PURCHASE AND SALE AGREEMENT

by and between

QEP ENERGY COMPANY
as Seller
and
PINEDALE ENERGY PARTNERS, LLC
as Buyer

dated
July 24, 2017

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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

2.4
MVC Liabilities and NGL Commitment Liabilities
4

2.5
Designated Well Costs
5

2.6
Joint Interest and Other Audits
5

 
 
 
ARTICLE III PURCHASE PRICE
5

3.1
Purchase Price
5

3.2
Deposit
5

3.3
Adjustments to Purchase Price
5

3.4
Adjustment Methodology
7

3.5
Preliminary Settlement Statement
8

3.6
Final Settlement Statement
8

3.7
Disputes
8

3.8
Allocation of Purchase Price/Allocated Values
9

3.9
Allocation for Imbalances at Closing
9

 
 
 
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER
10

4.1
Organization, Existence and Qualification
10

4.2
Authorization, Approval and Enforceability
10

4.3
No Conflicts
10

4.4
Consents
10

4.5
Bankruptcy
10

4.6
Brokers’ Fees
10

4.7
Litigation
11

4.8
Material Contracts
11

4.9
No Violation of Laws
12

4.1
Preferential Purchase Rights
12

4.11
Royalties, Expenses, Etc
12

4.12
Imbalances
12

4.13
Current Commitments
12

4.14
Asset Taxes
12

4.15
Wells
13

4.16
Leases
13

4.17
Employees
13

4.18
Environmental
14

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4.19
Permits
14

4.20
Suspended Funds
14

4.21
Insurance
14

4.22
Foreign Person
14

 
 
 
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER
15

5.1
Organization, Existence and Qualification
15

5.2
Authorization, Approval and Enforceability
15

5.3
No Conflicts
15

5.4
Consents
15

5.5
Bankruptcy
15

5.6
Litigation
15

5.7
Financing
16

5.8
Regulatory
16

5.9
Independent Evaluation
16

5.10
Brokers’ Fees
16

5.11
Accredited Investor
16

 
 
 
ARTICLE VI CERTAIN AGREEMENTS
16

6.1
Conduct of Business
16

6.2
Successor Operator
17

6.3
Governmental Bonds and Guarantees
18

6.4
Amendment to Schedules
18

6.5
Records Retention
18

6.6
Regulatory Matters
19

6.7
Compliance with Litigation Matters
19

6.8
Employees
20

6.9
Transition Services Agreement
21

6.10
Hedges
21

6.11
Novation
22

6.12
Vehicles
23

6.13
Financial Cooperation
23

6.14
Recording Cooperation
24

 
 
 
ARTICLE VII BUYER’S CONDITIONS TO CLOSING
24

7.1
Representations
24

7.2
Performance
24

7.3
No Legal Proceedings; Governmental Prohibitions
24

7.4
Title Defects, Environmental Defects, Etc
24

7.5
Closing Deliverables
24

7.6
HSR Act
25

 
 
 
ARTICLE VIII SELLER’S CONDITIONS TO CLOSING
25

8.1
Representations
25

8.2
Performance
25

8.3
No Legal Proceedings; Governmental Prohibitions
25

8.4
Title Defects, Environmental Defects, Etc
25

ii

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8.5
Replacement Bonds
25

8.6
Closing Deliverables
25

8.7
HSR Act
25

8.8
Novation of Hedges
26

 
 
 
ARTICLE IX CLOSING
26

9.1
Date of Closing
26

9.2
Place of Closing
26

9.3
Closing Obligations
26

9.4
Records
27

 
 
 
ARTICLE X ACCESS/DISCLAIMERS
27

10.1
Access
27

10.2
Confidentiality
29

10.3
Disclaimers
29

 
 
 
ARTICLE XI TITLE MATTERS; CASUALTY; TRANSFER RESTRICTIONS
31

11.1
Seller’s Title
31

11.2
Notice of Title Defects; Defect Adjustments
32

11.3
Casualty and Condemnation Loss
37

11.4
Preferential Purchase Rights and Consents to Assign
37

 
 
 
ARTICLE XII ENVIRONMENTAL MATTERS
39

12.1
Notice of Environmental Defects
39

12.2
NORM, Asbestos, Wastes and Other Substances
42

 
 
 
ARTICLE XIII ASSUMPTION; INDEMNIFICATION; SURVIVAL
43

13.1
Assumption by Buyer
43

13.2
Indemnities of Seller
43

13.3
Indemnities of Buyer
43

13.4
Limitation on Liability
44

13.5
Express Negligence
44

13.6
Exclusive Remedy
44

13.7
Indemnification Procedures
45

13.8
Survival
46

13.9
Waiver of Right to Rescission
47

13.10
Limitations on Damages
47

13.11
Non-Compensatory Damages
47

13.12
Disclaimer of Application of Anti-Indemnity Statutes
47

 
 
 
ARTICLE XIV TERMINATION, DEFAULT AND REMEDIES
48

14.1
Right of Termination
48

14.2
Effect of Termination
48

14.3
Return of Documentation and Confidentiality
49

 
 
 
ARTICLE XV MISCELLANEOUS
49

15.1
Appendices, Exhibits and Schedules
49

iii

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15.2
Expenses and Taxes
49

15.3
Assignment
51

15.4
Preparation of Agreement
52

15.5
Publicity
52

15.6
Notices
52

15.7
Further Cooperation
54

15.8
Filings, Notices and Certain Governmental Approvals
54

15.9
Entire Agreement; Conflicts
54

15.10
Parties in Interest
55

15.11
Amendment
55

15.12
Waiver; Rights Cumulative
55

15.13
Governing Law; Jurisdiction
55

15.14
Severability
56

15.15
Removal of Name
56

15.16
Counterparts
56

15.17
Like-Kind Exchange
56

15.18
Specific Performance
57

15.19
Financial Statements
57

15.20
No Financing Source Liability
58

iv

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LIST OF APPENDICES, EXHIBITS AND SCHEDULES
Appendix I
¯
Defined Terms
 
 
 
Exhibit A
¯
Leases
Exhibit B-1
¯
Wells
Exhibit B-2
¯
Well Locations
Exhibit C
¯
Other Wells
Exhibit D-1
¯
Surface Fee Interests
Exhibit D-2
¯
Easements
Exhibit E
¯
Excluded Assets
Exhibit F
¯
Form of Assignment and Bill of Sale
Exhibit G
¯
Form of Surface Deed
Exhibit H
¯
Personal Property
Exhibit I
¯
Transferred Cores
Exhibit J
¯
Seismic
Exhibit K
¯
Form of Transition Services Agreement
Exhibit L
¯
Forms of Novation Instruments
 
 
 
 
 
 
Schedule 1.1(a)
¯
Permitted Encumbrances
Schedule 1.1(b)
¯
Buffalo Leases
Schedule 2.5
¯
Designated Well Costs
Schedule 3.3(a)(i)
¯
Liquid Hydrocarbon Inventory and Valuation
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 Purchase Rights
Schedule 4.11
¯
Royalties, Expenses, Etc.
Schedule 4.12
¯
Imbalances
Schedule 4.13
¯
Current Commitments
Schedule 4.14
¯
Asset Taxes
Schedule 4.15
¯
Payout Balances
Schedule 4.16
¯
Leases
Schedule 4.17
¯
Employees
Schedule 4.18
¯
Environmental
Schedule 4.20
¯
Suspended Funds
Schedule 4.21
¯
Insurance
Schedule 6.1
¯
Conduct of Business
Schedule 6.3
¯
Bonds
Schedule 6.8
¯
Permitted Employees
Schedule 6.10
¯
Specified Hedging Agreement
Schedule 10.1
¯
Buyer Insurance

v

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PURCHASE AND SALE AGREEMENT

This PURCHASE AND SALE AGREEMENT (this “Agreement”) is executed as of the 24th
day of July, 2017 (the “Execution Date”), and is by and between QEP Energy
Company, a Texas corporation (“Seller”), and Pinedale Energy Partners, LLC, a
Delaware limited liability company (“Buyer”). Seller and Buyer may be referred
to collectively as the “Parties” or individually as a “Party.”
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), on the
terms and subject to the conditions of this Agreement.
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 hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION

1.1Defined Terms. Capitalized terms used herein shall have the meanings set
forth in Appendix I, unless the context otherwise requires.
1.2References 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
Appendices, Exhibits, Schedules, 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. References in this Agreement to any
agreement, including this Agreement, refer to such agreement as it may be
amended, supplemented or otherwise modified from time to time. 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 Execution Date. 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.

1

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ARTICLE II
PURCHASE AND SALE
2.1Purchase and Sale. Subject to the terms and conditions of this Agreement,
Seller agrees to sell to Buyer, and Buyer agrees to purchase and pay for,
effective as of the Effective Time, all of Seller’s right, title and interest in
and to the assets described in Section 2.1(a) through Section 2.1(o) below (such
right, title and interest, less and except the Excluded Assets, collectively,
the “Assets”).
(a)the oil and gas leases described on Exhibit A and the leasehold estates
created thereby (Seller’s interest in such leases, the “Leases”), together with
any and all other right, title and interest of Seller in and to the lands
covered thereby or the lands pooled, unitized, communitized or consolidated
therewith (such lands covered by the Leases or pooled, unitized, communitized or
consolidated therewith being hereinafter referred to as the “Lands”), and all
other interests of Seller of any character in the Leases;
(b)all rights and interests in, under or derived from all unitization,
communitization and pooling orders, declarations and agreements in effect with
respect to any of the Leases or Lands and the units created thereby (the
“Units”);
(c)all oil and gas wells located on any of the Leases, Lands or Units, whether
producing, non-producing, plugged and abandoned, temporarily abandoned, or
otherwise (such interest in such wells, including the wells set forth on
Exhibit B-1, the “Wells”); and all Hydrocarbons produced therefrom or allocated
thereto from and after the Effective Time (including all Hydrocarbons in storage
or existing in pipelines, plants and/or tanks (including inventory and line
fill) as of the Effective Time);
(d)all disposal, observation and other wells located on, or primarily used in
connection with, any of the Leases, Lands or Units (other than Wells), whether
plugged and abandoned, temporarily abandoned, or otherwise, including the wells
described on Exhibit C;
(e)all Applicable Contracts and all rights thereunder, except for any contracts,
agreements and instruments to the extent transfer is (i) restricted by Hard
Consents and the necessary consents to transfer are not obtained pursuant to
Section 11.4(b), or (ii) subject to payment of a fee or other consideration
under any agreement with a Person other than an Affiliate of Seller, and for
which no consent to transfer has been received and for which Buyer has not
agreed in writing to pay the fee or other consideration, as applicable;
(f)the fee simple surface estate in and covering the tract of land described on
Exhibit D-1 and all improvements, fixtures, facilities and appurtenances located
thereon or relating thereto (including the field office located thereon and
described on Exhibit D-1), but subject to the terms, conditions, covenants and
obligations described on Exhibit D-1 (the “Surface Fee Interests”);
(g)all permits, licenses, servitudes, easements and rights-of-way to the extent
used or held for use in connection with the ownership or operation of any of the
Leases, Wells, Units or other Assets, including the easements and rights-of-way
described on Exhibit D-2, except to the extent transfer is (i) restricted by
Hard Consents and the necessary consents to transfer are not obtained pursuant
to Section 11.4(b), or (ii) subject to payment of a fee or other consideration
under any agreement with a Person other than an Affiliate of Seller, and for
which no consent to transfer has been received and for which Buyer has not
agreed in writing to pay the fee or other consideration, as applicable;
(h)all facilities, equipment, machinery, fixtures and other personal, movable
and mixed property located on any of the Leases, Wells, Units or other Assets or
used or held for use in connection therewith, including pipelines, gathering
systems, manifolds, well equipment, casing, tubing, pumps, motors, vehicles,
fixtures, machinery, tanks, boilers, compression equipment, flow lines,
processing and separation facilities, injection facilities, disposal facilities,
pads, structures, materials, telemetry, production measuring

2

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equipment, communications equipment, SCADA equipment, personal computers and
associated peripherals, radio and telephone equipment and other items used or
held for use in the operation thereof (collectively, the “Personal Property”),
including (i) the vehicles used in connection with the Leases, Wells, Units or
other Assets, (ii) the inventory located at the Bunning Pipe Yard in Rock
Springs, Wyoming as of Closing, that is held for use in connection with the
Leases, Wells, Units or other Assets (such inventory as of the date set forth on
Exhibit H is described on Exhibit H, it being understood that such inventory may
be used in connection with the operation of the Leases, Wells, Units or other
Assets after the Execution Date) and (iii) the other items described on Exhibit
H;
(i)Seller’s undivided right, title and interest in and to the cores described on
Exhibit I;
(j)all Imbalances relating to the Assets;
(k)all of the files, records, information and data, either written or
electronically stored, relating to Seller’s ownership and operation of the
Assets and in Seller’s or its Affiliates’ possession, including: all title
records; title opinions; well logs; well tests; well files; mud logs;
directional surveys; core reports; daily drilling records; machinery and
equipment maintenance files; production and accounting records in Excel format
reflecting current ownership decks, well master files, division of interest
files, Working Interest owner name and address files and revenue, royalty
payment and joint interest billing account information; and Asset Tax records
(collectively, the “Records”);
(l)all rights, claims and causes of action to the extent, and only to the
extent, that such rights, claims or causes of action are associated with the
other Assets as of the Closing Date and (i) relate to the period from and after
the Effective Time, (ii) that constitute the accounts receivable for which there
is an upward adjustment to the Purchase Price pursuant to Section 3.3(a)(vii),
or (iii) relate to both the period prior to the Effective Time and the Assumed
Obligations for which Buyer is responsible hereunder, except to the extent
transfer is (A) restricted by Hard Consents and the necessary consents to
transfer are not obtained pursuant to Section 11.4(b), or (B) subject to payment
of a fee or other consideration under any agreement with a Person other than an
Affiliate of Seller, and for which no consent to transfer has been received and
for which Buyer has not agreed in writing to pay the fee or other consideration,
as applicable;
(m)all proprietary and, if transferrable without making any additional payments
or incurring any liabilities or obligations (or if such payments, liabilities
and obligations are assumed by Buyer), non-proprietary geophysical and other
seismic and related technical data and information, in each case to the extent
relating to the Assets, including the proprietary seismic described on
Exhibit J;
(n)air emissions credits to the extent directly attributable to the ownership
and operation of the Assets by Seller or its Affiliates; and
(o)with respect to each Well set forth on Schedule 2.5, accounts receivable
relating to the amount of other Working Interest owners’ share of costs which
Seller has borne.
2.2Excluded Assets. Seller shall reserve and retain all of the Excluded Assets.
2.3Revenues and Expenses.
(a)Subject to the provisions hereof, Seller shall remain entitled (by payment,
through the adjustments to the Purchase Price hereunder or otherwise) to all of
the rights of ownership (including the right to all production, proceeds of
production and other proceeds) and operatorship (including COPAS fees received
from Third Parties under operating agreements) 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 (by payment,
through the adjustments to the Purchase Price hereunder or otherwise) to all of
the rights of ownership (including the right to all receivables, production,
proceeds of production and other proceeds) and operatorship (including COPAS

3

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fees received from Third Parties under operating agreements except as otherwise
provided in the Transition Services Agreement, but excluding, for the avoidance
of doubt, amounts which are reimbursements of costs or expenses borne by Seller
as operator on behalf of other joint interest owners), 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 all 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 or pooling order, if any, but excluding
Liabilities attributable to (A) personal injury or death, property damage or
violation of any Law, (B) Decommissioning Obligations, (C) title matters,
including curing any Title Defects, (D) environmental matters, including
obligations to remediate any contamination of water or the Assets under
applicable Environmental Laws, (E) obligations with respect to Imbalances,
(F) 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, (G) Asset Taxes,
Income Taxes or Transfer Taxes, (H) NGL Commitment Liabilities and MVC
Liabilities (I) the Designated Well Costs or (J) overhead costs. Any deficiency
payments under the Marketing Contracts measured on other than a monthly basis
(excluding the MVC Liabilities) shall be allocated between the Parties
consistent with Section 2.4(a)(i)(C) and Section 2.4(a)(ii)(C).
(b)After the Closing and subject to Section 3.6(b), except as otherwise provided
in the Transition Services Agreement, if either Party receives monies belonging
to the other Party, including proceeds of production, then such amount shall,
within thirty (30) days after the end of the calendar month in which such
amounts were received, be paid by such receiving Party to the proper Party.
After the Parties’ agreement upon the Final Settlement Statement and subject to
Section 2.4 and Section 3.6(b), (i) if either Party pays monies for Operating
Expenses which are the obligation of the other Party, then such other Party
shall, within thirty (30) days after the end of the calendar month in which the
applicable invoice and proof of payment of such invoice were received by such
other Party, reimburse the Party which paid such Operating Expenses, (ii) if a
Party receives an invoice of an Operating Expense 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 (iii) if an invoice for Operating
Expenses 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 Operating Expenses to the obligee thereof.
2.4MVC Liabilities and NGL Commitment Liabilities.
(a)Subject to the provisions hereof and subject to the occurrence of Closing:
(i)Seller shall be responsible (by payment or through the adjustments to the
Purchase Price hereunder) for (A) all NGL Commitment Liabilities for the period
of time prior to the Effective Time, (B) all MVC Liabilities for the period of
time prior to August 1, 2016 (i.e., the end of the August 1, 2015 contract year
under the Subject Processing Agreement) and (C) sixty-six and two-thirds percent
(66.67%) of all MVC Liabilities for the period of time commencing on August 1,
2016, and ending on July 31, 2017 (i.e., the August 1, 2016 contract year under
the Subject Processing Agreement); and
(ii)Buyer shall be responsible (by payment or through the adjustments to the
Purchase Price hereunder) for (A) all NGL Commitment Liabilities for the period
of time from and after the Effective Time, (B) all MVC Liabilities for the
period of time from and after August 1, 2017 (i.e., the beginning of the August
1, 2017 contract year under the Subject Processing Agreement) and (C)
thirty-three and one-third percent (33.33%) of all MVC Liabilities for the
period of time commencing on August 1, 2016, and ending on July 31, 2017 (i.e.,
the August 1, 2016 contract year under the Subject Processing Agreement).

4

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(b)Subject to Section 2.4(c), Seller agrees to reimburse Buyer with respect to
payments of Reimbursable NGL Commitment/MVC Liabilities to the extent such
amounts are both (i) the responsibility of Buyer under Section 2.4(a)(ii) and
invoiced by Tesoro to Seller or Buyer pursuant to the Subject Processing
Agreement and (ii) paid by Buyer to Tesoro. Such reimbursement shall be made by
Seller within thirty (30) days after Buyer forwards an invoice therefor to
Seller.
(c)Notwithstanding anything in this Agreement to the contrary, Seller’s
aggregate liability for Reimbursable NGL Commitment/MVC Liabilities (whether
paid directly pursuant to Section 2.4(b) or through a Purchase Price adjustment
pursuant to Section 3.3(b)(x)) shall not exceed the sum of $45,000,000.00 in the
aggregate (the “Deficiency Cap”), with Buyer being responsible for all such
amounts in excess of the Deficiency Cap.
(d)From and after Closing and continuing until such time as Seller no long has
any further obligations under this Section 2.4 with respect to Reimbursable NGL
Commitment/MVC Liabilities (whether through the passage of time or satisfaction
of the Deficiency Cap), Buyer shall not agree to, or make, any waiver, amendment
or other modification with respect to the Subject Processing Agreement without
Seller’s prior written consent to the extent such waiver, amendment or other
modification accelerates or otherwise adversely modifies Seller’s obligations
with respect to Reimbursable NGL Commitment/MVC Liabilities.
2.5Designated Well Costs. Subject to the provisions hereof and subject to the
occurrence of Closing, Buyer shall be responsible (by payment, through the
adjustments to the Purchase Price hereunder or otherwise) for all capital
expenditures set forth on Schedule 2.5 relating to each Well set forth on
Schedule 2.5 that was not completed and placed on production prior to the
Effective Time, to the extent such capital expenditures were incurred before the
Effective Time (the “Designated Well Costs”), it being understood that
notwithstanding anything in this Section 2.5 to the contrary, Buyer’s liability
for Designated Wells Costs for any such Well shall not exceed the amount set
forth in Schedule 2.5 with respect to such Well.
2.6Joint Interest and Other Audits. After Closing, each Party shall be entitled
to participate in all joint interest audits and other audits of Operating
Expenses, NGL Commitment Liabilities, MVC Liabilities and Designated Well Costs
for which such Party is entirely or in part responsible under the terms of
Section 2.3, Section 2.4 or Section 2.5 (as applicable).

ARTICLE III
PURCHASE PRICE
3.1Purchase Price. The purchase price for the transfer of the Assets and the
transactions contemplated hereby shall be $740,000,000.00 (the “Purchase
Price”), as adjusted in accordance with this Agreement and payable by Buyer to
Seller at Closing by wire transfer in immediately available funds to the bank
account designated by Seller (the details of which shall be provided to Buyer in
the Preliminary Settlement Statement).
3.2Deposit. Within two (2) Business Days after the Execution Date, Buyer will
deposit with the Escrow Agent by wire transfer in same day funds the sum of
$37,000,000.00, representing five percent (5%) of the Purchase Price (such
amount, including any interest earned thereon, the “Deposit”), to be held,
invested and disbursed in accordance with the provisions of this Agreement and
the Escrow Agreement. If Closing occurs, the Deposit shall be applied toward the
Adjusted Purchase Price at Closing. Otherwise the Deposit shall be handled in
accordance with Section 14.2.
3.3Adjustments to Purchase Price. The Purchase Price shall be adjusted as
follows, and the resulting amount shall be herein called the “Adjusted Purchase
Price.”

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(a)The Purchase Price shall be adjusted upward by the following amounts (without
duplication):
(i)$701,322.00, such amount being equal to the value of all merchantable oil,
condensate and other liquid Hydrocarbons attributable to the Assets in storage
or existing in pipelines, plants and/or tanks (including inventory and line
fill) in each case that are, as of the Effective Time, (A) upstream of the
pipeline connection or above the relevant outlet flange or (B) upstream of the
sales meter, if any, the value of such Hydrocarbons to be based upon the
contract price in effect as of the Effective Time (or the price paid to Seller
in connection with the sale of such Hydrocarbons, if there is no contract price,
in effect as of the Effective Time), less Burdens on such production as set
forth in Schedule 3.3(a)(i);
(ii)an amount equal to all Operating Expenses (excluding, for the avoidance of
doubt, any Asset Taxes, Income Taxes and Transfer Taxes) incurred by Seller that
are attributable to the Assets during the period following the Effective Time
and paid by Seller (irrespective of whether paid before or after the Effective
Time), including (A) bond and customary and reasonable costs of insurance
premiums paid by or on behalf of Seller with respect to the period following the
Effective Time up to Closing, (B) Burdens and (C) rentals and other lease
maintenance payments;
(iii)an amount equal to the Designated Well Costs paid by Seller, whether paid
before or after the Effective Time subject to Section 2.5;
(iv)the amount of all Asset Taxes allocated to Buyer in accordance with
Section 15.2 but paid or otherwise economically borne by Seller;
(v)subject to Section 3.9, to the extent that Seller is underproduced as of the
Effective Time 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, an amount equal to the product of the underproduced
volumes times $2.14/MMBtu for gaseous Hydrocarbons;
(vi)subject to Section 3.9, 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, an amount equal to the product
of the overdelivered volumes times $2.14/MMBtu for gaseous Hydrocarbons;
(vii)if Seller or any of its Affiliates is the operator under an operating
agreement covering any Asset, the aggregate amount of accounts receivable with
respect to the total amount of costs and expenses paid by Seller or its
Affiliate on behalf of other joint interest owners of such Asset that are
attributable to the periods from and after the Effective Time, whether paid
before or after the Effective Time;
(viii)all MVC Liabilities and NGL Commitment Liabilities paid by Seller prior to
the Closing that are the responsibility of Buyer under Section 2.4(a)(ii);
(ix)if applicable and to the extent not reimbursed by Buyer, the amounts
actually paid by Seller under any settled Specified Hedging Agreements in the
event Closing occurs after the date on which the Specified Hedging Agreements
and the transactions contemplated thereby are settled; and
(x)any other amount provided for elsewhere in this Agreement or otherwise agreed
upon in writing by Seller and Buyer.
(b)The Purchase Price shall be adjusted downward by the following amounts
(without duplication):
(i)an amount equal to (x) all proceeds actually received by Seller attributable
to the sale of Hydrocarbons (A) produced from or allocable to the Assets during
the period following the Effective Time or (B) contained in storage or existing
in pipelines, plants and/or tanks (including inventory) as of the Effective Time
for which an upward adjustment to the Purchase Price was made pursuant to

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Section 3.3(a)(i), in each case, net of Burdens and reasonable expenses (other
than Operating Expenses and other expenses taken into account pursuant to
Section 3.3(a), Asset Taxes, Income Taxes and Transfer Taxes) directly incurred
in earning or receiving such proceeds in the ordinary course of business and
consistent with past practice and (y) all other proceeds actually received by
Seller attributable to the ownership or operatorship of the Assets (including
COPAS fees received from Third Parties under operating agreements attributable
to the period between the Effective Time and the Closing, but excluding, for the
avoidance of doubt, amounts which are reimbursements of costs or expenses borne
by Seller as operator on behalf of other joint interest owners) during the
period following the Effective Time;
(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;
(iii)if Seller makes the election under Section 12.1(c)(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 10.1(d), Section 11.2(d)(iii),
Section 11.4(a)(i), Section 11.4(b)(i) or Section 12.1(c)(ii);
(v)the amount of Purchase Price adjustment determined in accordance with
Section 11.3 with respect to any Casualty Losses;
(vi)the amount of all Asset Taxes allocated to Seller in accordance with
Section 15.2 but paid or otherwise economically borne by Buyer;
(vii)subject to Section 3.9, to the extent that Seller is overproduced as of the
Effective Time 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, an amount equal to the product of the overproduced
volumes times $2.14/MMBtu for gaseous Hydrocarbons;
(viii)subject to Section 3.9, 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, an amount equal to the product
of the underdelivered volumes times $2.14/MMBtu for gaseous Hydrocarbons;
(ix)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 or
its Affiliates in suspense as of the Closing Date;
(x)an amount equal to the amount by which the Purchase Price was increased
pursuant to Section 3.3(a)(viii) to the extent such amount consists of
Reimbursable NGL Commitment/MVC Liabilities (for the avoidance of doubt, subject
to the Deficiency Cap);
(xi)if applicable and to the extent not paid to Buyer, the amounts actually
received by Seller under any settled Specified Hedging Agreements in the event
Closing occurs after the date on which the Specified Hedging Agreements and the
transactions contemplated thereby are settled; and
(xii)any other amount provided for elsewhere in this Agreement or otherwise
agreed upon in writing by Seller and Buyer.
3.4Adjustment 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 3.6 and Section 3.7.

