Exhibit
2.1
  Execution
Version
  ASSET
PURCHASE AND SALE AGREEMENT
 Woodford
Area
 
 between
 
 Linn
Energy Holdings, LLC
 Midcontinent
I, LLC
 Midcontinent
II, LLC
 Linn
Operating, Inc.
 as
“Sellers”
 
 and
 
 Devon
Energy Production Company, LP
 as
“Buyer”
 
 
 
 Dated
as of October 9, 2008
  
 
  Execution
Version
  TABLE
OF CONTENTS
  ARTICLE
      I PROPERTIES TO BE SOLD AND PURCHASED
              1Section
      1.1.
              Assets
      Included
              1Section
      1.2.
              Assets
      Excluded
              3Section
      1.3.
              Non-Assumption
              5ARTICLE
      II PURCHASE PRICE
              5Section
      2.1.
              Purchase
      Price
              5Section
      2.2.
              Accounting
      Adjustments
              5Section
      2.3.
              Closing
      and Post-Closing Accounting Settlements
              6Section
      2.4.
              Payment
      of Adjusted Purchase Price
              7Section
      2.5.
              Allocation
      of Purchase Price
              8ARTICLE
      III THE CLOSING
              8ARTICLE
      IV REPRESENTATIONS AND WARRANTIES OF SELLERS
              8Section
      4.1.
              Organization
      and Existence
              9Section
      4.2.
              Power
      and Authority
              9Section
      4.3.
              Valid
      and Binding Agreement
              9Section
      4.4.
              Non-Contravention
              10Section
      4.5.
              Approvals
              10Section
      4.6.
              Litigation
              10Section
      4.7.
              Contracts
              10Section
      4.8.
              Compliance
      with Laws
              11Section
      4.9.
              Taxes
              11Section
      4.10.
              Net
      Revenue Interest in Leases
              11Section
      4.11.
              Leases
              12Section
      4.12.
              Prepayments;
      Imbalances
              12Section
      4.13.
              Current
      Commitments
              12Section
      4.14.
              Environmental
      Matters
              12Section
      4.15.
              Fees
      and Commissions
              13Section
      4.16.
              Preferential
      Rights and Consents
              13Section
      4.17.
              Disclaimer
      of Warranties
              13Section
      4.18.
              Disclosures
              14ARTICLE
      V REPRESENTATIONS AND WARRANTIES OF BUYER
              14
 
  PSA.FINAL.DOC
 i
  
 Section
      5.1.
              Organization
      and Existence
              14Section
      5.2.
              Power
      and Authority
              15Section
      5.3.
              Valid
      and Binding Agreement
              15Section
      5.4.
              Non-Contravention
              15Section
      5.5.
              Approvals
              15Section
      5.6.
              Pending
      Litigation
              16Section
      5.7.
              Knowledgeable
      Purchaser
              16Section
      5.8.
              Funds
              16Section
      5.9.
              Fees
      and Commissions
              16ARTICLE
      VI CERTAIN COVENANTS OF SELLERS PENDING CLOSING
              17Section
      6.1.
              Access
      to Files
              17Section
      6.2.
              Conduct
      of Operations
              17Section
      6.3.
              Restrictions
      on Certain Actions
              17Section
      6.4.
              Payment
      of Expenses
              19Section
      6.5.
              Preferential
      Rights and Third Party Consents
              19ARTICLE
      VII ADDITIONAL PRE-CLOSING AND POST-CLOSING AGREEMENTS OF BOTH
      PARTIES
              20Section
      7.1.
              Reasonable
      Best Efforts
              20Section
      7.2.
              Notice
      of Litigation
              20Section
      7.3.
              Notification
      of Certain Matters
              20Section
      7.4.
              Fees
      and Expenses
              21Section
      7.5.
              Public
      Announcements
              21Section
      7.6.
              Casualty
      Loss Prior to Closing
              21Section
      7.7.
              Governmental
      Bonds
              22Section
      7.8.
              Assumed
      Obligations
              22Section
      7.9.
              Books
      and Records
              22Section
      7.10.
              Further
      Assurances
              22Section
      7.11.
              Proposed
      Post-Closing Drilling Operations
              22ARTICLE
      VIII TITLE DUE DILIGENCE
              23Section
      8.1.
              Due
      Diligence Examination
              23Section
      8.2.
              Title
      Defects
              24Section
      8.3.
              Title
      Benefits
              26Section
      8.4.
              Disputes
      Regarding Title Defects
              27
 
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 Section
      8.5.
              Adjustments
      to Purchase Price for Defects
              27Section
      8.6.
              Depth
      Severances
              28Section
      8.7.
              Buyer
      Indemnification
              29ARTICLE
      IX CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
              30Section
      9.1.
              Conditions
      Precedent to the Obligations of Buyer
              30Section
      9.2.
              Conditions
      Precedent to the Obligations of Sellers
              31ARTICLE
      X TERMINATION, AMENDMENT AND WAIVER
              32Section
      10.1.
              Termination
              32Section
      10.2.
              Effect
      of Termination
              33Section
      10.3.
              Amendment
              33Section
      10.4.
              Waiver
              33ARTICLE
      XI SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
      INDEMNIFICATION
              34Section
      11.1.
              Survival
              34Section
      11.2.
              Sellers’
      Indemnification Obligations
              34Section
      11.3.
              Buyer’s
      Indemnification Obligations
              35Section
      11.4.
              Net
      Amounts
              35Section
      11.5.
              Indemnification
      Proceedings
              35Section
      11.6.
              Indemnification
      Exclusive Remedy
              36Section
      11.7.
              Limited
      to Actual Damages
              36Section
      11.8.
              Indemnification
      Despite Negligence
              37Section
      11.9.
              Tax
      Treatment of Indemnification Amounts
              37Section
      11.10.
              Sellers
      Aggregate Indemnity Limits
              37ARTICLE
      XII MISCELLANEOUS MATTERS
              37Section
      12.1.
              Notices
              37Section
      12.2.
              Prorations,
      Deposits and Taxes
              38Section
      12.3.
              Entire
      Agreement
              38Section
      12.4.
              Injunctive
      Relief
              38Section
      12.5.
              Binding
      Effect; Assignment; No Third Party Benefit
              39Section
      12.6.
              Severability
              39Section
      12.7.
              GOVERNING
      LAW
              39Section
      12.8.
              Counterparts
              39
 
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 Section
      12.9.
              WAIVER
      OF CONSUMER RIGHTS
              39Section
      12.10.
              Replacement
      Bonds, Letters of Credit and Guarantees
              40ARTICLE
      XIII DEFINITIONS AND REFERENCES
              40Section
      13.1.
              Certain
      Defined Terms
              40Section
      13.2.
              Certain
      Additional Defined Terms
              46Section
      13.3.
              References,
      Titles and Construction
              47
 
  EXHIBITS
  A           Leases
 B           Excluded
Assets
 C           Allocation
of Purchase Price
 D           Form
of Assignment
 
  SCHEDULES
  4           Sellers
Disclosure Schedule
 4.6           Litigation
 4.7           Material
Contracts
 4.9           Taxes
 4.11         Leases
 4.12         Imbalances
 4.13         Current
Commitments
 4.16         Preferential
Rights and Consents
 12.10    
Sellers Bonds
 13.1(a)  Sellers’
Knowledge
 13.1(b)Buyer’s
Knowledge
 
  Execution
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  ASSET
PURCHASE AND SALE AGREEMENT
  THIS ASSET PURCHASE AND SALE
AGREEMENT dated October 9, 2008, is made by and between Linn Energy
Holdings, LLC, a Delaware limited liability company (“LEH”), Midcontinent I, LLC, an
Oklahoma limited liability company, Midcontinent II, LLC, an Oklahoma limited
liability company, and Linn Operating, Inc., a Delaware corporation (“LOI”) (collectively “Sellers”), and Devon Energy
Production Company, LP, an Oklahoma limited partnership (“Buyer”).
  RECITALS:
  A.Sellers desire
to sell, assign and convey to Buyer, and Buyer desires to purchase and accept
from Sellers, certain oil and gas properties located in Blaine, Caddo, Canadian,
Grady and Kingfisher Counties, Oklahoma.
  B.Sellers and
Buyer deem it in their mutual best interests to execute and deliver this
Agreement.
  NOW, THEREFORE, in
consideration of the foregoing Recitals and the mutual covenants and agreements
contained herein, Sellers and Buyer do hereby agree as follows:
  ARTICLE
I
 Properties To Be Sold and
Purchased
  Section
1.1.                               Assets
Included.
  Subject
to Section 1.2,
Sellers agree to sell and Buyer agrees to purchase, for the consideration
hereinafter set forth, and subject to the terms and provisions herein contained,
the following described properties, rights and interests:
 
 (a)           All
right, title and interest of Sellers in and to the Leases described on Exhibit A
attached hereto (and any ratifications, extensions, renewals, and/or amendments
to such Leases, whether or not such ratifications, extensions, renewals, or
amendments are described on Exhibit A (the “Subject Leases”), but insofar
only as the Subject Leases cover, include or pertain to the Deep Rights,
together with a right of ingress and egress through the Shallow Zones for the
purpose of accessing, drilling to, testing, completing in, producing from,
reworking, and exploiting the Deep Zones;
  (b)           Without
limitation of the foregoing but subject to Section 1.2, all
other right, title and interest (of whatever kind or character, whether legal or
equitable, and whether vested or contingent) of Sellers in and to the oil, gas,
and other minerals in and under or that may be produced from the Deep Zones of
or underlying (1) the lands described in Exhibit Ahereto or described in
or covered by any of the Subject Leases, and/or (2) any lands spaced, pooled or
unitized with any of those lands (collectively, the “Lands”) (including interests
and rights in or attributable to the Subject Leases, overriding royalties,
production payments, operating rights, working interests, leasehold cost-bearing
interests, and net profits interests in the Lands or the Subject Leases, and
fee
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  mineral
interests, fee and term royalty interests, and other interests insofar as they
cover or are entitled to share in the production or proceeds of production of
Hydrocarbons derived from or attributable to the Deep Zones of the Lands), even
though Sellers’ interest therein may be incorrectly described in, or omitted
from, Exhibit
A;
  (c)           All
rights, titles and interests of Sellers in and to, or otherwise derived from all
oil, gas, or mineral unitization, pooling, or communitization agreements,
declarations, and/or orders and in and to the properties covered and the units
created thereby (including all units formed under orders, rules, regulations, or
other official acts of any Governmental Entity having jurisdiction, voluntary
unitization agreements, designations and/or declarations) existing and valid as
of the Closing Date that are related to any of the properties described in Sections 1.1(a) or
(b) above, but
only as any of the foregoing relate to the Deep Rights;
  (d)           All
rights, titles and interests of Sellers in and to, or otherwise derived from all
contracts and agreements related to the Oil and Gas Properties, including but
not limited to the Material Contracts, that may be transferred to and assumed by
Buyer without resulting in any breach or violation by Seller or Buyer of any
obligation or requirement therein, or Applicable Law, but only to the extent the
same relate to the Deep Rights and only to the extent such rights, titles and
interests may be transferred to and assumed by Buyer without prejudicing
Sellers’ retained rights with respect to the Shallow Zones in any material
respect;
  (e)           one
copy of all files, data, documentation, and records (including electronic data)
that directly pertain to the assets, properties, interests and rights described
or referenced in Sections 1.1(a), (b), (c),
(d) and/or (f), and are in the
possession or under the control of any Seller or any Affiliate of any Seller,
including lease files, land files, division order files, abstracts, title files,
and accounting records, but excluding any of the files, data, documentation, and
records which constitute any of the “Excluded Assets” (as defined in Section
1.2) (the “Records”);
  (f)           a
right to use any of surface use agreements, easements, rights of way, licenses,
authorizations, permits, and similar rights and interests held by Sellers that
are applicable to, or used in connection with the Oil and Gas Properties, but
only insofar as Sellers can transfer to or confer on Buyer the right to such use
or such use by Buyer would not limit Seller’s use as respect the Excluded Assets
in any material respect (collectively, the “Surface Contracts”);
and
  (g)           all
claims, rights, and causes of action of Sellers against third parties, asserted
and unasserted, known and unknown, but only to the extent each such claim, right
or cause of action results or arises from any circumstance, matter or event
which could reasonably be expected to adversely affect the value, use or
operation of the “Oil and Gas Properties” (as defined in this Section 1.1) on or
after the Effective Date, but excluding any such claims, rights, and causes of
action which are not assignable or transferable under Applicable
Law.  If necessary to give effect to the assignment of such rights,
claims, and causes of action, Sellers will assign at the Closing to Buyer the
right to be subrogated to such rights, claims, and causes of
action;
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  As used
herein:  (i) “Oil and Gas Properties” means
the properties, assets, rights, and interests described in Sections 1.1(a), (b) and (c) above, save and
except for any such properties or assets that are Excluded Assets; and
(ii) “Properties”
means the Oil and Gas Properties plus the properties and interests described in
Sections 1.1 (d), (e),
(f) and (g) above, save and except for any such properties or assets that
are Excluded Assets.
  Section
1.2.                              Assets
Excluded.
  Notwithstanding
anything herein contained to the contrary, neither the Oil and Gas Properties
nor the Properties include, and there is hereby excepted and reserved unto
Sellers all other assets, properties, and business of Sellers, including the
following:
 
