Exhibit 2.4
  Execution Version
  ASSET
PURCHASE AND SALE AGREEMENT
 Verden
Area
 
 between
 
 Linn
Energy Holdings, LLC
 Linn
Operating, Inc.
 Mid-Continent
I, LLC
 Mid-Continent
II, LLC
 Linn
Exploration Midcontinent, LLC
 as
“Sellers”
 
 and
 
 Laredo
Petroleum, Inc.
 as
“Buyer”
 
 
 
 Dated
as of May 30, 2008
    
  TABLE
OF CONTENTS
  ARTICLE
      I PROPERTIES TO BE SOLD AND PURCHASED
              1Section
      1.1.
              Assets
      Included
              1Section
      1.2.
              Assets
      Excluded
              3ARTICLE
      II PURCHASE PRICE
              5Section
      2.1.
              Purchase
      Price
              5Section
      2.2.
              Accounting
      Adjustments
              5Section
      2.3.
              Closing
      and Post-Closing Accounting Settlements
              6Section
      2.4.
              Payment
      of Adjusted Purchase Price
              7Section
      2.5.
              Allocation
      of Purchase Price
              7ARTICLE
      III THE CLOSING
              8ARTICLE
      IV REPRESENTATIONS AND WARRANTIES OF SELLERS
              8Section
      4.1.
              Organization
      and Existence
              8Section
      4.2.
              Power
      and Authority
              8Section
      4.3.
              Valid
      and Binding Agreement
              9Section
      4.4.
              Non-Contravention
              9Section
      4.5.
              Approvals
              9Section
      4.6.
              Litigation
              10Section
      4.7.
              Contracts
              10Section
      4.8.
              Commitments,
      Abandonments or Proposals
              10Section
      4.9.
              Production
      Sales Contracts
              10Section
      4.10.
              Plugging
      and Abandonment
              11Section
      4.11.
              Permits
              11Section
      4.12.
              Payment
      of Expenses
              11Section
      4.13.
              Compliance
      with Laws
              11Section
      4.14.
              Imbalances;
      Prepayments
              12Section
      4.15.
              Intellectual
      Property
              12Section
      4.16.
              Taxes
              12Section
      4.17.
              Environmental
      Matters
              12Section
      4.18.
              Preferential
      Purchase Rights and Required Consents
              13Section
      4.19.
              Payment
      of Burdens on Production
              13Section
      4.20.
              Fees
      and Commissions
              13
  