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3.5Preliminary Settlement Statement. Not less than five (5) 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 Seller’s good faith estimate of
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. Within two (2) Business Days
after receipt of the Preliminary Settlement Statement, Buyer will deliver to
Seller a written report containing all changes, with 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. Final adjustments to the Purchase
Price will be made pursuant to Section 3.6.
3.6Final Settlement Statement.
(a)On or before one hundred twenty (120) 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 Adjusted Purchase Price (the “Final Price”). The Final Settlement
Statement shall set forth the actual proration of the amounts required by this
Agreement. Seller shall, at Buyer’s request, supply reasonable documentation in
its or its Affiliates’ possession available to support the actual revenue,
expenses and other items for which adjustments are made. As soon as practicable,
and in any event within thirty (30) days, after receipt of the Final Settlement
Statement, Buyer shall deliver 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
mutually agreed upon by the Parties, and will, without limiting Section 15.2(d),
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, without limiting Section 15.2(d), be final and binding on the
Parties hereto, subject to the provisions of Section 2.3(b). Any difference in
the Adjusted Purchase Price as paid at Closing pursuant to the Preliminary
Settlement Statement and the Final Price shall be paid by the owing Party to the
owed Party within ten (10) days after final determination of such owed amounts
in accordance herewith. 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.
(b)Subject to matters for which a Party has an indemnity obligation pursuant to
ARTICLE XIII and subject to Section 2.4, there shall be no adjustment for, or
obligation to pay, any revenues, proceeds, Operating Expenses or Designated Well
Costs between the Parties following the eighteen (18) month anniversary of the
Closing Date.
3.7Disputes. If Seller and Buyer are unable to resolve the matters addressed in
the Dispute Notice (if any), within fifteen (15) Business Days after Buyer’s
delivery of a Dispute Notice, upon the written request of either Buyer or
Seller, Buyer and Seller shall engage the Denver office of KPMG LLP or such
other Person as the Parties may mutually select (the “Accounting Arbitrator”) to
resolve any such disputed matters set

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forth in the Dispute Notice (other than Disputed Title Matters and Disputed
Environmental Matters) in accordance with the terms of this Agreement. Each of
Buyer and Seller shall within twenty-five (25) Business Days after Buyer’s
delivery of such Dispute Notice summarize its position with regard to such
dispute in a written document and submit such summaries to the Accounting
Arbitrator, together with a copy of the Dispute Notice, the Final Settlement
Statement and any other documentation such Party may desire to submit. The
Parties shall cooperate diligently with any reasonable request of the Accounting
Arbitrator in an effort to resolve the matters submitted to the Accounting
Arbitrator as soon as reasonably possible after the Accounting Arbitrator is
engaged. Within twenty (20) Business Days after receiving the Parties’
respective submissions, the Accounting Arbitrator shall render a written
decision choosing either Seller’s position or Buyer’s position with respect to
each matter addressed in any Dispute Notice, based on the materials submitted to
the Accounting Arbitrator as described above. Any decision rendered by the
Accounting Arbitrator pursuant hereto shall, without limiting Section 15.2(d),
be final, conclusive and binding on Seller and Buyer, absent fraud or manifest
error, and will be enforceable against the Parties in any court of competent
jurisdiction. The costs of the Accounting Arbitrator shall be borne one-half by
Buyer and one-half by Seller. The Accounting Arbitrator shall act as an expert
for the limited purpose of determining the disputes presented to it, shall be
limited to the procedures in this Section 3.7, may not hear or decide any
matters except the disputes presented to it and may not award damages, interest,
costs, attorneys’ fees, expenses or penalties to either Party. In addition, the
Accounting Arbitrator shall agree in writing to keep strictly confidential the
specifics and existence of any matters submitted as well as all proprietary
records of the Parties, if any, reviewed by the Accounting Arbitrator in the
process of resolving such disputes.
3.8Allocation of Purchase Price/Allocated Values.
(a)Buyer and Seller agree that the Purchase Price shall be allocated among the
Wells and the Well Locations as set forth in Schedule 3.8 to this Agreement (the
“Allocated Values”). Buyer and Seller agree that such allocation is reasonable
and, subject to Section 3.8(b), shall not take any position inconsistent
therewith, including in notices to Preferential Purchase Right holders.
(b)Buyer and Seller shall use commercially reasonable efforts to agree to an
allocation of the Purchase Price and any other items properly treated as
consideration for U.S. federal income tax purposes among the Assets in
accordance with Section 1060 of the Code and the Treasury Regulations
promulgated thereunder and, to the extent allowed under applicable federal
income tax Law, in a manner consistent with the Allocated Values, within thirty
(30) days after the date that the Final Settlement Statement is determined
pursuant to Section 3.6 (the “Allocation”). If Seller and Buyer reach an
agreement with respect to the Allocation, (i) Buyer and Seller shall use
commercially reasonable efforts to update the Allocation in accordance with
Section 1060 of the Code following any adjustment to the Purchase Price pursuant
to this Agreement, and (ii) Buyer and Seller shall, and shall cause their
Affiliates to, report consistently with the Allocation, as adjusted, on all Tax
Returns, including Internal Revenue Service Form 8594, and neither Seller nor
Buyer shall take any position on any Tax Return that is inconsistent with the
Allocation, as adjusted, unless otherwise required by applicable Law; provided,
however, that neither Party shall be unreasonably impeded in its ability and
discretion to concede, negotiate, compromise and/or settle any Tax audit, claim
or similar proceedings in connection with such Allocation. If the Parties are
unable to reach agreement within thirty (30) days after the date that the Final
Settlement Statement is finally determined, then each Party shall be entitled to
adopt its own position regarding the Allocation; provided that such position
shall, to the extent allowed under applicable federal income tax Law, be
consistent with the Allocated Values.
3.9Allocation for Imbalances at Closing. If, prior to Closing, either Party
discovers an error in the Imbalances set forth in Schedule 4.12, then the
Purchase Price shall be further adjusted at Closing pursuant to
Section 3.3(a)(v), Section 3.3(a)(vi), Section 3.3(b)(vii) or
Section 3.3(b)(viii), 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 6.4), Seller
represents and warrants to Buyer the following:
4.1Organization, Existence and Qualification. Seller is a corporation duly
formed, validly existing and in good standing under the Laws of the State of
Texas. 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 the State of Wyoming and all other 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, individually or in the
aggregate, have a Material Adverse Effect.
4.2Authorization, 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 and the
Transaction Documents have been duly and validly authorized and approved by all
necessary corporate action on the part of Seller. Assuming the due
authorization, execution and delivery by the other parties to such documents,
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).
4.3No Conflicts. Assuming the receipt of all Consents and the waiver of, or
compliance with, all Preferential Purchase Rights, and except for compliance
with the HSR Act, the execution, delivery and performance by Seller of this
Agreement and the Transaction Documents to which it is a party and the
consummation of the transactions contemplated herein and therein will not
(a) conflict with or result in a breach of any provisions of the organizational
documents of Seller, (b) except for Permitted Encumbrances, 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 material terms, conditions or
provisions of any note, bond, mortgage, indenture, license or other Applicable
Contract to which Seller is a party or by which Seller or the Assets may be
bound or (c) violate in any material respect any Law applicable to Seller or any
of the Assets.
4.4Consents. Except (i) as set forth on Schedule 4.4, (ii) for Customary
Post-Closing Consents, (iii) under Contracts that are terminable upon not
greater than ninety (90) days’ notice without payment of any fee, (iv) for
Preferential Purchase Rights and (v) for compliance with the HSR Act, 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”).
4.5Bankruptcy. There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by or, to Seller’s Knowledge, threatened
in writing against Seller or its Affiliates.
4.6Brokers’ 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.

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4.7Litigation. Except as set forth in Schedule 4.7, there is no suit, action,
litigation or arbitration by any Person or before any Governmental Authority
pending or, to Seller’s Knowledge, threatened in writing against Seller with
respect to the Assets or, to Seller’s Knowledge, otherwise relating to the
Assets.
4.8Material Contracts.
(a)Schedule 4.8 sets forth as of the Execution Date 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 or any Affiliate of Seller of more than $200,000
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), or $1,000,000 in the aggregate over the term of such Applicable
Contract;
(ii)any Applicable Contract that can reasonably be expected to result in
aggregate revenues to Seller or any Affiliate of Seller of more than $200,000
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), or $1,000,000 in the aggregate over the term of such Applicable
Contract;
(iii)any Applicable Contract that is a Marketing Contract that cannot be
terminated by Seller without penalty upon ninety (90) days’ or less notice;
(iv)any Applicable Contract that is an indenture, mortgage, loan, credit or
sale-leaseback, guaranty of any obligation, letter of credit or similar
financial Contract;
(v)any Applicable Contract that constitutes a lease under which Seller or any
Affiliate of Seller is the lessor or the lessee of real or Personal Property
which lease (A) cannot be terminated by Seller or such Affiliate without penalty
upon ninety (90) days’ or less notice and (B) involves an annual base rental of
more than $50,000;
(vi)any Applicable Contract that is a farmout agreement, participation
agreement, partnership agreement, joint venture and/or exploration agreement,
development agreement, joint or unit operating agreement or similar Applicable
Contract;
(vii)any Applicable Contract that contains a non-compete provision or area of
mutual interest provision, or that purports to restrict, limit or prohibit the
locations in which Seller or any Affiliate of Seller conducts business (other
than those relating to restrictions under applicable Law);
(viii)any Applicable Contract that contains calls upon or options to purchase
production, or is a dedication of production or otherwise requires production to
be transported, processed or sold in a particular fashion or requires the
payment of deficiency payments if specified production volume levels are not
achieved;
(ix)any Applicable Contract that contains a take or pay payment, advance payment
or other similar payment clause (other than royalties, overriding royalties and
similar arrangements established in the Leases), to deliver Hydrocarbons, or
proceeds from the sale thereof, at some future time without receiving payment
therefor at or after the time of delivery;
(x)any Applicable Contract that constitutes a Hedge Contract;
(xi)any Applicable Contract for which the primary purpose is to provide for the
indemnification of another Person;
(xii)any Applicable Contract that would obligate Buyer to drill additional wells
after the Closing;

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(xiii)any Applicable Contract that provides for the maintenance of credit
support in favor of any Third Party (other than in respect of any credit
facilities of Seller or its Affiliates which will not bind the Assets following
Closing) by Seller or by Buyer as Seller’s successor; and
(xiv)any Applicable Contract between Seller and any Affiliate of Seller that
will not be terminated prior to Closing.
(b)To Seller’s Knowledge, each Applicable Contract listed or required to be
listed in Schedule 4.8 is in full force and effect as to Seller and each
counterparty. Except as set forth in Schedule 4.8, there exists no material
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 a material
default under any such Material Contract by Seller or, to Seller’s Knowledge,
any other Person who is a party to such Material Contract. Prior to the
Execution Date, Seller has made available to Buyer true and complete copies of
each Applicable Contract described or required to be listed in Schedule 4.8 and
all amendments thereto. As of the Execution Date, Seller has not received or
given any unresolved written notice of default, amendment, waiver, price
redetermination, market out, curtailment or termination with respect to any
Applicable Contract described or required to be listed in Schedule 4.8.
4.9No Violation of Laws. To Seller’s Knowledge, except as set forth in
Schedule 4.9, Seller is not in material violation of or material non-compliance
with any applicable Laws with respect to its ownership and operation of the
Assets. For the avoidance of doubt, this Section 4.9 does not include any
matters with respect to Environmental Laws or Laws related to Taxes, which shall
be exclusively addressed in Section 4.18 and Section 4.14, respectively.
4.10Preferential Purchase Rights. Except as set forth in Schedule 4.10, there
are no preferential purchase rights, rights of first refusal, tag-along rights,
drag-along rights 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”).
4.11Royalties, Expenses, Etc. Except for such items that are being held in
suspense for which the Purchase Price is adjusted pursuant to Section 3.3(b)(ix)
and except as set forth on Schedule 4.11, Seller has properly and timely paid
all material 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 as set
forth in Schedule 4.11. Subject to the foregoing, to Seller’s Knowledge, as of
the Execution Date, no material expenses (including bills for labor, materials
and supplies used or furnished for use in connection with the Assets, Burdens
and amounts payable to co-owners of the Assets) are delinquent in payment by
Seller that relate to the ownership or operation of the Assets.
4.12Imbalances. Schedule 4.12 sets forth all material Imbalances associated with
the Assets as of the Effective Time.
4.13Current Commitments. Schedule 4.13 sets forth, as of the Execution Date, all
approved authorizations for expenditures and other approved capital commitments
proposed or received by Seller, individually in excess of $300,000 net to
Seller’s applicable interest (the “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 were not
completed by the Effective Time.
4.14Asset Taxes. Except as set forth in Schedule 4.14, (a) all material Asset
Taxes that have become due and payable by Seller have been timely paid in full,
(b) all material Tax Returns with respect to Asset Taxes required to be filed by
Seller have been properly and timely filed (taking into account applicable
filing extensions) with the appropriate Governmental Authority, and all such Tax
Returns are true, correct and complete in all material respects, (c) there are
no liens on any of the Assets attributable to Taxes other than liens for Taxes
not yet due, (d) with respect to all Asset Taxes, (i)  there are not currently
in effect any

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extensions or waivers of any statute of limitations of any jurisdiction
regarding the assessment or collection of any such Tax and (ii) there are no
pending or, to Seller’s Knowledge, threatened audits, examinations or other
proceedings against the Assets or Seller by any Governmental Authority, and
(e) none of the Assets is subject to any tax partnership agreement or is
otherwise treated, or required to be treated, as held in an arrangement
requiring a partnership income Tax Return to be filed under Subchapter K of
Chapter 1 of Subtitle A of the Code. Notwithstanding any other provision of this
Agreement, the representations and warranties in this Section 4.14 are the only
representations and warranties in this Agreement with respect to Tax matters.
4.15Wells.
(a)There is no well operated by Seller or its Affiliates on the Assets, (i) with
respect to which there is an order from a Governmental Authority requiring that
such well be plugged and abandoned or (ii) that is neither in use for purposes
of production or injection, nor suspended or temporarily abandoned in accordance
with applicable Law, that has not been plugged and abandoned in accordance with
applicable Law.
(b)To Seller’s Knowledge, all Wells have been drilled and completed within the
limits permitted by all applicable Leases, Contracts and pooling or Unit
agreements and no such Well is subject to material penalties on allowables after
the Effective Time because of any overproduction prior to the Effective Time.
(c)With respect to those Wells that are subject to payout, Schedule 4.15 sets
forth, as of the date set forth in such Schedule, the payout balances maintained
by Seller for such of those Wells that are operated by Seller or its Affiliates.
4.16Leases. Except as specified in Schedule 4.16, to Seller’s Knowledge: (a) all
bonuses and rentals and other material payments or obligations due under the
Leases have been properly and timely paid (except for royalty payments (which
are addressed in Section ý4.11)), (b) as of the Execution Date, Seller has not
received written notice from a lessor of any requirements or demands to drill
additional wells on any of the Leases, which requirements or demands have not
been resolved, and (c) as of the Execution Date, Seller has not received any
unresolved written notice that any party to any Lease or any successor to the
interest of such party has filed or threatened to file any action to terminate,
cancel, rescind or procure judicial reformation of any Lease.
4.17Employees.
(a)Except as set forth on Schedule 4.17, Seller has no material Liabilities with
respect to non-compliance with employment Laws with respect to any employee of
Seller or any of its Affiliates that has performed work at or in connection with
the Assets. None of Seller or any of its Affiliates has made any commitments or
representations to any of its employees regarding (i) potential employment by
Buyer or any Affiliate of Buyer, or (ii) any terms and conditions of such
potential employment by Buyer or any Affiliate thereof. No union or similar
organization represents any Permitted Employee, and, to Seller’s Knowledge, no
other organization is attempting to organize such Permitted Employees.
(b)Seller does not have any material Liability with respect to any Employee
Benefit Plan. There does not now exist, nor do any circumstances exist that
would reasonably be expected to result in, any material Liability of Seller
under or with respect to (i) Title IV of ERISA, (ii) Sections 302 and 502 of
ERISA, (iii) Sections 412 and 4971 of the Code, (iv) any Employee Benefit Plan,
or (v) any “multiemployer plan” (as defined in Section 3(37) of ERISA) or any
voluntary employees’ beneficiary association (as described in Section 501(c)(9)
of the Code), in each case, that would reasonably be expected to be a Liability
of Buyer following the Closing Date. There does not now exist, nor do any
circumstances exist that could be expected to result in, any Liability for
failure to comply with the provisions of Section 601, et seq. of ERISA and

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Section 4980B of the Code and Section 701, et seq. of ERISA and Subtitle K of
the Code that would reasonably be expected to be a Liability of Buyer following
the Closing Date.
(c)The consummation of the transactions contemplated by this Agreement or any
Transaction Document will not, either alone or in combination with any other
event, result in Buyer or any of its ERISA Affiliates incurring any Liability
with respect to any Employee Benefit Plan sponsored, maintained, or contributed
to by Seller or any of its ERISA Affiliates.
4.18Environmental. Except as set forth in Schedule 4.18, as of the Execution
Date: (a) to Seller’s Knowledge, the Assets operated by Seller and the operation
thereof are in compliance with applicable Environmental Laws in all material
respects; (b) Seller has not received any written notice from any Person
asserting that any of the Assets is in violation of Environmental Laws or is
subject to material environmental Liabilities, which in either case remains
pending or unresolved; (c) Seller has provided Buyer with copies of all material
reports addressing an Environmental Condition with respect to the Assets that
are in Seller’s possession or control and relate to the five (5)-year period
prior to the Effective Time; and (d) with respect to the Assets, Seller has not
entered into, and to Seller’s Knowledge is not subject to, any written
agreements, consents, orders, decrees, judgments, or other directives of any
Governmental Authority (other than Permits) that are in existence as of the
Execution Date and unique to Seller, that 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.
4.19Permits. Seller possesses all permits, licenses, registrations, orders,
approvals, variances, waivers and other authorizations (but excluding
servitudes, easements and rights-of-way) (the “Permits”) required to be obtained
by Seller from any Governmental Authority for conducting its business with
respect to the Assets. To Seller’s Knowledge, (a) each of the Permits is in full
force and effect in all material respects, (b) there exists no material default
under any Permit by Seller or by any other Person, and (c) no event has occurred
that upon receipt of notice or lapse of time or both would constitute any
material default under any such Permit by Seller or any other Person.
4.20Suspended Funds. Schedule 4.20 lists (a) all funds held in suspense by
Seller as of the Execution Date that are attributable to the Assets, (b) a
description of the source of such funds and the reason they are being held in
suspense, and (c) if known, the name(s) of the Person(s) claiming such funds or
to whom such funds are owed.
4.21Insurance. Schedule 4.21 set forth a list of the material insurance policies
held by Seller with respect to the Assets. Such policies are in full force and
effect, and, as of the Execution Date, Seller has not (a) received written
notice of any pending or threatened termination of such policies or (b) received
any notice from the insurer under any such insurance policy related to the
Assets disclaiming coverage in any material amount, reserving rights with
respect to a material claim or such policy in general, or canceling or
materially amending any such policy.
4.22Foreign Person. Seller is not a “foreign person” within the meaning of
Section 1445 of the Code.

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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller the following:
5.1Organization, 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, or
will be at Closing, 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, individually or in the aggregate, have a
material adverse effect upon the ability of Buyer to consummate the transactions
contemplated by this Agreement or perform its obligations hereunder.
5.2Authorization, 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 and the
Transaction Documents have been duly and validly authorized and approved by all
necessary limited liability company action on the part of Buyer. Assuming the
due authorization, execution and delivery by the other parties to such
documents, 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
obligations 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).
5.3No Conflicts. The execution, delivery and performance by Buyer of this
Agreement and the Transaction Documents to which it is a party and the
consummation of the transactions contemplated herein and therein will not
(a) conflict with or result in a breach of any provisions of the organizational
or other governing 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) assuming compliance with
the HSR Act, 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, individually or in the
aggregate, have a material adverse effect upon the ability of Buyer to
consummate the transactions contemplated by this Agreement or perform its
obligations hereunder.
5.4Consents. Except for compliance with the HSR Act (if applicable), there are
no requirements to obtain consent from Third Parties that Buyer is required to
obtain in connection with the consummation of the transactions contemplated by
this Agreement by Buyer.
5.5Bankruptcy. There are no bankruptcy, reorganization or receivership
proceedings pending, being contemplated by or, to Buyer’s Knowledge, threatened
in writing against any member of the ORNR Group. Buyer is not insolvent.
5.6Litigation. As of the Execution Date, there is no investigation, lawsuit,
action, litigation or arbitration by any Person or before any Governmental
Authority pending, or to Buyer’s Knowledge, threatened in writing against Buyer
or any of its Affiliates that has or would have a material adverse effect

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upon the ability of Buyer to consummate the transactions contemplated by this
Agreement or perform its obligations hereunder.
5.7Financing. Buyer shall have as of the Closing Date sufficient cash, available
lines of credit or other sources of 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, and following Closing, Buyer shall have sufficient funds to meet any
other payment obligations under this Agreement.
5.8Regulatory. Buyer is or will be at Closing 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, as of Closing, Buyer shall
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 the Assets and as of Closing shall file any and all required
reports necessary for such ownership and/or operation with all Governmental
Authorities having jurisdiction over such ownership and/or operation.
5.9Independent Evaluation. Buyer (a) is sophisticated in the evaluation,
purchase, ownership and operation of oil and gas properties and related
facilities and is aware of the risks associated with the purchase, ownership and
operation of such properties and facilities, (b) is capable of evaluating, and
hereby acknowledges that it has so evaluated, the merits and risks of the
Assets, Buyer’s acquisition, ownership and operation thereof, and its
obligations hereunder, and (c) is able to bear the economic risks associated
with the Assets, Buyer’s acquisition, ownership and operation thereof, and its
obligations hereunder. In making its decision to enter into this Agreement and
to consummate the transactions contemplated hereby, Buyer (i) 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 (ii) has satisfied itself through its own due diligence as to the
environmental and physical condition of and contractual arrangements and other
matters affecting the Assets.
5.10Brokers’ Fees. None of Buyer or Buyer’s Affiliates has incurred any
liability, contingent or otherwise, for brokers’ or finders’ fees relating to
the transactions contemplated by this Agreement or the Transaction Documents for
which Seller or any of Seller’s Affiliates has or shall have any responsibility.
5.11Accredited Investor. Buyer is an “accredited investor,” as such term is
defined in Regulation D of the Securities Act, and will acquire the Assets for
its own account and not with a view to a sale, distribution or other disposition
thereof in violation of the Securities Act, and the rules and regulations
thereunder, any applicable state blue sky Laws or any other applicable
securities Laws.

