Exhibit
2.1
 
 EXECUTION
VERSION
  
  FIRST
AMENDED AND RESTATED
 ASSET
PURCHASE AND SALE AGREEMENT
 Appalachia
Region
 
 between
 
 Linn
Energy Holdings, LLC
 Linn
Operating, Inc.
 Penn
West Pipeline, LLC
 as
“Sellers”
 
 and
 
 XTO
Energy Inc.
 as
“Buyer”
 
 
 
 Dated
as of June 9th, 2008
  
  
  TABLE
OF CONTENTS
  PageARTICLE
      I PROPERTIES TO BE SOLD AND PURCHASED
              1Section
      1.1.
              Assets
      Included
              1Section
      1.2.
              Assets
      Excluded
              3ARTICLE
      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
              6Section
      2.5.
              Allocation
      of Purchase Price
              7ARTICLE
      III THE CLOSING
              7ARTICLE
      IV REPRESENTATIONS AND WARRANTIES OF SELLERS
              7Section
      4.1.
              Organization
      and Existence
              7Section
      4.2.
              Power
      and Authority
              8Section
      4.3.
              Valid
      and Binding Agreement
              8Section
      4.4.
              Non-Contravention
              8Section
      4.5.
              Approvals
              8Section
      4.6.
              Litigation
              9Section
      4.7.
              Contracts
              9Section
      4.8.
              Commitments,
      Abandonments or Proposals
              9Section
      4.9.
              Production
      Sales Contracts
              9Section
      4.10.
              Plugging
      and Abandonment
              10Section
      4.11.
              Permits
              10Section
      4.12.
              Payment
      of Expenses
              10Section
      4.13.
              Compliance
      with Laws
              10Section
      4.14.
              Imbalances;
      Prepayments
              10Section
      4.15.
              Intellectual
      Property
              10Section
      4.16.
              Taxes
              11Section
      4.17.
              Fees
      and Commissions
              11Section
      4.18.
              Disclaimer
      of Warranties
              11
  
  Section
      4.19.
              Disclosures
              12ARTICLE
      V REPRESENTATIONS AND WARRANTIES OF BUYER
              12Section
      5.1.
              Organization
      and Existence
              12Section
      5.2.
              Power
      and Authority
              12Section
      5.3.
              Valid
      and Binding Agreement
              13Section
      5.4.
              Non-Contravention
              13Section
      5.5.
              Approvals
              13Section
      5.6.
              Pending
      Litigation
              13Section
      5.7.
              Knowledgeable
      Purchaser
              13Section
      5.8.
              Funds
              14Section
      5.9.
              Fees
      and Commissions
              14ARTICLE
      VI CERTAIN COVENANTS OF SELLERS PENDING CLOSING
              14Section
      6.1.
              Access
      to Files
              14Section
      6.2.
              Conduct
      of Operations
              14Section
      6.3.
              Restrictions
      on Certain Actions
              14Section
      6.4.
              Service
      Fee
              15Section
      6.5.
              Payment
      of Expenses
              15Section
      6.6.
              Preferential
      Rights and Third Party Consents
              15Section
      6.7.
              Hart-Scott-Rodino
      Act
              16ARTICLE
      VII ADDITIONAL PRE-CLOSING AND POST-CLOSING AGREEMENTS OF BOTH
      PARTIES
              16Section
      7.1.
              Reasonable
      Best Efforts
              16Section
      7.2.
              Notice
      of Litigation
              16Section
      7.3.
              Notification
      of Certain Matters
              17Section
      7.4.
              Fees
      and Expenses
              17Section
      7.5.
              Public
      Announcements
              17Section
      7.6.
              Casualty
      Loss Prior to Closing
              17Section
      7.7.
              Governmental
      Bonds
              18Section
      7.8.
              Assumed
      Obligations
              18Section
      7.9.
              Operational
      Transition
              18Section
      7.10.
              Books
      and Records
              18Section
      7.11.
              Suspended
      Funds
              18Section
      7.12.
              Letters-in-Lieu
              19
  ii
  Section
      7.13.
              Logos
      and Names
              19Section
      7.14.
              Further
      Assurances
              19ARTICLE
      VIII DUE DILIGENCE EXAMINATION
              19Section
      8.1.
              Title
      Due Diligence Examination
              19Section
      8.2.
              Environmental
      Due Diligence Examination
              22Section
      8.3.
              Disputes
      Regarding Title Defects or Environmental Defects
              24Section
      8.4.
              Adjustments
      to Purchase Price for Defects
              24Section
      8.5.
              Buyer
      Indemnification
              25ARTICLE
      IX CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
              26Section
      9.1.
              Conditions
      Precedent to the Obligations of Buyer
              26Section
      9.2.
              Conditions
      Precedent to the Obligations of Sellers
              27ARTICLE
      X TERMINATION, AMENDMENT AND WAIVER
              28Section
      10.1.
              Termination
              28Section
      10.2.
              Effect
      of Termination
              29Section
      10.3.
              Amendment
              29Section
      10.4.
              Waiver
              29ARTICLE
      XI SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
      INDEMNIFICATION
              29Section
      11.1.
              Survival
              29Section
      11.2.
              Sellers’
      Indemnification Obligations
              30Section
      11.3.
              Buyer’s
      Indemnification Obligations
              30Section
      11.4.
              Net
      Amounts
              31Section
      11.5.
              Indemnification
      Proceedings
              31Section
      11.6.
              Indemnification
      Exclusive Remedy
              32Section
      11.7.
              Limited
      to Actual Damages
              32Section
      11.8.
              Indemnification
      Despite Negligence
              32Section
      11.9.
              Tax
      Treatment of Indemnification Amounts
              32Section
      11.10.
              Sellers
      Aggregate Indemnity Limits
              32ARTICLE
      XII MISCELLANEOUS MATTERS
              32Section
      12.1.
              Notices
              32Section
      12.2.
              Prorations,
      Deposits and Taxes
              33Section
      12.3.
              Entire
      Agreement
              34
  iii
  Section
      12.4.
              Injunctive
      Relief
              34Section
      12.5.
              Binding
      Effect; Assignment; No Third Party Benefit
              34Section
      12.6.
              Severability
              35Section
      12.7.
              GOVERNING
      LAW
              35Section
      12.8.
              Counterparts
              35Section
      12.9.
              WAIVER
      OF CONSUMER RIGHTS
              35Section
      12.10.
              Replacement
      Bonds, Letters of Credit and Guarantees
              35ARTICLE
      XIII EMPLOYEE MATTERS
              36Section
      13.1.
              Continuing
      Employees
              36Section
      13.2.
              No
      Obligation to Hire Seller Employees
              36Section
      13.3.
              Interview,
      Screening, and Offers of Employment
              36Section
      13.4.
              Employee
      Benefits
              37Section
      13.5.
              Control
      of Seller Employees
              37Section
      13.6.
              No
      Third Party Beneficiaries
              38ARTICLE
      XIV DEFINITIONS AND REFERENCES
              38Section
      14.1.
              Certain
      Defined Terms
              38Section
      14.2.
              Certain
      Additional Defined Terms
              43Section
      14.3.
              References,
      Titles and Construction
              44ARTICLE
      XV RATIFICATION BY LEL
              45
 
 
  Exhibits
 A-1           Leases
 A-2           Rights
of Way
 A-3           Mineral
Tracts
 A-4           Real
Property
 A-5           Vehicle
List
 B              
Excluded Assets
 B-1           Field
Office
 B-2           Equipment
 B-3           Vehicles
 C              
Allocation of Purchase Price
 D              
Form of Assignment
  Schedules
 2.5           
Purchase Price Tax Allocations
 4              
Sellers Disclosure Schedule
 12.10      
Sellers Bonds
  iv
  FIRST
AMENDED AND RESTATED
 ASSET
PURCHASE AND SALE AGREEMENT
 
 THIS FIRST AMENDED AND RESTATED ASSET
PURCHASE AND SALE AGREEMENT is dated as of June 9th, 2008,
and made by and between Linn Energy Holdings, LLC, a Delaware limited liability
company (“LEH”), Linn
Operating, Inc., a Delaware corporation (“LOI”), and Penn West Pipeline,
LLC, a Delaware limited liability company (“PWP”), (collectively “Sellers”), and XTO Energy
Inc., a Delaware corporation (“Buyer”).
  RECITALS:
  Sellers and Buyer entered into that
certain Purchase and Sale Agreement dated as of April 13, 2008 (the “Original
Agreement”).  Pursuant to the Original Agreement, and subject
to the terms and conditions contained therein, each Seller agreed to sell and
Buyer agreed to purchase those certain interests in oil and gas properties,
rights and related assets that are defined and described as the “Assets”
therein.
  The parties desire to amend and restate
the Original Agreement to amend Exhibit C, Schedule 4, and to address certain
other matters.  For further certainty, this Agreement in all respects
supersedes and replaces the Original 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:
  AGREEMENT:
  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
rights, titles and interests of Sellers in and to the Leases described on Exhibit A-1
attached hereto and made a part hereof for all purposes (and any ratifications
and/or amendments to such Leases, whether or not such ratifications or
amendments are described on such Exhibit A-1);
  (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 lands described
in Exhibits A-1, A-2, and A-3
hereto or described in any of the Leases described on such Exhibit A-1
(including interests in Leases, overriding royalties, production payments and
net profits interests in such lands or such Leases, and fee mineral interests,
fee royalty interests, and other interests in so far as they cover such lands),
even though Sellers’ interest therein may be incorrectly described in, or
omitted from, such Exhibits A-1, A-2, and
A-3;
   
  (c)           All
rights, titles and interests of Sellers in and to, or otherwise derived from,
all presently existing and valid 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 federal, state,
or other authority having jurisdiction, voluntary unitization agreements,
designations and/or declarations) relating to the properties described in paragraphs (a)
and (b)
above;
  (d)           All
rights, titles, and interests of Sellers in and to the Material Contracts and
all presently existing and valid production sales (and sales related) contracts,
operating agreements, and other agreements and contracts which relate to any of
the properties described in paragraphs (a),
(b) and (c) above, or which
relate to the exploration, development, operation, or maintenance thereof or the
treatment, storage, transportation or marketing of production therefrom (or
allocated thereto);
  (e)           All
rights, titles, and interests of Sellers in and to all materials, supplies,
machinery, equipment, improvements and other personal property and fixtures
(including all wells, wellhead equipment, pumping units, flowlines, tanks,
buildings, injection facilities, saltwater disposal facilities, compression
facilities, gathering systems, and other equipment), and all easements,
rights-of-way, surface leases and other surface rights, all Permits and
licenses, and all other appurtenances being used or held for use in connection
with, or otherwise related to, the exploration, development, operation or
maintenance of any of the properties described in paragraphs (a),
(b) and (c) above, or the
treatment, storage, transportation, or marketing of production therefrom (or
allocated thereto);
  (f)           Subject
to any third party rights, all of Sellers’ lease files, title opinions,
production records, well files, accounting records (but not including general
financial and accounting records attributable to Sellers or Sellers’ business),
seismic records and surveys, gravity maps, electric logs, geological or
geophysical data and records, and other files, documents and records of every
kind and description which relate to the properties described above (the “Records”); provided, however
that Sellers may retain copies of any or all of the Records;
  (g)           The
lease for the office premises used by Sellers located at “650 Washington Road,
Pittsburgh, PA” and the field offices and premises described on Exhibit A-4 and
all furniture, fixtures, and equipment located thereat, including computers,
telephone equipment and other similar items of tangible personal property
directly associated with the Properties; and
  (h)           The
vehicles described on Exhibit
A-5.
  