  Section
      4.21.
              Disclaimer
      of Warranties
              13Section
      4.22.
              Disclosures
              14ARTICLE
      V REPRESENTATIONS AND WARRANTIES OF BUYER
              14Section
      5.1.
              Organization
      and Existence
              14Section
      5.2.
              Power
      and Authority
              15Section
      5.3.
              Valid
      and Binding Agreement
              15Section
      5.4.
              Non-Contravention
              15Section
      5.5.
              Approvals
              16Section
      5.6.
              Pending
      Litigation
              16Section
      5.7.
              Knowledgeable
      Purchaser
              16Section
      5.8.
              Funds
              16Section
      5.9.
              Fees
      and Commissions
              16ARTICLE
      VI CERTAIN COVENANTS OF SELLERS PENDING CLOSING
              17Section
      6.1.
              Access
      to Files
              17Section
      6.2.
              Conduct
      of Operations
              17Section
      6.3.
              Restrictions
      on Certain Actions
              17Section
      6.4.
              Lease
      Renewals and Top Leasing
              18Section
      6.5.
              Payment
      of Expenses
              18Section
      6.6.
              Preferential
      Rights and Third Party Consents
              19ARTICLE
      VII ADDITIONAL PRE-CLOSING AND POST-CLOSING AGREEMENTS OF BOTH
      PARTIES
              19Section
      7.1.
              Reasonable
      Best Efforts
              19Section
      7.2.
              Notice
      of Litigation
              20Section
      7.3.
              Notification
      of Certain Matters
              20Section
      7.4.
              Fees
      and Expenses
              20Section
      7.5.
              Public
      Announcements
              20Section
      7.6.
              Casualty
      Loss Prior to Closing
              21Section
      7.7.
              Governmental
      Bonds
              21Section
      7.8.
              Assumed
      Obligations
              21Section
      7.9.
              Operational
      Transition
              21Section
      7.10.
              Books
      and Records
              22Section
      7.11.
              Suspended
      Funds
              22Section
      7.12.
              Letters-in-Lieu
              22
  ii
  Section
      7.13.
              Logos
      and Names
              22Section
      7.14.
              Further
      Assurances
              23Section
      7.15.
              Participation
      Option Agreement
              23ARTICLE
      VIII DUE DILIGENCE EXAMINATION
              24Section
      8.1.
              Title
      Due Diligence Examination
              24Section
      8.2.
              Environmental
      Due Diligence Examination
              27Section
      8.3.
              Disputes
      Regarding Title Defects or Environmental Defects
              30Section
      8.4.
              Substantial
      Environmental Concerns
              30Section
      8.5
              Adjustments
      to Purchase Price for Defects
              31Section
      8.6
              Buyer
      Indemnification
              32ARTICLE
      IX CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
              33Section
      9.1.
              Conditions
      Precedent to the Obligations of Buyer
              33Section
      9.2.
              Conditions
      Precedent to the Obligations of Sellers
              34ARTICLE
      X TERMINATION, AMENDMENT AND WAIVER
              35Section
      10.1.
              Termination
              35Section
      10.2.
              Effect
      of Termination
              36Section
      10.3.
              Amendment
              36Section
      10.4.
              Waiver
              37ARTICLE
      XI SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
      INDEMNIFICATION
              37Section
      11.1.
              Survival
              37Section
      11.2.
              Sellers’
      Indemnification Obligations
              37Section
      11.3.
              Buyer’s
      Indemnification Obligations
              38Section
      11.4.
              Net
      Amounts
              38Section
      11.5.
              Indemnification
      Proceedings
              39Section
      11.6.
              Indemnification
      Exclusive Remedy
              39Section
      11.7.
              Limited
      to Actual Damages
              40Section
      11.8.
              Indemnification
      Despite Negligence
              40Section
      11.9.
              Tax
      Treatment of Indemnification Amounts
              40Section
      11.10.
              Aggregate
      Indemnity Limits
              40ARTICLE
      XII MISCELLANEOUS MATTERS
              40Section
      12.1.
              Notices
              40
  iii
  Section
      12.2.
              Prorations,
      Deposits and Taxes
              41Section
      12.3.
              Entire
      Agreement
              41Section
      12.4.
              Injunctive
      or Other Relief
              41Section
      12.5.
              Binding
      Effect; Assignment; No Third Party Benefit
              42Section
      12.6.
              Severability
              42Section
      12.7.
              GOVERNING
      LAW
              42Section
      12.8.
              Counterparts
              42Section
      12.9.
              WAIVER
      OF CONSUMER RIGHTS
              42Section
      12.10.
              Replacement
      Bonds, Letters of Credit and Guarantees
              43Section
      12.11.
              Further
      Assurances
              43ARTICLE
      XIIIDEFINITIONS
      AND REFERENCES
              43Section
      13.1.
              Certain
      Defined Terms
              43Section
      13.2.
              Certain
      Additional Defined Terms
              48Section
      13.3.
              References,
      Titles and Construction
              50
 
  Exhibits
  A
              LeasesA-1
              Plat
      of Area of Included InterestsB
              Excluded
      AssetsC
              Represented
      Interests; Allocation of Purchase PriceD
              Form
      of Assignment
 Schedules
  2.5
              Purchase
      Price Tax Allocations4
              Sellers
      Disclosure Schedule12.10
              Sellers
      Bonds
 