ARTICLE VI
CERTAIN AGREEMENTS
6.1Conduct of Business. 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 Execution Date and until Closing:
(a)maintain, and if Seller is the operator thereof, operate, the Assets (i) in
the usual, regular and ordinary manner consistent with its past practice
(including in accordance with its current one

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rig program) as would a reasonable and prudent owner/operator, and (ii) in
accordance in all material respects with all applicable Laws and the terms of
the Leases and Applicable Contracts;
(b)maintain the books of account and Records relating to the Assets in the
usual, regular and ordinary manner, in accordance with the usual accounting
practices of Seller;
(c)subject to Section 6.1(b), (i) pay all Operating Expenses incurred with
respect to the Assets in the ordinary course of business and (ii) except for the
Leases set forth in Schedule 6.1, cause to be timely paid all rentals, shut-in
royalties, minimum royalties and other payments that are necessary to maintain
Seller’s rights in and to the Leases in full force and effect until Closing;
(d)give prompt notice to Buyer of any written notice (i) received or given by
Seller with respect to (A) any alleged material breach by Seller or other Person
of any of the Leases, Permits and Applicable Contracts or (B) any amendment,
waiver, price redetermination, market out, curtailment or termination with
respect to any Applicable Contract, (ii) received by Seller from a lessor with
respect to any requirements or demands to drill additional wells on any of the
Leases or (iii) received by Seller from any party to any Lease or any successor
to the interest of such party of the filing or threatened filing of any action
to terminate, cancel, rescind or procure judicial reformation of any Lease;
(e)give prompt notice to Buyer of (i) any material Casualty Losses and (ii) any
emergency with respect to the Assets necessitating emergency operations;
(f)not propose any operation with respect to the Assets reasonably expected to
cost Seller in excess of $300,000;
(g)not consent to any operation with respect to the Assets proposed by a Third
Party that is reasonably expected to cost Seller in excess of $300,000;
(h)not enter into an Applicable Contract that, if entered into on or prior to
the Execution Date, would be required to be listed in Schedule 4.8, or terminate
(unless such Material Contract terminates pursuant to its stated terms) or
materially amend or change the terms of any Material Contract;
(i)not encumber, transfer, sell, mortgage, pledge or dispose of any portion of
the Assets other than (i) the transfer, sale and/or disposition of Hydrocarbons
in the ordinary course of business, and (ii) sales of equipment that is no
longer necessary or desirable in the operation of the Assets or for which
replacement equipment has been, or will be on or prior to Closing, obtained;
(j)not reduce or terminate existing insurance;
(k)not voluntarily relinquish its position as operator with respect to any
Asset;
(l)not voluntarily settle or release any claim in excess of $100,000 with
respect to the Assets to the extent relating (i) to the post-Effective Time
period or (ii) to both the pre-Effective Time period and the Assumed Obligations
for which Buyer is responsible hereunder; and
(m)not commit to do any of the foregoing.
Buyer acknowledges that Seller owns undivided interests in certain of the
properties comprising the Assets of which neither Seller nor its Affiliates is
the operator, and Buyer agrees that the acts or omissions of any other Working
Interest owner or any other Person who is not Seller or an 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.
6.2Successor Operator. While Buyer acknowledges that it desires to succeed
Seller (or its Affiliate) as operator of those Assets or portions thereof that
Seller (or its Affiliate) may presently operate, Buyer acknowledges and agrees
that Seller cannot and does not covenant or warrant that Buyer shall become

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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 (or its
Affiliate) 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 or other applicable
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,
and subject to any Third Party’s right to resume operatorship under, any
applicable joint operating agreement or other applicable agreement, Buyer as
successor operator of such Assets effective as of Closing.
6.3Governmental Bonds and Guarantees.
(a)Buyer acknowledges that none of the bonds, letters of credit and guarantees,
if any, set forth on Schedule 6.3, posted by Seller or its Affiliates with any
Governmental Authority or any non-governmental Third Party and relating to the
Assets (the “Bonds”) are transferable to Buyer. On or before the Closing Date,
Buyer shall obtain, or cause to be obtained in the name of Buyer, replacements
for such Bonds to the extent such replacements are necessary (i) to consummate
the transactions contemplated by this Agreement and (ii) to permit the
cancellation of such Bonds posted by Seller and/or any of 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 and all applicable Third Parties meeting the
requirements of such Governmental Authorities and such Third Parties to own and,
if applicable, operate the Assets.
(b)In the event that any Governmental Authority or any Third Party does not
permit the cancellation of any Bond posted by Seller and/or any Affiliate
thereof with respect to the Assets, then, from and after Closing, without
limiting Buyer’s right to indemnification pursuant to Section 13.2, Buyer shall
indemnify Seller or such Affiliate, as applicable, against all amounts incurred
by Seller or such Affiliate, as applicable, under such Bond (and all costs
incurred in connection with such Bond) to the extent applicable to the Assets.
Notwithstanding anything to the contrary contained in this Agreement, any cash
placed in escrow by Seller or any Affiliate thereof in connection with the Bonds
must be returned to Seller, and shall be deemed an Excluded Asset for all
purposes hereunder.
6.4Amendment to 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 which, if existing or known, as applicable, on the Execution
Date, 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
Execution Date and shall be deemed to exclude all information contained in any
addition, supplement or amendment thereto; provided, however, that if Closing
shall occur, then all matters disclosed pursuant to any such addition,
supplement or amendment at or prior to Closing 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.
6.5Records Retention. Buyer shall and shall cause its successors and assigns to,
for a period of five (5) years following Closing (or, in the case of Records
related to Tax matters, until the expiration of the period of time set forth in
the applicable statute of limitations), (a) retain the Records, (b) provide
Seller and its officers, employees and representatives with reasonable access to
the Records during normal business hours for review and copying at Seller’s
expense, and (c) provide Seller and its officers, employees and representatives
with reasonable access, during normal business hours, to materials received or
produced after Closing relating to any indemnity claim made under Article XIII
for review and copying at Seller’s expense.

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6.6Regulatory Matters.
(a)Seller and Buyer shall (x) make or cause to be made appropriate filings of a
Notification and Report Form pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the “HSR Act”) with respect to the
transactions contemplated hereby as promptly as practicable, but in no event
later than ten (10) Business Days, after the Execution Date, and Seller and
Buyer shall bear their own costs and expenses incurred in connection with such
filings and compliance with this Section 6.6, provided that Buyer and Seller
shall each pay fifty percent (50%) of any filing fees in connection therewith,
and (y) use their commercially reasonable efforts to respond at the earliest
practicable date to any requests for additional information made by the
Antitrust Division of the Department of Justice (the “DOJ”), the Federal Trade
Commission (the “FTC”) or any other Governmental Authority, to take all actions
necessary to cause the waiting periods under the HSR Act and any other Laws to
terminate or expire at the earliest possible date but in no event later than the
Outside Date, to resist in good faith, at each of their respective cost and
expense, any assertion that the transactions contemplated hereby constitute a
violation of Laws, and to eliminate every impediment under any Laws that may be
asserted by any Governmental Authority so as to enable the Closing to occur as
soon as reasonably possible in accordance herewith, all to the end of expediting
consummation of the transactions contemplated hereby. In connection with this
Section 6.6, the Parties shall, to the extent permitted by Laws, (i) cooperate
in all respects with each other in connection with any filing, submission,
investigation or inquiry, (ii) absent an objection from a Governmental
Authority, provide advance notice and allow the other Party to participate in
every communication with a Governmental Authority, provided that this clause
shall not apply to a communication initiated by the Governmental Authority
without advance notice to a Party, in which case the next clause shall apply,
(iii) promptly inform the other Party of any communication received by such
Party from, or given by such Party to, the DOJ or the FTC or any other
Governmental Authority and of any material communication received or given in
connection with any proceeding by a private party, in each case, regarding the
transactions contemplated hereby, (iv) have the right to review in advance, and
to the extent practicable, each shall consult the other on, any filing made
with, or written materials to be submitted to, the DOJ, the FTC or any other
Governmental Authority or, in connection with any proceeding by a private party,
any other Person, in connection with the transactions contemplated hereby, and
(v) consult with each other in advance of any meeting, discussion, telephone
call or conference with the DOJ, the FTC or any other Governmental Authority or,
in connection with any proceeding by a private party, with any other Person.
Each Party shall provide the other with information that is reasonably requested
and that is reasonably necessary to obtain the expiration of the waiting period
under the HSR Act; provided, however, that neither Party would be required to
share information that (A) is subject to the attorney-client or work product
privilege, absent entry of a mutually acceptable joint defense agreement or
(B) reflects the value of the transaction.
(b)Buyer and Seller shall, and shall cause their respective Affiliates to, take
reasonable best efforts to cause the expiration or early termination of the
applicable waiting period under the HSR Act with respect to the transactions
contemplated by this Agreement as promptly as is practicable but in no event
later than the Outside Date. Buyer and Seller shall jointly determine all
strategy with regard to any provision of the foregoing; provided that nothing in
this Agreement obligates Buyer or any of its Affiliates or Seller or any of its
Affiliates to agree to divest, hold separate or otherwise take any action that
limits the ability of Buyer or its Affiliates or Seller or any of its Affiliates
to operate or retain its own assets or businesses, or the Assets. Neither Buyer
nor Seller shall take any action that will delay obtaining the expiration of the
HSR Act waiting period and neither shall withdraw or refile any filing under the
HSR Act without the approval of the other Party.
6.7Compliance with Litigation Matters. Buyer agrees that it will comply with the
terms and requirements of the Bishop Litigation Settlement to the extent
relating to the post-Closing operations of the Assets, including (a) the
covenant to pay future royalties based on the royalty valuation methodology
agreed to in the Bishop Litigation Settlement, (b) the covenant to report future
royalties based on the reporting format

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agreed to in the Bishop Litigation Settlement, and (c) the covenant not to take
or adjust royalties for certain disputed deductions described in the Bishop
Litigation Settlement. Notwithstanding anything in this Agreement to the
contrary, Buyer acknowledges that it is responsible for complying with the terms
and requirements of the Bishop Litigation Settlement to the extent relating to
the post-Closing operations of the Assets and agrees that Buyer does not have
any, and will not have any, claim against Seller relating to the requirements of
the Bishop Litigation Settlement, the results of such compliance on operations
or Buyer’s failure to comply with such requirements.
6.8Employees.
(a)Notwithstanding anything to the contrary contained in the Confidentiality
Agreement, Buyer and its Affiliates may, on or after the Execution Date and at
reasonable times approved by Seller, interview any employee of Seller or its
Affiliates set forth on Schedule 6.8 (each, a “Permitted Employee”) and conduct
those lawful, standard employee screening and eligibility procedures with regard
to the potential employment of any Permitted Employee as Buyer or any such
Affiliate conducts with respect to candidates for employment in its ordinary
course of business. Seller may supplement Schedule 6.8 at any time prior to the
Closing in order to add additional individuals to Schedule 6.8. Buyer and its
Affiliates may conduct interviews and screening of the Permitted Employees from
the Execution Date until fifteen (15) days before the Closing Date; provided
that such interviewing and screening shall not unreasonably interfere with the
business of Seller or its Affiliates. Seller shall exercise commercially
reasonable efforts to cooperate with Buyer and its Affiliates to facilitate the
completion of the interview and screening procedures hereunder.
(b)After the Execution Date, and as set forth in Section 6.8(a) above, Buyer and
its Affiliates shall be authorized to communicate with any Permitted Employee
regarding such Permitted Employee’s potential employment with Buyer or its
Affiliates and both Buyer and its Affiliates shall be authorized to communicate
any offer of employment to any Permitted Employees, with such employment offers
to be conditioned upon the Closing and effective as of the Closing Date. Buyer
shall, not later than fifteen (15) days before the Closing Date, deliver to
Seller a final written list containing the name of each Permitted Employee to
whom Buyer or any of its Affiliates has made an employment offer. Buyer shall
provide to Seller, not later than ten (10) days prior to the Closing Date, the
names of each Permitted Employee who has then accepted an employment offer from
Buyer or any of its Affiliates (each Permitted Employee who accepts such an
offer being a “Continuing Employee”) and the names of the Permitted Employees
who have then declined an employment offer from Buyer or its Affiliates. Each
Continuing Employee shall, as of the Closing Date (if he or she is still
employed by Seller or its Affiliate), be terminated by Seller or its Affiliate
and become an employee of Buyer or its Affiliate. Between the Execution Date and
ten (10) days prior to the Closing Date, Seller shall not (and shall cause its
Affiliates to not) terminate any Permitted Employee (other than for cause or
with Buyer’s prior written consent, not to be unreasonably withheld, conditioned
or delayed); provided, however, that prior to the Closing Date, Seller shall not
(and shall cause its Affiliates to not) terminate any Permitted Employee who has
received an employment offer from Buyer or any of its Affiliates and accepted
such offer (other than for cause or with Buyer’s prior written consent, not to
be unreasonably withheld, conditioned or delayed). Seller shall not induce or
otherwise attempt to influence any such Permitted Employee to resign or to not
accept his or her offer of employment from Buyer or any of its Affiliates.
(c)Seller shall be responsible for all compensation and benefits owing to
Continuing Employees arising on or prior to the Closing Date (or, if earlier,
the date a Continuing Employee ceases employment with Seller or its Affiliate)
and for all compensation and benefits owing to Permitted Employees not hired by
Buyer or its Affiliates. Buyer or its Affiliate, as applicable, shall be
responsible for all compensation and benefits owing to Continuing Employees
arising on or after their hiring by Buyer or such Affiliate (including after the
Closing Date). Seller shall be responsible and pay for any obligation arising
out of the WARN Act with respect to any employee of Seller or any of its
Affiliates (including any Permitted

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Employees laid off on or prior to the Closing Date); provided that Buyer or its
Affiliate, as applicable, shall be responsible and pay for any obligation
arising out of the WARN Act with respect to any Continuing Employees laid off
after the Closing Date. Buyer shall take no act (or omit to take any act) on or
after the Closing Date that creates any Liability for Seller or any of its
Affiliates under the WARN Act.
(d)Notwithstanding anything in this Agreement to the contrary, nothing in this
Agreement shall create any obligation on the part of Buyer or its Affiliates to
(i) offer employment to, or hire, any Permitted Employee, (ii) offer or provide
specified levels of compensation or benefits to Permitted Employees or
(iii) continue the employment of any employee for any definite period following
the Closing Date.
(e)Without limiting the generality of Section 15.10, no provision in this
Agreement shall create any Third-Party beneficiary or other right in any Person
(including any beneficiary or dependent thereof) for any reason in respect of
continued employment or new employment with Seller or its Affiliates or Buyer or
its Affiliates or in respect of any benefits that may be provided, directly or
indirectly, under any plan or arrangement maintained by Seller or Buyer or its
Affiliates. Nothing in this Section 6.8, express or implied, shall be deemed an
amendment of any Employee Benefit Plan providing benefits to any Permitted
Employee or any other employee of Seller or its Affiliates. Each Party hereby
agrees not to, and, with respect to Seller, to cause its Affiliates or anyone
acting on Seller’s or any of its Affiliates’ behalf not to, and, with respect to
Buyer, to cause each member of the ORNR Group or anyone acting on Buyer’s or any
member of the ORNR Group’s behalf not to, for two (2) years after the Execution
Date, directly or indirectly (other than as permitted by Sections 6.8(a) and
6.8(b) hereof): solicit or contact with a view to the engagement or employment
of, any employee of the other Party or its Affiliates; provided, however, that
it shall not be a violation of this Section 6.8(e) to engage in solicitations
incidental to general advertising or other general solicitation in the ordinary
course not specifically targeted at such Persons or to employ any Person not
solicited in violation hereof.
6.9Transition Services Agreement. The Parties shall enter into at Closing the
Transition Services Agreement substantially in the form set forth on Exhibit K
(the “Transition Services Agreement”); provided that, with respect to the items
on the Schedules thereto which the Parties fail to agree to as of the Execution
Date, Seller and Buyer shall, acting in good faith, use their commercially
reasonable efforts to agree to such items prior to the Closing and such
Schedules shall be modified accordingly.
6.10Hedges.
(a)After the execution of this Agreement and prior to Closing, upon receipt of
written instructions from Buyer, Seller shall promptly authorize the initiation
of one or more hedging transactions in connection with the Assets in accordance
with the terms and conditions, and with any counterparty that has an ISDA
agreement in effect or executes an ISDA agreement with Seller, set forth in such
written instructions (each such transaction initiated in accordance with this
Section 6.10(a), a “Specified Hedging Agreement”); provided that (i) the volumes
associated with all such Specified Hedging Agreements are, in the aggregate, no
greater than those listed on Schedule 6.10 and on market terms, (ii) the
Specified Hedging Agreements are executed solely with counterparties listed on
Schedule 6.10, (iii) Seller shall not be required to pay to any counterparty any
fee to authorize the initiation of any Specified Hedging Agreement (unless Buyer
agrees to reimburse Seller for such fee), and (iv) Buyer has delivered such
instructions at least five (5) Business Days prior to the Closing. Seller shall
not authorize the initiation of any Specified Hedging Agreement except as
expressly provided in this Section 6.10.
(b)If Seller has authorized the initiation of any Specified Hedging Agreement in
accordance with this Section 6.10 and the proposed counterparty thereto fails to
authorize the initiation of such Specified Hedging Agreement, Seller shall not
be in breach of this Section 6.10 for such counterparty’s failure to authorize
the initiation of such Specified Hedging Agreement.

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(c)Prior to the earlier of novation of a Specified Hedging Agreement to Buyer at
Closing or the unwinding of such Specified Hedging Agreement after the
occurrence of an Unwinding Scenario, Seller shall (i) comply with such Specified
Hedging Agreement and (ii) not execute or deliver any amendment for, or waiver
of any right under, such Specified Hedging Agreement, transfer any right or
obligation under such Specified Hedging Agreement or terminate such Specified
Hedging Agreement; provided, however, that Seller shall execute and deliver any
such amendment or waiver or effect any such transfer or termination in
accordance with any written request delivered by Buyer to Seller and consistent
with Schedule 6.10.
(d)Whether or not the Closing occurs, Buyer shall pay, be responsible for,
defend, indemnify, hold harmless and forever release Seller and its Affiliates
from and against any and all (i) payments made by Seller or payable by Seller to
any counterparty listed on Schedule 6.10 related to entering into the Specified
Hedging Agreements or any amendments, waivers, transfers or terminations of
Specified Hedging Agreements pursuant to Section 6.10(c), (ii) payments made by
Seller or payable by Seller related to transferring to, or novating in favor of,
Buyer the Specified Hedging Agreements, (iii) payments made by Seller or payable
by Seller related to any monthly settlement of a Specified Hedging Agreement,
and (iv) payments made by Seller or payable by Seller under any Specified
Hedging Agreement pursuant to an Unwinding Scenario (as defined below), in each
case, without duplication of the Purchase Price adjustments pursuant to Section
3.3(a)(ix) or Section 3.3(b)(xi) (the “Hedging Indemnities”).
(e)If this Agreement is terminated prior to Closing or Buyer fails to assume the
Specified Hedging Agreements or the transactions contemplated thereby at Closing
for any reason whatsoever (in either case, an “Unwinding Scenario”), then Seller
shall, at the sole cost and expense of Buyer, use its reasonable efforts to
unwind all of the Specified Hedging Agreements and the transactions contemplated
thereby within five (5) Business Days following the occurrence of the Unwinding
Scenario in accordance with the terms of the confirmations contained in each of
the Specified Hedging Agreements.
(f)Following the Scheduled Closing Date or the earlier termination of this
Agreement, Buyer shall make any required payments pursuant to the Hedging
Indemnities to Seller within ten (10) Business Days after receipt of a
reasonably detailed invoice with respect thereto.
(g)For the avoidance of doubt, Buyer shall be entitled to and responsible for,
as applicable, all revenues, gains, proceeds, losses, costs and expenses related
to the Specified Hedging Agreements and the transactions contemplated thereby
(whether or not Closing occurs), including all revenues, gains, proceeds,
losses, costs and expenses in an Unwinding Scenario, it being understood that
all such revenues, gains and proceeds shall be the property of Buyer and that
all such losses, costs and expenses shall be limited to the Hedging Indemnities.
(h)Notwithstanding anything to the contrary in this Agreement, the Specified
Hedging Agreements and the transactions contemplated thereby and the actions to
be taken by the Parties in accordance with this Section 6.10 and Section 6.11
are an exception to, and will under no circumstance constitute a breach of, any
of (A) the representations and warranties made by either Party in this Agreement
or in any certificate to be delivered at Closing and (B) the covenants contained
in Section 6.1.
6.11Novation. Seller shall execute and deliver to the Specified Hedging
Agreement counterparties the novation instruments substantially in the forms
attached to this Agreement as Exhibit L at the Closing (the “Novation
Instruments”). Buyer shall execute an ISDA agreement with each applicable
counterparty of the Specified Hedging Agreements prior to such novation and pay
to Seller any fees paid by Seller to a trade counterparty that was necessary to
effect any novation contemplated by Section 6.11. Seller shall consult with
Buyer regarding any such fee prior to agreeing to pay such fee. If Seller has
executed and delivered any Novation Instrument in accordance with this Section
6.11 and the proposed counterparty thereto or Buyer fails to execute and deliver
such Novation Instrument, Seller shall not be in breach of this Section 6.11 for
such counterparty’s or Buyer’s failure to execute and deliver such Novation
Instrument.

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6.12Vehicles. Seller agrees that the vehicles included in the Personal Property
shall include each company vehicle (if any) provided by Seller to any Permitted
Employee that becomes an employee of Buyer or one of its Affiliates and any pool
company vehicles dedicated to support the Assets.
6.13Financial Cooperation. For the period beginning on the Execution Date and
ending on the Closing Date, Seller shall use commercially reasonable efforts to
make available to Buyer financial information, accounting records, recording
information, party names, legal descriptions, and petroleum engineering
information relating to the Assets (in the form that such information and
records currently exist) for use by Buyer in connection with Buyer’s financing
of its acquisition of the Assets. In addition, for the period beginning on the
Execution Date and ending on the Closing Date, Seller shall cooperate as
reasonably requested by Buyer (in connection with Buyer’s efforts to obtain
financing of its acquisition of the Assets) by making the appropriate Seller
personnel available to Buyer and its independent certified public accounting
firm (such accounting firm to be of national standing selected by Buyer, and
agreed to by Seller) to (i) answer questions and assist in Buyer and Buyer’s
accounting firm’s review of Seller’s financial information and accounting
records relating to the Assets (including providing such auditors with customary
access to the books and records of Seller relating to the Assets at reasonable
times on the reasonable request of such auditors), (ii) answer questions in
connection with Buyer’s preparation of disclosure schedules related to the
Assets in connection with the Financing, (iii) answer questions in connection
with Buyer’s preparation of the documentation necessary to pledge and mortgage
the Assets that will be collateral under the Financing and (iv) provide Buyer
with documentation and other information with respect to the Assets as shall
have been reasonably requested by Buyer or its Designated Financing Sources or
their respective Affiliates that is required in connection with the Financing by
regulatory authorities under applicable “know your customer” and anti-money
laundering rules and regulations, including the USA PATRIOT Act of 2001. It is
understood and agreed by the Parties that the cooperation by Seller described in
this Section 6.13 shall not obligate Seller to take any actions that materially
interfere with Seller’s ongoing business and Seller shall not be responsible for
the creation or production of any financial information or reports (audited or
unaudited). Notwithstanding the foregoing, (a) neither Seller nor Seller’s
Affiliates shall be required to pay any commitment or other similar fee or incur
or become subject to any other Liability or obligation in connection with
Buyer’s financing and (b) none of Seller or Seller’s Affiliates shall be
required to authorize, execute or enter into, or perform any agreement with
respect to, Buyer’s financing. BUYER SHALL DEFEND, INDEMNIFY, HOLD HARMLESS AND
FOREVER RELEASE THE SELLER INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, DAMAGES, CLAIMS, COSTS, EXPENSES, INTEREST, AWARDS,
JUDGMENTS AND PENALTIES SUFFERED OR INCURRED BY THEM IN CONNECTION WITH BUYER’S
FINANCING AND THE PERFORMANCE OF THEIR RESPECTIVE OBLIGATIONS UNDER THIS SECTION
6.13 AND ANY INFORMATION UTILIZED IN CONNECTION THEREWITH EVEN IF CAUSED BY THE
NEGLIGENCE OF SELLER. Buyer shall, promptly upon written request by Seller,
reimburse Seller and its Affiliates for all reasonable and documented
out-of-pocket costs and expenses incurred by Seller or its Affiliates (including
those of its accountants, consultants, legal counsel, agents, contract labor and
other Seller representatives) in connection with the cooperation described by
this Section 6.13. All financial information, accounting records, recording
information, party names, legal descriptions, and petroleum engineering
information relating to the Assets is made available as a courtesy to Buyer and
SELLER MAKES NO REPRESENTATIONS TO ANY PERSON OR ENTITY AS TO THE TRUTHFULNESS,
COMPLETENESS OR ACCURACY OF SUCH INFORMATION AND THE SAME IS PROVIDED ON AN
AS-IS WHERE-IS BASIS WITH ALL WARRANTIES, EXPRESS OR IMPLIED, DISCLAIMED. All
financial information, accounting records, recording information, party names,
legal descriptions, and petroleum engineering information relating to the Assets
made available to Buyer pursuant to this Section 6.13 shall be subject to
Section 10.2.

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6.14Recording Cooperation. From the Execution Date until Closing, at Buyer’s
request, Seller shall cooperate with and assist Buyer in recording the federal
Leases in the applicable county records and will take such actions as may be
reasonably required with respect thereto, with all of Seller’s out of pocket
costs being borne by Buyer.

