 and obtaining any required consents of Third Parties,
including Third Party operators of the Assets, Seller shall afford to Buyer and
its officers, employees, agents, accountants, consultants, attorneys, investment
bankers and other authorized representatives (“Buyer’s Representatives”)
reasonable access, during normal business hours, to the Assets and all Records
in Seller’s or any of its Affiliates’ possession. All investigations and due
diligence conducted by Buyer or any Buyer’s Representative shall be conducted at
Buyer’s sole cost, risk and expense and any conclusions made from any
examination done by Buyer or any Buyer’s Representative shall result from
Buyer’s own independent review and judgment.
 
(b) Buyer shall be entitled to conduct a Phase I environmental property
assessment with respect to the Assets.  Seller or its designee shall have the
right to accompany Buyer and Buyer’s Representatives whenever they are on site
on the Assets and also to collect split test samples if any are
collected.  Notwithstanding anything herein to the contrary, Buyer shall not
have access to, and shall not be permitted to conduct any environmental due
diligence (including any Phase I environmental property assessments) with
respect to, any Assets where Seller does not have the authority to grant access
for such due diligence.
 
(c) Buyer shall coordinate its environmental property assessments and physical
inspections of the Assets with Seller and all Third Party operators to minimize
any inconvenience to or interruption of the conduct of business by Seller or
such Third Party operators.  Buyer shall abide by Seller’s, and any Third Party
operator’s, safety rules, regulations and operating policies while conducting
its due diligence evaluation of the Assets, including any environmental or other
inspection or assessment of the Assets and, to the extent required by Seller or
any Third Party operator, execute and deliver any required boarding agreement of
Seller or any such Third Party operator.  Buyer hereby defends, indemnifies and
holds harmless each of the operators of the Assets and the Seller Indemnified
Parties from and against any and all Liabilities arising out of, resulting from
or relating to any field visit, environmental property assessment or other due
diligence activity conducted by Buyer or any Buyer’s Representative with respect
to the Assets, EVEN IF SUCH LIABILITIES ARISE OUT OF OR RESULT FROM, SOLELY OR
IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT
LIABILITY OR OTHER FAULT OF OR BY A MEMBER OF THE SELLER INDEMNIFIED PARTIES,
EXCEPTING ONLY LIABILITIES ACTUALLY RESULTING ON THE ACCOUNT OF THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF A MEMBER OF THE SELLER INDEMNIFIED PARTIES.
 
(d) Buyer agrees to promptly provide Seller, but in no event less than five (5)
days after receipt or creation, copies of all final environmental reports and
test results prepared by Buyer and/or any of Buyer’s Representatives which
contain data collected or generated from Buyer’s environmental due diligence
with respect to the Assets.  Seller shall not be deemed by its receipt of said
documents or otherwise to have made any representation or warranty, expressed,
implied or statutory as to the condition of the Assets or to the accuracy of
said documents or the information contained therein.
 
 
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(e) Upon completion of Buyer’s environmental due diligence, Buyer shall at its
sole cost and expense and without any cost or expense to Seller or its
Affiliates (i) repair all damage done to the Assets in connection with Buyer’s
due diligence, (ii) restore the Assets to the approximate same or better
condition than they were prior to commencement of Buyer’s due diligence and
(iii) remove all equipment, tools or other property brought onto the Assets in
connection with Buyer’s due diligence.  Any disturbance to the Assets
(including, the leasehold associated therewith) resulting from Buyer’s due
diligence will be promptly corrected by Buyer.
 
(f) During all periods that Buyer and/or any of Buyer’s Representatives are on
the Assets, Buyer shall maintain, at its sole expense and with insurers
reasonably satisfactory to Seller, policies of insurance of the types and in the
amounts reasonably requested by Seller.  Coverage under all insurance required
to be carried by Buyer hereunder will (i) be primary insurance, (ii) list Seller
Indemnified Parties as additional insureds, (iii) waive subrogation against
Seller Indemnified Parties and (iv) provide for ten (10) days prior notice to
Seller in the event of cancellation or modification of the policy or reduction
in coverage.  Upon request by Seller, Buyer shall provide evidence of such
insurance to Seller prior to entering the Assets.
 
10.2 Confidentiality.  Buyer acknowledges that, pursuant to its right of access
to the Records or the Assets, Buyer will become privy to confidential and other
information of Seller or its Affiliates and Buyer shall ensure that such
confidential information shall be held confidential by Buyer and Buyer’s
Representatives in accordance with the terms of the Confidentiality
Agreement.  If Closing should occur, the foregoing confidentiality restriction
on Buyer, including the Confidentiality Agreement, shall terminate (except as to
(a) such portion of the Assets that are not conveyed to Buyer pursuant to the
provisions of this Agreement, (b) the Excluded Assets and (c) information
related to assets other than the Assets).
 
10.3 Disclaimers.
 
(a) EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN ARTICLE IV OR
SECTION 11.1(b) (I) SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS,
STATUTORY OR IMPLIED, AND (II) SELLER EXPRESSLY DISCLAIMS ALL LIABILITY AND
RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE
OR COMMUNICATED (ORALLY OR IN WRITING) TO BUYER OR ANY OF ITS AFFILIATES,
EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES (INCLUDING, ANY OPINION,
INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO BUYER BY ANY
OFFICER, DIRECTOR, EMPLOYEE, AGENT, CONSULTANT, REPRESENTATIVE OR ADVISOR OF
SELLER OR ANY OF ITS AFFILIATES).
 
 
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(b) EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED OTHERWISE IN
ARTICLE IV OR SECTION 11.1(b) AND WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS,
STATUTORY OR IMPLIED AS TO (I) TITLE TO ANY OF THE ASSETS, (II) THE CONTENTS,
CHARACTER OR NATURE OF ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR
ANY ENGINEERING, GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION RELATING TO THE
ASSETS, (III) THE QUANTITY, QUALITY OR  RECOVERABILITY OF HYDROCARBONS IN OR
FROM THE ASSETS, (IV) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE
REVENUES TO BE GENERATED BY THE ASSETS, (V) THE PRODUCTION OF OR ABILITY TO
PRODUCE HYDROCARBONS FROM THE ASSETS, (VI) THE MAINTENANCE, REPAIR, CONDITION,
QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE ASSETS, (VII) THE CONTENT,
CHARACTER OR NATURE OF ANY INFORMATION MEMORANDUM, REPORTS, BROCHURES, CHARTS OR
STATEMENTS PREPARED BY SELLER OR THIRD PARTIES WITH RESPECT TO THE ASSETS,
(VIII) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE TO
BUYER OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES, AGENTS, CONSULTANTS,
REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO AND (IX) ANY
IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK
INFRINGEMENT.  EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED
OTHERWISE IN ARTICLE IV OR SECTION 11.1(b), SELLER FURTHER DISCLAIMS ANY
REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF MERCHANTABILITY,
FREEDOM FROM LATENT VICES OR DEFECTS, FITNESS FOR A PARTICULAR PURPOSE OR
CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY OF THE ASSETS, RIGHTS OF A
PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR
RETURN OF THE PURCHASE PRICE, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE
PARTIES THAT BUYER 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 OR
DEFECTS (KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR UNDISCOVERABLE), AND THAT
BUYER HAS MADE OR CAUSED TO BE  MADE SUCH INSPECTIONS AS BUYER DEEMS
APPROPRIATE.
 
(c) OTHER THAN AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED OTHERWISE IN
SECTION 4.14, SELLER HAS NOT AND WILL NOT MAKE ANY REPRESENTATION OR WARRANTY
REGARDING ANY MATTER OR CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, THE RELEASE
OF MATERIALS INTO THE ENVIRONMENT OR THE PROTECTION OF HUMAN HEALTH, SAFETY,
NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF
THE ASSETS, AND NOTHING IN THIS AGREEMENT OR OTHERWISE SHALL BE CONSTRUED AS
SUCH A REPRESENTATION OR WARRANTY, AND SUBJECT TO BUYER’S LIMITED RIGHTS AS
SPECIFIED IN THIS AGREEMENT FOR A BREACH OF SELLER’S REPRESENTATIONS SET FORTH
IN SECTION 4.14, BUYER SHALL BE DEEMED TO BE TAKING THE ASSETS “AS IS” AND
“WHERE IS” WITH ALL FAULTS FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION AND
THAT BUYER HAS MADE OR CAUSED TO BE MADE SUCH ENVIRONMENTAL INSPECTIONS AS BUYER
DEEMS APPROPRIATE.
 
 
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(d) SELLER AND BUYER AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE
EFFECTIVE, THE DISCLAIMERS OF CERTAIN REPRESENTATIONS AND WARRANTIES CONTAINED
IN THIS SECTION 10.3 ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSE OF ANY
APPLICABLE LAW.
 
ARTICLE XI
 
TITLE MATTERS; CASUALTY; TRANSFER RESTRICTIONS
 
11.1 Seller’s Title.
 
(a) General Disclaimer of Title Warranties and Representations.  Except for the
special warranty of title as set forth in Section 11.1(b) and without limiting
Buyer’s remedies for Title Defects set forth in this Article XI, Seller makes no
warranty or representation, express, implied, statutory or otherwise, with
respect to Seller’s title to any of the Assets and Buyer hereby acknowledges and
agrees that Buyer’s sole remedy for any defect of title, including any Title
Defect, with respect to any of the Assets (i) before Closing, shall be as set
forth in Section 11.2 and (ii) after Closing, shall be pursuant to the special
warranty of title set forth in Section 11.1(b).
 
(b) Special Warranty of Title.  If Closing occurs, then effective as of the
Closing Date, Seller warrants Defensible Title to the Assets (but, with respect
to any Lease and any Well or Undrilled Location associated therewith, limited to
the depths set forth in Exhibit A or Exhibit A-1, as applicable) unto Buyer
against every Person whomsoever lawfully claiming or to claim the same or any
part thereof by, through or under Seller or its Affiliates, but not otherwise,
subject, however, to the Permitted Encumbrances and to any matters of record in
the applicable counties or in the applicable state or federal records prior to
the Defect Claim Date; provided, however, that, except with respect to any
liability of Seller for any claim asserted in writing by Buyer to Seller in
accordance with Section 11.1(c) on or before the expiration of the Survival
Period for breach of such special warranty, such special warranty shall cease
and terminate at the end of such Survival Period.  Said special warranty of
title shall be subject to the further limitations and provisions of this
Article XI.
 
(c) Recovery on Special Warranty.
 
(i) Buyer’s Assertion of Title Warranty Breaches.  Prior to the expiration of
the period of time commencing as of the Closing Date and ending at 5 p.m.
Central Time on the twelve (12) month anniversary thereof (the “Survival
Period”), Buyer shall furnish Seller a Title Defect Notice meeting the
requirements of Section 11.2(a) setting forth any matters which Buyer intends to
assert as a breach of Seller’s special warranty in Section 11.1(b).  For all
purposes of this Agreement, Buyer shall be deemed to have waived, and Seller
shall have no further liability for, any breach of Seller’s special warranty
that Buyer fails to assert by a Title Defect Notice given to Seller on or before
the expiration of the Survival Period.  Seller shall have a reasonable
opportunity, but not the obligation, to cure any Title Defect asserted by Buyer
pursuant to this Section 11.1(c)(i).  Buyer agrees to reasonably cooperate with
any attempt by Seller to cure any such Title Defect.
 
 
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(ii) Limitations on Special Warranty.  For purposes of Seller’s special warranty
of title, the value of the Wells and/or Undrilled Locations set forth in
Schedule 3.8, as appropriate (but limited to the depths, if any, set forth on
Exhibit A-1 for such Well and/or Undrilled Location), shall be deemed to be the
Allocated Value thereof, as adjusted herein.  Recovery on Seller’s special
warranty of title shall be limited to an amount (without any interest accruing
thereon) equal to the reduction in the Purchase Price to which Buyer would have
been entitled had Buyer asserted the Title Defect giving rise to such breach of
Seller’s special warranty of title as a Title Defect prior to Closing pursuant
to Section 11.2, in each case taking into account the Individual Title Defect
Threshold and the Aggregate Deductible.  Seller shall be entitled to offset any
amount owed by Seller for breach of its special warranty of title with respect
to any Asset by the amount of any Title Benefits with respect to such Asset as
to which Seller gives Buyer notice after the Defect Claim Date.
 
11.2 Notice of Title Defects; Defect Adjustments.
 
(a) Title Defect Notices.  Buyer must deliver at least five (5) Business Days
before Closing (the “Defect Claim Date”) claim notices to Seller meeting the
requirements of this Section 11.2(a) (collectively the “Title Defect Notices”
and individually a “Title Defect Notice”) setting forth any matters which, in
Buyer’s reasonable opinion, constitute Title Defects and which Buyer intends to
assert as a Title Defect pursuant to this Section 11.2(a).  For all purposes of
this Agreement and notwithstanding anything herein to the contrary (except as
provided in Section 11.1), Buyer shall be deemed to have waived, and Seller
shall have no liability for, any Title Defect which Buyer fails to assert as a
Title Defect by a properly delivered Title Defect Notice received by Seller on
or before the Defect Claim Date; provided, however, that, for purposes of
Seller’s special warranty to title under Section 11.1(b), such waiver shall not
apply to any matter that prior to the Defect Claim Date is not reflected of
record in the applicable counties or in the applicable state or federal
records.  To be effective, each Title Defect Notice shall be in writing, and
shall include (i) a description of the alleged Title Defect and the Asset, or
portion thereof, affected by such Title Defect (each a “Title Defect Property”),
(ii) the Allocated Value of each Title Defect Property, (iii) supporting
documents reasonably necessary for Seller to verify the existence of such
alleged Title Defect, and (iv) the amount by which Buyer reasonably believes the
Allocated Value of each Title Defect Property is reduced by such alleged Title
Defect and the computations upon which Buyer’s belief is based.  Buyer shall
promptly upon discovery furnish Seller with written notice of any Title Benefit
which is discovered by any of Buyer’s or any of its Affiliate’s employees, title
attorneys, landmen or other title examiners while conducting Buyer’s due
diligence with respect to the Assets prior to the Defect Claim Date.
 
