**Exhibit 2.1**

 

**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 April 13, 2008**

 

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**TABLE OF CONTENTS**

 
|               |                                            | **P****age** |
|--------------------|-------------------------------------------------|--------------|
|               |                                            |         |
| ARTICLE I          | PROPERTIES TO BE SOLD AND  PURCHASED            | 1            |
|               |                                            |
| Section 1.1.  | Assets Included                                 | 1            |
| Section 1.2.  | Assets Excluded                                 | 3            |
|               |                                            |
| ARTICLE II         | PURCHASE PRICE                                  | 5            |
|               |                                            |
| Section 2.1.  | Purchase Price                                  | 5            |
| Section 2.2.  | Accounting Adjustments                          | 5            |
| Section 2.3.  | Closing and Post-Closing Accounting Settlements | 6            |
| Section 2.4.  | Payment of Adjusted Purchase Price              | 6            |
| Section 2.5.  | Allocation of Purchase Price                    | 7            |
|               |                                            |
| ARTICLE III        | THE CLOSING                                     | 7            |
|               |                                            |
| ARTICLE IV         | REPRESENTATIONS AND  WARRANTIES OF SELLERS      | 7            |
|               |                                            |
| Section 4.1.  | Organization and Existence                      | 7            |
| Section 4.2.  | Power and Authority                             | 8            |
| Section 4.3.  | Valid and Binding Agreement                     | 8            |
| Section 4.4.  | Non-Contravention                               | 8            |
| Section 4.5.  | Approvals                                       | 8            |
| Section 4.6.  | Litigation                                      | 9            |
| Section 4.7.  | Contracts                                       | 9            |
| Section 4.8.  | Commitments, Abandonments or Proposals          | 9            |
| Section 4.9.  | Production Sales Contracts                      | 9            |
| Section 4.10. | Plugging and Abandonment                        | 10           |
| Section 4.11. | Permits                                         | 10           |
| Section 4.12. | Payment of Expenses                             | 10           |
| Section 4.13. | Compliance with Laws                            | 10           |
| Section 4.14. | Imbalances; Prepayments                         | 10           |
| Section 4.15. | Intellectual Property                           | 10           |
| Section 4.16. | Taxes                                           | 11           |
| Section 4.17. | Fees and Commissions                            | 11           |
| Section 4.18. | Disclaimer of Warranties                        | 11           |
|                    |                                                 |              |  |

 

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| Section 4.19. | Disclosures                                                         | 12 |
|--------------------|---------------------------------------------------------------------|----|
| Section 4.20. | Organization and Existence                                          | 12 |
| Section 4.21. | Power and Authority                                                 | 12 |
| Section 4.22. | Valid and Binding Agreement                                         | 13 |
| Section 4.23. | Non-Contravention                                                   | 13 |
| Section 4.24. | Approvals                                                           | 13 |
| Section 4.25. | Pending Litigation                                                  | 13 |
| Section 4.26. | Knowledgeable Purchaser                                             | 13 |
| Section 4.27. | Funds                                                               | 14 |
| Section 4.28. | Fees and Commissions                                                | 14 |
|               |                                                                |
| ARTICLE V          | CERTAIN COVENANTS OF  SELLERS PENDING CLOSING                       | 14 |
|               |                                                                |
| Section 5.1.  | Access to Files                                                     | 14 |
| Section 5.2.  | Conduct of Operations                                               | 14 |
| Section 5.3.  | Restrictions on Certain Actions                                     | 14 |
| Section 5.4.  | Service Fee                                                         | 15 |
| Section 5.5.  | Payment of Expenses                                                 | 15 |
| Section 5.6.  | Preferential Rights and Third Party Consents                        | 15 |
| Section 5.7.  | Hart-Scott-Rodino Act                                               | 16 |
|               |                                                                |
| ARTICLE VI         | ADDITIONAL PRE-CLOSING AND  POST-CLOSING AGREEMENTS OF BOTH PARTIES | 16 |
|               |                                                                |
| Section 6.1.  | Reasonable Best Efforts                                             | 16 |
| Section 6.2.  | Notice of Litigation                                                | 16 |
| Section 6.3.  | Notification of Certain Matters                                     | 17 |
| Section 6.4.  | Fees and Expenses                                                   | 17 |
| Section 6.5.  | Public Announcements                                                | 17 |
| Section 6.6.  | Casualty Loss Prior to Closing                                      | 17 |
| Section 6.7.  | Governmental Bonds                                                  | 18 |
| Section 6.8.  | Assumed Obligations                                                 | 18 |
| Section 6.9.  | Operational Transition                                              | 18 |
| Section 6.10. | Books and Records                                                   | 18 |
| Section 6.11. | Suspended Funds                                                     | 18 |
| Section 6.12. | Letters-in-Lieu                                                     | 19 |
| Section 6.13. | Logos and Names                                                     | 19 |
|                    |                                                                     |    |  |

 

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| Section 6.14.  | Further Assurances                                                      | 19 |
|---------------------|-------------------------------------------------------------------------|----|
|                |                                                                    |
| ARTICLE VII         | DUE DILIGENCE EXAMINATION                                               | 19 |
|                |                                                                    |
| Section 7.1.   | Title Due Diligence Examination                                         | 19 |
| Section 7.2.   | Environmental Due Diligence Examination                                 | 22 |
| Section 7.3.   | Disputes Regarding Title Defects or Environmental  Defects              | 24 |
| Section 7.4.   | Adjustments to Purchase Price for Defects                               | 24 |
| Section 7.5.   | Buyer Indemnification                                                   | 25 |
|                |                                                                    |
| ARTICLE VIII        | CONDITIONS PRECEDENT TO THE  OBLIGATIONS OF THE PARTIES                 | 26 |
|                |                                                                    |
| Section 8.1.   | Conditions Precedent to the Obligations of Buyer                        | 26 |
| Section 8.2.   | Conditions Precedent to the Obligations of Sellers                      | 27 |
|                |                                                                    |
| ARTICLE IX          | TERMINATION, AMENDMENT AND  WAIVER                                      | 28 |
|                |                                                                    |
| Section 9.1.   | Termination                                                             | 28 |
| Section 9.2.   | Effect of Termination                                                   | 29 |
| Section 9.3.   | Amendment                                                               | 29 |
| Section 9.4.   | Waiver                                                                  | 29 |
|                |                                                                    |
| ARTICLE X           | SURVIVAL OF  REPRESENTATIONS, WARRANTIES AND COVENANTS; INDEMNIFICATION | 29 |
|                |                                                                    |
| Section 10.1.  | Survival                                                                | 29 |
| Section 10.2.  | Sellers’ Indemnification Obligations                               | 30 |
| Section 10.3.  | Buyer’s Indemnification Obligations                                | 30 |
| Section 10.4.  | Net Amounts                                                             | 31 |
| Section 10.5.  | Indemnification Proceedings                                             | 31 |
| Section 10.6.  | Indemnification Exclusive Remedy                                        | 32 |
| Section 10.7.  | Limited to Actual Damages                                               | 32 |
| Section 10.8.  | Indemnification Despite Negligence                                      | 32 |
| Section 10.9.  | Tax Treatment of Indemnification Amounts                                | 32 |
| Section 10.10. | Sellers Aggregate Indemnity Limits                                      | 32 |
|                |                                                                    |
| ARTICLE XI          | MISCELLANEOUS MATTERS                                                   | 32 |
|                |                                                                    |
| Section 11.1.  | Notices                                                                 | 32 |
| Section 11.2.  | Prorations, Deposits and Taxes                                          | 33 |
| Section 11.3.  | Entire Agreement                                                        | 34 |
| Section 11.4.  | Injunctive Relief                                                       | 34 |
|                     |                                                                         |    |  |

 

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| Section 11.5.  | Binding Effect; Assignment; No Third Party Benefit  | 34     |
|---------------------|-----------------------------------------------------|--------|
| Section 11.6.  | Severability                                        | 35     |
| Section 11.7.  | GOVERNING LAW                                       | 35     |
| Section 11.8.  | Counterparts                                        | 35     |
| Section 11.9.  | WAIVER OF CONSUMER RIGHTS                           | 35     |
| Section 11.10. | Replacement Bonds, Letters of Credit and Guarantees | 35     |
|                |                                                |
| ARTICLE XII         | EMPLOYEE MATTERS                                    | 36     |
|                |                                                |
| Section 12.1.  | Continuing Employees                                | 36     |
| Section 12.2.  | No Obligation to Hire Seller Employees              | 36     |
| Section 12.3.  | Interview, Screening, and Offers of Employment      | 36     |
| Section 12.4.  | Employee Benefits                                   | 37     |
| Section 12.5.  | Control of Seller Employees                         | 37     |
| Section 12.6.  | No Third Party Beneficiaries                        | 38     |
|                |                                                |
| ARTICLE XIII        | DEFINITIONS AND REFERENCES                          | 38     |
|                |                                                |
| Section 13.1.  | Certain Defined Terms                               | 38     |
| Section 13.2.  | Certain Additional Defined Terms                    | 43     |
| Section 13.3.  | References, Titles and Construction                 | 44     |
|                |                                                |
| ARTICLE XIV         | 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**                                   |   |
|                     |                                                     |        |  |  |

 

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**ASSETPURCHASE AND SALE AGREEMENT**

 

**THISASSET PURCHASE AND SALE AGREEMENT** dated April 13, 2008, is made by and betweenLinn Energy Holdings, LLC, a Delaware limited liability company (“**LEH**”), Linn Operating, Inc., a Delaware corporation (“**LOI**”), and Penn West Pipeline, LLC, a Delaware limitedliability company (“**PWP**”),(collectively “**Sellers**”), and XTO Energy Inc., aDelaware corporation (“**Buyer**”).

 

**RECITALS:**

 

**A.**                                    Sellers desire to sell, assign and convey to Buyer,and Buyer desires to purchase and accept from Sellers, certain oil and gasproperties and related assets located in the Appalachia Region.

 

**B.**                                    Sellers and Buyer deem it in their mutual bestinterests to execute and deliver this Agreement.

 

**NOW,THEREFORE**, in consideration of the foregoing Recitals and the mutual covenantsand agreements contained herein, Sellers and Buyer do hereby agree as follows:

 

**AGREEMENT:**

 

**ARTICLE IProperties To Be Sold and Purchased**

 

**Section 1.1.****                               ****Assets Included**. Subject to Section 1.2, Sellers agree to sell and Buyeragrees to purchase, for the consideration hereinafter set forth, and subject tothe terms and provisions herein contained, the following described properties,rights and interests:

 

(a)                                  All right, title and interest of Sellersin and to the Leases described on Exhibit A-1 attached hereto andmade a part hereof for all purposes (and any ratifications and/or amendments tosuch Leases, whether or not such ratifications or amendments are described onsuch Exhibit A-1);

 

(b)                                 Without limitation of the foregoing butsubject to Section 1.2, all other right, title and interest (ofwhatever kind or character, whether legal or equitable, and whether vested orcontingent) of Sellers in and to the oil, gas, and other minerals in and underor 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 andnet 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, oromitted from, such Exhibits A-1, A-2, and A-3;

 

(c)                                  All rights, titles and interests ofSellers in and to, or otherwise derived from, all presently existing and validoil, gas, or mineral unitization, pooling, or communitization agreements,declarations, and/or orders and in and to the properties covered and the unitscreated thereby (including all units formed under orders, rules, regulations,or other official acts of any 

 

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federal, state, or other authority having jurisdiction, voluntaryunitization agreements, designations and/or declarations) relating to theproperties described in paragraphs (a) and (b) above;

 

(d)                                 All rights, titles, and interests ofSellers in and to the Material Contracts and all presently existing and validproduction sales (and sales related) contracts, operating agreements, and otheragreements 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 ofSellers in and to all materials, supplies, machinery, equipment, improvementsand other personal property and fixtures (including all wells, wellheadequipment, pumping units, flowlines, tanks, buildings, injection facilities,saltwater disposal facilities, compression facilities, gathering systems, andother equipment), and all easements, rights-of-way, surface leases and othersurface rights, all Permits and licenses, and all other appurtenances beingused 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 ofSellers’ lease files, title opinions, production records, well files,accounting records (but not including general financial and accounting recordsattributable to Sellers or Sellers’ business), seismic records and surveys,gravity maps, electric logs, geological or geophysical data and records, andother files, documents and records of every kind and description which relateto 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 bySellers located at “650 Washington Road, Pittsburgh, PA” and the field officesand premises described on Exhibit A-4 and all furniture, fixtures, andequipment located thereat, including computers, telephone equipment and othersimilar items of tangible personal property directly associated with theProperties;

 

(h)                                 The vehicles described on Exhibit A-5;and

 

(i)                                     All of the right, title and interest ofLinn Energy, LLC, a Delaware limited liability company (“**LEL**”),in Big Creek Pipeline Limited Liability Company, a West Virginia limitedliability company (“**BC**”).

 

As used herein:  (i) “**Oil and Gas Properties**” means the properties and interestsdescribed 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 GasProperties plus the properties and interests described in paragraphs (d),(e), (f), (g), (h) and (i) above, save andexcept for any such properties or assets that are Excluded Assets.

 

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**Section 1.2.****                               ****Assets Excluded**. Notwithstanding anything herein contained to the contrary, theProperties do not include, and there is hereby excepted and reserved unto Sellersall other assets, properties, and business of Sellers, including the following:

 

(a)                                  Any accounts receivable or accountspayable accruing before the Effective Date;

 

(b)                                 All of Sellers’ right, title, andinterest in any oil, gas, or mineral Leases, overriding royalties, productionpayments, net profits interests, fee mineral interests, fee royalty interestsand other interests in oil, gas, and other minerals not expressly included inthe definition of Oil and Gas Properties and all oil, gas or other hydrocarbonproduction from or attributable to the Properties with respect to all periodsprior to the Effective Date, all proceeds attributable thereto, and allHydrocarbons that, at the Effective Date, are owned by Sellers and are instorage or within processing plants;

 

(c)                                  Any rebate or refund of costs, Taxes, orexpenses borne by Sellers or Sellers’ predecessors in title attributable toperiods prior to the Effective Date;

 

(d)                                 Any and all proceeds from the settlementsof contract disputes with purchasers of Hydrocarbons from the Properties,including settlement of take-or-pay disputes, insofar as said proceeds areattributable to periods of time prior to the Effective Date;

 

(e)                                  Any and all proceeds from settlementswith regard to reclassification of oil or gas produced from the Properties,insofar as said proceeds are attributable to periods of time prior to theEffective 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 fromacts, omission, or events occurring prior to the Effective Date and all claimsunder any joint interest audit attributable to any period prior to theEffective Date;

 

(h)                                 All limited liability company, financial,tax, and legal (other than title) books and records of Sellers;

 

(i)                                     Any geological, geophysical or seismicdata, materials, or information, including maps, interpretations, records, orother technical information related to or based upon any such data, materialsor information, and any other asset, data, materials, or information, thetransfer of which is restricted or prohibited under the terms of any thirdparty license, confidentiality agreement, or other agreement or the transfer ofwhich would require the payment of a fee or other consideration to any thirdparty; provided, however, that if any such data, materials, or information istransferable upon payment of a fee or other consideration, and if Buyer haspaid such fee or other consideration prior to the Closing Date, then such data,materials, or information shall be transferred to Buyer;

 

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(j)                                     The field office located at Jane Lew,West Virginia, described on Exhibit B and all furniture, fixturesand equipment located thereat, including computers, telephone equipment andother similar items of tangible personal property;

 

(k)                                  All share drive and accounting serversrelated to the Properties regardless of where such servers are located;

 

(l)                                     All of Sellers’ accounting or otheradministrative systems, computer software, patents, trade secrets, copyrights,names, trademarks, logos, and other intellectual property;

 

(m)                               All documents and instruments of Sellersthat may be protected by an attorney-client privilege (exclusive of titleopinions in respect of the Oil and Gas Properties and all documents andinstruments related to any matters in Sellers Disclosure Schedule);

 

(n)                                 All of the other properties, interestsand assets described on Exhibit B, together with any rights,liabilities, or obligations associated with such assets;

 

(o)                                 The Existing Hedges and all hedgingtransactions 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 theProperties to the extent attributable to the period prior to the EffectiveDate;

 

(q)                                 All bonds, letters of credit andguarantees if any, posted by Sellers or any Affiliate with any GovernmentalAuthority or third person and relating to the Properties;

 

(r)                                    All (i) correspondence or otherdocuments or instruments of Sellers relating to the transactions contemplatedhereby, (ii) lists of other prospective purchasers of Sellers or theProperties compiled by Sellers, (iii) bids submitted to Sellers by otherprospective purchasers of Sellers or the Properties, (iv) analyses bySellers or any Affiliates thereof submitted by other prospective purchasers ofSellers or the Properties, and (v) correspondence between or among Sellersor their Affiliates or their respective representatives with respect to, orwith, 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 LimitedPartnership, a West Virginia limited partnership, and Marathon 85-III LimitedPartnership, a West Virginia limited partnership] and their respectiveoperations 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 calledthe “**Excluded Assets**”.  It is understood that certain of the ExcludedAssets may not be embraced by the term “Properties”.  The fact that certain assets have beenexpressly excluded is not intended to suggest that had they not been excludedthey would have constituted Properties and may not be used to interpret themeaning of any word or phrase used in describing the Properties.

 

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**ARTICLE IIPurchase 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-NINEMILLION SEVEN HUNDRED THOUSAND AND NO\100 DOLLARS ($599,700.00) (the “**Purchase Price**”). The Purchase Price, as adjusted pursuantto this Article II and the other applicable provisions hereof, isherein 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 thisAgreement, appropriate adjustments shall be made between Buyer and Sellers sothat:

 

(i)                                     all expenses (including all drillingcosts, all capital expenditures, and all overhead administrative charges underapplicable operating agreements, and all other operating costs actually chargedby third parties) for work done in the operation of the Properties on or afterthe Effective Date will be borne by Buyer, and all proceeds (net of applicablegathering, transportation charges as well as production, severance, and similarTaxes) from the sale of oil, gas or other minerals produced from the Oil andGas Properties on or after the Effective Date will be received by Buyer, and

 

(ii)                                  all expenses for work done in theoperation of the Properties before the Effective Date will be borne by Sellersand all proceeds (net of applicable production, severance, and similar Taxes)from the sale of oil, gas, or other minerals produced therefrom before theEffective Date will be received by Sellers.