  As used
herein:  (i) “Oil and Gas Properties” means
the properties and interests described in paragraphs (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
paragraphs (d),
(e), (f), (g),
and (h) above,
save and except for any such properties or assets that are Excluded
Assets.
   2
  Section
1.2.                                Assets
Excluded.  Notwithstanding anything herein contained to the
contrary, the Properties do not include, and there is hereby excepted and
reserved unto Sellers, all other assets, properties, and business of Sellers,
including the following:
  (a)           Any
accounts receivable or accounts payable accruing before the Effective
Date;
  (b)           All
of Sellers’ right, title, and interest in any oil, gas, or mineral Leases,
overriding royalties, production payments, net profits interests, fee mineral
interests, fee 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 Effective Date, are
owned by Sellers and are in storage or within processing plants;
  (c)           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;
  (d)           Any
and all proceeds from the settlements of contract disputes with purchasers of
Hydrocarbons from the Properties, including settlement of take-or-pay disputes,
insofar as said proceeds are attributable to periods of time prior to the
Effective Date;
  (e)           Any
and all proceeds from settlements with regard to reclassification of oil or gas
produced from the Properties, insofar as said proceeds are attributable to
periods of time prior to the Effective Date;
  (f)           All
contracts of insurance or indemnity;
  (g)           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;
  (h)           All
limited liability company, financial, tax, and legal (other than title) books
and records of Sellers;
  (i)           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;
  (j)           The
field office located at Jane Lew, West Virginia, to the extent described on
Exhibit B and
all furniture, fixtures and equipment located thereat, including computers,
telephone equipment and other similar items of tangible personal
property;
   3
  (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);
  (n)           All
of the other properties, interests and assets described on Exhibit B,
together with any rights, liabilities, or obligations associated with such
assets;
  (o)           The
Existing Hedges and all hedging transactions and any gains or losses
attributable to any hedging activities, whether occurring before or after the
Effective Date;
  (p)           Any
other right or interest in and to the Properties to the extent attributable to
the period prior to the Effective Date;
  (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;
  (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; and
  (s)           All
assets associated with Sellers’ Affiliates, Mid Atlantic Well Service, Inc.,
Marathon 85-II Limited Partnership, a West Virginia limited partnership, and
Marathon 85-III Limited Partnership, a West Virginia limited partnership, and
their respective operations including those specifically described on Exhibit
B.
  The
properties and interests specified in the foregoing paragraphs (a)
through (s) 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.
  