(b) Title Benefit Notices.  Seller shall have the right, but not the obligation,
to deliver to Buyer on or before the Defect Claim Date with respect to each
Title Benefit a notice (a “Title Benefit Notice”) including (i) a description of
the alleged Title Benefit and the Asset, or portion thereof, affected by such
alleged Title Benefit (each a “Title Benefit Property”), and (ii) the amount by
which Seller reasonably believes the Allocated Value of such Title Benefit
Property is increased by such alleged Title Benefit and the computations upon
which Seller’s belief is based.  Seller shall be deemed to have waived all Title
Benefits for which a Title Benefit Notice has not been delivered on or before
the Defect Claim Date.
 
 
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(c) Seller’s Right to Cure.  Seller shall have the right, but not the
obligation, to attempt, at its sole cost, to cure at any time prior to the
expiration of one hundred and eighty (180) days following Closing (the “Cure
Period”), any Title Defects of which it has timely received a Title Defect
Notice from Buyer.  During the period of time from Closing to the expiration of
the Cure Period, Buyer hereby agrees to afford Seller and its officers,
employees, agents and other authorized representatives reasonable access, during
normal business hours, to the Assets and all Records in Buyer’s or any of its
Affiliates’ possession in order that Seller may attempt to cure any such Title
Defects.
 
(d) Remedies for Title Defects.  Subject to Seller’s continuing right to dispute
the existence of a Title Defect and/or the Title Defect Amount asserted with
respect thereto and subject to the rights of the Parties pursuant to
Section 14.1(c), in the event that any Title Defect timely asserted by Buyer in
accordance with Section 11.2(a) is not waived in writing by Buyer or cured prior
to Closing, Seller shall, at its sole option, elect to:
 
(i) subject to the Individual Title Defect Threshold and the Aggregate
Deductible, reduce the Purchase Price by the Title Defect Amount determined
pursuant to Section 11.2(h) or Section 11.2(k);
 
(ii) retain the entirety of the Title Defect Property that is subject to such
Title Defect, together with all associated Assets, in which event the Purchase
Price shall be reduced by an amount equal to the Allocated Value of such Title
Defect Property and such associated Assets; or
 
(iii) if applicable, terminate this Agreement pursuant to Section 14.1(c).
 
(e) Post-Closing Payments/Adjustments.
 
(i) In the event that an adjustment for a Title Defect Amount is made to the
Purchase Price and Seller thereafter cures, during the Cure Period, the Title
Defect(s) for which such adjustment was made, then, at Seller’s election, (A)
the Final Price reflected in the Final Settlement Statement shall be adjusted
upward by the amount by which the Purchase Price was adjusted on account of such
Title Defect(s) at Closing, or (B) Buyer shall promptly, but in any event within
ten (10) Business Days after such Title Defect(s) has been cured and Buyer has
received written notice from Seller thereof, together with supporting
documentation available to Seller reasonably necessary to verify such cure of
such Title Defect(s), pay to Seller the amount by which the Purchase Price was
adjusted on account of such Title Defect(s).
 
(ii) In the event Seller retained the entirety of a Title Defect Property
pursuant to Section 11.2(d) at Closing and Seller thereafter cures, during the
Cure Period, the Title Defect(s) affecting such Title Defect Property, then, (A)
at Seller’s election, (x) the Final Price reflected in the Final Settlement
Statement shall be adjusted upward by the Allocated Value of such Title Defect
Property and any associated Assets, or (y) Buyer shall promptly, but in any
event within ten (10) Business Days after such Title Defect(s) has been cured
and Buyer has received written notice from Seller thereof, together with
supporting documentation available to Seller reasonably necessary to verify such
cure of such Title Defect(s), pay to Seller the Allocated Value of the Title
Defect Property, and (B) promptly following receipt of payment, Seller shall
convey the Title Defect Property to Buyer pursuant to an assignment and bill of
sale substantially in the form attached to this Agreement as Exhibit B.
 
 
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(f) Remedies for Title Benefits.  With respect to each Title Benefit Property
reported under Section 11.2(b), the Purchase Price shall be increased by an
amount (the “Title Benefit Amount”) equal to the increase in the Allocated Value
for such Title Benefit Property caused by such Title Benefit, as determined
pursuant to Section 11.2(i) or Section 11.2(k).
 
(g) Exclusive Remedy.  Except for Buyer’s rights under Seller’s special warranty
of title under Section 11.1(b) and Buyer’s rights to terminate this Agreement
pursuant to Section 14.1(c), the provisions set forth in Section 11.2(d) shall
be the exclusive right and remedy of Buyer with respect to Seller’s failure to
have Defensible Title with respect to any Asset or any other title matter.
 
(h) Title Defect Amount.  The amount by which the Allocated Value of a Title
Defect Property is reduced as a result of the existence of a Title Defect shall
be the “Title Defect Amount” and shall be determined in accordance with the
following terms and conditions:
 
(i) if Buyer and Seller agree on the Title Defect Amount, then that amount shall
be the Title Defect Amount;
 
(ii) if the Title Defect is an Encumbrance that is undisputed and liquidated in
amount, then the Title Defect Amount shall be the amount necessary to be paid to
remove the Title Defect from the Title Defect Property;
 
(iii) if the Title Defect represents a discrepancy between (A) Seller’s Net
Revenue Interest for any Title Defect Property and (B) the Net Revenue Interest
set forth for such Title Defect Property in Exhibit A-1, then the Title Defect
Amount shall be the product of the Allocated Value of such Title Defect Property
multiplied by a fraction, the numerator of which is the Net Revenue Interest
decrease and the denominator of which is the Net Revenue Interest set forth for
such Title Defect Property in Exhibit A-1;
 
(iv) if the Title Defect represents an obligation or Encumbrance upon or other
defect in title to the Title Defect Property of a type not described above, then
the Title Defect Amount shall be determined by taking into account the Allocated
Value of the Title Defect Property, the portion of the Title Defect Property
affected by the Title Defect, the legal effect of the Title Defect, the
potential economic effect of the Title Defect over the life of the Title Defect
Property, the values placed upon the Title Defect by Buyer and Seller and such
other reasonable factors as are necessary to make a proper evaluation; provided,
however, that if such Title Defect is reasonably capable of being cured, the
Title Defect Amount shall not be greater than the reasonable cost and expense of
curing such Title Defect;
 
 
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(v) the Title Defect Amount with respect to a Title Defect Property shall be
determined without duplication of any costs or losses included in another Title
Defect Amount hereunder; and
 
(vi) notwithstanding anything to the contrary in this Article XI, 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 such Title Defect
Property.
 
(i) Title Benefit Amount.  The Title Benefit Amount resulting from a Title
Benefit shall be determined in accordance with the following methodology, terms
and conditions:
 
(i) if Buyer and Seller agree on the Title Benefit Amount, then that amount
shall be the Title Benefit Amount;
 
(ii) if the Title Benefit represents a discrepancy between (A) Seller’s Net
Revenue Interest for any Title Benefit Property and (B) the Net Revenue Interest
set forth for such Title Benefit Property in Exhibit A-1, then the Title Benefit
Amount shall be the product of the Allocated Value of such Title Benefit
Property multiplied by a fraction, the numerator of which is the Net Revenue
Interest increase and the denominator of which is the Net Revenue Interest set
forth for such Title Benefit Property in Exhibit A-1; and
 
(iii) if the Title Benefit is of a type not described above, then the Title
Benefit Amounts shall be determined by taking into account the Allocated Value
of Title Benefit Property, the portion of such Title Benefit Property affected
by such Title Benefit, the legal effect of the Title Benefit, the potential
economic effect of the Title Benefit over the life of such Title Benefit
Property, the values placed upon the Title Benefit by Buyer and Seller and such
other reasonable factors as are necessary to make a proper evaluation.
 
(j) Title Deductibles.  Notwithstanding anything to the contrary, (i) in no
event shall there be any adjustments to the Purchase Price or other remedies
provided by Seller for any individual Title Defect for which the Title Defect
Amount does not exceed $100,000 (the “Individual Title Defect Threshold”); and
(ii) in no event shall there be any adjustments to the Purchase Price or other
remedies provided by Seller for any Title Defect that exceeds the Individual
Title Defect Threshold unless (A) the amount of the sum of (1) the aggregate
Title Defect Amounts of all such Title Defects that exceed the Individual Title
Defect Threshold (but excluding any such Title Defects cured by Seller), plus
(2) the aggregate Remediation Amounts of all Environmental Defects that exceed
the Individual Environmental Threshold (but excluding any Environmental Defects
cured by Seller), exceeds (B) the Aggregate Deductible, after which point Buyer
shall be entitled to adjustments to the Purchase Price or other applicable
remedies available hereunder, but, only with respect to the aggregate amount of
such Title Defect Amounts and Remediation Amounts in excess of the Aggregate
Deductible.  For the avoidance of doubt, if Seller retains any Title Defect
Property pursuant to Section 11.2(d)(ii), the Title Defect Amount related to
such Title Defect Property will not be counted towards the Aggregate Deductible.
 
 
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(k) Title Dispute Resolution.  Seller and Buyer shall attempt to agree on all
Title Defects, Title Benefits, Title Defect Amounts and Title Benefit Amounts
prior to Closing.  If Seller and Buyer are unable to agree by Closing, the Title
Defect Amounts and Title Benefit Amounts in dispute shall be exclusively and
finally resolved pursuant to this Section 11.2(k).  There shall be a single
arbitrator, who shall be a title attorney with at least ten (10) years
experience in oil and gas titles involving properties in the regional area in
which the Title Defect Properties are located, as selected by mutual agreement
of Buyer and Seller within fifteen (15) days after the end of the Cure Period,
and absent such agreement, by the Denver, Colorado office of the American
Arbitration Association (the “Title Arbitrator”).  The arbitration proceeding
shall be held in Denver, Colorado and shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, to the
extent such rules do not conflict with the terms of this Section 11.2(k).  The
Title Arbitrator’s determination shall be made within twenty (20) days after
submission of the matters in dispute and shall be final and binding upon both
Parties, without right of appeal. In making its determination, the Title
Arbitrator shall be bound by the rules set forth in Section 11.2(h) and
Section 11.2(i) and, subject to the foregoing, may consider such other matters
as in the opinion of the Title Arbitrator are necessary to make a proper
determination.  The Title Arbitrator, however, may not award the Buyer a greater
Title Defect Amount than the Title Defect Amount claimed by Buyer in its
applicable Title Defect Notice.  The Title Arbitrator shall act as an expert for
the limited purpose of determining the specific disputed Title Defect, Title
Benefit, Title Defect Amount and/or Title Benefit Amount submitted by either
Party and may not award damages, interest or penalties to either Party with
respect to any matter. Seller and Buyer shall each bear its own legal fees and
other costs of presenting its case.  Each of Seller and Buyer shall bear
one-half of the costs and expenses of the Title Arbitrator.  To the extent that
the award of the Title Arbitrator with respect to any Title Defect Amount or
Title Benefit Amount is not taken into account as an adjustment to the Purchase
Price pursuant to Section 3.5 or Section 3.7, then within ten (10) days after
the Title Arbitrator delivers written notice to Buyer and Seller of his award
with respect to a Title Defect Amount or a Title Benefit Amount and, subject to
Section 11.2(j) (i) Buyer shall pay to Seller the amount, if any, so awarded by
the Title Arbitrator to Seller, and (ii) Seller shall pay to Buyer the amount,
if any, so awarded by the Title Arbitrator to Buyer.  Nothing herein shall
operate to cause Closing to be delayed on account of any arbitration conducted
pursuant to this Section 11.2(k) and, to the extent any adjustments are not
agreed upon by the Parties as of Closing, the Purchase Price shall not be
adjusted therefor at Closing and subsequent adjustments to the Purchase Price,
if any, will be made pursuant to Section 3.7 or this Section 11.2.
 
11.3 Casualty Loss.
 
(a) Notwithstanding anything herein to the contrary, from and after the
Effective Time, if Closing occurs, Buyer shall assume all risk of loss with
respect to production of Hydrocarbons through normal depletion (including
watering out of any well, collapsed casing or sand infiltration of any well) and
the depreciation of Personal Property due to ordinary wear and tear, in each
case, with respect to the Assets.
 