 (a)           All
right, title and interest of Sellers in the Subject Leases and Lands to the
extent covering, including or pertaining to the Shallow Zones, together with a
right to use the Surface Contracts to access the same;
  (b)           All
right, title and interest of Sellers in and to the wellbores only of all wells
located on the Oil and Gas Properties that are, as of the Effective Date,
producing from or completed in and capable of producing from the Deep Zones (the
“Existing Deep Wells”),
together with all associated production of Hydrocarbons from those wellbores and
the right to complete, recomplete or re-enter any Existing Deep Well, but not
the right to deepen or sidetrack any Existing Deep Well; and, further, together
with so much of those rights, titles and interests described in Sections 1.1(a),
1.1(b) and
1.1(c) insofar
as and only insofar as the same pertain to the wellbores only of the Existing
Deep Wells and the associated production of Hydrocarbons therefrom, and together
with so much of the rights, titles and interests derived from contracts and
agreements described in Section 1.1(d) insofar as and only insofar as the same
pertains to the wellbores only of the Existing Deep Wells and the right of
production of Hydrocarbons therefrom;
  (c)           All
right, title and interest of Sellers in all equipment, machinery, fixtures,
facilities, and other tangible personal property and improvements located in,
on, or under the Properties or used or held for use in connection with the
operation of the Properties, including, but not limited to pumps, well equipment
(surface and subsurface), saltwater disposal wells, lines and facilities, sulfur
recovery facilities, compressors, compressor stations, dehydration facilities,
treating facilities, pipeline gathering lines, flow lines, transportation lines
(including long lines and laterals), valves, meters, separators, tanks, tank
batteries, buildings, roads, and other fixtures;
  (d)           Any
accounts receivable or accounts payable accruing before the Effective
Date;
  (e)           All
of Sellers’ right, title, and interest in any Leases, overriding royalties,
production payments, net profits interests, fee or term mineral interests, fee
or term royalty interests and other interests in oil, gas, and other minerals
not expressly included in the definition of Oil and Gas Properties and all oil,
gas or other hydrocarbon production from or attributable to the Properties with
respect to all periods prior to the Effective Date, all proceeds attributable
thereto, and all Hydrocarbons that, at the
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  Effective
Date, are owned by Sellers and are in storage or within processing plants or in
flow lines, gathering systems or transmission pipelines;
  (f)           Any
rebate or refund of costs, Taxes, or expenses borne by Sellers or Sellers’
predecessors in title attributable to periods prior to the Effective
Date;
  (g)           All
contracts of insurance or indemnity;
  (h)           All
claims (including insurance claims) and causes of action of Sellers against one
or more third parties arising from acts, omission, or events occurring prior to
the Effective Date and all claims under any joint interest audit attributable to
any period prior to the Effective Date), except for the claims and causes of
action described in Section 1.1(g);
  (i)           All
limited liability company, financial, tax, and legal (other than title) books
and records of Sellers;
  (j)           Any
geological, geophysical or seismic data, materials, or information, including
maps, interpretations, records, or other technical information related to or
based upon any such data, materials or information, and any other asset, data,
materials, or information, the transfer of which is restricted or prohibited
under the terms of any third party license, confidentiality agreement, or other
agreement or the transfer of which would require the payment of a fee or other
consideration to any third party; provided, however, that if any such data,
materials, or information is transferable upon payment of a fee or other
consideration, and if Buyer has paid such fee or other consideration prior to
the Closing Date, then such data, materials, or information shall be transferred
to Buyer;
  (k)           All
share drive and accounting servers related to the Properties regardless of where
such servers are located;
  (l)           All
of Sellers’ accounting or other administrative systems, computer software,
patents, trade secrets, copyrights, names, trademarks, logos, and other
intellectual property;
  (m)           All
documents and instruments of Sellers that may be protected by an attorney-client
privilege (exclusive of title opinions in respect of the Oil and Gas Properties
and all documents and instruments related to any matters in Sellers Disclosure
Schedule, except such documents and instruments as may be subject to a
confidentiality agreement or a protective order);
  (n)           All
of the other properties, interests and assets described on Exhibit B
attached hereto, together with any rights, liabilities, or obligations
associated with such assets;
  (o)           Any
other right or interest in and to the Properties to the extent attributable to
the period prior to the Effective Date, except for rights, claims and causes of
action described in Section 1.1(g);
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  (p)           All
original lease files, title opinions,  and accounting records and
other files that relate to the Properties;
  (q)           All
bonds, letters of credit and guarantees if any, posted by Sellers or any
Affiliate with any Governmental Authority or third person and relating to the
Properties; and
  (r)           All
(i) correspondence or other documents or instruments of Sellers relating to the
transactions contemplated hereby, (ii) lists of other prospective purchasers of
Sellers or the Properties compiled by Sellers, (iii) bids submitted to Sellers
by other prospective purchasers of Sellers or the Properties, (iv) analyses by
Sellers or any Affiliates thereof submitted by other prospective purchasers of
Sellers or the Properties, and (v) correspondence between or among Sellers or
their Affiliates or their respective representatives with respect to, or with,
any other prospective purchasers of Sellers or the Properties.
  The
properties and interests specified in the foregoing paragraphs (a)
through (r) of
this Section 1.2 are
herein collectively called the “Excluded
Assets”.  It is understood that certain of the Excluded Assets
may not be embraced by the term “Properties”.  The fact that certain
assets have been expressly excluded is not intended to suggest that had they not
been excluded they would have constituted Properties and may not be used to
interpret the meaning of any word or phrase used in describing the
Properties.
  Section
1.3.                                Non-Assumption.  Buyer
does not and shall not assume, and shall not be deemed to have assumed any
obligation, undertaking, responsibility or liability of Seller under any
contract or agreement to the extent or insofar as that obligation, undertaking,
responsibility or liability pertains to the Excluded Assets.
  ARTICLE
II
 Purchase
Price
  Section
2.1.                               Purchase
Price.
  In
partial consideration of the sale of the Properties by Sellers to Buyer, Buyer
shall pay to Sellers cash in the amount of Two-Hundred Twenty-Nine Million,
One-Hundred Thirty-Five Thousand, One-Hundred Fifty-Six Dollars
($229,135,156.00) (the “Purchase
Price”).  The Purchase Price, as adjusted pursuant to this
Article II
and the other applicable provisions hereof, is herein called the “Adjusted Purchase
Price”.
 
 Section
2.2.                              Accounting
Adjustments.
  (a)           Subject
to Section
2.2(b), and in addition to other adjustments to the Purchase Price
provided for in this Agreement, including adjustments for Title Defects provided
for in Article
VIII, appropriate adjustments shall be made between Buyer and Sellers so
that:
  (i)           all
direct, non-affiliated third-party expenses reasonably incurred by Sellers for
work done in the drilling and operation of the Oil and Gas
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  Properties
on or after the Effective Date in accordance with this Agreement will be borne
by Buyer, excluding all such third-party expenses to the extent pertaining or
attributable to any of the Excluded Assets, and all production and proceeds (net
of applicable gathering, transportation charges as well as production,
severance, and similar Taxes) from the sale of oil, gas or other minerals
produced from the Oil and Gas Properties on or after the Effective Date will be
received by and belong to Buyer, and
  (ii)           all
expenses for work done in the operation of the Oil and Gas Properties before the
Effective Date will be borne by Sellers and all proceeds (net of applicable
production, severance, and similar Taxes) from the sale of oil, gas, or other
minerals produced therefrom before the Effective Date will be received by and
belong to Sellers.
  (b)           It
is agreed that, in making the adjustments contemplated by Section
2.2(a):
  (i)           ad
valorem Taxes assessed with respect to a period which begins before and ends on
or after the Effective Date shall be prorated based on the number of days in
such period which fall on each side of the Effective Date (with the day on which
the Effective Date falls being counted in the period after the Effective Date),
and
  (ii)           no
consideration shall be given to the local, state, or federal income tax
liabilities of any party.
  Notwithstanding
any other provision in this Agreement to the contrary, Buyer shall not have any
obligation, responsibility, liability or undertaking for any cost or expense
incurred in connection with the ownership, use or operation of any Excluded
Assets, including the Existing Deep Wells.
  Section
2.3.                                Closing
and Post-Closing Accounting Settlements.
  (a)           No
later than three (3) business days prior to the Closing Date, the parties shall
determine, based upon the best information reasonably available to them, the
amount of the adjustments provided for in Section 2.2 and,
any other adjustments provided in this Agreement to be made at the Closing to
the Purchase Price.If the amount of
adjustments so determined which would result in a credit to Buyer exceed the
amount of adjustments so determined which would result in a credit to Sellers,
Buyer shall receive a credit, for the amount of such excess, against the
Purchase Price to be paid at Closing, and, if the converse is true, Buyer shall
pay to Sellers, at Closing (in addition to amounts otherwise then owed), the
amount of such excess.  If the parties are unable to resolve any
disagreement concerning any proposed Purchase Price adjustment provided for in
or to be made pursuant to Section 2.2 at the
Closing (excluding any adjustment provided for elsewhere in this Agreement, such
as an adjustment resulting from a Title Defect ) then the amount of the
adjustment to the Purchase Price with respect to all disputed items shall be the
amount that is midway between Sellers’ and Buyer’s good faith proposed
adjustment with respect to such disputed items.
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  (b)           On
or before 120 days after Closing, Buyer and Sellers shall review any additional
information which may then be available pertaining to the adjustments provided
for in Section 2.2 and
elsewhere in this Agreement, shall determine if any additional adjustments
(whether the same be made to account for expenses or revenues not considered in
making the adjustments made at Closing, or to correct errors made in such
adjustments) should be made beyond those made at Closing, and shall make any
such adjustments by appropriate payments from Sellers to Buyer or from Buyer to
Sellers.Following
such additional adjustments, no further adjustments to the Purchase Price shall
be made under this Section 2.3.  This
Section 2.3
shall not apply or pertain to any Party’s rights or obligations under Article XI, or with
respect to any breach by any Party of any of its obligations, undertakings,
representations or warranties contained in this Agreement.
  (c)           If
a dispute arises under Section 2.3(b)
with respect to any additional adjustments (an “Accounting Dispute”) that the
parties have been unable to resolve prior to the end of the 120-day period in
Section 2.3(b)
above, except and excluding any dispute concerning any adjustment resulting from
any Title Defect or alleged Title Defect, which shall be handled and resolved in
accordance with Section 8.2, then any party shall have the right, by written
notice to the other specifying in reasonable detail the basis for the Accounting
Dispute, to resolve the Accounting Dispute by submission thereof to a
independent public accounting firm mutually agreeable to the parties, which firm
shall serve as sole arbitrator (the “Accounting
Referee”).  The scope of the Accounting Referee’s engagement
shall be limited to the resolution of the items described in the notice of the
Accounting Dispute given in accordance with the foregoing and the corresponding
calculation of the adjustments pursuant to Section
2.2.  The Accounting Referee shall be instructed by the parties
to resolve the Accounting Dispute as soon as reasonably practicable in light of
the circumstances but in no event in excess of 15 days following the submission
of the Accounting Dispute to the Accounting Referee.  The decision and
award of the Accounting Referee shall be binding upon the parties as an award
under the Federal Arbitration Act and final and nonappealable to the maximum
extent permitted by Applicable Law, and judgment thereon may be entered in a
court of competent jurisdiction and enforced by any party as a final judgment of
such court.  The fees and expenses of the Accounting Referee shall be
borne equally by Sellers, on the one hand, and Buyer, on the other
hand.
  Section
2.4.                                Payment
of Adjusted Purchase Price.
  The
Adjusted Purchase Price shall be paid to Sellers as follows:
 
 (a)           Within
one Business Day after the execution and delivery of this Agreement, Buyer shall
tender to the Escrow Agent cash equal to five percent (5%) of the Purchase Price
as a deposit (such amount, together with all interest earned thereon, the “Deposit”) to be held by Escrow
Agent pursuant to the Escrow Agreement.  The Deposit shall (i) be
applied against the Adjusted Purchase Price owing by Buyer at the Closing
pursuant to Section
2.4(b), (ii) retained by Sellers pursuant to Section 10.2, or
(iii) returned to Buyer pursuant to Section 10.2, as
applicable.
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  (b)           At
the Closing, Buyer shall pay to Sellers cash equal to the Adjusted Purchase
Price, less the sum of the Deposit, as determined by the parties pursuant to
Section
2.3(a).  At Closing, the Deposit will become the Holdback
Amount referenced in Section
8.6(d).  The Holdback Amount will be released to Buyer or
Sellers in accordance with Section
­­­8.6(d).
  (c)           All
cash payments by Buyer pursuant to this Section 2.4
shall be made in immediately available funds by confirmed wire transfer to a
bank account or accounts designated by Sellers, as applicable.
  Section
2.5.                                Allocation
of Purchase Price.
  Buyer and
Sellers have agreed as to the allocation of the Adjusted Purchase Price among
the Properties under the methodology required by Section 1060 of the
Code.  Such agreed allocation is set forth on Exhibit C attached
hereto.  The Buyer and Sellers shall report the transactions
contemplated hereby on all Tax Returns, including, but not limited to Form 8594,
in a manner consistent with such allocation.  If, contrary to the
intent of the parties hereto as expressed in this Section 2.5, any
taxing authority makes or proposes an allocation different from the allocation
determined under this Section 2.5,
Buyer and Sellers shall cooperate with each other in good faith to contest such
taxing authority’s allocation (or proposed allocation), provided, however, that,
after consultation with the party adversely affected by such allocation (or
proposed allocation), the other party hereto may file such protective claims or
Tax Returns as may be reasonably required to protect its interests.
  ARTICLE
III
 The
Closing
  The
closing of the transactions contemplated hereby (the “Closing”) shall take place
(i) at the offices of Sellers at 600 Travis Street, Suite 5100, Houston,
Texas 77002, at 10:00 a.m. (local Houston, Texas time) on November 24, 2008, or
(ii) at such other time or place or on such other date as the parties
hereto shall agree.  The date on which the Closing is required to take
place is herein referred to as the “Closing Date”.  All
Closing transactions shall be deemed to have occurred
simultaneously.
  ARTICLE
IV
 Representations and
Warranties of Sellers
  Except as
provided in Sellers Disclosure Schedule, each Seller hereby represents and
warrants to Buyer as follows:
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  Section
4.1.                                Organization
and Existence.
  Seller is
a limited liability company or corporation duly formed or organized, validly
existing, and in good standing under the Applicable Laws of the State of
Delaware or the State of Oklahoma.  Seller is duly qualified to do
business in Oklahoma and duly qualified to do business and in good standing in
each jurisdiction in which either the ownership or use of its properties, or the
nature of its activities, requires such qualification under Applicable Law,
except where the failure to be so qualified or in good standing will not in any
manner impair Seller’s ability to consummate the transactions contemplated
hereby by Seller in accordance with this Agreement or result in Buyer incurring
any loss or liability in connection therewith.
 
 Section
4.2.                                Power and
Authority.
  Seller
has all requisite corporate or limited liability company power and authority to
execute, deliver, and perform this Agreement, the Assignment, and each other
agreement, instrument, or document executed or to be executed by Seller in
connection with the transactions contemplated hereby to which it is a party, to
own and operate its assets and properties, including the Properties, and to
consummate the transactions contemplated hereby and thereby.  The
execution, delivery, and performance by Seller of this Agreement, the
Assignment, and each other agreement, instrument, or document executed or to be
executed by Seller in connection with the transactions contemplated hereby to
which it is a party, and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary action of
Seller.
 
 Section
4.3.                                Valid and
Binding Agreement.
  This
Agreement has been duly executed and delivered by Seller and constitutes, and
the Assignment and each other agreement, instrument, or document executed or to
be executed by Seller in connection with the transactions contemplated hereby to
which it is a party has been, or when executed will be, duly executed and
delivered by Seller and constitutes, or when executed and delivered will
constitute, a valid and legally binding obligation of Seller, enforceable
against it in accordance with their respective terms, except that such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium, and similar laws affecting creditors’ rights
generally and (b) equitable principles which may limit the availability of
certain equitable remedies (such as specific performance) in certain
instances.
 
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  Section
4.4.                                Non-Contravention.
  Other
than requirements (if any) that there be obtained consents to assignment (or
waivers of preferential rights to purchase) from third parties, neither the
execution, delivery, and performance by Seller of this Agreement, the
Assignment, and each other agreement, instrument, or document executed or to
Sellers’ Knowledge to be executed by Seller in connection with the transactions
contemplated hereby to which it is, a party nor the consummation by it of the
transactions contemplated hereby and thereby do and will (a) conflict with
or result in a violation of Seller’s Governing Documents, (b) materially
conflict with or result in a material violation of any provision of, or
constitute (with or without the giving of notice or the passage of time or both)
a material default under, or give rise (with or without the giving of notice or
the passage of time or both) to any right of termination, cancellation, or
acceleration under, any bond, debenture, note, mortgage or indenture, or any
material lease, contract, agreement, or other instrument or obligation to which
Seller is a party or by which any Seller or any of its properties may be bound,
(c) result in the creation or imposition of any Lien or other encumbrance
upon any of the Properties, or (d) result in a material violation of any
Applicable Law binding upon the Seller.
 
 Section
4.5.                                Approvals.
  Other
than requirements (if any) that there be obtained consents to assignment (or
waivers of preferential rights to purchase), from third parties and except for
approvals required to be obtained from Governmental Entities who are lessors
under leases forming a part of the Oil and Gas Properties (or who administer
such leases on behalf of such lessors) which are customarily obtained after the
consummation of the purchase and sale of oil and gas properties consisting in
part of such type of leases and compliance with the qualification requirements
to obtain such approvals, no material consent, approval, order, or authorization
of, or declaration, filing, or registration with, any court or other
Governmental Entity or of any third party is required to be obtained or made by
Seller in connection with the execution, delivery, or performance by Seller of
this Agreement, the Assignment, each other agreement, instrument, or document
executed or to be executed by Seller in connection with the transactions
contemplated hereby to which they are a party or the consummation by them of the
transactions contemplated hereby or thereby.
  Section
4.6.                                Litigation.
  Except as listed on
Section 4.6 of the Sellers Disclosure Schedule, there are no Proceedings
pending or, to Sellers’ Knowledge, threatened, against or affecting Seller or
the Properties (including any Proceedings pending or threatened (i) challenging
or pertaining to Seller’s title to any of the Properties, (ii) alleging the
violation of any Applicable Law by Seller with respect to its ownership or
operation of any of the Properties, or (iii) affecting the execution and
delivery of this Agreement by Seller or the consummation of the transactions
contemplated hereby by Seller.
 
 Section
4.7.                                Contracts.
  Section
4.7 of Sellers Disclosure Schedule identifies and lists all Material
Contracts.  To Sellers’ Knowledge, none of the Sellers is in material
breach of or material default under any Material Contract except as disclosed on
Section 4.7 of the Sellers Disclosure Schedule.  To Sellers’
Knowledge, all Material Contracts are in full force and
effect.  Except as disclosed on Section
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  4.7 of
the Sellers Disclosure Schedule, there are no hedges, futures, options, swaps or
other derivatives with respect to the sale of production that will be binding on
Sellers (or Buyer as Sellers’ transferee) or the Properties after
Closing.  To Sellers’ Knowledge, the Records include a true and
complete copy of each of the Material Contracts.  No notice of default
or breach has been received or delivered by Seller under any Material Contract,
the resolution of which is currently outstanding, and no currently effective
notices have been received by Seller of the exercise of any premature
termination, price redetermination, market-out or curtailment of any Material
Contract.
 