 

(b)                                 It is agreed that, in making theadjustments contemplated by Section 2.2(a):

 

(i)                                     Oil which was produced from the Oil andGas Properties and which was, on the Effective Date, stored in tanks, butwithout taking into account tank bottom sediment and water,  located on the Oil and Gas Properties (orlocated elsewhere but used to store oil produced from the Oil and GasProperties prior to delivery to oil purchasers) and above pipeline connectionsshall be deemed to have been produced before the Effective Date (it isrecognized that such tanks were not gauged on the Effective Date for thepurposes of this Agreement and that determination of the volume of such oil instorage will be based on the best available data, which may include estimates),

 

(ii)                                  ad valorem Taxes assessed with respect toa period which begins before and ends on or after the Effective Date shall beprorated based on the number of days in such period which fall on each side ofthe Effective Date (with the day on which the Effective Date falls beingcounted in the period after the Effective Date), and

 

(iii)                               no consideration shall be given to thelocal, state, or federal income tax liabilities of any party.

 

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**Section 2.3.****                                Closingand Post-Closing Accounting Settlements**.

** **

(a)                                  No laterthan three (3) business days prior to the Closing Date, the parties shalldetermine, based upon the best information reasonably available to them, theamount of the adjustments provided for in Section 2.2.** **If the amount ofadjustments so determined which would result in a credit to Buyer exceed theamount of adjustments so determined which would result in a credit to Sellers,Buyer shall receive a credit, for the amount of such excess, against thePurchase Price to be paid at Closing, and, if the converse is true, Buyer shallpay to Sellers, at Closing (in addition to amounts otherwise then owed), theamount of such excess.

 

(b)                                 On or before120 days after Closing, Buyer and Sellers shall review any additionalinformation which may then be available pertaining to the adjustments providedfor in Section 2.2, shall determine if any additional adjustments(whether the same be made to account for expenses or revenues not considered inmaking the adjustments made at Closing, or to correct errors made in suchadjustments) should be made beyond those made at Closing, and shall make anysuch adjustments by appropriate payments from Sellers to Buyer or from Buyer toSellers.** **Followingsuch additional adjustments, no further adjustments to the Purchase Price shallbe made under this Section 2.3.

 

(c)                                  If a disputearises under Section 2.3(b) with respect to any additionaladjustments (an “**Accounting Dispute**”) that theparties 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 andcommit one of their senior officers to meet at a mutually agreed time and placenot later than ten days after the Request Date to attempt to resolve same.  If such senior officers have been unable toresolve such Accounting Dispute within a period of 30 days after the RequestDate, any party shall have the right, by written notice to the other specifyingin reasonable detail the basis for the Accounting Dispute, to resolve theAccounting Dispute by submission thereof to a independent public accountingfirm mutually agreeable to the Parties, which firm shall serve as solearbitrator (the “**Accounting Referee**”).  The scope of the Accounting Referee’sengagement shall be limited to the resolution of the items described in thenotice of the Accounting Dispute given in accordance with the foregoing and thecorresponding calculation of the adjustments pursuant to Section 2.2.  The Accounting Referee shall be instructed bythe parties to resolve the Accounting Dispute as soon as reasonably practicablein light of the circumstances but in no event in excess of 15 days followingthe submission of the Accounting Dispute to the Accounting Referee.  The decision and award of the AccountingReferee shall be binding upon the parties as an award under the FederalArbitration Act and final and nonappealable to the maximum extent permitted bylaw, and judgment thereon may be entered in a court of competent jurisdictionand enforced by any party as a final judgment of such court.  The fees and expenses of the AccountingReferee shall be borne equally by Sellers and Buyer.

 

**Section 2.4.****                                Paymentof Adjusted Purchase Price**.  TheAdjusted Purchase Price shall be paid to Sellers as follows:

 

(a)                                  Within oneBusiness Day after the execution and delivery of this Agreement, Buyer shalltender to Sellers cash equal to ten percent (10%) of the Purchase PriceFIFTY-NINE MILLION NINE HUNDRED SEVEN THOUSAND AND NO\100 DOLLARS($59,970,000.00) as a deposit (such amount, together with all interest earnedthereon, the 

 

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“**Deposit**”).  TheDeposit shall (i) be applied against the Adjusted Purchase Price owing byBuyer at the Closing pursuant to Section 2.4(b), (ii) retainedby Sellers pursuant to Section 10.2 or (iii) returned to Buyerpursuant to Section 10.2, as applicable.

 

(b)                                 At theClosing, Buyer shall pay to Sellers cash equal to the Adjusted Purchase Price lessthe Deposit.

 

(c)                                  All cashpayments by Buyer pursuant to this Section 2.4 shall be made inimmediately available funds by confirmed wire transfer to a bank account oraccounts designated by Sellers, as applicable.

 

**Section 2.5.****                                Allocationof Purchase Price**.  (a) Onor before the fifth Business Day following execution and delivery of thisAgreement by Sellers and Buyer, Buyer, using its reasonable business judgment,shall allocate the Purchase Price among the Oil and Gas Properties on Exhibit Cand shall furnish the completed Exhibit C to Sellers, whereupon bothparties shall attach the completed Exhibit C to this Agreement with thesame effect as if the completed Exhibit C was attached to and made part ofthis Agreement at signing.  (b) Onor before the Closing Date, the Buyer and Sellers shall agree in writing as tothe allocation of the Adjusted Purchase Price among the Properties under themethodology required by Section 1060 of the Code.  Such agreed allocation shall be set forth onSchedule 2.5 attached hereto.  The Buyerand Sellers shall report the transactions contemplated hereby on all TaxReturns, including, but not limited to Form 8594, in a manner consistentwith such allocation.  If, contrary tothe intent of the parties hereto as expressed in this Section 2.5,any taxing authority makes or proposes an allocation different from theallocation determined under this Section 2.5, Buyer and Sellersshall cooperate with each other in good faith to contest such taxing authority’sallocation (or proposed allocation), provided, however, that, afterconsultation with the party adversely affected by such allocation (or proposedallocation), the other party hereto may file such protective claims or TaxReturns as may be reasonably required to protect its interests.

** **

**ARTICLE IIIThe Closing**

 

The closing of thetransactions contemplated hereby (the “**Closing**”) shalltake 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 placeor on such other date as the parties hereto shall agree.  The date on which the Closing is required totake place is herein referred to as the “**Closing Date**”.  All Closing transactions shall be deemed tohave occurred simultaneously.

 

**ARTICLE IVRepresentations and Warranties of Sellers**

 

Except as provided inSellers Disclosure Schedule, LEH hereby represents and warrants to Buyer asfollows:

 

**Section 4.1.****                                Organizationand Existence**.  Each Seller is alimited liability company or corporation duly formed and validly existing underthe laws of the State of Delaware.

 

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**Section 4.2.****                                Powerand Authority**.  Each Seller hasall requisite corporate or limited liability company power and authority toexecute, deliver, and perform this Agreement and each other agreement,instrument, or document executed or to be executed by Sellers in connectionwith the transactions contemplated hereby to which it is a party and toconsummate the transactions contemplated hereby and thereby.  The execution, delivery, and performance bySellers of this Agreement and each other agreement, instrument, or documentexecuted or to be executed by Sellers in connection with the transactionscontemplated hereby to which it is a party, and the consummation by it of thetransactions contemplated hereby and thereby, have been duly authorized by allnecessary action of Sellers.

 

**Section 4.3.****                                Validand Binding Agreement**.  ThisAgreement has been duly executed and delivered by Sellers and constitutes, andeach other agreement, instrument, or document executed or to be executed bySellers in connection with the transactions contemplated hereby to which it isa party has been, or when executed will be, duly executed and delivered bySellers and constitutes, or when executed and delivered will constitute, avalid and legally binding obligation of Sellers, enforceable against it inaccordance with their respective terms, except that such enforceability may belimited by (a) applicable bankruptcy, insolvency, reorganization,moratorium, and similar laws affecting creditors’ rights generally and (b) equitableprinciples which may limit the availability of certain equitable remedies (suchas specific performance) in certain instances.

 

**Section 4.4.****                                Non-Contravention**.  Other than requirements (if any) that therebe obtained consents to assignment (or waivers of preferential rights topurchase) from third parties, neither the execution, delivery, and performanceby Sellers of this Agreement and each other agreement, instrument, or documentexecuted or to Sellers’ Knowledge to be executed by Sellers in connection withthe transactions contemplated hereby to which it is a party nor theconsummation by it of the transactions contemplated hereby and thereby do andwill (a) conflict with or result in a violation of Sellers’ GoverningDocuments, (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 orboth) a default under, or give rise (with or without the giving of notice orthe passage of time or both) to any right of termination, cancellation, oracceleration under, any bond, debenture, note, mortgage or indenture, or anymaterial lease, contract, agreement, or other instrument or obligation to whichSellers are a party or by which Sellers or any of their properties may bebound, (c) result in the creation or imposition of any lien or otherencumbrance upon the properties of Sellers, or (d) violate any ApplicableLaw binding upon Sellers, except, in the instance of clause (b) orclause (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 therebe obtained consents to assignment (or waivers of preferential rights topurchase) from third parties and except for approvals required to be obtainedfrom Governmental Entities who are lessors under leases forming a part of theOil and Gas Properties (or who administer such leases on behalf of suchlessors) which are obtained post-closing, no consent, approval, order, orauthorization of, or declaration, filing, or registration with, any court orgovernmental agency or of any third party is required to be obtained or made bySellers in connection with the execution, delivery, or performance by Sellersof this Agreement, each other agreement, instrument, or document 

 

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executed or to beexecuted by Sellers in connection with the transactions contemplated hereby towhich they are a party or the consummation by them of the transactionscontemplated hereby and thereby, except for such consents, approvals, orders,authorizations, declarations, filings, or registrations which, if not obtainedor made (as applicable), would not, individually or in the aggregate, have aMaterial Adverse Effect.

 

**Section 4.6.****                                Litigation**.  Exceptas listed on Section 4.6 of the Sellers Disclosure Schedule, thereare no Proceedings pending or, to Sellers’ Knowledge, threatened, against oraffecting Sellers or the Properties (including any actions challenging orpertaining to Sellers’ title to any of the Properties), or affecting theexecution and delivery of this Agreement by Sellers or the consummation of thetransactions contemplated hereby by Sellers.

 

**Section 4.7.****                                Contracts**.  Schedule 4.7 lists all MaterialContracts.  To Sellers’ Knowledge, noneof the Sellers is in default under any Material Contract except as disclosed onSchedule 4.7 and except such defaults as would not, individually or in theaggregate, have a Material Adverse Effect. To Sellers’ Knowledge, all Material Contracts are in full force andeffect.  Except as disclosed on Schedule4.7, there are no futures, options, swaps or other derivatives with respect tothe sale of production that will be binding on Sellers or the Properties afterClosing.  Except as disclosed on Schedule4.7, as of the date identified on such Schedule, there were no contracts forthe purchase, sale or exchange of oil, gas or other hydrocarbons produced from orattributable to the Properties that will be binding on the Buyer, the Sellersor the Properties after Closing that Buyer will not be entitled to terminate atwill (without penalty)  on ninety (90)days notice or less.  No notice ofdefault or breach has been received or delivered by any Seller under anyMaterial Contract, the resolution of which is currently outstanding, and nocurrently effective notices have been received by any Seller of the exercise ofany premature termination, price redetermination, market-out or curtailment ofany Material Contract.

 

**Section 4.8.****                                Commitments,Abandonments or Proposals**. Sellers will not incur any expenses, and will not make any commitmentsto make expenditures in connection with the ownership or operation of theProperties after the Effective Date, other than expenses incurred in the normaloperation of existing wells on the Oil and Gas Properties; Sellers will notabandon any wells (or removed any material items of equipment, except thosereplaced by items of materially equal suitability and value)****on the Oil and Gas Properties on or after the EffectiveDate except for those done in the ordinary course of Sellers’ business orunless required by Applicable Law; and no proposals are currently outstandingby Sellers or other working interest owners to drill additional wells, or todeepen, plug back, sidetrack or rework existing wells, or to conduct otheroperations for which consent is required under the applicable operatingagreement, or to conduct any other operations other than normal operation ofexisting wells on the Oil and Gas Properties.

 

**Section 4.9.****                                ProductionSales Contracts**.  There exist noagreements or arrangements for the sale of Hydrocarbons from the Oil and GasProperties (including calls on, or other rights to purchase, production,whether or not the same are currently being exercised) other than (a) productionsales contracts (in this Section, the****“**ScheduledProduction Sales Contracts**”) disclosed in Section 4.9 ofthe Sellers Disclosure Schedule or (b) agreements or arrangements whichare cancelable on 90 days notice or less without penalty or detriment.

 

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**Section 4.10.****                         Pluggingand Abandonment**.  To Seller’sKnowledge, except for wells listed in Section 4.10 of the SellersDisclosure Schedule, there are no dry holes, or shut in or otherwise inactivewells, located on the Oil and Gas Properties or on lands pooled or unitizedtherewith, except for wells that have been plugged and abandoned.

 

**Section 4.11.****                         Permits**.  Sellers have all Permits necessary orappropriate to own and where Seller operates, operate the Properties aspresently being owned and operated, except for such Permits the absence ofwhich would not be reasonably expected to have a Material Adverse Effect, andto Sellers’ Knowledge, such Permits are in full force and effect.  Except as set forth in Section 4.11 ofthe Sellers Disclosure Schedule, Sellers have not received written notice ofany violations in respect of any Permits and to Sellers’ Knowledge, there areno violations in respect of any Permit and no one has communicated to Sellersthat there are any violations in respect of any Permit, except for suchviolations which would not reasonably be expected to have a Material AdverseEffect.

 

**Section 4.12.****                         Paymentof Expenses**.  All expenses(including all bills for labor, materials, and supplies used or furnished foruse in connection with the Properties, and all severance, production, advalorem, and other similar Taxes) relating to the ownership or operation bySellers of the Properties, have been, and are being, paid (timely, and beforethe same become delinquent) by Sellers, except such expenses and Taxes as aredisputed in good faith by Sellers and for which an adequate accounting reservehas been established by Sellers.  Sellersare not delinquent with respect to their obligations to bear costs and expensesrelating to the development and operation of the Oil and Gas Properties.

 

**Section 4.13.****                         Compliancewith Laws**.  To Sellers’ Knowledge, the ownershipand operation of the Properties operated by Sellers have been in compliancewith all Applicable Laws. Notwithstanding the foregoing, this Section 4.13 does notrelate to environmental matters (including compliance with Environmental Lawsor matters that would constitute Environmental Defects), it being agreed thatsuch matters are covered by and dealt with in Article VIIIexclusively.

 

**Section 4.14.****                         Imbalances;Prepayments**.  Section 4.14of the Sellers Disclosure Schedule sets forth all Imbalances as of the date setforth in such Section with respect to the Oil and Gas Properties.  Sellers are not obligated by virtue of a takeor 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 theOil and Gas Properties at some future time without receiving payment thereforat or after the time of delivery.

 

**Section 4.15.****                         IntellectualProperty**.  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 usedby Sellers in connection with their ownership and operation of the Propertiesas presently conducted, subject to the limitations contained in the agreementsgoverning the use of the same, which limitations are customary for companiesengaged in the business of the exploration and production of Hydrocarbons.

 

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**Section 4.16.****                         Taxes**.

 

(a)                                  Except asset forth in Section 4.16 of the Sellers Disclosure Schedule, all advalorem and severance Taxes due and payable for the Properties have been timelypaid in accordance with Applicable Laws and are not delinquent, or if not paid,are being contested in good faith by one or more of the Sellers.

 

(b)                                 With respectto all Taxes related to the Properties, (i) all material Tax Returnsrelating to the Properties required to be filed on or before the Effective Dateby Sellers with respect to any Taxes for any period ending on or before theEffective Date have been timely filed with the appropriate Governmental Entity,(ii) to Sellers Knowledge such Tax Returns are true and correct in allrespects, and (iii) all Taxes reported on such Tax Returns have been paidor provided for, except those being contested in good faith.

 

(c)                                  With respectto all Taxes related to the Properties (i) there are not currently ineffect any extension or waiver by Sellers of any statute of limitations of anyjurisdiction regarding the assessment or collection of any Tax related to theProperties, and (ii) there are no administrative Proceedings or lawsuitspending against the Properties or Sellers with respect to the Properties by anytaxing authority.

 

(d)                                 None of theProperties were bound as of the Effective Date or will be bound at Closing byany tax partnership agreement binding upon Sellers that would preclude Sellersform being entitled to dispose of the property.

 

**Section 4.17.****                         Feesand Commissions**.  Buyer will haveno responsibility for payment of any broker’s, finder’s, financial advisors’ orother similar fee or commission in connection with the transactionscontemplated by this Agreement based upon any arrangements made by or on behalfof Sellers.