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:
7.1Representations. (a) The representations and warranties of Seller set forth
in ARTICLE IV (other than the Specified Representations) shall be true and
correct on and as of the Closing Date (without regard to any materiality or
Material Adverse Effect qualifiers contained therein), 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 in the
aggregate would not have a Material Adverse Effect, and (b) the Specified
Representations shall be true and correct in all material respects on and as of
the Closing Date (without regard to any materiality or Material Adverse Effect
qualifiers contained therein), 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).
7.2Performance. Seller shall have performed or complied in all material respects
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.
7.3No Legal Proceedings; Governmental Prohibitions. No material suit, action,
litigation or other proceeding instituted 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, and no statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or permanent
injunction, judgment or other order enacted, entered, promulgated, enforced or
issued by any Governmental Authority preventing the consummation of the
transactions contemplated by this Agreement shall be in effect.
7.4Title Defects, Environmental Defects, Etc. The sum of (a) all Title Defect
Amounts determined under Section 11.2(g) prior to Closing (or if not so
determined prior to Closing, as alleged by Buyer in any Title Defect Notice in
its reasonable and good faith opinion), less the sum of all Title Benefit
Amounts determined under Section 11.2(h) prior to Closing, plus (b) all
Remediation Amounts for Environmental Defects determined under ARTICLE XII prior
to Closing (or if not so determined prior to Closing, as alleged by Buyer in any
Environmental Defect Notice in its reasonable and good faith opinion), plus
(c) the Allocated Value of all Assets withheld from Closing on account of
Preferential Purchase Rights and Hard Consents pursuant to Section 11.4, plus
(d) the amount of Purchase Price adjustment determined in accordance with
Section 11.3 with respect to any Casualty Losses, shall be less than fifteen
percent (15%) of the Purchase Price.
7.5Closing 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.

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7.6HSR Act. The waiting period under the HSR Act applicable to the consummation
of the transactions contemplated hereby (if any) shall have expired or been
terminated.

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:
8.1Representations. (a) The representations and warranties of Buyer set forth in
ARTICLE V (other than the Specified Representations) shall be true and correct
in all material respects on and as of the Closing Date (without regard to any
materiality qualifiers contained therein), 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), and (b) the Specified
Representations shall be true and correct in all material respects on and as of
the Closing Date (without regard to any materiality qualifiers contained
therein), 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).
8.2Performance. Buyer shall have performed or complied in all material respects
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.
8.3No Legal Proceedings; Governmental Prohibitions. No material suit, action,
litigation or other proceeding instituted 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, and no statute, rule, regulation,
executive order, decree, temporary restraining order, preliminary or permanent
injunction, judgment or other order enacted, entered, promulgated, enforced or
issued by any Governmental Authority preventing the consummation of the
transactions contemplated by this Agreement shall be in effect.
8.4Title Defects, Environmental Defects, Etc. The sum of (a) all Title Defect
Amounts determined under Section 11.2(g) prior to Closing (or if not so
determined prior to Closing, as alleged by Buyer in any Title Defect Notice in
its reasonable and good faith opinion), less the sum of all Title Benefit
Amounts determined under Section 11.2(h) prior to Closing, plus (b) all
Remediation Amounts for Environmental Defects determined under ARTICLE XII prior
to Closing (or if not so determined prior to Closing, as alleged by Buyer in any
Environmental Defect Notice in its reasonable and good faith opinion), plus
(c) the Allocated Value of all Assets withheld from Closing on account of
Preferential Purchase Rights and Hard Consents pursuant to Section 11.4, plus
(d) the amount of Purchase Price adjustment determined in accordance with
Section 11.3 with respect to any Casualty Losses, shall be less than fifteen
percent (15%) of the Purchase Price.
8.5Replacement Bonds. Buyer shall have obtained, in the name of Buyer,
replacements for Seller’s and/or its Affiliates’ Bonds to the extent required by
Section 6.3.
8.6Closing 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.
8.7HSR Act. The waiting period under the HSR Act applicable to the consummation
of the transactions contemplated hereby (if any) shall have expired or been
terminated.

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8.8Novation of Hedges. The Specified Hedging Agreements shall have been novated
in favor of Buyer at no cost to Seller that is not covered by the Hedging
Indemnities.

ARTICLE IX
CLOSING
9.1Date 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 7:00 a.m. (Mountain Time) on September
20, 2017 (the “Scheduled Closing Date”), or on such date as Buyer and Seller may
agree upon in writing; provided that if the conditions to Closing in ARTICLE VII
and ARTICLE VIII have not yet been satisfied or waived by the Scheduled Closing
Date, then subject to the Parties’ rights under ARTICLE XIV, Closing shall occur
within five (5) Business Days after such conditions have been satisfied or
waived. The date on which the Closing actually occurs shall be the “Closing
Date.”
9.2Place of Closing. Closing shall be held at the offices of Seller at 1050 17th
Street, Suite 800, Denver, Colorado 80265, or such other place as mutually
agreed upon by the Parties.
9.3Closing 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, acknowledge and deliver the Deed in
sufficient counterparts to facilitate recording in the applicable counties.
(d)Seller and Buyer shall execute, acknowledge and deliver such instruments as
may be required to transfer the vehicles described in Section 2.1(h) to Buyer.
(e)Seller and Buyer shall execute and deliver the Preliminary Settlement
Statement.
(f)Seller and Buyer shall execute and deliver the Transition Services Agreement.
(g)Buyer shall deliver to Seller, to the account(s) designated in the
Preliminary Settlement Statement, by direct bank or wire transfer in same day
funds, the Adjusted Purchase Price, less the Deposit.
(h)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.
(i)Seller shall deliver an executed statement that meets the requirements set
forth in Treasury Regulation §1.1445-2(b)(2).
(j)To the extent required under any applicable Law or Governmental Authority for
any federal or state Lease, Seller and Buyer shall deliver federal and state
change of operator forms designating Buyer as the operator of the Wells and the
Leases currently operated by Seller or any of its Affiliates.
(k)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.

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(l)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.
(m)Buyer shall deliver any instruments and documents required by Section 6.3.
(n)Seller and Buyer shall execute and deliver joint written instructions to the
Escrow Agent to pay the Deposit to Seller.
(o)Seller shall deliver or cause to be delivered to Buyer recordable releases of
all Encumbrances securing borrowed monies incurred by Seller or its Affiliates
that are burdening the Assets.
(p)Seller shall execute and deliver to the Specified Hedging Agreement
counterparties for counter signature the Novation Instruments substantially in
the forms attached to this Agreement as Exhibit L as may be required to novate
each Specified Hedging Agreement to Buyer.
(q)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.
9.4Records. 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 consistent with each Record’s current form and format as maintained by
Seller as of the Effective Time, for pickup from Seller’s offices during normal
business hours; provided that Seller shall retain copies of the Records, it
being understood that Buyer shall be entitled to all original copies of the
Records in Seller’s possession; provided further that Seller shall not be
required to conduct processing, conversion, compiling or any other further work
with respect to the delivery of copies of the Records pursuant to this
Section 9.4.

ARTICLE X
ACCESS/DISCLAIMERS
10.1Access.
(a)From and after the Execution Date 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, Seller shall afford to Buyer and its authorized
representatives (“Buyer’s Representatives”) reasonable access, during normal
business hours, to the Assets operated by Seller or any of its Affiliates and
all Records in Seller’s or any of its Affiliates’ possession at such time, to
the extent necessary to conduct the title or environmental review described in
this Agreement. Seller shall use commercially reasonable efforts to also make
available to Buyer and the Buyer’s Representatives, upon reasonable notice
during normal business hours, Seller’s personnel knowledgeable with respect to
the Assets in order that Buyer may make such diligence investigation as Buyer
considers necessary or appropriate. 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)From the Execution Date to the Defect Claim Date, Buyer shall be entitled to
undertake a Phase I Environmental Site Assessment of the Assets, conducted by a
reputable environmental consulting or engineering firm approved in advance in
writing by Seller (such approval not to be unreasonably withheld or delayed). In
conducting such inspection, Buyer shall not operate any equipment or conduct any
testing or sampling of soil, groundwater or other materials (including any
testing or sampling for Hazardous Substances, Hydrocarbons or NORM). Seller or
Seller’s designee shall have the right to be present during any stage of the
assessment. Buyer shall give Seller reasonable prior written notice before
entering onto any of the Assets,

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and Seller or its designee shall have the right to accompany Buyer and Buyer’s
Representatives whenever they are on site on the Assets. 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 Site Assessment) of, any property adjacent to the Assets.
(c)Subject to Seller’s consent as described below, Buyer shall be entitled to
conduct sampling, boring, drilling and other invasive investigation activities
(“Invasive Activities”) on or with respect to any of the Assets to the extent
Buyer’s Phase I Environmental Site Assessment reasonably indicates that Invasive
Activities are required in order to determine the scope of an existing
Environmental Defect identified in such Phase I Environmental Site Assessment;
provided that before Buyer conducts any Invasive Activities, Buyer shall
(i) furnish Seller with such Phase I Environmental Site Assessment and a written
description of the proposed scope of the Invasive Activities to be conducted,
including a description of the activities to be conducted, and a description of
the approximate location and expected timing of such activities and (ii) obtain
the prior written consent of Seller to undertake such Invasive Activities (such
consent to be in Seller’s sole discretion). If any of the proposed Invasive
Activities may unreasonably interfere with normal operation of the Assets,
Seller may request an appropriate modification of the proposed Invasive
Activity. Any Invasive Activities shall be conducted by a reputable
environmental consulting or engineering firm, approved in advance in writing by
Seller (such approval not to be unreasonably withheld or delayed). Seller shall
have the right, at its option, to split with Buyer any samples collected
pursuant to approved Invasive Activities.
(d)If Seller denies any Invasive Activities reasonably requested by Buyer in
accordance with Section 10.1(c), then Buyer may at its option, require Seller to
retain the affected Assets by delivering written notice thereof at least two (2)
Business Days prior to the Closing, whereupon the Assets shall be considered
Excluded Assets for all purposes hereunder and the Purchase Price shall be
reduced by the Allocated Value of the Assets so excluded.
(e)Buyer shall coordinate its access rights, environmental property assessments
and physical inspections of the Assets with Seller to minimize any inconvenience
to or interruption of the conduct of business by Seller. Buyer shall abide by
Seller’s written safety rules, regulations and operating policies that are
provided to Buyer in advance while conducting its due diligence evaluation of
the Assets, including any environmental or other inspection or assessment of the
Assets. Buyer hereby defends, indemnifies and holds harmless the Seller
Indemnified Parties from and against any and all Liabilities to the extent
arising out of or resulting from 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, IN WHOLE OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF, OR THE VIOLATION OF
LAW BY, ANY INDEMNIFIED PERSON, EXCEPTING ONLY LIABILITIES TO THE EXTENT
ACTUALLY RESULTING (I) FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY
INDEMNIFIED PERSON OR (II) FROM MATTERS DISCOVERED OR UNCOVERED BY BUYER AND
BUYER’S REPRESENTATIVES IN THE COURSE OF SUCH DUE DILIGENCE INVESTIGATION TO THE
EXTENT SUCH DISCOVERIES ARE OF PRE-EXISTING CONDITIONS (INCLUDING ANY
ENVIRONMENTAL DEFECTS) NOT CAUSED OR EXACERBATED (WHICH TERM SHALL SPECIFICALLY
EXCLUDED THE DISCOVERY OF SUCH CONDITIONS) BY BUYER OR BUYER’S REPRESENTATIVES.
(f)Buyer acknowledges that any entry into Seller’s offices or onto the Assets
shall be at Buyer’s sole risk, cost and expense, and, subject to the terms
hereof, that none of the Seller Indemnified Parties shall be liable in any way
for any injury, loss or damage arising out of such entry that may occur to Buyer
or any of Buyer’s Representatives pursuant to this Agreement. Buyer hereby fully
waives and releases any and all Liabilities against all of the Seller
Indemnified Parties for any injury, death, loss or damage to

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any of Buyer’s Representatives or their property in connection with Buyer’s due
diligence activities, EVEN IF SUCH LIABILITIES ARISE OUT OF OR RESULT FROM, IN
WHOLE OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE
NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF, OR THE VIOLATION OF LAW BY, ANY
INDEMNIFIED PERSON, EXCEPTING ONLY LIABILITIES ACTUALLY RESULTING FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY INDEMNIFIED PERSON.
(g)Buyer agrees to provide to Seller promptly, but in no event less than five
(5) Business Days after receipt, copies of all final reports and test results
prepared by Buyer’s environmental consulting or engineering firm which contain
data collected or generated from Buyer’s 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, express, implied or statutory, as
to the condition of the Assets or to the accuracy of said documents or the
information contained therein.
(h)Upon completion of Buyer’s 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 and/or any of Buyer’s
Representatives’ due diligence, (ii) restore the Assets to the approximate same
condition as, or better condition than, they were prior to commencement of any
such due diligence and (iii) remove all equipment, tools and other property
brought onto the Assets in connection with such due diligence. Any disturbance
to the Assets (including the leasehold associated therewith) resulting from such
due diligence will be promptly corrected by Buyer at Buyer’s sole cost and
expense.
(i)During all periods that Buyer and/or any of Buyer’s Representatives are on
the Assets, Buyer shall maintain, at its sole expense, policies of insurance of
the types and in the amounts set forth on Schedule 10.1. Upon request by Seller,
Buyer shall provide evidence of such insurance to Seller prior to entering the
Assets.
10.2Confidentiality. Buyer acknowledges that, pursuant to its right of access to
the Records or the Assets, Buyer and/or Buyer’s Representatives (including
Buyer’s environmental consulting or engineering firm) may become privy to
confidential and other information of Seller or its Affiliates, and Buyer shall
ensure that such confidential information (i) shall not be used for any purpose
other than in connection with the transactions contemplated hereby and
(ii) shall be held confidential by Buyer and Buyer’s Representatives in
accordance with the terms of the Confidentiality Agreement. Buyer agrees to
inform Buyer’s Representatives of the confidential nature of such confidential
information and to be responsible for any breach of this Section 10.2 by any of
Buyer’s Representatives. If Closing should occur, the foregoing confidentiality
restriction on Buyer, including the Confidentiality Agreement, shall terminate
as of the Closing Date (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 Seller’s or its Affiliates’ assets other
than the Assets).
10.3Disclaimers.
(a)EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN ARTICLE IV,
SECTION 11.1(b) OR IN THE SPECIAL WARRANTY OF TITLE IN THE ASSIGNMENT,
(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, OR ITS OR THEIR
EMPLOYEES, AGENTS, OFFICERS, CONSULTANTS, ADVISORS OR REPRESENTATIVES (INCLUDING
ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO
BUYER BY ANY SELLER INDEMNIFIED PARTY).

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(b)EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED OTHERWISE IN
ARTICLE IV, SECTION 11.1(b) OR IN THE SPECIAL WARRANTY OF TITLE IN THE
ASSIGNMENT, 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 (INCLUDING WELL LOCATIONS),
(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 (INCLUDING WELL LOCATIONS), (III) THE
QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR FROM THE ASSETS
(INCLUDING WELL LOCATIONS), (IV) ANY ESTIMATES OF THE VALUE OF, OR FUTURE
REVENUES TO BE GENERATED BY, THE ASSETS (INCLUDING WELL LOCATIONS), (V) THE
PRODUCTION OF OR ABILITY TO PRODUCE HYDROCARBONS FROM THE ASSETS (INCLUDING WELL
LOCATIONS), (VI) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY,
DESIGN OR MARKETABILITY OF THE ASSETS (INCLUDING WELL LOCATIONS), (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 (INCLUDING WELL LOCATIONS), (VIII) ANY OTHER MATERIALS OR INFORMATION
THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO BUYER OR ITS AFFILIATES, OR
ITS OR THEIR RESPECTIVE EMPLOYEES, AGENTS, OFFICERS, DIRECTORS, MEMBERS,
MANAGERS, EQUITY OWNERS, 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, SECTION 11.1(b) OR IN THE
SPECIAL WARRANTY OF TITLE IN THE ASSIGNMENT, 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, EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED
OTHERWISE IN ARTICLE IV, SECTION 11.1(b) OR IN THE SPECIAL WARRANTY OF TITLE IN
THE ASSIGNMENT, 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. FOR THE AVOIDANCE OF DOUBT, BUYER ACKNOWLEDGES AND AGREES THAT,
EXCEPT FOR POSITIONS TAKEN ON A TAX RETURN WITH RESPECT TO ASSET TAXES FOR A
STRADDLE PERIOD WHERE SUCH POSITION IS BASED ON COMMENTS RECEIVED FROM SELLER
AND IMPLEMENTED BY BUYER PURSUANT TO SECTION 15.2(f) (IN WHICH CASE BUYER CAN
RELY ON SUCH POSITION SOLELY FOR SUCH STRADDLE PERIOD) BUYER CANNOT RELY ON OR
FORM ANY CONCLUSIONS FROM SELLER’S METHODOLOGIES FOR THE DETERMINATION AND
REPORTING OF ANY ASSET TAXES THAT WERE UTILIZED FOR ANY TAX PERIOD (OR PORTION
THEREOF) BEGINNING PRIOR TO THE CLOSING DATE FOR PURPOSES OF CALCULATING AND
REPORTING ASSET TAXES ATTRIBUTABLE TO ANY TAX PERIOD (OR PORTION THEREOF)

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BEGINNING AFTER THE CLOSING DATE, IT BEING UNDERSTOOD THAT BUYER MUST MAKE ITS
OWN DETERMINATION AS TO THE PROPER METHODOLOGIES THAT CAN OR SHOULD BE USED FOR
ANY SUCH LATER TAX RETURN.
(c)OTHER THAN AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED OTHERWISE IN
SECTION 4.18, 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. OTHER THAN AS AND TO THE LIMITED EXTENT
EXPRESSLY REPRESENTED OTHERWISE IN SECTION 4.18 AND SUBJECT TO BUYER’S RIGHTS
UNDER SECTION 12.1, BUYER SHALL BE DEEMED TO BE TAKING THE ASSETS “AS IS” AND
“WHERE IS” WITH ALL FAULTS FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION, AND
BUYER HAS MADE OR CAUSED TO BE MADE SUCH ENVIRONMENTAL INSPECTIONS AS BUYER
DEEMS APPROPRIATE.
(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
11.1Seller’s Title.
(a)General Disclaimer of Title Warranties and Representations. Except for the
special warranty of title as set forth in the Assignment, Seller’s
representations contained in Section 4.16 and the certificate delivered at
Closing pursuant to Section 9.3(k), 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 the Assignment.
(b)Special Warranty of Title. The Assignment delivered at Closing will contain a
special warranty of title whereby Seller warrants and agrees to defend
Defensible Title effective as of Closing and until the end of the Survival
Period, without duplication, to (i) each Well set forth on Exhibit B-1 (limited
to any currently producing formations), (ii) each Well Location set forth on
Exhibit B-2 (limited to the applicable Target Formation(s) set forth on
Exhibit B-2 for such Well Location) and (iii) each SWD Well set forth on Exhibit
C, 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; 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.
(c)Recovery on Special Warranty.

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(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. Mountain
Time on the three (3) year anniversary thereof (the “Survival Period”), Buyer
shall furnish Seller a Title Defect Notice meeting the requirements of
Section 11.2(a) (other than the requirement to deliver by the Defect Claim Date)
setting forth any matters which Buyer intends to assert as a breach of Seller’s
special warranty in the Assignment. 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 special warranty breach 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 special warranty breach.
(ii)Limitations on Special Warranty. For purposes of Seller’s special warranty
of title contained in the Assignment, the value of the Wells, Well Locations
and/or SWD Wells set forth in Schedule 3.8, as appropriate ((1) for a Well,
limited to any currently producing formations, and (2) for a Well Location,
limited to the applicable Target Formation(s) set forth on Exhibit B-2 for such
Well Location), shall be deemed to be the Allocated Value thereof, as adjusted
herein. Recovery on Seller’s special warranty of title contained in the
Assignment 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 defect giving rise to such breach of Seller’s
special warranty of title as a Title Defect prior to the Defect Claim Date
pursuant to Section 11.2, except that the Individual Title Defect Threshold and
the Aggregate Deductible shall not apply. Seller shall be entitled to offset any
amount owed by Seller for breach of the special warranty of title contained in
the Assignment with respect to any Well, Well Location or SWD Well by the amount
of any Title Benefits with respect to such Well, Well Location or SWD Well as to
which Seller gives Buyer notice after the Defect Claim Date which have not
already been used to offset Title Defects claimed by Buyer.
11.2Notice of Title Defects; Defect Adjustments.
(a)Title Defect Notices. Buyer must deliver, no later than forty-five (45) days
after the Execution Date (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 Title Defects pursuant to this Section 11.2(a). For
all purposes of this Agreement and notwithstanding anything herein to the
contrary (except for the special warranty of title contained in the Assignment
and except for Seller’s representations contained in Section 4.16 and the
certificate delivered at Closing pursuant to Section 9.3(k)), 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. To be
effective, each Title Defect Notice shall be in writing, and shall include (i) a
description of the alleged Title Defect and the Well (including the legal
description of such Well), the Well Location (including the legal description of
such Well Location, the affected Lease(s) contributing to such Well Location,
and the affected Target Formation(s) with respect to such Well Location) or the
SWD Well (including the legal description of such SWD Well), 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. To give Seller an
opportunity to commence reviewing and curing Title Defects, Buyer agrees to use
reasonable efforts to give Seller, on or before the end of each calendar week
prior to the Defect Claim Date, written notice of all alleged Title Defects (as
well as any claims that would be claims under the special warranty set forth in
the Assignment if asserted after Closing) discovered by Buyer during the
preceding calendar week, which notice may be preliminary in nature and
supplemented prior to the Defect Claim Date; provided that the

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failure to give such notice shall not preclude Buyer from asserting a Title
Defect on or before the Defect Claim Date or asserting a breach of Seller’s
special warranty of title after the Closing 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 Well (including the legal description of such
Well), the Well Location (including the legal description of such Well Location,
the affected Lease(s) contributing to such Well Location, and the affected
Target Formation(s) with respect to such Well Location) or the SWD Well
(including the legal description of such SWD Well), 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. Except as set forth in Section 11.1(c)(ii),
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.
(c)Seller’s Right to Cure.
(i)Seller shall have the right, but not the obligation, to attempt, at its sole
cost, to cure, at any time prior to ninety (90) days after Closing (the “Cure
Period”), any Title Defects of which it has been advised by Buyer and which it
has provided written notice of election to cure at least two (2) Business Days
prior to Closing. In the event that Seller elects to cure any such Title Defect
during the Cure Period, (x) the Title Defect Property affected by such Title
Defect shall be excluded from the transaction and (y) the Purchase Price payable
by Buyer to Seller shall be reduced at Closing by the Allocated Value of such
Title Defect Property. Within ten (10) days after the end of the Cure Period
(or, if applicable, within ten (10) days following the resolution of any dispute
related to such Title Defect pursuant to Section 11.2(j)), and subject to
Section 11.2(i), (A) if the remedy set forth in Section 11.2(d)(i) is elected,
Seller shall assign to Buyer the affected Title Defect Property pursuant to an
instrument in substantially the same form as the Assignment, and Buyer shall pay
to Seller an amount equal to the Allocated Value of such Title Defect Property
minus the Title Defect Amount in respect of any portion of such Title Defect
that is not cured as determined pursuant to Section 11.2(g) or Section 11.2(j),
as applicable (provided that solely in the case where such Title Defect Amount
(x) is determined under Section 11.2(g)(ii) and (y) exceeds the Allocated Value
of such Title Defect Property, then Seller shall pay to Buyer, by wire transfer
of immediately available funds to the account specified in writing by Buyer, an
amount equal to such excess over such Allocated Value), (B) if the remedy set
forth in Section 11.2(d)(ii) is elected, Seller shall assign to Buyer the
affected Title Defect Property pursuant to an instrument in substantially the
same form as the Assignment, and Buyer shall pay to Seller an amount equal to
the Allocated Value of such Title Defect Property, and (C) if the remedy set
forth in Section 11.2(d)(iii) is elected, Seller shall retain the affected Title
Defect Property and such Title Defect Property shall be deemed an Excluded Asset
for all purposes hereunder. Until such time as such Title Defect Property is
assigned to Buyer pursuant to clauses (A) or (B) above or retained by Seller
pursuant to clause (C) above, Seller shall continue to comply with the terms of
Section 6.1 with respect to such Title Defect Property.
(ii)During the period of time from Closing to the expiration of the Cure Period,
Buyer agrees to afford Seller and its officers, employees 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 or control,
together with a right to copy such Records at Seller’s sole cost, in order to
facilitate Seller’s attempt to cure any such Title Defects. An election by
Seller to attempt to cure a Title Defect shall be without prejudice to its
rights under Section 11.2(j) and shall not constitute an admission against
interest or a waiver of Seller’s right to dispute the existence, nature or value
of, or cost to cure, the alleged Title Defect.