(b) If, after the date of this Agreement but prior to the Closing Date, any
portion of the Assets is destroyed by fire or other casualty (each, a "Casualty
Loss"), the Closing shall nevertheless occur despite such Casualty Loss without
any adjustment to the Purchase Price, and Seller, at Closing, shall pay to Buyer
all sums paid to Seller by Third Parties by reason of any Casualty Loss insofar
as with respect to the Assets and shall assign, transfer and set over to Buyer
or subrogate Buyer to all of Seller's right, title and interest (if any) in
insurance claims, unpaid awards, and other rights against Third Parties
(excluding any Liabilities, other than insurance claims, of or against any
Seller Indemnified Parties) arising out of such Casualty Loss insofar as with
respect to the Assets; provided, however, that Seller shall reserve and retain
(and Buyer shall assign to Seller) all right, title, interest and claims against
Third Parties for the recovery of Seller's costs and expenses incurred prior to
Closing in pursuing or asserting any such insurance claims or other rights
against Third Parties to the extent no adjustment has been made in Seller’s
favor under Section 3.3 for such costs and expenses.
 
 
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11.4 Preferential Purchase Rights and Consents to Assign.
 
(a) With respect to each Preferential Purchase Right set forth in Schedule 4.10,
Seller, prior to Closing, shall send to the holder of each such Preferential
Purchase Right a notice in material compliance with the contractual provisions
applicable to such Preferential Purchase Right.
 
(i) If, prior to Closing, any holder of a Preferential Purchase Right notifies
Seller that it intends to consummate the purchase of the Asset to which its
Preferential Purchase Right applies or if the time for exercising such
Preferential Purchase Right has not expired, then the Asset subject to such
Preferential Purchase Right shall be excluded from the Assets to be assigned to
Buyer at Closing (but only to the extent of the portion of such Asset affected
by the Preferential Purchase Right), and the Purchase Price shall be reduced by
the Allocated Value of the Asset (or portion thereof) so excluded.  Seller shall
be entitled to all proceeds paid by any Person exercising a Preferential
Purchase Right prior to Closing.  If such holder of such Preferential Purchase
Right thereafter fails to consummate the purchase of the Asset (or portion
thereof) covered by such Preferential Purchase Right on or before sixty (60)
days following the Closing Date, or the time for exercising such Preferential
Purchase Right expires without exercise by the holder thereof (A) Seller shall
so notify Buyer and (B) Buyer shall purchase, on or before ten (10) days
following receipt of such notice, such Asset (or portion thereof) that was so
excluded from Seller, under the terms of this Agreement and for a price equal to
the amount by which the Purchase Price was reduced at Closing with respect to
such excluded Asset (or portion thereof).
 
(ii) All Assets for which any applicable Preferential Purchase Right has been
waived, or as to which the period to exercise the applicable Preferential
Purchase Right has expired, in each case, prior to Closing, shall be sold to
Buyer at Closing pursuant to the provisions of this Agreement.
 
(b) With respect to each Consent set forth in Schedule 4.4, Seller, prior to
Closing, shall send to the holder of each such Consent a notice in material
compliance with the contractual provisions applicable to such Consent seeking
such holder’s consent to the transactions contemplated hereby.
 
(i) If (A) Seller fails to obtain a Consent set forth in Schedule 4.4 prior to
Closing and the failure to obtain such Consent would cause (1) the assignment of
the Assets affected thereby to Buyer to be void or (2) the termination of a
Lease under the express terms thereof or (B) a Consent requested by Seller is
denied in writing, then, in each case, the Asset (or portion thereof) affected
by such un-obtained Consent shall be excluded from the Assets to be assigned to
Buyer at Closing, and the Purchase Price shall be reduced by the Allocated Value
of such Asset (or portion thereof) so excluded.  In the event that a Consent
(with respect to an Asset excluded pursuant to this Section11.4(b)(i)) that was
not obtained prior to Closing is obtained within sixty (60) days following
Closing, then, within ten (10) days after such Consent is obtained (x) Buyer
shall purchase the Asset (or portion thereof) that was so excluded as a result
of such previously un-obtained Consent and pay to Seller the amount by which the
Purchase Price was reduced at Closing with respect to the Asset (or portion
thereof) so excluded and (y) Seller shall assign to Buyer the Asset (or portion
thereof) so excluded at Closing pursuant to an instrument in substantially the
same form as the Assignment.
 
 
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(ii) If Seller fails to obtain a Consent set forth in Schedule 4.4 prior to
Closing (A) and the failure to obtain such Consent would not cause (1) the
assignment of the Asset (or portion thereof) affected thereby to Buyer to be
void or (2) the termination of a Lease under the express terms thereof and (B)
such Consent requested by Seller is not denied in writing by the holder thereof,
then the Asset (or portion thereof) subject to such un-obtained Consent shall
nevertheless be assigned by Seller to Buyer at Closing as part of the Assets and
Buyer shall have no claim against, and Seller shall have no Liability for, the
failure to obtain such Consent.
 
(iii) Prior to Closing, Seller and Buyer shall use their commercially reasonable
efforts to obtain all Consents listed on Schedule 4.4; provided, however, that
neither Party shall be required to incur any Liability or pay any money in order
to obtain any such Consent.  Subject to the foregoing, Buyer hereby agrees to
provide Seller with any information or documentation that may be reasonably
requested by Seller and/or the Third Party holders of such Consents in order to
facilitate the process of obtaining such Consents.
 
ARTICLE XII
 
ENVIRONMENTAL MATTERS
 
12.1 Notice of Environmental Defects.
 
(a) Environmental Defects Notice.  Buyer must deliver, at or prior to the Defect
Claim Date, claim notices to Seller meeting the requirements of this
Section 12.1(a) (collectively the “Environmental Defect Notices” and
individually an “Environmental Defect Notice”) setting forth any matters which,
in Buyer’s reasonable opinion, constitute Environmental Defects and which Buyer
intends to assert as Environmental Defects pursuant to this Section 12.1.  For
all purposes of this Agreement, but subject to Buyer’s remedy for a breach of
Seller’s representation contained in Section 4.14, Buyer shall be deemed to have
waived, and Seller shall have no liability for, any Environmental Defect which
Buyer fails to assert as an Environmental Defect by a properly delivered
Environmental Defect Notice received by Seller on or before the Defect Claim
Date.  To be effective, each Environmental Defect Notice shall be in writing and
shall include (i) a description of the matter constituting the alleged
Environmental Condition (including the applicable Environmental Law violated or
implicated thereby) and the Assets affected by such alleged Environmental
Condition, (ii) the Allocated Value of the Assets (or portions thereof) affected
by such alleged Environmental Condition, (iii) supporting documents reasonably
necessary for Seller to verify the existence of such alleged Environmental
Condition, and (iv) a calculation of the Remediation Amount (itemized in
reasonable detail) that Buyer asserts is attributable to such alleged
Environmental Defect.  Buyer’s calculation of the Remediation Amount included in
the Environmental Defect Notice must describe in reasonable detail the
Remediation proposed for the alleged Environmental Condition that gives rise to
the asserted Environmental Defect and identify all assumptions used by the Buyer
in calculating the Remediation Amount, including the standards that Buyer
asserts must be met to comply with Environmental Laws.  Seller shall have the
right, but not the obligation, to cure any asserted Environmental Defect on or
before Closing.
 
 
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(b) Remedies for Environmental Defects.  Subject to Seller’s continuing right to
dispute the existence of an Environmental Defect and/or the Remediation Amount
asserted with respect thereto, and subject to the rights of the Parties pursuant
to Section 14.1(c), in the event that any Environmental Defect timely asserted
by Buyer in accordance with Section 12.1(a) is not waived in writing by Buyer or
cured during the Cure Period, Seller shall, at its sole option, elect to:
 
(i) subject to the Individual Environmental Threshold and the Aggregate
Deductible, reduce the Purchase Price by the Remediation Amount;
 
(ii) assume responsibility for the Remediation of such Environmental Defect;
 
(iii) retain the entirety of the Asset that is subject to such Environmental
Defect, together with all associated Assets, in which event the Purchase Price
shall be reduced by an amount equal to the Allocated Value of such Asset and
such associated Assets; or
 
(iv) if applicable, terminate this Agreement pursuant to Section 14.1(c).
 
If Seller elects the option set forth in clause (i) above, and if Closing
occurs, Buyer shall be deemed to have assumed responsibility for all of the
costs and expenses attributable to the Remediation of the Environmental
Condition attributable to such Environmental Defect and all of all Liabilities
with respect thereto and such responsibility of Buyer shall be deemed to
constitute part of the Assumed Obligations hereunder.  If Seller elects the
option set forth in clause (ii) above, Seller shall use 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
Seller elects to undertake and Buyer, effective as of Closing, hereby grants to
Seller and its representatives, access to the Assets to conduct such
Remediation.  Seller will be deemed to have adequately completed the Remediation
required in the immediately preceding sentence (A) upon receipt of a certificate
or approval from the applicable Governmental Authority that the Remediation has
been implemented to the extent necessary to comply with existing Laws or
(B) upon receipt of a certificate from a licensed professional engineer that the
Remediation has been implemented to the extent necessary to comply with existing
Laws.
 
(c) Exclusive Remedy.  Except for Buyer’s remedy for a breach of Seller’s
representation contained in Section 4.14 and Buyer’s rights to terminate this
Agreement pursuant to Section 14.1(c), the provisions set forth in
Section 12.1(b) shall be the exclusive right and remedy of Buyer with respect to
any Environmental Defect with respect to any Asset or other environmental
matter.
 
 
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(d) Environmental Deductibles.  Notwithstanding anything to the contrary, (i) in
no event shall there be any adjustments to the Purchase Price or other remedies
provided by Seller for any individual Environmental Defect for which the
Remediation Amount does not exceed $100,000 (the “Individual Environmental
Threshold”); and (ii) in no event shall there be any adjustments to the Purchase
Price or other remedies provided by Seller for any Environmental Defect for
which the Remediation Amount exceeds the Individual Environmental Threshold
unless (A) the amount of the sum of (1) the aggregate Remediation Amounts of all
such Environmental Defects that exceed the Individual Environmental Threshold
(but excluding any Environmental Defects cured by Seller), plus (2) the
aggregate Title Defect Amounts of all Title Defects that exceed the Individual
Title Defect Threshold (but excluding any Title Defects cured by Seller),
exceeds (B) the Aggregate Deductible, after which point Buyer shall be entitled
to adjustments to the Purchase Price or other applicable remedies available
hereunder, but only with respect to the aggregate amount of such Remediation
Amounts and Title Defect Amounts in excess of the Aggregate Deductible. For the
avoidance of doubt, if Seller retains any Assets pursuant to Section
12.1(b)(iii), the Remediation Amounts relating to such retained Assets will not
be counted towards the Aggregate Deductible.
 
(e) Environmental Dispute Resolution.  Seller and Buyer shall attempt to agree
on all Environmental Defects and Remediation Amounts prior to Closing.  If
Seller and Buyer are unable to agree by Closing, the Environmental Defects
and/or Remediation Amounts in dispute shall be exclusively and finally resolved
by arbitration pursuant to this Section 12.1(e).  There shall be a single
arbitrator, who shall be an environmental attorney with at least ten (10) years
experience in environmental matters involving oil and gas producing properties
in the regional area in which the affected Assets are located, as selected by
mutual agreement of Buyer and Seller within fifteen (15) days after the Closing
Date, and absent such agreement, by the Denver, Colorado office of the American
Arbitration Association (the “Environmental Arbitrator”).  The arbitration
proceeding shall be held in Denver, Colorado and shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, to the extent such rules do not conflict with the terms of this
Section 12.1.  The Environmental Arbitrator’s determination shall be made within
twenty (20) days after submission of the matters in dispute and shall be final
and binding upon both Parties, without right of appeal. In making its
determination, the Environmental Arbitrator shall be bound by the rules set
forth in this Section 12.1 and, subject to the foregoing, may consider such
other matters as in the opinion of the Environmental Arbitrator are necessary or
helpful to make a proper determination.  The Environmental Arbitrator, however,
may not award Buyer its share of any greater Remediation Amount than the
Remediation Amount claimed by Buyer in its applicable Environmental Defect
Notice.  The Environmental Arbitrator shall act as an expert for the limited
purpose of determining the specific disputed Environmental Defects and/or
Remediation Amounts submitted by either Party and may not award damages,
interest or penalties to either Party with respect to any matter. Seller and
Buyer shall each bear its own legal fees and other costs of presenting its
case.  Each of Seller and Buyer shall bear one-half of the costs and expenses of
the Environmental Arbitrator.  To the extent that the award of the Environmental
Arbitrator with respect to any Remediation Amount is not taken into account as
an adjustment to the Purchase Price pursuant to Section 3.5 or Section 3.7,
then, within ten (10) days after the Environmental Arbitrator delivers written
notice to Buyer and Seller of his award with respect to any Remediation Amount,
and subject to Section 12.1(d) (i) Buyer shall pay to Seller the amount, if any,
so awarded by the Environmental Arbitrator to Seller, and (ii) Seller shall pay
to Buyer the amount, if any, so awarded by the Environmental Arbitrator to
Buyer.  Nothing herein shall operate to cause Closing to be delayed on account
of any arbitration conducted pursuant to this Section 12.1(e), and to the extent
any adjustments are not agreed upon by the Parties as of Closing, the Purchase
Price shall not be adjusted therefor at Closing and subsequent adjustments to
the Purchase Price, if any, will be made pursuant to Section 3.7 or this Section
12.1(e).
 