 

**Section 4.18.****                         Disclaimerof Warranties**.  Other than thoseexpressly set out in this Article IV, and the special warranty oftitle included in the Assignment, Sellers hereby expressly disclaim any and allrepresentations or warranties with respect to the Properties or thetransactions contemplated hereby.  Inaddition, each Seller’s liability under the special warranty of title shall belimited to those Properties specifically sold or conveyed by that Seller.  Buyer agrees that the Properties are beingsold by each Seller “where is” and “as is”, with all faults.  Specifically as a part of (but not inlimitation 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 orcondition of the Properties **(INCLUDING ANY IMPLIED OREXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ORCONFORMITY TO MODELS OR SAMPLES OF MATERIALS)**.  **OTHER THAN THOSE EXPRESSLYSET OUT IN THIS ARTICLE IV, SELLERS MAKE NO REPRESENTATION ORWARRANTY AS TO (I) THE AMOUNT, VALUE, QUALITY, QUANTITY, VOLUME, ORDELIVERABILITY 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, RELEASEOR DISPOSAL**

 

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**OF HAZARDOUS MATERIALS, SOLIDWASTES, ASBESTOS OR NATURALLY OCCURRING RADIOACTIVE MATERIALS (**“**NORM**”**), OR (III) THEGEOLOGICAL OR ENGINEERING CONDITION OF THE PROPERTIES OR ANY VALUE THEREOF.  SELLERS MAKE NO WARRANTY OR REPRESENTATION,EXPRESS, STATUTORY, OR IMPLIED, AS TO (A) THE ACCURACY, COMPLETENESS, ORMATERIALITY OF ANY DATA, INFORMATION, OR RECORDS FURNISHED TO BUYER INCONNECTION WITH THE PROPERTIES OR OTHERWISE CONSTITUTING A PORTION OF THEPROPERTIES; (B) THE PRESENCE, QUALITY, AND QUANTITY OF HYDROCARBONRESERVES (IF ANY) ATTRIBUTABLE TO THE PROPERTIES; (C) THE ABILITY OF THEPROPERTIES TO PRODUCE HYDROCARBONS, INCLUDING PRODUCTION RATES, DECLINE RATES,AND RECOMPLETION OPPORTUNITIES; (D) IMBALANCE OR PAYOUT ACCOUNTINFORMATION, ALLOWABLES, OR OTHER REGULATORY MATTERS, (E) THE PRESENT ORFUTURE VALUE OF THE ANTICIPATED INCOME, COSTS, OR PROFITS, IF ANY, TO BEDERIVED FROM THE PROPERTIES, (F) THE ENVIRONMENTAL CONDITION OF THE PROPERTIES,(G) ANY PROJECTIONS AS TO EVENTS THAT COULD OR COULD NOT OCCUR, (H) ANYOTHER MATTERS CONTAINED IN OR OMITTED FROM ANY INFORMATION OR MATERIALFURNISHED TO BUYER BY SELLERS OR OTHERWISE CONSTITUTING A PORTION OF THEPROPERTIES, OR (I) ANY PORTION OF THE PROPERTIES OTHER THAN THE PORTIONSOF THE PROPERTIES BEING SOLD OR CONVEYED BY THAT PARTICULAR SELLER.  ANY DATA, INFORMATION, OR OTHER RECORDSFURNISHED BY SELLERS ARE PROVIDED TO BUYER AS A CONVENIENCE AND BUYER’SRELIANCE ON OR USE OF THE SAME IS AT BUYER’S SOLE RISK.**

** **

**Section 4.19.****                         Disclosures**.  The matters set forth on the SellersDisclosure Schedule are not necessarily matters that Sellers are required todisclose or matter that would constitute a breach of any representation orwarranty had such matters not been disclosed. **ARTICLE V Representations and Warranties of Buyer**

 

**Section 4.20.****                         Organizationand Existence**.  Buyer is acorporation, duly organized, legally existing and in good standing under thelaws of the State of Delaware, and is qualified to do business and in goodstanding in each of the states in which Oil and Gas Properties are locatedwhere the laws of such state would require a corporation owning the Oil and GasProperties located in such state to so qualify. Buyer is also qualified to own and operate oil and gas properties withall applicable governmental agencies having jurisdiction over the Properties,to the extent such qualification is necessary or appropriate or will benecessary or appropriate upon consummation of the transactions contemplatedhereby.

 

**Section 4.21.****                         Powerand Authority**.  Buyer has fullcorporate power and authority to execute, deliver, and perform this Agreementand each other agreement, instrument, or document executed or to be executed byBuyer in connection with the transactions contemplated hereby to which it is aparty and to consummate the transactions contemplated hereby and thereby.  The execution, delivery, and performance byBuyer of this Agreement and each other agreement, instrument, or documentexecuted or to be executed by Buyer in connection with the transactionscontemplated hereby to which it is a party, and the consummation by it of thetransactions 

 

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contemplated hereby andthereby, have been duly authorized by all necessary corporate action of Buyer.

 

**Section 4.22.****                         Validand Binding Agreement**.  ThisAgreement has been duly executed and delivered by Buyer and constitutes, andeach other agreement, instrument, or document executed or to be executed byBuyer in connection with the transactions contemplated hereby to which it is aparty has been, or when executed will be, duly executed and delivered by Buyerand constitutes, or when executed and delivered will constitute, a valid andlegally binding obligation of Buyer, enforceable against it in accordance withtheir respective terms, except that such enforceability may be limited by (a) applicablebankruptcy, insolvency, reorganization, moratorium, and similar laws affectingcreditors’ rights generally, and (b) equitable principles which may limitthe availability of certain equitable remedies (such as specific performance)in certain instances.

 

**Section 4.23.****                         Non-Contravention**.  Neither the execution, delivery, andperformance by Buyer of this Agreement and each other agreement, instrument, ordocument executed or to Buyer’s Knowledge to be executed by Buyer in connectionwith the transactions contemplated hereby to which it is a party and theconsummation by it of the transactions contemplated hereby and thereby do notand will not (i) conflict with or result in a violation of Buyer’sGoverning Documents, (ii) conflict with or result in a violation of anyprovision of, or constitute (with or without the giving of notice or thepassage of time or both) a default under, or give rise (with or without thegiving 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 orobligation to which Buyer is a party or by which Buyer or any of its propertiesmay be bound, (iii) result in the creation or imposition of any lien orother encumbrance upon the properties of Buyer, or (iv) violate any ApplicableLaw binding upon Buyer, except, in the instance of clauses (ii) and (iii) above,for which any such conflicts, violations, defaults, terminations, cancellationsor accelerations which would not, individually or in the aggregate, have aMaterial Adverse Effect.

 

**Section 4.24.****                         Approvals**.  Other than requirements (if any) that therebe obtained consents to assignment (or waivers of preferential rights topurchase) from third parties, no consent, approval, order, or authorization of,or declaration, filing, or registration with, any court or governmental agencyor of any third party is required to be obtained or made by Buyer in connectionwith the execution, delivery, or performance by Buyer of this Agreement andeach other agreement, instrument, or document executed or to be executed byBuyer in connection with the transactions contemplated hereby to which it is aparty or the consummation by it of the transactions contemplated hereby andthereby, except, for such consents, approvals, orders, authorizations,declarations, filings, or registrations which, if not obtained or made (asapplicable), would not, individually or in the aggregate, have a MaterialAdverse Effect.

 

**Section 4.25.****                         PendingLitigation**.  There are noProceedings pending or, to Buyer’s Knowledge, threatened against or affectingthe execution and delivery of this Agreement by Buyer or the consummation ofthe transactions contemplated hereby by Buyer.

 

**Section 4.26.****                         KnowledgeablePurchaser**.  Buyer is aknowledgeable purchaser, owner and operator of oil and gas properties, has theability to evaluate (and in fact has evaluated) the Properties forpurchase.  Buyer is an “accreditedinvestor,” as defined in Regulation D 

 

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promulgated pursuant tothe Securities Act, and is acquiring the Properties for its own account and notwith the intent to make a distribution within the meaning of the SecuritiesAct  (and the rules and regulationspertaining thereto) or a distribution thereof in violation of any otherapplicable securities laws.  At Closing,Buyer will have had access to the Properties, the officers and consultants ofSellers, and the books, records, and files of Sellers relating to theProperties.  In making the decision toenter into this Agreement and to consummate the transactions contemplatedhereby, Buyer has relied on its own independent due diligence investigation ofthe Properties and has been advised by and has relied solely on its ownexpertise and legal, land, tax, reservoir engineering, and other professionalcounsel concerning this transaction, the Properties and the value thereof.

 

**Section 4.27.****                         Funds**.  Buyer has, and at the Closing will have,sufficient cash and other sources of immediately available funds, as arenecessary in order to pay the Adjusted Purchase Price to Sellers at the Closingand otherwise consummate the transactions contemplated hereby.

 

**Section 4.28.****                         Feesand 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 connectionwith the transactions contemplated by this Agreement based upon arrangementsmade by or on behalf of Buyer.

 

**ARTICLE VCertain Covenants of Sellers Pending Closing**

 

**Section 5.1.****                                Accessto Files**.  Subject to the termsof the Confidentiality Agreement and Article IX, from the datehereof until the Closing Date, Sellers will give Buyer, and its attorneys andother authorized representatives, access at all reasonable times and in amanner so as to not interfere with the normal business operations of theSellers to the Properties and to any contract files, lease or other titlefiles, production files, well files, and other files of Sellers pertaining tothe ownership or operation of the Properties, and Sellers will use theirReasonable Best Efforts to arrange for Buyer, and its attorneys and otherrepresentatives, to have access to any such files in the office of Sellers.

 

**Section 5.2.****                                Conductof Operations**.  From the date hereof until the Closing Date, Sellerswill (i) continue the routine operation of the Properties in the ordinarycourse of business as previously conducted prior to the date of this Agreement,including without limitation, the continuation of the drilling of new wells inaccordance with the 2008 Appalachia Drilling Plan, a copy of which has beenpreviously furnished to Buyer by Sellers; and (ii) operate the Propertiesin material compliance with all Applicable Laws and Environmental Laws andMaterial Agreements.  Without expandingany obligations that Sellers may have to Buyer, it is expressly agreed thatSellers shall never have any liability to Buyer which respect to operation of aProperty greater than that which it might have as the operator to anon-operator under the applicable operating agreement (or, in the absence ofsuch an agreement, under the AAPL 610 (1989 Revision) form OperatingAgreement).

** **

**Section 5.3.****                                Restrictionson Certain Actions**.  From the date hereof until the Closing Date, Sellerswill not, without Buyer’s prior consent in connection with the Properties:

 

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(a)                                  expend anyfunds, or make any commitments to expend funds (including entering into newagreements which would obligate Sellers to expend funds), or otherwise incurany other obligations or liabilities, other than to pay expenses or to incurliabilities in the ordinary course of business as previously conducted prior tothe date of this Agreement in connection with operation of the Properties afterthe Effective Date and as set out in the 2008 Appalachia Drilling Plan, a copyof which has been previously furnished to Buyer by Sellers, and except in theevent of an emergency requiring immediate action to protect life or preservethe Properties;

 

(b)                                 except wherenecessary to prevent the termination of a Lease or other material agreementgoverning Sellers’ interest in the Properties, propose the drilling of anyadditional wells, or propose the deepening, plugging back or reworking of anyexisting wells, or propose the conducting of any other operations which requireconsent under the applicable operating agreement, or propose the conducting ofany other operations other than the normal operation of the existing wells onthe Oil and Gas Properties, or propose the abandonment of any wells on the Oiland Gas Properties (and Sellers agree that they will advise Buyer of any suchproposals made by third parties and will respond to each such proposal made bya third party in the manner requested by Buyer);

 

(c)                                  sell,transfer, or abandon any portion of the Properties other than items ofmaterials, supplies, machinery, equipment, improvements, or other personalproperty or fixtures forming a part of the Properties (and then only if thesame is replaced with an item of substantially equal suitability, free of liensand security interests, which replacement item will then, for the purposes ofthis Agreement, become part of the Properties); or

 

(d)                                 release (orpermit to terminate), or modify or reduce its rights under, any oil, gas, ormineral lease forming a part of the Oil and Gas Properties, or any MaterialAgreement, or modify any existing production sales contracts or enter into anynew production sales contracts, except contracts terminable by Sellers withnotice of 60 days or less.

 

**Section 5.4.****                                ServiceFee**.  To compensate Seller foradministrative overhead expenses associated with conducting operations pursuantto Section 6.2 from the Effective Date to the Closing Date, Buyer agreesto pay Sellers the sum of $350,000.00 per month.  Buyer will be responsible for operating theProperties after Closing, unless Buyer and Sellers enter into a TransitionServices Agreement.

 

**Section 5.5.****                                Paymentof Expenses**.  Sellers will causeall expenses (including all bills for labor, materials, and supplies used orfurnished for use in connection with the Properties and all severance,production, and similar Taxes) relating to the ownership or operation of theProperties prior to the Closing Date to be promptly paid and discharged, exceptfor expenses disputed in good faith.

 

**Section 5.6.****                                PreferentialRights and Third Party Consents**. Sellers will use Reasonable Best Efforts to request, from theappropriate parties (and in accordance with the documents creating such rightsand/or requirements), waivers of the preferential rights to purchase, orrequirements that consent to assignment be obtained, which are identified in Section 6.6of the Sellers Disclosure Schedule. Sellers shall have no obligation to assure that such waivers areobtained, and if all such waivers (or any other waivers of preferential rightsto purchase or requirements that consent be obtained to assignment, even if thesame are not listed 

 

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on such Section 6.6)are not obtained, Buyer may treat any waiver which is not obtained as a matterwhich causes Sellers’ title to not be sufficient to meet the standards setforth 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 unobtainedwaiver is a waiver of a preferential right to purchase, and if both Buyer andSellers agree to this treatment of such matter (and agree upon an appropriateallocation of the Purchase Price), Sellers will tender (at the agreed allocatedportion of the Purchase Price) the required interest in the Property affectedby such unwaived preferential right to purchase to the holder, or holders, ofsuch right who have elected not to waive such preferential right to purchase,and if, and to the extent that, such preferential right to purchase isexercised by such party or parties, such interest in such Property will beexcluded from the transaction contemplated hereby and the Purchase Price willbe reduced by the amount paid, or to be paid, by the party exercising suchpreferential right to purchase (and Sellers shall collect such amount from suchpurchaser).

 

**Section 5.7.****                                Hart-Scott-RodinoAct**.  As  soon as practicable, but no later than fifteen(15) Business Days after the execution hereof, Sellers and Buyer shall eachprepare and submit any necessary filings in connection with the transactionscontemplated by this Agreement under the Hart-Scott-Rodino Act (“HSR Act”) andthe rules and regulations promulgated thereunder.  Each party shall request expedited treatmentof such filing by the Federal Trade Commission, shall promptly make anyappropriate or necessary subsequent or supplemental filings, and shall furnishto the other party copies of all filings made under the HSR Act at the sametime they are filed with the government.

** **

**ARTICLE VIAdditional Pre-Closing and Post-Closing Agreements of Both Parties**

 

**Section 6.1.****                                ReasonableBest Efforts**.  Each party heretoagrees that it will not voluntarily undertake any course of action inconsistentwith the provisions or intent of this Agreement and will use its ReasonableBest Efforts to take, or cause to be taken, all action and to do, or cause tobe done, all things reasonably necessary, proper, or advisable under ApplicableLaws to consummate the transactions contemplated by this Agreement, including (i) cooperationin determining whether any consents, approvals, orders, authorizations,waivers, declarations, filings, or registrations of or with any GovernmentalEntity or third party are required in connection with the consummation of thetransactions contemplated hereby; (ii) Reasonable Best Efforts to obtainany such consents approvals, orders, authorizations, and waivers and to effectany such declarations, filings, and registrations; (iii) Reasonable BestEfforts to cause to be lifted or rescinded any injunction or restraining orderor other order adversely affecting the ability of the parties to consummate thetransactions contemplated hereby; (iv) Reasonable Best Efforts to defend,and cooperation in defending, all Proceedings challenging this Agreement or theconsummation of the transactions contemplated hereby; and (v) theexecution of any additional instruments necessary to consummate thetransactions contemplated hereby.

 

**Section 6.2.****                                Noticeof Litigation**.  Until theClosing, (i) Buyer, upon learning of the same, shall promptly notifySellers of any Proceeding which is commenced or threatened against Buyer andwhich affects this Agreement or the transactions contemplated hereby, and (ii) Sellers, upon learning of the same, shall promptly notify Buyer of anyProceeding which is commenced or threatened against Sellers which affects thisAgreement or the transactions contemplated hereby.

 

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**Section 6.3.****           Notification ofCertain Matters**.  Until theClosing, Sellers shall give prompt notice to Buyer of:  (i) the occurrence or nonoccurrence ofany event the occurrence or nonoccurrence of which, to Sellers’ Knowledge,would be likely to cause any representation or warranty made by Sellers in Article IVto be untrue or inaccurate at or prior to the Closing, and (ii) anyfailure of Sellers to comply with or satisfy any covenant, condition, oragreement to be complied with or satisfied by Sellers hereunder prior toClosing.  Until the Closing, Buyer shallgive prompt notice to Sellers of:  (i) theoccurrence or nonoccurrence of any event the occurrence or nonoccurrence ofwhich, to Buyer’s Knowledge, would be likely to cause any representation orwarranty contained in Article V to be untrue or inaccurate at orprior to the Closing, and (ii) any failure of Buyer to comply with orsatisfy any covenant, condition, or agreement to be complied with or satisfiedby Buyer hereunder prior to Closing.  Thedelivery of any notice pursuant to this Section 7.3 shall not bedeemed to (x) modify the representations or warranties hereunder of theparty delivering such notice, (y) modify the conditions set forth in Article IX,or (z) limit or otherwise affect the remedies available hereunder to theparty receiving such notice.

 

**Section 6.4.****           Fees and Expenses**.

 

(a)           Except asotherwise provided herein, (i) all fees and expenses incurred inconnection with this Agreement by Sellers will be borne by and paid by Sellers,and (ii) all fees and expenses incurred in connection with this Agreementby Buyer will be borne by and paid by Buyer.

 

(b)           All requireddocumentary, filing and recording fees and expenses in connection with thefiling and recording of the Assignment and other instruments required to conveytitle to the Properties to Buyer shall be borne by Buyer.  Buyer shall assume responsibility for, andshall bear and pay, any applicable state sales and use Taxes (including anyapplicable interest or penalties) incurred or imposed with respect to thetransactions contemplated by this Agreement.

 

**Section 6.5.****           Public Announcements**.  Except as may be required by Applicable Law,neither Buyer nor Sellers shall issue any press release or otherwise make anystatement to the public generally with respect to this Agreement or thetransactions contemplated hereby without the prior consent of the other party(which consent shall not be unreasonably withheld and which consent, if givenverbally, shall be confirmed in writing within one Business Daythereafter).  Any such press release orstatement required by Applicable Law shall only be made after reasonable noticeto the other parties.