 
 
  iv
  ASSET
PURCHASE AND SALE AGREEMENT
  THIS ASSET PURCHASE AND SALE
AGREEMENT dated May 30, 2008, is made by and between Linn Energy
Holdings, LLC, a Delaware limited liability company (“LEH”), Linn Operating, Inc., a
Delaware corporation (“LOI”), Mid-Continent I, LLC, a
Delaware limited liability company, Mid-Continent II, LLC, a Delaware limited
liability company, and Linn Exploration Midcontinent, LLC, an Oklahoma limited
liability company (collectively “Sellers”), and Laredo
Petroleum, Inc., a Delaware 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 gas properties and related assets located in the
Verden area in Caddo, Grady and Comanche Counties, Oklahoma.
  B.           As
part of the consideration for the purchase and sale of the Assets, as further
described herein, Buyer and Seller agree to enter into the Participation Option
Agreement further described herein, which will give Seller the option to
participate in certain wells under the terms and conditions of the Participation
Option Agreement.
  C.Sellers and
Buyer deem it in their mutual best interests to execute and deliver this
Agreement.
  NOW, THEREFORE, in
consideration of the foregoing Recitals and the mutual covenants and agreements
contained herein, Sellers and Buyer do hereby agree as follows:
  ARTICLE
I
  Properties To Be Sold and
Purchased
  Section
1.1.                                Assets
Included.
  Subject
to Section 1.2,
Sellers agree to sell and Buyer agrees to purchase, for the consideration
hereinafter set forth, and subject to the terms and provisions herein contained,
the following described properties, rights and interests:
 
 (a)           All
right, title and interest of Sellers in and to the Leases described on Exhibit A
attached hereto and made a part hereof for all purposes (and any ratifications
and/or amendments, renewals or extensions to such Leases, whether or not such
ratifications, amendments, renewals or extensions are described on such Exhibit
A);
  (b)           Without
limitation of the foregoing but subject to Section 1.2, all
other right, title and interest (of whatever kind or character, whether legal or
equitable, and whether vested or contingent) of Sellers in and to the oil, gas,
and other minerals in and under or that may be produced from the lands described
in Exhibit Ahereto, described in any
of the Leases described on such Exhibit A or included
within the area outlined in red on the Plat attached as Exhibit A-1 hereto
(including interests in Leases, overriding royalties, production payments and
net profits interests in such lands or such Leases, and
   
  fee
mineral interests, fee royalty interests, and other interests in so far as they
cover such lands), even though Sellers’ interest therein may be incorrectly
described in, or omitted from, such Exhibit
A;
  (c)           All
rights, titles and interests of Sellers in and to, or otherwise derived from,
all presently existing and valid oil, gas, or mineral unitization, pooling, or
communitization agreements, declarations, and/or orders and in and to the
properties covered and the units created thereby (including all units formed
under orders, rules, regulations, or other official acts of any federal, state,
or other authority having jurisdiction, voluntary unitization agreements,
designations and/or declarations) relating to the properties described in paragraphs (a)
and (b)
above;
  (d)           All
rights, titles, and interests of Sellers in and to the Material Contracts and
all presently existing and valid production sales (and sales related) contracts,
operating agreements, and other agreements and contracts which relate to any of
the properties described in paragraphs (a),
(b) and (c) above, or which
relate to the exploration, development, operation, or maintenance thereof or the
treatment, storage, transportation or marketing of production therefrom (or
allocated thereto);
  (e)           All
rights, titles, and interests of Sellers in and to all materials, supplies,
machinery, equipment, improvements and other personal property and fixtures
(including all wells, wellhead equipment, pumping units, flowlines, tanks,
buildings, injection facilities, saltwater disposal facilities, compression
facilities, gathering systems, and other equipment), and all easements,
rights-of-way, surface tracts, surface leases and other surface rights, all
Permits and licenses, and all other appurtenances being used or held for use in
connection with, or otherwise related to, the exploration, development,
operation or maintenance of any of the properties described in paragraphs (a),
(b) and (c) above, or the
treatment, storage, transportation, or marketing of production therefrom (or
allocated thereto);
  (f)           Subject
to any third party rights, all of Sellers’ lease files, title opinions,
production records, well files, accounting records (but not including general
financial and accounting records attributable to Sellers or Sellers’ business),
seismic records and surveys, gravity maps, electric logs, geological or
geophysical data and records, and other files, documents and records of every
kind and description which relate to the properties described above (the “Records”); provided, however
that Sellers may, at their expense, retain copies of any or all of the Records;
and
  (g)           To
the extent transferable, all of Sellers’ right to enforce representations,
warranties and indemnities under agreements with third parties in favor of
Sellers respecting one or more of the properties and interests described in
paragraphs (a),
(b) and (c)
above.
  As used
herein:  (i) “Oil and Gas Properties” means
the properties and interests described in paragraphs (a),
(b) and (c) above, save and
except for any such properties or assets that are Excluded Assets; and
(ii) “Properties”
means the Oil and Gas Properties plus the properties and interests described in
paragraphs (d),
(e), (f) and (g) above, save and
except for any such properties or assets that are Excluded Assets.
   2
  Section
1.2.                                Assets
Excluded.
  Notwithstanding
anything herein contained to the contrary, the Properties do not include, and
there is hereby excepted and reserved unto Sellers all other assets, properties,
and business of Sellers, including the following:
 