 
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12.2 NORM, Wastes and Other Substances.  Buyer acknowledges 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
Substances.  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 Substances.  NORM containing material and/or other wastes or
Hazardous Substances 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 Substances from the Assets.
 
ARTICLE XIII
 
ASSUMPTION; INDEMNIFICATION; SURVIVAL
 
13.1 Assumption by Buyer.  Subject to Buyer’s rights to indemnity under this
Article XIII, from and after Closing, if Closing occurs, Buyer assumes and
hereby agrees to fulfill, perform, pay and discharge (or cause to be fulfilled,
performed, paid and discharged) all obligations and Liabilities, known or
unknown, arising from, based upon, related to or associated with the Assets,
regardless of whether such obligations or Liabilities arose prior to, on or
after the Effective Time, including obligations and Liabilities relating in any
manner to the use, ownership or operation of the Assets, including obligations
to (a) furnish makeup gas and/or settle Imbalances according to the terms of
applicable gas sales, processing, gathering or transportation Contracts, (b) pay
Working Interests, royalties, overriding royalties and other interest owners’
revenues or proceeds attributable to sales of Hydrocarbons, including those held
in suspense (including those amounts for which the Purchase Price was adjusted
pursuant to Section 3.3(b)(viii)), (c) Decommission the Assets (the
“Decommissioning Obligations”), (d) except to the extent Seller is required to
do so pursuant to Section 12.1(b)(ii), clean up and/or remediate the Assets in
accordance with applicable Contracts and Laws, and (e) perform all obligations
applicable to or imposed on the lessee, owner or operator under the Leases and
the Applicable Contracts, or as required by Law, (all of said obligations and
Liabilities, subject to the exclusions below, herein being referred to as the
“Assumed Obligations”); provided, Buyer does not assume any obligations or
Liabilities of Seller to the extent that they are:
 
(i) attributable to or arise out of the ownership, use or operation of the
Excluded Assets; or
 
 
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(ii) attributable to or arise out of the actions, litigation, suits or other
proceedings, if any, set forth in Schedule 13.1, except insofar and only insofar
as they are attributable or relate to the ownership or operation of the Assets,
or production therefrom, for periods after the Effective Time.
 
13.2 Indemnities of Seller.  Effective as of Closing, subject to the limitations
set forth in Section 13.4 and Section 13.8 or otherwise in this Agreement,
Seller shall be responsible for, shall pay on a current basis and hereby
defends, indemnifies, holds harmless and forever releases Buyer and its
Affiliates, and all of its and their respective equityholders, partners,
members, directors, officers, managers, employees, agents and representatives
(collectively, “Buyer Indemnified Parties”) from and against any and all
Liabilities, whether or not relating to Third Party claims or incurred in the
investigation or defense of any of the same or in asserting, preserving or
enforcing any of their respective rights hereunder, arising from, based upon,
related to or associated with:
 
(a) any breach by Seller of any of its representations or warranties contained
in Article IV;
 
(b) any breach by Seller of any of its covenants or agreements under this
Agreement;
 
(c) the actions, suits or proceedings, if any, set forth in Schedule 13.1,
except insofar and only insofar as they are attributable or relate to the
ownership or operation of the Assets, or production therefrom, for periods after
the Effective Time;
 
(d) any obligations to Seller’s employees and officers, except Operating
Expenses attributable to the period from and after the Effective Time, or any
obligations under employment contracts or retention, severance, termination,
separation or incentive compensation with respect to Seller’s employees or
officers, in each case, to the extent attributable to the period of time prior
to the Closing Date;
 
(e) any act or omission by Seller involving or relating to the Excluded Assets;
and
 
(f) any personal injury or death relating to the ownership, use or operation of
the Assets that occurs prior to the Closing Date.
 
 
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13.3 Indemnities of Buyer. Effective as of Closing, Buyer and its successors and
assigns shall assume, be responsible for, shall pay on a current basis, and
hereby defends, indemnifies, holds harmless and forever releases Seller and its
Affiliates, and all of its and their respective equityholders, partners,
members, directors, officers, managers, employees, agents and representatives
(collectively, “Seller Indemnified Parties”) from and against any and all
Liabilities, whether or not relating to Third Party claims or incurred in the
investigation or defense of any of the same or in asserting, preserving or
enforcing any of their respective rights hereunder, arising from, based upon,
related to or associated with:
 
(a) any breach by Buyer of any of its representations or warranties contained in
Article V;
 
(b) any breach by Buyer of any of its covenants or agreements under this
Agreement; and
 
(c) the Assumed Obligations.
 
13.4 Limitation on Liability.
 
(a) Seller shall not have any liability for any indemnification under
Section 13.2(a) and Section 13.2(f) of this Agreement (i) for any individual
Liability unless the amount with respect to such Liability exceeds $100,000, and
(ii) until and unless the aggregate amount of all Liabilities for which Claim
Notices are delivered by Buyer exceeds the Indemnity Deductible, and then only
to the extent such Liabilities exceeds the Indemnity Deductible; provided that
the adjustments to the Purchase Price under Section 3.3, Section 3.5, Section
3.6, Section 3.7 or Section 3.8 and any payments in respect thereof shall not be
limited by this Section 13.4(a).
 
(b) Notwithstanding anything to the contrary contained in this Agreement, Seller
shall not be required to indemnify Buyer for aggregate Liabilities in excess of
$34,000,000.00; provided that the adjustments to the Purchase Price under
Section 3.3, Section 3.5, Section 3.6, Section 3.7 or Section 3.8 and any
payments in respect thereof shall not be limited by this Section 13.4(b).
 
13.5 Express Negligence.  THE DEFENSE, INDEMNIFICATION, HOLD HARMLESS, RELEASE
AND ASSUMED OBLIGATIONS PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE
APPLICABLE WHETHER OR NOT THE LIABILITIES, LOSSES, COSTS, EXPENSES AND DAMAGES
IN QUESTION AROSE OR RESULTED SOLELY OR IN PART FROM THE SOLE, ACTIVE, PASSIVE,
CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF OR BY
ANY INDEMNIFIED PARTY.  BUYER AND SELLER ACKNOWLEDGE THAT THIS STATEMENT
COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.
 
 
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13.6 Exclusive Remedy.  Notwithstanding anything to the contrary contained in
this Agreement, the Parties agree that, from and after Closing, Section 6.6,
Section 10.1(c), Section 11.1(c), Section 13.2 and Section 13.3, contain the
Parties’ exclusive remedies against each other with respect to the transactions
contemplated hereby, including breaches of the representations, warranties,
covenants and agreements of the Parties contained in this Agreement or in any
document or certificate delivered pursuant to this Agreement.  Except as
specified in Section 11.1(c) and Section 13.2, effective as of Closing, Buyer,
on its own behalf and on behalf of the Buyer Indemnified Parties, hereby
releases, remises and forever discharges Seller and its Affiliates and all such
Persons’ equityholders, partners, members, directors, officers, employees,
agents and representatives from any and all suits, legal or administrative
proceedings, claims, demands, damages, losses, costs, Liabilities, interest or
causes of action whatsoever, in Law or in equity, known or unknown, which Buyer
or the Buyer Indemnified Parties might now or subsequently may have, based on,
relating to or arising out of this Agreement, the transactions contemplated by
this Agreement, the ownership, use or operation of any of the Assets prior to
Closing or the condition, quality, status or nature of any of the Assets prior
to Closing, including rights to contribution under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended,
breaches of statutory or implied warranties, nuisance or other tort actions,
rights to punitive damages, common Law rights of contribution and rights under
insurance maintained by Seller or any of its Affiliates (except as provided in
Section 11.3(b)).
 
13.7 Indemnification Procedures.  All claims for indemnification under Section
6.6, Section 10.1(c), Section 13.2 and Section 13.3 shall be asserted and
resolved as follows:
 
(a) For purposes of Section 6.6, Section 10.1(c) and this Article XIII, the term
“Indemnifying Party” when used in connection with particular Liabilities shall
mean the Party or Parties having an obligation to indemnify another Party or
Parties with respect to such Liabilities pursuant to Section 6.6, Section
10.1(c) or this Article XIII, and the term “Indemnified Party” when used in
connection with particular Liabilities shall mean the Party or Parties having
the right to be indemnified with respect to such Liabilities by another Party or
Parties pursuant to Section 6.6, Section 10.1(c) or this Article XIII.
 
(b) To make claim for indemnification under Section 6.6, Section 10.1(c),
Section 13.2 and Section 13.3, an Indemnified Party shall notify the
Indemnifying Party of its claim under this Section 13.7, including the specific
details of and specific basis under this Agreement for its claim (the “Claim
Notice”).  In the event that the claim for indemnification is based upon a claim
by a Third Party against the Indemnified Party (a “Third Party Claim”), the
Indemnified Party shall provide its Third Party Claim Notice promptly after the
Indemnified Party has actual knowledge of the Third Party Claim and shall
enclose a copy of all papers (if any) served with respect to the Third Party
Claim; provided that the failure of any Indemnified Party to give notice of a
Third Party Claim as provided in this Section 13.7(b) shall not relieve the
Indemnifying Party of its obligations under Section 6.6, Section 10.1(c),
Section 13.2 and Section 13.3 (as applicable) except to the extent such failure
results in insufficient time being available to permit the Indemnifying Party to
effectively defend against the Third Party Claim or otherwise materially
prejudices the Indemnifying Party's ability to defend against the Third Party
Claim.  In the event that the claim for indemnification is based upon an
inaccuracy or breach of a representation, warranty, covenant or agreement, the
Third Party Claim Notice shall specify the representation, warranty, covenant or
agreement that was inaccurate or breached.
 
(c) In the case of a claim for indemnification based upon a Third Party Claim,
the Indemnifying Party shall have thirty (30) days from its receipt of the Claim
Notice to notify the Indemnified Party whether it admits or denies its liability
to defend the Indemnified Party against such Third Party Claim at the sole cost
and expense of the Indemnifying Party.  The Indemnified Party is authorized,
prior to and during such thirty (30) day period, to file any motion, answer or
other pleading that it shall deem necessary or appropriate to protect its
interests or those of the Indemnifying Party and that is not prejudicial to the
Indemnifying Party.
 
 
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(d) If the Indemnifying Party admits its liability to defend the Indemnified
Party against a Third Party Claim, it shall have the right and obligation to
diligently defend, at its sole cost and expense, the Indemnified Party against
such Third Party Claim.  The Indemnifying Party shall have full control of such
defense and proceedings, including any compromise or settlement thereof.  If
requested by the Indemnifying Party, the Indemnified Party agrees to cooperate
in contesting any Third Party Claim which the Indemnifying Party elects to
contest.  The Indemnified Party may participate in, but not control, any defense
or settlement of any Third Party Claim controlled by the Indemnifying Party
pursuant to this Section 13.7(d).  An Indemnifying Party shall not, without the
written consent of the Indemnified Party, (i) settle any Third Party Claim or
consent to the entry of any judgment with respect thereto which does not include
an unconditional written release of the Indemnified Party from all liability in
respect of such Third Party Claim or (ii) settle any Third Party Claim or
consent to the entry of any judgment with respect thereto in any manner that may
materially and adversely affect the Indemnified Party (other than as a result of
money damages covered by the indemnity).
 
(e) If the Indemnifying Party does not admit its liability or admits its
liability to defend the Indemnified Party against a Third Party Claim, but fails
to diligently prosecute, indemnify against or settle the Third Party Claim, then
the Indemnified Party shall have the right to defend against the Third Party
Claim at the sole cost and expense of the Indemnifying Party, with counsel of
the Indemnified Party’s choosing, subject to the right of the Indemnifying Party
to admit its liability and assume the defense of the Third Party Claim at any
time prior to settlement or final determination thereof.  If the Indemnifying
Party has not yet admitted its liability to defend the Indemnified Party against
a Third Party Claim, the Indemnified Party shall send written notice to the
Indemnifying Party of any proposed settlement and the Indemnifying Party shall
have the option for ten (10) days following receipt of such notice to (i) admit
in writing its liability to indemnify the Indemnified Party from and against the
liability and consent to such settlement and (ii) if liability is so admitted,
reject, in its reasonable judgment, the proposed settlement, or (iii) deny
liability. Any failure to respond such notice by the Indemnified Party shall be
deemed to be an election under subsection (i) above.
 
(f) In the case of a claim for indemnification not based upon a Third Party
Claim, the Indemnifying Party shall have thirty (30) days from its receipt of
the Claim Notice to (i) cure the Liabilities complained of, (ii) admit its
liability for such Liability or (iii) dispute the claim for such
Liabilities.  If the Indemnifying Party does not notify the Indemnified Party
within such thirty (30) day period that it has cured the Liabilities or that it
disputes the claim for such Liabilities, the amount of such Liabilities shall
conclusively be deemed a liability of the Indemnifying Party hereunder.
 