 

**Section 6.6.****           Casualty Loss Priorto Closing**.  In the event ofdamage by fire or other casualty to any of the Properties after the EffectiveDate and prior to the Closing, then this Agreement shall remain in full forceand effect, and (unless Buyer and Sellers shall otherwise agree) in such event:

 

(a)           as to eachsuch 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 anasserted Title Defect associated with it and the procedure provided for in Article VIIIshall 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 notbe adjusted, and if Sellers should be entitled to make any claims under anyinsurance policy with respect to 

 

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such damage, Sellersshall, at Sellers’ election, either collect (and when collected pay over toBuyer), or assign to Buyer, such claims, and

 

(b)           as to eachsuch Property which is other than an Oil and Gas Property, Sellers shall, atSellers’ election, either collect (and when collected pay over to Buyer), orassign to Buyer, any and all insurance claims relating to such loss, and Buyershall take title to the Property affected by such loss without reduction of thePurchase Price.

 

**Section 6.7.****           Governmental Bonds**.  At or prior to Closing, Buyer shall deliverto Sellers evidence that Buyer has completed all action necessary to permitBuyer to post bonds or other security immediately following the Closing withall applicable Governmental Entities meeting the requirements of suchGovernmental Entities to own, and where appropriate, operate, the Properties.

 

**Section 6.8.****           Assumed Obligations**.  At Closing, Buyer shall assume and agree topay, perform and discharge the Assumed Obligations.

 

**Section 6.9.****           OperationalTransition**.  IT IS RECOGNIZEDTHAT THERE IS NO ASSURANCE GIVEN BY SELLERS THAT BUYER SHALL SUCCEED SELLERS ASOPERATOR OF ANY PROPERTY WHERE OTHER PARTIES OWN INTERESTS IN THE WELLS LOCATEDTHEREON, but Sellers shall cooperate with Buyer to see that Buyer shall succeedSellers as operator of all the Sellers operated properties, by: (a) deliveringat Closing signed counterparts of letters addressed to non-operating workinginterest owners of the Sellers operated Properties advising them of the sale ofthose Properties by Sellers to Buyer; and seeking such owners’ consideration ofBuyer’s selection as successor to Seller as operator, and (b) executingapplicable change of operator forms for filing with the applicable GovernmentalAgencies.

 

**Section 6.10.****        Books and Records**.  At or promptly after Closing, but in no eventlater than 30 days after the Closing, Sellers will deliver to Buyer all relatedbooks and records that are a part of the Properties to a location designated byBuyer.  Buyer will promptly reimburseSellers for all reasonable costs of shipping or transporting such books andrecords including any costs incurred to provide such data in an electronicformat.  Sellers (or its Affiliates)shall have the right to have reasonable access during Buyer’s reasonable andcustomary business hours to inspect and copy (at Sellers’ or such Affiliate’sexpense) the books and records so delivered under this Section 7.10for the six-year period commencing on the Closing Date.

 

**Section 6.11.****        Suspended Funds**.  As soon as practicable after the ClosingDate, but no later than 90 days thereafter, Sellers shall provide to Buyer alisting in Excel spreadsheet format, showing all proceeds from productionattributable to the wells which are currently held in suspense by Sellers andthe reason for suspending such proceeds, shall transfer to Buyer all thosesuspended proceeds (the “**Suspended Proceeds**”).  Thereafter, Buyer shall be responsible forproper distribution of the Suspended Proceeds to the parties lawfully entitledto them to the extent and only to the extend of Suspended Proceeds, exceptSellers shall remain liable for interest and penalties, if any, associated withthe Suspended Proceeds for failure, prior to the Closing Date, to escheat suchSuspended Proceeds to the applicable Governmental Entities in accordance withApplicable Law.

 

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**Section 6.12.****        Letters-in-Lieu**.  At Closing, Sellers shall execute and deliverletters in lieu of transfer orders (or similar documentation) in formreasonably acceptable to Buyer and Sellers.

 

**Section 6.13.****        Logos and Names**.  As soon as practicable after the Closing,Buyer will remove or cause to be removed the names and marks used by Sellersand all variations and derivatives thereof and logos relating thereto from theProperties.

 

**Section 6.14.****        Further Assurances**.  At the Closing, and from time to timefollowing the Closing, at the request of any party hereto and without furtherconsideration, the other party or parties hereto shall execute and deliver tosuch requesting party such instruments and documents and take such other action(but without incurring any material financial obligation) as such requestingparty may reasonably request in order to consummate more fully and effectivelythe transactions contemplated hereby.

 

**ARTICLE VIIDue Diligence Examination**

 

**Section 7.1.****           TitleDue Diligence Examination**.

 

(a)           From thedate of this Agreement until 5:00 p.m. (local time in Houston, Texas)seven Business Days prior to the Closing Date (the “**ExaminationPeriod**”), Sellers shall afford to Buyer and its authorizedrepresentatives reasonable access during normal business hours and in a mannerso as to not unduly interfere with the normal business operations of theSellers to the office, personnel and books and records of Sellers in order forBuyer to conduct a title examination as it may in its sole discretion choose toconduct with respect to the Oil and Gas Properties in order to determinewhether Title Defects (as defined below) exist (“**Buyer’sTitle Review**”).  Such booksand 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 andengineering records, in each case insofar as same may now be in existence andin the possession of Sellers, excluding, however, any information that Sellersare prohibited from disclosing by bona fide, third party confidentialityrestrictions; provided, that if requested by Buyer, Sellers shall use theirReasonable Best Efforts to obtain a waiver of any such restrictions in favor ofBuyer.  The cost and expense of Buyer’sTitle Review, if any, shall be borne solely by Buyer.

 

(b)           If Buyerdiscovers any Title Defect affecting any of the Oil and Gas Properties, Buyershall notify Sellers prior to the expiration of the Examination Period of suchalleged Title Defect.  To be effective,such notice (“**Title Defect Notice**”) must (i) bein writing, (ii) be received by Sellers prior to the expiration of theExamination Period, (iii) describe the Title Defect in reasonable detail(including any alleged variance in the Net Revenue Interest), (iv) identifythe specific Oil and Gas Property affected by such Title Defect, and (v) includethe value of such Title Defect as determined by Buyer in good faith.  Buyer will provide Sellers with Title DefectNotices, if any, as soon as practicable upon discovery and will use ReasonableBest Efforts to provide Sellers with weekly updates of any alleged TitleDefects.  Any matters that may otherwiseconstitute Title Defects, but of which Sellers have not been specificallynotified by Buyer in accordance with the foregoing, shall be deemed to havebeen waived by Buyer for all purposes. Upon the receipt of such effective Title Defect Notice from Buyer,Sellers shall, in 

 

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addition to the remediesset forth in Section 8.1(c) (the “**Remedies forTitle Defects**”), use Sellers’ Reasonable Best Efforts to cure suchTitle Defect at any time prior to the Closing. The Oil and Gas Property affected by such uncured Title Defect shall bea “**Title Defect Property**”.

 

(c)           With respectto each Title Defect that is not cured on or before the Closing, the PurchasePrice shall be reduced, subject to this Article VIII, by the TitleDefect Amount with respect to such Title Defect Property.  The “**Title Defect Amount**”shall mean, with respect to a Title Defect Property, and except in connectionwith Section 8.1(d)(i)(D), the amount in excess of $175,000 by which suchTitle Defect Property is impaired as a result of the existence of one or moreTitle Defects, which amount shall be determined as follows:

 

(i)            The TitleDefect Amount with respect to a Title Defect Property shall be determined bytaking into consideration the “**Allocated Value**”(as set forth in Exhibit C attached hereto) of the Oil and GasProperty subject to such Title Defect, the portion of the Oil and Gas Propertysubject to such Title Defect, and the legal effect of such Title Defect on theOil and Gas Property affected thereby; provided, however, that:  (A) if such Title Defect is in thenature of Sellers’ Net Revenue Interest in an Oil and Gas Property being lessthan the Net Revenue Interest set forth in Exhibit C hereto and theWorking Interest remains the same, then the Title Defect Amount shall equal theAllocated Value for the relevant Oil and Gas Property multiplied by the percentagereduction in such Net Revenue Interest as a result of such Title Defect or (B) ifsuch Title Defect is in the nature of a Lien, then the Title Defect Amountshall equal the amount required to fully discharge such Lien; and

 

(ii)           If the TitleDefect 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 thevalue of the Title Defect Property affected by such Title Defect with suchTitle Defect and the value of such Title Defect Property without such TitleDefect (taking into account the portion of the Allocated Value of the TitleDefect Property).

 

(d)           As used inthis Section 8.1:

 

(i)            “**Defensible Title**” means, as of the date of this Agreementand the Closing Date (and all periods in between), with respect to the Oil andGas Properties, such record title and ownership by Sellers that:

 

(A)          entitlesSellers to receive and retain, without reduction, suspension or termination,not less than the percentage set forth in Exhibit C as Sellers’ NetRevenue Interest of all Hydrocarbons produced, saved, and marketed from eachLease comprising such Oil and Gas Property as set forth in Exhibit C,through plugging, abandonment, and salvage of all wells comprising or includedin such Oil and Gas Property, and except for changes or adjustments that resultfrom the establishment of units, changes in existing units (or theparticipating areas therein), or the entry into of pooling or unitizationagreements after the date hereof unless made in breach of the provisions of Section 6.3;

 

(B)           obligatesSellers to bear not greater than the percentage set forth in Exhibit Cas Sellers’ Working Interest of the costs and expenses relating to themaintenance, development and operation of each Lease comprising such Oil andGas 

 

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Property, through plugging, abandonmentand salvage of all wells comprising or included in such Oil and Gas Property,and except for changes or adjustments that result from the establishment ofunits, changes in existing units (or the participating areas therein), or theentry into of pooling or unitization agreements after the date hereof unlessmade in breach of the provisions of Section 6.3;

 

(C)           is free andclear of all Liens, except Permitted Encumbrances;

 

(D)          reflectsthat all consents to assignment, notices of assignment or preferential purchaserights which are applicable to or must be complied with in connection with thetransaction contemplated by this Agreement, or any prior sale, assignment orthe transfer of such Oil and Gas Property, have either been obtained andcomplied with, or are deemed waived by Buyer pursuant to this Agreement, to theextent the failure to obtain or comply with the same could render this transactionor any such sale, assignment or transfer (or any right or interest affectedthereby) void or voidable or could result in Buyer or Sellers incurring anyliability.

 

(ii)           “**Permitted Encumbrances**” shall mean (A) Liens for Taxeswhich are not yet delinquent or which are being contested in good faith; (B) normaland customary Liens of co-owners under operating agreements, unitizationagreements, and pooling orders relating to the Oil and Gas Properties, whichobligations are not yet due and pursuant to which Sellers are not in default; (C) mechanic’sand materialman’s Liens relating to the Oil and Gas Properties, whichobligations are not yet due and pursuant to which Sellers are not in default; (D) Liensin the ordinary course of business consisting of minor defects andirregularities in title or other restrictions (whether created by or arisingout of joint operating agreements, farm-out agreements, leases and assignments,contracts for purchases of Hydrocarbons or similar agreements, or otherwise inthe ordinary course of business) that are of the nature customarily accepted byprudent purchasers of oil and gas properties and do not decrease the NetRevenue Interest, increase the Working Interest (without a proportionateincrease in the Net Revenue Interest) or materially affect the value of anyproperty encumbered thereby; (E) all approvals required to be obtainedfrom Governmental Entities that are lessors under Leases forming a part of theOil and Gas Properties (or who administer such Leases on behalf of suchlessors) which are customarily obtained post-closing; (F) preferentialrights to purchase and consent to transfer requirements of any Person (to theextent same have been complied with in connection with the prior sale,assignment or the transfer of such Oil and Gas Property and are not triggeredby the consummation of the transactions contemplated herein) or are deemedwaived by Buyer under the Agreement; (G) Liens under the Credit Facility(provided such Liens are released at Closing); (H) Liens under theExisting Hedges (provided such Liens are released at Closing); and (I) conventionalrights of reassignment normally actuated by an intent to abandon or release alease and requiring notice to the holders of such rights.

 

(iii)          “**Title Defect**” shall mean any particular defect in or failureof Sellers’ ownership of any Property:  (A) thatcauses Sellers to not have Defensible Title to such Oil and Gas Property, (B) thathas attributable thereto a Title Defect Amount in excess of $175,000 (except asotherwise provided for in Sections 6.6 and Section 7.6(a)) and (C) regardingwhich a Title Defect Notice has been timely and otherwise validly 

 

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delivered.  Notwithstanding any other provision in thisAgreement to the contrary, the following matters shall not constitute, andshall not be asserted as, a Title Defect: (A) defects or irregularities arising out of lack of corporateauthorization; (B) defects or irregularities that have been cured orremedied by the applicable statutes of limitation or statutes for prescription;(C) defects or irregularities in the chain of title consisting of thefailure to recite marital status in documents or omissions of heirshipProceedings; (D) minor defects or irregularities in title which for aperiod of five years or more have not delayed or prevented Sellers (or Sellers’predecessor) from receiving their Net Revenue Interest share of the proceeds ofproduction and have not caused Sellers to bear a share of expenses and costsgreater than its Working Interest share from each Lease, unit or Well; and (E) defectsor irregularities resulting from or related to probate Proceedings or the lackthereof which defects or irregularities have been outstanding for five years ormore; provided, however, matters covered by subparagraphs (A), (C), and (E) aboveshall constitute a Title Defect if Buyer provides Sellers with sufficientlyclear evidence of an actual claim of title made by a third party based on suchmatter.

 

(e)           If Sellersand Buyer are unable to reach an agreement as to whether a Title Defect existsor, if it does exist, the Title Defect Amount attributable such Title Defect,the provisions of Section 8.3 shall be applicable.

 

**Section 7.2.****          ****Environmental Due DiligenceExamination**.

 

(a)           During theExamination Period, Buyer shall have the right, or the right to cause anenvironmental consultant reasonably acceptable to Sellers (“**Buyer’s Environmental Consultant**”), to conduct a Phase Ienvironmental assessment of the Properties and to conduct any further Phase Ior other non-invasive environmental assessment of the Properties it deemsappropriate, to the extent Sellers have the authority to grant such right toBuyer. (“**Buyer’s Environmental Review**”).  No less than three Business Days prior to theproposed commencement date of Buyer’s Environmental Review, Buyer shall furnishSellers with an outline of the proposed scope of such review, including thelocations of such activities.  The costand expense of Buyer’s Environmental Review, if any, shall be borne solely byBuyer.  No Person, other than Buyer’sEnvironmental Consultant and Buyer’s employees may conduct Buyer’sEnvironmental Review.  Sellers shall havethe right to have representatives thereof present to observe Buyer’s EnvironmentalReview conducted in Sellers’ offices or on Sellers’ properties.  Buyer agrees to conduct Buyer’s EnvironmentalReview in a manner so as not to unduly interfere with the business operationsof Sellers and in compliance with all Applicable Laws, and Buyer shall exercisedue care with respect to Sellers’ properties and their condition.

 

(b)           Prior to theClosing, unless otherwise required by Applicable Law, Buyer shall (and shallcause Buyer’s Environmental Consultant, if applicable, to) treat confidentiallyany matters revealed by Buyer’s Environmental Review and any reports or datagenerated from such review (the “**Environmental Information**”),and Buyer shall not (and shall cause Buyer’s Environmental Consultant, ifapplicable, to not) disclose any Environmental Information to any GovernmentalEntity 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, Buyermay use the Environmental Information only in connection with the transactionscontemplated by this Agreement.  IfBuyer, Buyer’s Environmental Consultant, if applicable, or any third party towhom Buyer has provided any Environmental Information become legally 

 

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compelled to discloseany of the Environmental Information, Buyer shall provide Sellers with promptnotice and Sellers, at Sellers’ expense, may file any protective order, or seekany other remedy, as it deems appropriate under the circumstances.  If this Agreement is terminated prior to theClosing, Buyer shall deliver the Environmental Information to Sellers, whichEnvironmental Information shall become the sole property of Sellers.  Upon Sellers’ written request to Buyer, Buyershall provide copies of the Environmental Information to Sellers withoutcharge.

 

(c)           If Buyer orBuyer’s Environmental Consultant, if applicable, discovers any EnvironmentalDefect (as herein defined), Buyer shall notify Sellers prior to the expirationof the Examination Period of such alleged Environmental Defect.  To be effective, such notice (an “**Environmental Defect Notice**”) must (i) be in writing; (ii) bereceived by Sellers prior to the expiration of the Examination Period; (iii) describethe Environmental Defect in reasonable detail, including (A) the specificProperties affected by or associated with such Environmental Defect, (B) ifapplicable, a site plan showing the location of all field notes and the fieldconditions observed, (C) the written conclusion of Buyer’s EnvironmentalConsultant, if applicable, that an Environmental Defect is believed to exist,which conclusion shall be reasonably substantiated by the factual data gatheredin Buyer’s Environmental Review, and (D) if feasible and applicable, aseparate, reasonably specific citation of the provisions of the EnvironmentalLaws alleged to be violated and the related facts that substantiate suchviolation; (iv) describe the procedures recommended to correct, eliminateor pay the Environmental Defect, together with any related recommendations fromBuyer’s Environmental Consultant, if applicable; and (v) set forth Buyer’sgood faith estimate of the Environmental Defect Value, including the basis forsuch estimate.  Any matters that mayotherwise constitute Environmental Defects, but of which Sellers have not beenspecifically notified by Buyer in accordance with the foregoing, together withany 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 noticefrom Buyer, Sellers shall have the option, in addition to the remedy set forthin Section 8.4(c), but not the obligation, to attempt to cure suchEnvironmental Defect at any time prior to the Closing, at the sole cost andexpense of Sellers.  If Sellers and Buyerare unable to reach an agreement as to whether an Environmental Defect existsor, if it does exist, the amount of the Environmental Defect Value attributablethereto, the provisions of Section 8.3 shall be applicable.

 

(d)           If anyEnvironmental Defect described in a notice delivered in accordance with Section 8.2is not cured on or before the Closing, then the Purchase Price shall bereduced, subject to Section 8.4, by the Environmental Defect Valueof such Environmental Defect.