 (a)           Any
accounts receivable or accounts payable accruing before the Effective
Date;
  (b)           All
of Sellers’ right, title and interest in any oil, gas or mineral Leases,
overriding royalties, production payments, net profits interests, fee mineral
interests, fee royalty interests and other interests in oil, gas and other
minerals not included within the area outlined in red on Exhibit A-1 and all
oil, gas or other hydrocarbon production from or attributable to the Properties
with respect to all periods prior to the Effective Date, all proceeds
attributable thereto, and all Hydrocarbons that, at the Effective Date, are
owned by Sellers and are in storage or within processing plants;
  (c)           Any
rebate or refund of costs, Taxes, or expenses borne by Sellers or Sellers’
predecessors in title attributable to periods prior to the Effective
Date;
  (d)           Any
and all proceeds from the settlements of contract disputes with purchasers of
Hydrocarbons from the Properties, including settlement of take-or-pay disputes,
insofar as said proceeds are attributable to periods of time prior to the
Effective Date;
  (e)           Any
and all proceeds from settlements with regard to reclassification of oil or gas
produced from the Properties, insofar as said proceeds are attributable to
periods of time prior to the Effective Date;
  (f)           All
contracts of insurance;
  (g)           All
claims (including insurance claims) and causes of action of Sellers against one
or more third parties arising from acts, omission, or events occurring prior to
the Effective Date and all claims under any joint interest audit attributable to
any period prior to the Effective Date;
  (h)           All
limited liability company, financial, tax, and legal (other than title) books
and records of Sellers;
  (i)           Any
geological, geophysical or seismic data, materials, or information, including
maps, interpretations, records, or other technical information related to or
based upon any such data, materials or information, and any other asset, data,
materials, or information, the transfer of which is restricted or prohibited
under the terms of any third party license, confidentiality agreement, or other
agreement or the transfer of which would require the payment of a fee or other
consideration to any third party; provided, however, that if any such data,
materials, or information is (i) restricted or disclosure is prohibited, at
Buyer’s option (A) Sellers shall use Reasonable Best Efforts to cause such
restrictions or prohibitions to be removed or waived so that such data,
materials or
   3
  information
might be transferred to Buyer, and Buyer will reimburse Sellers for any
third-party expense incurred by Sellers in connection therewith, or (B) Sellers
shall transfer to Buyer such restricted geological, geophysical or other
information in accordance with the Participation Option Agreement; and (ii)
transferable upon payment of a fee or other consideration, such data, materials,
or information shall be transferred to Buyer subject to the payment by Buyer of
such fee or other consideration;
  (j)           All
share drive and accounting servers related to the Properties regardless of where
such servers are located;
  (k)           All
of Sellers’ accounting or other administrative systems, computer software,
patents, trade secrets, copyrights, names, trademarks, logos, and other
intellectual property;
  (l)           All
documents and instruments of Sellers that are protected by an attorney-client
privilege (exclusive of title opinions in respect of the Oil and Gas Properties
and all documents and instruments related to any matters in Sellers Disclosure
Schedule);
  (m)           All
of the other properties, interests and assets described on Exhibit B,
together with any rights, liabilities, or obligations associated with such
assets;
  (n)           The
Existing Hedges and all hedging transactions and any gains or losses
attributable to any hedging activities;
  (o)           Any
other right or interest in and to the Properties to the extent attributable to
the period prior to the Effective Date;
  (p)           All
bonds, letters of credit and guarantees if any, posted by Sellers or any
Affiliate with any Governmental Authority or third person and relating to the
Properties;
  (q)           All
(i) correspondence or other documents or instruments of Sellers relating to the
transactions contemplated hereby, (ii) lists of other prospective purchasers of
Sellers or the Properties compiled by Sellers, (iii) bids submitted to Sellers
by other prospective purchasers of Sellers or the Properties, (iv) analyses by
Sellers or any Affiliates thereof submitted by other prospective purchasers of
Sellers or the Properties, and (v) correspondence between or among Sellers or
their Affiliates or their respective representatives with respect to, or with,
any other prospective purchasers of Sellers or the Properties;
  (r)           Eighty
percent (80%) of Sellers’ total interest in (i) the wellbore of the Weber 3-4
Well (API # 01522984A) in Section 4-6N-9W of Caddo County, Oklahoma and
(ii) the McGuire 1-24 Well (API # 05123416) in Section 24-3N-8W of Grady County,
Oklahoma, together with the right to deepen, sidetrack, recomplete or drill a
replacement for either of the foregoing; and
  (s)           All
rights, titles, interests and obligations retained by Sellers or granted to
Sellers pursuant to that certain Participation Option Agreement further
described herein.
   4
  The
properties and interests specified in the foregoing paragraphs (a)
through (s) of
this Section 1.2 are
herein collectively called the “Excluded
Assets”.  It is understood that certain of the Excluded Assets
may not be embraced by the term “Properties”.  The
fact that certain assets have been expressly excluded is not intended to suggest
that had they not been excluded they would have constituted Properties and may
not be used to interpret the meaning of any word or phrase used in describing
the Properties.
  