(g) An Indemnified Party shall use reasonable commercial efforts to pursue, and
to cause its Affiliates to pursue, all insurance claims to which it may be
entitled in connection with any Liabilities for which a claim for
indemnification is made, and the Parties shall cooperate with each other in
pursuing insurance claims with respect to any such Liabilities or any
indemnification obligations from Third Parties with respect to any such
Liabilities.  The Indemnifying Party is authorized by the Indemnified Party to
give direction to the insurer under any insurance policy with respect to the
defense of any action, suit, proceeding or claim relating to any liability
giving rise to a claim for indemnification.  If the Indemnifying Party makes any
payment on any Third Party Claim, the Indemnifying Party shall be subrogated, to
the extent of such payment, to all rights and remedies of the Indemnified Party
to any insurance benefits or other claims of the Indemnified Party with respect
to such Third Party Claim.  The Parties acknowledge and agree that (i) the
obligations of the Indemnified Party set forth in this Section 13.7(g) with
respect to any Liabilities for which a claim for indemnification has been made
shall be contingent on the Indemnified Party receiving a written statement from
the Indemnifying Party whereby the Indemnifying Party admits its liability for
such Liability and (ii) neither Party shall be required to maintain any
particular insurance coverage following the Closing.
 
 
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13.8 Survival.
 
(a) The representations and warranties of the Parties in Article IV and Article 
V (other than the representations and warranties in Sections 4.1, 4.2, 4.16,
5.1, 5.2, 5.9, 5.10 and 5.11), and the covenants and agreements of the Parties
in Sections 6.1 and 9.4, shall survive Closing for a period of twelve (12)
months.  The representation and warranty of Seller in Section 11.1(b) shall
terminate as of the expiration of the Survival Period.  Subject to the foregoing
and Section 13.8(b), the remainder of this Agreement (including Sections 4.1,
4.2, 4.6, 4.16, 5.1, 5.2, 5.9, 5.10 and 5.11) shall survive Closing without time
limit.  Representations, warranties, covenants and agreements shall be of no
further force and effect after the date of their expiration, provided that there
shall be no termination of any bona fide claim asserted pursuant to this
Agreement with respect to such a representation, warranty, covenant or agreement
prior to its expiration date.
 
(b) The indemnities in Section 13.2(a), Section 13.2(b),
Section 13.3(a) and Section 13.3(b) shall terminate as of the expiration date of
each respective representation, warranty, covenant or agreement that is subject
to indemnification, except in each case as to matters for which a specific
written claim for indemnity has been delivered to the Indemnifying Party on or
before such expiration date.  Seller’s indemnity in Section 13.2(c) shall
survive without time limit and Seller’s indemnities in Section 13.2(d), Section
13.2(e) and Section 13.2(f) shall survive the Closing for a period of two (2)
years.  Buyer’s indemnities in Section 6.6, Section 10.1(c) and in Section
13.3(c) shall survive Closing without time limit and shall be deemed covenants
running with the Assets (provided that Buyer and its successors and assigns
shall not be released from any of, and shall remain jointly and severally liable
to the Seller Indemnified Parties for, the obligations and Liabilities of Buyer
under such Sections of this Agreement upon any transfer or assignment of any
Asset).
 
13.9 Waiver of Right to Rescission.  Seller and Buyer acknowledge that,
following Closing, the payment of money, as limited by the terms of this
Agreement, shall be adequate compensation for breach of any representation,
warranty, covenant or agreement contained herein or for any other claim arising
in connection with or with respect to the transactions contemplated by this
Agreement.  As the payment of money shall be adequate compensation, following
Closing, Buyer and Seller waive any right to rescind this Agreement or any of
the transactions contemplated hereby.
 
 
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13.10 Insurance, Taxes.  The amount of any Liabilities for which any of the
Indemnified Parties is entitled to indemnification under this Agreement or in
connection with or with respect to the transactions contemplated by this
Agreement shall be reduced by any corresponding (a) Tax benefit created or
generated by the incurrence of the Liability or (b) insurance proceeds, from
insurance policies carried by a party realized, or that could reasonably be
expected to be realized by such Party if a claim were properly pursued under the
relevant insurance arrangements.
 
13.11 Non-Compensatory Damages.  None of the Buyer Indemnified Parties nor
Seller Indemnified Parties shall be entitled to recover from Seller or Buyer, or
their respective Affiliates, 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 or the transactions
contemplated hereby, except to the extent any such Party suffers such damages to
a Third Party, which damages (including costs of defense and reasonable
attorneys’ 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, Buyer, on behalf of each of the Buyer Indemnified
Parties, and Seller, 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 or the transactions
contemplated hereby.
 
13.12 Cooperation by Buyer - Retained Litigation.  Buyer agrees to use
reasonable efforts to cooperate with Seller in connection with Seller’s defense
and other actions relating to or arising out of the litigation and claims set
forth in Schedule 13.1.  Buyer agrees to make available Buyer’s employees
engaged in the operation of the Assets for the purposes of providing testimony,
depositions, information and other related activities relating to such
litigation and claims.
 
13.13 Disclaimer of Application of Anti-Indemnity Statutes.  The Parties
acknowledge and agree that the provisions of any anti-indemnity statute relating
to oilfield services and associated activities shall not be applicable to this
Agreement and/or the transactions contemplated hereby.
 
ARTICLE XIV
 
TERMINATION, DEFAULT AND REMEDIES
 
14.1 Right of Termination.  This Agreement and the transactions contemplated
herein may be terminated at any time prior to Closing:
 
(a) by Seller, at Seller’s option, if any of the conditions set forth in
Article VIII have not been satisfied on or before the Closing Date and, with the
exception of the condition set forth in Section 8.1 to the extent the failure to
satisfy such condition relates to the representations and warranties of Buyer
set forth in Sections 5.5 and 5.7 and, with the exception of the condition set
forth in Section 8.2 to the extent the failure to satisfy such condition relates
to the covenants of Buyer set forth in Sections 3.1, 6.4 and 6.6, following
written notice thereof from Seller to Buyer specifying the reason such condition
is unsatisfied (including any breach by Seller of this Agreement), such
condition remains unsatisfied for a period of five (5) Business Days after
Buyer’s receipt of written notice thereof from Seller;
 
 
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(b) by Buyer, at Buyer’s option, if any of the conditions set forth in Article
VII have not been satisfied on or before the Closing Date and, following written
notice thereof from Buyer to Seller specifying the reason such condition is
unsatisfied (including any breach by Seller of this Agreement), such condition
remains unsatisfied for a period of ten (10) Business Days after Seller’s
receipt of written notice thereof from Buyer;
 
(c) by Buyer if the condition set forth in Section 7.4 has not been satisfied on
or before the Closing Date or by Seller if the condition set forth in
Section 8.4 is not satisfied on or before the Closing Date; or
 
(d) by Seller or Buyer if Closing shall not have occurred on or before July 31,
2012;
 
provided, however, that no Party shall have the right to terminate this
Agreement pursuant to clause (a), (b) or (d) above if such Party or its
Affiliates are at such time in material breach of any provision of this
Agreement.
 
14.2 Effect of Termination; Remedies.
 
(a) If the obligation to close the transactions contemplated by this Agreement
is terminated pursuant to any provision of Section 14.1 hereof, then, except as
provided in this Section 14.2 and except for the provisions of
Sections 1.1, 10.1(c) through (f), 10.2, 10.3, 13.11, this Section 14.2, Section
14.3 and Article XV (other than Sections 15.2(b), 15.7 and 15.8) and such of the
defined terms set forth on Annex 1 to give context to such sections, this
Agreement shall forthwith become void and the Parties shall have no liability or
obligation hereunder except and to the extent such termination results from the
Willful Breach by a Party of any of its covenants or agreements hereunder in
which case the other Party shall have the right to seek all remedies available
at Law or in equity, including specific performance, for such Willful Breach;
provided that if Seller is entitled to retain the Deposit as liquidated damages
pursuant to Section 14.2(b), then such retention shall constitute full and
complete satisfaction of any and all damages Seller may have against Buyer.
 
(b) If (i) Seller has the right to terminate this Agreement pursuant to Section
14.1(a) because of (A) the failure of Buyer to materially perform any of its
obligations hereunder, or (B) the failure of any of Buyer’s representations and
warranties hereunder to be true and correct in all respects as of the date of
this Agreement and Closing, and (ii) all conditions precedent to the obligations
of Buyer set forth in Article VII (other than those actions or deliveries to
occur at Closing) have been met or waived by Buyer, then, in such event, Seller,
as Seller’s sole remedy for Buyer’s breach of this Agreement or failure or
refusal to close or perform any of its obligations hereunder, may terminate this
Agreement and retain the Deposit as liquidated damages as its sole remedy, and
in such case Seller expressly waives any and all other remedies, legal or
equitable, that it otherwise may have had for Buyer’s breach of this Agreement
or failure or refusal to close and Buyer shall have no further liability or
obligation hereunder.
 
 
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(c) If Closing does not occur for any reason other than as set forth in Section
14.2(b), then Buyer shall be entitled to the delivery of the Deposit upon
demand, free of any claims by Seller with respect thereto.
 
14.3 Return of Documentation and Confidentiality.  Upon termination of this
Agreement, Buyer shall return to Seller all title, engineering, geological and
geophysical data, environmental assessments and/or reports, maps and other
information furnished by Seller to Buyer or prepared by or on behalf of Buyer in
connection with its due diligence investigation of the Assets, in each case in
accordance with the Confidentiality Agreement and an officer of Buyer shall
certify same to Seller in writing.
 
ARTICLE XV
 
MISCELLANEOUS
 
15.1 Appendices, Exhibits and Schedules.  All of the Appendices, Exhibits and
Schedules referred to in this Agreement are hereby incorporated into this
Agreement by reference and constitute a part of this Agreement.  Each Party to
this Agreement and its counsel has received a complete set of Appendices,
Exhibits and Schedules prior to and as of the execution of this Agreement.
 
15.2 Expenses and Taxes.
 
(a) Except as otherwise specifically provided, all fees, costs and expenses
incurred by Buyer or Seller in negotiating this Agreement or in consummating the
transactions contemplated by this Agreement shall be paid by the Party incurring
the same, including, legal and accounting fees, costs and expenses.
 
(b) All required documentary, filing and recording fees and expenses in
connection with the filing and recording of the assignments, conveyances or
other instruments required to convey title to the Assets to Buyer shall be borne
by Buyer.  Seller shall retain responsibility for, and shall bear and pay, all
federal income Taxes and state income Taxes (including any applicable interest
or penalties) incurred or imposed with respect to (i) the transactions described
in this Agreement or (ii) the ownership of the Assets, the production of
Hydrocarbons, or the receipt of proceeds therefrom for all periods prior to the
Closing Date.  Buyer shall assume responsibility for, and shall bear and pay,
all state sales and use Taxes (including any applicable interest or penalties)
incurred or imposed with respect to the transactions described in this Agreement
or otherwise occurring in the ordinary course on or after the Effective
Time.  Except to the extent reflected in the computation of the Adjusted
Purchase Price pursuant to Section 3.3, (i) Seller shall retain responsibility
for, and shall bear and pay, all ad valorem, property, severance, production,
and similar Taxes and assessments based upon or measured by the ownership of the
Assets, the production of Hydrocarbons, or the receipt of proceeds therefrom
(including any applicable penalties and interest) and assessed against the
Assets by any Taxing Authority for any period or portion thereof prior to the
Effective Time, and (ii) Buyer shall be responsible for, and shall bear and pay,
all such Taxes and assessments assessed against Seller or the Assets by any
Taxing Authority for any period or portion thereof on or after the Effective
Time.  For purposes of this Agreement, the foregoing proration of ad valorem and
property Taxes shall be accomplished at Closing based on the ratio of the number
of days in the year prior to (for Seller) and on and after (for Buyer) the
Effective Time to the total number of days in the year as applied to the amount
of ad valorem and property Taxes for the most recent year for which the amount
of such Taxes can be finally determined at Closing.  Buyer shall be responsible
for delivering payment to the Taxing Authorities of all ad valorem and property
Taxes for the current year.
 
 
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15.3 Assignment.  This Agreement may not be assigned by Buyer without prior
written consent of Seller.  In the event Seller consents to any such assignment,
such assignment shall not relieve Buyer of any obligations and responsibilities
hereunder.  Any assignment or other transfer by Buyer or its successors and
assigns of any of the Assets shall not relieve Buyer or its successors or
assigns of any of their obligations (including indemnity obligations) hereunder,
as to the Assets so assigned or transferred.
 
15.4 Preparation of Agreement.  Both Seller and Buyer and their respective
counsel participated in the preparation of this Agreement. In the event of any
ambiguity in this Agreement, no presumption shall arise based on the identity of
the draftsman of this Agreement.
 
15.5 Publicity.  Seller and Buyer shall promptly consult with each other with
regard to all press releases or other public or private announcements issued or
made at or prior to Closing concerning this Agreement or the transactions
contemplated herein, and, except as may be required by applicable Laws or the
applicable rules and regulations of any Governmental Authority or stock
exchange, neither Buyer nor Seller shall issue any such press release or other
public or private announcement without the prior written consent of the other
Party, which shall not be unreasonably withheld or delayed.
 