 

(e)           As used inthis Section 8.2:

 

(i)            “**Environmental Defect**” shall mean, with respect to anygiven Property, a violation of Environmental Laws in effect as of the EffectiveDate in the jurisdiction in which such Property is located, an obligation underEnvironmental Laws to complete immediately or promptly after the Closing anycorrective action at the Property, or any Environmental Liability arising fromor 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 ofHazardous Materials prior to the Closing Date, (A) regarding which anEnvironmental 

 

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Defect Notice has been timely andotherwise validly delivered, (B) that has an Environmental Defect Valueattributable thereto in excess of $250,000, and (C) is not otherwisedisclosed in Sellers Disclosure Schedule 8.2.

 

(ii)           “**Environmental Defect Value**” shall mean the amount (A) thenet present value of the reasonably estimated costs and expenses in excess of$250,000 to correct such Environmental Defect in the most cost effective mannerreasonably available, consistent with Environmental Laws, or (B) the netpresent value in excess of $250,000, of the amount of Environmental Liabilitiesreasonably believed will be incurred or required to be paid by Sellers withrespect thereto. The parties recognize that the calculation of an EnvironmentalDefect Value may require the use of assumptions and extrapolations; however, itis acknowledged and agreed that any such assumptions and extrapolations will beconsistent with the known factual information and reasonable in nature.

 

**Section 7.3.****           Disputes RegardingTitle Defects or Environmental Defects**. If Sellers and Buyer are unable to reach an agreement as to whether aTitle Defect or an Environmental Defect exists, or if it does exist, the TitleDefect Amount or Environmental Defect Value attributable to such Title Defector Environmental Defect, or disputes relating to Post-Closing Defects pursuantto Section 8.4(c) (a “**Defect Dispute**”),each party shall have the right to submit a Defect Dispute to an independentexpert (the “**Independent Expert**”), who shallserve as sole arbitrator.  TheIndependent Expert shall be appointed by mutual agreement of Sellers and Buyerfrom among candidates (including lawyers) with experience and expertise in thearea that is the subject of such Defect Dispute, and failing such agreement,such Independent Expert for such Defect Dispute shall be selected in accordancewith the Commercial Arbitration Rules of the AAA (the “**Rules**”).  Defect Disputes to be resolved by anIndependent Expert shall be resolved in accordance with mutually agreedprocedures and rules and failing such agreement, in accordance with theRules.  The Independent Expert shall beinstructed by the parties to resolve such Defect Dispute as soon as reasonablypracticable in light of the circumstances. The decision and award of the Independent Expert shall be binding uponthe parties as an award under the Federal Arbitration Act and final andnonappealable to the maximum extent permitted by law, and judgment thereon maybe entered in a court of competent jurisdiction and enforced by any party as afinal judgment of such court.

 

**Section 7.4.****           Adjustments toPurchase Price for Defects**.

 

(a)           Notwithstandinganything to the contrary contained in this Agreement, no adjustment of thePurchase Price shall be made for Title Defects unless the aggregate of theTitle Defect Amounts, as determined in accordance with this Agreement, equalsor exceeds two percent of the Purchase Price, in which event the Purchase Priceshall be adjusted downward by the amount such Title Defect Amounts exceed twopercent of the Purchase Price in the aggregate.

 

(b)           Notwithstandinganything to the contrary contained in this Agreement, no adjustment of thePurchase Price shall be made for Environmental Defects unless the aggregate ofthe Environmental Defect Values, as determined in accordance with thisAgreement, equals or exceeds two percent of the Purchase Price, in which eventthe Purchase Price shall be adjusted 

 

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downward by the amountsuch Environmental Defect Values exceed two percent of the Purchase Price inthe aggregate.

 

(c)           Notwithstandinganything herein to the contrary, if Sellers are unable to cure a Title Defect oran Environmental Defect (a “**Post-Closing Defect**”)on or prior to Closing, Sellers shall have the option, by notice in writing toBuyer on or before Closing, to attempt to cure such Post-Closing Defect withinthe 90-day period commencing with the Closing Date (the “**Cure Period**”).  In such event, the transactions contemplatedhereby will close as provided herein, but an amount equal to the applicableTitle Defect Amount or Environmental Defect Value to which the Post-ClosingDefect pertains shall be deducted from the Adjusted Purchase Price otherwisepayable at Closing and paid into an escrow account (the “**DefectsEscrow**”) established with a federally insured savings or bankinginstitution mutually acceptable to Buyer and Sellers (the “**DefectsEscrow Agent**”) pursuant to the terms of an escrow agreement in aform acceptable to the Defects Escrow Agent and reasonably acceptable to Buyerand Sellers (the “**Defects Escrow Agreement**”).  The amount deposited into the Defects Escrowwith respect to a Post-Closing Defect will remain therein until released asprovided in Section 8.4(d).

 

(d)           Buyer willact in good faith and reasonably cooperate with the Sellers after the Closingto cure a Post-Closing Defect provided that Buyer shall not be required toexpend any monies in connection therewith and Sellers shall conduct theiractivities so as to not unreasonably interfere with Buyer’s operations.  If Sellers and Buyer mutually agree that aPost-Closing Defect has been cured, then within two Business Days after suchdetermination, the amount withheld in the Defects Escrow with respect thereto(together with any interest earned thereon) shall be released to Sellers inaccordance with the terms of the Defects Escrow Agreement.  If Sellers and Buyer mutually agree that aPost-Closing Defect has been partially cured, then Sellers and Buyer shallmutually determine the portion of the amount retained in the Defects Escrowwith respect thereto (together with any interest earned thereon) that should bepaid to Buyer to compensate it for the uncured portion thereof (together withinterest earned thereon), and the remaining portion of such amount shall bereleased to Sellers (together with any interest earned thereon) in accordancewith the terms of the Defects Escrow Agreement. If Sellers and Buyer mutually agree that a Post-Closing Defect has notbeen cured, then within two Business Days after such determination, the amountwithheld in the Defects Escrow with respect thereto (together with any interestearned thereon) shall be released to Buyer in accordance with the terms of theDefects Escrow Agreement.  If, at the endof the Cure Period, Sellers have been unable to cure a Post-Closing Defect (andthere is no dispute as to whether or not it has been cured), the amountwithheld in the Defects Escrow with respect thereto (together with any interestearned thereon) shall be released to Buyer in accordance with the terms of theDefects Escrow Agreement. If, at the end of the Cure Period, Sellers and Buyerare unable to agree whether there has been a satisfactory resolution of aPost-Closing Defect, then such disagreement shall be resolved as provided in Section 8.3.

 

**Section 7.5.****           BuyerIndemnification**.  BUYER HEREBYINDEMNIFIES AND SHALL DEFEND AND HOLD SELLERS, AFFILIATES THEREOF, AND ITS ANDTHEIR RESPECTIVE OWNERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,REPRESENTATIVES, CONTRACTORS, SUCCESSORS, AND ASSIGNS HARMLESS FROM AND AGAINSTANY AND ALL OF THE FOLLOWING CLAIMS ARISING FROM BUYER’S INSPECTING ANDOBSERVING THE PROPERTIES:  (I) CLAIMSFOR 

 

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PERSONAL INJURIES TO OR DEATH OF EMPLOYEES OF BUYER,ITS CONTRACTORS, AGENTS, CONSULTANTS, AND REPRESENTATIVES, AND DAMAGE TO THEPROPERTY OF BUYER OR OTHERS ACTING ON BEHALF OF BUYER, EXCEPT FOR INJURIES ORDEATH CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SELLERS,AFFILIATES THEREOF OR ITS OR THEIR RESPECTIVE EMPLOYEES, CONTRACTORS, AGENTS,CONSULTANTS, OR REPRESENTATIVES; AND (II) CLAIMS FOR PERSONAL INJURIES TOOR DEATH OF EMPLOYEES OF SELLERS OR THIRD PARTIES, AND DAMAGE TO THE PROPERTYOF SELLERS OR THIRD PARTIES, TO THE EXTENT CAUSED BY THE NEGLIGENCE, GROSSNEGLIGENCE, OR WILLFUL MISCONDUCT OF BUYER. TO THE EXTENT PROVIDED ABOVE, THE FOREGOING INDEMNITY INCLUDES, AND THEPARTIES INTEND IT TO INCLUDE, AN INDEMNIFICATION OF THE INDEMNIFIED PARTIESFROM AND AGAINST CLAIMS ARISING OUT OF OR RESULTING, IN WHOLE OR PART, FROM THECONDITION OF THE PROPERTY OR THE SOLE, JOINT, COMPARATIVE, OR CONCURRENTNEGLIGENCE OR STRICT LIABILITY OF ANY OF THE INDEMNIFIED PARTIES.  THE PARTIES HERETO AGREE THAT THE FOREGOINGCOMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.

 

**ARTICLE VIIIConditions Precedent to the Obligations of the Parties**

 

**Section 8.1.****           Conditions Precedentto the Obligations of Buyer**.  Theobligations of Buyer under this Agreement are subject to each of the followingconditions being met:

 

(a)           Each of therepresentations and warranties of Sellers contained in Article IVshall be true and correct in all material respects on and as of the ClosingDate as if made on and as of such date, except (i) as affected bytransactions contemplated or permitted by this Agreement, (ii) to theextent 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 correctin all material respects as of such specified date, and (iii) any suchinaccuracies or breaches which, in the aggregate, have not had or could notreasonably be expected to have, a Material Adverse Effect.

 

(b)           Sellersshall have performed and complied in all material respects with (or compliancetherewith shall have been waived by Buyer) each and every covenant, agreementand condition required by this Agreement to be performed or complied with bySellers prior to or at the Closing.

 

(c)           Sellersshall have delivered a certificate executed by an executive officer of Sellersdated as of the Closing Date, representing and certifying in such detail asBuyer may reasonably request that the conditions set forth in subsections (a) and(b) above have been fulfilled.

 

(d)           NoProceeding (excluding any Proceeding initiated by Buyer or any of itsAffiliates) shall, on the Closing Date, be pending or threatened before anyGovernmental Entity seeking to restrain, prohibit, or obtain damages or otherrelief in connection with the consummation of the transactions contemplated bythis Agreement.

 

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(e)                                  Buyer shallhave received a release of Liens with respect to the Properties, executed inrecordable form by the Lender, and in form and substance agreeable to Buyer.

 

(f)                                    Buyer shallhave received an assignment of the Properties executed and delivered bySellers, which assignment shall be substantially in the form of the instrumentattached hereto as Exhibit D in all material respects (the “**Assignment**”).

 

(g)                                 Buyer shallhave received a certificate that each of the Sellers is not a “foreign person”,executed and delivered by Sellers that complies with Section 1445 of theCode and the United States Department of Treasury regulations promulgatedthereunder.

 

(h)                                 Buyer shallhave received all other agreements, instruments and documents which arerequired by other terms of this Agreement to be executed or delivered bySellers or any other party to Buyer prior to or in connection with the Closing.

 

(i)                                     Ifapplicable, the waiting period under the HSR Act shall have expired or beenterminated.

 

(j)                                     Evidence of replacementbonds guarantees and letters of credit, pursuant to Section 12.10.

 

**Section 8.2.****                                ConditionsPrecedent to the Obligations of Sellers**.  The obligations of Sellers under thisAgreement are subject to each of the following conditions being met:

 

(a)                                  Each of therepresentations and warranties of Buyer contained in Article Vshall 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 inthe same language) shall be true and correct in all material respects on and asof the Closing Date, except as affected by transactions permitted by thisAgreement and except to the extent that any such representation or warranty ismade as of a specified date, in which case such representation or warrantyshall have been true and correct in all material respects as of such specifieddate.

 

(b)                                 Buyer shallhave performed and complied in all material respects with (or compliancetherewith shall have been waived by Sellers) each and every covenant, agreementand condition required by this Agreement to be performed or complied with byBuyer prior to or at the Closing.

 

(c)                                  Buyer shallhave delivered a certificate executed by an executive officer of Buyer dated asof the Closing Date, representing and certifying in such detail as Sellers mayreasonably request that the conditions set forth in subsections (a) and(b) above have been fulfilled.

 

(d)                                 NoProceeding (excluding any Proceeding initiated by Sellers or any of theirAffiliates) shall, on the Closing Date, be pending or threatened before anyGovernmental Entity seeking to restrain, prohibit, or obtain damages or otherrelief in connection with the consummation of the transactions contemplated bythis Agreement.

 

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(e)                                  Sellersshall have received all other agreements, instruments and documents which arerequired by other terms of this Agreement to be executed or delivered by Buyeror any other party to Sellers prior to or in connection with the Closing.

 

(f)                                    Sellersshall have received an instrument evidencing the assumption by Buyer of theAssumed Obligations, in form and substance reasonably agreeable to Sellers.

 

(g)                                 Ifapplicable, the waiting period under the HSR Act shall have expired or beenterminated.

 

(h)                                 Sellersshall have received all required waivers and consents under the CreditFacility, provided, however, Sellers shall use their Reasonable Best Efforts toobtain all such waivers and consents.

 

**ARTICLE IXTermination, Amendment and Waiver**

 

**Section 9.1.****                                Termination**.  This Agreement may be terminated and thetransactions contemplated hereby abandoned at any time prior to the Closing inthe following manner:

 

(a)                                  by mutualwritten consent of Sellers and Buyer; or

 

(b)                                 by eitherSellers or Buyer, if:

 

(i)                                     the Closingshall 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 abreach of this Agreement by the party seeking to terminate this Agreementpursuant to this clause (i); or

 

(ii)                                  there shallbe any statute, rule, or regulation that makes consummation of the transactionscontemplated hereby illegal or otherwise prohibited or a Governmental Entityshall have issued an order, decree, or ruling or taken any other actionpermanently restraining, enjoining, or otherwise prohibiting the consummationof the transactions contemplated hereby, and such order, decree, ruling, orother action shall have become final and nonappealable; or

 

(c)                                  by Buyer orSellers, if the aggregate amount of the Title Defect Amounts and theEnvironmental 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 warrantyof Buyer contained in Article V, or (ii) there shall be amaterial breach by Buyer of any of its covenants and agreements contained inthis 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 noticeto Buyer from the Sellers of such breach; or

 

(e)                                  by Buyer, if(i) there shall be a material breach of any representation and warranty ofSellers contained in Article IV, other than any such breacheswhich, in the aggregate, have not had or could not reasonably be expected tohave a Material Adverse Effect, or (ii) there shall be a 

 

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materialbreach by Sellers of any of their covenants and agreements contained in thisAgreement, 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 noticeto Sellers from Buyer of such breach.

 

**Section 9.2.****                                Effectof Termination**.  In the event ofthe termination of this Agreement pursuant to Section 10.1 bySellers, on the one hand, or Buyer, on the other, written notice thereof shallforthwith be given to the other party or parties specifying the provisionhereof pursuant to which such termination is made, and this Agreement shallbecome 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 XIIand XIII****shall survive the terminationhereof.  Nothing contained in this Section 10.2shall relieve any party from liability for damages actually incurred as aresult of any breach of this Agreement. If this Agreement is terminated by Sellers pursuant to (i) Section 10.1(b)(i) (andBuyer 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 anyother reason, the Deposit shall be returned to Buyer.

 

**Section 9.3.****                                Amendment**.  This Agreement may not be amended except byan instrument in writing signed by or on behalf of all the parties hereto.

 

**Section 9.4.****                                Waiver**.  Sellers, on the one hand, or Buyer, on theother, may:  (i) waive anyinaccuracies in the representations and warranties of the other containedherein or in any document, certificate, or writing delivered pursuant hereto,or (ii) waive compliance by the other with any of the other’s agreementsor fulfillment of any conditions to its own obligations contained herein.  Any agreement on the part of a party heretoto any such waiver shall be valid only if set forth in an instrument in writingsigned by or on behalf of such party.  Nofailure or delay by a party hereto in exercising any right, power, or privilegehereunder shall operate as a waiver thereof nor shall any single or partialexercise thereof preclude any other or further exercise thereof or the exerciseof any other right, power, or privilege.

 

**ARTICLE XSurvival of Representations, Warranties and Covenants; Indemnification**

 

**Section 10.1.****                         Survival**.

 

(a)                                  Therepresentations and warranties of the parties hereto contained in thisAgreement shall terminate at Closing except that the representations made bySellers pursuant to Sections 4.1, 4.2, 4.3, 4.4, 4.5,and 4.17, and the representations and warranties made by Buyer shallsurvive the Closing and shall remain in effect thereafter for the period thatan Indemnified Party is entitled to indemnification based on a breach of suchrepresentation or warranty contained in this Article XI.

 

(b)                                 No partyhereto shall have any indemnification obligation pursuant to this Article XIor otherwise in respect of any representation, warranty or covenant unless (i) itshall 

 

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havereceived from the party seeking indemnification written notice of the existenceof the claim for or in respect of which indemnification in respect of suchrepresentation, warranty or covenant is being sought and (ii) such noticeis received on or before the Survival Date. Such notice shall set forth with reasonable specificity (i) thebasis under this Agreement, and the facts that otherwise form the basis of suchclaim, (ii) the estimate of the amount of such claim (which estimate shallnot be conclusive of the final amount of such claim) and an explanation of thecalculation of such estimate, including a statement of any significantassumptions employed therein, and (iii) the date on and manner in whichthe party delivering such notice became aware of the existence of such claim.

 

**Section 10.2.****                         Sellers’Indemnification Obligations**. Sellers shall, on the Closing Date, agree (and, upon delivery to Buyerof the Assignment, shall be deemed to have agreed), subject to the limitationsand procedures contained in this Article XI, following the Closing,to indemnify and hold Buyer, its Affiliates and its and their respectivesuccessors and permitted assigns and all of their respective stockholders,partners, members, managers, directors, officer, employees, agents andrepresentatives harmless from and against any and all claims, obligations,actions, liabilities, damages or expenses (collectively, “**Buyer’sLosses**”):

 

(a)                                  resultingfrom 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 anycertificate delivered at Closing; or

 

(b)                                 relating tothe Retained Obligations;

 

provided, however, thatSellers’ indemnification obligations for Buyer’s Losses under this Section 11.2shall (i) not include any claims, obligations, liabilities, damages orexpenses that do not individually exceed Two Hundred and Fifty Thousand Dollars($250,000) and; (ii) expire on the one-year anniversary of the ClosingDate (the “**Survival Date**”), except for Buyer’sLosses for which a notice is received by Sellers as provided in this Agreementprior to such date; and further provided that Sellers’ indemnification forBuyer’s Losses under Section 11.2(b) shall not expire but shallremain in effect until such Retained Obligations are fully satisfied.  Any provision to the contrary contained inthis Section 11.2 notwithstanding, Buyer’s Losses arising out of theassets or membership interests in BC shall not be subject to the threshold setout in this Section 11.2 ,clause (i).