  ARTICLE
II
  Purchase
Price
  Section
2.1.                                Purchase
Price.  In consideration of the sale of the Properties by
Sellers to Buyer, Buyer shall pay to Sellers cash in the amount of FIVE HUNDRED
NINETY-NINE
   4
  MILLION
SEVEN HUNDRED THOUSAND AND NO\100 DOLLARS ($599,700,000.00) (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, appropriate adjustments shall be made between
Buyer and Sellers so that:
  (i)           all
expenses (including all drilling costs, all capital expenditures, and all
overhead administrative charges under applicable operating agreements, and all
other operating costs actually charged by third parties) for work done in the
operation of the Properties on or after the Effective Date will be borne by
Buyer, and all 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 Buyer, and
  (ii)           all
expenses for work done in the operation of the 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
Sellers.
  (b)           It
is agreed that, in making the adjustments contemplated by Section
2.2(a):
  (i)           Oil
which was produced from the Oil and Gas Properties and which was, on the
Effective Date, stored in tanks, but without taking into account tank bottom
sediment and water,  located on the Oil and Gas Properties (or located
elsewhere but used to store oil produced from the Oil and Gas Properties prior
to delivery to oil purchasers) and above pipeline connections shall be deemed to
have been produced before the Effective Date (it is recognized that such tanks
were not gauged on the Effective Date for the purposes of this Agreement and
that determination of the volume of such oil in storage will be based on the
best available data, which may include estimates),
  (ii)           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
  (iii)           no
consideration shall be given to the local, state, or federal income tax
liabilities of any party.
  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
   5
  adjustments
provided for in Section 2.2.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.
  (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,
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.
  (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, then, at the written request of either Sellers or Buyer (the “Request Date”), each of
Sellers and Buyer shall nominate and commit one of their senior officers to meet
at a mutually agreed time and place not later than ten days after the Request
Date to attempt to resolve same.  If such senior officers have been
unable to resolve such Accounting Dispute within a period of 30 days after the
Request Date, 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 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 and Buyer.
  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 Sellers cash equal to ten percent (10%) of the Purchase Price, which
is FIFTY-NINE MILLION NINE HUNDRED SEVEN THOUSAND AND NO\100 DOLLARS
($59,970,000.00), as a deposit (such amount, together with all interest earned
thereon, the “Deposit”).  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.
   6
  (b)           At
the Closing, Buyer shall pay to Sellers cash equal to the Adjusted Purchase
Price less the
Deposit.
  (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.
  (a)           Buyer,
using its reasonable business judgment, has allocated the Purchase Price among
the Oil and Gas Properties as shown on the attached Exhibit C.
  (b)           On
or before the Closing Date, the Buyer and Sellers shall agree in writing 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 shall be set forth on Schedule 2.5 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 July 1, 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, LEH hereby represents and warrants to
Buyer as follows:
  Section
4.1.                                Organization
and Existence.  Each Seller is a limited liability company or
corporation duly formed and validly existing under the laws of the State of
Delaware.
  Section
4.2.                                Power and
Authority.  Each Seller has all requisite corporate or limited
liability company power and authority to execute, deliver, and perform this
Agreement and each other agreement, instrument, or document executed or to be
executed by Sellers in connection with the transactions contemplated hereby to
which it is a party and to consummate the
   7
  transactions
contemplated hereby and thereby.  The execution, delivery, and
performance by Sellers of this Agreement and each other agreement, instrument,
or document executed or to be executed by Sellers 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 Sellers.
  Section
4.3.                                Valid and
Binding Agreement.  This Agreement has been duly executed and
delivered by Sellers and constitutes, and each other agreement, instrument, or
document executed or to be executed by Sellers 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 Sellers and constitutes, or
when executed and delivered will constitute, a valid and legally binding
obligation of Sellers, 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
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 Sellers of this Agreement and each other
agreement, instrument, or document executed or to Sellers’ Knowledge to be
executed by Sellers 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 Sellers’ Governing Documents, (b) 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 or
indenture, or any material lease, contract, agreement, or other instrument or
obligation to which Sellers are a party or by which Sellers or any of their
properties may be bound, (c) result in the creation or imposition of any
lien or other encumbrance upon the properties of Sellers, or (d) violate
any Applicable Law binding upon Sellers, except, in the instance of clause (b) or
clause (c)
above, for any such conflicts, violations, defaults, terminations, cancellations
or accelerations which would not, individually or in the aggregate, have a
Material Adverse Effect.
  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 obtained post-closing, no
consent, approval, order, or authorization of, or declaration, filing, or
registration with, any court or governmental agency or of any third party is
required to be obtained or made by Sellers in connection with the execution,
delivery, or performance by Sellers of this Agreement, each other agreement,
instrument, or document executed or to be executed by Sellers in connection with
the transactions contemplated hereby to which they are a party or the
consummation by them of the transactions contemplated hereby and thereby, except
for such consents, approvals, orders, authorizations, declarations, filings,
or
   8
  registrations
which, if not obtained or made (as applicable), would not, individually or in
the aggregate, have a Material Adverse Effect.
  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 Sellers or
the Properties (including any actions challenging or pertaining to Sellers’
title to any of the Properties), or affecting the execution and delivery of this
Agreement by Sellers or the consummation of the transactions contemplated hereby
by Sellers.
  Section
4.7.                                Contracts.  Schedule
4.7 lists all Material Contracts.  To Sellers’ Knowledge, none of the
Sellers is in default under any Material Contract except as disclosed on
Schedule 4.7 and except such defaults as would not, individually or in the
aggregate, have a Material Adverse Effect.  To Sellers’ Knowledge, all
Material Contracts are in full force and effect.  Except as disclosed
on Schedule 4.7, there are no futures, options, swaps or other derivatives with
respect to the sale of production that will be binding on Sellers or the
Properties after Closing.  Except as disclosed on Schedule 4.7, as of
the date identified on such Schedule, there were no contracts for the purchase,
sale or exchange of oil, gas or other hydrocarbons produced from or attributable
to the Properties that will be binding on the Buyer, the Sellers or the
Properties after Closing that Buyer will not be entitled to terminate at will
(without penalty)  on ninety (90) days notice or less.  No
notice of default or breach has been received or delivered by any Seller under
any Material Contract, the resolution of which is currently outstanding, and no
currently effective notices have been received by any Seller of the exercise of
any premature termination, price redetermination, market-out or curtailment of
any Material Contract.
  Section
4.8.                                Commitments,
Abandonments or Proposals.  Sellers will not incur any
expenses, and will not make any commitments to make expenditures in connection
with the ownership or operation of the Properties after the Effective Date,
other than expenses incurred in the normal operation of existing wells on the
Oil and Gas Properties; Sellers will not abandon any wells (or remove any
material items of equipment, except those replaced by items of materially equal
suitability and value)on the Oil and Gas
Properties on or after the Effective Date except for those done in the ordinary
course of Sellers’ business or unless required by Applicable Law; and no
proposals are currently outstanding by Sellers or other working interest owners
to drill additional wells, or to deepen, plug back, sidetrack or rework existing
wells, or to conduct other operations for which consent is required under the
applicable operating agreement, or to conduct any other operations other than
normal operation of existing wells on the Oil and Gas Properties.
  Section
4.9.                                Production
Sales Contracts.  There exist no agreements or arrangements for
the sale of Hydrocarbons from the Oil and Gas Properties (including calls on, or
other rights to purchase, production, whether or not the same are currently
being exercised) other than (a) production sales contracts (in this
Section, the“Scheduled Production Sales
Contracts”) disclosed in Section 4.9 of the Sellers Disclosure
Schedule or (b) agreements or arrangements which are cancelable on 90 days
notice or less without penalty or detriment.
  Section
4.10.                                Plugging
and Abandonment.  To Seller’s Knowledge, except for wells
listed in Section 4.10 of the Sellers Disclosure Schedule, there are no dry
holes, or shut in or otherwise inactive wells, located on the Oil and Gas
Properties or on lands pooled or unitized therewith, except for wells that have
been plugged and abandoned.
   9
  Section
4.11.                                Permits.  Sellers
have all Permits necessary or appropriate to own and where Seller operates,
operate the Properties as presently being owned and operated, except for such
Permits the absence of which would not be reasonably expected to have a Material
Adverse Effect, and to Sellers’ Knowledge, such Permits are in full force and
effect.  Except as set forth in Section 4.11 of the Sellers
Disclosure Schedule, Sellers have not received written notice of any violations
in respect of any Permits and to Sellers’ Knowledge, there are no violations in
respect of any Permit and no one has communicated to Sellers that there are any
violations in respect of any Permit, except for such violations which would not
reasonably be expected to have a Material Adverse Effect.
  Section
4.12.                                Payment
of Expenses.  All expenses (including all bills for labor,
materials, and supplies used or furnished for use in connection with the
Properties, and all severance, production, ad valorem, and other similar Taxes)
relating to the ownership or operation by Sellers of the Properties, have been,
and are being, paid (timely, and before the same become delinquent) by Sellers,
except such expenses and Taxes as are disputed in good faith by Sellers and for
which an adequate accounting reserve has been established by
Sellers.  Sellers are not delinquent with respect to their obligations
to bear costs and expenses relating to the development and operation of the Oil
and Gas Properties.
  Section
4.13.                                Compliance
with Laws.  To Sellers’ Knowledge, the ownership and operation
of the Properties operated by Sellers have been in compliance with all
Applicable Laws.  Notwithstanding the foregoing, this Section 4.13 does not
relate to environmental matters (including compliance with Environmental Laws or
matters that would constitute Environmental Defects), it being agreed that such
matters are covered by and dealt with in Article VIII
exclusively.
  Section
4.14.                                Imbalances;
Prepayments.  Section 4.14 of the Sellers Disclosure Schedule
sets forth all Imbalances as of the date set forth in such Section with respect
to the Oil and Gas Properties.  Sellers are not obligated by virtue of
a take or pay payment, advance payment or other similar payment (other than
royalties, overriding royalties and similar arrangements reflected in Exhibit C), to
deliver Hydrocarbons, or proceeds from the sale thereof, attributable to the Oil
and Gas Properties at some future time without receiving payment therefor at or
after the time of delivery.
  Section
4.15.                                Intellectual
Property.  To Sellers’ Knowledge, Sellers own or have valid
licenses or other rights to use all patents, copyrights, trademarks, software,
databases, geological data, geophysical data, engineering data, maps,
interpretations, and other technical information used by Sellers in connection
with their ownership and operation of the Properties as presently conducted,
subject to the limitations contained in the agreements governing the use of the
same, which limitations are customary for companies engaged in the business of
the exploration and production of Hydrocarbons.
  Section
4.16.                                Taxes.
  (a)           Except
as set forth in Section 4.16 of the Sellers Disclosure Schedule, all ad valorem
and severance Taxes due and payable for the Properties have been timely paid
in
   10
  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, (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
4.17.                                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
4.18.                                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 by that Seller.  Buyer agrees
that the Properties are being sold by each Seller “where is” and “as is”, with
all faults.  Specifically as a part of (but not in limitation of) the
foregoing, 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 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,
   11
  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
FURNISHED BY SELLERS ARE PROVIDED TO BUYER AS A CONVENIENCE AND BUYER’S RELIANCE
ON OR USE OF THE SAME IS AT BUYER’S SOLE RISK.
  Section
4.19.                                Disclosures.  The
matters set forth on the Sellers Disclosure Schedule are not necessarily matters
that Sellers are required to disclose or matter 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 corporation, duly organized, legally
existing and in good standing under the laws of the State of Delaware, and is
qualified to do business and in good standing in each of the states in which Oil
and Gas Properties are located where the laws of such state would require a
corporation owning the Oil and Gas Properties located in such state to so
qualify.  Buyer is also qualified to own and operate oil and gas
properties with all applicable governmental agencies 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.
  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 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.
   12
  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, individually or in
the aggregate, have a Material Adverse Effect.
  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 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, individually or in
the aggregate, have a Material Adverse Effect.
  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 (and in fact has
evaluated) 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
   13
  applicable
securities laws.  At Closing, Buyer will have had access to the
Properties, the 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 and to consummate the transactions contemplated
hereby, Buyer has relied on its own independent due diligence investigation of
the Properties and has been advised by and has relied solely 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.
  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
and in a manner so as to not interfere with the normal business operations of
Sellers to the Properties and to any contract files, lease or other title files,
production files, well files, and other files of Sellers pertaining to the
ownership or operation of the Properties, and Sellers will use their Reasonable
Best Efforts to arrange for Buyer, and its attorneys and other representatives,
to have access to any such files in the office of Sellers.
  Section
6.2.                                Conduct
of Operations.  From the date hereof until the Closing Date,
Sellers will (i) continue the routine operation of the Properties in the
ordinary course of business as previously conducted prior to the date of this
Agreement, including without limitation, the continuation of the drilling of new
wells in accordance with the 2008 Appalachia Drilling Plan, a copy of which has
been previously furnished to Buyer by Sellers; and (ii) operate the
Properties in material compliance with all Applicable Laws and Environmental
Laws and Material Agreements.  Without expanding any obligations that
Sellers may have to Buyer, it is expressly agreed that Sellers shall never have
any liability to Buyer which respect to operation of a Property greater than
that which it might have as the operator to a non-operator under the applicable
operating agreement (or, in the absence of such an agreement, under the AAPL 610
(1989 Revision) form Operating Agreement).
  Section
6.3.                                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
   14
  operation
of the Properties after the Effective Date and as set out in the 2008 Appalachia
Drilling Plan, a copy of which has been previously furnished to Buyer by
Sellers, and except in the event of an emergency requiring immediate action to
protect life or preserve the Properties;
  (b)           except
where necessary to prevent the termination of a 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); or
  (d)           release
(or permit to terminate), or modify or reduce its rights under, any oil, gas, or
mineral lease forming a part of the Oil and Gas Properties, or any Material
Agreement, 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.
  Section
6.4.                                Service
Fee.  To compensate Sellers for administrative overhead
expenses associated with conducting operations pursuant to Section 6.2 from the
Effective Date to the Closing Date, Buyer agrees to pay Sellers the sum of
$350,000.00 per month.  Buyer will be responsible for operating the
Properties after Closing, unless Buyer and Sellers enter into a Transition
Services Agreement.
  Section
6.5.                                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 in good
faith.
  Section
6.6.                                Preferential
Rights and Third Party Consents.  Sellers will use Reasonable
Best Efforts to 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 6.6 of the Sellers Disclosure
Schedule.  Sellers shall have no obligation to assure that such
waivers are obtained, 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 6.6) 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: (i) the $175,000 threshold provided for
in Section 8.1(c), (ii) Section 8.1(d)(iii)(B), and (iii) Section 8.4(a));
provided, however, that if the
   15
  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
amount paid, or to be paid, by the party exercising such preferential right to
purchase (and Sellers shall collect such amount from such
purchaser).
  Section
6.7.                                Hart-Scott-Rodino
Act.  As  soon as practicable, but no later than
fifteen (15) Business Days after the execution hereof, Sellers and Buyer shall
each prepare and submit any necessary filings in connection with the
transactions contemplated by this Agreement under the Hart-Scott-Rodino Act
(“HSR Act”) and the rules and regulations promulgated
thereunder.  Each party shall request expedited treatment of such
filing by the Federal Trade Commission, shall promptly make any appropriate or
necessary subsequent or supplemental filings, and shall furnish to the other
party copies of all filings made under the HSR Act at the same time they are
filed with the government.
  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
of any additional instruments necessary to consummate the transactions
contemplated hereby.
  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
   16
  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.  The
delivery of any notice pursuant to this Section 7.3 shall not
be deemed to (x) modify the representations or warranties hereunder of the
party delivering such notice, (y) modify the conditions set forth in Article IX, or
(z) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
  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.
  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: (i) the
$175,000 threshold provided for in Section 8.1(c), (ii) Section 8.1(d)(iii)(B),
and (iii) Section 8.4(a)), 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 damage, Sellers shall, at Sellers’ election, either collect
(and when collected pay over to Buyer), or assign to Buyer, such claims,
and
   17
  (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
bonds or other security 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.                                Operational
Transition.  IT IS RECOGNIZED THAT THERE IS NO ASSURANCE GIVEN
BY SELLERS THAT BUYER SHALL SUCCEED SELLERS AS OPERATOR OF ANY PROPERTY WHERE
OTHER PARTIES OWN INTERESTS IN THE WELLS LOCATED THEREON, but Sellers shall
cooperate with Buyer to see that Buyer shall succeed Sellers as operator of all
the Sellers operated properties, by: (a) delivering at Closing signed
counterparts of letters addressed to non-operating working interest owners of
the Sellers operated Properties advising them of the sale of those Properties by
Sellers to Buyer; and seeking such owners’ consideration of Buyer’s selection as
successor to Seller as operator, and (b) executing applicable change of operator
forms for filing with the applicable Governmental Agencies.
  Section
7.10.                                Books and
Records.  At or promptly after Closing, but in no event later
than 30 days after the Closing, Sellers will deliver to Buyer all related books
and records that are a part of the Properties to a location designated by
Buyer.  Buyer will promptly reimburse Sellers for all reasonable costs
of shipping or transporting such books and records including any costs incurred
to provide such data in an electronic format.  Sellers (or its
Affiliates) shall have the right to have reasonable access during Buyer’s
reasonable and customary business hours to inspect and copy (at Sellers’ or such
Affiliate’s expense) the books and records so delivered under this Section 7.10 for the
six-year period commencing on the Closing Date.
  Section
7.11.                                Suspended
Funds.  As soon as practicable after the Closing Date, but no
later than 90 days thereafter, Sellers shall provide to Buyer a listing in Excel
spreadsheet format, showing all proceeds from production attributable to the
wells which are currently held in suspense by Sellers and the reason for
suspending such proceeds, and shall transfer to Buyer all those suspended
proceeds (the “Suspended
Proceeds”).  Thereafter, Buyer shall be responsible for proper
distribution of the Suspended Proceeds to the parties lawfully entitled to them
to the extent and only to the extent of Suspended Proceeds, except Sellers shall
remain liable for interest and penalties, if any, associated with the Suspended
Proceeds for failure, prior to the Closing Date, to escheat such Suspended
Proceeds to the applicable Governmental Entities in accordance with Applicable
Law.
  Section
7.12.                                Letters-in-Lieu.  At
Closing, Sellers shall execute and deliver letters in lieu of transfer orders
(or similar documentation) in form reasonably acceptable to Buyer and
Sellers.
   18
  Section
7.13.                                Logos and
Names.  As soon as practicable after the Closing, Buyer will
remove or cause to be removed the names and marks used by Sellers and all
variations and derivatives thereof and logos relating thereto from the
Properties.
  Section
7.14.                                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.
  ARTICLE
VIII
  Due Diligence
Examination
  Section
8.1.                                Title Due
Diligence Examination.
  (a)           From
the date of this Agreement until 5:00 p.m. (local time in Houston, Texas) seven
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 in order to determine whether Title Defects (as defined below) exist
(“Buyer’s Title
Review”).  Such books and records shall include all title
opinions, title files, ownership maps, lease files, assignments, division
orders, operating records and agreements, well files, financial and accounting
records, geological, geophysical and engineering 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 if requested by
Buyer, Sellers shall use their Reasonable Best Efforts to obtain a waiver of any
such restrictions in favor of Buyer.  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 (“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 value of such Title Defect as determined by
Buyer in good faith.  Buyer will provide Sellers with Title Defect
Notices, if any, as soon as 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 notified by Buyer in accordance with
the foregoing, shall be deemed to have been waived by Buyer for all
purposes.  Upon the receipt of such effective Title Defect Notice from
Buyer, Sellers shall, in addition to the remedies set forth in Section 8.1(c)
(the “Remedies for Title
Defects”), use Sellers’ Reasonable Best Efforts 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”.
   19
  (c)           With
respect to each Title Defect that is not cured on or before the Closing, the
Purchase Price shall be reduced, subject to this Article VIII, by
the Title Defect Amount with respect to such Title Defect
Property.  The “Title
Defect Amount” shall mean, with respect to a Title Defect Property, and
except in connection with Section 8.1(d)(i)(D), the amount in excess of $175,000
by which such Title Defect Property is impaired as a result of the existence of
one or more Title Defects, which amount shall be determined as
follows:
  (i)           The
Title Defect Amount with respect to a Title Defect Property shall be determined
by taking into consideration the “Allocated Value” (as set forth
in Exhibit C
attached hereto) of the Oil and Gas Property subject to such Title Defect, the
portion of the Oil and Gas Property subject to such Title Defect, and the legal
effect of such Title Defect on the Oil and Gas Property affected thereby;
provided, however, that:  (A) if such Title Defect is in the
nature of Sellers’ Net Revenue Interest in an Oil and Gas Property being less
than the Net Revenue Interest set forth in Exhibit C hereto
and the Working Interest remains the same, then the Title Defect Amount shall
equal the Allocated Value for the relevant Oil and Gas Property multiplied by
the percentage reduction in such Net Revenue Interest as a result of such Title
Defect or (B) if such Title Defect is in the nature of a Lien, then the
Title Defect Amount shall equal the amount required to fully discharge such
Lien; and
  (ii)           If
the Title Defect results from any matter not described in Section 8.1(c)(i),
the Title Defect Amount shall be an amount equal to the difference between the
value of the Title Defect Property affected by such Title Defect with such Title
Defect and the value of such Title Defect Property without such Title Defect
(taking into account the portion of the Allocated Value of the Title Defect
Property).
  (d)           As
used in this Section 8.1:
  (i)           “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:
  (A)           entitles
Sellers to receive and retain, without reduction, suspension or termination, not
less than the percentage set forth in Exhibit C as
Sellers’ Net Revenue Interest of all Hydrocarbons produced, saved, and marketed
from each Lease comprising such Oil and Gas Property as set forth in Exhibit C,
through plugging, abandonment, and salvage of all wells comprising or included
in such Oil and Gas Property, and 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;
  (B)           obligates
Sellers to bear not greater than the percentage set forth in Exhibit C as
Sellers’ Working Interest of the costs and expenses relating to the maintenance,
development and operation of each Lease comprising such Oil and Gas Property,
through plugging, abandonment and salvage of all wells comprising or included in
such Oil and Gas Property, and except for changes or adjustments that result
from the establishment of units, changes in existing units (or the participating
areas therein), or the
   20
  entry
into of pooling or unitization agreements after the date hereof unless made in
breach of the provisions of Section 6.3;
  (C)           is
free and clear of all Liens, except Permitted Encumbrances;
  (D)           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.
  (ii)           “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 the Net Revenue Interest, increase
the Working Interest (without a proportionate increase in the Net Revenue
Interest) or materially affect the value of any property encumbered thereby;
(E) all approvals required to be obtained from 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 at
Closing); (H) Liens under the Existing Hedges (provided such Liens are
released at Closing); and (I) conventional rights of reassignment normally
actuated by an intent to abandon or release a lease and requiring notice to the
holders of such rights.
  (iii)           “Title Defect” shall mean any
particular defect in or failure of Sellers’ ownership of any
Property:  (A) that causes Sellers to not have Defensible Title
to such Oil and Gas Property, (B) that has attributable thereto a Title Defect
Amount in excess of $175,000 (except as otherwise provided for in Sections 6.6
and Section 7.6(a)) and (C) 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
   21
  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; (D) minor defects or irregularities in
title which for a period of five years or more have not delayed or prevented
Sellers (or Sellers’ predecessor) from receiving their Net Revenue Interest
share of the proceeds of production and have not caused Sellers to bear a share
of expenses and costs greater than its Working Interest share from each Lease,
unit or Well; and (E) 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 (E) 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.
  (e)           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 8.3
shall be applicable.
  Section
8.2.                                Environmental
Due Diligence Examination.
  (a)           During
the Examination Period, Buyer shall have the right, or the right to cause an
environmental consultant reasonably acceptable to Sellers (“Buyer’s Environmental
Consultant”), to conduct a Phase I environmental assessment of the
Properties and to conduct any further Phase I or other non-invasive
environmental assessment of the Properties it deems appropriate, to the extent
Sellers have the authority to grant such right to Buyer (“Buyer’s Environmental
Review”).  No less than three Business Days prior to the
proposed commencement date of Buyer’s Environmental Review, Buyer shall furnish
Sellers with an outline of the proposed scope of such review, including the
locations of such activities.  The cost and expense of Buyer’s
Environmental Review, if any, shall be borne solely by Buyer.  No
Person, other than Buyer’s Environmental Consultant and Buyer’s employees, may
conduct Buyer’s Environmental Review.  Sellers shall have the right to
have representatives thereof present to observe Buyer’s Environmental Review
conducted in Sellers’ offices or on Sellers’ properties.  Buyer agrees
to conduct Buyer’s Environmental Review in a manner so as not to unduly
interfere with the business operations of Sellers and in compliance with all
Applicable Laws, and Buyer shall exercise due care with respect to Sellers’
properties and their condition.
  (b)           Prior
to the Closing, unless otherwise required by Applicable Law, Buyer shall (and
shall cause Buyer’s Environmental Consultant, if applicable, to) treat
confidentially any matters revealed by Buyer’s Environmental Review and any
reports or data generated from such review (the “Environmental Information”),
and Buyer shall not (and shall cause Buyer’s Environmental Consultant, if
applicable, to not) disclose any Environmental Information to any Governmental
Entity or other third party without the prior written consent of Sellers (unless
so required under Applicable Law).  Prior to the Closing, unless
otherwise required by Applicable Law, Buyer may use the Environmental
Information only in connection with the transactions contemplated by this
Agreement.  If Buyer, Buyer’s Environmental Consultant, if applicable,
or any third party to whom Buyer has provided any Environmental Information
become legally compelled to disclose any of the Environmental Information, Buyer
shall provide Sellers with prompt notice and Sellers, at Sellers’ expense, may
file any protective order, or seek any other remedy, as it deems appropriate
under the circumstances.  If this Agreement is terminated
prior
   22
  to the
Closing, Buyer shall deliver the Environmental Information to Sellers, which
Environmental Information shall become the sole property of
Sellers.  Upon Sellers’ written request to Buyer, Buyer shall provide
copies of the Environmental Information to Sellers without charge.
  (c)           If
Buyer or Buyer’s Environmental Consultant, if applicable, discovers any
Environmental Defect (as herein defined), Buyer shall notify Sellers prior to
the expiration of the Examination Period of such alleged Environmental
Defect.  To be effective, such notice (an “Environmental Defect Notice”)
must (i) be in writing; (ii) be received by Sellers prior to the
expiration of the Examination Period; (iii) describe the Environmental
Defect in reasonable detail, including (A) the specific Properties affected by
or associated with such Environmental Defect, (B) if applicable, a site plan
showing the location of all field notes and the field conditions observed,
(C) the written conclusion of Buyer’s Environmental Consultant, if
applicable, that an Environmental Defect is believed to exist, which conclusion
shall be reasonably substantiated by the factual data gathered in Buyer’s
Environmental Review, and (D) if feasible and applicable, a separate,
reasonably specific citation of the provisions of the Environmental Laws alleged
to be violated and the related facts that substantiate such violation; (iv)
describe the procedures recommended to correct, eliminate or pay the
Environmental Defect, together with any related recommendations from Buyer’s
Environmental Consultant, if applicable; and (v) set forth Buyer’s good
faith estimate of the Environmental Defect Value, including the basis for such
estimate.  Any matters that may otherwise constitute Environmental
Defects, but of which Sellers have not been specifically notified by Buyer in
accordance with the foregoing, together with any environmental matter that does
not constitute an Environmental Defect, shall be deemed to have been waived by
Buyer for purposes of this Section 8.2.  Upon
the receipt of such effective notice from Buyer, Sellers shall have the option,
in addition to the remedy set forth in Section 8.4(c),
but not the obligation, to attempt to cure such Environmental Defect at any time
prior to the Closing, at the sole cost and expense of Sellers.  If
Sellers and Buyer are unable to reach an agreement as to whether an
Environmental Defect exists or, if it does exist, the amount of the
Environmental Defect Value attributable thereto, the provisions of Section 8.3
shall be applicable.
  (d)           If
any Environmental Defect described in a notice delivered in accordance with
Section 8.2 is
not cured on or before the Closing, then the Purchase Price shall be reduced,
subject to Section
8.4, by the Environmental Defect Value of such Environmental
Defect.
  (e)           As
used in this Section 8.2:
  (i)           “Environmental Defect” shall
mean, with respect to any given Property, a violation of Environmental Laws
in effect as of the Effective Date in the jurisdiction in which such Property is
located, an obligation under Environmental Laws to complete immediately or
promptly after the Closing any corrective action at the Property, or any
Environmental Liability arising from or attributable to any condition, event,
circumstance, activity, practice, incident, action, or omission existing or
occurring prior to the Closing Date, or the use, release, storage, treatment,
transportation, or disposal of Hazardous Materials prior to the Closing Date,
(A) regarding which an Environmental Defect Notice has been timely and
otherwise validly delivered, (B) that has an Environmental Defect Value
attributable thereto in excess of $250,000, and (C) is not otherwise
disclosed in Section 8.2 of the Sellers Disclosure Schedule.
   23
  (ii)           “Environmental Defect Value”
shall mean the amount (A) the net present value of the reasonably estimated
costs and expenses in excess of $250,000 to correct such Environmental Defect in
the most cost effective manner reasonably available, consistent with
Environmental Laws, or (B) the net present value in excess of $250,000, of
the amount of Environmental Liabilities reasonably believed will be incurred or
required to be paid by Sellers with respect thereto. The parties recognize that
the calculation of an Environmental Defect Value may require the use of
assumptions and extrapolations; however, it is acknowledged and agreed that any
such assumptions and extrapolations will be consistent with the known factual
information and reasonable in nature.
  Section
8.3.                                Disputes
Regarding Title Defects or Environmental Defects.  If Sellers
and Buyer are unable to reach an agreement as to whether a Title Defect or an
Environmental Defect exists, or if it does exist, the Title Defect Amount or
Environmental Defect Value attributable to such Title Defect or Environmental
Defect, or disputes relating to Post-Closing Defects pursuant to Section 8.4(c) (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 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.
  Section
8.4.                                Adjustments
to Purchase Price for Defects.
  (a)           Notwithstanding
anything to the contrary contained in this Agreement, no adjustment of the
Purchase Price shall be made for Title Defects unless the aggregate of the Title
Defect Amounts, as determined in accordance with this Agreement, equals or
exceeds two percent of the Purchase Price, in which event the Purchase Price
shall be adjusted downward by the amount such Title Defect Amounts exceed two
percent of the Purchase Price in the aggregate.
  (b)           Notwithstanding
anything to the contrary contained in this Agreement, no adjustment of the
Purchase Price shall be made for Environmental Defects unless the aggregate of
the Environmental Defect Values, as determined in accordance with this
Agreement, equals or exceeds two percent of the Purchase Price, in which event
the Purchase Price shall be adjusted downward by the amount such Environmental
Defect Values exceed two percent of the Purchase Price in the
aggregate.
  (c)           Notwithstanding
anything herein to the contrary, if Sellers are unable to cure a Title Defect or
an Environmental Defect (a “Post-Closing Defect”) on or
prior to Closing,
   24
  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,
but an amount equal to the applicable Title Defect Amount or Environmental
Defect Value 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 8.4(d).
  (d)           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 8.3.
  Section
8.5.                                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
   25
  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.
  ARTICLE
IX
  Conditions Precedent to the
Obligations of the Parties
  Section
9.1.                                Conditions
Precedent to the Obligations of Buyer.  The obligations of
Buyer under this Agreement are subject to each of the following conditions being
met:
  (a)           Each
of the representations and warranties of Sellers contained in Article IV 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 (i) as affected by transactions
contemplated or permitted by this Agreement, (ii) to the extent that any
such representation or warranty 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, and (iii) any such inaccuracies or
breaches which, in the aggregate, have not had or could not reasonably be
expected to have, a Material Adverse Effect.
  (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 a release of Liens with respect to the Properties, executed
in recordable form by the Lender, and in form and substance agreeable to
Buyer.
  (f)           Buyer
shall have received an assignment of the Properties executed and delivered by
Sellers, which assignment shall be substantially in the form of the instrument
attached hereto as Exhibit D in all
material respects (the “Assignment”).
   26
  (g)           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.
  (h)           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
or any other party to Buyer prior to or in connection with the
Closing.
  (i)           If
applicable, the waiting period under the HSR Act shall have expired or been
terminated.
  (j)           Buyer
shall have provided Sellers with evidence of replacement bonds, guarantees and
letters of credit, pursuant to Section 12.10, provided however, in the case of
replacement bonds, Buyer shall use their Reasonable Best Efforts to obtain all
such replacement bonds.
  Section
9.2.                                Conditions
Precedent to the Obligations of Sellers.  The obligations of
Sellers under this Agreement are subject to each of the following conditions
being met:
  (a)           Each
of the representations and warranties of Buyer contained in Article V shall be
true and correct in all material respects as of the date made and (having been
deemed to have been made again on and as of the Closing Date in the same
language) shall be true and correct in all material respects on and as of the
Closing Date, except as affected by transactions permitted by this Agreement and
except to the extent that any such representation or warranty 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.
  (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.
  (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
or any other party 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.
   27
  (g)           If
applicable, the waiting period under the HSR Act shall have expired or been
terminated.
  (h)           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 September 1, 2008, unless such failure to close shall be due to a
breach of this Agreement by the party seeking to terminate this Agreement
pursuant to this clause (i);
or
  (ii)           there
shall be any statute, rule, or regulation 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 and the
Environmental Defect Values exceeds fifteen percent 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 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, other
than any such breaches which, in the aggregate, have not had or could not
reasonably be expected to have a Material Adverse Effect, 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.
   28
  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 8.5 and in Articles XII and
XIIIshall 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.  If this Agreement is
terminated under Section 10.1 for
any other reason, the Deposit shall be returned 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.
  