  ARTICLE
II
  Purchase
Price
  Section
2.1.                                Purchase
Price.
  In
consideration of the sale of the Properties by Sellers to Buyer, Buyer shall pay
to Sellers cash in the amount of One Hundred Eighty Five Million Dollars
($185,000,000.00) (the “Purchase
Price”).  The Purchase Price, as adjusted pursuant to this
Article II
and the other applicable provisions hereof, is herein called the “Adjusted Purchase
Price”.
 
 Section
2.2.                                Accounting
Adjustments.
  (a)           Subject
to Section
2.2(b), and in addition to other adjustments to the Purchase Price
provided for in this Agreement including, without limitation, adjustments due to
Title Defects and/or Environmental Defects or the exclusion of certain Oil and
Gas Properties from this transaction or from assignment at Closing, appropriate
adjustments shall be made between Buyer and Sellers so that:
  (i)           all
expenses (including all drilling costs, all capital expenditures, and all
overhead administrative charges under applicable operating agreements, and all
other operating costs actually charged by third parties) for work done in the
operation of the Properties on or after the Effective Date will be borne by
Buyer, and all proceeds (net of applicable gathering and transportation charges
deducted or netted by the purchaser of production, as well as production,
severance, and similar Taxes) from the sale of oil, gas or other minerals
produced from the Oil and Gas Properties on or after the Effective Date will be
received by Buyer, and
  (ii)           all
expenses for work done in the operation of the Properties, or otherwise
attributable to the ownership or operation of the Properties, before the
Effective Date will be borne by Sellers and all proceeds (net of applicable
gathering and transportation charges deducted or netted by the purchaser of
production, as well as production, severance, and similar Taxes) from the sale
of oil, gas, or other minerals produced therefrom before the Effective Date will
be received by Sellers.
  (b)           It
is agreed that, in making the adjustments contemplated by Section
2.2(a):
   5
  (i)           Oil
which was produced from the Oil and Gas Properties and which was, on the
Effective Date, stored in tanks, but without taking into account tank bottom
sediment and water,  located on the Oil and Gas Properties (or located
elsewhere but used to store oil produced from the Oil and Gas Properties prior
to delivery to oil purchasers) and above pipeline connections shall be measured,
gauged or strapped by the parties on the Effective Date; the intent being that
the oil in storage above the pipeline connection or through the meters on the
pipelines prior to the Effective Date shall belong to Sellers, and the oil
placed in such storage facilities from and after the Effective Date and oil
production upstream of the production meter charts shall belong to
Buyer.
  (ii)           ad
valorem Taxes assessed with respect to a period which begins before and ends on
or after the Effective Date shall be prorated based on the number of days in
such period which fall on each side of the Effective Date (with the day on which
the Effective Date falls being counted in the period after the Effective
Date),
  (iii)           the
Purchase Price will be adjusted by the value of any natural gas Imbalances, such
value to be derived by multiplying the net overproduced or net underproduced
Imbalance volumes as of the Effective Date by $3.00 per Mcf so that the Purchase
Price will be adjusted upward if there is a net underproduced Imbalance or
adjusted downward if there is a net overproduced Imbalance.