15.6 Notices.  All notices and communications required or permitted to be given
hereunder shall be in writing and shall be delivered personally, or sent by
bonded overnight courier, or mailed by U.S. Express Mail or by certified or
registered United States Mail with all postage fully prepaid, or sent by
facsimile transmission (provided any such facsimile transmission is confirmed
either orally or by written confirmation), addressed to the appropriate Party at
the address for such Party shown below or at such other address as such Party
shall have theretofore designated by written notice delivered to the Party
giving such notice:
 
 
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If to Seller:
 
Antero Resources Corporation
1625 17th Street
Denver, Colorado 70202
Attention:  Alvyn A. Schopp
Fax:  (303) 357-7315

 
With additional copy to:
 
Vinson & Elkins LLP
1001 Fannin, Suite 2500
Houston, TX 77002
Attention:  John B. Connally
Fax:  (713) 615-5333

If to Buyer:
 
Vanguard Permian, LLC
5847 San Felipe, Ste. 3000
Houston, Texas 77057
Attention: Mark Carnes
Fax:  (832) 327-2260

With additional copy to:
 
Doherty & Doherty LLP
1717 St. James Place, Ste. 520
Houston, TX 77056
Attention:  J. Patrick Doherty
Fax:  (713) 572-1001

Any notice given in accordance herewith shall be deemed to have been given only
when delivered to the addressee in person, or by courier, or transmitted by
facsimile transmission during normal business hours on a Business Day (or if
delivered or transmitted after normal business hours on a Business Day or on a
day other than a Business Day, then on the next Business Day), or upon actual
receipt by the addressee during normal business hours on a Business Day after
such notice has either been delivered to an overnight courier or deposited in
the United States Mail, as the case may be (or if delivered after normal
business hours on a Business Day or on a day other than a Business Day, then on
the next Business Day).  The Parties hereto may change the address and facsimile
numbers to which such communications are to be addressed by giving written
notice to the other Parties in the manner provided in this Section 15.6.
 
 
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15.7 Further Cooperation.  After Closing, Buyer and Seller shall execute and
deliver, or shall cause to be executed and delivered, from time to time such
further instruments of conveyance and transfer, and shall take such other
actions as any Party may reasonably request, to convey and deliver the Assets to
Buyer, to perfect Buyer’s title thereto, and to accomplish the orderly transfer
of the Assets to Buyer in the manner contemplated by this Agreement.
 
15.8 Filings, Notices and Certain Governmental Approvals.  Promptly after
Closing Buyer shall (a) record all assignments executed at Closing in the
records of the applicable Governmental Authority (including any federal or state
agencies, if applicable), (b) if applicable, send notices to vendors supplying
goods and services for the Assets and to the operator of such Assets of the
assignment of such Assets to Buyer, (c) actively pursue all Customary
Post-Closing Consents from Governmental Authorities and (d) actively pursue all
other consents and approvals set forth on Schedule 4.4 that may be required in
connection with the assignment of the Assets to Buyer and the assumption of the
Liabilities assumed by Buyer hereunder, in each case, that shall not have been
obtained prior to Closing; provided, that, in the case of clause (d), at Buyer’s
request, Seller shall reasonably cooperate with Buyer in connection with such
pursuit efforts, the Parties understanding and agreeing that in no event will
Seller be required to pay any out of pocket expenses associated with such
efforts. Buyer obligates itself to use commercially reasonable efforts to take
any and all action required by any Governmental Authority in order to obtain
such unconditional approval, including Buyer shall post any and all bonds or
other security that may be required in excess of its existing lease, pipeline or
area-wide bond.
 
15.9 Entire Agreement; Conflicts.  THIS AGREEMENT, THE APPENDICES, EXHIBITS AND
SCHEDULES HERETO, THE TRANSACTION DOCUMENTS AND THE CONFIDENTIALITY AGREEMENT
COLLECTIVELY CONSTITUTE THE ENTIRE AGREEMENT AMONG THE PARTIES PERTAINING TO THE
SUBJECT MATTER HEREOF AND SUPERSEDE ALL PRIOR AGREEMENTS, UNDERSTANDINGS,
NEGOTIATIONS AND DISCUSSIONS, WHETHER ORAL OR WRITTEN, OF THE PARTIES PERTAINING
TO THE SUBJECT MATTER HEREOF.  THERE ARE NO WARRANTIES, REPRESENTATIONS OR OTHER
AGREEMENTS AMONG THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF EXCEPT AS
SPECIFICALLY SET FORTH IN THIS AGREEMENT, AND NEITHER SELLER NOR BUYER SHALL BE
BOUND BY OR LIABLE FOR ANY ALLEGED REPRESENTATION, PROMISE, INDUCEMENT OR
STATEMENTS OF INTENTION NOT SO SET FORTH.  IN THE EVENT OF A CONFLICT BETWEEN
THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE TERMS AND PROVISIONS OF ANY
SCHEDULE OR EXHIBIT HERETO, THE TERMS AND PROVISIONS OF THIS AGREEMENT SHALL
GOVERN AND CONTROL; PROVIDED, HOWEVER, THAT THE INCLUSION IN ANY OF THE
SCHEDULES AND EXHIBITS HERETO OF TERMS AND PROVISIONS NOT ADDRESSED IN THIS
AGREEMENT SHALL NOT BE DEEMED A CONFLICT, AND ALL SUCH ADDITIONAL PROVISIONS
SHALL BE GIVEN FULL FORCE AND EFFECT, SUBJECT TO THE PROVISIONS OF THIS
SECTION 15.9.
 
 
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15.10 Parties in Interest.  The terms and provisions of this Agreement shall be
binding upon and inure to the benefit of Seller and Buyer and their respective
successors and permitted assigns.  Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any Person other than the Parties or their successors and
permitted assigns, or the Parties’ respective related Indemnified Parties
hereunder any rights, remedies, obligations or liabilities under or by reason of
this Agreement; provided that only a Party and its respective successors and
assigns will have the right to enforce the provisions of this Agreement on its
own behalf or on behalf of any of its related Indemnified Parties (but shall not
be obligated to do so).
 
15.11 Amendment.  This Agreement may be amended only by an instrument in writing
executed by the Parties hereto against whom enforcement is sought.
 
15.12 Waiver; Rights Cumulative.  Any of the terms, covenants, representations,
warranties or conditions hereof may be waived only by a written instrument
executed by or on behalf of the Party waiving compliance.  No course of dealing
on the part of Seller or Buyer or their respective officers, employees, agents,
or representatives and no failure by Seller or Buyer to exercise any of its
rights under this Agreement shall, in each case, operate as a waiver thereof or
affect in any way the right of such Party at a later time to enforce the
performance of such provision.  No waiver by any Party of any condition, or any
breach of any term, covenant, representation or warranty contained in this
Agreement, in any one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach or a waiver of any
other condition or of any breach of any other term, covenant, representation or
warranty.  The rights of Seller and Buyer under this Agreement shall be
cumulative and the exercise or partial exercise of any such right shall not
preclude the exercise of any other right.
 
15.13 Governing Law; Jurisdiction. 
 
(a) Except to the extent that the Laws of the State of Oklahoma and/or Arkansas,
as applicable, are mandatorily applicable to the Assignment in connection with
the conveyances of property interests involving real property located in the
State of Oklahoma or Arkansas, as applicable, this Agreement and any claim,
controversy or dispute arising under or related to this Agreement or the
transactions contemplated hereby or the rights, duties and relationship of the
parties hereto and thereto, shall be governed by and construed and enforced in
accordance with the laws of the State of Texas, excluding any conflicts of law,
rule or principle that might refer construction of provisions to the Laws of
another jurisdiction.
 
(b) The Parties agree that the appropriate, exclusive and convenient forum for
any disputes between any of the Parties hereto arising out of this Agreement,
the Transaction Documents or the transactions contemplated hereby shall be in
any state or federal court in Denver, Colorado and each of the Parties hereto
irrevocably submits to the jurisdiction of such courts solely in respect of any
proceeding arising out of or related to this Agreement.  The Parties further
agree that the Parties shall not bring suit with respect to any disputes arising
out of this Agreement, the Transaction Documents or the transactions
contemplated hereby in any court or jurisdiction other than the above specified
courts.  The Parties further agree, to the extent permitted by Law, that a final
and nonappealable judgment against a Party in any action or proceeding
contemplated above shall be conclusive and may be enforced in any other
jurisdiction within or outside the United States by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the fact
and amount of such judgment.
 
 
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(c) To the extent that any Party hereto or any of its Affiliates has or
hereafter may acquire any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, such Party (on its own behalf and on behalf of its Affiliates)
hereby irrevocably (i) waives such immunity in respect of its obligations with
respect to this Agreement and (ii) submits to the personal jurisdiction of any
court described in Section 15.13(b).
 
(d) THE PARTIES HERETO AGREE THAT THEY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE
TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
 
15.14 Severability.  If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any adverse manner to
any Party.  Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
 
15.15 Removal of Name.  As promptly as practicable, but in any case within
thirty (30) days after the Closing Date, Buyer shall eliminate the names “Antero
Resources”, “Antero” and any variants thereof from the Assets and, except with
respect to such grace period for eliminating existing usage, shall have no right
to use any logos, trademarks or trade names belonging to Seller or any of its
Affiliates.
 
15.16 Counterparts.  This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all of such counterparts shall constitute for all purposes one
agreement.  Any signature hereto delivered by a Party by facsimile or other
electronic transmission shall be deemed an original signature hereto.
 
[Remainder of page intentionally left blank.  Signature page follows.]
 

 
 
 
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IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of the date
first written above.
 
SELLER:

 ANTERO RESOURCES CORPORATION

By:           /s/Alvyn A. Schopp
Name:      Alvyn A. Schopp
Title:        Vice President Accounting and Administration

 
BUYER:

VANGUARD PERMIAN, LLC

By: Vanguard Natural Gas, LLC, its sole member

By:           /s/Scott W. Smith
Name:      Scott W. Smith
Title:        President

 

[Signature Page to Purchase and Sale Agreement]
S-1

 
 

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APPENDIX I
 
DEFINED TERMS
 
“Accounting Arbitrator” shall have the meaning set forth in Section 3.8.
 
“Adjusted Purchase Price” shall have the meaning set forth in Section 3.3.
 
“AFEs” shall have the meaning set forth in Section 4.13.
 
“Affiliate” shall mean any Person that, directly or indirectly, through one or
more intermediaries, controls or is controlled by, or is under common control
with, another Person.  The term “control” and its derivatives with respect to
any Person mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
 
“Aggregate Deductible” shall mean $10,000,000.00.
 
“Agreement” shall have the meaning set forth in the introductory paragraph
herein.
 
“Allocated Values” shall have the meaning set forth in Section 3.9.
 
“Applicable Contracts” shall mean all Contracts to which Seller is a party or is
bound relating to any of the Assets and (in each case) that will be binding on
Buyer after Closing, including: confidentiality agreements; farmin and farmout
agreements; bottom hole agreements; crude oil, condensate and natural gas
purchase and sale, gathering, transportation and marketing agreements;
hydrocarbon storage agreements; acreage contribution agreements; operating
agreements; balancing agreements; pooling declarations or agreements;
unitization agreements; processing agreements; saltwater disposal agreements;
facilities or equipment leases; crossing agreements; letters of no objection;
and other similar contracts and agreements, but exclusive of any master service
agreements and Contracts relating to the Excluded Assets.
 
“Assets” shall have the meaning set forth in Section 2.1.
 
“Assignment” shall mean the Assignment and Bill of Sale from Seller to Buyer,
pertaining to the Assets, substantially in the form attached to this Agreement
as Exhibit B.
 
“Assumed Obligations” shall have the meaning set forth in Section 13.1.
 
“Burden” shall mean any and all royalties (including lessor’s royalty),
overriding royalties, production payments, net profits interests and other
burdens upon, measured by or payable out of production.

“Business Day” shall mean a day (other than a Saturday or Sunday) on which
commercial banks in Denver, Colorado are generally open for business.
 
“Buyer” shall have the meaning set forth in the introductory paragraph herein.
 
“Buyer Indemnified Parties” shall have the meaning set forth in Section 13.2.
 
 
Appendix I-1

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“Buyer’s Representatives” shall have the meaning set forth in Section 10.1(a).
 
“Casualty Loss” shall have the meaning set forth in Section 11.3(b).
 
“Claim Notice” shall have the meaning set forth in Section 13.7(b).
 
“Closing” shall have the meaning set forth in Section 9.1.
 
“Closing Date” shall have the meaning set forth in Section 9.1.
 
“Code” shall mean the Internal Revenue Code of 1986, as amended.
 
“Confidentiality Agreement” shall mean that certain Confidentiality Agreement
between Seller and Vanguard Natural Resources, LLC dated March 5, 2012.
 
“Consent” shall have the meaning set forth in Section 4.4.
 
“Contract” shall mean any written or oral contract, agreement, agreement
regarding indebtedness, indenture, debenture, note, bond, loan, collective
bargaining agreement, lease, mortgage, franchise, license agreement, purchase
order, binding bid, commitment, letter of credit or any other legally binding
arrangement, including farmin and farmout agreements; participation, exploration
and development agreements, crude oil, condensate and natural gas purchase and
sale, gathering, transportation and marketing agreements, operating agreements,
balancing agreements, unitization agreements, processing agreements, facilities
or equipment leases, and other similar Contracts, but excluding, however, any
Lease, easement, right-of-way, permit or other instrument creating or evidencing
an interest in the Assets or any real or immovable property related to or used
in connection with the operations of any Assets.
 
“Cure Period” shall have the meaning set forth in Section 11.2(c).
 
“Customary Post Closing Consents” shall mean the consents and approvals from
Governmental Authorities for the assignment of the Assets to Buyer that are
customarily obtained after the assignment of properties similar to the Assets.
 