 Section
4.8.                                Compliance
with Laws.
  The
ownership, use, and operation of the Oil and Gas Properties and the Surface
Contracts by Seller and its respective Affiliates have been in compliance in all
material respects with all Applicable Laws.
 
 Section
4.9.                                Taxes.
  (a)           Except
as set forth in Section 4.9 of the Sellers Disclosure Schedule and excluding
gross production taxes withheld and remitted by first purchasers or other
Persons, all ad valorem (but excluding ad valorem taxes pertaining to
non-producing leases) and severance Taxes due and payable for the Properties
have been timely paid in accordance with Applicable Laws and are not delinquent,
or if not paid, are being contested in good faith by one or more of the
Sellers.
  (b)           With
respect to all Taxes related to the Properties, but excluding gross production
taxes withheld and remitted by first purchasers or other Persons, (i) all
material Tax Returns relating to the Properties required to be filed on or
before the Effective Date by Sellers with respect to any Taxes for any period
ending on or before the Effective Date have been timely filed with the
appropriate Governmental Entity, (ii) to Sellers Knowledge such Tax Returns
are true and correct in all respects, and (iii) all Taxes reported on such
Tax Returns have been paid or provided for, except those being contested in good
faith.
  (c)           With
respect to all Taxes related to the Properties (i) there are not currently
in effect any extension or waiver by Sellers of any statute of limitations of
any jurisdiction regarding the assessment or collection of any Tax related to
the Properties, and (ii) there are no administrative Proceedings or
lawsuits pending against the Properties or Sellers with respect to the
Properties by any taxing authority.
  (d)           None
of the Properties were bound as of the Effective Date or will be bound at
Closing by any tax partnership agreement binding upon Sellers that would
preclude Sellers form being entitled to dispose of the property.
  Section
4.10.                                Net Revenue Interest in
Leases.
  To the
extent any of the Subject Leases were acquired by Sellers or their Affiliates
pursuant to the Dominion PSA (such Subject Leases referred to herein as the
“Dominion Heritage
Leases”), the Net Revenue Interest attributable to each such Dominion
Heritage Lease has not been
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  reduced
by any of Sellers or any such Affiliates between the acquisition of such Leases
and the current date without a corresponding reduction in the Working Interest
attributable to such Dominion Heritage Leases, except for changes or adjustments
that result from the establishment of units, changes in existing units (or the
participating areas therein), or the entry into of pooling or unitization
agreements.  Sellers have provided Buyer with Sellers’ estimated
current Net Revenue Interest attributable to the Dominion Heritage Leases on
Exhibit C hereto; provided, however, that Sellers and Buyer recognize that Net
Revenue Interests provided on Exhibit C are for illustration only, and Buyer is
not entitled to rely on the Net Revenue Interests provided on Exhibit C for any
purpose.
  Section
4.11.                                Leases.
  Except as
set forth in Section 4.11 of Sellers Disclosure Schedule, (i) each of the
Subject Leases identified at Exhibit “A” is either in its stated primary term or
held by production if beyond its stated primary term, and (ii) Seller has
complied in all material respects with its obligations under those Subject
Leases.
 
 Section
4.12.                                Prepayments;
Imbalances
  Other
than royalties, overrides or similar arrangements reflected in Exhibit A, none
of the Oil and Gas Properties are subject to any outstanding obligations for the
future delivery of any of the Hydrocarbons attributable or allocable to any of
the Subject Leases as a result or on account of any deficiency payments,
prepayment, advance payment, take-or-pay payment or similar payment heretofore
received by Seller and, to Sellers’ Knowledge, no payments for production of
Hydrocarbons attributable to any Seller’s interest in the Subject Leases have
been received which are subject to refund or recoupment out of future
production.  Except as identified in Section 4.12 of Sellers
Disclosure Schedule, there are no Imbalances.
  Section
4.13.                                Current
Commitments.
  Section
4.13 of the Sellers Disclosure Schedule contains a true and complete list of (i)
all currently outstanding or pending proposals received or made by Seller with
respect to the drilling of any well (excluding the Existing Deep Wells) to any
of the Deep Zones as of the date of this Agreement and (ii) all authorizations
for expenditures received or prepared by Sellers for currently proposed or
on-going operations or capital expenditures with respect to any of the Oil and
Gas Properties by any Person, including Seller.  Except for (i) the
continuing operations conducted at the Oil and Gas Properties in the ordinary
course, (ii) operations conducted at the Properties before the date hereof, and
(iii) any operation at the Oil and Gas Properties necessary to address an
emergency, Seller has not become legally obligated as of the date hereof to
expend in excess of Twenty-Five Thousand Dollars ($25,000.00) (net to Seller’s
interest in the pertinent Oil and Gas Properties) in connection with any
operation conducted after the Effective Date with respect to the Oil and Gas
Properties other than the commitments disclosed on Section 4.13.
  Section
4.14.                                Environmental
Matters.
  (a)           To
Sellers’ Knowledge, the Properties and any operations conducted with respect to
the Properties are and, within the time periods specified under all
applicable
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  statutes
of limitations, have been in compliance in all material respects with all
applicable Environmental Laws and are not subject to any material Environmental
Liabilities.
  (b)           Sellers
have made available to Buyer complete and correct copies of all environmental
site assessment reports, studies, analyses, and correspondence concerning
alleged environmental matters (including any alleged non-compliance with any
Environmental Law, any alleged exposure to Hazardous Materials, or any release,
threatened release, or disposal of Hazardous Materials) that are in the
possession or control of Sellers or any Affiliate of Sellers and relate to the
ownership or operation of the Properties.
  Section
4.15.                                Fees and
Commissions.
  Buyer
will have no responsibility for payment of any broker’s, finder’s, financial
advisors’ or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon any arrangements made by or on behalf
of Sellers.
 
 Section
4.16.                                Preferential Rights and
Consents
  Except
for approvals required to be obtained from Governmental Entities that are
customarily obtained after the consummation of a purchase and sale, Section 4.16
of the Sellers’ Disclosure Schedule lists all preferential rights to purchase or
required third-party consents to assignment, which may be applicable to the
transactions contemplated by this Agreement.
  Section
4.17.                                Disclaimer
of Warranties.
  Other
than those expressly set out in this Article IV, and
the special warranty of title included in the Assignment, Sellers hereby
expressly disclaim any and all representations or warranties with respect to the
Properties or the transactions contemplated hereby.  In addition, each
Seller’s liability under the special warranty of title shall be limited to those
Properties specifically sold or conveyed or purported to be sold or conveyed by
that Seller.  As respects any representation or warranty (express,
implied, under Law or otherwise), Buyer agrees that the Properties are being
sold by each Seller “where is” and “as is”, with all faults, subject only to the
representations and warranties in this Article IV, and the
special warranty of title contained in the Assignment.  Specifically
as a part of (but not in limitation of) the foregoing, except as otherwise
provided in this Article IV and the
special warranty of title contained in the Assignment, Buyer acknowledges that
Sellers have not made, and Sellers hereby expressly disclaim, any representation
or warranty (express, implied, under common law, by statute or otherwise) as to
the title or condition of the Properties (INCLUDING ANY IMPLIED OR EXPRESS
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR CONFORMITY TO
MODELS OR SAMPLES OF MATERIALS).  OTHER THAN THOSE EXPRESSLY SET OUT IN
THISARTICLE IV, SELLERS MAKE NO REPRESENTATION OR
WARRANTY AS TO (I) THE AMOUNT, VALUE, QUALITY, QUANTITY, VOLUME, OR
DELIVERABILITY OF ANY OIL, GAS, OR OTHER MINERALS OR RESERVES (IF ANY) IN,
UNDER, OR ATTRIBUTABLE TO THE PROPERTIES, (II) THE PHYSICAL, OPERATING,
REGULATORY COMPLIANCE, SAFETY, OR ENVIRONMENTAL CONDITION OF THE PROPERTIES,
BOTH SURFACE
AND SUBSURFACE, INCLUDING MATTERS RELATED TO THE
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  PRESENCE, RELEASE OR DISPOSAL OF
HAZARDOUS MATERIALS, SOLID WASTES, ASBESTOS OR NATURALLY OCCURRING RADIOACTIVE
MATERIALS (“NORM”), OR (III) THE GEOLOGICAL OR
ENGINEERING CONDITION OF THE PROPERTIES OR ANY VALUE THEREOF.  SELLERS
MAKE NO WARRANTY OR REPRESENTATION, EXPRESS, STATUTORY, OR IMPLIED, AS TO
(A) THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA, INFORMATION, OR
RECORDS FURNISHED TO BUYER IN CONNECTION WITH THE PROPERTIES OR OTHERWISE
CONSTITUTING A PORTION OF THE PROPERTIES; (B) THE PRESENCE, QUALITY, AND
QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE PROPERTIES;
(C) THE ABILITY OF THE PROPERTIES TO PRODUCE HYDROCARBONS, INCLUDING
PRODUCTION RATES, DECLINE RATES, AND RECOMPLETION OPPORTUNITIES;
(D) IMBALANCE OR PAYOUT ACCOUNT INFORMATION, ALLOWABLES, OR OTHER
REGULATORY MATTERS, (E) THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED
INCOME, COSTS, OR PROFITS, IF ANY, TO BE DERIVED FROM THE PROPERTIES,
(F) THE ENVIRONMENTAL CONDITION OF THE PROPERTIES, (G) ANY PROJECTIONS
AS TO EVENTS THAT COULD OR COULD NOT OCCUR, (H) ANY OTHER MATTERS CONTAINED
IN OR OMITTED FROM ANY INFORMATION OR MATERIAL FURNISHED TO BUYER BY SELLERS OR
OTHERWISE CONSTITUTING A PORTION OF THE PROPERTIES, OR (I) ANY PORTION OF THE
PROPERTIES OTHER THAN THE PORTIONS OF THE PROPERTIES BEING SOLD OR CONVEYED BY
THAT PARTICULAR SELLER.  ANY DATA, INFORMATION, OR OTHER RECORDS
FURNISHEDBY SELLERS ARE PROVIDED TO BUYER AS A
CONVENIENCE AND BUYER’S RELIANCE ON OR USE OF THE SAME IS AT BUYER’S SOLE RISK,
EXCEPT SELLERS HEREBY REPRESENT TO BUYER THAT NO SELLER HAS FURNISHED OR WILL
INTENTIONALLY FURNISH BUYER WITH ANY RECORDS, INFORMATION OR DATA WITH THE
INTENT TO MISLEAD BUYER IN CONNECTION WITH BUYER’S DILIGENCE OF THE OIL AND GAS
PROPERTIES.
 
 Section
4.18.                                Disclosures.
  The
matters set forth on the Sellers Disclosure Schedule are not necessarily matters
that Sellers are required to disclose or matters that would constitute a breach
of any representation or warranty had such matters not been
disclosed.
 
 ARTICLE
V
 Representations and
Warranties of Buyer
  Section
5.1.                                Organization
and Existence.
  Buyer is
a limited partnership, duly organized, legally existing and in good standing
under the Applicable Laws of the State of Oklahoma, and is qualified to do
business and in good standing in Oklahoma.  Buyer is also qualified to
own and operate oil and gas properties with all applicable Governmental Entities
having jurisdiction over the Properties, to the extent such qualification is
necessary or appropriate or will be necessary or appropriate upon consummation
of the transactions contemplated hereby.
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  Section
5.2.                                Power and
Authority.
  Buyer has
full corporate power and authority to execute, deliver, and perform this
Agreement and each other agreement, instrument, or document executed or to be
executed by Buyer in connection with the transactions contemplated hereby to
which it is a party, and the power and authority to own and operate oil and gas
properties, and to consummate the transactions contemplated hereby and
thereby.  The execution, delivery, and performance by Buyer of this
Agreement and each other agreement, instrument, or document executed or to be
executed by Buyer in connection with the transactions contemplated hereby to
which it is a party, and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action
of Buyer.
 
 Section
5.3.                                Valid and
Binding Agreement.
  This
Agreement has been duly executed and delivered by Buyer and constitutes, and
each other agreement, instrument, or document executed or to be executed by
Buyer in connection with the transactions contemplated hereby to which it is a
party has been, or when executed will be, duly executed and delivered by Buyer
and constitutes, or when executed and delivered will constitute, a valid and
legally binding obligation of Buyer, enforceable against it in accordance with
their respective terms, except that such enforceability may be limited by
(a) applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws affecting creditors’ rights generally, and (b) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances.
 
 Section
5.4.                                Non-Contravention.
  Neither
the execution, delivery, and performance by Buyer of this Agreement and each
other agreement, instrument, or document executed or to Buyer’s Knowledge to be
executed by Buyer in connection with the transactions contemplated hereby to
which it is a party and the consummation by it of the transactions contemplated
hereby and thereby do not and will not (i) conflict with or result in a
violation of Buyer’s Governing Documents, (ii) conflict with or result in a
violation of any provision of, or constitute (with or without the giving of
notice or the passage of time or both) a default under, or give rise (with or
without the giving of notice or the passage of time or both) to any right of
termination, cancellation, or acceleration under, any bond, debenture, note,
mortgage, indenture, or any material lease, contract, agreement, or other
instrument or obligation to which Buyer is a party or by which Buyer or any of
its properties may be bound, (iii) result in the creation or imposition of
any lien or other encumbrance upon the properties of Buyer, or
(iv) violate any Applicable Law binding upon Buyer, except, in the instance
of clauses (ii) and (iii) above, for which any such conflicts, violations,
defaults, terminations, cancellations or accelerations which would not, prevent
or impair the sale of the Properties to Buyer or the delivery of the Adjusted
Purchase Price to Sellers.
 
 Section
5.5.                                Approvals.
  Other
than requirements (if any) that there be obtained consents to assignment (or
waivers of preferential rights to purchase) from third parties, no consent,
approval, order, or authorization of, or declaration, filing, or registration
with, any court or governmental agency or of any third
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  party is
required to be obtained or made by Buyer in connection with the execution,
delivery, or performance by Buyer of this Agreement and each other agreement,
instrument, or document executed or to be executed by Buyer in connection with
the transactions contemplated hereby to which it is a party or the consummation
by it of the transactions contemplated hereby and thereby, except, for such
consents, approvals, orders, authorizations, declarations, filings, or
registrations which, if not obtained or made (as applicable), would not, prevent
or impair the sale of the Properties to Buyer or the delivery of the Adjusted
Purchase Price to Sellers.
 
 Section
5.6.                                Pending
Litigation.
  There are
no Proceedings pending or, to Buyer’s Knowledge, threatened against or affecting
the execution and delivery of this Agreement by Buyer or the consummation of the
transactions contemplated hereby by Buyer.
 
 Section
5.7.                                Knowledgeable
Purchaser.
  Buyer is
a knowledgeable purchaser, owner and operator of oil and gas properties, has the
ability to evaluate the Properties for purchase.  Buyer is an
“accredited investor,” as defined in Regulation D promulgated pursuant to the
Securities Act, and is acquiring the Properties for its own account and not with
the intent to make a distribution within the meaning of the Securities Act (and
the rules and regulations pertaining thereto) or a distribution thereof in
violation of any other applicable securities laws.  At Closing, Buyer
will have had access, if allowed and as facilitated and directed by Sellers, to
the Properties, the pertinent officers and consultants of Sellers, and the
books, records, and files of Sellers relating to the Properties.  In
making the decision to enter into this Agreement Buyer has relied, and in making
its decision to consummate the transactions contemplated hereby, Buyer will rely
on its own independent due diligence investigation of the Properties and has
been and will be advised by and has relied and will rely solely on the terms and
conditions of this Agreement, and all documents to be delivered by Sellers
pursuant to Sections 9.1(c), (e), (f), (g), and (h) and on its own
expertise and legal, land, tax, reservoir engineering, and other professional
counsel concerning this transaction, the Properties and the value
thereof.
 
 Section
5.8.                                Funds.
  Buyer
has, and at the Closing will have, sufficient cash and other sources of
immediately available funds, as are necessary in order to pay the Adjusted
Purchase Price to Sellers at the Closing and otherwise consummate the
transactions contemplated hereby.
 