  (iv)           no
consideration shall be given to the local, state, or federal income tax
liabilities of any party.
  Section
2.3.                                Closing
and Post-Closing Accounting Settlements.
  (a)           No
later than three (3) business days prior to the Closing Date, the parties shall
determine, based upon the best information reasonably available to them, the
amount of the adjustments provided for in Section 2.2.If the amount of
adjustments so determined which would result in a credit to Buyer exceeds the
amount of adjustments so determined which would result in a credit to Sellers,
Buyer shall receive a credit, for the amount of such excess, against the
Purchase Price to be paid at Closing, and, if the converse is true, Buyer shall
pay to Sellers, at Closing (in addition to amounts otherwise then owed), the
amount of such excess.
  (b)           On
or before 120 days after Closing, Buyer and Sellers shall review any additional
information which may then be available pertaining to the adjustments provided
for in Section 2.2,
shall determine if any additional adjustments (whether the same be made to
account for expenses or revenues not considered in making the adjustments made
at Closing, or to correct errors made in such adjustments) should be made beyond
those made at Closing, and shall make any such adjustments by appropriate
payments from Sellers to Buyer or from Buyer to Sellers.Following such
additional adjustments, no further adjustments to the Purchase Price shall be
made under this Section 2.3.
   6
  (c)           If
a dispute arises under Section 2.3(b)
with respect to any additional adjustments (an “Accounting Dispute”) that the
parties have been unable to resolve prior to the end of the 120 day period in
Section 2.3(b)
above, then, at the written request of either Sellers or Buyer (the “Request Date”), each of
Sellers and Buyer shall nominate and commit one of their senior officers to meet
at a mutually agreed time and place not later than ten days after the Request
Date to attempt to resolve same.  If such senior officers have been
unable to resolve such Accounting Dispute within a period of 30 days after the
Request Date, any party shall have the right, by written notice to the other
specifying in reasonable detail the basis for the Accounting Dispute, to resolve
the Accounting Dispute by submission thereof to an independent public accounting
firm mutually agreeable to the parties, which firm shall serve as sole
arbitrator (the “Accounting
Referee”).  The scope of the Accounting Referee’s engagement
shall be limited to the resolution of the items described in the notice of the
Accounting Dispute given in accordance with the foregoing and each party’s
corresponding calculation of the adjustments pursuant to Section
2.2.  The Accounting Referee shall be instructed by the parties
to resolve the Accounting Dispute as soon as reasonably practicable in light of
the circumstances but in no event in excess of 15 days following the submission
of the Accounting Dispute to the Accounting Referee.  The decision and
award of the Accounting Referee shall be binding upon the parties as an award
under the Federal Arbitration Act and final and nonappealable to the maximum
extent permitted by law, and judgment thereon may be entered in a court of
competent jurisdiction and enforced by any party as a final judgment of such
court.  The fees and expenses of the Accounting Referee shall be borne
equally by Sellers and Buyer.
  Section
2.4.                                Payment
of Adjusted Purchase Price.
  The
Adjusted Purchase Price shall be paid to Sellers as follows:
 