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(d)Remedies for Title Defects. Subject to Seller’s continuing right to
(i) attempt to cure any Title Defect for which it has elected to cure in
accordance with Section 11.2(c) and (ii) 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 on or before Closing or the end of the Cure Period
(as applicable), then, subject to the Individual Title Defect Threshold and the
Aggregate Deductible, upon the election of Seller, at its sole option (subject
to Buyer’s consent where applicable below):
(i)the Purchase Price shall be reduced by the Title Defect Amount determined
pursuant to Section 11.2(g) or Section 11.2(j);
(ii)subject to Buyer’s consent (in its sole discretion), Seller shall indemnify
Buyer against all Liability resulting from such Title Defect with respect to
such Title Defect Property pursuant to an indemnity agreement in a form and
substance mutually agreed upon by the Parties (a “Title Indemnity Agreement”);
(iii)in the event the Title Defect Amount of any Title Defect equals or exceeds
the Allocated Value of the applicable Title Defect Property, Seller shall retain
the entirety of the Title Defect Property that is subject to such Title Defect,
together with all associated Assets (in which case, such Assets shall become
Excluded Assets hereunder), 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
(iv)if applicable, terminate this Agreement pursuant to Section 14.1(c).
(e)Remedies for Title Benefits. With respect to each Title Benefit Property
reported under Section 11.2, as Seller’s sole remedy, the aggregate Title Defect
Amounts of all Title Defects shall be reduced 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(h)
or Section 11.2(j).
(f)Exclusive Remedy. Except for (i) Buyer’s rights under Seller’s special
warranty of title in the Assignment, (ii) Seller’s representations contained in
Section 4.16 and the certificate delivered at Closing pursuant to
Section 9.3(k), and (iii) 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, and Buyer
hereby waives any and all other rights or remedies against Seller or its
Affiliates with respect thereto.
(g)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” for such Title Defect Property and shall be
determined in accordance with the following terms and conditions (without
duplication):
(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 on Exhibit B-1, Exhibit B-2 or Exhibit
C, as applicable, and there is a proportionate decrease in Seller’s Working
Interest for such Title Defect Property, 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

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Revenue Interest decrease and the denominator of which is the Net Revenue
Interest set forth for such Title Defect Property on Exhibit B-1, Exhibit B-2 or
Exhibit C, as applicable;
(iv)if the Title Defect represents an obligation, 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;
(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, except for
defects of the type described in Section 11.2(g)(ii), 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.
(h)Title Benefit Amount. The Title Benefit Amount resulting from a Title Benefit
shall be determined in accordance with the following methodology, terms and
conditions (without duplication):
(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 on Exhibit B-1, Exhibit B-2 or Exhibit
C, as applicable, and there is a proportionate increase in Seller’s Working
Interest for such Title Defect Property, 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 on Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable; 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.
(i)Title Defect Threshold and Deductible. Notwithstanding anything herein 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 affecting
one or more Assets for which the Title Defect Amounts do not exceed $50,000 (the
“Individual Title Defect Threshold”); and (ii) in no event shall there be any
adjustment to the Purchase Price or other remedies provided by Seller for any
Title Defect for which the Title Defect Amount 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 Title Defect Amounts attributable to 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 to the
extent that the amount by which the aggregate amount of such Title Defect
Amounts and Remediation Amounts exceeds the Aggregate Deductible. For the
avoidance of doubt, if Seller indemnifies Buyer with respect to any Title Defect
Property pursuant to a Title Indemnity Agreement or

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retains any Title Defect Property pursuant to Section 11.2(d)(iii) or
Environmental Defect Property pursuant to Section 12.1(c)(ii), in each case the
Title Defect Amount or Remediation Amount, as applicable, related to such Title
Defect Property or Environmental Defect Property will not be counted towards the
Aggregate Deductible.
(j)Title Dispute Resolution. Seller and Buyer shall attempt to agree on matters
regarding (i) all Title Defects, Title Benefits, Title Defect Amounts and Title
Benefit Amounts, and (ii) the adequacy of any curative materials provided by
Seller to cure an alleged Title Defect (the “Disputed Title Matters”) prior to
Closing. If Seller and Buyer are unable to agree by Closing (or by the end of
the Cure Period if Seller elects to attempt to cure a Title Defect after
Closing), the Disputed Title Matters shall be exclusively and finally resolved
pursuant to this Section 11.2(j). If any Disputed Title Matter involving a Title
Defect exists as of the Closing and if Seller does not elect to cure any Title
Defect that is the subject of such dispute during the Cure Period, then (x) the
Title Defect Property affected by such Disputed Title Matter shall be excluded
from the transaction and (y) the Purchase Price payable to Seller shall be
reduced at Closing by the Allocated Value of such Title Defect Property. If the
Parties are unable to agree on any Title Benefits and/or Title Benefit Amounts
by the Closing, the affected Title Benefit Property shall be conveyed to Buyer
and the Purchase Price payable to Seller at Closing shall not be adjusted by the
Title Benefit Amounts in dispute. There shall be a single arbitrator, who shall
be a title attorney with at least fifteen (15) years’ experience in oil and gas
titles involving properties in the regional area in which the Title Defect
Properties or the Title Benefit Properties are located, as selected by mutual
agreement of Buyer and Seller within fifteen (15) days after the Closing or the
end of the Cure Period, as applicable, or, absent such agreement, by the Denver,
Colorado office of the American Arbitration Association (the “Title
Arbitrator”); provided, however, that such Title Arbitrator must (A) have not
been employed by or represented either Party (or its Affiliate) in the past ten
(10) years, and (B) have no ethical conflict in serving as the Title Arbitrator.
Each of Buyer and Seller shall submit to the Title Arbitrator its proposed
resolution of the Disputed Title Matter. The proposed resolution of the Disputed
Title Matter shall include the best offer of the submitting Party in a single
monetary amount that such Party is willing to pay or accept (as applicable) to
settle the Disputed Title Matter. The Title Arbitrator shall be limited to
awarding only one or the other of the two proposed settlement amounts. 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(j). The Title Arbitrator’s determination shall be made within
twenty (20) days after submission of the Disputed Title Matters and shall be
final and binding upon both Parties, without right of appeal. In making his
determination with respect to any Disputed Title Matter, the Title Arbitrator
shall be bound by the rules set forth in Section 11.2(g) and Section 11.2(h)
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 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 Matter submitted by either Party and may
not award damages, interest or penalties to either Party with respect to any
matter. Each Party shall bear its own legal fees and other costs of presenting
its case to the Title Arbitrator. 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 3.6(a), 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(i), (A) with respect to a Title Defect, (I) if the remedy set forth
in Section 11.2(d)(i) is elected, Seller shall assign to Buyer the affected
Title Defect Property excluded at Closing pursuant to an instrument in
substantially the same form as the Assignment, and Buyer shall pay to Seller, by
wire transfer of immediately available funds to the account specified in writing
by Seller, an amount equal to the Allocated Value of such Title Defect Property
minus the Title Defect

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Amount attributable to any portion of the Title Defect that was not cured or
that was determined by the Title Arbitrator pursuant to this Section 11.2(j) to
be owed to Buyer (provided that solely in the case where such Title Defect
Amount (x) is determined under Section 11.2(g)(ii) and (y) exceeds the Allocated
Value of such Title Defect Property, then Seller shall pay to Buyer, by wire
transfer of immediately available funds to the account specified in writing by
Buyer, an amount equal to such excess over such Allocated Value), (II) if the
remedy set forth in Section 11.2(d)(ii) is elected, Seller shall assign to Buyer
the affected Title Defect Property pursuant to an instrument in substantially
the same form as the Assignment, and Buyer shall pay to Seller, by wire transfer
of immediately available funds to the account specified in writing by Seller, an
amount equal to the Allocated Value of such Title Defect Property, and (III) if
the remedy set forth in Section 11.2(d)(iii) is elected, Seller shall retain the
affected Title Defect Property and such Title Defect Property shall be deemed an
Excluded Asset for all purposes hereunder, and (B) with respect to a Title
Benefit, any amount due to Seller as a result of such Title Benefit, if any,
shall be paid by Buyer to Seller by wire transfer of immediately available funds
to the account specified in writing by Seller. Until such time as such Title
Defect Property is assigned to Buyer pursuant to clauses (I) or (II) above or
retained by Seller pursuant to clause (III) above, Seller shall continue to
comply with the terms of Section 6.1 with respect to such Title Defect Property.
Nothing herein shall operate to cause Closing to be delayed on account of any
arbitration conducted pursuant to this Section 11.2(j). To the extent any
adjustments are not agreed upon by the Parties as of Closing, the Purchase Price
shall be adjusted at Closing pursuant to this Section 11.2(j) and subsequent
adjustments to the Purchase Price, if any, will be made pursuant to Section 3.6
or this Section 11.2(j).
11.3Casualty and Condemnation 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, and Buyer shall not assert such matters as Casualty
Losses or Title Defects hereunder.
(b)If, after the Execution Date but prior to the Closing Date, any portion of
the Assets is damaged or destroyed by fire or other casualty or is taken in
condemnation or under right of eminent domain and the reduction in value
attributable to such individual casualty or taking exceeds $100,000 (each, a
“Casualty Loss”) (with the risk of casualty or takings below such threshold
belonging to Buyer), and the Closing thereafter occurs, such Casualty Loss shall
result in a downward adjustment to the Purchase Price equal to the lesser of
(i) the Allocated Value of the Asset(s) affected by such Casualty Loss, and
(ii) the amount of such Casualty Loss; provided, however, that to the extent the
amount of such Casualty Loss is greater than the downward adjustments to the
Purchase Price under this Section 11.3, Seller, at Closing, shall pay to Buyer
all sums actually paid to Seller by Third Parties by reason of such 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 (A) Buyer shall purchase the
affected Assets at Closing notwithstanding such Casualty Loss and (B) 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 repairing such Casualty Loss and/or
pursuing or asserting any such insurance claims or other rights against Third
Parties.
11.4Preferential 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.

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(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, 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 the end of the period
of time for closing such sale but not later than one hundred twenty (120) days
following the Closing Date, (A) Seller shall so notify Buyer, (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 the Assets to be assigned
to Buyer at Closing, 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) and (C) 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. If, as of Closing, the time
for exercising a Preferential Purchase Right has not expired and such
Preferential Purchase Right has not been exercised or waived, then the Asset
subject to such Preferential Purchase Right shall be included in the Assets to
be assigned to Buyer at Closing, and Buyer shall be solely responsible for
complying with the terms of such Preferential Purchase Right and shall be
entitled to the proceeds, if any, associated with the exercise of such
Preferential Purchase Right.
(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 without exercise by the holder thereof, 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 voidable or (2) the
termination of a Lease or Contract under the express terms thereof (in either
case, a “Hard Consent”), 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 as Buyer’s exclusive remedy, 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
Section 11.4(b)(i)) that was not obtained prior to Closing is obtained within
one hundred eighty (180) 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. Until the
first to occur of such time as Seller has assigned any Asset (or portion
thereof) excluded pursuant to this Section 11.4(b)(i) or the expiration of such
one hundred eighty- (180-) day period, Seller shall continue to comply with the
terms of Section 6.1 with respect to such Asset (or portion thereof).
(ii)If (A) Seller fails to obtain a Consent set forth in Schedule 4.4 prior to
Closing and such Consent is not a Hard Consent 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, without adjustment
to the Purchase Price, and Buyer shall have no claim against, and Seller shall
have no Liability for, the failure to obtain such Consent.

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(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 agrees to provide
Seller with any information or documentation that may be reasonably requested by
Seller and/or the Third Party holder(s) of such Consents in order to facilitate
the process of obtaining such Consents.

ARTICLE XII
ENVIRONMENTAL MATTERS
12.1Notice of Environmental Defects.
(a)Environmental Defects Notice. Buyer must deliver no later than 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. 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 (the
“Environmental Defect Property”), (ii) the Allocated Value of the Assets (or
portions thereof) affected by such alleged Environmental Condition,
(iii) supporting documents reasonably available to or prepared by Buyer
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 reasonably asserts is necessary to
Remediate such alleged Environmental Condition. Notwithstanding anything
contained in this Agreement to the contrary, and for the avoidance of doubt, any
Environmental Defect asserted by Buyer pursuant to this Section 12.1(a) shall be
limited to the Assets only, and Buyer shall not have the right to assert
environmental defects with respect to any other assets, properties or
operations. For all purposes of this Agreement (except for Seller’s
representations in Section 4.18 and the certificate delivered at Closing
pursuant to Section 9.3(k)), Buyer shall be deemed to have waived, and Seller
shall have no liability for, (A) any Environmental Defect which Buyer fails to
assert as an Environmental Defect by a properly delivered Environmental Defect
Notice delivered to Seller on or before the Defect Claim Date, and/or (B) any
environmental defect affecting any assets, properties or operations other than
the Assets (other than contribution requirements in accordance with the
applicable operating agreements), in each case, with such liabilities being
“Buyer’s Environmental Liabilities.” 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 material
assumptions used by Buyer in calculating the Remediation Amount, including the
standards that Buyer asserts must be met to comply with Environmental Laws. To
give Seller an opportunity to commence reviewing and curing Environmental
Defects, Buyer agrees to use reasonable efforts to give Seller, on or before the
end of each calendar week prior to the Defect Claim Date, written notice of all
alleged Environmental Defects discovered by Buyer during the preceding calendar
week, which notice may be preliminary in nature and supplemented prior to the
Defect Claim Date; provided that the failure to give such notice shall not
preclude Buyer from asserting an Environmental Defect on or before the Defect
Claim Date.
(b)Seller’s Right to Cure.
(i)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 the Cure Period, any
Environmental Defects of which it has been advised by Buyer and which it has
provided written notice of election to cure at least two (2) Business Days prior
to Closing. In the event that Seller elects to cure any such Environmental
Defect during the Cure

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Period, (x) the Environmental Defect Property affected by such Environmental
Defect shall be excluded from the transaction, and (y) the Purchase Price
payable by Buyer to Seller shall be reduced at Closing by the Allocated Value of
such Environmental Defect Property. Within ten (10) days after the end of the
Cure Period (or, if applicable, within ten (10) days following the resolution of
any dispute related to such Environmental Defect pursuant to Section 12.1(f)),
and subject to Section 12.1(e), (A) if the remedy set forth in Section
12.1(c)(i) is elected, Seller shall assign to Buyer the affected Environmental
Defect Property pursuant to an instrument in substantially the same form as the
Assignment, and Buyer shall pay to Seller an amount equal to the Allocated Value
of such Environmental Defect Property minus the Remediation Amount in respect of
any portion of such Environmental Defect that is not cured, (B) if the remedy
set forth in Section 12.1(c)(iii) is elected, Seller shall assign to Buyer the
affected Environmental Defect Property pursuant to an instrument in
substantially the same form as the Assignment, and Buyer shall pay to Seller an
amount equal to the Allocated Value of such Environmental Defect Property, and
(C) if the remedy set forth in Section 12.1(c)(ii) is elected, Seller shall
retain the affected Environmental Defect Property and such Environmental Defect
Property shall be deemed an Excluded Asset for all purposes hereunder. Until
such time as such Environmental Defect Property is assigned to Buyer pursuant to
clauses (A) or (B) above or retained by Seller pursuant to clause (C) above,
Seller shall continue to comply with the terms of Section 6.1 with respect to
such Environmental Defect Property.
(ii)During the period of time from Closing to the expiration of the Cure Period,
Buyer agrees to afford Seller and its officers, employees 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 or control in
order to facilitate Seller’s attempt to cure any such Environmental Defects. An
election by Seller to attempt to cure an Environmental Defect shall be without
prejudice to its rights under Section 12.1(f) and shall not constitute an
admission against interest or a waiver of Seller’s right to dispute the
existence, nature or value of, or cost to cure, the alleged Environmental
Defect.
(c)Remedies for Environmental Defects. Subject to Seller’s continuing right to
(i) attempt to cure any Environmental Defect for which it has elected to cure in
accordance with Section 12.1(b) and (ii) 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 on or
before Closing or the end of the Cure Period (as applicable), then, subject to
the Individual Environmental Threshold and the Aggregate Deductible, upon the
election of Seller, at its sole option (subject to Buyer’s consent or election
where applicable below), elect one of the following:
(i)the Purchase Price shall be reduced by the Remediation Amount agreed upon by
the Parties or determined pursuant to Section 12.1(f);
(ii)in the event the Remediation Amount of any Environmental Defect equals or
exceeds the Allocated Value of the applicable Environmental Defect Property,
Seller shall retain the entirety of the Asset that is subject to such
Environmental Defect, together with all associated Assets (in which case, such
Assets shall become Excluded Assets hereunder), in which event the Purchase
Price shall be reduced by an amount equal to the Allocated Value of such Asset
and such associated Assets;
(iii)subject to Buyer’s consent (in its sole discretion), Seller shall indemnify
Buyer against all Liability resulting from such Environmental Defect with
respect to the Assets pursuant to an indemnity agreement in a form and substance
mutually agreeable to the Parties (each, an “Environmental Indemnity
Agreement”); or
(iv)if applicable, terminate this Agreement pursuant to Section 14.1(c);

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provided, however, that if the Remediation Amount for such Environmental Defect
Property equals or exceeds the Allocated Value for such Environmental Defect
Property, either Party shall have the right to elect to have the option set
forth in Section 12.1(c)(ii) apply with respect to such Environmental Defect
Property.
If the option set forth in Section 12.1(c)(i) applies, 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 for all Liabilities with respect thereto and such
responsibility of Buyer shall be deemed to constitute part of the Assumed
Obligations hereunder.
(d)Exclusive Remedy. Except for (i) Seller’s representation contained in
Section 4.18 and the certificate delivered at Closing pursuant to
Section 9.3(k), and (ii) Buyer’s rights to terminate this Agreement pursuant to
Section 14.1(c), the provisions set forth in Section 12.1(c) shall be the
exclusive right and remedy of Buyer with respect to any Environmental Defect
with respect to any Asset or any other environmental matter, and Buyer hereby
waives any and all other rights and remedies against Seller with respect
thereto.
(e)Environmental Deductibles. Notwithstanding anything herein to the contrary,
(i) in no event shall there be any adjustment to the Purchase Price or other
remedies provided by Seller for any individual Environmental Defect affecting
one or more Assets for which the Remediation Amounts do not exceed $100,000 (the
“Individual Environmental Threshold”); and (ii) in no event shall there be any
adjustment 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 Remediation Amounts attributable to
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 Defect Amounts attributable to 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 amount by which the aggregate
amount of such Remediation Amounts and Title Defect Amounts exceeds the
Aggregate Deductible. For the avoidance of doubt, if Seller indemnifies Buyer
with respect to any Assets pursuant to an Environmental Indemnity Agreement or
retains any Assets pursuant to Section 12.1(c)(ii), the Remediation Amounts
relating to such indemnified or retained Assets will not be counted towards the
Aggregate Deductible.
(f)Environmental Dispute Resolution. Seller and Buyer shall attempt to agree on
(i) all Environmental Defects and Remediation Amounts prior to Closing and
(ii) the adequacy of any cure by Seller of any asserted Environmental Defect
prior to the end of the Cure Period (items (i) and (ii), collectively, the
“Disputed Environmental Matters”). If Seller and Buyer are unable to agree by
Closing (or by the end of the Cure Period if Seller elects to attempt to cure an
asserted Environmental Defect after Closing), the Disputed Environmental Matters
shall be exclusively and finally resolved by arbitration pursuant to this
Section 12.1(f). If Seller and Buyer are unable to agree by Closing (or by the
end of the Cure Period if Seller elects to attempt to cure an Environmental
Defect after Closing), the Disputed Environmental Matters shall be exclusively
and finally resolved pursuant to this Section 12.1(f). If any Disputed
Environmental Matter involving an Environmental Defect exists as of the Closing
and if Seller does not elect to cure any Environmental Defect that is the
subject of such dispute during the Cure Period, then (x) the Environmental
Defect Property affected by such Disputed Environmental Matter shall be excluded
from the transaction and (y) the Purchase Price payable to Seller shall be
reduced at Closing by the Allocated Value of such Environmental Defect Property.
There shall be a single arbitrator, who shall be an environmental attorney with
at least fifteen (15) 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

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Seller within fifteen (15) days after the Closing Date or the end of the Cure
Period, as applicable, or, absent such agreement, by the Denver, Colorado office
of the American Arbitration Association (the “Environmental Arbitrator”);
provided, however, that such Environmental Arbitrator must (A) have not been
employed by or represented either Party (or its Affiliate) in the past ten (10)
years, and (B) have no ethical conflict in serving as the Environmental
Arbitrator. Each of Buyer and Seller shall submit to the Environmental
Arbitrator its proposed resolution of the Disputed Environmental Matter. The
proposed resolution of the Disputed Environmental Matter shall include the best
offer of the submitting Party in a single monetary amount that such Party is
willing to pay or accept (as applicable) to settle the Disputed Environmental
Matter. The Environmental Arbitrator shall be limited to awarding only one or
the other of the two proposed settlement amounts. 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 his 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 a 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 Matters submitted by either Party and may not award
damages, interest or penalties to either Party with respect to any matter. Each
Party shall bear its own legal fees and other costs of presenting its case to
the Environmental Arbitrator. 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 3.6(a), 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(e),
(A) if the remedy set forth in Section 12.1(c)(i) is elected, Seller shall
assign to Buyer the affected Environmental Defect Property excluded at Closing
pursuant to an instrument in substantially the same form as the Assignment, and
Buyer shall pay to Seller, by wire transfer of immediately available funds to
the account specified in writing by Seller, an amount equal to the Allocated
Value of such Environmental Defect Property minus the Remediation Amount
attributable to any portion of the Environmental Defect that was not cured or
that was determined by the Environmental Arbitrator pursuant to this Section
12.1(f) to be owed to Buyer, (II) if the remedy set forth in Section
12.1(c)(iii) is elected, Seller shall assign to Buyer the affected Environmental
Defect Property pursuant to an instrument in substantially the same form as the
Assignment, and Buyer shall pay to Seller, by wire transfer of immediately
available funds to the account specified in writing by Seller, an amount equal
to the Allocated Value of such Environmental Defect Property, and (III) if the
remedy set forth in Section 12.1(c)(ii) is elected, Seller shall retain the
affected Environmental Defect Property and such Environmental Defect Property
shall be deemed an Excluded Asset for all purposes hereunder. Until such time as
such Environmental Defect Property is assigned to Buyer pursuant to clauses (I)
or (II) above or retained by Seller pursuant to clause (III) above, Seller shall
continue to comply with the terms of Section 6.1 with respect to such
Environmental Defect Property. Nothing herein shall operate to cause Closing to
be delayed on account of any arbitration conducted pursuant to this
Section 12.1(f). To the extent any adjustments are not agreed upon by the
Parties as of Closing, the Purchase Price shall be adjusted at Closing pursuant
to this Section 12.1(f) and subsequent adjustments to the Purchase Price, if
any, will be made pursuant to Section 3.6 or this Section 12.1(f).
12.2NORM, Asbestos, 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

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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, asbestos 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. The presence of NORM or
asbestos-containing materials that are non-friable cannot be claimed as an
Environmental Defect, except to the extent constituting a violation of
Environmental Laws.