  
  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, 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.  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
   29
  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 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, damages or expenses (collectively, “Buyer’s Losses”):
  (a)           resulting
from any a breach of the representations made by Sellers in Sections 4.1, 4.2, 4.3, 4.4, 4.5, or 4.17, or any
certificate delivered at Closing; or
  (b)           relating
to the Retained Obligations;
  provided,
however, that Sellers’ indemnification obligations for Buyer’s Losses under this
Section 11.2
shall (i) not include any claims, obligations, liabilities, damages or expenses
that do not individually exceed Two Hundred and Fifty Thousand Dollars
($250,000) and; (ii) 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 until such Retained Obligations are fully satisfied.
  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 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, damages, costs or expenses, (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;
  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.
   30
  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 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.  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 elects not to assume the defense
of such claim or demand (or fails to give notice to the Indemnified Party during
the Notice Period), 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 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).
  Section
11.6.                                Indemnification
Exclusive Remedy.  Indemnification pursuant to the provisions
of this Article XI shall
be the exclusive remedy 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.
   31
  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, consequential, indirect, punitive, or exemplary
damages, provided that any incidental, 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.  Sellers shall not have any
liability for indemnification under Section 11.2 until
and unless the aggregate amount of Buyer’s Losses which comply with the
requirements of Section 11.2 exceed
one percent of the Purchase Price, and then only to the extent such Buyer’s
Losses exceed one percent of the Purchase Price.  Notwithstanding
anything to the contrary contained elsewhere in the Agreement, Sellers shall not
be required to indemnify Buyer under this Article XI for
aggregate Buyer’s Losses in excess of ten percent 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):
  If to
Sellers:
  Linn
Energy Holdings, LLC
 600
      Travis Street, Suite 5100
 Houston,
      Texas 77002
  32
  Attention:
      Charlene A. Ripley, Senior Vice President, General Counsel and Corporate
      Secretary
  Fax
      No.:  (281) 840-4001, Email:
    cripley@linnenergy.com
  If to
      Buyer:
 