 Section
5.9.                                Fees and
Commissions.
  No
broker, investment banker, financial advisor or other Person is entitled to any
broker’s, finder’s, financial advisor’s or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Buyer.
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  ARTICLE
VI
 Certain Covenants of Sellers
Pending Closing
  Section
6.1.                                Access to
Files.
  Subject
to the terms of the Confidentiality Agreement and Article IX, from the
date hereof until the Closing Date, Sellers will give Buyer, and its attorneys
and other authorized representatives, access at all reasonable times (which
shall include Sellers’ normal business hours) and in a manner so as to not
interfere in any material respect with the normal business operations of the
Sellers to the Properties and to any well, production, lease, contract, or other
title files, and other files of Sellers pertaining to the ownership or operation
of the Properties for Buyer’s and its attorneys and other authorized
representatives’ inspection and review, and Sellers will use their Reasonable
Best Efforts to arrange for Buyer, and its attorneys and other representatives,
to have reasonable access to any such files in the office of
Sellers.
 
 Section
6.2.                                Conduct
of Operations.
  From the
date hereof until the Closing Date, unless otherwise agreed in writing by Buyer,
Sellers will:
  (a)           comply
in all material respects with all Applicable Laws and Environmental Laws
pertaining to the Properties and the terms and conditions of the Material
Contracts.
   (b)           notify
Buyer of the proposed commencement of the drilling of any oil or gas well having
a target deep in any of the Deep Zones promptly after Sellers have received
notice of that proposal;
   (c)           pay
all Taxes and assessments with respect to the Properties that become due and
payable prior to the Closing Date;
   (d)           respond
to and consult with Buyer with respect to any reasonable request or inquiry made
by Buyer concerning the status of the Oil and Gas Properties or any operations
conducted or proposed to be conducted at the Lands; and
  Section
6.3.                                Restrictions
on Certain Actions.
  From the
date hereof until the Closing Date, Sellers will not, without Buyer’s prior
consent in connection with the Properties:
 
 (a)           expend
any funds, or make any commitments to expend funds (including entering into new
agreements which would obligate Sellers to expend funds), or otherwise incur any
other obligations or liabilities, other than to pay expenses or to incur
liabilities in the ordinary course of business as previously conducted prior to
the date of this Agreement in connection with operation of the Properties after
the Effective Date, except in the event of an emergency requiring immediate
action to protect life or preserve the Properties;
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  (b)           except
where necessary to prevent the termination of a Subject Lease or other material
agreement governing Sellers’ interest in the Properties, propose the drilling of
any additional wells, or propose the deepening, plugging back or reworking of
any existing wells, or propose the conducting of any other operations which
require consent under the applicable operating agreement, or propose the
conducting of any other operations other than the normal operation of the
existing wells on the Oil and Gas Properties, or propose the abandonment of any
wells on the Oil and Gas Properties (and Sellers agree that they will advise
Buyer of any such proposals made by third parties and will respond to each such
proposal made by a third party in the manner requested by Buyer);
  (c)           sell,
transfer, or abandon any portion of the Properties other than items of
materials, supplies, machinery, equipment, improvements, or other personal
property or fixtures forming a part of the Properties (and then only if the same
is replaced with an item of substantially equal suitability, free of liens and
security interests, which replacement item will then, for the purposes of this
Agreement, become part of the Properties);
   (d)           act
in any manner with respect to the Properties other than in the normal, usual and
customary manner, consistent with prior prudent practices (including paying or
causing to be paid all associated costs and expenses of owning, operating and
using the Properties, including those meant to preserve the Properties intact)
and other than in compliance with the Subject Leases and all Applicable
Laws;
   (e)           make
or enter into an agreement, contract or commitment affecting the Deep Rights
(other than with respect to an Existing Deep Well;
   (f)           make
or agree to any material revision, amendment or change to any of the Scheduled
Contracts and Permits;
   (g)           grant
or suffer to exist any Lien upon the Properties (other than Permitted
Encumbrances or any Lien which will be released in full at the
Closing);
   (h)           waive,
compromise or settle any material claim or cause of action if such waiver,
compromise or settlement would adversely affect the value, use, ownership or
operation of any of the Deep Rights in any respect;
   (i)           make
or incur, or agree to make or incur, any expenditure or series or related
expenditures exceeding Twenty-Five Thousand Dollars ($25,000) for which Buyer
will be responsible after the Closing under the terms of this Agreement, except
any expenditure necessary to maintain the Oil and Gas Properties in accordance
with Section 6.3(d) or to address an emergency, or to preserve Sellers interest
in the Shallow Zones; or
  (j)           release
(or permit to terminate), or modify or reduce its rights under, any Subject
Lease, or any Material Contract, or modify any existing production sales
contracts or enter into any new production sales contracts, except contracts
terminable by Sellers with notice of 60 days or less.
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  Without
expanding any obligations that Sellers may have to Buyer, it is expressly agreed
that Sellers shall never have any liability to Buyer with respect to operation
of a Property greater than that which it might have as the operator under the
applicable operating agreement (or, in the absence of such an agreement, under
the AAPL 610 (1989 Revision) form Operating Agreement);
  Section
6.4.                                Payment
of Expenses.
  Sellers
will cause all expenses (including all bills for labor, materials, and supplies
used or furnished for use in connection with the Properties and all severance,
production, and similar Taxes) relating to the ownership or operation of the
Properties prior to the Closing Date to be promptly paid and discharged, except
for expenses disputed by Sellers in good faith.
  
 Section
6.5.                                Preferential
Rights and Third Party Consents.
  Promptly
after the date hereof, Sellers will request, from the appropriate parties (and
in accordance with the documents creating such rights and/or requirements),
waivers of the preferential rights to purchase, or requirements that consent to
assignment be obtained, which are identified in Section 4.16 of the Sellers
Disclosure Schedule and use its Reasonable Best Efforts to obtain such waivers
and consents.  Sellers shall use the Allocated Values to provide
required preferential right to purchase notifications to the holders
thereof.  Sellers shall use its Reasonable Best Efforts to obtain all
such waivers, and if all such waivers (or any other waivers of preferential
rights to purchase or requirements that consent be obtained to assignment, even
if the same are not listed on such Section 4.16) are not obtained, Buyer
may treat any waiver which is not obtained as a matter which causes Sellers’
title to not be sufficient to meet the standards set forth in Article VIII
(except the following shall not apply: the $24,000 threshold provided for in
Section 8.2(a)(ii));
provided, however, that if the unobtained waiver is a waiver of a preferential
right to purchase, and if both Buyer and Sellers agree to this treatment of such
matter (and agree upon an appropriate allocation of the Purchase Price), Sellers
will tender (at the agreed allocated portion of the Purchase Price) the required
interest in the Property affected by such unwaived preferential right to
purchase to the holder, or holders, of such right who have elected not to waive
such preferential right to purchase, and if, and to the extent that, such
preferential right to purchase is exercised by such party or parties, such
interest in such Property will be excluded from the transaction contemplated
hereby and the Purchase Price will be reduced by the greater of the Allocated
Value of such interest in such Property or the amount paid, or to be paid, by
the party exercising such preferential right to purchase (and Sellers shall
collect such amount from such purchaser).  If a third party gives
notice of its intent to exercise a preferential right to purchase any of the
Properties, but does not close the purchase for any reason, either before or
within a reasonable time after the Closing, or if the holder of a preferential
right to purchase any of the Properties is not required by the terms of the
instrument creating that preferential right to make an election to exercise that
preferential right until after the Closing and such holder has not waived that
right or made such election prior to the Closing and, thereafter, does not
exercise that right or close such purchase as required under the terms of that
instrument, then (in either or both circumstances) there shall promptly be an
additional closing between Sellers and Buyer for such Properties pursuant to the
terms of this Agreement, by which Sellers will transfer the applicable
Properties to Buyer and Buyer will promptly pay Sellers the Allocated Value
(subject to the
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  terms and
provisions of this Agreement) for the applicable Properties that was deducted
from the Purchase Price.
 
 ARTICLE
VII
 Additional Pre-Closing and
Post-Closing Agreements of Both Parties
  Section
7.1.                                Reasonable
Best Efforts.
  Each
party hereto agrees that it will not voluntarily undertake any course of action
inconsistent with the provisions or intent of this Agreement and will use its
Reasonable Best Efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things reasonably necessary, proper, or advisable under
Applicable Laws to consummate the transactions contemplated by this Agreement,
including (i) cooperation in determining whether any consents, approvals,
orders, authorizations, waivers, declarations, filings, or registrations of or
with any Governmental Entity or third party are required in connection with the
consummation of the transactions contemplated hereby; (ii) Reasonable Best
Efforts to obtain any such consents approvals, orders, authorizations, and
waivers and to effect any such declarations, filings, and registrations;
(iii) Reasonable Best Efforts to cause to be lifted or rescinded any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby;
(iv) Reasonable Best Efforts to defend, and cooperation in defending, all
Proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby; and (v) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated hereby
including releases in full of all Liens affecting the Properties granted under
or pursuant to the Credit Facility.  Nothing in this Section 7.1 shall be
construed as requiring or obligating any party to waive any condition precedent
to such party’s obligations under this Agreement.
 
 Section
7.2.                                Notice of
Litigation.
  Until the
Closing, (i) Buyer, upon learning of the same, shall promptly notify
Sellers of any Proceeding which is commenced or threatened against Buyer and
which affects this Agreement or the transactions contemplated hereby, and
(ii)  Sellers, upon learning of the same, shall promptly notify Buyer of
any Proceeding which is commenced or threatened against Sellers which affects
this Agreement or the transactions contemplated hereby.
 
 Section
7.3.                                Notification
of Certain Matters.
  Until the
Closing, Sellers shall give prompt notice to Buyer of:  (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which, to Sellers’ Knowledge, would be likely to cause any representation or
warranty made by Sellers in Article IV to be
untrue or inaccurate at or prior to the Closing, and (ii) any failure of
Sellers to comply with or satisfy any covenant, condition, or agreement to be
complied with or satisfied by Sellers hereunder prior to
Closing.  Until the Closing, Buyer shall give prompt notice to Sellers
of:  (i) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which, to Buyer’s Knowledge, would be likely to
cause any representation or warranty contained in Article V to be
untrue or inaccurate at or prior to the Closing, and (ii) any failure of
Buyer to comply with or satisfy any covenant, condition, or agreement to be
complied with or satisfied by Buyer hereunder prior to Closing.  With
respect to Sellers’ representations in Article IV,
any
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  information
contained in such notices from Sellers that affects such representations and
warranties shall be added to the Sellers Disclosure Schedule, as appropriate;
provided, however, that for purposes of determining the satisfaction of any of
the conditions to the obligations of Buyer in Article IX and the
liability of Buyer and Sellers following Closing for breaches of their
respective representations, warranties, and covenants under this Agreement, the
Sellers Disclosure Schedule shall be deemed to include only the information
contained therein on the date of this Agreement, other than any supplemental
information provided for Section 4.13 of the Sellers Disclosure Schedule, to the
extent the same is provided in accordance with this Section
7.3.
 
 Section
7.4.                                Fees and
Expenses.
  (a)           Except
as otherwise provided herein, (i) all fees and expenses incurred in connection
with this Agreement by Sellers will be borne by and paid by Sellers, and (ii)
all fees and expenses incurred in connection with this Agreement by Buyer will
be borne by and paid by Buyer.
  (b)           All
required documentary, filing and recording fees and expenses in connection with
the filing and recording of the Assignment and other instruments required to
convey title to the Properties to Buyer shall be borne by
Buyer.  Buyer shall assume responsibility for, and shall bear and pay,
any applicable state sales and use Taxes (including any applicable interest or
penalties) incurred or imposed with respect to the transactions contemplated by
this Agreement.
  Section
7.5.                                Public
Announcements.
  Except as
may be required by Applicable Law, neither Buyer nor Sellers shall issue any
press release or otherwise make any statement to the public generally with
respect to this Agreement or the transactions contemplated hereby without the
prior consent of the other party (which consent shall not be unreasonably
withheld and which consent, if given verbally, shall be confirmed in writing
within one Business Day thereafter).  Any such press release or
statement required by Applicable Law shall only be made after reasonable notice
to the other parties and after the other parties or party have had a reasonable
time to review, comment upon and make reasonable revisions to a draft of the
press release or statement.
  Section
7.6.                                Casualty Loss Prior to
Closing.
  In the
event of damage by fire or other casualty to any of the Properties after the
Effective Date and prior to the Closing, then this Agreement shall remain in
full force and effect, and (unless Buyer and Sellers shall otherwise agree) in
such event:
 
 (a)           as
to each such Property so damaged which is an Oil and Gas Property, then, at
Sellers’ election, either (i) such Property shall be treated as if it had
an asserted Title Defect associated with it and the procedure provided for in
Article VIII
shall be applicable thereto (except the following shall not apply: the $24,000
threshold provided for in Section 8.2(a)(ii), or
(ii) the Purchase Price will not be adjusted, and if Sellers should be
entitled to make any claims under any insurance policy with respect to
such
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  damage,
Sellers shall, at Sellers’ election, either collect (and when collected pay over
to Buyer), or assign to Buyer, such claims, and
  (b)           as
to each such Property which is other than an Oil and Gas Property, Sellers
shall, at Sellers’ election, either collect (and when collected pay over to
Buyer), or assign to Buyer, any and all insurance claims relating to such loss,
and Buyer shall take title to the Property affected by such loss without
reduction of the Purchase Price.
  Section
7.7.                                Governmental
Bonds.
  At or
prior to Closing, Buyer shall deliver to Sellers evidence that Buyer has
completed all action necessary to permit Buyer to post the bonds or other
security identified at Section 7.7 of Sellers Disclosure Statement immediately
following the Closing with all applicable Governmental Entities meeting the
requirements of such Governmental Entities to own, and where appropriate,
operate, the Properties.
  Section
7.8.                                Assumed
Obligations.
  At
Closing, Buyer shall assume and agree to pay, perform and discharge the Assumed
Obligations.
 
 Section
7.9.                                Books and
Records.
  Subject
to any third party rights, Sellers will deliver at or promptly after Closing,
but in no event later than 30 days after the Closing, a copy of the Records to a
location designated by Buyer.  Buyer will promptly reimburse Sellers
for all reasonable costs of shipping or the Records including any costs incurred
to provide such data in an electronic format.
  Section
7.10.                                Further
Assurances.
  At the
Closing, and from time to time following the Closing, at the request of any
party hereto and without further consideration, the other party or parties
hereto shall execute and deliver to such requesting party such instruments and
documents and take such other action (but without incurring any material
financial obligation) as such requesting party may reasonably request in order
to consummate more fully and effectively the transactions contemplated
hereby.  Sellers shall not revoke or terminate, or cause any other
Person to revoke or terminate any right set forth in Section 1.1(f) to be
transferred or assigned to Buyer.  Sellers shall use Sellers’
Reasonable Best Efforts to obtain all consents required to transfer the rights
identified in Section 1.1(f) to Buyer.
  Section
7.11.                                Proposed Post-Closing
Drilling Operations.
  After the
Closing, Sellers will promptly notify Buyer of any oil or gas well on the Lands
which is (i) operated by Sellers or any Affiliate of Sellers that has not
produced Hydrocarbons in paying or commercial quantities for a period of at
least 30 consecutive days or that has any cessation of production or (ii)
operated by a Person other than any Seller or any Affiliate of Sellers that to
Sellers’ Knowledge has not produced Hydrocarbons in paying or commercial
quantities for a period of at least 30 consecutive days or that has any
cessation of production.  The additional
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  rights
and obligations of Sellers and Buyers with respect to post-Closing operations in
the Deep Zones and Shallow Zones will be described in a side letter to be
drafted and agreed to prior to Closing (the “Side Letter”) and executed by
Buyer and Sellers at Closing.
 