 

**Section 10.3.****                         Buyer’sIndemnification Obligations**. Buyer shall, on the Closing Date, agree (and, upon delivery to Buyer ofthe Assignment, shall be deemed to have agreed), subject to the limitations andprocedures contained in this Article XI, following the Closing, toindemnify and hold Sellers, their Affiliates and their respective successorsand permitted assigns and all of their respective stockholders, partners,members, managers, directors, officer, employees, agents and representativesharmless from and against any and all claims, obligations, actions,liabilities, damages, costs or expenses, (collectively, “**Sellers’Losses**”):

 

(a)                                  resultingfrom any misrepresentation or breach of any warranty, covenant or agreement ofBuyer contained in this Agreement or any certificate delivered by Buyer at theClosing; or

 

(b)                                 relating tothe Assumed Obligations;

 

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provided, however, thatBuyer’s indemnification obligations for Sellers’ Losses under Section 11.3(a) shallexpire on the Survival Date, except for Sellers’ Losses for which a notice isreceived by Buyer as provided in this Agreement prior to such date; and furtherprovided, however, provided, that Buyer’s indemnification obligations forSellers’ Losses under Section 11.3(b) shall not expire butshall remain in effect until such Assumed Obligations are fully satisfied.

 

**Section 10.4.****                         NetAmounts**.  Any amounts recoverableby any party pursuant to this Article XI with respect to any Buyer’sLosses or Sellers’ Losses, as the case may be, shall be decreased by anyinsurance 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 (otherthan any Affiliate of such Indemnified Party) not a party to this Agreement.

 

**Section 10.5.****                         IndemnificationProceedings**.  In the event thatany 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 againstor sought to be collected from an Indemnified Party by a third party, theIndemnified Party shall with reasonable promptness notify the IndemnifyingParty of such claim or demand, but the failure so to notify the IndemnifyingParty shall not relieve the Indemnifying Party of its obligations under this Article XI,except to the extent the Indemnifying Party demonstrates that the defense ofsuch claim or demand is materially prejudiced thereby.  The Indemnifying Party shall have 30 daysfrom receipt of the above notice from the Indemnified Party (in this Section 11.5,the “**Notice Period**”) to notify theIndemnified Party whether or not the Indemnifying Party desires, at theIndemnifying Party’s sole cost and expense, to defend the Indemnified Partyagainst such claim or demand; provided, that the Indemnified Party is herebyauthorized prior to and during the Notice Period to file any motion, answer orother pleading that it shall deem necessary or appropriate to protect itsinterests or those of the Indemnifying Party and not prejudicial to theIndemnifying Party.  If the IndemnifyingParty elects to assume the defense of any such claim or demand, the IndemnifiedParty shall have the right to employ separate counsel at its own expense and toparticipate in the defense thereof.  Ifthe 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 ordemand with counsel of its own choice, at the expense of the IndemnifyingParty.  If the claim or demand isasserted against both the Indemnifying Party and the Indemnified Party andbased on the advice of counsel reasonably satisfactory to the IndemnifyingParty it is determined that there is a conflict of interest which renders itinappropriate for the same counsel to represent both the Indemnifying Party andthe Indemnified Party, the Indemnifying Party shall be responsible for payingseparate counsel for the Indemnified Party; provided, however, that theIndemnifying Party shall not be responsible for paying for more than oneseparate firm of attorneys to represent all of the Indemnified Parties,regardless of the number of Indemnified Parties.  If the Indemnifying Party elects to assumethe defense of such claim or demand, (i) no compromise or settlementthereof may be effected by the Indemnifying Party without the Indemnified Party’swritten consent (which shall not be unreasonably withheld) unless the solerelief provided is monetary damages that are paid in full by the IndemnifyingParty and (ii) the Indemnifying Party shall have no liability with respectto any compromise or settlement thereof effected without its written consent(which shall not be unreasonably withheld).

 

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**Section 10.6.****                         IndemnificationExclusive Remedy**. Indemnification pursuant to the provisions of this Article XIshall be the exclusive remedy of the parties hereto for any misrepresentationor breach of any warranty, covenant or agreement contained in this Agreement orin any closing document executed and delivered pursuant to the provisionshereof or thereof, or any other claim arising out of the transactions contemplatedby this Agreement.

 

**Section 10.7.****                         Limitedto Actual Damages**.  Theindemnification obligations of the parties pursuant to this Article XIshall be limited to actual Buyer’s Losses or Sellers’ Losses, as the case maybe, and shall not include incidental, consequential, indirect, punitive, orexemplary damages, provided that any incidental, consequential, indirect,punitive, or exemplary damages recovered by a third party (including aGovernmental Entity, but excluding any Affiliate of any party) against a partyentitled to indemnity pursuant to this Article XI shall be includedin the damages recoverable under such indemnity.

 

**Section 10.8.****                         IndemnificationDespite Negligence**.  It is theexpress intention of the parties hereto that each party to be indemnifiedpursuant to this Article XI shall be indemnified and held harmless fromand against all Buyer’s Losses or Sellers’ Losses, as the case may be, as towhich indemnity is provided for under this Article XI, notwithstandingthat any such damages arise out of or result from the ordinary, strict, sole,or contributory negligence of such party and regardless of whether any otherparty (including the other parties to this Agreement) is or is not alsonegligent; provided, however, nothing herein is intended or shall be construedto as an indemnification by one party for the gross negligence or willfulmisconduct of the other party.  Theparties hereto acknowledge that the foregoing complies with the expressnegligence rule and is conspicuous.

 

**Section 10.9.****                         Tax Treatmentof Indemnification Amounts**. Sellers and Buyer agree that any amounts recoverable by any partypursuant to this Article XI with respect to any Buyer’s Losses orSellers’ Losses shall be treated as adjustments to the Purchase Price for allTax purposes.

 

**Section 10.10.****                  SellersAggregate Indemnity Limits**. Sellers shall not have any liability for indemnification under Section 11.2until and unless the aggregate amount of Buyer’s Losses which comply with therequirements of Section 11.2 exceed one percent of the PurchasePrice, and then only to the extent such Buyer’s Losses exceed one percent ofthe Purchase Price.  Notwithstandinganything to the contrary contained elsewhere in the Agreement, (a) Sellersshall not be required to indemnify Buyer under this Article XI foraggregate Buyer’s Losses in excess of ten percent of the Purchase Price, and (b) Buyer’sLosses arising out of the assets or membership interests in BC shall not besubject to either of the limits, whether threshold or cap, set  out in this Section 11.10.

 

**ARTICLE XIMiscellaneous Matters**

 

**Section 11.1.****                         Notices**.  All notices, requests, demands, and othercommunications required or permitted to be given or made hereunder by any partyhereto shall be in writing and shall be deemed to have been duly given or madeif (i) delivered personally, (ii) transmitted by first classregistered or certified mail, postage prepaid, return receipt requested, (iii) sentby a recognized prepaid overnight courier service (which provides a receipt),or (iv) sent by email, 

 

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facsimile transmission,with receipt acknowledged, to the parties at the following addresses (or atsuch 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                                                                           |
|   | Attention:  Charlene A. Ripley, Senior Vice President, General Counsel and Corporate  Secretary |
|   | Fax No.: (281)  840-4001, Email: cripley@linnenergy.com                                         |

 

If to Buyer:
|   | Mr. Vaughn  O. Vennerberg, II                           |
|--------|-------------------------------------------------------------------|
|   | Senior Executive  Vice President & Chief of Staff        |
|   | XTO Energy Inc.                                                   |
|   | 810 Houston  Street                                               |
|   | Fort Worth, TX  76102                                             |
|   | Fax No.: (817)  870-0379. E-mail: Vaughn_Vennerberg@xtoenergy.com |

 

Such notices, requests, demands, and other communications shall beeffective upon receipt.

 

**Section 11.2.****                         Prorations,Deposits and Taxes**.  Taxes andother charges with respect to the transactions contemplated by this Agreementshall be paid or prorated by the parties as follows:

 

(a)                                  Prior toClosing, Buyer shall provide Sellers with an appropriate exemption certificateto establish the right to any exemption from state and local sales and useTaxes and for any exemptions from any other applicable state Tax.  Buyer shall thereafter provide Sellers withany additional exemption certificates and other documentation as may berequired by the Governmental Entities for such purpose.  Sellers shall reasonably cooperate withBuyer, including providing Buyer with such data as Buyer may reasonably requestin order to support all applicable sales Tax exemptions, subject to theConfidentiality Agreement.

 

(b)                                 Sellers andBuyer agree that all state and local sales and use Taxes or other similar Taxesrelating to the sale and conveyance of the Properties shall be the liability ofBuyer, and shall be borne by Buyer.  AtClosing, Sellers shall collect from Buyer any state and local sales and useTaxes to the extent any such Taxes are due and owing after taking into accountany exemption certificates provided by Buyer to Sellers as set forth in Section 12.2(a).  Sellers shall remit such Taxes directly tothe appropriate Governmental Entities.

 

(c)                                  If any stateand local sales and use Taxes or other similar Taxes relating to the sale andconveyance of the Properties, are subsequently imposed or assessed by anyGovernmental Entities, and as a result of such subsequent imposition orassessment Sellers, or their assignees, are assessed additional Taxes, thenBuyer shall reimburse Sellers, or their assignees, for such imposed or assessedTaxes, including without limitation interest and penalties assessed thereon.

 

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(d)                                 All real orpersonal property transfer Taxes or other similar Taxes (including withoutlimitation documentary transfer taxes, realty transfer taxes and charges orfees with respect to the transfer of real property or to the recordation of thedocuments necessary for the transfer of real property that may be required forthe transfer of the Properties from Sellers to Buyer) shall be borne by andpaid directly to the Governmental Entities by Buyer.

 

(e)                                  After theClosing, the party receiving each property Tax or other such bill or noticeapplicable to the Properties for the period before or after the Closing Date occurredshall promptly notify the other party and shall pay each such bill prior to thelast day the same may be paid without penalty or interest.  The party responsible or liable under thisAgreement with respect to such amount shall promptly on receipt of a writtenrequest (accompanied by appropriate supporting documentation) reimburse theresponsible party’s share of such amount so paid as provided under thisAgreement.  Sellers and Buyer shallreasonably cooperate with each other after Closing with respect to any propertyTax assessment or valuation (or protest in connection therewith) by anyGovernmental Entity with respect to the Tax periods in which the Closing Dateoccurs.  If either party receives arefund of any property Taxes for which the other is liable or responsible underthis Agreement, the party receiving such refund, whether received in cash, oras 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 isliable.

 

Forthe avoidance of doubt, and notwithstanding any provision in this Agreement tothe contrary, the parties hereto acknowledge that their respective obligationsunder this Section 12.2 will survive Closing.

 

**Section 11.3.****                        ****Entire Agreement**.  This Agreement, the Sellers DisclosureSchedule, together with the Exhibits and other writings referred to herein ordelivered pursuant hereto, constitute the entire agreement between the partieshereto with respect to the subject matter hereof and supersede all prioragreements and understandings, both written and oral, between the parties withrespect to the subject matter hereof; provided that any ConfidentialityAgreement executed by Buyer and Sellers, in connection with the transactioncontemplated hereby remains in full force and effect and is not superseded ormodified by this Agreement.

 

**Section 11.4.****                         InjunctiveRelief**.  The parties heretoacknowledge and agree that irreparable damage would occur in the event any ofthe provisions of this Agreement were not performed in accordance with theirspecific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to aninjunction or injunctions to prevent breaches of the provisions of thisAgreement, and shall be entitled to enforce specifically the provisions of thisAgreement, in any court of the United States or any state thereof havingjurisdiction, in addition to any other remedy to which the parties may beentitled under this Agreement or at law or in equity.

 

**Section 11.5.****                         BindingEffect; Assignment; No Third Party Benefit**.  This Agreement shall be binding upon andinure to the benefit of the parties hereto and their respective heirs, legalrepresentatives, successors, and permitted assigns.  Except as otherwise expressly provided inthis Agreement, neither this Agreement nor any of the rights, interests, orobligations hereunder shall be assigned by any of the parties hereto withoutthe 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 conferupon any Person other than the parties hereto, 

 

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and their respectiveheirs, legal representatives, successors, and permitted assigns, any rights,benefits, or remedies of any nature whatsoever under or by reason of thisAgreement.

 

**Section 11.6.****                         Severability**.  If any provision of this Agreement is held tobe unenforceable, this Agreement shall be considered divisible and suchprovision shall be deemed inoperative to the extent it is deemed unenforceable,and in all other respects this Agreement shall remain in full force and effect;provided, however, that if any such provision may be made enforceable bylimitation thereof, then such provision shall be deemed to be so limited andshall be enforceable to the maximum extent permitted by Applicable Law.

 

**Section 11.7.****                         GOVERNINGLAW**.  THIS AGREEMENT SHALL BEGOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OFTHE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWSTHEREOF.

 

**Section 11.8.****                         Counterparts**.  This instrument may be executed in any numberof identical counterparts, each of which for all purposes shall be deemed anoriginal, and all of which shall constitute collectively, one instrument.  It is not necessary that each party heretoexecute the same counterpart so long as identical counterparts are executed byeach such party hereto.  This instrumentmay be validly executed and delivered by facsimile or other electronictransmission.

 

**Section 11.9.****                         WAIVEROF CONSUMER RIGHTS**.  BUYER HEREBYWAIVES ITS RIGHTS UNDER THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTIONACT, SECTION 17.41 ET SEQ., BUSINESS AND COMMERCE CODE, A LAW THAT GIVESCONSUMERS SPECIAL RIGHTS AND PROTECTIONS, AND ANY SIMILAR LAW IN ANY OTHERSTATE TO THE EXTENT SUCH ACT OR SIMILAR LAW WOULD OTHERWISE APPLY.  AFTER CONSULTATION WITH AN ATTORNEY OF BUYER’SOWN SELECTION, BUYER VOLUNTARILY CONSENTS TO THIS WAIVER.

 

**Section 11.10.****                  ReplacementBonds, Letters of Credit and Guarantees**.

 

The Parties understand that none of the bonds, letters of credit andguarantees, if any, posted by Sellers or any other Affiliate with anyGovernmental Authority or third Person and relating to the Sellers or theProperties are to be transferred to Buyer. On or before Closing, Buyer shall obtain, or cause to be obtained in thename of Buyer, replacements for such bonds, letters of credit and guarantees,and shall cause, effective as of the Closing, cancellation or return to Sellersof the bonds, letters of credit or guarantees posted by Sellers.  Buyer may also provide evidence that suchreplacements are not necessary as a result of existing bonds, letters of creditor guarantees that Buyer has previously posted as long as such existing bonds,letters of credit or guarantees are adequate to secure the release of thoseposted 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 bySellers as of the date noted on such schedule.

 

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**ARTICLE XIIEmployee Matters**

 

**Section 12.1.****                         ContinuingEmployees**.  From and after thedate hereof, and until Closing, LOI will assist Buyer in seeking to retaincertain of LOI’s employees to effectuate a smooth transition of the operationof the Properties to the Buyer.  Within10 days from the date hereof, LOI will provide Buyer with a list of employees(the “Seller Employees”) available for employment with Buyer, which willinclude 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 whocomplete one hour of actual service with Buyer are referred to as the “NewEmployees”.

 

**Section 12.2.****                         NoObligation to Hire Seller Employees**. Nothing in this Agreement shall require or be construed or interpretedas requiring the Buyer to offer employment to any employee of LOI or tocontinue the employment of any employee of LOI (including any New Employees)following the Hire Date, or to prevent Buyer from changing the terms andconditions of employment (including compensation and benefits) of any of itsemployees (including any New Employees) following the Hire Date.  LOI and the Buyer hereby acknowledge andagree that any employment offered by Buyer to a New Employee will be “at will”and may be terminated by the Buyer or such New Employee at any time for anyreason (subject to applicable Laws and to any specific written commitments madeto the contrary by Buyer to such New Employee).

 

**Section 12.3.****                         Interview,Screening, and Offers of Employment**.

 

(a)                                  LOI shallnotify the Seller Employees of Buyer’s desire to interview them for possiblehire by Buyer.  LOI and Buyer shallassist one another in providing such employees the opportunity to meet withrepresentatives of Buyer to discuss the capacity in which such persons may beemployed by Buyer and the terms and conditions under which such employment maybe offered.  Buyer shall provide LOI withthe terms (including the position title, description, and responsibilities) andcopies 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 mustinclude terms (including the position title, description, and responsibilities)and conditions covering total compensation and benefits that are at leastcomparable, in the aggregate to the terms and level of compensation andbenefits provided by LOI (“Qualifying Offer”). LOI shall retain all liabilityfor severance benefits owed to any Seller Employee who (i) unreasonablyrefused to interview with Buyer and (ii) who receives but does not accepta Qualifying Offer from Buyer, as well as any liability arising under theWorkers Adjustment and Retraining Notification Act (“WARN Act”).  Buyer shall assume responsibility andliability for severance benefits owed to any Seller Employee who interviewedwith Buyer but does not receive a Qualifying Offer from Buyer, as well as anyliability arising under the WARN Act as a result thereof. LOI will determinethe severance benefits, if any, owed to any Seller Employee regardless ofwhether owed by LOI or Buyer but such severance benefits shall be determinedconsistent with LOI’s existing severance plan, as discussed to Buyer.  If it chooses to hire any Seller Employees,Buyer shall provide such employees with offers of employment no later than fiveBusiness Days prior to the Closing Date, with each offer stipulating that, ifaccepted, the date for commencement of work is the first Business Day after theClosing Date 

 

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(the“Hire Date”).  Buyer shall provide LOIwith notice of the names of those Seller Employees to whom Buyer has madeemployment offers promptly after making such offers.