 XTO
      Energy Inc.
 810
      Houston Street
 Fort
      Worth, TX  76102
 Attention:  Mr.
      Vaughn O. Vennerberg, II
 Senior
      Executive Vice President & Chief of
Staff
 Fax
      No.:  (817) 870-0379. E-mail:
      Vaughn_Vennerberg@xtoenergy.com
  Such
notices, requests, demands, and other communications shall be effective upon
receipt.
  Section
12.2.                                Prorations,
Deposits and Taxes.  Taxes and other charges with respect to
the transactions contemplated by this Agreement shall be paid or prorated by the
parties as follows:
  (a)           Prior
to Closing, Buyer shall provide Sellers with an appropriate exemption
certificate to establish the right to any exemption from state and local sales
and use Taxes and for any exemptions from any other applicable state
Tax.  Buyer shall thereafter provide Sellers with any additional
exemption certificates and other documentation as may be required by the
Governmental Entities for such purpose.  Sellers shall reasonably
cooperate with Buyer, including providing Buyer with such data as Buyer may
reasonably request in order to support all applicable sales Tax exemptions,
subject to the Confidentiality Agreement.
  (b)           Sellers
and Buyer agree that all state and local sales and use Taxes or other similar
Taxes relating to the sale and conveyance of the Properties shall be the
liability of Buyer, and shall be borne by Buyer.  At Closing, Sellers
shall collect from Buyer any state and local sales and use Taxes to the extent
any such Taxes are due and owing after taking into account any exemption
certificates provided by Buyer to Sellers as set forth in Section
12.2(a).  Sellers shall remit such Taxes directly to the
appropriate Governmental Entities.
  (c)           If
any state and local sales and use Taxes or other similar Taxes relating to the
sale and conveyance of the Properties, are subsequently imposed or assessed by
any Governmental Entities, and as a result of such subsequent imposition or
assessment Sellers, or their assignees, are assessed additional Taxes, then
Buyer shall reimburse Sellers, or their assignees, for such imposed or assessed
Taxes, including without limitation interest and penalties assessed
thereon.
  (d)           All
real or personal property transfer Taxes or other similar Taxes (including
without limitation documentary transfer taxes, realty transfer taxes and charges
or fees with respect to the transfer of real property or to the recordation of
the documents necessary for the transfer of real property that may be required
for the transfer of the Properties from Sellers to Buyer) shall be borne by and
paid directly to the Governmental Entities by Buyer.
   33
  (e)           After
the Closing, the party receiving each property Tax or other such bill or notice
applicable to the Properties for the period before or after the Closing Date
occurred shall promptly notify the other party and shall pay each such bill
prior to the last day the same may be paid without penalty or
interest.  The party responsible or liable under this Agreement with
respect to such amount shall promptly on receipt of a written request
(accompanied by appropriate supporting documentation) reimburse the responsible
party’s share of such amount so paid as provided under this
Agreement.  Sellers and Buyer shall reasonably cooperate with each
other after Closing with respect to any property Tax assessment or valuation (or
protest in connection therewith) by any Governmental Entity with respect to the
Tax periods in which the Closing Date occurs.  If either party
receives a refund of any property Taxes for which the other is liable or
responsible under this Agreement, the party receiving such refund, whether
received in cash, or as a credit against another state and/or local Tax, shall,
within thirty (30) days after the receipt of such refund, remit it to the
party who is liable.
  For the
avoidance of doubt, and notwithstanding any provision in this Agreement to the
contrary, the parties hereto acknowledge that their respective 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.
  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 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, 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
   34
  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.
  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 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 other Affiliate with any Governmental Authority or
third Person and relating to the Sellers or the Properties are to be transferred
to Buyer.  On or before Closing, or in the case of bonds, within sixty
(60) days following Closing, Buyer shall obtain, or cause to be obtained in the
name of Buyer, replacements for such bonds, letters of credit and guarantees,
and shall cause, effective as of the Closing, or in the case of bonds, effective
within sixty (60) days following  Closing, cancellation or return to
Sellers of the bonds, letters of credit or guarantees posted by
Sellers.  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.
   35
  ARTICLE
XIII
  Employee
Matters
  Section
13.1.                                Continuing
Employees.  From and after the date hereof, and until Closing,
LOI will assist Buyerin
seeking to retain certain of LOI’s employees to effectuate a smooth transition
of the operation of the Properties to Buyer.  Within 10 days from the
date hereof, LOI will provide Buyer with a list of employees (the “Seller
Employees”) available for employment with Buyer, which will include the
following data: name, job title, salary or wage, bonus eligibility, vacation
eligibility, hire date, and service date.  The Seller Employees that
Buyer hires and who complete one hour of actual service with Buyer are referred
to as the “New Employees”.
  Section
13.2.                                No
Obligation to Hire Seller Employees.  Nothing in this Agreement
shall require or be construed or interpreted as requiring Buyer to offer
employment to any employee of LOI or to continue the employment of any employee
of LOI (including any New Employees) following the Hire Date, or to prevent
Buyer from changing the terms and conditions of employment (including
compensation and benefits) of any of its employees (including any New Employees)
following the Hire Date.  LOI and Buyer hereby acknowledge and agree
that any employment offered by Buyer to a New Employee will be “at will” and may
be terminated by Buyer or such New Employee at any time for any reason (subject
to applicable Laws and to any specific written commitments made to the contrary
by Buyer to such New Employee).
  Section
13.3.                                Interview,
Screening, and Offers of Employment.
  (a)           LOI
shall notify the Seller Employees of Buyer’s desire to interview them for
possible hire by Buyer.  LOI and Buyer shall assist one another in
providing such employees the opportunity to meet with representatives of Buyer
to discuss the capacity in which such persons may be employed by Buyer and the
terms and conditions under which such employment may be
offered.  Buyer shall provide LOI with the terms (including the
position title, description, and responsibilities) and copies of all offers of
employment Buyer intends to make to Selling Employees, at least two Business
Days prior to making any offers of employment.  Any offer made to a
Seller Employee must include terms (including the position title, description,
and responsibilities) and conditions covering total compensation and benefits
that are at least comparable, in the aggregate to the terms and level of
compensation and benefits provided by LOI (“Qualifying Offer”). LOI shall retain
all liability for severance benefits owed to any Seller Employee who (i)
unreasonably refused to interview with Buyer and (ii) who receives but does not
accept a Qualifying Offer from Buyer, as well as any liability arising under the
Workers Adjustment and Retraining Notification Act (“WARN
Act”).  Buyer shall assume responsibility and liability for severance
benefits owed to any Seller Employee who interviewed with Buyer but does not
receive a Qualifying Offer from Buyer, as well as any liability arising under
the WARN Act as a result thereof. LOI will determine the severance benefits, if
any, owed to any Seller Employee regardless of whether owed by LOI or Buyer but
such severance benefits shall be determined consistent with LOI’s existing
severance plan, as discussed with Buyer.  If it chooses to hire any
Seller Employees, Buyer shall provide such employees with offers of employment
no later than five Business Days prior to the Closing Date, with each offer
stipulating that, if accepted, the date for commencement of work is the first
Business Day after the Closing Date (the “Hire Date”).  Buyer shall
provide LOI with notice of the names of those
   36
  Seller
Employees to whom Buyer has made employment offers promptly after making such
offers.
  (b)           Seller
Employees who have accepted an offer of employment from Buyer shall become a New
Employee after completing one hour of service with Buyer.
  Section
13.4.                                Employee
Benefits.
  (a)           Buyer
shall grant to the New Employees credit for their past service years as outlined
in the data provided by LOI to Buyer pursuant to Section 13.1 for determining
the duration and amount of their benefits under any vacation policy, maintained
by the Buyer in which they are eligible to participate.
  (b)           After
completing one hour of actual service with Buyer, a New Employee shall cease to
actively participate or be eligible to actively participate in any Seller
Plan.  Buyer shall not assume any Seller Plan or be liable in any
respect for the funding of, or contributions to, or liabilities under any Seller
Plan.  Until a New Employee becomes a Continuing Employee by
completing one hour of actual service with Buyer, New Employees shall remain the
employee of LOI and LOI shall provide his or her wages and employee benefits at
LOI’s sole expense.  Without limiting the foregoing, for all periods
prior to the completion of one hour of actual service with Buyer, LOI shall be
responsible for (i) the base salaries or wages and overtime payments of the
Seller Employees along with any bonuses to which such Seller Employee may be
entitled, (ii) the costs of the Seller Employees’ participation in the
retirement, medical, dental and other employee benefit plans sponsored by LOI,
(iii) workers’ compensation coverage of the Seller Employees, (iv) vacation and
leave pay for the Seller Employees, (v) the employer’s portion of any health,
life, disability or other insurance provided as a part of LOI’s employee benefit
plans in effect and in which the Seller Employees participate, (vi) all employee
taxes (including Social Security, Medicare and unemployment taxes) and tax
withholdings, and (vii) all payroll processing, payroll deduction, tax
withholding and tax reporting services, employee benefit administration, claims
processing, personnel administration, and all such related human resources
services with respect to the Seller Employees.
  (c)           For
a period of one year from the Hire Date, in the event a New Employee is
terminated by Buyer or its Affiliates, without cause, Buyer shall pay the New
Employee a severance amount and provide severance benefits substantially
equivalent to or better than LOI’s current severance program.
  Section
13.5.                                Control
of Seller Employees.  Prior to the Hire Date, if any, of a
Seller Employee, LOI shall have the right to control and direct the Seller
Employees as to the performance of duties and as to the means by which such
duties are performed, including the right to terminate the employment of any
Seller Employee, provided that Buyer shall not be liable for any costs, expense,
liabilities, or severance benefits, if any, related to any such terminated
Seller Employee.  Seller shall fully and timely inform Buyer of and
consult Buyer with respect to, all employment, benefits, workplace and
performance matters relating to Seller Employees prior to the Hire Date that, in
the reasonable judgment of LOI’s management, could have a material impact on
Buyer prior to taking any actions or making any decisions with respect to such
matters, subject to applicable law.  Notwithstanding the foregoing,
prior to the Hire Date, LOI shall have the right to direct such employee to
perform reasonable administrative duties on
   37
  behalf of
LOI in connection with the winding down of LOI’s services with respect to the
Properties.  Prior to the Hire Date, LOI will not permanently
reassign, make compensation changes, promote or relocate any Seller Employee,
other than in the ordinary course of business or as required by any Seller Plan
or applicable law, without the written consent of Buyer.  LOI shall be
responsible for complying with all safety, health and work-related laws,
regulations and rules with respect to the Seller Employees employed by LOI prior
to the Hire Date.  Nothing herein is intended to affect LOI’s status
as employer of each Seller Employee while employed by LOI or LOI’s control over
such individual until the Hire Date.
  Section
13.6.                                No Third
Party Beneficiaries.  Notwithstanding any other provisions of
this Agreement, the provisions of this Article XIII are not intended to and
shall not create or confer any third-party beneficiary rights respecting any
Seller Employee or New Employee.
  ARTICLE
XIV
  Definitions and
References
  Section
14.1.                                Certain
Defined Terms.  When used in this Agreement, the following
terms shall have the respective meanings assigned to them in this Section 14.1:
  “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 First
Amended and Restated Asset Purchase and Sale Agreement, as hereafter amended or
modified in accordance with the terms hereof.
  “Applicable Law” means any
statute, law, principle of common law, rule, regulation, judgment, order,
ordinance, requirement, code, writ, injunction, or decree of any Governmental
Entity, 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, with respect to: (a) the
Properties; and (b) the contract operating agreements described on Schedule 4.7;
regardless of whether such obligations arose prior to or after the Effective
Date, including but not limited to: (i) the obligation to (x) plug and
abandon or remove and dispose of all wells, platforms, structures, flow lines,
pipelines and other equipment, pits and holding ponds now or hereafter located
on the Oil and Gas Properties, (y) cap and bury all flow lines and other
pipelines now or hereafter located on the Oil and Gas Properties, and
(z) remedy all Environmental Liabilities with respect to the Properties,
including any actual or potential NORM contamination or chloride or other
contamination of groundwater; (ii)  obligations and liabilities
arising from or in connection with any Imbalances, whether before, on or after
the Effective Date; (iii) obligations to pay working interests, royalties,
overriding royalties and other interests held in suspense and transferred to
Buyer pursuant to Section 7.11 (iv)  all Taxes assessed with respect
to a period which begins on or after the Effective Date; and (v) 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
   38
  such
disputes, actions and proceedings relate; 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 March 24, 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.
  “Dollars”or“$” means U.S.
Dollars.
  “Effective Date” means April 1,
2008.
  “Environmental Laws” means all
national, state, municipal or local laws, rules, regulations, statutes,
ordinances or orders of any Governmental Entity pertaining to the protection of
human health or the environment, 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. (“CERCLA”), 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 and associated legal costs)
incurred or imposed (a) 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 (b) pursuant to any
claim by a Governmental Entity or any other Person for personal injury, property
damage, damage to natural resources, remediation, or payment or reimbursement of
response costs incurred or expended by such Governmental Entity or other Person
pursuant to common law or statute and related to the use or release of Hazardous
Materials.
  “ERISA” means the Employee
Retirement Income Security Act of 1974, as amended.
   39
  “ERISA Affiliate” means, with
respect to any entity, any entity, trade or business that is a under common
control with such entity, within the meaning of Section 414(b), (c), (m) or (o)
of the Code or Section 4001 of ERISA.
  “Existing Hedges” mean any
Hedges affecting the Properties on the Closing Date.
  “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.
  “Hazardous Materials” means
(i) any substance or material that is listed, defined or otherwise
designated as a “hazardous substance” under Section 101(14) of CERCLA,
(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 or the Executive Vice President and Chief Financial
Officer, of Sellers, have actual knowledge. Knowledge of Buyer (or similar
references to Buyer’s knowledge) means all information of which either the Chief
Executive Officer, President, any Senior Vice President, Operations, or the
Executive Vice President and Chief Financial Officer, of Buyer, has actual
knowledge.
  “Laws” means all statutes,
rules, regulations, ordinances, orders, and codes of Governmental
Authorities.
  “Leases” means oil, gas or
mineral leases, leasehold estates, operating rights 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 interests,
which have been earned by performance, and fee mineral, royalty and overriding
royalty interests, net profits
   40
  interests,
production payments and other interests payable out of Hydrocarbon production,
in each case, in which Sellers have an interest.
  “Lender” means the lenders
party to the Credit Facility.
  “Lien” means any claim, lien,
mortgage, security interest, pledge, charge, option, right-of-way, easement,
encroachment, or encumbrance of any kind.
  “Material Adverse Effect” means
any change, development, or effect (individually or in the aggregate) which is,
or is reasonably likely to be, materially adverse (i) to the business,
assets, results of operations or condition (financial or otherwise) of a party,
or (ii) to the ability of a party to perform on a timely basis any material
obligation under this Agreement or any agreement, instrument, or document
entered into or delivered in connection herewith; provided, however, that
changes, developments or effects relating to (x) the economy in general
(including any effects on the economy arising as a result of acts of terrorism
or the credit markets), (y) changes in Hydrocarbon commodity prices or other
changes affecting the U.S. oil and gas industry generally, or (z) the
announcement of the transactions contemplated hereby, shall not be deemed to
constitute a Material Adverse Effect with respect to Sellers and shall not be
considered in determining whether a Material Adverse Effect has occurred with
respect to Sellers.
  “Material
Contract”  means any contract which can reasonably be expected
in the case of (A) below to generate gross revenue per year for the owner of the
Properties in excess of One Million dollars ($1,000,000) or in the case of (B),
(C), (D), (E), or (F) below to require expenditures per year by the owner of the
Properties in excess of One Million dollars ($1,000,000) and which is not (i)
terminable by either party at will (without penalty) on ninety (90) days notice
or less and (ii) is of one or more of the following types:
  (A)           contracts
for the purchase, sale or exchange of oil, gas, or other
hydrocarbons;
  (B)           contracts
for the gathering, treatment, processing, handling, storage or transportation of
oil, gas or other hydrocarbons;
  (C)           contracts
for the use of drilling rigs;
  (D)           purchase
agreements, farmin and farmout agreements, exploration agreements, participation
agreements and similar agreements providing for the earning of an equity
interest;
  (E)           partnership
agreements, joint venture agreements and similar agreements;
  (F)           operating
agreements, unit agreements, and unit operating agreements;
  (G)           seismic
licenses and contracts; and
   41
  (H)           contracts
for the construction and installation of equipment with guaranteed production
throughput requirements where amounts owed if the guaranteed throughput is not
delivered exceed One Million dollars ($1,000,000).
  “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 an Oil and Gas
Property.
  “Permits” means licenses,
permits, franchises, consents, approvals, variances, exemptions, and other
authorizations of or from Governmental Entities.
  “Person” means any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, enterprise, unincorporated organization, or Governmental
Entity.
  “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” nor , in
performing Reasonable Best Efforts under Section 8.1(b), shall Sellers be
obligated to expend more than the aggregate sum of $175,000.00 in curing all
Title Defects.
  “Retained Obligations” means
Sellers’ obligations and liabilities (i) under the Credit Facility or any
amounts that may be due and owing Sellers’ officers, employees or owners,
(ii) with respect to the Excluded Assets, or (iii) with respect to
royalties, and Taxes attributable to the Properties for all periods prior to the
Effective Date.
 