 
  ARTICLE
VIII
  Title Due
Diligence
  Section
8.1.                                Due
Diligence Examination.
  (a)           From
the date of this Agreement until 5:00 p.m. (local time in Houston, Texas) five
Business Days prior to the Closing Date (the “Examination Period”), Sellers
shall afford to Buyer and its authorized representatives reasonable access
during normal business hours and in a manner so as to not unduly interfere with
the normal business operations of the Sellers to the office, personnel and books
and records of Sellers in order for Buyer to conduct a title examination as it
may in its sole discretion choose to conduct with respect to the Oil and Gas
Properties to determine whether Title Defects (as defined below) exist (“Buyer’s Title
Review”).  Such books and records shall include all title
opinions, title files, well files, production files, ownership maps, lease
files, assignments, division orders, financial and accounting records, in each
case insofar as same may now be in existence and in the possession of Sellers,
excluding, however, any information that Sellers are prohibited from disclosing
by bona fide, third party confidentiality restrictions; provided, that Sellers
shall use their Reasonable Best Efforts to obtain a waiver of any such
restrictions in favor of Buyer and shall disclose the identity of the contract
or agreement giving rise to such restriction, but only insofar as Sellers are
permitted to make such disclosure of the contract or agreement and only where
such contract or agreement could be binding on Buyer or the Oil and Gas
Properties after Closing.There are no provisions or
obligations included in any contract or agreement the terms of which Sellers are
prohibited from disclosing to Buyer  and burdening or affecting the
Properties which, if disclosed to Buyer on the date hereof, would reasonably be
expected to cause a reasonable prudent purchaser of oil and gas assets
substantially similar to the Properties to not enter this Agreement or to not
consummate the transactions contemplated hereby. The cost and
expense of Buyer’s Title Review, if any, shall be borne solely by
Buyer.
  (b)           If
Buyer discovers any Title Defect affecting any of the Oil and Gas Properties,
Buyer shall notify Sellers prior to the expiration of the Examination Period of
such alleged Title Defect.  To be effective, such notice (the “Title Defect Notice”) must
(i) be in writing, (ii) be received by Sellers prior to the expiration
of the Examination Period, (iii) describe the Title Defect in reasonable
detail (including any alleged variance in the Net Revenue Interest),
(iv) identify the specific Oil and Gas Property affected by such Title
Defect, and (v) include the estimated Title Defect Amount as determined by
Buyer in good faith.  Buyer will provide Sellers with Title Defect
Notices, if any, as soon as reasonably practicable upon discovery, and will use
Reasonable Best Efforts to provide Sellers with weekly updates of any alleged
Title Defects.  Any matters that may otherwise constitute Title
Defects, but of which Sellers have not been specifically
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  notified
by Buyer in accordance in all material respects with the foregoing, shall be
deemed, as respects Sellers, to have been waived by Buyer for all purposes,
except for any rights Buyer may have arising from the special warranty of title
made by Sellers in the Assignment and for any Depth Severance, which is covered
by Section
8.6.   Upon the receipt of such effective Title Defect
Notice from Buyer, Sellers may, in addition to the remedies set forth in Sections 8.2(e) and 8.5(b), cure or
attempt to cure such Title Defect at any time prior to the
Closing.  The Oil and Gas Property affected by such uncured Title
Defect shall be a “Title Defect
Property.”
  (c)           For
a period of forty-five (45) days after Closing, (the “Extended Examination Period”)
Buyer may conduct an extended Buyer’s Title Review related solely to Depth
Severances, the costs and expenses related to such review to be borne solely by
Buyer.  If Buyer discovers any Depth Severance during the Extended
Examination Period, Buyer shall notify the Sellers prior to the expiration of
the Extended Examination Period of such alleged Depth Severance.  To
be effective, such notice (the “Depth Severance Notice”) must
be (i) in writing, (ii) be received by Sellers prior to the expiration of the
Extended Examination Period, (iii) identify the specific Oil and Gas Property
affected by the alleged Depth Severance, (iv) identify the source of the alleged
Depth Severance, and (v) include the estimated Depth Severance Amount as
determined by Buyer in good faith.  Buyer will provide Sellers with
Depth Severance Notices, if any, as soon as reasonably practicable upon
discovery.  Any matters that may otherwise constitute Depth
Severances, but of which Sellers have not been specifically notified by Buyer in
accordance in all material respects with the foregoing, shall be deemed, as
respects Sellers, to have been waived by Buyer for all purposes, except for any
rights Buyer may have arising from the special warranty of title made by Sellers
in the Assignment.
  Section
8.2.                                Title
Defects.
  (a)           “Title Defect” means any
particular defect in or failure of Sellers’ ownership of any Oil and Gas
Property:  (i) that causes Sellers to not have Defensible Title
to such Oil and Gas Property, (ii) that has attributable thereto a Title Defect
Amount in excess of $24,000 (except as otherwise provided for in Section 6.5 and Section 7.6(a) and
except for any Title Defect attributable to a failure of Defensible Title
arising under Section
8.2(c)(iv) ), and (iii) regarding which a Title Defect Notice has
been timely and otherwise validly delivered.  Notwithstanding any
other provision in this Agreement to the contrary, the following matters shall
not constitute, and shall not be asserted as, a Title
Defect:  (A) defects or irregularities arising out of lack of
corporate authorization; (B) defects or irregularities that have been cured
or remedied by the applicable statutes of limitation or statutes for
prescription; (C) defects or irregularities in the chain of title
consisting of the failure to recite marital status in documents or omissions of
heirship Proceedings; and (D) defects or irregularities resulting from or
related to probate Proceedings or the lack thereof which defects or
irregularities have been outstanding for five years or more; provided, however,
matters covered by subparagraphs (A), (C), and (D) above shall constitute a
Title Defect if Buyer provides Sellers with sufficiently clear evidence of an
actual claim of title made by a third party based on such matter.
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  (b)           The
“Title Defect Amount”
means, with respect to a Title Defect Property, the percentage reduction in Net
Acreage of the Oil and Gas Property subject to such Title Defect multiplied by
the “Allocated Value”
(as set forth in Exhibit C attached
hereto) of such Oil and Gas Property.
  (c)           “Defensible Title” means, as of
the date of this Agreement and the Closing Date (and all periods in between),
with respect to the Oil and Gas Properties, such record title and ownership by
Sellers that:
  (i)           entitles
Sellers to participate in not less than the Net Acreage set forth in Exhibit C as
Sellers’ Net Acreage in the corresponding Lease included in such Oil and Gas
Property until the termination of such Lease, except for changes or adjustments
that result from the establishment of units, changes in existing units (or the
participating areas therein), or the entry into of pooling or unitization
agreements after the date hereof unless made in breach of the provisions of
Section 6.3;
  (ii)           is
free and clear of all Liens, except Permitted Encumbrances;
  (iii)           reflects
that all consents to assignment, notices of assignment or preferential purchase
rights which are applicable to or must be complied with in connection with the
transaction contemplated by this Agreement, or any prior sale, assignment or the
transfer of such Oil and Gas Property, have either been obtained and complied
with, or are deemed waived by Buyer pursuant to this Agreement, to the extent
the failure to obtain or comply with the same could render this transaction or
any such sale, assignment or transfer (or any right or interest affected
thereby) void or voidable or could result in Buyer or Sellers incurring any
liability; and
  (iv)           if
such title and ownership arises by way of a Lease, such Lease is either (i)
still in a primary term ending after December 31, 2008 or (ii) held by
production under the terms of such Lease.
  
  (d)           “Permitted Encumbrances” shall
mean (A) Liens for Taxes which are not yet delinquent or which are being
contested in good faith; (B) normal and customary Liens of co-owners under
operating agreements, unitization agreements, and pooling orders relating to the
Oil and Gas Properties, which obligations are not yet due and pursuant to which
Sellers are not in default; (C) mechanic’s and materialman’s Liens relating
to the Oil and Gas Properties, which obligations are not yet due and pursuant to
which Sellers are not in default; (D) Liens in the ordinary course of
business consisting of minor defects and irregularities in title or other
restrictions (whether created by or arising out of joint operating agreements,
farm-out agreements, leases and assignments, contracts for purchases of
Hydrocarbons or similar agreements, or otherwise in the ordinary course of
business) that are of the nature customarily accepted by prudent purchasers of
oil and gas properties and do not decrease Sellers’ Net Acreage or materially
affect the value of any property encumbered thereby; (E) all approvals
required to be obtained from
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  Governmental
Entities that are lessors under Leases forming a part of the Oil and Gas
Properties (or who administer such Leases on behalf of such lessors) which are
customarily obtained post-closing; (F) preferential rights to purchase and
consent to transfer requirements of any Person (to the extent same have been
complied with in connection with the prior sale, assignment or the transfer of
such Oil and Gas Property and are not triggered by the consummation of the
transactions contemplated herein) or are deemed waived by Buyer under the
Agreement; (G) Liens under the Credit Facility (provided such Liens are
released in full as respects the Properties at Closing); and
(H) conventional rights of reassignment normally actuated by an intent to
abandon or release a lease and requiring notice to the holders of such
rights.
  (e)           With
respect to each Title Defect (other than Depth Severances) that is not cured on
or before the Closing, Sellers, in their sole discretion, may elect (i) to
reduce the Purchase Price, subject to this Article VIII, by
the Title Defect Amount with respect to such Title Defect Property, or (ii) to
attempt to cure the Title Defect post-Closing in accordance with Section 8.5(c).
  (f)           If
Sellers and Buyer are unable to reach an agreement as to whether a Title Defect
exists or, if it does exist, the Title Defect Amount attributable such Title
Defect, the provisions of Section 8.4
shall be applicable.
  Section
8.3.                                Title
Benefits.
  (a)           The
term “Title Benefit,” as
used herein, shall be limited to any right, circumstance or condition in
existence as of the date hereof that operates to increase the Net Acreage of
Sellers in any Oil and Gas Property above that shown on Exhibit C and
which additional Net Acreage in any such Oil and Gas Property has at least a
seventy-five percent (75%) Net Revenue Interest.
  (b)           Sellers
may assert a Title Benefit for any Oil and Gas Property that (i) Buyer has
allocated value to on Exhibit C, and (ii) is a Material Title Benefit,
which means that the effect of such Title Benefit on the Allocated Value of such
Asset would be equal to at least Twenty Four Thousand and No/100 Dollars
($24,000.00) (“Material Title
Benefit”).
  (c)           The
“Title Benefit Amount”
is an amount equal to the percentage increase in Net Acreage for the Property
affected by such Material Title Benefit above that shown on Exhibit C,
multiplied by the Allocated Value for the Property as shown on Exhibit
C.  The Title Benefit Amount will be used only to reduce the total
reductions to Purchase Price for Title Defect Amounts in accordance with Section 8.5.
  (d)           If
Sellers discover a Material Title Benefit, then no later than the end of the
Examination Period, Sellers shall notify Buyer, in writing, of the nature of the
Material Title Benefit and provide (i) the basis for the assertion of such
Material Title Benefit, (ii) the data in support of such Material Title
Benefit and (iii) the proposed Title Benefit Amount.
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  (e)           If
the parties cannot agree on the existence of a Material Title Benefit or the
amount in which the Purchase Price should be increased on account thereof, the
issue will be resolved in accordance with Section 8.4.
  Section
8.4.                                Disputes
Regarding Title Defects.
  If
Sellers and Buyer are unable to reach an agreement as to whether a Title Defect
or Title Benefit exists, or if it does exist, the Title Defect Amount
attributable to such Title Defect, or Title Benefit Amount attributable to such
Material Title Benefit, or disputes relating to Post-Closing Defects pursuant to
Section 8.5(b) (a “Defect Dispute”), each party
shall have the right to submit a Defect Dispute to an independent expert (the
“Independent Expert”),
who shall serve as sole arbitrator.  The Independent Expert shall be
appointed by mutual agreement of Sellers and Buyer from among candidates
(including lawyers) with experience and expertise in the area that is the
subject of such Defect Dispute, and failing such agreement, such Independent
Expert for such Defect Dispute shall be selected in accordance with the
Commercial Arbitration Rules of the AAA (the “Rules”).  Defect
Disputes to be resolved by an Independent Expert shall be resolved in accordance
with mutually agreed procedures and rules and failing such agreement, in
accordance with the Rules.  The Independent Expert shall be instructed
by the parties to resolve such Defect Dispute as soon as reasonably practicable
in light of the circumstances.  The decision and award of the
Independent Expert shall be binding upon the parties as an award under the
Federal Arbitration Act and final and nonappealable to the maximum extent
permitted by Applicable Law, and judgment thereon may be entered in a court of
competent jurisdiction and enforced by any party as a final judgment of such
court.  Notwithstanding any Defect Dispute, all Properties subject to
such Defect Dispute shall be sold, transferred and conveyed at the Closing to
Buyer, subject to and in accordance with this Agreement.
 
 Section
8.5.                                Adjustments
to Purchase Price for Defects.
  (a)           The
Purchase Price shall be adjusted downward by the aggregate Title Defect Amounts
less the aggregate Title Benefit Amounts.
  (b)           Notwithstanding
anything herein to the contrary, if Sellers are unable to cure a Title Defect (a
“Post-Closing Defect”)
on or prior to Closing, Sellers shall have the option, by notice in writing to
Buyer on or before Closing, to attempt to cure such Post-Closing Defect within
the 90-day period commencing with the Closing Date (the “Cure Period”).  In
such event, the transactions contemplated hereby will close as provided herein,
including the sale, transfer and conveyance of the affected Properties to Buyer,
but an amount equal to the applicable Title Defect Amount to which the
Post-Closing Defect pertains shall be deducted from the Adjusted Purchase Price
otherwise payable at Closing and paid into an escrow account (the “Defects Escrow”) established
with a federally insured savings or banking institution mutually acceptable to
Buyer and Sellers (the “Defects
Escrow Agent”) pursuant to the terms of an escrow agreement in a form
acceptable to the Defects Escrow Agent and reasonably acceptable to Buyer and
Sellers (the “Defects Escrow
Agreement”).  The amount deposited into the Defects Escrow with
respect to a Post-Closing Defect will remain therein until released as provided
in Section 8.5(c).
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  (c)           Buyer
will act in good faith and reasonably cooperate with the Sellers after the
Closing to cure a Post-Closing Defect; provided, that Buyer shall not be
required to expend any monies in connection therewith and Sellers shall conduct
their activities so as to not unreasonably interfere with Buyer’s
operations.  If Sellers and Buyer mutually agree that a Post-Closing
Defect has been cured, then within two Business Days after such determination,
the amount withheld in the Defects Escrow with respect thereto (together with
any interest earned thereon) shall be released to Sellers in accordance with the
terms of the Defects Escrow Agreement.  If Sellers and Buyer mutually
agree that a Post-Closing Defect has been partially cured, then Sellers and
Buyer shall mutually determine the portion of the amount retained in the Defects
Escrow with respect thereto (together with any interest earned thereon) that
should be paid to Buyer to compensate it for the uncured portion thereof
(together with interest earned thereon), and the remaining portion of such
amount shall be released to Sellers (together with any interest earned thereon)
in accordance with the terms of the Defects Escrow Agreement.  If
Sellers and Buyer mutually agree that a Post-Closing Defect has not been cured,
then within two Business Days after such determination, the amount withheld in
the Defects Escrow with respect thereto (together with any interest earned
thereon) shall be released to Buyer in accordance with the terms of the Defects
Escrow Agreement.  If, at the end of the Cure Period, Sellers have
been unable to cure a Post-Closing Defect (and there is no dispute as to whether
or not it has been cured), the amount withheld in the Defects Escrow with
respect thereto (together with any interest earned thereon) shall be released to
Buyer in accordance with the terms of the Defects Escrow Agreement. If, at the
end of the Cure Period, Sellers and Buyer are unable to agree whether there has
been a satisfactory resolution of a Post-Closing Defect, then such disagreement
shall be resolved as provided in Section 8.4.
  Section
8.6.                                Depth
Severances.
  (a)           “Depth Severance” means any
particular defect in or failure of Sellers’ ownership of any Oil and Gas
Property that (i) operates to terminate Sellers’ ownership with respect to
specific depths that include the Deep Zones, (ii) has attributable thereto a
Depth Severance Amount in excess of $24,000, and (iii) regarding which a
Depth Severance Notice has been timely and otherwise validly
delivered.  Notwithstanding any other provision in this Agreement to
the contrary, the following matters shall not constitute, and shall not be
asserted as, a Depth Severance:  (A) defects or failures that are
not depth specific or (B) defects or failures that were asserted as Title
Defects by Buyer.
  (b)           The
“Depth Severance Amount”
means, with respect to an Oil and Gas Property subject to a Depth Severance, the
percentage reduction in Net Acreage of the Oil and Gas Property on account of
such Depth Severance multiplied by Allocated Value of such Oil and Gas Property;
provided, however, that where a Depth Severance does not operate to terminate
Sellers’ ownership with respect to specific depths that include the formation
commonly referred to as the “Woodford Shale Formation,” the Depth Severance
Amount will be limited to fifteen percent (15%) of the percentage reduction in
Net Acreage of the Oil and Gas Property on account of such Depth Severance
multiplied by the Allocated Value of such Oil and Gas Property.
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  (c)           If
Sellers and Buyer are unable to reach an agreement as to whether a Depth
Severance exists or, if it does exist, the Depth Severance Amount attributable
such Title Defect, the provisions of Section 8.4
shall be applicable.
  (d)           At
Closing, the Deposit will become the “Holdback Amount”, to be held
in escrow by the Escrow Agent pursuant to the Escrow Agreement.  At
the conclusion of the Extended Examination Period, the Holdback Amount (together
with any interest earned thereon), less the aggregate Depth Severance Amount,
will be released to Sellers.  The remaining Holdback Amount (which
will equal the Depth Severance Amount, if any) shall be released to Buyer. To
the extent Sellers and Buyer are unable to reach an agreement as to whether a
Depth Severance exists or, if it does exist, the Depth Severance Amount
attributable such Title Defect, the amount of the Holdback Amount equal to the
asserted Depth Severance Amount will remain in escrow until resolved pursuant to
Section 8.4, at
which time the Escrow Agent will disperse the remaining Holdback Amount in
accordance with the Independent Expert’s decisions under Section
8.4.  If the aggregate Depth Severance Amount exceeds the
Holdback Amount (together with any interest earned thereon), Sellers shall pay
the difference between the Depth Severance Amount and the Holdback Amount
(together with any interest earned thereon) to Buyer within ten (10) days of the
earlier of (i) Sellers agreement to the Depth Severance Amount or (ii) the
Independent Expert’s decision under Section 8.4, if
necessary with regard to the Depth Severance Amount.
  Section
8.7.                                Buyer
Indemnification.
  BUYER
HEREBY INDEMNIFIES AND SHALL DEFEND AND HOLD SELLERS, AFFILIATES THEREOF, AND
ITS AND THEIR RESPECTIVE OWNERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
REPRESENTATIVES, CONTRACTORS, SUCCESSORS, AND ASSIGNS HARMLESS FROM AND AGAINST
ANY AND ALL OF THE FOLLOWING CLAIMS ARISING FROM BUYER’S INSPECTING AND
OBSERVING THE PROPERTIES:  (I)  CLAIMS FOR PERSONAL INJURIES TO
OR DEATH OF EMPLOYEES OF BUYER, ITS CONTRACTORS, AGENTS, CONSULTANTS, AND
REPRESENTATIVES, AND DAMAGE TO THE PROPERTY OF BUYER OR OTHERS ACTING ON BEHALF
OF BUYER, EXCEPT FOR INJURIES OR DEATH CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SELLERS, AFFILIATES THEREOF OR ITS OR THEIR RESPECTIVE EMPLOYEES,
CONTRACTORS, AGENTS, CONSULTANTS, OR REPRESENTATIVES; AND (II)  CLAIMS FOR
PERSONAL INJURIES TO OR DEATH OF EMPLOYEES OF SELLERS OR THIRD PARTIES, AND
DAMAGE TO THE PROPERTY OF SELLERS OR THIRD PARTIES, TO THE EXTENT CAUSED BY THE
NEGLIGENCE, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT OF BUYER.  TO THE
EXTENT PROVIDED ABOVE, THE FOREGOING INDEMNITY INCLUDES, AND THE PARTIES INTEND
IT TO INCLUDE, AN INDEMNIFICATION OF THE INDEMNIFIED PARTIES FROM AND AGAINST
CLAIMS ARISING OUT OF OR RESULTING, IN WHOLE OR PART, FROM THE CONDITION OF THE
PROPERTY OR THE SOLE, JOINT, COMPARATIVE, OR CONCURRENT NEGLIGENCE OR STRICT
LIABILITY OF ANY OF THE INDEMNIFIED PARTIES.  THE PARTIES HERETO AGREE
THAT THE FOREGOING COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS
CONSPICUOUS.
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  ARTICLE
IX
 Conditions Precedent to the
Obligations of the Parties
  Section
9.1.                                Conditions
Precedent to the Obligations of Buyer.
  The
obligations of Buyer to close the transactions contemplated under this Agreement
are subject to each of the following conditions being met:
 