 

(b)                                 SellerEmployees who have accepted an offer of employment from Buyer shall become aNew Employee after completing one hour of service with Buyer.

 

**Section 12.4.****                         EmployeeBenefits**.

 

(a)                                  The Buyershall grant to the New Employees credit for their past service years asoutlined in the data provided by LOI to Buyer pursuant to Section 13.1 fordetermining the duration and amount of their benefits under any vacationpolicy, maintained by the Buyer in which they are eligible to participate.

 

(b)                                 Aftercompleting one hour of actual  servicewith Buyer, a New Employee shall cease to actively participate or be eligibleto actively participate in any Seller Plan. Buyer shall not assume any Seller Plan or be liable in any respect forthe funding of, or contributions to, or liabilities under any Seller Plan.  Until a New Employee becomes a ContinuingEmployee by completing one hour of actual service with Buyer New Employeesshall remain the employee of LOI and LOI shall provide his or her wages and employeebenefits at LOI’s sole expense.  Withoutlimiting the foregoing, for all periods prior to the completion of one hour ofactual service with Buyer, LOI shall be responsible for (i) the basesalaries or wages and overtime payments of the Seller Employees along with anybonuses to which such Seller Employee may be entitled, (ii) the costs ofthe Seller Employees’ participation in the retirement, medical, dental andother employee benefit plans sponsored by LOI, (iii) workers’ compensationcoverage of the Seller Employees, (iv) vacation and leave pay for theSeller Employees, (v) the employer’s portion of any health, life,disability or other insurance provided as a part of LOI’s employee benefitplans in effect and in which the Seller Employees participate, (vi) allemployee taxes (including Social Security, Medicare and unemployment taxes) andtax withholdings, and (vii) all payroll processing, payroll deduction, taxwithholding and tax reporting services, employee benefit administration, claimsprocessing, personnel administration, and all such related human resourcesservices with respect to the Seller Employees.

 

(c)                                  For a periodof one year from the Hire Date, in the event a New Employee is terminated byBuyer or its Affiliates, without cause, Buyer shall pay the New Employee aseverance amount and provide severance benefits substantially equivalent to orbetter than LOI’s current severance program.

 

**Section 12.5.****                         Controlof Seller Employees**.  Prior tothe Hire Date, if any, of a Seller Employee, LOI shall have the right tocontrol and direct the Seller Employees as to the performance of duties and asto the means by which such duties are performed, including the right toterminate the employment of any Seller Employee, provided that Buyer shall notbe 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 withrespect to, all employment, benefits, workplace and performance mattersrelating to Seller Employees prior to the Hire Date that, in the reasonablejudgment of LOI’s management, could have a material impact on Buyer prior totaking 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 havethe right to direct such employee to perform reasonable administrative dutieson 

 

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behalf of LOI inconnection with the winding down of LOI’s services with respect to theProperties.  Prior to the Hire Date, LOIwill not permanently reassign, make compensation changes, promote or relocateany Seller Employee, other than in the ordinary course of business or asrequired by any Seller Plan or applicable law, without the written consent ofBuyer.  LOI shall be responsible forcomplying with all safety, health and work-related laws, regulations and rules withrespect to the Seller Employees employed by LOI prior to the Hire Date.  Nothing herein is intended to affect LOI’sstatus as employer of each Seller Employee while employed by LOI or LOI’scontrol over such individual until the Hire Date.

 

**Section 12.6.****                         NoThird Party Beneficiaries**. Notwithstanding any other provisions of this Agreement, the provisionsof this Article XIII are not intended to and shall not create or conferany third-party beneficiary rights respecting any Seller Employee or NewEmployee.

 

**ARTICLE XIIIDefinitions and References**

 

**Section 13.1.****                         CertainDefined Terms**.  When used in thisAgreement, the following terms shall have the respective meanings assigned tothem in this Section 14.1:

 

“**AAA**” means theAmerican Arbitration Association.

 

“**Affiliate**”means any Person directly or indirectly controlling, controlled by or undercommon control with a Person.

 

“**Agreement**”means this Asset Purchase and Sale Agreement, as hereafter amended or modifiedin 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 anyGovernmental Entity, exclusive of Environmental Laws.

 

“**Assumed Obligations**”means all obligations to timely fulfill, perform, pay, and discharge (or causeto be timely fulfilled, performed, paid or discharged) all of the costs,obligations and liabilities of Sellers, known or unknown, with respect to: (a) theProperties; and (b) the contract operating agreements described onSchedule 4.7; regardless of whether such obligations arose prior to or afterthe Effective Date, including but not limited to: (i) the obligation to (x) plugand abandon or remove and dispose of all wells, platforms, structures, flowlines, pipelines and other equipment, pits and holding ponds now or hereafterlocated on the Oil and Gas Properties, (y) cap and bury all flow lines andother pipelines now or hereafter located on the Oil and Gas Properties, and (z) remedyall Environmental Liabilities with respect to the Properties, including anyactual or potential NORM contamination or chloride or other contamination ofgroundwater; (ii)  obligations and liabilities arising from or inconnection with any Imbalances, whether before, on or after the Effective Date;(iii) obligations to pay working interests, royalties, overridingroyalties and other interests held in suspense and transferred to Buyerpursuant to Section 7.11 (iv)  all Taxes assessed with respect to aperiod which begins on or after the Effective Date; and (v) obligationswith respect to the disputes, actions, suits and proceedings including thosedescribed on Schedule 4.6 (and any other actions, suits or proceedings arisingout of the same facts or circumstances), regardless of the Properties to which 

 

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such disputes, actionsand proceedings relate; provided, that Assumed Obligations does not mean orinclude Sellers’ obligations and liabilities with respect to the RetainedObligations.

 

“**Business Day**” means a day other than a Saturday, Sundayor day on which commercial banks in the State of Texas are authorized orrequired to be closed for business.

 

“**Code**” means theInternal Revenue Code of 1986, or any comparable successor statute thereto, asamended.

 

“**Confidentiality Agreement**”means that certain Confidentiality Agreement by and between Sellers and Buyerdated March 24, 2008.

 

**“Credit Facility”**meanscollectively, the Third Amended and Restated Credit Agreement dated August 31,2007 (as amended by the First Amendment to the Third Amended and RestatedCredit Agreement dated November 2, 2007 and the Second Amendment to theThird Amended and Restated Credit Agreement dated January 31, 2008) amongLinn Energy, LLC as Borrower and BNP Paribas as Administrative Agent and theLenders signatory thereto; and the Second Lien Term Loan Agreement dated January 31,2008 among Linn Energy, LLC as Borrower and BNP Paribas as AdministrativeAgent, RBC Capital Markets as Syndication Agent and the Lenders signatorythereto.

 

“**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 theprotection of human health or the environment, including the ComprehensiveEnvironmental Response, Compensation and Liability Act, as amended by theSuperfund Amendments and Reauthorization Act, 42 U.S.C. § 9601 et seq. (“**CERCLA**”), the Solid Waste Disposal Act, as amended by theResource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., the FederalWater 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 ToxicSubstances Control Act, 15 U.S.C. § 2601 et seq., and any similar state orlocal statutes.

 

“**Environmental Liabilities**”means any and all damages (including any remedial, removal, response,abatement, clean-up, investigation and/or monitoring costs and associated legalcosts) incurred or imposed (a) pursuant to any agreement order, notice ofresponsibility, directive (including directives embodied in EnvironmentalLaws), injunctions, judgment or similar documents (including settlements)arising out of, in connection with, or under Environmental Laws, or (b) pursuantto any claim by a Governmental Entity or any other Person for personal injury,property damage, damage to natural resources, remediation, or payment orreimbursement of response costs incurred or expended by such GovernmentalEntity or other Person pursuant to common law or statute and related to the useor release of Hazardous Materials.

 

**“ERISA”** meansthe Employee Retirement Income Security Act of 1974, as amended.

 

39

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**“ERISA Affiliate”**means, with respect to any entity, any entity, trade or business that is aunder 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 theformation and operation of such entity, including (i) in the instance of acorporation, the articles or incorporation and bylaws of such corporation, (ii) inthe instance of a partnership, the partnership agreement, and (iii) in theinstance of a limited liability company, the certificate of formation andlimited liability company agreement.

 

“**Governmental Entity**”means any court or tribunal in any jurisdiction (domestic or foreign) or anyfederal, state, county, municipal or other governmental or quasi-governmentalbody, agency, authority, department, board, commission, bureau orinstrumentality.

 

“**Hazardous Materials**”means (i) any substance or material that is listed, defined or otherwisedesignated as a “hazardous substance” under Section 101(14) of CERCLA, (ii) anypetroleum or petroleum products, (iii) radioactive materials, ureaformaldehyde, asbestos and PCBs and (iv) any other chemical substance orwaste that is regulated by any Governmental Entity under any Environmental Law.

 

“**Hedge**” meansany future derivative, swap, collar, put, call, cap, option or other contractthat is intended to benefit from, relate to, or reduce or eliminate the risk offluctuations 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 anycombination thereof, and all products and substances extracted, separated,processed and produced therefrom.

 

“**Imbalances**”means gas production, pipeline, storage, processing or other imbalanceattributable to substances produced from the Oil and Gas Properties.

 

“**Knowledge**” ofSellers (or similar references to Sellers’ knowledge) means all information ofwhich either the Chief Executive Officer, President and Chief OperatingOfficer, Senior Vice President, Operations and the Executive Vice President andChief Financial Officer, of Sellers, have actual knowledge. Knowledge of Buyer(or similar references to Buyer’s knowledge) means all information of whicheither the Chief Executive Officer, President and Chief Operating Officer,Senior Vice President, Operations and the Executive Vice President and ChiefFinancial Officer, of Sellers, have actual knowledge.

 

**“Laws”** meansall statutes, rules, regulations, ordinances, orders, and codes of GovernmentalAuthorities.

 

“**Leases**” meansoil, gas or mineral leases, leasehold estates, operating rights and otherrights authorizing the owner thereof to explore or drill for and produceHydrocarbons and other minerals, contractual rights to acquire any such of theforegoing interest, which have been earned by performance, and fee mineral,royalty and overriding royalty interest, net profits interest, 

 

40

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production payments andother interest payable out of Hydrocarbon production, in each case, in whichSellers have an interest.

 

“**Lender**” meansthe lenders party to the Credit Facility.

 

“**Lien**” means anyclaim, 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 thebusiness, 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 basisany material obligation under this Agreement or any agreement, instrument, ordocument entered into or delivered in connection herewith; provided, however,that changes, developments or effects relating to (x) the economy ingeneral (including any effects on the economy arising as a result of acts ofterrorism or the credit markets), (y) changes in Hydrocarbon commodityprices or other changes affecting the U.S. oil and gas industry generally, or (z) theannouncement of the transactions contemplated hereby, shall not be deemed toconstitute a Material Adverse Effect with respect to Sellers and shall not beconsidered in determining whether a Material Adverse Effect has occurred withrespect to Sellers.

 

**“Material Contract”**  means any contract which can reasonably beexpected in the case of (A) below to generate gross revenue per year forthe owner of the Properties in excess of One Million dollars ($1,000,000) or inthe case of (B), (C), (D), (E), or (F) below to require expenditures peryear 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 ormore of the following types:

 

(A)                              contractsfor the purchase, sale or exchange of oil, gas, or other hydrocarbons;

 

(B)                                contractsfor the gathering, treatment, processing, handling, storage or transportationof oil, gas or other hydrocarbons;

 

(C)                                contractsfor the use of drilling rigs;

 

(D)                               purchaseagreements, farmin and farmout agreements, exploration agreements,participation agreements and similar agreements providing for the earning of anequity interest;

 

(E)                                 partnershipagreements, joint venture agreements and similar agreements;

 

(F)                                 operatingagreements, unit agreements, and unit operating agreements;

 

(G)                                seismiclicenses and contracts; and

 

41

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(H)                               contractsfor the construction and installation of equipment with guaranteed productionthroughput requirements where amounts owed if the guaranteed throughput is notdelivered exceed One Million dollars ($1,000,000).

 

“**Net Revenue Interest**”means an interest (expressed as a percentage or decimal fraction) in and to allHydrocarbons produced and saved from or attributable to an Oil and GasProperty.

 

“**Permits**” meanslicenses, permits, franchises, consents, approvals, variances, exemptions, andother authorizations of or from Governmental Entities.

 

“**Person**” meansany individual, corporation, partnership, joint venture, association,joint-stock company, trust, enterprise, unincorporated organization, orGovernmental Entity.

 

“**Proceedings**”means all proceedings, actions, claims, suits, investigations, and inquiries byor before any arbitrator or Governmental Entity.

 

“**Reasonable Best Efforts**”means a party’s reasonable best efforts in accordance with reasonablecommercial practice; provided, however, no party shall be required to file orthreaten litigation in order to have performed “Reasonable Best Efforts” nor ,in performing Reasonable Best Efforts under Section 8.1(b), shall Sellersbe obligated to expend more than the aggregate sum of $175,000.00 in curing allTitle Defects.

 

**“Retained Obligations”**means Sellers’ obligations and liabilities (i) under the Credit Facilityor any amounts that may be due and owing Sellers’ officers, employees orowners, (ii) with respect to the Excluded Assets, (iii) with respectto royalties, and Taxes attributable to the Properties for all periods prior tothe Effective Date, or (iv) all obligations and liabilities of BC arisingprior to the Effective Date other than those obligations and liabilitiesarising out of the litigation and causes of action described in unsignedRelease and Settlement Agreement dated as of October 17, 2007, among LEH,BC and others, a copy of which has been previously furnished to Buyer.

 

“**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 otherarrangement providing for compensation, severance, change-in-control,termination pay, deferred compensation, retirement or pension payments,bonuses, performance awards, retention payments, incentive compensation, stockor stock-related awards, fringe benefits or other employee benefits orremuneration of any kind, whether written or unwritten or otherwise, funded orunfunded, including without limitation, each “employee benefit plan,” withinthe meaning of Section 3(3) of ERISA and any plans that would be “employeebenefit plans” within the meaning of Section 3(3) of ERISA if theywere subject to ERISA (such as foreign plans and plans for directors) which, ineach case, is or ever has been sponsored, maintained, contributed to, orrequired 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 orofficer, consultant or similar representative of LOI or any of such ERISAAffiliates, and with respect to which the LOI or any of such ERISA Affiliateshas or may have any liability or obligation on behalf of any of suchindividuals.

 

42

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“**Sellers Disclosure Schedule**” shall mean a scheduledelivered by Sellers to Buyer on the date hereof which sets forth additionalinformation regarding the representations and warranties of Sellers containedherein and information called for hereby.

 

“**Tax Returns**”mean any return, report, statement, form or similar statement required to befiled with respect to any Taxes (including any attached schedules), including,without limitation, any information return, claim for refund, amended return ordeclaration of estimated Taxes.

 

**“Tax” or**“**Taxes**” means any income taxes or similar assessments or anysales, excise, occupation, use, ad valorem, property, production, severance,transportation, employment, payroll, franchise, or other tax imposed by anyUnited States federal, state, or local (or any foreign or provincial) taxingauthority, including any interest, penalties, or additions attributablethereto.

 

“**Working Interest**”means the percentage of costs and expenses attributable to the maintenance,development and operation of an Oil and Gas Property.

 

**Section 13.2.****                         CertainAdditional Defined Terms**.  Inaddition 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 orSections set forth opposite such terms:

 
| **Defined Term**                      | ** ** | **Reference**           |
|---------------------------------------|------------|-------------------------|
| Accounting Dispute                    |       | Section 2.3(c)     |
| Accounting Referee                    |       | Section 2.3(c)     |
| Adjusted Purchase Price               |       | Section 2.1        |
| Allocated 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 11.2       |
| Buyer’s Title Review             |       | Section 8.1(a)     |
| Closing                               |       | Article III        |
| Closing Date                          |       | Article III        |
| Cure Period                           |       | Section 8.4(c)     |
| Defect Dispute                        |       | Section 8.3        |
| Defects 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 1.2        |
| Indemnified Party                     |       | Section 11.5       |

 

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| **Defined Term**                     | ** ** | **Reference**            |
|--------------------------------------|------------|--------------------------|
| Indemnifying Party                   |       | Section 11.5        |
| Independent Expert                   |       | Section 8.3         |
| Notice Period                        |       | Section 11.5        |
| Oil and Gas Properties               |       | Section 1.1         |
| Permitted Encumbrances               |       | Section 8.1(d)(ii)  |
| Post-Closing Defect                  |       | Section 8.4(c)      |
| Properties                           |       | Section 1.1         |
| Purchase Price                       |       | Section 2.1         |
| Records                              |       | Section 1.1(f)      |
| Remedies for Title Defects           |       | Section 8.1(b)      |
| Request Date                         |       | Section 2.3(c)      |
| Rules                                |       | Section 8.3         |
| Scheduled Production Sales Contracts |       | Section 4.9         |
| Sellers’ Losses                 |       | Section 11.3        |
| Suspended Proceeds                   |       | Section 7.11        |
| Survival 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 13.3.****                         References,Titles and Construction**.

 

(a)                                  Allreferences in this Agreement to articles, sections, subsections and othersubdivisions refer to corresponding articles, sections, subsections and othersubdivisions of this Agreement unless expressly provided otherwise.

 

(b)                                 Titlesappearing at the beginning of any of such subdivisions are for convenience onlyand shall not constitute part of such subdivisions and shall be disregarded inconstruing the language contained in such subdivisions.

 

(c)                                  The words “thisAgreement”, “this instrument”, “herein”, “hereof”, “hereby”, “hereunder” andwords of similar import refer to this Agreement as a whole and not to anyparticular subdivision unless expressly so limited.

 

(d)                                 Words in thesingular form shall be construed to include the plural and viceversa,unless the context otherwise requires. Pronouns in masculine, feminine and neuter genders shall be construed toinclude any other gender.