 “Securities Act” shall mean the
Securities Act of 1933, as amended, and all rules and regulations under such
Act.
  “Seller Plan” means any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, change-in-control, termination pay, deferred
compensation, retirement or pension payments, bonuses, performance awards,
retention payments, incentive compensation, stock or stock-related awards,
fringe benefits or other employee benefits or remuneration of any kind, whether
written or unwritten or otherwise, funded or unfunded, including without
limitation, each “employee benefit plan,” within the meaning of Section 3(3) of
ERISA and any plans that would be “employee benefit plans” within the meaning of
Section 3(3) of ERISA if they were subject to ERISA (such as foreign plans and
plans for directors) which, in each case, is or ever has been sponsored,
maintained, contributed to, or required to be contributed to, by the LOI or any
ERISA Affiliate of the LOI (present or former) for the benefit of any present or
former employee or officer, consultant or similar representative of LOI or any
of such ERISA Affiliates, and with respect to which the LOI or any of such ERISA
Affiliates has or may have any liability or obligation on behalf of any of such
individuals.
   42
  “Sellers Disclosure Schedule”
shall mean the schedule attached hereto as Schedule 4, which sets forth
additional information regarding the representations and warranties of Sellers
contained herein and information called for hereby.
  “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.
  Section
14.2.                                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
      8.1(c)(i)Assignment
              Section
      9.1(f)Buyer’s
      Environmental Consultant
              Section
      8.2(a)Buyer’s
      Environmental Review
              Section
      8.2(a)Buyer’s
      Losses
              Section
      11.2Buyer’s
      Title Review
              Section
      8.1(a)Closing
              Article
      IIIClosing
      Date
              Article
      IIICure
      Period
              Section
      8.4(c)Defect
      Dispute
              Section
      8.3Defects
      Escrow
              Section
      8.4(c)Defects
      Escrow Agent
              Section
      8.4(c)Defects
      Escrow Agreement
              Section
      8.4(c)Defensible
      Title
              Section
      8.1(d)(i)Deposit
              Section
      2.4(a)Environmental
      Defect
              Section
      8.2(e)(i)Environmental
      Defect Notice
              Section
      8.2(c)Environmental
      Defect Value
              Section
      8.2(e)(ii)Environmental
      Information
              Section
      8.2(b)Examination
      Period
              Section
      8.1(a)Excluded
      Assets
              Section
      1.2Indemnified
      Party
              Section
      11.5
  43
  