 (a)           All
of the representations and warranties of Sellers contained in Article IV considered
collectively, and each of the representations and warranties of Sellers
contained in Article IV
considered individually shall be true and correct in all material respects on
and as of the Closing Date as if made on and as of such date, except to the
extent that any such representation or warranty (i) is made as of a specified
date, in which case such representation or warranty shall have been true and
correct in all material respects as of such specified date or (ii) contains an
express materiality qualification, in which case such representation or warranty
shall have been true and correct in all respects on and as of the Closing Date
as if made on and as of such date.
  (b)           Sellers
shall have performed and complied in all material respects with (or compliance
therewith shall have been waived by Buyer) each and every covenant, agreement
and condition required by this Agreement to be performed or complied with by
Sellers prior to or at the Closing.
  (c)           Sellers
shall have delivered a certificate executed by an executive officer of Sellers
dated as of the Closing Date, representing and certifying in such detail as
Buyer may reasonably request that the conditions set forth in subsections (a)
and (b) above
have been fulfilled.
  (d)           No
Proceeding (excluding any Proceeding initiated by Buyer or any of its
Affiliates) shall, on the Closing Date, be pending or threatened before any
Governmental Entity seeking to restrain, prohibit, or obtain damages or other
relief in connection with the consummation of the transactions contemplated by
this Agreement.
  (e)           Buyer
shall have received original releases of all Liens (except Permitted
Encumbrances) burdening any of the Properties, executed and acknowledged in
recordable form by the Lender, and in form and substance agreeable to
Buyer.
  (f)           Buyer
shall have received an assignment of the Properties prepared, executed,
acknowledged and delivered by Sellers in a form substantially similar to the
instrument attached hereto as Exhibit D (the “Assignment”) for each county,
state, and federal Governmental Entity at which an assignment is required to be
filed or submitted by Applicable Law or in order to provide notice of its
contents to third parties or to effect the transfer of the Properties to
Buyer.
  (g)           Buyer
shall have received from Seller all requests for authorizations, consents or
approvals required by the Bureau of Indian Affairs or the Bureau of
Land
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  Management
with respect to the assignment of all the Subject Leases subject to such
Governmental Entity’s jurisdiction.
  (h)           Buyer
shall have received a certificate that each of the Sellers is not a “foreign
person”, executed and delivered by Sellers that complies with Section 1445
of the Code and the United States Department of Treasury regulations promulgated
thereunder.
  (i)           Buyer
and Sellers shall have agreed to a form of Side Letter, and Buyer shall have
received a copy of the same, executed by Sellers.
  (j)           Buyer
shall have received all other agreements, instruments and documents which are
required by other terms of this Agreement to be executed or delivered by Sellers
to Buyer prior to or in connection with the Closing.
  Section
9.2.                                Conditions
Precedent to the Obligations of Sellers.
  The
obligations of Sellers to close the transactions contemplated under this
Agreement are subject to each of the following conditions being
met:
 
 (a)           All
of the representations and warranties of Buyer contained in Article V considered
collectively, and each of the representations and warranties of Buyer contained
in Article V
considered individually shall be true and correct in all material respects on
and as of the date made and as of Closing Date as if made on or as of such date,
except to the extent that any such representation or warranty (i) is made as of
a specified date, in which case such representation or warranty shall have been
true and correct in all material respects as of such specified date or (ii)
contains an express materiality qualification, in which case such representation
or warranty shall have been true and correct in all respects on and as of the
Closing Date as if made on and as of such date.
  (b)           Buyer
shall have performed and complied in all material respects with (or compliance
therewith shall have been waived by Sellers) each and every covenant, agreement
and condition required by this Agreement to be performed or complied with by
Buyer prior to or at the Closing.
  (c)           Buyer
shall have delivered a certificate executed by an executive officer of Buyer
dated as of the Closing Date, representing and certifying in such detail as
Sellers may reasonably request that the conditions set forth in subsections (a)
and (b) above
have been fulfilled.
  (d)           No
Proceeding (excluding any Proceeding initiated by Sellers or any of their
Affiliates) shall, on the Closing Date, be pending or threatened before any
Governmental Entity seeking to restrain, prohibit, or obtain damages or other
relief in connection with the consummation of the transactions contemplated by
this Agreement.
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  (e)           Sellers
shall have received all other agreements, instruments and documents which are
required by other terms of this Agreement to be executed or delivered by Buyer
to Sellers prior to or in connection with the Closing.
  (f)           Sellers
shall have received an instrument evidencing the assumption by Buyer of the
Assumed Obligations, in form and substance reasonably agreeable to
Sellers.
  (g)           Sellers
shall have received evidence of replacement bonds guarantees and letters of
credit, pursuant to Section 12.10.
  (h)           Buyer
and Sellers shall have agreed to a form of Side Letter, and Sellers shall have
received a copy of the same, executed by Buyer.
  (i)           Sellers
shall have received all required waivers and consents under the Credit Facility,
provided, however, Sellers shall use their Reasonable Best Efforts to obtain all
such waivers and consents.
  ARTICLE
X
 Termination, Amendment and
Waiver
  Section
10.1.                                Termination.
  This
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing in the following manner:
 
 (a)           by
mutual written consent of Sellers and Buyer; or
  (b)           by
either Sellers or Buyer, if:
  (i)           the
Closing shall not have occurred on or before 5:00 p.m., local Houston, Texas
time, on December 31, 2008, unless such failure to close shall be due to a
breach of this Agreement by the party or parties seeking to terminate this
Agreement pursuant to this clause (i);
or
  (ii)           there
shall be any Applicable Law that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or a Governmental Entity
shall have issued an order, decree, or ruling or taken any other action
permanently restraining, enjoining, or otherwise prohibiting the consummation of
the transactions contemplated hereby, and such order, decree, ruling, or other
action shall have become final and nonappealable; or
  (c)           by
Buyer or Sellers, if the aggregate amount of the Title Defect Amounts less the
aggregate amount of the Title Benefit Amounts exceeds fifteen percent (15%) of
the Purchase Price; or
  (d)           by
Sellers, if (i) there shall be a material breach of any representation and
warranty of Buyer contained in Article V, or (ii)
there shall be a material breach by Buyer of any of its covenants and agreements
contained in this Agreement, which breach, in the
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  case of
clause (i)
or clause (ii),
is not capable of being cured or, if it is capable of being cured, has not been
cured by the 10th
Business Day following written notice to Buyer from the Sellers of such breach;
or
  (e)           by
Buyer, if (i) there shall be a material breach of any representation and
warranty of Sellers contained in Article IV, or (ii)
there shall be a material breach by Sellers of any of their covenants and
agreements contained in this Agreement, which breach, in the case of clause (i) or
clause (ii), is
not capable of being cured or, if it is capable of being cured, has not been
cured by the 10th
Business Day following written notice to Sellers from Buyer of such
breach.
  Section
10.2.                                Effect of
Termination.
  In the
event of the termination of this Agreement pursuant to Section 10.1 by
Sellers, on the one hand, or Buyer, on the other, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall become void
and have no effect, except that the agreements contained in this Article X, in
Sections 7.4,
7.5 and 8.4 and in Article XII shall
survive the termination hereof.  Nothing contained in this Section 10.2 shall
relieve any party from liability for damages actually incurred as a result of
any breach of this Agreement.   If this Agreement is terminated
by Sellers pursuant to (i) Section 10.1(b)(i)
(and Buyer is in material breach of this Agreement) or (ii) Section 10.1(d),
Sellers shall be entitled to the Deposit as liquidated damages, and the Escrow
Agent will release the Deposit to Sellers.  The parties agree that in
the event of such termination, Sellers’ damages would be difficult to calculate
and the Deposit represents an equitable estimated of such damages.  If
this Agreement is terminated under Section 10.1 for any
other reason, the Escrow Agent will release the Deposit to Buyer.
 
 Section
10.3.                                Amendment.
  This
Agreement may not be amended except by an instrument in writing signed by or on
behalf of all the parties hereto.
 
 Section
10.4.                                Waiver.
  Sellers,
on the one hand, or Buyer, on the other, may:  (i) waive any
inaccuracies in the representations and warranties of the other contained herein
or in any document, certificate, or writing delivered pursuant hereto, or
(ii) waive compliance by the other with any of the other’s agreements or
fulfillment of any conditions to its own obligations contained
herein.  Any agreement on the part of a party hereto to any such
waiver shall be valid only if set forth in an instrument in writing signed by or
on behalf of such party.  No failure or delay by a party hereto in
exercising any right, power, or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege.
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   ARTICLE
XI
 Survival of Representations,
Warranties and Covenants;Indemnification
  Section
11.1.                                Survival.
  (a)           The
representations and warranties of the parties hereto contained in this Agreement
shall terminate at Closing except that the representations made by Sellers
pursuant to Sections 4.1, 4.2, 4.3, 4.4, 4.5, clause (iii) of
Section 4.6, and 4.17, and the
representations and warranties made by Buyer shall survive the Closing and shall
remain in effect thereafter for the period that an Indemnified Party is entitled
to indemnification based on a breach of such representation or warranty
contained in this Article
XI.
  (b)           No
party hereto shall have any indemnification obligation pursuant to this Article XI or
otherwise in respect of any representation, warranty or covenant unless
(i) it shall have received from the party seeking indemnification written
notice of the existence of the claim for or in respect of which indemnification
in respect of such representation, warranty or covenant is being sought and
(ii) such notice is received on or before the Survival Date, if a Survival
Date applies.  Such notice shall set forth with reasonable specificity
(i) the basis under this Agreement, and the facts that otherwise form the
basis of such claim, (ii) the estimate of the amount of such claim (which
estimate shall not be conclusive of the final amount of such claim) and an
explanation of the calculation of such estimate, including a statement of any
significant assumptions employed therein, and (iii) the date on and manner
in which the party delivering such notice became aware of the existence of such
claim.
  Section
11.2.                                Sellers’
Indemnification Obligations.
  Sellers
shall, on the Closing Date, agree (and, upon delivery to Buyer of the
Assignment, shall be deemed to have agreed), subject to the limitations and
procedures contained in this Article XI,
following the Closing, to indemnify, defend and hold Buyer, its Affiliates and
its and their respective successors and permitted assigns and all of their
respective stockholders, partners, members, managers, directors, officer,
employees, agents and representatives harmless from and against any and all
claims, obligations, actions, liabilities, losses, damages, costs or expenses,
including reasonable attorneys’ fees (collectively, “Buyer’s Losses”):
  (a)           resulting
from any a breach of the representations made by Sellers Sections 4.1, 4.2, 4.3, 4.4, 4.5, clause (iii) of
Section 4.6, or 4.17 or any
certificate delivered at Closing; or
  (b)           resulting
from the Retained Obligations;
  provided,
however, that Sellers’ indemnification obligations for Buyer’s Losses under this
Section 11.2(a)
shall expire on the one-year anniversary of the Closing Date (the “Survival Date”), except for
Buyer’s Losses for which a notice is received by Sellers as provided in this
Agreement prior to such date; and further provided that Sellers’ indemnification
for Buyer’s Losses under Section 11.2(b) shall not expire but shall remain in
effect indefinitely until such Retained Obligations are fully
satisfied.
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  Section
11.3.                                Buyer’s
Indemnification Obligations.
  Buyer
shall, on the Closing Date, agree (and, upon delivery to Buyer of the
Assignment, shall be deemed to have agreed), subject to the limitations and
procedures contained in this Article XI,
following the Closing, to indemnify, defend and hold Sellers, their Affiliates
and their respective successors and permitted assigns and all of their
respective stockholders, partners, members, managers, directors, officer,
employees, agents and representatives harmless from and against any and all
claims, obligations, actions, liabilities, losses, damages, costs or expenses,
including reasonable attorneys’ fees (collectively, “Sellers’
Losses”):
 
 (a)           resulting
from any misrepresentation or breach of any warranty, covenant or agreement of
Buyer contained in this Agreement or any certificate delivered by Buyer at the
Closing; or
  (b)           relating
to the Assumed Obligations; or
  (c)           resulting
from or related to Buyer’s use or right of access by virtue of the Surface
Contracts; or
  (d)           resulting
from Buyer’s ingress and egress through the Shallow Zones or Buyer’s operations
in the Deep Zones;
  provided,
however, that Buyer’s indemnification obligations for Sellers’ Losses under
Section 11.3(a)
shall expire on the Survival Date, except for Sellers’ Losses for which a notice
is received by Buyer as provided in this Agreement prior to such date; and
further provided, however, provided, that Buyer’s indemnification obligations
for Sellers’ Losses under Section 11.3(b) shall
not expire but shall remain in effect until such Assumed Obligations are fully
satisfied.
  Section
11.4.                                Net
Amounts.
  Any
amounts recoverable by any party pursuant to this Article XI with
respect to any Buyer’s Losses or Sellers’ Losses, as the case may be, shall be
decreased by any insurance proceeds or other amounts relating to such Buyer’s
Losses or Sellers’ Losses, as the case may be, paid to such Indemnified Party by
any Person (other than any Affiliate of such Indemnified Party) not a party to
this Agreement.
 