“Decommission” shall mean all dismantling and decommissioning activities and
obligations as are required by Law, any Governmental Authority or agreements
including all well plugging, replugging and abandonment, facility dismantlement
and removal, pipeline and flowline removal, dismantlement and removal of all
other property of any kind related to or associated with operations or
activities and associated site clearance, site restoration and site remediation.
 
“Decommissioning Obligations” shall have the meaning set forth in Section 13.1.
 
“Defect Claim Date” shall have the meaning set forth in Section 11.2(a).
 
“Defensible Title” shall mean such title of Seller with respect to the Assets
that, as of the Effective Time and the date hereof and subject to Permitted
Encumbrances:
 
 
Appendix I-2

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(a)           with respect to each Well or Undrilled Location shown in Exhibit
A-1 (but limited to any depth restrictions contained in Exhibit A-1), entitles
Seller to receive not less than the Net Revenue Interest set forth in Exhibit
A-1 for such Well or Undrilled Location (but limited to any depth restrictions
contained in Exhibit A-1), except for (i) decreases in connection with those
operations in which Seller or its successors or assigns may from and after the
date of this Agreement elect to be a non-consenting co-owner, (ii) decreases
resulting from the establishment or amendment from and after the date of this
Agreement of pools or units, (iii) decreases required to allow other Working
Interest owners to make up past underproduction or pipelines to make up past
under deliveries, and (iv) as otherwise set forth in Exhibit A-1;
 
(b)           with respect to each Well or Undrilled Location shown in Exhibit
A-1 (but limited to any depth restrictions contained in Exhibit A-1), obligates
Seller to bear not more than the Working Interest set forth in Exhibit A-1 for
such Well or Undrilled Location (but limited to any depth restrictions contained
in Exhibit A-1), except (i) increases resulting from contribution requirements
with respect to defaulting co-owners under applicable operating agreements, (ii)
increases to the extent that such increases are accompanied by a proportionate
increase in Seller’s Net Revenue Interest, and (iii) as otherwise set forth in
Exhibit A-1; and
 
(c)           is free and clear of all Encumbrances.
 
“Deposit” shall have the meaning set forth in Section 3.2.
 
“Dispute Notice” shall have the meaning set forth in Section 3.7.
 
“DOJ” shall mean the Department of Justice.
 
“Effective Time” shall mean 7:00 a.m. (Central Time) on April 1, 2012; provided,
however, that the “Effective Time” for purposes of the Hedges shall mean 7:00
a.m. (Central Time) on May 1, 2012.
 
“Encumbrance” shall mean any lien, mortgage, security interest, pledge, charge
or similar encumbrance.
 
“Environmental Arbitrator” shall have the meaning set forth in Section 12.1(e).
 
“Environmental Condition” shall mean (a) a condition existing on the date of
this Agreement with respect to the air, soil, subsurface, surface waters, ground
waters and/or sediments that causes an Asset (or Seller with respect to an
Asset) not to be in compliance with any Environmental Law or (b) the existence
as of the date of this Agreement with respect to the Assets or their operation
thereof of any environmental pollution, contamination or degradation where
remedial or corrective action is presently required (or if known, would be
presently required) under Environmental Laws.
 
“Environmental Defect” shall mean an Environmental Condition with respect to an
Asset that is not set forth in Schedule 4.14.
 
 
Appendix I-3

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“Environmental Defect Notice” shall have the meaning set forth in
Section 12.1(a).
 
“Environmental Laws” shall mean all applicable Laws in effect as of the date of
this Agreement, including common Law, relating to the protection of the public
health, welfare and the environment, including, those Laws relating to the
storage, handling and use of chemicals and other Hazardous Substances and those
Laws relating to the generation, processing, treatment, storage, transportation,
disposal or other management thereof.  The term “Environmental Laws” does not
include good or desirable operating practices or standards that may be employed
or adopted by other oil and gas well operators or recommended by a Governmental
Authority.
 
“Excluded Assets” shall mean (a) all of Seller’s corporate minute books,
financial records and other business records that relate to Seller’s business
generally (including the ownership and operation of the Assets); (b) all trade
credits, all accounts, all receivables and all other proceeds, income or
revenues attributable to the Assets and attributable to any period of time prior
to the Effective Time; (c) all claims and causes of action of Seller arising
under or with respect to any Contracts that are attributable to periods of time
prior to the Effective Time (including claims for adjustments or refunds); (d)
subject to Section 11.3, all rights and interests of Seller (i) under any policy
or agreement of insurance or indemnity, (ii) under any bond or (iii) to any
insurance or condemnation proceeds or awards arising, in each case, from acts,
omissions or events or damage to or destruction of property; (e) all
Hydrocarbons produced and sold from the Assets with respect to all periods prior
to the Effective Time; (f) all claims of Seller for refunds of, rights to
receive funds from any Governmental Authority or loss carry forwards with
respect to (i) production or any other Taxes attributable to any period prior to
the Effective Time, (ii) income or franchise Taxes or (iii) any Taxes
attributable to the Excluded Assets; (g) all personal computers and associated
peripherals and all radio and telephone equipment (excluding any such radio and
telephone equipment used in the operation of the Assets); (h) all of Seller’s
proprietary computer software, patents, trade secrets, copyrights, names,
trademarks, logos and other intellectual property; (i) all documents and
instruments of Seller that may be protected by an attorney-client privilege; (j)
all data that cannot be disclosed to Buyer as a result of confidentiality
arrangements under agreements with Third Parties; (k) all audit rights arising
under any of the Applicable Contracts or otherwise with respect to any period
prior to the Effective Time or to any of the Excluded Assets, except for any
Imbalances assumed by Buyer; (l) all geophysical and other seismic and related
technical data and information relating to the Assets which Buyer has not
separately agreed in writing to transfer, to the extent and only to the extent
such geophysical and other seismic and related technical data and information is
not transferred pursuant to Section 2.1(i) and Section 2.1(j); (m) documents
prepared or received by Seller with respect to (i) lists of prospective
purchasers for such transactions compiled by Seller, (ii) bids submitted by
other prospective purchasers of the Assets, (iii) analyses by Seller of any bids
submitted by any prospective purchaser, (iv) correspondence between or among
Seller, its respective representatives, and any prospective purchaser other than
Buyer and (v) correspondence between Seller or any of its respective
representatives with respect to any of the bids, the prospective purchasers or
the transactions contemplated by this Agreement; (n) any offices, office leases
and any personal property located in or on such offices or office leases; (o)
any assets specifically listed in Exhibit C; (p) any debt instruments; and (q)
any assets described in Section 2.1(d), Section 2.1(e), Section 2.1(h) or
Section 2.1(i) that are not assignable.
 
 
Appendix I-4

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“Final Price” shall have the meaning set forth in Section 3.7.
 
“Final Settlement Statement” shall have the meaning set forth in Section 3.7.
 
“FTC” shall mean the Federal Trade Commission.
 
“G&T Agreement” shall have the meaning set forth in Section 6.11.
 
“GAAP” shall mean United States generally accepted accounting principles.
 
“Governmental Authority” shall mean any federal, state, local, municipal, tribal
or other government; any governmental, regulatory or administrative agency,
commission, body or other authority exercising or entitled to exercise any
administrative, executive, judicial, legislative, regulatory or Taxing Authority
or power, and any court or governmental tribunal, including any tribal authority
having or asserting jurisdiction.
 
“Guarantees” shall have the meaning set forth in Section 6.6.
 
“Hazardous Substances” shall mean any pollutants, contaminants, toxins or
hazardous or extremely hazardous substances, materials, wastes, constituents,
compounds or chemicals that are regulated by, or may form the basis of liability
under, any Environmental Laws, including NORM and other substances referenced in
Section 12.2.
 
“Hedge Counterparties” shall mean JP Morgan Chase Bank, N.A., Wells Fargo Bank,
N.A., Key Bank National Association, Credit Suisse Energy LLC and Credit
Agricole Corporate & Investment Bank, as applicable.
 
“Hedges” shall mean those swap, forward, future or derivative transactions or
options or other similar Contracts to which Seller is a party set forth on
Schedule 2.1(h).
 
“HSR Act” shall mean the Hart Scott Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder.
 
“Hydrocarbons” shall mean oil and gas and other hydrocarbons produced or
processed in association therewith.
 
“Imbalances” shall mean all Well Imbalances and Pipeline Imbalances.
 
“Indemnified Party” shall have the meaning set forth in Section 13.7(a).
 
“Indemnifying Party” shall have the meaning set forth in Section 13.7(a).
 
“Indemnity Deductible” shall mean $6,666,667.00.
 
“Individual Environmental Threshold” shall have the meaning set forth in
Section 12.1(d).
 
“Individual Title Defect Threshold” shall have the meaning set forth in
Section 11.2(j).
 
 
Appendix I-5

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“Interim Period” shall mean that period of time commencing with the Effective
Time and ending at 7:00 a.m. (Central Time) on the Closing Date.
 
“Interim Settlement Statement” shall have the meaning set forth in Section 3.6.
 
“ISDA Master Agreement” shall mean the ISDA 2002 Master Agreement or the 1992
Master Agreement, each as published by the International Swaps and Derivatives
Association, Inc.
 
“ISDA Novation Agreement” shall mean the 2002 ISDA Novation Agreement, as
published by the International Swaps and Derivatives Association, Inc.
 
“Knowledge” shall mean with respect to Seller, the actual knowledge (without
investigation) of the following Persons:  Paul Rady, Glen Warren, Al Schopp,
Kevin Kilstrom, Mark Mauz, Steve Woodward, Ward McNeilly, Chad Green and Phil
Yoo.
 
“Law” shall mean any applicable statute, law, rule, regulation, ordinance,
order, code, ruling, writ, injunction, decree or other official act of or by any
Governmental Authority.
 
“Leases” shall have the meaning set forth in Section 2.1(a).
 
“Liabilities” shall mean any and all claims, causes of action, payments,
charges, judgments, assessments, liabilities, losses, damages, penalties, fines
and costs and expenses, including any attorneys’ fees, legal or other expenses
incurred in connection therewith and including liabilities, costs, losses and
damages for personal injury or death or property damage or environmental damage
or remediation.
 
“Material Adverse Effect” shall mean an event or circumstance that, individually
or in the aggregate, results in a material adverse effect on the ownership,
operation or value of the Assets taken as a whole and as currently operated as
of the date of this Agreement or a material adverse effect on the ability of
Seller to consummate the transactions contemplated by this Agreement and perform
its obligations hereunder; provided, however, that a Material Adverse Effect
shall not include any material adverse effects resulting from:  (a) entering
into this Agreement or the announcement of the transactions contemplated by this
Agreement; (b) changes in general market, economic, financial or political
conditions (including changes in commodity prices, fuel supply or transportation
markets, interest or rates) in the area in which the Assets are located, the
United States or worldwide; (c) changes in conditions or developments generally
applicable to the oil and gas industry in the area where the Assets are located;
(d) acts of God, including hurricanes, storms or other naturally occurring
events; (e) acts or failures to act of Governmental Authorities; (f) civil
unrest, any outbreak of disease or hostilities, terrorist activities or war or
any similar disorder; (g) matters that are cured or no longer exist by the
earlier of Closing and the termination of this Agreement; (h) a change in Laws
from and after the date of this Agreement; (i) any reclassification or
recalculation of reserves in the ordinary course of business; (j) changes in the
prices of Hydrocarbons; (k) a change in Laws and any interpretations thereof
from and after the date of this Agreement; and (l) natural declines in well
performance.
 
“Material Contracts” shall have the meaning set forth in Section 4.8(a).
 
 
Appendix I-6

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“Net Revenue Interest” shall mean, with respect to any Well or Undrilled
Location (but limited to the depths, if any, set forth on Exhibit A-1 for such
Well or Undrilled Location) the interest in and to all Hydrocarbons produced,
saved and sold from or allocated to such Well or Undrilled Location (but limited
to the depths, if any, set forth on Exhibit A-1 for such Well or Undrilled
Location) after giving effect to all Burdens.
 
“NORM” shall mean naturally occurring radioactive material.
 
“Novation Agreement(s)” shall mean, collectively, each ISDA Novation Agreement
by and among a Hedge Counterparty, Seller and Buyer pursuant to which the
parties thereto shall agree that, effective upon Closing, all Hedges between
Seller and such Hedge Counterparty shall be automatically novated and assigned
from Seller to Buyer or Buyer’s designated financial institution, and upon such
novation, such Hedges shall be transactions under, and the confirmations for
such Hedges shall be confirmations subject to, the ISDA Master Agreement then in
effect between Buyer and such Hedge Counterparty.
 
“Operating Expenses” shall have the meaning set forth in Section 2.3.
 
“Party” and “Parties” shall have the meaning set forth in the introductory
paragraph herein.
 