 Defined
      Term
              ReferenceIndemnifying
      Party
              Section
      11.5Independent
      Expert
              Section
      8.3Notice
      Period
              Section
      11.5Oil
      and Gas Properties
              Section
      1.1Permitted
      Encumbrances
              Section
      8.1(d)(ii)Post-Closing
      Defect
              Section
      8.4(c)Properties
              Section
      1.1Purchase
      Price
              Section
      2.1Records
              Section
      1.1(f)Remedies
      for Title Defects
              Section
      8.1(b)Request
      Date
              Section
      2.3(c)Rules
              Section
      8.3Scheduled
      Production Sales Contracts
              Section
      4.9Sellers’
      Losses
              Section
      11.3Suspended
      Proceeds
              Section
      7.11Survival
      Date
              Section
      11.2(b)Title
      Defect
              Section
      8.1(d)(iii)Title
      Defect Amount
              Section
      8.1(c)Title
      Defect Notice
              Section
      8.1(b)Title
      Defect Property
              Section
      8.1(b)
 
  Section
14.3.                                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.
   44
  (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.
  (i)           All
references herein to “$” or “dollars” shall refer to U.S. Dollars.
  (j)           Exhibits A-1, A-2, A-3,
A-4, A-5, B, B-1, B-2, B-3, C, and D and Schedules 2.5, 4, and
12.10 are attached hereto.  Each such Exhibit and Schedule 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.
   [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
  45
  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
  PENN WEST
PIPELINE, LLC, a Delaware limited liability company
  By:  /s/ Mark E.
Ellis_________________
 Mark E.
Ellis, President and Chief Operating Officer
  BUYER:
  XTO
ENERGY INC., a Delaware corporation
  By:  /s/ Vaughn O. Vennerberg,
II______
 Vaughn O.
Vennerberg, II, Senior Executive Vice President & Chief of
Staff
  
 SIGNATURE PAGE TO
ASSET PURCHASE AND SALE AGREEMENT- Appalachia Region
  
  EXHIBIT
A-1
  LEASES
   
  EXHIBIT
A-2
  RIGHTS
OF WAY
   
  EXHIBIT
A-3
  MINERAL
TRACTS
   
  EXHIBIT
A-4
  REAL
PROPERTY
   
  EXHIBIT
A-5
  VEHICLE
LIST
   
  EXHIBIT
B
  EXCLUDED
ASSETS
   
  EXHIBIT
B-1
  FIELD
OFFICE
  
  EXHIBIT
B-2
  EQUIPMENT
  
  EXHIBIT
B-3
  VEHICLES
  
  EXHIBIT
C
  ALLOCATION
OF PURCHASE PRICE
   
  EXHIBIT
D
  FORM
OF ASSIGNMENT
  THE STATE
OF [KENTUCKY/PENNSYLVANIA/VIRGINIA/WEST VIRGINIA]
  COUNTIES
OF ______________
  ASSIGNMENT AND BILL OF
SALE
  [LINN
ENERGY HOLDINGS, LLC, a Delaware limited liability company/LINN OPERATING, INC.,
a Delaware corporation/PENN WEST PIPELINE, LLC, a Delaware limited liability
company] (“Grantor”), for Ten Dollars and other good and valuable consideration
(the receipt and sufficiency of which are hereby acknowledge), does hereby
GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER, AND DELIVER unto XTO
ENERGY INC., a Delaware corporation (herein called “Grantee”), whose address
is________________________,the following described properties, rights and interests:
  1.1           All
right, title and interest of Grantor in and to the Leases described on Exhibit A-1
attached hereto and made a part hereof for all purposes (and any ratifications
and/or amendments to such Leases, whether or not such ratifications or
amendments are described on such Exhibit A-1);
  1.2           Without
limitation of the foregoing but subject to the provisions in this Assignment and
Bill of Sale regarding Excluded Properties, all other right, title and interest
(of whatever kind or character, whether legal or equitable, and whether vested
or contingent) of Grantor in and to the oil, gas, and other minerals in and
under or that may be produced from the lands described in Exhibits A-1, A-2, and A-3
hereto or described in any of the Leases described on such Exhibit A (including
interests in Leases, overriding royalties, production payments and net profits
interests in such lands or such Leases, and fee mineral interests, fee royalty
interests, and other interests in so far as they cover such lands), even though
Grantor’s interests therein may be incorrectly described in, or omitted from,
such Exhibits A-1,
A-2, and A-3;
  1.3           All
rights, titles and interests of Grantor in and to, or otherwise derived from,
all presently existing and valid 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 federal, state,
or other authority having jurisdiction, voluntary unitization agreements,
designations and/or declarations) relating to the properties described in paragraphs  1.1
and 1.2(b)
above;
  1.4           All
rights, titles, and interests of Grantor in and to the Material Contracts and
all presently existing and valid production sales (and sales related) contracts,
operating agreements, and other agreements and contracts which relate to any of
the properties described in paragraphs 1.1, 1.2and 1.3
above, or which relate to the exploration, development, operation, or
maintenance thereof or the treatment, storage, transportation or marketing of
production therefrom (or allocated thereto);
   
  1.5           All
rights, titles, and interests of Grantor in and to all materials, supplies,
machinery, equipment, improvements and other personal property and fixtures
(including all wells, wellhead equipment, pumping units, flowlines, tanks,
buildings, injection facilities, saltwater disposal facilities, compression
facilities, gathering systems, and other equipment), and all easements,
rights-of-way, surface leases and other surface rights, all Permits and
licenses, and all other appurtenances being used or held for use in connection
with, or otherwise related to, the exploration, development, operation or
maintenance of any of the properties described in paragraphs 1.1, 1.2and 1.3
above, or the treatment, storage, transportation, or marketing of production
therefrom (or allocated thereto);
  1.6           Subject
to any third party rights, all of Grantor’s lease files, title opinions,
production records, well files, accounting records (but not including general
financial and accounting records attributable to Grantor or Grantor’s business),
seismic records and surveys, gravity maps, electric logs, geological or
geophysical data and records, and other files, documents and records of every
kind and description which relate to the properties described above (the
“Records”); provided, however that Grantor may retain copies of any or all of
the Records;
  1.7           The
lease for the office premises used by Grantor located at “650 Washington Road,
Pittsburgh, PA” and the field offices and premises described on Exhibit A-4 and
all furniture, fixtures, and equipment located thereat, including computers,
telephone equipment and other similar items of tangible personal property
directly associated with the Subject Properties; and
  1.8           The
vehicles described on Exhibit
A-5.
  
  The
properties, rights and interests specified in the foregoing paragraphs 1.1 through 1.8exclusive of the
Excluded Properties (defined below), are herein sometimes collectively called
the “Subject Properties.”
  Any
provision contained in this Assignment and Bill of Sale notwithstanding, the
Subject Properties do not include, and there is hereby expressly excepted and
excluded therefrom and reserved to Grantor, all other assets, properties, and
business of Grantor, including the following:
  2.1           Any
accounts receivable or accounts payable accruing before the Effective
Date;
  2.2           All
of Grantor’s right, title, and interest in any oil, gas, or mineral Leases,
overriding royalties, production payments, net profits interests, fee mineral
interests, fee 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 Subject
Properties with respect to all periods prior to the Effective Date, all proceeds
attributable thereto, and all Hydrocarbons that, at the Effective Date, are
owned by Grantor and are in storage or within processing plants;
  2.3           Any
rebate or refund of costs, Taxes, or expenses borne by Grantor or Grantor’s
predecessors in title attributable to periods prior to the Effective
Date;
   
  2.4           Any
and all proceeds from the settlements of contract disputes with purchasers of
Hydrocarbons from the Subject Properties, including settlement of take-or-pay
disputes, insofar as said proceeds are attributable to periods of time prior to
the Effective Date;
  2.5           Any
and all proceeds from settlements with regard to reclassification of oil or gas
produced from the Subject Properties, insofar as said proceeds are attributable
to periods of time prior to the Effective Date;
  2.6           All
contracts of insurance or indemnity;
  2.7           All
claims (including insurance claims) and causes of action of Grantor 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;
  2.8           All
limited liability company, financial, tax, and legal (other than title) books
and records of Grantor;
  2.9           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;
  2.10           The
field office located at Jane Lew, West Virginia, described on Exhibit B and all
furniture, fixtures and equipment located thereat, including computers,
telephone equipment and other similar items of tangible personal
property;
  2.11           All
share drive and accounting servers related to the Subject Properties regardless
of where such servers are located;
  2.12           All
of Grantor’s accounting or other administrative systems, computer software,
patents, trade secrets, copyrights, names, trademarks, logos, and other
intellectual property;
  2.13           All
documents and instruments of Grantor 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 Grantor’s Disclosure
Schedule);
  2.14           All
of the other properties, interests and assets described on Exhibit B,
together with any rights, liabilities, or obligations associated with such
assets;
  2.15           The
Existing Hedges and all hedging transactions and any gains or losses
attributable to any hedging activities, whether occurring before or after the
Effective Date;
   