ARTICLE XIII
ASSUMPTION; INDEMNIFICATION; SURVIVAL
13.1Assumption by Buyer. Other than the Retained Liabilities (each only for the
period of its respective survival pursuant to Section 13.8) and without limiting
Buyer’s rights to indemnity under this ARTICLE XIII, from and after Closing,
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, at or after the Effective Time, including
obligations and Liabilities relating in any manner to the use, ownership or
operation of the Assets, including obligations (a) to furnish makeup gas and/or
settle Imbalances according to the terms of applicable gas sales, processing,
gathering or transportation Contracts, (b) to 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)(ix)), (c) to Decommission the Assets (the “Decommissioning
Obligations”), (d) to clean up and/or remediate the Assets in accordance with
applicable Contracts and Laws, (e) to 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, and (f) subject to ARTICLE XII, relating to
Environmental Conditions, Environmental Defects and Buyer’s Environmental
Liabilities (all of said obligations and Liabilities described in this
Section 13.1, including in clauses (a) through (f), herein being referred to as
the “Assumed Obligations”).
13.2Indemnities of Seller. Effective as of Closing, subject to the limitations
set forth in Section 13.4 and Section 13.8 or otherwise contained in this
Agreement, Seller shall be responsible for, shall pay on a current basis, and
hereby agrees to defend, indemnify, hold harmless and forever release Buyer and
its Affiliates, and all of its and their respective equityholders, partners,
members, directors, officers, managers, employees, attorneys, consultants,
agents and representatives (collectively, the “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)any Retained Liabilities; or
(d)any and all Seller Taxes.
13.3Indemnities of Buyer. Effective as of Closing, Buyer and its successors and
assigns shall assume and be responsible for, shall pay on a current basis, and
hereby agrees to defend, indemnify, hold harmless and forever release Seller and
its Affiliates, and all of its and their respective equityholders, partners,

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members, directors, officers, managers, employees, attorneys, consultants,
agents and representatives (collectively, the “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; or
(c)the Assumed Obligations.
13.4Limitation on Liability.
(a)Seller shall not have any Liability for any indemnification under
Section 13.2(a) of this Agreement (other than Liabilities with respect to any
breach of the Specified Representations or the representations or warranties in
Section 4.14) (i) for any individual Liability unless the amount with respect to
such Liability exceeds $100,000 (the “Individual Indemnity Threshold”), and
(ii) until and unless the aggregate amount of all such Liabilities (that exceed
the Individual Indemnity Threshold and for which Claim Notices are timely
delivered pursuant to Section 13.7) exceeds the Indemnity Deductible, and then
only to the extent such Liabilities exceed the Indemnity Deductible.
(b)Notwithstanding anything to the contrary contained in this Agreement, Seller
shall not be required to indemnify Buyer for aggregate Liabilities for any
indemnification under Section 13.2(a) of this Agreement (other than Liabilities
with respect to any breach of the Specified Representations or the
representations or warranties in Section 4.14) in excess of an amount equal to
twenty percent (20%) of the Purchase Price. Without limiting the foregoing,
Seller shall never be required to indemnify Buyer pursuant to this Agreement for
aggregate Liabilities in excess of one hundred percent (100%) of the Purchase
Price (inclusive of the aggregate damages for which Buyer may be indemnified
pursuant to the immediately preceding sentence, which are limited to twenty
percent (20%) of the Purchase Price).
(c)Notwithstanding anything to the contrary contained in this Agreement, Seller
shall not be required to indemnify Buyer under Section 13.2(a) for any Asset Tax
(or portion thereof) allocable to Buyer under Section 15.2 as a result of a
breach of any representation or warranty set forth in Section 4.14, except to
the extent the amount of such Asset Tax (or portion thereof) exceeds the amount
that would have been due absent such breach.
(d)Notwithstanding anything to the contrary contained in this Agreement, for
purposes of calculating the amount of any damages caused by, arising out of or
resulting from any breach of any representation or warranty in ARTICLE IV or
ARTICLE V, the representations and warranties shall, for purposes of this
ARTICLE XIII, be read without giving effect to any qualifiers as to materiality
contained or incorporated directly or indirectly in such representation or
warranty.
13.5Express Negligence. EXCEPT AS OTHERWISE PROVIDED IN SECTION 10.1, 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 GROSS, SOLE, ACTIVE, PASSIVE, CONCURRENT OR
COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF
OR BY ANY INDEMNIFIED PARTY. BUYER AND SELLER ACKNOWLEDGE THAT THIS STATEMENT
COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS “CONSPICUOUS.”
13.6Exclusive Remedy. Notwithstanding anything to the contrary contained in this
Agreement, the Parties agree that, from and after Closing, Section 6.3, Section
6.10(d), Section 10.1, Section 11.1(c),

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Section 13.2, Section 13.3, Section 15.17 and Section 15.19(c), and any Title
Indemnity Agreement or Environmental Indemnity Agreement entered into by the
Parties, 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), Section 13.2, Section 15.17
and any Title Indemnity Agreement or Environmental Indemnity Agreement entered
into by the Parties, 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 of 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, at
law or in equity, known or unknown, which Buyer or the Buyer Indemnified Parties
might now or subsequently 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, and any similar Environmental Law, 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)).
13.7Indemnification Procedures. All claims for indemnification under
Section 6.3, Section 6.10(d), Section 10.1, Section 13.2, Section 13.3,
Section 15.17 and Section 15.19(c) shall be asserted and resolved as follows:
(a)For purposes of Section 6.3, Section 6.10(d), Section 10.1, this
ARTICLE XIII, Section 15.17 or Section 15.19(c), the term “Indemnifying Party”
when used in connection with particular Liabilities shall mean the Party or
Parties having an obligation to indemnify the other Party and/or other Persons
with respect to such Liabilities pursuant to Section 6.3, Section 6.10(d),
Section 10.1, this ARTICLE XIII, Section 15.17 or Section 15.19(c), and the term
“Indemnified Party” when used in connection with particular Liabilities shall
mean the Party and/or other Persons having the right to be indemnified with
respect to such Liabilities by the Indemnifying Party pursuant to Section 6.3,
Section 6.10(d), Section 10.1, this ARTICLE XIII, Section 15.17 or
Section 15.19(c).
(b)To make a claim for indemnification under Section 6.3, Section 6.10(d),
Section 10.1, Section 13.2, Section 13.3, Section 15.17 or Section 15.19(c), an
Indemnified Party shall notify the Indemnifying Party in writing 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 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 6.3, Section 6.10(d), Section 10.1, Section 13.2, Section 13.3,
Section 15.17 or Section 15.19(c) (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 a breach of a representation, warranty, covenant or agreement,
the 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
obligation to defend and indemnify the Indemnified Party against such

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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, at the expense of the Indemnifying Party, 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.
(d)If the Indemnifying Party admits its obligation to defend and indemnify the
Indemnified Party against a Third Party Claim, it shall have the right and
obligation to diligently defend and indemnify, 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, at its own expense, 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 (which shall not be unreasonably withheld, conditioned or
delayed), (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 obligation or admits its
obligation to defend and indemnify the Indemnified Party against a Third Party
Claim, but fails to diligently prosecute, indemnify against or settle such 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 obligation and assume the defense of the Third
Party Claim at any time prior to settlement or final determination thereof. If
settlement has been offered and the Indemnifying Party has not yet admitted its
obligation to defend and indemnify 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
obligation to indemnify the Indemnified Party from and against the liability and
consent to such settlement, (ii) if liability is so admitted, reject, in its
reasonable judgment, the proposed settlement, or (iii) deny liability. Any
failure by the Indemnifying Party to respond to such notice shall be deemed to
be an election under subsection (iii) 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 Indemnifying Party shall be deemed to have disputed
the claim for such Liabilities.
13.8Survival.
(a)Except for the Specified Representations and the representations and
warranties in Section 4.14, the representations and warranties of the Parties in
ARTICLE IV and ARTICLE V and the covenants and agreements of the Parties in
Section 6.1 and Section 9.4 shall survive Closing for a period of twelve (12)
months. The Specified Representations shall survive Closing without time limit.
The representations and warranties in Section 4.14 shall survive the Closing for
the applicable statute of limitations period plus thirty (30) days. Except as
otherwise set forth in the preceding sentences of this Section 13.8(a) or in
Section 13.8(b), all covenants and agreements to be performed at or prior to
Closing shall terminate as of Closing and all other covenants shall survive
Closing until fully performed. Representations, warranties, covenants and
agreements shall be of no further force or effect after the date of their
expiration; provided

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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 indemnities in Section 13.2(c) shall survive
Closing for a period of three (3) years (except for Seller’s indemnity with
respect to clause (h) of Retained Liabilities which shall survive Closing for a
period of eighteen (18) months). Seller’s indemnities in Section 13.2(d) and
Section 15.17 shall survive the Closing for the applicable statute of
limitations period plus thirty (30) days. Buyer’s indemnities in Section 15.17
shall survive the Closing for the applicable statute of limitations period plus
thirty (30) days. Buyer’s indemnities in Section 6.3, Section 6.10(d),
Section 10.1, Section 13.3(c) and Section 15.19(c) shall survive Closing without
time limit.
13.9Waiver 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.
13.10Limitations on Damages.
(a)The amount of any Liabilities for which any of the Buyer 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 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.
(b)The Indemnified Party shall use commercially reasonable efforts to mitigate
or resolve any Liabilities subject to indemnification under this ARTICLE XIII.
13.11Non-Compensatory Damages. None of the Buyer Indemnified Parties nor Seller
Indemnified Parties shall be entitled to recover from Seller or Buyer, as
applicable, or their respective Affiliates, any special, indirect,
consequential, punitive, exemplary, remote or speculative damages, or 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 the Seller Indemnified
Parties, waive any right to recover special, indirect, consequential, punitive,
exemplary, remote or speculative damages, or damages for lost profits of any
kind, arising in connection with or with respect to this Agreement or the
transactions contemplated hereby.
13.12Disclaimer 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.

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ARTICLE XIV
TERMINATION, DEFAULT AND REMEDIES
14.1Right of Termination. This Agreement and the transactions contemplated
herein may be terminated at any time prior to Closing:
(a)by Seller, at its option, if any of the conditions set forth in ARTICLE VIII
(other than the conditions set forth in Section 8.3, Section 8.4 or Section 8.7)
have not been satisfied on or before the Scheduled Closing Date and, following
written notice thereof from Seller to Buyer specifying the reason such condition
is unsatisfied (including any breach by Buyer of this Agreement), such condition
remains unsatisfied for a period of ten (10) Business Days after Buyer’s receipt
of written notice thereof from Seller;
(b)by Buyer, at Buyer’s option, if any of the conditions set forth in
ARTICLE VII (other than the conditions set forth in Section 7.3, Section 7.4 or
Section 7.6) have not been satisfied on or before the Scheduled 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 Scheduled Closing Date or by Seller if the condition set forth in
Section 8.4 is not satisfied on or before the Scheduled Closing Date;
(d)by Seller or Buyer if Closing shall not have occurred on or before November
15, 2017 (or such later date as agreed to in writing by Seller and Buyer) (the
“Outside Date”); or
(e)by Seller if Buyer has not deposited the Deposit (by wire transfer in same
day funds) with the Escrow Agent within two (2) Business Days after the
Execution Date;
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.
14.2Effect of Termination.
(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 Section 3.2 and except for the provisions of Sections 6.8(e),
6.10(b) through (h), 6.11 (only the last sentence thereof), 10.1(e) through (i),
10.2, 10.3, 12.2, 13.11, this Section 14.2, Section 14.3, ARTICLE I and
ARTICLE XV (other than Sections 15.2(b) through (j), 15.3, 15.7, 15.8, 15.15,
15.17 and 15.19) and such of the defined terms set forth in Appendix I to give
context to such Sections, this Agreement shall forthwith become void, and the
Parties shall have no liability or obligation hereunder.
(b)If Seller has the right to terminate this Agreement pursuant to
Section 14.1(a), (i)  all of the conditions precedent to the obligations of
Buyer set forth in ARTICLE VII (other than those actions or deliveries to occur
at Closing or contingent upon the satisfaction of other conditions precedent set
forth in ARTICLE VII at Closing) have been met, or waived by Buyer, and
(ii) Seller is ready, willing and able to perform its obligations under
Section 9.3, then, in such event, Seller shall have the right to, at its option,
terminate this Agreement pursuant to Section 14.1(a) and the Parties shall
jointly instruct the Escrow Agent to pay the Deposit to Seller together with any
interest or income thereon, free of any claims by Buyer with respect thereto as
liquidated damages and as Seller’s sole and exclusive remedy, except that Seller
shall continue to be entitled to recover from Buyer any and all damages and
Liabilities suffered by Seller in connection with the Specified Hedging
Agreements or the transactions contemplated thereby pursuant to the Hedging
Indemnities. The provision for payment of liquidated damages in this
Section 14.2(b) has been

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included because, in the event of a termination of this Agreement permitting
Seller to receive the Deposit, the actual damages to be incurred by Seller can
reasonably be expected to approximate the amount of liquidated damages called
for herein and because the actual amount of such damages would be difficult if
not impossible to measure accurately.
(c)If Buyer has the right to terminate this Agreement pursuant to
Section 14.1(b), (i) all of the conditions precedent to the obligations of
Seller set forth in ARTICLE VIII (other than those actions or deliveries to
occur at Closing or contingent upon the satisfaction of other conditions
precedent set forth in ARTICLE VIII at Closing) have been met, or waived by
Seller, and (ii) Buyer is ready, willing and able to perform its obligations
under Section 9.3, then, in such event, Buyer shall have the right to, at its
option, (1) terminate this Agreement pursuant to Section 14.1(b) and the Parties
shall jointly instruct the Escrow Agent to pay the Deposit to Buyer, free of any
claims by Seller with respect thereto after the termination of this Agreement,
or (2) seek all remedies available at law or in equity, including specific
performance by Seller.
(d)If this Agreement is terminated by the mutual written agreement of the
Parties, or this Agreement is otherwise terminated pursuant to Section 14.1
(other than Section 14.1(e)) and the Closing does not occur on or before the
Closing Date for any reason other than as set forth in Section 14.2(b) or
Section 14.2(c), then Buyer shall be entitled to the return of the Deposit, free
of any claims by Seller with respect thereto after the termination of this
Agreement and the Parties shall jointly instruct the Escrow Agent to pay the
Deposit to Buyer.
(e)Notwithstanding anything to the contrary herein, in the event that this
Agreement is terminated prior to Closing, Seller shall be entitled to recover
from Buyer any and all damages and Liabilities suffered by Seller in connection
with the Specified Hedging Agreements or the transactions contemplated thereby
pursuant to the Hedging Indemnities.
14.3Return of Documentation and Confidentiality. Upon termination of this
Agreement, Buyer shall destroy or return to Seller all title, engineering,
geological and geophysical data, environmental assessments and/or reports, maps
and other information (including any confidential information or digital
Records) furnished by or on behalf of 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, but if
Buyer elects to destroy any such information, an officer of Buyer shall certify
same to Seller in writing.

ARTICLE XV
MISCELLANEOUS
15.1Appendices, 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 have received a complete set of Appendices,
Exhibits and Schedules prior to and as of the Execution Date.
15.2Expenses and Taxes.
(a)Except as otherwise specifically provided herein, 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)Seller shall be allocated and bear all Asset Taxes attributable to (i) any
Tax period ending prior to the Effective Time and (ii) the portion of any
Straddle Period ending immediately prior to

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the Effective Time. Buyer shall be allocated and bear all Asset Taxes
attributable to (x) any Tax period beginning at or after the Effective Time and
(y) the portion of any Straddle Period beginning at the Effective Time.
(c)For purposes of determining the allocations described in Section 15.2(b),
(i) Asset Taxes that are attributable to the severance or production of
Hydrocarbons (other than such Asset Taxes described in clause (iii), below)
shall be allocated to the period in which the severance or production giving
rise to such Asset Taxes occurred, (ii) Asset Taxes that are based upon or
related to sales or receipts or imposed on a transactional basis (other than
such Asset Taxes described in clause (i) or (iii)), shall be allocated to the
period in which the transaction giving rise to such Asset Taxes occurred, and
(iii) Asset Taxes that are ad valorem, property or other Asset Taxes imposed on
a periodic basis pertaining to a Straddle Period shall be allocated between the
portion of such Straddle Period ending immediately prior to the Effective Time
and the portion of such Straddle Period beginning at the Effective Time by
prorating each such Asset Tax based on the number of days in the applicable
Straddle Period that occur before the date on which the Effective Time occurs,
on the one hand, and the number of days in such Straddle Period that occur on or
after the date on which the Effective Time occurs, on the other hand.
Notwithstanding anything in this Section 15.2(c) to the contrary, (1) the
portion of Gross Products Taxes based on the value of 2016 production of
Hydrocarbons (and payable in 2017 and 2018) attributable to 2016 production
shall be allocated to Seller and (2) the portion of Gross Products Taxes based
on the value of 2017 production of Hydrocarbons (and payable in 2018 and 2019)
attributable to 2017 production that occurs prior to the Effective Time shall be
allocated to Seller, and the portion of such Gross Products Taxes attributable
to 2017 production that occurs from and after the Effective Time shall be
allocated to Buyer.
(d)To the extent the actual amount of an Asset Tax is not known at the time an
adjustment is to be made with respect to such Asset Tax pursuant to Section 3.3,
Section 3.5 and Section 3.6, as applicable, the Parties shall utilize the most
recent information available in estimating the amount of such Asset Tax for
purposes of such adjustment. To the extent the actual amount of an Asset Tax (or
the amount thereof paid or economically borne by a Party) is ultimately
determined to be different than the amount (if any) that was taken into account
in the Final Settlement Statement as finally determined pursuant to Section 3.6,
timely payments will be made from one Party to the other to the extent necessary
to cause each Party to bear the amount of such Asset Tax that is allocable to
such Party under this Section 15.2.
(e)The Parties recognize and acknowledge that, for purposes of Income Taxes,
Seller will remain the owner of the Assets for all taxable periods or portions
thereof ending before the Closing, and accordingly Seller (i) must include in
its federal and any state or local Tax Returns with respect to Income Taxes all
items of income, gain, loss, deduction and credit related to the ownership or
operation of the Assets that are allocable to taxable periods and portions
thereof ending prior to the Closing and (ii) shall be liable for and shall bear
all Income Taxes imposed by reason of such inclusions, and Buyer shall have no
liability or responsibility for any such Income Taxes.
(f)Subject to Buyer’s indemnification rights under Section 13.2, after the
Closing Date, Buyer shall (i) prepare and file with the appropriate Taxing
Authority any and all Tax Returns required to be filed after the Closing Date
with respect to Asset Taxes, (ii) submit each such Tax Return that relates to a
Straddle Period or to a Tax period ending prior to the Effective Time to Seller
for its review and comment reasonably in advance of the due date therefor, and
(iii) timely file any such Tax Return, incorporating any reasonable comments
received from Seller (with respect to Tax Returns relating to a Straddle Period
or to a Tax period ending prior to the Effective Time) prior to the due date
therefor. Buyer shall pay the Asset Taxes reflected on such Tax Returns and
Seller shall promptly reimburse Buyer the amount of any Seller Taxes paid with
respect to such Tax Returns. The Parties agree that (x) this Section 15.2(f) is
intended to solely address the timing and manner in which certain Tax Returns
relating to Asset Taxes are filed and the Asset Taxes shown thereon are paid to
the applicable Taxing Authority, and (y) nothing in this Section 15.2(f) shall

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be interpreted as altering the manner in which Asset Taxes are allocated to and
economically borne by the Parties (except for any penalties, interest or
additions to Tax imposed as a result of any breach by Buyer of its obligations
under this Section 15.2(f), which shall be borne by Buyer).
(g)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
solely by Buyer. Any sales, use, transfer, stamp, documentary, registration or
similar Taxes incurred or imposed with respect to the transactions described in
this Agreement (collectively, “Transfer Taxes”) shall be borne one-half by Buyer
and one-half by Seller. Seller and Buyer shall reasonably cooperate in good
faith to minimize, to the extent permissible under applicable Law, the amount of
any such Transfer Taxes.
(h)Seller shall be entitled to any and all refunds of Asset Taxes allocated to
Seller pursuant to Section 15.2(b) and Section 15.2(c), and Buyer shall be
entitled to any and all refunds of Asset Taxes allocated to Buyer pursuant to
Section 15.2(b) and Section 15.2(c); provided, however, that neither Seller nor
Buyer shall be entitled to any refund of Asset Taxes allocated to it pursuant to
Section 15.2(b) if Seller or Buyer, as the case may be, did not pay or otherwise
economically bear such Asset Taxes. If a Party or its Affiliate receives a
refund of Asset Taxes to which the other Party is entitled pursuant to this
Section 15.2(h), such recipient Party shall forward to the entitled Party the
amount of such refund within thirty (30) days after such refund is received, net
of any reasonable, out-of-pocket costs or expenses incurred by such recipient
Party in procuring such refund.
(i)The Parties shall cooperate fully, as and to the extent reasonably requested
by the other Party, in connection with the filing of Tax Returns and any audit,
litigation or other proceeding with respect to Taxes relating to the Assets.
Such cooperation shall include the retention and (upon the other Party’s
request) the provision of records and information that are relevant to any such
Tax Return or audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided under this Agreement. The Parties agree to
retain all books and records with respect to Tax matters pertinent to the Assets
relating to any Tax period beginning before the Closing Date until the
expiration of the statute of limitations of the respective Tax periods and to
abide by all record retention agreements entered into with any Governmental
Authority. Buyer and Seller further agree, upon request, to use their
commercially reasonable efforts to obtain any certificate or other document from
any Governmental Authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed with respect to the
transactions contemplated hereby.
(j)Notwithstanding anything in this Agreement to the contrary, if Buyer becomes
entitled, pursuant to Section 3.6(b), to any amounts earned from the sale of
Hydrocarbons, which amounts are received after the eighteen (18) month
anniversary of the Closing Date, Buyer shall be allocated and bear all Asset
Taxes attributable to the production of such Hydrocarbons or the receipt of
proceeds therefrom notwithstanding that such Hydrocarbons were produced prior to
the Effective Time.
15.3Assignment. Subject to the provisions of Section 15.17, this Agreement may
not be assigned by Buyer or Seller without the prior written consent of the
other Party. Any assignment or delegation made without the consents required
hereby shall be void. In the event a Party consents to any such assignment, such
assignment shall not relieve the assigning Party of any obligations and
responsibilities hereunder, including obligations and responsibilities arising
following such assignment. 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.
Notwithstanding the foregoing, but subject to Buyer remaining liable for its
obligations (including indemnity obligations) hereunder, Buyer may direct that
the Assets be assigned to one or more of the other members of the ORNR Group;
provided that such applicable members of the ORNR Group expressly agree,
pursuant to an instrument in favor of and reasonably acceptable to Seller and
without releasing Buyer

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hereunder, to assume and be directly responsible for all of Buyer’s obligations
hereunder as to the Assets so assigned.
15.4Preparation 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.
15.5Publicity. 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. The Parties shall be
obligated to hold all specific terms and provisions of this Agreement strictly
confidential after the Closing; provided, however, that the foregoing shall not
(a) restrict disclosures by Buyer or Seller that are required by applicable
securities or other Laws or regulations or the applicable rules of any stock
exchange having jurisdiction over the disclosing Party or its Affiliates,
provided that such disclosures shall be made only to the extent required
thereunder, (b) prevent Buyer or Seller from recording the Assignment, the Deed
and any federal or state assignments delivered at Closing or from complying with
any disclosure requirements of Governmental Authorities that are applicable to
the transfer of the Assets from Seller to Buyer, (c) prevent Buyer or Seller
from making any disclosure of information relating to this Agreement if made in
a manner, under conditions and to Persons that would be permitted under the
Confidentiality Agreement so long as such Person continues to hold such
information confidential on the same terms as set forth in this Section 15.5 and
(d) prevent Seller from making disclosures in connection with complying with
Preferential Purchase Rights and other transfer restrictions applicable to the
transactions contemplated hereby.
15.6Notices. All notices and communications required or permitted to be given
hereunder shall be given in writing and shall be delivered personally, or sent
by bonded overnight courier, or mailed by U.S. Express Mail, Federal Express or
United Parcel Service Express Delivery or by certified or registered United
States Mail with all postage fully prepaid, or sent by electronic mail (“email”)
transmission (provided that receipt of such email is requested and received,
excluding automatic receipts) 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:
QEP Energy Company
Independence Plaza
1050 17th Street, Suite 800
Denver, Colorado 80265
Attention: Joe Redman, General Manager, Natural Gas Division
Email: joe.redman@qepres.com

With a copy to:

QEP Energy Company
Independence Plaza
1050 17th Street, Suite 800
Denver, Colorado 80265
Attention: Christopher Woosley, Senior Vice President and General Counsel
Email: chris.woosley@qepres.com

If to Buyer:
Pinedale Energy Partners, LLC
c/o Oak Ridge Natural Resources, LLC
5727 S. Lewis Ave., Suite 200
Tulsa, Oklahoma 74105
Attention: J. Chris Jacobsen,
President and Chief Executive Officer
Email: CJacobsen@ORNR.Energy

With a copy to:
Baker Botts L.L.P.
2001 Ross Avenue
Dallas, Texas 75201
Attention: Lawrence A. Hall
Email: larry.hall@bakerbotts.com

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Any notice given in accordance herewith shall be deemed to have been given when
delivered to the addressee in person, or by courier, or transmitted by email
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 or with Federal Express or United Parcel Service, 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). Either Party may change its
contact information for notice by giving written notice to the other Party in
the manner provided in this Section 15.6. If the date specified in this
Agreement for giving any notice or taking any action is not a Business Day (or
if the period during which any notice is required to be given or any action
taken expires on a date which is not a Business Day), then the date for giving
such notice or taking such action (and the expiration date of such period during
which notice is required to be given or action taken) shall be the next day
which is a Business Day.
15.7Further 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 the other 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.
Without limiting the generality of the foregoing, Seller agrees that, at Buyer’s
request, Seller shall use its reasonable efforts to enforce, for the benefit of
Buyer, at Buyer’s cost and expense, any right, claim or cause of action that
would otherwise be included in the Assets pursuant to Section 2.1(l) but is not
transferable.
15.8Filings, 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 of the assignment of such Assets to Buyer, (c) actively
pursue the unconditional approval of all applicable Governmental Authorities of
the assignment of the Assets to Buyer, (d) provide Seller with copies of all
recorded or approved instruments, and (e) actively pursue all other consents and
approvals 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. Buyer obligates
itself to take any and all action required by any Governmental Authority in
order to obtain such unconditional approval, including the posting of any and
all bonds or other security that may be required in excess of its existing
lease, pipeline or area-wide bonds.
15.9Entire Agreement; Conflicts. THIS AGREEMENT, THE APPENDICES, EXHIBITS AND
SCHEDULES HERETO, THE TRANSACTION DOCUMENTS AND THE CONFIDENTIALITY AGREEMENT
COLLECTIVELY CONSTITUTE THE ENTIRE AGREEMENT BETWEEN 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 BETWEEN 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 (A)
THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE TERMS AND PROVISIONS OF ANY
SCHEDULE OR EXHIBIT HERETO OR (B) THE TERMS AND PROVISIONS OF THIS AGREEMENT AND
THE TERMS AND PROVISIONS OF ANY TRANSACTION DOCUMENT, THE TERMS AND PROVISIONS
OF THIS AGREEMENT SHALL GOVERN AND CONTROL; PROVIDED, HOWEVER, THAT THE
INCLUSION