 Section
11.5.                                Indemnification
Proceedings.
  In the
event that any claim or demand for which a party (an “Indemnifying Party”), would be
liable to the another party under Section 11.2 or
Section 11.3 (an
“Indemnified Party”) is
asserted against or sought to be collected from an Indemnified Party by a third
party, the Indemnified Party shall with reasonable promptness notify the
Indemnifying Party of such claim or demand, but the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
under this Article XI,
except to the extent the Indemnifying Party demonstrates that the defense of
such claim or demand is materially prejudiced thereby.  The
Indemnifying Party shall have 30 days from receipt of the above notice from the
Indemnified Party (in this Section 11.5,
the “Notice Period”) to
notify the Indemnified Party whether or not
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  the
Indemnifying Party desires, at the Indemnifying Party’s sole cost and expense,
to defend the Indemnified Party against such claim or demand; provided, that the
Indemnified Party is hereby authorized prior to and during the Notice Period to
file any motion, answer or other pleading that it shall deem necessary or
appropriate to protect its interests or those of the Indemnifying Party and not
prejudicial to the Indemnifying Party.  In each such instance, the
Indemnifying Party shall employ counsel reasonably acceptable to the Indemnified
Party.  If the Indemnifying Party elects to assume the defense of any
such claim or demand, the Indemnified Party shall have the right to employ
separate counsel at its own expense and to participate in the defense
thereof.  If the Indemnifying Party (i) elects not to assume the
defense of such claim or demand, (ii) fails to give notice to the Indemnified
Party during the Notice Period, (iii) fails to employ counsel reasonably
acceptable to the Indemnified Party, (iv) the Indemnified Party reasonably
concludes that there may be defenses available to such Indemnified Party that
are different from or additional to those available to the Indemnifying Party,
or (v) the Indemnified Party’s counsel shall have advised the Indemnified Party
in writing, with a copy delivered to the Indemnifying Party, that there is a
material conflict of interest that could violate applicable standards of
professional conduct to have common counsel and counsel for the Indemnifying
Party concurs with that advice, the Indemnified Party shall be entitled to
assume the defense of such claim or demand with counsel of its own choice, at
the expense of the Indemnifying Party.  If the claim or demand is
asserted against both the Indemnifying Party and the Indemnified Party and based
on the advice of counsel reasonably satisfactory to the Indemnifying Party it is
determined that there is a conflict of interest which renders it inappropriate
for the same counsel to represent both the Indemnifying Party and the
Indemnified Party, the Indemnifying Party shall be responsible for paying
separate counsel for the Indemnified Party; provided, however, that the
Indemnifying Party shall not be responsible for paying for more than one
separate firm of attorneys to represent all of the Indemnified Parties,
regardless of the number of Indemnified Parties.  If the Indemnifying
Party elects to assume the defense of such claim or demand, (i) no
compromise, admission or settlement thereof may be effected by the Indemnifying
Party without the Indemnified Party’s written consent (which shall not be
unreasonably withheld) unless the sole relief provided is monetary damages that
are paid in full by the Indemnifying Party and (ii) the Indemnifying Party
shall have no liability with respect to any compromise or settlement thereof
effected without its written consent (which shall not be unreasonably
withheld).  No Indemnifying Party shall consent to the entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by each claimant or plaintiff to each Indemnified Party
of a release from all liability in respect of all claims asserted.
 
 Section
11.6.                                Indemnification
Exclusive Remedy.
  Indemnification
pursuant to the provisions of this Article XI shall
be the exclusive remedy after the Closing of the parties hereto for any
misrepresentation or breach of any warranty, covenant or agreement contained in
this Agreement or in any closing document executed and delivered pursuant to the
provisions hereof or thereof, or any other claim arising out of the transactions
contemplated by this Agreement.
 
 Section
11.7.                                Limited
to Actual Damages.
  The
indemnification obligations of the parties pursuant to this Article XI shall
be limited to actual Buyer’s Losses or Sellers’ Losses, as the case may be, and
shall not include incidental,
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  special,
consequential, indirect, punitive, or exemplary damages, provided that any
incidental, special, consequential, indirect, punitive, or exemplary damages
recovered by a third party (including a Governmental Entity, but excluding any
Affiliate of any party) against a party entitled to indemnity pursuant to this
Article XI
shall be included in the damages recoverable under such indemnity.
 
 Section
11.8.                                Indemnification
Despite Negligence.
  IT
IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PARTY TO BE INDEMNIFIED
PURSUANT TO THIS ARTICLE XI SHALL
BE INDEMNIFIED AND HELD HARMLESS FROM AND AGAINST ALL BUYER’S LOSSES OR SELLERS’
LOSSES, AS THE CASE MAY BE, AS TO WHICH INDEMNITY IS PROVIDED FOR UNDER THIS
ARTICLE XI,
NOTWITHSTANDING THAT ANY SUCH DAMAGES ARISE OUT OF OR RESULT FROM THE ORDINARY,
STRICT, SOLE, OR CONTRIBUTORY NEGLIGENCE OF SUCH PARTY AND REGARDLESS OF WHETHER
ANY OTHER PARTY (INCLUDING THE OTHER PARTIES TO THIS AGREEMENT) IS OR IS NOT
ALSO NEGLIGENT; PROVIDED, HOWEVER, NOTHING HEREIN IS INTENDED OR SHALL BE
CONSTRUED TO AS AN INDEMNIFICATION BY ONE PARTY FOR THE GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT OF THE OTHER PARTY.  THE PARTIES HERETO ACKNOWLEDGE
THAT THE FOREGOING COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS
CONSPICUOUS.
 
 Section
11.9.                                Tax
Treatment of Indemnification Amounts.
  Sellers
and Buyer agree that any amounts recoverable by any party pursuant to this Article XI with
respect to any Buyer’s Losses or Sellers’ Losses shall be treated as adjustments
to the Purchase Price for all Tax purposes.
 
 Section
11.10.                                Sellers
Aggregate Indemnity Limits.
  Notwithstanding
anything to the contrary contained elsewhere in the Agreement, Sellers shall not
be required to indemnify Buyer under Section 11.2(a) for aggregate Buyer’s
Losses in excess of twenty percent (20%) of the Purchase Price.
 
 ARTICLE
XII
 Miscellaneous
Matters
  Section
12.1.                                Notices.
  All
notices, requests, demands, and other communications required or permitted to be
given or made hereunder by any party hereto shall be in writing and shall be
deemed to have been duly given or made if (i) delivered personally,
(ii) transmitted by first class registered or certified mail, postage
prepaid, return receipt requested, (iii) sent by a recognized prepaid
overnight courier service (which provides a receipt), or (iv) sent by
email, facsimile transmission, with receipt acknowledged, to the parties at the
following addresses (or at such other addresses as shall be specified by the
parties by like notice):
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  If to
Sellers:                                      Linn
Energy Holdings, LLC
 600 Travis Street, Suite
5100
 Houston, Texas 77002
 Attention:
Charlene A. Ripley, Senior Vice President, General Counsel and Corporate
Secretary
 Fax
No.:  (281) 840-4001, Email: cripley@linnenergy.com
  If to
Buyer:                                       Devon
Energy Production Company, LP
 20 N
Broadway
 1500
Mid-America Tower
 Oklahoma
City OK 73102-8260
 Attention:                  Jeff
Ritenour, Manager, Acquisitions and Divestitures
 Fax
No.:                    (405)
552-8109
 Email:                        Jeff.Ritenour@dvn.com
 
 Such
notices, requests, demands, and other communications shall be effective upon
receipt.
 
 Section
12.2.                                Prorations,
Deposits and Taxes.
  No sales,
transfer or similar tax will be collected at Closing from Buyer in connection
with this transaction.  If, however, this transaction is later deemed
to be subject to sales, transfer or similar tax, for any reason, Buyer agrees to
be solely responsible, and shall indemnify and hold Seller (and its Affiliates,
and its and their directors, officers, employees, attorneys, contractors and
agents) harmless, for any and all sales, transfer or other similar taxes
(including related penalty, interest or legal costs) due by virtue of this
transaction on the Properties transferred pursuant hereto and the Buyer shall
remit such taxes at that time.  Seller and Buyer agree to cooperate
with each other in demonstrating that the requirements for exemptions from such
taxes have been met.
 
 For the
avoidance of doubt, and notwithstanding any provision in this Agreement to the
contrary, Buyer acknowledges that its obligations under this Section 12.2 will
survive Closing.
 
 Section
12.3.                                Entire
Agreement.
  This
Agreement, the Sellers Disclosure Schedule, together with the Exhibits and other
writings referred to herein or delivered pursuant hereto, constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof; provided that any
Confidentiality Agreement executed by Buyer and Sellers, in connection with the
transaction contemplated hereby remains in full force and effect and is not
superseded or modified by this Agreement.  This Agreement shall
survive the Closing.
 
 Section
12.4.                                Injunctive
Relief.
  The
parties hereto acknowledge and agree that irreparable damage would occur in the
event any of the provisions of this Agreement were not performed in accordance
with their specific terms
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  or were
otherwise breached.  It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement, and shall be entitled to enforce specifically the
provisions of this Agreement, including Sellers’ obligation to sell, transfer
and deliver the Properties to Buyer in accordance with this Agreement, in any
court of the United States or any state thereof having jurisdiction, in addition
to any other remedy to which the parties may be entitled under this Agreement or
at law or in equity.
 
 Section
12.5.                                Binding
Effect; Assignment; No Third Party Benefit.
  This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors, and permitted
assigns.  Except as otherwise expressly provided in this Agreement,
neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties.  Except as provided in Section 8.5 and
Article XI,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person other than the parties hereto, and their respective heirs, legal
representatives, successors, and permitted assigns, any rights, benefits, or
remedies of any nature whatsoever under or by reason of this
Agreement.
 
 Section
12.6.                                Severability.
  If any
provision of this Agreement is held to be unenforceable, this Agreement shall be
considered divisible and such provision shall be deemed inoperative to the
extent it is deemed unenforceable, and in all other respects this Agreement
shall remain in full force and effect; provided, however, that if any such
provision may be made enforceable by limitation thereof, then such provision
shall be deemed to be so limited and shall be enforceable to the maximum extent
permitted by Applicable Law.
  
 Section
12.7.                                GOVERNING
LAW.
  THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS THEREOF, EXCEPT FOR MATTERS RELATING TO TITLE TO PROPERTY,
WHICH SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE
JURISDICTION IN WHICH SUCH PROPERTY IS LOCATED.
 
 Section
12.8.                                Counterparts.
  This
instrument may be executed in any number of identical counterparts, each of
which for all purposes shall be deemed an original, and all of which shall
constitute collectively, one instrument.  It is not necessary that
each party hereto execute the same counterpart so long as identical counterparts
are executed by each such party hereto.  This instrument may be
validly executed and delivered by facsimile or other electronic
transmission.
 
 Section
12.9.                                WAIVER OF
CONSUMER RIGHTS.
  BUYER
HEREBY WAIVES ITS RIGHTS UNDER THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER
PROTECTION ACT, SECTION 17.41 ET SEQ., BUSINESS AND
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  COMMERCE
CODE, A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS, AND ANY SIMILAR
LAW IN ANY OTHER STATE TO THE EXTENT SUCH ACT OR SIMILAR LAW WOULD OTHERWISE
APPLY.  AFTER CONSULTATION WITH AN ATTORNEY OF BUYER’S OWN SELECTION,
BUYER VOLUNTARILY CONSENTS TO THIS WAIVER.
 
 Section
12.10.                                Replacement
Bonds, Letters of Credit and Guarantees.
  The
parties understand that none of the bonds, letters of credit and guarantees, if
any, posted by Sellers or any of their Affiliates with any Governmental
Authority or third Person and relating to Sellers or the Properties are to be
transferred to Buyer.  On or before Closing, Buyer shall obtain, or
cause to be obtained in the name of Buyer, replacements for the bonds, letters
of credit and guarantees identified in Schedule 12.10, and shall cause,
effective as of the Closing, cancellation or return to Sellers of those bonds,
letters of credit or guarantees.  Buyer may also provide evidence that
such replacements are not necessary as a result of existing bonds, letters of
credit or guarantees that Buyer has previously posted as long as such existing
bonds, letters of credit or guarantees are adequate to secure the release of
those posted by Sellers.  Except for bonds, letters of credit and
guarantees related primarily to the Excluded Assets, Schedule 12.10 identifies
the bonds, letters of credit and guarantees posted by Sellers as of the date
noted on such schedule.
  ARTICLE
XIII
 Definitions and
References
  Section
13.1.                                Certain
Defined Terms.
  Each term
that is enclosed by parentheses and quotation marks in the preamble, recitals or
body of this Agreement, or that is specified as a defined term in this
Agreement, is and shall be a defined term.  Wherever used in this
Agreement with initial capitalization, each term defined in this Agreement shall
have the meaning ascribed to it in this Agreement.  When used in
this Agreement, the following terms shall have the respective meanings assigned
to them in this Section 13.1:
 
 “AAA” means the American
Arbitration Association.
 
 “Affiliate” means any Person
directly or indirectly controlling, controlled by or under common control with a
Person.
 
 “Agreement” means this Asset
Purchase and Sale Agreement, as hereafter amended or modified in accordance with
the terms hereof.
 
 “Applicable Law” means any Law,
exclusive of Environmental Laws.
 
 “Assumed Obligations” means all
obligations to timely fulfill, perform, pay, and discharge (or cause to be
timely fulfilled, performed, paid or discharged) all of the costs, obligations
and liabilities of Sellers, known or unknown, of whatsoever kind or nature, with
respect to the Properties:(A) arising or pertaining to the period from and after
the Effective Date, including but not limited to: (i) the obligation to
(y) plug and abandon or remove and dispose of all wells, platforms,
structures, flow lines, pipelines and other equipment, pits and holding ponds
hereafter
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  located
on the Oil and Gas Properties, and (z) cap and bury all flow lines and
other pipelines hereafter located on the Oil and Gas Properties to the extent
used or formerly used in connection with the Deep Rights,
(ii)  obligations and liabilities arising from or in connection with
any Imbalances initially arising after the Effective Date with respect to the
production of Hydrocarbons in which Buyer has any right or interest;
(iii)  all Taxes assessed with respect to a period which begins on or
after the Effective Date; and (iv) obligations with respect to the disputes,
actions, suits and proceedings including those described on Schedule 4.6 (and
any other actions, suits or proceedings arising out of the same facts or
circumstances), regardless of the Properties to which such disputes, actions,
and proceedings relate; and (B) arising or pertaining to the Deep Rights of or
underlying the Lands, regardless of when occurring, excluding any obligation,
cost or liability of Sellers arising from or associated with the Existing Deep
Wells or any pre-Effective Date Imbalances; provided, that Assumed Obligations
does not mean or include Sellers’ obligations and liabilities with respect to
the Retained Obligations.
 
 “Business Day” means a day
other than a Saturday, Sunday or day on which commercial banks in the State of
Texas are authorized or required to be closed for business.
 
 “Code” means the Internal
Revenue Code of 1986, or any comparable successor statute thereto, as
amended.
 
 “Confidentiality Agreement”
means that certain Confidentiality Agreement by and between Sellers and Buyer
dated August 6, 2008.
 
 “Credit Facility”means
collectively, the Third Amended and Restated Credit Agreement dated August 31,
2007 (as amended by the First Amendment to the Third Amended and Restated Credit
Agreement dated November 2, 2007 and the Second Amendment to the Third Amended
and Restated Credit Agreement dated January 31, 2008) among Linn Energy, LLC as
Borrower and BNP Paribas as Administrative Agent and the Lenders signatory
thereto; and the Second Lien Term Loan Agreement dated January 31, 2008 among
Linn Energy, LLC as Borrower and BNP Paribas as Administrative Agent, RBC
Capital Markets as Syndication Agent and the Lenders signatory
thereto.
 