 

(e)                                  Unless thecontext otherwise requires or unless otherwise provided herein, the termsdefined in this Agreement which refer to a particular agreement, instrument ordocument also refer to and include all renewals, extensions, modifications, amendmentsor restatements of such agreement, instrument or document, provided thatnothing contained in this subsection shall be construed to authorize suchrenewal, extension, modification, amendment or restatement.

 

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(f)                                    Examplesshall not be construed to limit, expressly or by implication, the matter theyillustrate.

 

(g)                                 The word “or”is not intended to be exclusive and the word “includes” and its derivativesmeans “includes, but is not limited to” and corresponding derivativeexpressions.

 

(h)                                 Noconsideration shall be given to the fact or presumption that one party had agreater or lesser hand in drafting this Agreement.

 

(i)                                     Allreferences 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 Schedules2.5, 4, and 12.10 are attached hereto. Each such Exhibit and Schedule is incorporated herein by referencefor all purposes and references to this Agreement shall also include such Exhibit orSchedule unless the context in which used shall otherwise require.

 

**ARTICLE XIVRatification by LEL**

 

LEL, the ***[sole /managing]*** member of BC joins in this Agreementfor the sole purposes of agreeing to (a) sell to Buyer all of LEL’s righttitle and interest as the ***[sole/managing]***  member of BC and, (b) sell to Buyer allof the assets of BC.

 

 

**[REMAINDER OF PAGEINTENTIONALLY LEFT BLANK]**

 

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**INWITNESS WHEREOF**, this Agreement is executed by the partieshereto 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 |

 

 

**SIGNATUREPAGE TO ASSET PURCHASE AND SALE AGREEMENT- Appalachia Region**

 

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|   | **LEL:**                                                                                                             |
|--------|----------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                 |
|   | **LINN  ENERGY, LLC,**a  Delaware limited  liability company, signing for the purposes  set out in Article XIV. |
|   | ** **                                                                                                           |
|   |                                                                                                                 |
|   | By:                                                                                                                  | /s/ Mark E. Ellis |
|   |                                                                                                                 | Mark  E. Ellis, President and Chief |
|   |                                                                                                                 | Operating  Officer |

 

 

**SIGNATUREPAGE TO ASSET PURCHASE AND SALE AGREEMENT- Appalachia Region**

 

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**EXHIBIT A-1**

** **

**LEASES**

** **

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** **

**EXHIBIT A-2**

** **

**RIGHTS OF WAY**

** **

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** **

**EXHIBIT A-3**

** **

**MINERAL TRACTS**

** **

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** **

**EXHIBIT A-4**

** **

**REAL PROPERTY**

** **

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** **

**EXHIBIT A-5**

** **

**VEHICLE LIST**

** **

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** **

**EXHIBIT B**

** **

**EXCLUDED ASSETS**

** **

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** **

**EXHIBIT B-1**

** **

**FIELDOFFICE**

** **

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**EXHIBIT B-2**

 

**EQUIPMENT**

 

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**EXHIBIT B-3**

 

**VEHICLES**

 

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**EXHIBIT C**

** **

**ALLOCATIONOF PURCHASE PRICE**

** **

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** **

**EXHIBIT DFORM OF ASSIGNMENT**

 

THE STATE OF [KENTUCKY/PENNSYLVANIA/VIRGINIA/WESTVIRGINIA]

 

COUNTIES OF                       

 

ASSIGNMENT AND BILL OF SALE

 

[LINNENERGY HOLDINGS, LLC, a Delaware limited liability company/LINN OPERATING,INC., a Delaware corporation/PENN WEST PIPELINE, LLC, a Delaware limitedliability company] (“Grantor”), for Ten Dollars and other good and valuableconsideration (the receipt and sufficiency of which are hereby acknowledge),does hereby GRANT, BARGAIN, SELL, CONVEY, ASSIGN, TRANSFER, SET OVER, ANDDELIVER 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 theLeases described on Exhibit A-1 attached hereto and made a parthereof for all purposes (and any ratifications and/or amendments to suchLeases, whether or not such ratifications or amendments are described on such Exhibit A-1);

 

1.2                                 Without limitation of the foregoing but subject to theprovisions in this Assignment and Bill of Sale regarding Excluded Properties,all other right, title and interest (of whatever kind or character, whetherlegal or equitable, and whether vested or contingent) of Grantor in and to theoil, gas, and other minerals in and under or that may be produced from thelands 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 andnet 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, oromitted from, such Exhibits A-1, A-2, and A-3;

 

1.3                                 All rights, titles and interests of Grantor in and to, orotherwise derived from, all presently existing and valid oil, gas, or mineralunitization, pooling, or communitization agreements, declarations, and/ororders and in and to the properties covered and the units created thereby(including all units formed under orders, rules, regulations, or other officialacts of any federal, state, or other authority having jurisdiction, voluntaryunitization agreements, designations and/or declarations) relating to theproperties described in paragraphs  1.1 and 1.2  (b) above;

 

1.4                                 All rights, titles, and interests of Grantor in and to theMaterial Contracts and all presently existing and valid production sales (andsales related) contracts, operating agreements, and other agreements andcontracts which relate to any of the properties described in paragraphs 1.1,1.2 and 1.3 above, or which relate to the exploration, development,operation, or maintenance thereof or the treatment, storage, transportation ormarketing of production therefrom (or allocated thereto);

 

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1.5                                 All rights, titles, and interests of Grantor in and to allmaterials, supplies, machinery, equipment, improvements and other personalproperty and fixtures (including all wells, wellhead equipment, pumping units,flowlines, tanks, buildings, injection facilities, saltwater disposalfacilities, compression facilities, gathering systems, and other equipment),and all easements, rights-of-way, surface leases and other surface rights, allPermits and licenses, and all other appurtenances being used or held for use inconnection with, or otherwise related to, the exploration, development,operation or maintenance of any of the properties described in paragraphs 1.1,1.2 and 1.3 above, or the treatment, storage, transportation, ormarketing of production therefrom (or allocated thereto);

 

1.6                                 Subject to any third party rights, all of Grantor’s leasefiles, title opinions, production records, well files, accounting records (butnot including general financial and accounting records attributable to Grantoror Grantor’s business), seismic records and surveys, gravity maps, electriclogs, geological or geophysical data and records, and other files, documentsand records of every kind and description which relate to the propertiesdescribed above (the “Records”); provided, however that Grantor may retaincopies 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 premisesdescribed on Exhibit A-4 and all furniture, fixtures, and equipmentlocated thereat, including computers, telephone equipment and other similaritems of tangible personal property directly associated with the SubjectProperties;

 

1.8                                 The vehicles described on Exhibit A-5; and

 

1.9                                 All of the right, title and interest of Linn Energy, LLC, a Delawarelimited liability company (“**LEL**”),in Big Creek Pipeline Limited Liability Company, a West Virginia limitedliability company (“**BC**”).

 

Theproperties, rights and interests specified in the foregoing paragraphs 1.1through 1.9 exclusive of the Excluded Properties (defined below), areherein sometimes collectively called the “Subject Properties.”

 

Anyprovision contained in this Assignment and Bill of Sale notwithstanding, the Subject Properties do not include, and thereis 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 beforethe Effective Date;

 

2.2                                 All of Grantor’s right, title, and interest in any oil, gas,or mineral Leases, overriding royalties, production payments, net profitsinterests, fee mineral interests, fee royalty interests and other interests inoil, gas, and other minerals not expressly included in the definition of Oil andGas Properties and all oil, gas or other hydrocarbon production from orattributable to the Subject Properties with respect to all periods prior to theEffective Date, all proceeds attributable thereto, and all Hydrocarbons that,at the Effective Date, are owned by Grantor and are in storage or withinprocessing plants;

 

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2.3                                 Any rebate or refund of costs, Taxes, or expenses borne byGrantor or Grantor’s predecessors in title attributable to periods prior to theEffective Date;

 

2.4                                 Any and all proceeds from the settlements of contractdisputes with purchasers of Hydrocarbons from the Subject Properties, includingsettlement of take-or-pay disputes, insofar as said proceeds are attributableto periods of time prior to the Effective Date;

 

2.5                                 Any and all proceeds from settlements with regard toreclassification of oil or gas produced from the Subject Properties, insofar assaid 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 actionof Grantor against one or more third parties arising from acts, omission, orevents occurring prior to the Effective Date and all claims under any jointinterest 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, orinformation, including maps, interpretations, records, or other technicalinformation related to or based upon any such data, materials or information,and any other asset, data, materials, or information, the transfer of which isrestricted or prohibited under the terms of any third party license,confidentiality agreement, or other agreement or the transfer of which wouldrequire the payment of a fee or other consideration to any third party;provided, however, that if any such data, materials, or information istransferable upon payment of a fee or other consideration, and if Buyer haspaid 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 equipmentlocated thereat, including computers, telephone equipment and other similaritems of tangible personal property;

 

2.11                           All share drive and accounting servers related to theSubject 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 protectedby an attorney-client privilege (exclusive of title opinions in respect of theOil and Gas Properties and all documents and instruments related to any mattersin Grantor’s Disclosure Schedule);

 

2.14                           All of the other properties, interests and assets describedon Exhibit B, together with any rights, liabilities, or obligationsassociated with such assets;

 

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2.15                           The Existing Hedges and all hedging transactions and anygains or losses attributable to any hedging activities, whether occurringbefore or after the Effective Date;

 

2.16                           Any other right or interest in and to the Subject Propertiesto the extent attributable to the period prior to the Effective Date;

 

2.17                           All bonds, letters of credit and guarantees if any, postedby Grantor or any Affiliate with any Governmental Authority or third person andrelating to the Subject Properties;

 

2.18                           All (a) correspondence or other documents orinstruments of Grantor relating to the transactions contemplated hereby, (b) listsof other prospective purchasers of Grantor or the Subject Properties compiledby Grantor, (c) bids submitted to Grantor by other prospective purchasersof Grantor or the Subject Properties, (d) analyses by Grantor or anyAffiliates thereof submitted by other prospective purchasers of Grantor or theSubject Properties and (e) correspondence between or among Grantor or itsAffiliates or their respective representatives with respect to, or with, anyother prospective purchasers from Grantor or the Subject Properties; and

 

2.19                           All assets associated with Grantor’s Affiliates, MidAtlantic Well Service, Inc., Marathon 85-II Limited Partnership, andMarathon 85-III Limited Partnership and their respective operations includingthose specifically described on Exhibits B, B-1, B-2 and B-3.

 

The properties andinterests specified in the foregoing paragraphs 2.1 through 2.19 areherein collectively called the “ExcludedProperties”.  It is understoodthat certain of the Excluded Properties may not be embraced by the term “SubjectProperties”.  The fact that certainassets have been expressly excluded is not intended to suggest that had theynot been excluded they would have constituted Subject Properties and may not beused to interpret the meaning of any word or phrase used in describing theSubject Properties.

 

ThisAssignment and Bill of Sale is made by Grantor and accepted by Grantee subjectto all matters shown of record in                     Counties, [Kentucky/Pennsylvania/Virginia and West Virginia], and the otherpublic records of that State.

 

This Assignment and Bill of Sale is made subject tothat certain Asset Purchase and Sale Agreement (the Agreement”) between Grantorand Grantee dated                                             .  The Agreement contains certainrepresentations, warranties, covenants, indemnities and agreements between theparties, some of which may survive the delivery of this Assignment and Bill ofSale, as more particularly provided for therein, but third parties mayconclusively rely on this Assignment and Bill of Sale to vest title to theSubject Properties in Grantee.  TheAgreement also contains certain defined terms which are used in this Assignmentand Bill of Sale with the same meaning as set out in this Assignment and Bill ofSale.

 

TOHAVE AND TO HOLD the Subject Properties unto Grantee, and its successors and assigns, forever.

 

**GRANTOR AGREE TO WARRANT AND FOREVER DEFEND TITLE TO THESUBJECT PROPERTIES UNTO GRANTEE AND ITS SUCCESSORS AND ASSIGNS,**

 

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**AGAINST THE CLAIMS AND DEMANDS OF ALL PERSONS CLAIMING, OR TOCLAIM THE SAME, OR ANY PART THEREOF BY, THROUGH OR UNDER GRANTOR, BUT NOTOTHERWISE.  THE EXPRESS WARRANTY OF TITLESET FORTH ABOVE IS EXCLUSIVE, AND IN LIEU OF ALL OTHER REPRESENTATIONS ANDWARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND GRANTOR EXPRESSLYDISCLAIM ANY AND ALL SUCH OTHER REPRESENTATIONS AND WARRANTIES.  WITHOUT LIMITATION OF THE FOREGOING, THESUBJECT PROPERTIES ARE CONVEYED PURSUANT HERETO WITHOUT ANY WARRANTY ORREPRESENTATION WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, RELATING TOTHE CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE, CONFORMITYTO THE MODELS OR SAMPLES OF MATERIALS OR MERCHANTABILITY OF ANY EQUIPMENT ORITS FITNESS FOR ANY PURPOSE, AND, EXCEPT AS PROVIDED OTHERWISE IN THE FIRSTSENTENCE OF THIS PARAGRAPH, WITHOUT ANY OTHER EXPRESS, IMPLIED, STATUTORY OROTHER WARRANTY OR REPRESENTATION WHATSOEVER. GRANTEE HAS INSPECTED, OR WAIVED GRANTEE’S RIGHT TO INSPECT, THE SUBJECTPROPERTIES FOR ALL PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL ANDENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITEDTO CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OFHAZARDOUS SUBSTANCES, SOLID WASTES OR NATURALLY OCCURRING RADIOACTIVE MATERIALS(“NORM”).  GRANTEE IS RELYING SOLELY UPONITS OWN INSPECTION OF THE SUBJECT PROPERTIES, AND GRANTEE SHALL ACCEPT ALL OFTHE SAME IN THEIR “AS IS, WHERE IS” CONDITION. ALSO WITHOUT LIMITATION OF THE FOREGOING, GRANTOR MAKES NO WARRANTY ORREPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AS TO THE ACCURACY ORCOMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION ORMATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR MADE AVAILABLE TO GRANTEEIN CONNECTION WITH THIS ASSIGNMENT INCLUDING, WITHOUT LIMITATION, RELATIVE TOPRICING ASSUMPTIONS, OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY)ATTRIBUTABLE TO THE SUBJECT PROPERTIES OR THE ABILITY OR POTENTIAL OF THESUBJECT PROPERTIES TO PRODUCE HYDROCARBONS OR THE ENVIRONMENTAL CONDITION OFTHE SUBJECT PROPERTIES OR ANY OTHER MATTERS CONTAINED IN THE MATERIALSFURNISHED OR MADE AVAILABLE TO GRANTEE BY GRANTOR OR BY GRANTOR’S AGENTS ORREPRESENTATIVES.  ANY AND ALL SUCH DATA,RECORDS, REPORTS, PROJECTIONS, INFORMATION AND OTHER MATERIALS (WRITTEN ORORAL) FURNISHED BY GRANTOR OR OTHERWISE MADE AVAILABLE OR DISCLOSED TO GRANTEEARE PROVIDED AS A CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO ANYLIABILITY OF OR AGAINST GRANTOR AND ANY RELIANCE ON OR USE OF THE SAME SHALL BEAT GRANTEE’S SOLE RISK TO THE MAXIMUM EXTENT PERMITTED BY LAW.**

 

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Byacceptance of this Assignment, Grantee hasagreed (i) to assume, and to timely pay and perform, all duties,obligations and liabilities relating to the ownership and/or operation of theSubject Properties regardless ofwhether the same accrued or otherwise arose before or after the effective datehereof (including, without limitation, those arising under the contractsand agreements described in subparagraph (c) above), and (ii) to indemnify and hold Grantor, itsrespective Affiliates, and its or their respective directors, officers,employees, attorneys, contractors and agents harmless from and against any andall claims, actions, causes of action, liabilities, damages, losses, costs orexpenses (including, without limitation, court costs and attorneys’ fees) ofany kind or character arising out of or otherwise relating to the ownershipand/or operation of the Subject Properties regardless of whether the same accrued or otherwise arose before or afterthe effective date hereof.  Inconnection with (but not in limitation of) the foregoing, it is specificallyunderstood and agreed that such duties,obligations and liabilities shall be deemed to include all mattersarising out of the condition of the Subject Properties on the effective date hereof (including,without limitation, within such matters all obligations to properly plug andabandon, or replug and re-abandon, wells located on the Subject Properties, torestore the surface of the Subject Properties and to comply with, or to bringthe Subject Properties into compliance with, applicable environmental laws,rules, regulations and orders, including conducting any remediation activitieswhich may be required on or otherwise in connection with activities on theSubject Properties), regardless of whether such condition or the events givingrise to such condition arose or occurred before or after the effective date hereof, and theassumptions and indemnifications by Grantee provided for in the first sentenceof this section shall expressly cover and include such matters.  **THEFOREGOING ASSUMPTIONS AND INDEMNIFICATIONS SHALL APPLY WHETHER OR NOT SUCHDUTIES, 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 ORPASSIVE NEGLIGENCE, BUT EXPRESSLY NOT INCLUDING GROSS NEGLIGENCE) OF GRANTOR ORANY OTHER INDEMNIFIED PARTY, OR (ii) STRICT LIABILITY.**

 

Grantoragrees to execute and deliver to Grantee, from time to time, such other andadditional instruments, notices, division orders, transfer orders and otherdocuments, and to do all such other and further acts and things as may benecessary to more fully and effectively grant, convey and assign to Grantee theSubject Properties.

 

ThisAssignment 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 Awhich contains specific descriptions of the Subject Properties located in therecording jurisdiction in which the particular counterpart is to be recorded.  All of such counterparts together shallconstitute one and the same instrument.  Complete copies of this Assignment containingthe entire Exhibit A have been recorded in County,  and retained by Grantorand Grantee.

 

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INWITNESS WHEREOF this Assignment has been executed by the parties hereto on the dates of their respective acknowledgmentseffective as to runs of oil and deliveries of gas, and for all other purposes,as of 7:00 a.m. local time at thelocations 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:                                                            |   |
|        |                                                                   |  |  |  |  |

 

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**[ACKNOWLEDGMENTS]**

 

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