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IN ANY OF THE SCHEDULES OR EXHIBITS HERETO OR ANY TRANSACTION DOCUMENT 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.
15.10Parties 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 respective
successors and permitted assigns, or the Parties’ respective related Indemnified
Parties hereunder any rights, remedies, obligations or Liabilities under or by
reason of this Agreement; provided that only a Party and its successors and
permitted 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). Notwithstanding the foregoing,
the Financing Sources shall be deemed Third Party beneficiaries of the
provisions set forth in Section 6.13, this Section 15.10, Section 15.11, Section
15.13 and Section 15.20, each of which shall be enforceable by each Financing
Source.
15.11Amendment. This Agreement may be amended, restated, supplemented or
otherwise modified only by an instrument in writing executed by both Parties and
expressly identified as an amendment, restatement, supplement or modification;
provided, however, notwithstanding anything to the contrary in this Agreement,
the provisions relating to the Financing Sources set forth in Section 6.13,
Section 15.10, this Section 15.11, Section 15.13 and Section 15.20 (and, in each
case, the defined terms used therein) may not be amended, modified or altered in
a manner that is material and adverse to the interests of the Designated
Financing Sources or their respective Affiliates without the prior written
consent of the Designated Financing Sources.
15.12Waiver; 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 either Party or its officers, employees, agents, or
representatives, and no failure by either Party to exercise any of its rights
under this Agreement, shall, in any such 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 either 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.
15.13Governing Law; Jurisdiction.
(a)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 the Parties arising out of this Agreement, the Transaction
Documents or the transactions contemplated hereby shall be in any state or
federal court in Dallas, Texas, and each of the Parties 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

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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.
(c)To the extent that either Party or any of its Affiliates has acquired, or
hereafter may acquire, any immunity from jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property, such Party (on its own behalf and on behalf of its Affiliates)
hereby irrevocably (i) waives such immunity in respect of its obligations with
respect to this Agreement and (ii) submits to the personal jurisdiction of any
court described in Section 15.13(b).
(d)Notwithstanding anything in this Section 15.13 or otherwise in this Agreement
to the contrary, each of the Parties agrees that it will not bring or support
any action, cause of action, claim, cross-claim or Third Party claim of any kind
or description, whether in Law or in equity, whether in contract or in tort or
otherwise, against the Financing Sources in any way relating to this Agreement
or the transactions contemplated under this Agreement, including any proceeding
arising out of or relating in any way to the Financing or the performance
thereof, in any forum other than the Supreme Court of the State of New York,
County of New York, or, if under applicable Law exclusive jurisdiction is vested
in the federal courts, the United States District Court for the Southern
District of New York (and appellate courts thereof), and any such action, claim,
cross-claim or Third Party claim shall be governed by and construed and enforced
in accordance with the Laws of the State of New York, excluding any conflicts of
law, rule or principle that might refer construction of provisions to the Laws
of another jurisdiction.
(e)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.
15.14Severability. 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 either
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.
15.15Removal of Name. As promptly as practicable, but in any case within thirty
(30) days after the Closing Date, Buyer shall eliminate, or cause to be
eliminated, the names “QEP”, “QEP Energy” and any variations 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.
15.16Counterparts. 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.
15.17Like-Kind Exchange. Buyer and Seller agree that either or both of Seller
and Buyer may elect to treat the acquisition or sale of the Assets as an
exchange of like-kind property under Section 1031 of the Code (an “Exchange”);
provided that the Closing shall not be delayed by reason of the Exchange.

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Each Party agrees to use reasonable efforts to cooperate with the other Party in
the completion of such an Exchange including an Exchange subject to the
procedures outlined in Treasury Regulation Section 1.1031(k)-1 and/or Internal
Revenue Service Revenue Procedure 2000-37. Each of Seller and Buyer shall have
the right at any time prior to Closing to assign all or a part of its rights
under this Agreement to a qualified intermediary (as that term is defined in
Treasury Regulation Section 1.1031(k)-1(g)(4)(iii)) or an exchange accommodation
titleholder (as that term is defined in Internal Revenue Service Revenue
Procedure 2000-37) to effect an Exchange. Each Party acknowledges and agrees
that neither an assignment of a Party’s rights under this Agreement nor any
other actions taken by a Party or any other Person in connection with the
Exchange shall release either Party from, or modify, any of its liabilities and
obligations (including indemnity obligations to each other) under this
Agreement, and neither Party makes any representations as to any particular tax
treatment that may be afforded to the other Party by reason of such assignment
or any other actions taken in connection with the Exchange. The Party electing
to treat the acquisition or sale of the Assets as an Exchange shall be obligated
to pay all additional costs incurred hereunder as a result of the Exchange, and
in consideration for the cooperation of the other Party, the Party electing
Exchange treatment shall agree to pay all costs associated with the Exchange and
to indemnify and hold the other Party, its Affiliates, and their respective
former, current and future partners, members, shareholders, owners, officers,
directors, managers, employees, agents and representatives harmless from and
against any and all Liabilities arising out of, based upon, attributable to or
resulting from the Exchange or transactions or actions taken in connection with
the Exchange that would not have been incurred by the other Party but for the
electing Party’s Exchange election.
15.18Specific Performance. Subject to Section 14.2, the Parties agree that if
any of the provisions of this Agreement are not performed by a Party in
accordance with their specific terms, the other Party shall be entitled to
specific performance of the terms hereof, in addition to any other remedy
available at law or in equity.
15.19Financial Statements.
(a)Seller acknowledges that Buyer and its Affiliates may be required to include
statements of revenues and direct operating expenses and other financial
information relating to the Assets for up to three (3) years (or interim periods
within the three (3) year period) ending on, or including, the Closing
(collectively, the “Consolidated Financial Statements”) in documents filed with
the U.S. Securities and Exchange Commission (the “SEC”) by Buyer or any of its
Affiliates pursuant to the Securities Act of 1933, as amended (the “Securities
Act”), and that such Consolidated Financial Statements may be required to be
audited in accordance with GAAP and may need to comply with the requirements of
one or more registration statements, reports or other documents (collectively,
the “SEC Documents”) required to be filed by Buyer or its Affiliates under the
Securities Act, the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and the rules set forth in Regulation S-X, or other rules promulgated
thereunder. From and after the Closing Date and for only up to three (3) years
after the Closing Date, Seller shall, and will cause its Affiliates to, use its
commercially reasonable efforts to cause its accountants and counsel to assist
Buyer and its Affiliates in preparing and obtaining the Consolidated Financial
Statements. Buyer shall be responsible for, and obligated to promptly reimburse
Seller for, all reasonable costs and expenses (including third person or
internal resources and personnel) incurred by Seller or its Affiliates to the
extent associated with preparing and obtaining the Consolidated Financial
Statements and otherwise complying with this Section 15.19. From and after the
Closing Date and for only up to three (3) years after the Closing Date,
following reasonable advance notice from Buyer to Seller, Seller shall provide
Buyer and its Affiliates and their respective representatives reasonable access
during normal business hours to such records (including original source
materials underlying such records), to the extent such information is available,
and personnel of Seller and its Affiliates and its accounting firms and/or
counsel as Buyer may reasonably request to enable Buyer and its representatives
to create and audit the Consolidated Financial Statements. From and after the
Closing Date and for only up to three (3) years after the Closing Date, to the
extent requested by Buyer, Seller will

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use its commercially reasonable efforts to obtain representation letters and
similar documents (in each case, in form and substance customary for
representation letters provided to external audit firms by management of a
company whose financial statements are the subject of an audit used in filings
of acquired company financial statements under the Exchange Act) from applicable
personnel of Seller and its Affiliates as may be reasonably required in
connection with the preparation and audit of the Consolidated Financial
Statements. From and after the Closing Date and for only up to three (3) years
after the Closing Date, to the extent requested by Buyer, Seller will use its
commercially reasonable efforts to provide and request that the independent
audit firm that audits the Consolidated Financial Statements provide consents
necessary for the inclusion or incorporation by reference of the Consolidated
Financial Statements in any SEC Document in which the Consolidated Financial
Statements are required to be included or incorporated. Except to the extent
included in any filings made pursuant to the Securities Act or the Exchange Act,
Buyer agrees to hold all information provided to Buyer and its Affiliates
pursuant to this Section 15.19 confidential and agrees not to use any such
information other than in connection with the preparation of any such filings,
provided, however, that Buyer may disclose the information (i) to any
representative of Buyer but only to the extent such representative needs to know
such information for Buyer’s purpose of preparing the Consolidated Financial
Statement; provided that (A) Buyer shall advise each such representative of the
confidential nature of the information, (B) Buyer shall be responsible for each
such representative’s compliance with the terms of this Agreement binding on
Buyer, and (C) Buyer shall take reasonable measures to cause its representatives
to comply with the terms of this Agreement binding on Buyer; or (ii) to the
extent that Buyer or such representative is required to disclose such
information in order to avoid committing a violation of any Law, or governmental
rule or regulation, including any rules or regulations of any securities
association, stock exchange or national securities quotation system, provided
that Buyer provides prompt advance written notice to Seller of the proposed
disclosure.
(b)Except for the information that will be contained in the representation
letters referred to above, all of the information to be provided by Seller or
its Affiliates pursuant to this Section 15.19 will be given without any
representation or warranty, express or implied, and no Seller Indemnified Party
shall have any liability or responsibility with respect thereto.
(c)Buyer, for itself and for each member of the Buyer Indemnified Parties,
hereby releases, defends, indemnifies, remises and forever discharges each
member of the Seller Indemnified Parties from any and all suits, legal or
administrative proceedings, claims, demands, damages, losses, costs,
Liabilities, interest or causes of action whatsoever, at law or in equity, known
or unknown, which any member of the Buyer Indemnified Parties might now or
subsequently may have, based on or arising out of the information provided by
Seller or its Affiliates pursuant to this Section 15.19.
15.20No Financing Source Liability. None of the Financing Sources will have any
liability to any member of the Seller Indemnified Parties relating to or arising
out of this Agreement, the Transaction Documents, the transactions contemplated
hereby and thereby or the Financing, whether at law or in equity, in contract,
in tort, or otherwise, and none of the Seller Indemnified Parties will have any
rights or claims against any of the Financing Sources hereunder, under the
Transaction Documents, or otherwise in connection with the Financing, and Seller
hereby waives any rights or claims that it has or may have on its behalf and on
behalf of the Seller Indemnified Parties. Seller hereby agrees that it will not
bring or support any action, claim, cause of action or similar claims or
assertions of any kind or description arising out of or relating to this
Agreement, whether at law or in equity, whether in contract or tort or
otherwise, against the Financing Sources with respect to any dispute arising out
of or relating in any way to the Financing contemplated hereby or the
performance thereof.

[Remainder of page intentionally left blank. Signature pages follow.]

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IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of the date
first written above.
 
SELLER:
 
QEP ENERGY COMPANY
 
 
 
 
By:
/s/ Michael C. Puchalski
Name:
Michael C. Puchalski
Title:
Vice President of Business Development
 
 
 
 

S-1

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BUYER:
 
Pinedale Energy Partners, LLC
 
 
 
 
By:
/s/ J. Chris Jacobsen
Name:
J. Chris Jacobsen
Title:
President and Chief Executive Officer
 
 
 
 

S-2

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APPENDIX I
DEFINED TERMS
Capitalized terms used in this Agreement shall have the meanings set forth in
this Appendix I unless the context requires otherwise.
“Accounting Arbitrator” shall have the meaning set forth in Section 3.7.
“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, with respect to any Person, any other 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 an amount equal to three and one-half percent
(3.5%) of the Purchase Price.
“Agreement” shall have the meaning set forth in the introductory paragraph
herein.
“Allocated Values” shall have the meaning set forth in Section 3.8(a).
“Allocation” shall have the meaning set forth in Section 3.8(b).
“Applicable Contracts” shall mean all Contracts (a) to which Seller is a party
(or is a successor or assign of a party), (b) to the extent such Contracts bind
or burden the Assets or Seller with respect to the Assets and (c) that will be
binding on Buyer after Closing, including: communitization agreements;
unitization agreements; net profits agreements; production payment agreements;
area of mutual interest agreements; surface use agreements, joint development
agreements, joint venture agreements; confidentiality agreements; farmin and
farmout agreements; bottom hole agreements; crude oil, condensate and natural
gas purchase and sale, gathering, transportation and marketing agreements;
hydrocarbon storage agreements; acreage contribution agreements; operating
agreements; balancing agreements; processing agreements; saltwater disposal
agreements; facilities or equipment leases; and other similar contracts and
agreements, but exclusive of Contracts relating to the Excluded Assets to the
extent not related to the Assets and all master services agreements.
“Asset Taxes” shall mean ad valorem, property, excise, severance, production,
sales, use, and similar Taxes based upon or measured by the ownership or
operation of the Assets or the production of Hydrocarbons or the receipt of
proceeds therefrom, but excluding, for the avoidance of doubt, Income Taxes and
Transfer Taxes.
“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 (other than the Surface Fee Interests), substantially
in the form attached to this Agreement as Exhibit F.
“Assumed Obligations” shall have the meaning set forth in Section 13.1.
“Bishop Litigation Settlement” shall mean the Agreement for Settlement of Claims
against Questar Exploration and Production Company dated effective September 30,
2002, between Larry Madsen, Special Trustee of the H.M. Klaenhammer Revocable
Trust dated May 9, 1996, Susan Leigh Bishop, individually and also acting in
their capacity as proposed class representatives (Plaintiffs).
“Bonds” shall have the meaning set forth in Section 6.3(a).

APPENDIX I - PAGE 1

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“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 (excluding, for the
avoidance of doubt, any Taxes).
“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.
“Buyer’s Environmental Liabilities” shall have the meaning set forth in
Section 12.1(a).
“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, and any
successor statute.
“Confidentiality Agreement” shall mean that certain confidentiality agreement
dated as of May 1, 2017, between Seller and Oak Ridge Natural Resources, LLC.
“Consent” shall have the meaning set forth in Section 4.4.
“Consolidated Financial Statements” shall have the meaning set forth in
Section 15.19.
“Continuing Employee” shall have the meaning set forth in Section 6.8(b).
“Contract” shall mean any written contract, agreement or any other legally
binding arrangement, but excluding, however, any Lease, easement, right-of-way,
permit or other instrument creating or evidencing an interest in the Assets or
any real or immovable property related to or used in connection with the
operations of any Assets.
“Cure 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” and “Decommissioning” 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(c).
“Deed” shall mean the Surface Deed from Seller to Buyer, pertaining to the
applicable Surface Fee Interests, substantially in the form attached to this
Agreement as Exhibit G.
“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 Wells
set forth on Exhibit B-1, the Well Locations set forth on Exhibit B-2 and the
SWD Wells set forth on Exhibit C, that, as of the Effective Time and the Closing
Date and subject to the Permitted Encumbrances:

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(a)with respect to each Well, Well Location or SWD Well set forth on
Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable (for a Well, limited to any
currently producing formations, and, for a Well Location, limited to the
applicable Target Formation(s) set forth on Exhibit B-2 for such Well Location),
entitles Seller to receive not less than the Net Revenue Interest set forth on
Exhibit B-1 for such Well, set forth on Exhibit B-2 for such Well Location, or
set forth on Exhibit C for such SWD Well, except for (i) subject to Section 6.1,
decreases in connection with those operations in which Seller or its successors
or assigns may from and after the Execution Date elect to be a non-consenting
co-owner, (ii) subject to Section 6.1, decreases resulting from the
establishment or amendment from and after the Execution Date 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 expressly set forth on Exhibit A, Exhibit B-1, Exhibit B-2, or Exhibit
C, as applicable;
(b)with respect to each Well, Well Location or SWD Well set forth on
Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable (for a Well, limited to any
currently producing formations, and, for a Well Location, limited to the
applicable Target Formation(s) set forth on Exhibit B-2 for such Well Location),
obligates Seller to bear not more than the Working Interest set forth on
Exhibit B-1 for such Well, set forth on Exhibit B-2 for such Well Location, or
set forth on Exhibit C for such SWD Well except for (i) increases resulting from
contribution requirements with respect to defaulting co-owners under applicable
operating agreements, (ii) subject to Section 6.1, increases resulting from the
establishment or amendment from and after the Execution Date of pools or units,
(iii) increases to the extent that such increases are accompanied by a
proportionate increase in Seller’s Net Revenue Interest, and (iv) as otherwise
expressly set forth on Exhibit A, Exhibit B-1, Exhibit B-2 or Exhibit C, as
applicable; and
(c)is free and clear of all Encumbrances.
“Deficiency Cap” shall have the meaning set forth in Section 2.4(c).
“Deposit” shall have the meaning set forth in Section 3.2.
“Designated Financing Sources” shall mean Wells Fargo Bank, National
Association, Wells Fargo Securities, LLC, BMO Harris Bank N.A. and Citibank,
N.A.
“Designated Well Costs” shall have the meaning set forth in Section 2.5.
“Dispute Notice” shall have the meaning set forth in Section 3.6(a).
“Disputed Environmental Matters” shall have the meaning set forth in
Section 12.1(f).
“Disputed Title Matters” shall have the meaning set forth in Section 11.2(j).
“DOJ” shall have the meaning set forth in Section 6.6(a).
“Effective Time” shall mean 7:00 a.m. (Mountain Time) on April 1, 2017.
“email” shall have the meaning set forth in Section 15.6.
“Employee Benefit Plan” shall mean an “employee benefit plan” within the meaning
of Section 3(3) of ERISA, any specified fringe benefit plan as defined in
Section 6039D of the Code, and any other bonus, incentive compensation, deferred
compensation, profit-sharing, stock-option, stock-appreciation right,
stock-bonus, stock-purchase, employee-stock-ownership, savings, severance,
change in control, supplemental unemployment, layoff, salary-continuation,
retirement, pension, health, life-insurance, disability, accident,
group-insurance, vacation, holiday, sick-leave, fringe-benefit, or welfare plan,
and any other employee compensation or benefit plan, contract (including any
collective bargaining agreement), policy, practice, commitment or understanding
(whether qualified or non-qualified, currently effective or terminated, written
or unwritten) and any trust, escrow or other agreement related thereto.

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“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(f).
“Environmental Condition” shall mean (a) a condition existing on the Execution
Date or the Defect Claim Date with respect to the air, soil, subsurface, surface
waters, ground waters and/or sediments or the operation of the Assets 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 Execution Date or the
Defect Claim Date with respect to the Assets or the 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.
“Environmental Defect Notice” shall have the meaning set forth in
Section 12.1(a).
“Environmental Defect Property” shall have the meaning set forth in
Section 12.1(a).
“Environmental Indemnity Agreement” shall have the meaning set forth in
Section 12.1(c)(iii).
“Environmental Laws” shall mean all applicable Laws in effect as of the
Execution Date relating to the prevention of pollution or the protection of the
environment, natural resources or threatened, endangered or otherwise protected
species, 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, handling, use, 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, but that do not constitute a Law or are not required by a
Governmental Authority or any Law.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.
“ERISA Affiliate” shall mean, with respect to any Person, each trade or
business, whether or not incorporated, that, together with such Persons would be
deemed a “single employer” within the meaning of Section 414 of the Code or
Section 4001(a)(14) or Section 4001(b) of ERISA.
“Escrow Agent” shall mean Wells Fargo Bank, N.A.
“Escrow Agreement” shall mean that certain Escrow Agreement, dated of even date
herewith, among Seller, Buyer and Escrow Agent.
“Exchange” shall have the meaning set forth in Section 15.17.
“Exchange Act” shall have the meaning set forth in Section 15.19.
“Excluded Assets” shall mean:
(a)all of Seller’s corporate minute books, financial records, Income Tax records
and other business records that relate to Seller’s business generally (including
the ownership and operation of the Assets);
(b)to the extent that they do not relate to the Assumed Obligations for which
Buyer is providing indemnification hereunder, all trade credits, all accounts,
all receivables of Seller and all other proceeds, income or revenues of Seller
attributable to the Assets and attributable to any period of time prior to the
Effective Time;
(c)to the extent that they do not relate to the Assumed Obligations for which
Buyer is providing indemnification hereunder, Seller’s right with respect to all
claims and causes of action of Seller

APPENDIX I - PAGE 4

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arising under or with respect to any Contract that are attributable to periods
of time prior to the Effective Time (including claims for adjustments or
refunds);
(d)subject to Section 11.3 and to the extent that they do not relate to the
Assumed Obligations for which Buyer is providing indemnification hereunder, all
rights and interests of Seller (i) under any policy or agreement of insurance or
indemnity, (ii) under any bond or (iii) to any insurance or condemnation
proceeds or awards arising, in each case, from acts, omissions or events or
damage to or destruction of property;
(e)Seller’s rights with respect to all Hydrocarbons produced and sold from the
Assets with respect to all periods prior to the Effective Time;
(f)any and all claims of Seller or its Affiliates for refunds of, credits
attributable to, loss carryforwards with respect to or similar Tax assets
relating to (i) Asset Taxes attributable to any period (or portion thereof)
ending prior to the Effective Time that are or were paid or otherwise
economically borne by Seller, (ii) Income Taxes of Seller or its Affiliates,
(iii) Taxes attributable to the Excluded Assets and (iv) any other Taxes
relating to the ownership or operation of the Assets or the production of
Hydrocarbons or the receipt of proceeds therefrom that are attributable to any
period (or portion thereof) ending prior to the Effective Time and that are or
were paid or otherwise economically borne by Seller;
(g)all of Seller’s proprietary computer software, patents, trade secrets,
copyrights, names, trademarks, logos and other intellectual property;
(h)all documents and instruments of Seller that may be protected by an
attorney-client privilege or any attorney work product doctrine (other than
title opinions);
(i)all data of Seller that cannot be disclosed to Buyer as a result of
confidentiality arrangements under agreements with Third Parties;
(j)all audit rights of Seller 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;
(k)all geophysical and other seismic and related technical data and information
relating to the Assets which Seller may not disclose, assign or transfer under
its existing agreements and licenses without making any additional payments or
incurring any liabilities or obligations, except to the extent such payments,
liabilities and obligations are assumed by Buyer, excluding, for the avoidance
of doubt, the proprietary seismic described in Exhibit J;
(l)documents prepared or received by Seller or its Affiliates with respect to
(i) lists of prospective purchasers for such transactions compiled by Seller,
(ii) bids submitted by other prospective purchasers of the Assets,
(iii) analyses by Seller or its Affiliates of any bids submitted by any
prospective purchaser, (iv) correspondence between or among Seller, its
representatives, and any prospective purchaser other than Buyer and
(v) correspondence between Seller or any of its representatives with respect to
any of the bids, the prospective purchasers or the transactions contemplated by
this Agreement;
(m)except for the field office described in Section 2.1(f), any offices, office
leases and any personal property located in or on such offices or office leases;
(n)any Hedge Contracts (excluding all Specified Hedging Agreements);
(o)Seller’s debt instruments;
(p)all of Seller’s personnel files and records;
(q)the monies held by Seller for which the Purchase Price was adjusted pursuant
to Section 3.3(b)(ix);

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(r)any assets described in Section 2.1(e) or Section 2.1(g) that are not
assignable in accordance with the terms hereof;
(s)any recoupment of federal royalties paid by Seller and attributable to
(i) the Assets, (ii) valuation under 30 C.F.R. Pt. 1206 Subpt. D, and (iii) any
period of time prior to the Effective Time; and
(t)any assets described on Exhibit E.
“Execution Date” shall have the meaning set forth in the introductory paragraph
herein.
“Final Price” shall have the meaning set forth in Section 3.6(a).
“Final Settlement Statement” shall have the meaning set forth in Section 3.6(a).
“Financing” shall mean the financing incurred or intended to be incurred by
Buyer and its Affiliates, in each case, in regards to financing the transactions
contemplated under this Agreement.
“Financing Sources” shall mean any potential or actual lenders and investors for
the Financing, together with their Affiliates and their Representatives.
“FTC” shall have the meaning set forth in Section 6.6(a).
“GAAP” shall mean generally accepted accounting principles in the United States
as interpreted as of the Execution Date.
“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.
“Gross Products Taxes” shall mean property or ad valorem Asset Taxes assessed by
the State of Wyoming that are measured by the production of Hydrocarbons.
“Hard Consent” shall have the meaning set forth in Section 11.4(b)(i).
“Hazardous Substances” shall mean any pollutants, contaminants, toxins or
hazardous, radioactive 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 Contract” shall mean any Contract to which Seller or any of its
Affiliates is a party with respect to any swap, forward, future or derivative
transaction or option or similar agreement, whether exchange traded,
“over-the-counter” or otherwise, involving, or settled by reference to, one or
more rates, currencies, commodities, equity or debt instruments or securities,
or economic, financial or pricing indices or measures of economic, financial or
pricing risk or value or any similar transaction or any combination of these
transactions.
“Hedging Indemnities” shall have the meaning set forth in Section 6.10(d).
“Hilliard Formation” shall mean the interval shown by open-hole log in the
Stewart Point 15-29 (L) well (API No. 49-035-235600000) with the top at
18,325 feet measured depth (equivalent to a subsea -10,740 feet) (or the
stratigraphic equivalent thereof, recognizing that actual depths may vary across
the relevant Leases and Units) and deeper. The base of the Hilliard formation
was not penetrated by this wellbore.
“HSR Act” shall have the meaning set forth in Section 6.6(a).
“Hydrocarbons” shall mean oil and gas and other hydrocarbons produced or
processed in association therewith.
“Imbalances” shall mean all Well Imbalances and Pipeline Imbalances.