“Permitted Encumbrances” shall mean:
 
(a) the terms and conditions of all Leases and all Burdens if the net cumulative
effect of such Leases and Burdens does not operate to reduce the Net Revenue
Interest of Seller with respect to any Well or Undrilled Location to an amount
less than the Net Revenue Interest set forth in Exhibit A-1 for such Well or
Undrilled Location (but limited to the depths, if any, set forth on Exhibit A-1
for such Well or Undrilled Location), and does not obligate Seller to bear a
Working Interest with respect to any Well or Undrilled Location in any amount
greater than the Working Interest set forth in Exhibit A-1 for such Well or
Undrilled Location (unless the Net Revenue Interest for such Well or Undrilled
Location is greater than the Net Revenue Interest set forth in Exhibit A-1 in
the same proportion as any increase in such Working Interest);
 
(b) preferential rights to purchase and required consents to assignment and
similar agreements listed on Schedule 4.4 or Schedule 4.10;
 
(c) liens for Taxes or assessments not yet due or delinquent or, if delinquent,
that are being contested in good faith in the normal course of business;
 
(d) Customary Post-Closing Consents;
 
(e) conventional rights of reassignment;
 
(f) such Title Defects as Buyer may have waived (or deemed to be waived);
 
 
Appendix I-7

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(g) all applicable Laws and all rights reserved to or vested in any Governmental
Authority (i) to control or regulate any Asset in any manner; (ii) by the terms
of any right, power, franchise, grant, license or permit, or by any provision of
Law, to terminate such right, power, franchise, grant, license or permit or to
purchase, condemn, expropriate or recapture or to designate a purchaser of any
of the Assets; (iii) to use such property in a manner which does not materially
impair the use of such property for the purposes for which it is currently owned
and operated; or (iv) to enforce any obligations or duties affecting the Assets
to any Governmental Authority with respect to any franchise, grant, license or
permit;
 
(h) rights of a common owner of any interest in rights-of-way, permits or
easements held by Seller and such common owner as tenants in common or through
common ownership;
 
(i) easements, conditions, covenants, restrictions, servitudes, permits,
rights-of-way, surface leases and other rights in the Assets for the purpose of
operations, facilities, pipelines, transmission lines, transportation lines,
distribution lines, power lines, telephone lines and other like purposes, or for
the joint or common use of the lands situated on the outer continental shelf,
rights-of-way, facilities and equipment, which, in each case, do not materially
impair the operation or use of the Assets as currently operated and used;
 
(j) vendors, carriers, warehousemen’s, repairmen’s, mechanics’, workmen’s,
materialmen’s, construction or other like liens arising by operation of Law in
the ordinary course of business or incident to the construction or improvement
of any property in respect of obligations which are not yet due or which are
being contested in good faith by appropriate proceedings by or on behalf of
Seller;
 
(k) liens created under Leases and/or operating agreements or by operation of
Law in respect of obligations that are not yet due or that are being contested
in good faith by appropriate proceedings by or on behalf of Seller;
 
(l) with respect to any interest in the Assets acquired through forced pooling
or pursuant to an integration order, failure of the records of any Governmental
Authority to reflect Seller as the owner of an Asset;
 
(m) any Encumbrance affecting the Assets that is discharged by Seller at or
prior to Closing;
 
(n) any matters referenced and set forth in Exhibit A or Exhibit A-1 and all
litigation set forth in Schedule 4.7; and
 
(o) the Leases and all other Encumbrances, Contracts (including the Applicable
Contracts), instruments, obligations, defects and irregularities affecting the
Assets that individually or in the aggregate are not such as to materially
interfere with the operation or use of any of the Assets (as currently operated
and used), do not reduce the Net Revenue Interest of Seller with respect to any
Well or Undrilled Location to an amount less than the Net Revenue Interest set
forth in Exhibit A-1 for such Well or Undrilled Location (but limited to the
depths, if any, set forth on Exhibit A-1 for such Well or Undrilled Location),
and do not obligate Seller to bear a Working Interest with respect to a
currently producing formation in any Well or Undrilled Location in any amount
greater than the Working Interest set forth in Exhibit A-1 for such Well or
Undrilled Location (unless the Net Revenue Interest for such Well or Undrilled
Location is greater than the Net Revenue Interest set forth in Exhibit A-1 in
the same proportion as any increase in such Working Interest).
 
 
Appendix I-8

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“Person” shall mean any individual, firm, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization, Governmental Authority or any other entity.
 
“Personal Property” shall have the meaning set forth in Section 2.1(f).
 
“Pipeline Imbalance” shall mean any marketing imbalance between the quantity of
Hydrocarbons attributable to the Assets required to be delivered by Seller under
any Contract relating to the purchase and sale, gathering, transportation,
storage, processing or marketing of Hydrocarbons and the quantity of
Hydrocarbons attributable to the Assets actually delivered by Seller pursuant to
the relevant Contract, together with any appurtenant rights and obligations
concerning production balancing at the delivery point into the relevant sale,
gathering, transportation, storage or processing facility.
 
“Preferential Purchase Right” shall have the meaning set forth in Section 4.10.
 
“Preliminary Settlement Statement” shall have the meaning set forth in
Section 3.5.
 
“Purchase Price” shall have the meaning set forth in Section 3.1.
 
“Records” shall have the meaning set forth in Section 2.1(i).
 
“Remediation” shall mean, with respect to an Environmental Condition, the
implementation and completion of any remedial, removal, response, construction,
closure, disposal or other corrective actions required under Environmental Laws
to correct or remove such Environmental Condition.
 
“Remediation Amount” shall mean, with respect to an Environmental Condition, the
present value as of the Closing Date (using an annual discount rate of ten
percent (10%)) of the cost (net to Seller’s interest prior to the consummation
of the transactions contemplated by this Agreement) of the most cost effective
Remediation of such Environmental Condition.
 
“Seller” shall have the meaning set forth in the introductory paragraph of this
Agreement.
 
“Seller Indemnified Parties” shall have the meaning set forth in Section 13.3.
 
“Shortfall Amount” shall have the meaning set forth in Section 6.11.
 
“Survival Period” shall have the meaning set forth in Section 11.1(c)(i).
 
“Tax” or “Taxes” shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, license tax, value-added tax, surtax,
excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, environmental tax, inventory tax, occupancy tax, severance tax,
withholding tax, payroll tax, employment tax, gift tax, estate tax or
inheritance tax, wealth tax, other import or export duties), levy, assessment,
tariff or impost (including any related fine, penalty or interest imposed with
respect thereto), imposed by or on behalf of any Taxing Authority.
 
 
Appendix I-9

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“Taxing Authority” shall mean, with respect to any Tax, the governmental entity
or political subdivision thereof that imposes such Tax, and the agency (if any)
charged with the collection of such Tax for such entity or subdivision.
 
“Third Party” shall mean any Person other than a Party to this Agreement or an
Affiliate of a Party to this Agreement or any officer or director of any Party
or Affiliate of any Party.
 
“Third Party Claim” shall have the meaning set forth in Section 13.7(b).
 
“Title Arbitrator” shall have the meaning set forth in Section 11.2(k).
 
“Title Benefit” shall mean any right, circumstance or condition that operates
(a) to increase the Net Revenue Interest of Seller in any Well or Undrilled
Location above that shown for such Well or Undrilled Location in Exhibit A-1 to
the extent the same does not cause a greater than proportionate increase in
Seller’s Working Interest therein above that shown in Exhibit A-1, or (b) to
decrease the Working Interest of Seller in any Well or Undrilled Location below
that shown for such Well or Undrilled Location in Exhibit A-1 to the extent the
same causes a decrease in Seller’s Working Interest that is proportionately
greater than the decrease in Seller’s Net Revenue Interest therein below that
shown in Exhibit A-1.
 
“Title Benefit Amount” shall have the meaning set forth in Section 11.2(f).
 
“Title Benefit Notice” shall have the meaning set forth in Section 11.2(b).
 
“Title Benefit Property” shall have the meaning set forth in Section 11.2(b).
 
“Title Defect” shall mean any Encumbrance, defect or other matter that causes
Seller not to have Defensible Title in and to any Well or Undrilled Location as
of the Effective Time; provided that the following shall not be considered Title
Defects:
 
(a)           defects arising out of lack of corporate or other entity
authorization unless Buyer provides affirmative evidence that such corporate or
other entity action was not authorized and results in another Person’s superior
claim of title to the relevant Asset;
 
(b)           defects based on a gap in Seller’s chain of title in the
applicable federal, state or county records, unless such gap is affirmatively
shown to exist in such records by an abstract of title, title opinion or
landman’s title chain which documents shall be included in a Title Defect
Notice;
 
(c)           defects based solely upon the failure to record any Leases or any
assignments of interests in such Leases in any applicable county records;
 
(d)           defects based on the failure to recite marital status in a
document or omission of successors or heirship or estate proceedings;
 
 
Appendix I-10

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(e)           any Encumbrance or loss of title resulting from Seller’s conduct
of business after the date of this Agreement in compliance with this Agreement;
 
(f)           Intentionally omitted.
 
(g)           defects arising from any prior oil and gas lease relating to the
lands covered by a Lease not being surrendered of record, unless Buyer provides
affirmative evidence that such prior oil and gas lease is still in effect and
results in another Person’s actual and superior claim of title to the relevant
Lease or Hydrocarbon Well;
 
(h)           defects that affect only which Person has the right to receive
royalty payments (rather than the amount or the proper payment of such royalty
payment);
 
(i)           defects based solely on: (i) lack of information in Seller’s
files; (ii) references to an unrecorded document(s) to which neither Seller or
any Affiliate is a party, if such document is dated earlier than January 1, 1960
and is not in Seller’s files; or (iii) Tax assessment, Tax payment or similar
records (or the absence of such activities or records);
 
(j)           defects or irregularities that would customarily be waived by a
reasonable owner or operator of oil and gas properties;
 
(k)           defects based upon the exercise of any Preferential Purchase
Rights or failure to obtain any Consent listed on Schedule 4.4 or Schedule 4.10;
and
 
(l)           defects that have been cured by applicable Laws of limitations or
presumptions.
 
“Title Defect Amount” shall have the meaning set forth in Section 11.2(h).
 
“Title Defect Notice” shall have the meaning set forth in Section 11.2(a).
 
“Title Defect Property” shall have the meaning set forth in Section 11.2(a).
 
 “Transaction Documents” shall mean those documents executed pursuant to or in
connection with this Agreement.
 
“Treasury Regulations” shall mean the regulations promulgated by the United
States Department of the Treasury pursuant to and in respect of provisions of
the Code.  All references herein to sections of the Treasury Regulations shall
include any corresponding provision or provisions of succeeding, similar,
substitute, proposed or final Treasury Regulations.
 
“Undrilled Location” shall mean the undrilled wells identified on Exhibit A-1
and the Lease rights and lands attributable thereto.
 
“Units” shall have the meaning set forth in Section 2.1(c).
 
“Unpaid Capital Costs” shall have the meaning set forth in Section 2.3.
 
 
Appendix I-11

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“Well Imbalance” shall mean any imbalance at the wellhead between the amount of
Hydrocarbons produced from a Well and allocable to the interests of Seller
therein and the shares of production from the relevant Well to which Seller is
entitled, together with any appurtenant rights and obligations concerning future
in kind and/or cash balancing at the wellhead.
 
“Wells” shall have the meaning set forth in Section 2.1(b).
 
“Willful Breach” means, with respect to any Party, that such Party does one or
more of the following:  (a) such Party willfully and intentionally breaches in
any material respect (by refusing to perform or by taking an action prohibited)
any material pre-Closing covenant applicable to such Party, (b) such Party
intentionally misrepresents any of the matters covered by its representations
and warranties under this Agreement as of the date hereof, or (c) such Party
willfully and intentionally causes any of its representations and warranties
under this Agreement to not be true and correct in all material respects as of
the Closing Date.
 
“Working Interest” shall mean, with respect to any Well or Undrilled Location
(but limited to the depths, if any, set forth on Exhibit A-1 for such Well or
Undrilled Location), the interest in and to such producing formation for such
Well or Undrilled Location that is burdened with the obligation to bear and pay
costs and expenses of maintenance, development and operations on or in
connection with such producing formation for such Well or Undrilled Location,
but without regard to the effect of any Burdens.
 

 

 
Appendix I-12

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DISCLOSURE SCHEDULES
 
Inclusion of a matter on a Schedule to this Agreement in relation to a
representation or warranty which addresses matters having a Material Adverse
Effect or which contain a materiality threshold shall not be deemed an
indication that such matter does or does not, or may or may not, have a Material
Adverse Effect, or is or is not, or may or may not be, material.  Likewise, the
inclusion of a matter on a Schedule to this Agreement in relation to a
representation or warranty shall not be deemed an indication that such matter
necessarily would or would not, or may or may not, breach such representation or
warranty absent its inclusion on such Schedule.  Matters reflected in the
Schedules to this Agreement, including specifications of the Assets, are not
necessarily limited to matters required by this Agreement to be reflected in the
Schedules.  Such additional matters are set forth for information purposes only,
do not necessarily include other matters of a similar nature, and shall not
expand the scope of the representations and warranties set forth in this
Agreement.
 
Any fact or item which is clearly and conspicuously disclosed on any Schedule to
this Agreement in such a way as to make its relevance or applicability to
information called for by another Schedule or other Schedules to this Agreement
reasonably apparent shall be deemed to be disclosed on such other Schedule or
Schedules, as the case may be, notwithstanding the omission of a reference or
cross-reference thereto.
 
Each of the Schedules to this Agreement is qualified in its entirety by
reference to specific provisions of this Agreement, and is not intended to
constitute, and shall not be construed as constituting, representations or
warranties of Seller, except as and to the extent provided in this Agreement.
 

 

 

Disclosure Schedules