  2.16           Any
other right or interest in and to the Subject Properties to the extent
attributable to the period prior to the Effective Date;
  2.17           All
bonds, letters of credit and guarantees if any, posted by Grantor or any
Affiliate with any Governmental Authority or third person and relating to the
Subject Properties;
  2.18           All
(a) correspondence or other documents or instruments of Grantor relating to the
transactions contemplated hereby, (b) lists of other prospective purchasers of
Grantor or the Subject Properties compiled by Grantor, (c) bids submitted to
Grantor by other prospective purchasers of Grantor or the Subject Properties,
(d) analyses by Grantor or any Affiliates thereof submitted by other prospective
purchasers of Grantor or the Subject Properties and (e) correspondence between
or among Grantor or its Affiliates or their respective representatives with
respect to, or with, any other prospective purchasers from Grantor or the
Subject Properties; and
  2.19           All
assets associated with Grantor’s Affiliates, Mid Atlantic Well Service, Inc.,
Marathon 85-II Limited Partnership, and Marathon 85-III Limited Partnership and
their respective operations including those specifically described on Exhibits
B, B-1, B-2 and
B-3.
  The
properties and interests specified in the foregoing paragraphs 2.1 through 2.19are herein
collectively called the “Excluded Properties”.  It is understood that
certain of the Excluded Properties may not be embraced by the term “Subject
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 Subject Properties and may not be used to interpret the meaning
of any word or phrase used in describing the Subject Properties.
  This
Assignment and Bill of Sale is made by Grantor and accepted by Grantee subject
to all matters shown of record in __________ Counties,
[Kentucky/Pennsylvania/Virginia and West Virginia], and the other public records
of that State.
  This
Assignment and Bill of Sale is made subject to that certain Asset Purchase and
Sale Agreement (the Agreement”) between Grantor and Grantee dated
______________________.  The Agreement contains certain
representations, warranties, covenants, indemnities and agreements between the
parties, some of which may survive the delivery of this Assignment and Bill of
Sale, as more particularly provided for therein, but third parties may
conclusively rely on this Assignment and Bill of Sale to vest title to the
Subject Properties in Grantee.  The Agreement also contains certain
defined terms which are used in this Assignment and Bill of Sale with the same
meaning as set out in this Assignment and Bill of Sale.
  TO HAVE
AND TO HOLD the Subject Properties unto Grantee, and its successors and assigns,
forever.
  GRANTOR
AGREE TO WARRANT AND FOREVER DEFEND TITLE TO THE SUBJECT PROPERTIES UNTO GRANTEE
AND ITS SUCCESSORS AND ASSIGNS, AGAINST THE CLAIMS AND DEMANDS OF ALL PERSONS
CLAIMING, OR TO CLAIM THE SAME, OR ANY PART THEREOF BY, THROUGH OR UNDER
GRANTOR, BUT NOT OTHERWISE.  THE EXPRESS WARRANTY OF TITLE
SET
   
  FORTH
ABOVE IS EXCLUSIVE, AND IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES,
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND GRANTOR EXPRESSLY DISCLAIM ANY AND
ALL SUCH OTHER REPRESENTATIONS AND WARRANTIES.  WITHOUT LIMITATION OF
THE FOREGOING, THE SUBJECT PROPERTIES ARE CONVEYED PURSUANT HERETO WITHOUT ANY
WARRANTY OR REPRESENTATION WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE,
RELATING TO THE CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE,
CONFORMITY TO THE MODELS OR SAMPLES OF MATERIALS OR MERCHANTABILITY OF ANY
EQUIPMENT OR ITS FITNESS FOR ANY PURPOSE, AND, EXCEPT AS PROVIDED OTHERWISE IN
THE FIRST SENTENCE OF THIS PARAGRAPH, WITHOUT ANY OTHER EXPRESS, IMPLIED,
STATUTORY OR OTHER WARRANTY OR REPRESENTATION WHATSOEVER.  GRANTEE HAS
INSPECTED, OR WAIVED GRANTEE’S RIGHT TO INSPECT, THE SUBJECT PROPERTIES FOR ALL
PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION,
BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO CONDITIONS
SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS
SUBSTANCES, SOLID WASTES OR NATURALLY OCCURRING RADIOACTIVE MATERIALS
(“NORM”).  GRANTEE IS RELYING SOLELY UPON ITS OWN INSPECTION OF THE
SUBJECT PROPERTIES, AND GRANTEE SHALL ACCEPT ALL OF THE SAME IN THEIR “AS IS,
WHERE IS” CONDITION.  ALSO WITHOUT LIMITATION OF THE FOREGOING,
GRANTOR MAKES NO WARRANTY OR REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE, AS TO THE ACCURACY OR COMPLETENESS OF ANY DATA, REPORTS, RECORDS,
PROJECTIONS, INFORMATION OR MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR
MADE AVAILABLE TO GRANTEE IN CONNECTION WITH THIS ASSIGNMENT INCLUDING, WITHOUT
LIMITATION, RELATIVE TO PRICING ASSUMPTIONS, OR QUALITY OR QUANTITY OF
HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE SUBJECT PROPERTIES OR THE
ABILITY OR POTENTIAL OF THE SUBJECT PROPERTIES TO PRODUCE HYDROCARBONS OR THE
ENVIRONMENTAL CONDITION OF THE SUBJECT PROPERTIES OR ANY OTHER MATTERS CONTAINED
IN THE MATERIALS FURNISHED OR MADE AVAILABLE TO GRANTEE BY GRANTOR OR BY
GRANTOR’S AGENTS OR REPRESENTATIVES.  ANY AND ALL SUCH DATA, RECORDS,
REPORTS, PROJECTIONS, INFORMATION AND OTHER MATERIALS (WRITTEN OR ORAL)
FURNISHED BY GRANTOR OR OTHERWISE MADE AVAILABLE OR DISCLOSED TO GRANTEE ARE
PROVIDED AS A CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF
OR AGAINST GRANTOR AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT GRANTEE’S
SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW.
  By
acceptance of this Assignment, Grantee has agreed (i) to assume, and to timely
pay and perform, all duties, obligations and liabilities relating to the
ownership and/or operation of the Subject Properties regardless of whether the
same accrued or otherwise arose before or after the effective date hereof
(including, without limitation, those arising under the contracts
and
   
  agreements
described in subparagraph (c) above), and (ii) to indemnify and hold
Grantor, its respective Affiliates, and its or their respective directors,
officers, employees, attorneys, contractors and agents harmless from and against
any and all claims, actions, causes of action, liabilities, damages, losses,
costs or expenses (including, without limitation, court costs and attorneys’
fees) of any kind or character arising out of or otherwise relating to the
ownership and/or operation of the Subject Properties regardless of whether the
same accrued or otherwise arose before or after the effective date
hereof.  In connection with (but not in limitation of) the foregoing,
it is specifically understood and agreed that such duties, obligations and
liabilities shall be deemed to include all matters arising out of the condition
of the Subject Properties on the effective date hereof (including, without
limitation, within such matters all obligations to properly plug and abandon, or
replug and re-abandon, wells located on the Subject Properties, to restore the
surface of the Subject Properties and to comply with, or to bring the Subject
Properties into compliance with, applicable environmental laws, rules,
regulations and orders, including conducting any remediation activities which
may be required on or otherwise in connection with activities on the Subject
Properties), regardless of whether such condition or the events giving rise to
such condition arose or occurred before or after the effective date hereof, and
the assumptions and indemnifications by Grantee provided for in the first
sentence of this section shall expressly cover and include such
matters.  THE
FOREGOING ASSUMPTIONS AND INDEMNIFICATIONS SHALL APPLY WHETHER OR NOT SUCH
DUTIES, OBLIGATIONS OR LIABILITIES, OR SUCH CLAIMS, ACTIONS, CAUSES OF ACTION,
LIABILITIES, DAMAGES, LOSSES, COSTS OR EXPENSES ARISE OUT OF (i) NEGLIGENCE
(INCLUDING SOLE NEGLIGENCE, SINGLE NEGLIGENCE, CONCURRENT NEGLIGENCE, ACTIVE OR
PASSIVE NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE) OF GRANTOR OR
ANY OTHER INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY.
  Grantor
agrees to execute and deliver to Grantee, from time to time, such other and
additional instruments, notices, division orders, transfer orders and other
documents, and to do all such other and further acts and things as may be
necessary to more fully and effectively grant, convey and assign to Grantee the
Subject Properties.
  This
Assignment is being executed in several counterparts all of which are identical,
except that, to facilitate recordation, certain counterparts hereof may contain
only that portion of Exhibit A which contains specific descriptions of the
Subject Properties located in the recording jurisdiction in which the particular
counterpart is to be recorded.  All of such counterparts together
shall constitute one and the same instrument.  Complete copies of this
Assignment containing the entire Exhibit A have been recorded
in  County,  and retained by Grantor and
Grantee.
   
  IN
WITNESS WHEREOF this Assignment has been executed by the parties hereto on the
dates of their respective acknowledgments effective as to runs of oil and
deliveries of gas, and for all other purposes, as of 7:00 a.m. local time at the
locations of the Subject Properties, respectively, on April 1, 2008 (the
“Effective Date”).
  “GRANTOR”
  LINN
ENERGY HOLDINGS, LLC, a Delaware limited liability company
  By:  _______________________________
 Name:  _____________________________
 Title:  ______________________________
  LINN
OPERATING, INC., a Delaware corporation
  By:  _______________________________
 Name:  _____________________________
 Title:  ______________________________
  PENN WEST
PIPELINE, LLC, a Delaware limited liability company
  By:  _______________________________
 Name:  _____________________________
 Title:  ______________________________
  “GRANTEE”
  XTO
ENERGY INC., a Delaware corporation
  By:  _______________________________
 Name:  _____________________________
 Title:  ______________________________
  
  
 [ACKNOWLEDGMENTS]
   
  SCHEDULE
2.5
  PURCHASE
PRICE TAX ALLOCATIONS
 
 SCHEDULE
4
  SELLERS
DISCLOSURE SCHEDULE
  4.6  Litigation
  4.7  Material
Contracts
  4.8  Commitments,
Abandonments or Proposals
  4.9  Production
Sales Contracts
  4.10  Plugging
and Abandonment
  4.11  Permits
  4.14  Imbalances;
Prepayments
  4.16  Taxes
  6.6  Preferential
Rights and Third Party Consents
  8.2
Phase I Reports
  SCHEDULE
12.10
  SELLERS
BONDS