APPENDIX I - PAGE 6

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“Income Taxes” shall mean (a) all Taxes based upon, measured by, or calculated
with respect to gross or net income, gross or net receipts or profits (including
franchise Taxes and any capital gains, alternative minimum, and net worth Taxes,
but excluding ad valorem, property, excise, severance, production, sales, use,
real or personal property transfer or other similar Taxes), (b) Taxes based
upon, measured by, or calculated with respect to multiple bases (including
corporate franchise, doing business or occupation Taxes) if one or more of the
bases upon which such Tax may be based, measured by, or calculated with respect
to is included in clause (a) above, or (c) withholding Taxes measured with
reference to or as a substitute for any Tax included in clauses (a) or (b)
above.
“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 an amount equal to two percent (2%) of the
Purchase Price.
“Individual Environmental Threshold” shall have the meaning set forth in
Section 12.1(e).
“Individual Indemnity Threshold” shall have the meaning set forth in
Section 13.4(a).
“Individual Title Defect Threshold” shall have the meaning set forth in
Section 11.2(i).
“Interim Period” shall mean that period of time commencing at the Effective Time
and ending at 7:00 a.m. (Mountain Time) on the Closing Date.
“Invasive Activities” shall have the meaning set forth in Section 10.1(c).
“Knowledge” shall mean (a)  with respect to Seller, the actual knowledge
(without investigation) of the following Persons: Joe Redman, Perry Willis,
Kevin Williams and Alice Ley; and (b) with respect to Buyer, the actual
knowledge (without investigation) of the following Persons: Chris Jacobsen,
Brian Wheeler, Hung Nguyen and Robert Grisaffe.
“Lance Formation” shall mean the interval shown by open-hole log in the Mesa
Unit 14-6D well (API No. 49-035-230660000) with the top at 8,320 feet measured
depth (equivalent to a subsea -535 feet) and the bottom at 13,420 feet measured
depth (equivalent to a subsea -5,630 feet) (or the stratigraphic equivalent
thereof, recognizing that actual depths may vary across the relevant Leases and
Units), which is the top of the Mesaverde formation.
“Lance Pool” shall mean the interval from the stratigraphic equivalent of
7,261 feet in measured depth, which is from the base of the Fort Union at the
top of the pool, to the stratigraphic equivalent of 13,062 feet in measured
depth, to the top of the Ericson Sandstone of the Mesaverde formation at the
base of the pool, as found in the El Paso Wagon Wheel No. 1 well located in the
southeast quarter of the northeast quarter (SE/4NE/4) of Section 5, Township 30
North, Range 108 West, 6th P.M., Sublette County, WY, as defined by WOGCC Docket
136-2003.
“Lands” shall have the meaning set forth in Section 2.1(a).
“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, obligations, causes of action,
payments, charges, judgments, assessments, liabilities, losses, damages,
penalties, fines, costs and expenses, including any reasonable attorneys’ fees,
legal or other expenses incurred in connection therewith, including liabilities,
costs, losses and damages for personal injury, death, property damage,
environmental damage or Remediation.
“Marketing Contracts” shall mean Hydrocarbon purchase and sale, marketing,
transportation, gathering, processing or similar Applicable Contract.

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“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 Execution Date 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 effect resulting from: (a) entering into this
Agreement or the announcement of the transactions contemplated by this
Agreement; (b) any action or omission of Seller taken in accordance with the
terms of this Agreement without the violation thereof or with the prior written
consent of Buyer; (c) 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; (d) changes in conditions or
developments generally applicable to the oil and gas industry in the area where
the Assets are located; (e) acts of God, including hurricanes, tornados, storms
or other naturally occurring events; (f) acts or failures to act of Governmental
Authorities; (g) civil unrest, any outbreak of disease or hostilities, terrorist
activities or war or any similar disorder; (h) matters that are cured or no
longer exist by the earlier of Closing and the termination of this Agreement;
(i) a change in Laws and any interpretations thereof from and after the
Execution Date; (j) any reclassification or recalculation of reserves in the
ordinary course of business; (k) changes in the prices of Hydrocarbons;
(l) changes in service costs generally applicable to the oil and gas industry in
the United States; (m) strikes and labor disturbances; and (n) natural declines
in well performance.
“Material Contracts” shall have the meaning set forth in Section 4.8(a).
“Mesaverde Formation” shall mean the interval shown by open-hole log in the Mesa
Unit 14-6D well (API No. 49-035-230660000) with the top at 13,420 feet measured
depth (equivalent to a subsea -5,630 feet) and the bottom at 14,435 feet
measured depth (equivalent to a subsea -6,645 feet) (or the stratigraphic
equivalent thereof, recognizing that actual depths may vary across the relevant
Leases and Units), which is the top of the Ericson Sandstone in the Mesaverde
formation.
“MVC Liabilities” shall mean Liabilities attributable to the Minimum Volume
Commitment under subsections (a) and (b) of Section 6.1 of the Subject
Processing Agreement.
“Net Revenue Interest” shall mean, (a) with respect to each Well or Well
Location set forth on Exhibit B-1 or Exhibit B-2, as applicable (for a Well,
limited to any currently producing formations, and, for a Well Location, limited
to the applicable Target Formation(s) set forth on Exhibit B-2 for such Well
Location), the interest in and to all Hydrocarbons produced, saved and sold from
or allocated to such Well or Well Location (for a Well, limited to any currently
producing formations, and, for a Well Location, limited to the applicable Target
Formation(s) set forth on Exhibit B-2 for such Well Location), after giving
effect to all Burdens and (b) with respect to a SWD Well set forth on Exhibit C,
the interest in and to all revenue attributable to the operation of such SWD
Well.
“NGL Commitment Liabilities” shall mean Liabilities attributable to the NGL
Commitment under Section 6.2 of the Subject Processing Agreement.
“NORM” shall mean naturally occurring radioactive material.
“Novation Instruments” shall have the meaning set forth in Section 6.11.
“Operating Expenses” shall have the meaning set forth in Section 2.3(a).
“ORNR Group” shall mean, collectively, (a) Oak Ridge Natural Resources, LLC and
its direct and indirect subsidiaries (including Buyer) and (b) Kayne Private
Energy Income Fund, L.P.
“Outside Date” shall have the meaning set forth in Section 14.1(d).
“Party” and “Parties” shall have the meaning set forth in the introductory
paragraph herein.

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“Permits” shall have the meaning set forth in Section 4.19.
“Permitted Employees” shall have the meaning set forth in Section 6.8(a).
“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 (i) does not operate to reduce the Net Revenue
Interest of Seller with respect to any Well, Well Location or SWD Well set forth
on Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable, to an amount less than
the Net Revenue Interest set forth on Exhibit B-1, Exhibit B-2 or Exhibit C, as
applicable, for such Well, Well Location or SWD Well, and (ii) does not obligate
Seller to bear a Working Interest with respect to any Well, Well Location or SWD
Well set forth on Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable, in any
amount greater than the Working Interest set forth on Exhibit B-1, Exhibit B-2
or Exhibit C, as applicable, for such Well, Well Location or SWD Well (unless
the Net Revenue Interest for such Well, Well Location or SWD Well is greater
than the Net Revenue Interest set forth on Exhibit B-1, Exhibit B-2 or Exhibit
C, as applicable, in the same or greater proportion as any increase in such
Working Interest);
(b)Preferential Purchase Rights set forth on Schedule 4.10 and Consents set
forth on Schedule 4.4;
(c)liens for Taxes not yet due or delinquent or, if delinquent, that are being
contested in good faith in the normal course of business as set forth in
Schedule 1.1(a);
(d)Customary Post-Closing Consents;
(e)to the extent not yet triggered, conventional rights of reassignment;
(f)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;
(g)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 if the net cumulative effect thereof (i) does not operate to
reduce the Net Revenue Interest of Seller with respect to any Well, Well
Location or SWD Well set forth on Exhibit B-1, Exhibit B-2 or Exhibit C, as
applicable, to an amount less than the Net Revenue Interest set forth on
Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable, for such Well, Well
Location or SWD Well, and (ii) does not obligate Seller to bear a Working
Interest with respect to any Well, Well Location or SWD Well set forth on
Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable, in any amount greater than
the Working Interest set forth on Exhibit B-1, Exhibit B-2 or Exhibit C, as
applicable, for such Well, Well Location or SWD Well (unless the Net Revenue
Interest for such Well, Well Location or SWD Well is greater than the Net
Revenue Interest set forth on Exhibit B-1, Exhibit B-2 or Exhibit C, as
applicable, in the same or greater proportion as any increase in such Working
Interest);
(h)easements, conditions, covenants, restrictions, servitudes, permits,
rights-of-way, surface leases and other rights in the Assets for the purpose of
operations, facilities, roads, alleys, highways, railways, pipelines,
transmission lines, transportation lines, distribution lines, power lines,
telephone lines, removal of timber, grazing, logging operations, canals,
ditches, reservoirs and other like purposes, or for the joint or common use of
real estate, rights-of-way, facilities and equipment, which, in each case, if
the net cumulative effect thereof (i) does not operate to reduce the Net Revenue
Interest of Seller with respect to any Well, Well Location or SWD Well set forth
on Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable, to an amount less than
the Net Revenue Interest set forth on Exhibit B-1, Exhibit B-2 or Exhibit C, as
applicable,

APPENDIX I - PAGE 9

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for such Well, Well Location or SWD Well, and (ii) does not obligate Seller to
bear a Working Interest with respect to any Well, Well Location or SWD Well set
forth on Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable, in any amount
greater than the Working Interest set forth on Exhibit B-1, Exhibit B-2 or
Exhibit C, as applicable, for such Well, Well Location or SWD Well (unless the
Net Revenue Interest for such Well, Well Location or SWD Well is greater than
the Net Revenue Interest set forth on Exhibit B-1, Exhibit B-2 or Exhibit C, as
applicable, in the same or greater proportion as any increase in such Working
Interest), and (iii) does not materially impair the value, ownership, operation
or use of the Assets as currently operated and used;
(i)vendors, carriers, warehousemen’s, repairmen’s, mechanics’, workmen’s,
materialmen’s, employee’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 as set forth on Schedule 1.1(a);
(j)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 as set forth on
Schedule 1.1(a);
(k)any Encumbrance affecting the Assets that is discharged by Seller at or prior
to Closing;
(l)any matters referenced and set forth on Exhibit A and all litigation set
forth in Schedule 4.7;
(m)mortgage liens burdening a lessor’s interest in the Assets unless such lien
is unsubordinated and foreclosure proceedings with respect to such lien are
pending;
(n)the terms and conditions of this Agreement or any other Transaction Document;
(o)with respect to any Well Location on Exhibit B-2, any variations in wellbore
path;  
(p)the terms and conditions of all Contracts (including the Applicable
Contracts) if the net cumulative effect thereof (i) does not operate to reduce
the Net Revenue Interest of Seller with respect to any Well, Well Location or
SWD Well set forth on Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable, to
an amount less than the Net Revenue Interest set forth on Exhibit B-1,
Exhibit B-2 or Exhibit C, as applicable, for such Well, Well Location or SWD
Well, and (ii) does not obligate Seller to bear a Working Interest with respect
to any Well, Well Location or SWD Well set forth on Exhibit B-1, Exhibit B-2 or
Exhibit C, as applicable, in any amount greater than the Working Interest set
forth on Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable, for such Well,
Well Location or SWD Well (unless the Net Revenue Interest for such Well, Well
Location or SWD Well is greater than the Net Revenue Interest set forth on
Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable, in the same or greater
proportion as any increase in such Working Interest); and
(q)all other Encumbrances, instruments, obligations, defects and irregularities
affecting the Assets that, individually or in the aggregate, (i) would be
accepted by a reasonable and prudent owner and operator of oil and gas assets
located within the geographical area in which the Assets are located, (ii) are
not such as to materially interfere with the value, ownership, operation or use
of any of the Assets (as currently operated and used), (iii) do not reduce the
Net Revenue Interest of Seller with respect to any Well, Well Location or SWD
Well set forth on Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable, to an
amount less than the Net Revenue Interest set forth on Exhibit B-1, Exhibit B-2
or Exhibit C, as applicable, for such Well, Well Location or SWD Well, and
(iv) do not obligate Seller to bear a Working Interest with respect to any Well,
Well Location or SWD Well set forth on Exhibit B-1, Exhibit B-2 or Exhibit C, as
applicable, in any amount greater than the Working Interest set forth on
Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable, for such Well, Well
Location or SWD Well (unless the Net Revenue Interest for such Well, Well
Location or

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SWD Well is greater than the Net Revenue Interest set forth on Exhibit B-1,
Exhibit B-2 or Exhibit C, as applicable, in the same or greater proportion as
any increase in such Working Interest).
“Person” shall mean any individual, firm, corporation, company, 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(h).
“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 (including any production handling and processing at a
separation facility) 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.
“Phase I Environmental Site Assessment” shall mean an environmental site
assessment performed pursuant to ASTM Standard E1527, or any similar
environmental assessment that does not involve any invasive, sampling or testing
activities.
“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(k).
“Reimbursable NGL Commitment/MVC Liabilities” shall mean:
(a)NGL Commitment Liabilities that are Buyer’s responsibility under Section
2.4(a)(ii)(A) for the period of time through the Reimbursement Termination Date;
(b)MVC Liabilities that are Buyer’s responsibility under Section 2.4(a)(ii)(C);
(c)MVC Liabilities that are Buyer’s responsibility under Section 2.4(a)(ii)(B)
for the period of time prior to August 1, 2019; and
(d)the Reimbursement Stub Period Percentage of MVC Liabilities that are Buyer’s
responsibility under Section 2.4(a)(ii)(B) for the contract year under the
Subject Processing Agreement commencing on August 1, 2019.
“Reimbursement Stub Period Percentage” shall mean forty-one and two-third
percent (41.67%).
“Reimbursement Termination Date” shall mean December 31, 2019.
“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, including monitoring, to the
extent but only to the extent required under Environmental Laws to correct or
remove such Environmental Condition.
“Remediation Amount” shall mean, with respect to an Environmental Condition, the
cost (net to the interests of Seller in the affected Assets prior to the
consummation of the transactions contemplated by this Agreement) of the most
cost-effective Remediation of such Environmental Condition allowed under
Environmental Laws.

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“Representative” shall mean with respect to a particular Person, any director,
officer, manager, employee, agent, consultant, advisor or other representative
of such Person, including legal counsel, accountants and financial advisors.
“Retained Liabilities” shall mean the following obligations and Liabilities,
known or unknown, relating to the Assets:
(a)any Liabilities to Third Parties for personal injury or death attributable to
Seller’s or its Affiliates’ operation of the Assets prior to the Closing Date;
(b)any Liabilities attributable to Third Party Claims against, or fines or
penalties imposed by any Governmental Authority on, Seller relating to Seller’s
payment of or accounting for Burdens on production attributable to Hydrocarbons
produced from the Assets or payments due to other Working Interest owners, in
each case, during the period of time prior to the Effective Time (i) directly
associated with item (s) of the Excluded Assets or (ii) otherwise;
(c)any Liabilities arising from disposal of Hazardous Substances off-site of the
Assets by Seller or its Affiliates prior to the Closing Date;
(d)any Liabilities attributable to Third Party Claims against Seller arising
from the gross negligence or willful misconduct of Seller or any of its
Affiliates with respect to the operation of the Assets during Seller’s ownership
thereof;
(e)any Liabilities arising from (i) items (m), (n), (o), (r) and (t) of the
Excluded Assets and (ii) any assets permanently retained by Seller or
permanently excluded in each case from the Assets pursuant to the terms hereof;
(f)Liabilities consisting of any civil or administrative fines or penalties or
criminal sanctions imposed under applicable Law as interpreted as of the
Execution Date on Seller or its Affiliates and resulting from or relating to the
ownership, use or operation of the Assets by Seller or its Affiliates prior to
Closing, but excluding any Remediation related obligations, costs or expenses;
(g)any Liabilities arising from the actions, suits or proceedings, if any, set
forth on Schedule 4.7;
(h)Liabilities attributable to Third Party Claims consisting of unpaid Operating
Expenses attributable to periods prior to the Effective Time that are not taken
into account on the Preliminary Settlement Statement or the Final Settlement
Statement;
(i)Liabilities with respect to the employees of Seller or its Affiliates,
excluding Liabilities with respect to Continuing Employees to the extent such
Liabilities arise on or after the time that such individuals are hired by Buyer
or its Affiliate but including in all cases Liabilities related to Employee
Benefit Plans and programs maintained by Seller or ERISA Affiliates of Seller;
(j)MVC Liabilities and NGL Commitment Liabilities that are the responsibility of
Seller under Section 2.4(a)(i); and
(k)Liabilities under any Title Indemnity Agreement or Environmental Indemnity
Agreement.
“Scheduled Closing Date” shall have the meaning set forth in Section 9.1.
“SEC” shall have the meaning set forth in Section 15.19.
“SEC Documents” shall have the meaning set forth in Section 15.19.
“Securities Act” shall have the meaning set forth in Section 15.19.
“Seller” shall have the meaning set forth in the introductory paragraph of this
Agreement.

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“Seller Indemnified Parties” shall have the meaning set forth in Section 13.3.
“Seller Taxes” shall mean (a) Income Taxes imposed by applicable Law on Seller
or any of its Affiliates and (b) Asset Taxes allocable to Seller pursuant to
Section 15.2 (taking into account, and without duplication of, such Asset Taxes
effectively borne by Seller as a result of (i) the adjustments to the Purchase
Price made pursuant to Section 3.3, Section 3.5 or Section 3.6, as applicable,
and (ii) any payments made from one Party to the other in respect of Asset Taxes
pursuant to Section 15.2(d) or Section 15.2(f)).
“Specified Hedging Agreement” shall have the meaning set forth in
Section 6.10(a).
“Specified Representations” shall mean the representations and warranties in
Sections 4.1, 4.2, 4.3, 4.5, 4.6, 4.22, 5.1, 5.2, 5.5, 5.10 and 5.11.
“Straddle Period” shall mean any Tax period beginning before and ending after
the Effective Time.
“Subject Processing Agreement” shall mean that certain Amended and Restated Gas
Processing Agreement dated March 18, 2014, between Seller and Tesoro (successor
by assignment to QEP Field Services Company).
“Surface Fee Interests” shall have the meaning set forth in Section 2.1(f).
“Survival Period” shall have the meaning set forth in Section 11.1(c)(i).
“SWD Wells” shall mean those wells identified as “Water Disposal” wells on
Exhibit C.
“Target Formations” shall mean the Lance Formation, the Mesaverde Formation, the
Lance Pool and the Hilliard Formation, and each a “Target Formation.”
“Tax Return” shall mean any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and any amendment thereof.
“Taxes” shall mean any taxes, assessments, levies, imposts and other
governmental charges in the nature of a tax (including escheatment and any other
levies, charges and fees imposed under unclaimed property Laws) imposed by or
payable to any Governmental Authority, including income, profits, gross
receipts, employment, stamp, occupation, license, services, premium, alternative
or add-on minimum, ad valorem, real property, personal property, transfer, real
property transfer, value added, sales, use, customs, duties, capital stock,
franchise, excise, withholding, social security (or similar), employment,
unemployment, disability, payroll, windfall profit, severance, production,
estimated or other tax, including any interest, penalty or addition thereto.
“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,
including any governmental or quasi-governmental entity or agency that imposes,
or is charged with collecting, social security or similar charges or premiums.
“Tesoro” shall mean Green River Processing, LLC and its successors or assigns
under the Subject Processing Agreement.
“Third Party” shall mean any Person other than a Party to this Agreement or an
Affiliate of a Party to this Agreement.
“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(j).
“Title Benefit” shall mean, as of the Effective Time, with respect to each Well,
Well Location or SWD Well set forth on Exhibit B-1, Exhibit B-2 or Exhibit C, as
applicable, any right, circumstance or condition that operates to (a) increase
the Net Revenue Interest of Seller above that shown on Exhibit B-1, Exhibit B-2
or Exhibit C, as applicable, for such Well, Well Location or SWD Well, to the
extent the same does not cause

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a greater than proportionate increase in Seller’s Working Interest therein above
that shown on Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable, or (b) to
decrease the Working Interest of Seller in such Well, Well Location or SWD Well
below that shown on Exhibit B-1, Exhibit B-2 or Exhibit C, as applicable, for
such Well, Well Location or SWD Well, 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 on Exhibit B-1,
Exhibit B-2 or Exhibit C, as applicable.
“Title Benefit Amount” shall have the meaning set forth in Section 11.2(e).
“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 the Wells set forth on
Exhibit B-1, the Well Locations set forth on Exhibit B-2 or the SWD Wells set
forth on Exhibit C, as of the Effective Time and the Closing Date, without
duplication; provided that the following shall not be considered Title Defects:
(a)defects arising out of the lack of corporate or other entity authorization
unless Buyer provides affirmative evidence that such corporate or other entity
action was not authorized and results in another Person’s actual and superior
claim of title to the relevant 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 upon the failure to record any federal, state or Indian 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;
(e)any Encumbrance or loss of title resulting from Seller’s conduct of business
in compliance with this Agreement;
(f)defects based upon the exercise of any Preferential Purchase Rights or
failure to obtain any Consents, in each case, with respect to the transactions
contemplated by this Agreement;
(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 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; or
(ii) references to an unrecorded document(s) to which neither Seller nor any
Affiliate thereof is a party, if such document is dated earlier than January 1,
1960 and is not in Seller’s files;
(j)defects arising out of lack of survey, unless a survey is expressly required
by applicable Laws;
(k)defects that have been cured by applicable Laws of limitations or
presumptions;
(l)defects arising from any change in applicable Law after the Execution Date,
including changes that would raise the minimum landowner royalty;
(m)defects or irregularities resulting from or related to probate proceedings or
the lack thereof, which defects or irregularities have been outstanding for ten
(10) years or more;

APPENDIX I - PAGE 14

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(n)defects to the extent affecting (i) any depth other than any currently
producing formations with respect to a Well or (ii) any depth other than the
applicable Target Formation(s) set forth on Exhibit B-2 with respect to a Well
Location;
(o)defects or irregularities resulting from liens, production payments, or
mortgages that have expired by their own terms or the enforcement of which are
barred by applicable statutes of limitation; and
(p)to the extent related to the Leases described on Schedule 1.1(b), any
assignments of Assets earned, acquired, or otherwise due to or owed to Seller by
a Third Party, but not yet received and/or filed of record; and any assignments
of record title or operating rights in any federal Lease or state Lease earned
or acquired by Seller, but not yet approved by the applicable Governmental
Authorities.
“Title Defect Amount” shall have the meaning set forth in Section 11.2(g).
“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).
“Title Indemnity Agreement” shall have the meaning set forth in
Section 11.2(d)(ii).
“Transaction Documents” shall mean those documents executed pursuant to or in
connection with this Agreement.
“Transfer Taxes” shall have the meaning set forth in Section 15.2(g).
“Transition Services Agreement” shall have the meaning set forth in Section 6.9.
“Treasury Regulations” shall mean the final or temporary regulations promulgated
by the U.S. Department of the Treasury under the Code.
“Units” shall have the meaning set forth in Section 2.1(b).
“Unwinding Scenario” shall have the meaning set forth in Section 6.10(e).
“WARN Act” shall mean the federal Worker Adjustment and Retraining Notification
Act of 1988, and similar state, local and foreign Laws related to plant
closings, relocations, mass layoffs and employment losses.
“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.
“Well Location” shall mean each potential well location shown in Exhibit B-2,
limited to the Target Formations shown in Exhibit B-2 for such well locations.
“Wells” shall have the meaning set forth in Section 2.1(c).
“Working Interest” shall mean, (a) with respect to any Well or Well Location set
forth on Exhibit B-1 or Exhibit B-2, as applicable (for a Well, limited to any
currently producing formations, and, for a Well Location, limited to the
applicable Target Formation(s) set forth on Exhibit B-2 for such Well Location),
the interest in and to such currently producing formations (for such Well) or
such applicable Target Formation(s) (for such Well 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 currently producing
formations (for such Well) or such applicable Target Formation(s) (for such Well
Location), but without regard to the effect of any Burdens, and (b) with respect
to a SWD Well set forth on Exhibit C, the interest in and to such SWD Well that
is burdened with the obligation to bear and pay costs and expenses of
maintenance, development and operations on or in connection with such SWD Well.

APPENDIX I - PAGE 15