 “Deep Rights” means rights,
titles and interests associated with, but limited to, the Deep
Zones.  The parties recognize that the depth of the Mississippi
Limestone Formation may not be uniform throughout the Lands and agree that it is
their express intent for Sellers to convey and Buyer to acquire rights limited
to the Mississippi Limestone Formation and all lower depths, as further
described in this Purchase and Sale Agreement.
 
 “Deep Zones” means the area
from and below the stratagraphic equivalent of the top of the Mississippi
Limestone Formation, as identified at 11,244’ measured depth on the induction
log in the Leon Little 3-2 Well (API No. 3501723828) located in Section
2-12N-10W, Canadian County, Oklahoma.
 
 “Dollars”or“$” means U.S.
Dollars.
 
 “Dominion” means Dominion
Exploration & Production, Inc., a Delaware corporation, Dominion
Oklahoma Texas Exploration & Production, Inc., a Delaware corporation,
LDNG
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  Texas
Holdings, LLC, an Oklahoma limited liability company and DEPI Texas Holdings,
LLC, a Delaware limited liability company, collectively.
 
 “Dominion PSA” means that
certain Amended and Restated Mid-Continent Onshore Package Purchase Agreement
dated as of August 30, 2007, between by and between Dominion, as sellers, and
Linn Energy, LLC, as buyer, as amended by that certain First Amendment to
Purchase and Sale Agreement dated March 13, 2008, by and between Dominion and
Linn Energy.
 
 “Effective Date” means August
15, 2008.
 
 “Environmental Laws” means all
national, state, municipal or local laws, rules, regulations, statutes,
ordinances, orders or other legally enforceable directives of any Governmental
Entity pertaining to the protection of human health, natural resources, wildlife
or the environment, or the regulation of, or exposure to, Hazardous Materials,
including the Comprehensive Environmental Response, Compensation and Liability
Act, as amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C.
§ 9601 et seq., the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., the Federal Water
Pollution Control Act, as amended by the Clean Water Act, 33 U.S.C. § 1251 et
seq., the Clean Air Act, 42 U.S.C. §7401 et seq., the Toxic Substances
Control Act, 15 U.S.C. § 2601 et seq., and any similar state or local
statutes.
  “Environmental Liabilities”
means any and all damages (including any remedial, removal, response, abatement,
clean-up, investigation and/or monitoring costs, environmental response costs,
fines, penalties and associated legal costs) incurred or imposed
(i) pursuant to any agreement order, notice of responsibility, directive
(including directives embodied in Environmental Laws), injunctions, judgment or
similar documents (including settlements) arising out of, in connection with, or
under Environmental Laws, or (ii) pursuant to any claim by a Governmental
Entity or any other Person under Environmental Law for personal injury, property
damage, damage or injury to natural resources or wildlife, remediation, or
payment or reimbursement of response costs incurred or expended by such
Governmental Entity or other Person.
 
 “Escrow Agent” means Wells
Fargo Bank, National Association.
 
 “Escrow Agreement” means that
certain escrow agreement by and between Buyer, LEH and Escrow Agent dated of
even date herewith.
 
 “Governing Documents” means,
when used with respect to an entity, the documents governing the formation and
operation of such entity, including (i) in the instance of a corporation,
the articles or incorporation and bylaws of such corporation, (ii) in the
instance of a partnership, the partnership agreement, and (iii) in the
instance of a limited liability company, the certificate of formation and
limited liability company agreement.
 
 “Governmental Entity” means any
court or tribunal in any jurisdiction (domestic or foreign) or any federal,
state, county, municipal or other governmental or quasi-governmental body,
agency, authority, department, board, commission, bureau or
instrumentality.
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  “Hazardous Materials” means
(i) any substance or material that is listed, defined, or otherwise
designated as a “hazardous substance” under Section 101(14) of CERCAL, (ii) any
petroleum or petroleum products, (iii) radioactive materials, urea formaldehyde,
asbestos, and PCBs and (iv) any other chemical substance or waste that is
regulated by any Governmental Entity under any Environmental Law.
 
 “Hedge” means any future
derivative, swap, collar, put, call, cap, option or other contract that is
intended to benefit from, relate to, or reduce or eliminate the risk of
fluctuations in interest rates, basis risk or the price of commodities,
including Hydrocarbons.
 
 “Hydrocarbons” means oil, gas,
other liquid or gaseous hydrocarbons, or any of them or any combination thereof,
and all products and substances extracted, separated, processed and produced
therefrom.
 
 “Imbalances” means gas
production, pipeline, storage, processing or other imbalance attributable to
substances produced from the Oil and Gas Properties.
 
 “Knowledge” of Sellers (or
similar references to Sellers’ knowledge) means all information of which either
the Chief Executive Officer, President and Chief Operating Officer, Senior Vice
President, Operations, the Executive Vice President, Chief Financial Officer, or
the Vice President, Operations Mid-continent Deep of any of Sellers have actual
knowledge have actual knowledge including the Persons identified in Section
13.1(a) of Sellers Disclosure Schedule.  Knowledge of Buyer (or
similar references to Buyer’s knowledge) means all information of which either
the Chief Executive Officer, President and Chief Operating Officer, Senior Vice
President, Operations and the Executive Vice President and Chief Financial
Officer, of Sellers, have actual knowledge including the Persons identified in
Section 13.1(b) of Sellers Disclosure Schedule.
 
 “Laws” means all
constitutional provisions, statutes, rules, regulations, ordinances, judicial
and administrative decisions, decrees, judgments, rulings and orders, and codes
of, or adopted, enacted, promulgated, governing or issued by, any Governmental
Entity, including the common law.
 
 “Leases” means oil, gas or
mineral leases, leasehold estates, operating rights, rights under compulsory
pooling orders, and other rights authorizing the owner thereof to explore or
drill for and produce Hydrocarbons and other minerals, contractual rights to
acquire any such of the foregoing interest, which have been or may be earned by
performance, and fee and term mineral and royalty interests, and overriding
royalty interests, net profits interests, production payments and other
interests payable out of Hydrocarbon production.
 
 “Lender” means the lenders
party to the Credit Facility.
 
 “Lien” means any lien,
mortgage, deed of trust, security interest, pledge, charge, or similar
encumbrance against, covering, affecting or encumbering any property or right to
secure the payment of a debt or performance of an obligation or
understanding.
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  “Material Contract” means any
contract or agreement (i) to which any Seller is a party or by or under which
any Seller or any of the Properties may be subject or bound, (ii) which is not
terminable by Sellers at will and without penalty upon sixty (60) days notice or
less, (iii) which in any manner pertains to, covers, involves or includes any of
the Properties, and (iv) which is of a type described or identified at item (A),
(B), (C), (D), (E),  (F), (G), (H) or (I) immediately
below.
 
 (A)           contracts
or agreements for the purchase, sale or exchange of Hydrocarbons;
  (B)           contracts
or agreements for the gathering, treatment, processing, handling, storage or
transportation of Hydrocarbons;
  (C)           operating
agreements, unit agreements, and unit operating agreements;
  (D)           contracts
or agreements under which any Seller is or may be obligated to transfer, assign
or convey any right, title or interest in any Oil and Gas Property to any other
Person (other than Buyer);
  (E)           contracts
or agreements under which any Seller may earn or acquire, or is or may be
obligated to purchase or acquire any right, title or interest in any Deep Rights
of or underlying the Lands;
  (F)           contracts
or agreements under which any Seller is required to take some action to earn or
obtain an assignment or transfer of or title to any interest in any Scheduled
Lease;
  (G)           contracts
creating any area of mutual interest;
  (H)           partnership
agreements and joint venture agreements; and
  (I)           contracts
or agreements creating any hedges or hedging positions with respect to the
purchase or sales price of Hydrocarbons.
  “Net Acreage” means the net
number of mineral acres of Deep Rights covered by and subject to the associated
Lease, without regard to the associated Net Revenue Interest.
 
 “Net Revenue Interest” means an
interest (expressed as a percentage or decimal fraction) in and to all
Hydrocarbons produced and saved from or attributable to the associated
Lease.
 
 “Permits” means licenses,
permits, franchises, consents, approvals, variances, exemptions, and other
authorizations of or from Governmental Entities.
 
 “Person” means any individual,
corporation, partnership, limited liability company, joint venture, association,
joint-stock company, trust, estate, enterprise, unincorporated organization, or
Governmental Entity.
 
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  “Proceedings” means all
proceedings, actions, claims, suits, investigations, and inquiries by or before
any arbitrator or Governmental Entity.
 
 “Reasonable Best Efforts” means
a party’s reasonable best efforts in accordance with reasonable commercial
practice; provided, however, no party shall be required to file or threaten
litigation in order to have performed “Reasonable Best Efforts”.
  “Retained Obligations” means
Sellers’ obligations, liabilities, and duties (including associated attorneys’
fees and costs of litigation, arbitration and settlements) of any nature or
kind, whether know or unknown, whether by contract, agreement, lease, operation
of Law or otherwise, arising from, relating to or connection with, directly or
indirectly, any of the following: (i)  the Credit Facility, any other debt
instruments of Sellers or any of their Affiliates, or any amounts that may be
due and owing Sellers’ officers, employees or owners, (ii) the Excluded Assets,
including any obligation, undertaking, duty and/or liability of any Seller or
any other Person in connection with or arising from the ownership, operation
and/or use of any of the Excluded Assets, regardless of when occurring or
arising, (iii) Taxes attributable to the Properties for all periods prior to the
Effective Date, (iv) any Hedge relating to the Properties which was placed in
effect by any Person other than Buyer prior to the Closing, (v) all Imbalances
associated with the Shallow Zones of or underlying the Lands regardless of when
occurring, including the production or proceeds of production of Hydrocarbons
therefrom, and all Imbalances arising prior to the Effective Date with respect
to the Oil and Gas Properties, including the production or proceeds of
production of Hydrocarbons therefrom, and (vi) Sellers’ or any of their
Affiliate’s gross negligence or willful misconduct related to the ownership or
operation of the Oil and Gas Properties between the Effective Date and
Closing.
 
 “Securities Act” shall mean the
Securities Act of 1933, as amended, and all rules and regulations under such
Act.
 
 “Sellers Disclosure Schedule”
shall mean Schedule 4 attached hereto, which sets forth additional information
regarding the representations and warranties of Sellers contained herein and
information called for hereby.
 
 “Shallow Zones” mean all depths
above the Deep Zones.
 
 “Tax Returns” mean any return,
report, statement, form or similar statement required to be filed with respect
to any Taxes (including any attached schedules), including, without limitation,
any information return, claim for refund, amended return or declaration of
estimated Taxes.
 
 “Tax” or“Taxes” means any income taxes
or similar assessments or any sales, excise, occupation, use, ad valorem,
property, production, severance, transportation, employment, payroll, franchise,
or other tax imposed by any United States federal, state, or local (or any
foreign or provincial) taxing authority, including any interest, penalties, or
additions attributable thereto.
 
 “Working Interest” means the
percentage of costs and expenses attributable to the maintenance, development
and operation of an Oil and Gas Property.
 
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  Section
13.2.                                Certain
Additional Defined Terms.
  In
addition to such terms as are defined in the preamble to this Agreement and in
Section 14.1,
the following terms are used in this Agreement as defined in the Articles or
Sections set forth opposite such terms:
 
 
 Defined
      Term
              ReferenceAccounting
      Dispute
              Section
      2.3(c)Accounting
      Referee
              Section
      2.3(c)Adjusted
      Purchase Price
              Section
      2.1Allocated
      Value
              Section
      8.2(b)Assignment
              Section
      9.1(f)Buyer’s
      Losses
              Section
      11.2Buyer’s
      Title Review
              Section
      8.1(a)Closing
              Article
      IIIClosing
      Date
              Article
      IIICure
      Period
              Section
      8.5(b)Depth
      Severance
              Section
      8.6(a)Depth
      Severance Amount
              Section
      8.6(b)Depth
      Severance Notice
              Section
      8.6(c)Defect
      Dispute
              Section
      8.4Defects
      Escrow
              Section
      8.5(b)Defects
      Escrow Agent
              Section
      8.5(b)Defects
      Escrow Agreement
              Section
      8.5(b)Defensible
      Title
              Section
      8.2(c)Deposit
              Section
      2.4(a)Dominion
      Heritage Leases
              Section
      4.10Examination
      Period
              Section
      8.1(a)Excluded
      Assets
              Section
      1.2Existing
      Deep Wells
              Section
      1.2(b)Extended
      Examination Period
              Section
      8.1(c)Holdback
      Amount
              Section
      8.6(d)Indemnified
      Party
              Section
      11.5Indemnifying
      Party
              Section
      11.5Independent
      Expert
              Section
      8.4Lands
              Section
      1.1(b)Material
      Title Benefit
              Section
      8.3(b)Notice
      Period
              Section
      11.5Oil
      and Gas Properties
              Section
      1.1Permitted
      Encumbrances
              Section
      8.2(d)Post-Closing
      Defect
              Section
      8.5(b)Properties
              Section
      1.1Purchase
      Price
              Section
      2.1Records
              Section
      1.1(e)Rules
              Section
      8.4Sellers’
      Losses
              Section
      11.3
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  Defined
      Term
              Reference
 Side
      Letter
              Section
      7.11Subject
      Leases
              Section
      1.1(a)Surface
      Contracts
              Section
      1.1(f)Survival
      Date
              Section
      11.2(b)Title
      Benefit
              Section
      8.3(a)Title
      Benefit Amount
              Section
      8.3(c)Title
      Defect
              Section
      8.2(a)Title
      Defect Amount
              Section
      8.2(b)Title
      Defect Notice
              Section
      8.1(b)Title
      Defect Property
              Section
      8.1(b)
  Section
13.3.                                References,
Titles and Construction.
  (a)           All
references in this Agreement to articles, sections, subsections and other
subdivisions refer to corresponding articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise.
  (b)           Titles
appearing at the beginning of any of such subdivisions are for convenience only
and shall not constitute part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions.
  (c)           The
words “this Agreement”, “this instrument”, “herein”, “hereof”, “hereby”,
“hereunder” and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited.
  (d)           Words
in the singular form shall be construed to include the plural and vice versa, unless the
context otherwise requires.  Pronouns in masculine, feminine and
neuter genders shall be construed to include any other gender.
  (e)           Unless
the context otherwise requires or unless otherwise provided herein, the terms
defined in this Agreement which refer to a particular agreement, instrument or
document also refer to and include all renewals, extensions, modifications,
amendments or restatements of such agreement, instrument or document, provided
that nothing contained in this subsection shall be construed to authorize such
renewal, extension, modification, amendment or restatement.
  (f)           Examples
shall not be construed to limit, expressly or by implication, the matter they
illustrate.
  (g)           The
word “or” is not intended to be exclusive and the word “includes” and its
derivatives means “includes, but is not limited to” and corresponding derivative
expressions.
  (h)           No
consideration shall be given to the fact or presumption that one party had a
greater or lesser hand in drafting this Agreement.
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  (i)           Wherever
the term “Sellers” is used in this Agreement, it shall mean and refer to each
Seller or any one or more of the Sellers (including all Sellers) as the context
requires.
  (j)           Each
such Exhibit and Schedule attached hereto is incorporated herein by reference
for all purposes and references to this Agreement shall also include such
Exhibit or Schedule unless the context in which used shall otherwise
require.
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  IN WITNESS WHEREOF, this
Agreement is executed by the parties hereto on the date set forth
above.
   SELLERS:
  LINN
ENERGY HOLDINGS, LLC, a Delaware limited liability company
  By:  /s/ Mark E. Ellis
 Mark E.
Ellis, President and Chief Operating Officer
  LINN
OPERATING, INC., a Delaware corporation
  By:  /s/ Mark E. Ellis
 Mark E.
Ellis, President and Chief Operating Officer
  MIDCONTINENT
I, LLC
  By:  /s/ Mark E. Ellis
 Mark E.
Ellis, President and Chief Operating Officer
  MIDCONTINENT
II, LLC
  By:  /s/ Mark E. Ellis
 Mark E.
Ellis, President and Chief Operating Officer
  BUYER:
  DEVON
ENERGY PRODUCTION COMPANY, LP, an Oklahoma limited partnership
   By:  /s/ K. Earl Reynolds
 K. Earl
Reynolds
 
   Signature
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