 (a)           Within
one Business Day after the execution and delivery of this Agreement, Buyer shall
tender to Sellers cash equal to five percent (5%) of the Purchase Price as a
deposit (such amount, together with all interest earned thereon, the “Deposit”).  The
Deposit is considered and recognized by Sellers and Buyer as an earnest money
deposit on the Purchase Price and as security for Buyer’s performance
hereunder.  The Deposit shall (i) be applied against the Adjusted
Purchase Price owing by Buyer at the Closing pursuant to Section 2.4(b),
(ii) retained by Sellers pursuant to Section 10.2 or
(iii) returned to Buyer pursuant to Section 10.2, as
applicable.
  (b)           At
the Closing, Buyer shall pay to Sellers cash equal to the Adjusted Purchase
Price less the
Deposit.
  (c)           All
cash payments by Buyer pursuant to this Section 2.4
shall be made in immediately available funds by confirmed wire transfer to a
bank account or accounts designated by Sellers, as applicable.
  Section
2.5.                                Allocation
of Purchase Price.
  (a)           Buyer
has used its reasonable business judgment to  allocate the Purchase
Price among the Oil and Gas Properties on Exhibit
C.
  7
  (b)           On
or before the Closing Date, the Buyer and Sellers shall agree in writing as to
the allocation of the Adjusted Purchase Price among the Properties under the
methodology required by Section 1060 of the Code.  Such agreed
allocation shall be set forth on Schedule 2.5 attached
hereto.  The Buyer and Sellers shall report the transactions
contemplated hereby on all Tax Returns, including, but not limited to Form 8594,
in a manner consistent with such allocation.  If, contrary to the
intent of the parties hereto as expressed in this Section 2.5, any
taxing authority makes or proposes an allocation different from the allocation
determined under this Section 2.5,
Buyer and Sellers shall cooperate with each other in good faith to contest such
taxing authority’s allocation (or proposed allocation); provided, however, that,
after consultation with the party adversely affected by such allocation (or
proposed allocation), the other party hereto may file such protective claims or
Tax Returns as may be reasonably required to protect its interests.
 
  ARTICLE
III
  The
Closing
  The
closing of the transactions contemplated hereby (the “Closing”) shall take place
(i) at the offices of Sellers at 600 Travis Street, Suite 5100, Houston,
Texas 77002, at 10:00 a.m. (local Houston, Texas time) on August 15, 2008, or
(ii) on an earlier date, at Buyer’s discretion, after the completion of Buyer’s
title and environmental due diligence pursuant to Article VIII, but no
earlier than five (5) Business Days after the date of Buyer’s written notice
delivered to Sellers in accordance with Section 12.1 below,
or (iii) at such other time or place or on such other date as the parties
hereto shall agree.  The date on which the Closing is required to take
place is herein referred to as the “Closing Date”.  All
Closing transactions shall be deemed to have occurred
simultaneously.
  ARTICLE
IV
  Representations and
Warranties of Sellers
  Except as
provided in Sellers Disclosure Schedule, Sellers, jointly and severally, hereby
represent and warrant to Buyer as follows:
  Section
4.1.                                Organization
and Existence.
  Each
Seller is a limited liability company or corporation duly formed and validly
existing under the laws of the State of Delaware or State of
Oklahoma.
 
 Section
4.2.                                Power and
Authority.
  Each
Seller has all requisite corporate or limited liability company power and
authority to execute, deliver, and perform this Agreement and each other
agreement, instrument, or document executed or to be executed by Sellers in
connection with the transactions contemplated hereby to which it is a party and
to consummate the transactions contemplated hereby and thereby.  The
execution, delivery, and performance by Sellers of this Agreement and each other
agreement, instrument, or document executed or to be executed by Sellers in
connection with the transactions contemplated hereby to which it is a party, and
the consummation by it of the
  8
  transactions
contemplated hereby and thereby, have been duly authorized by all necessary
action of Sellers.
 
 Section
4.3.                                Valid and
Binding Agreement.
  This
Agreement has been duly executed and delivered by Sellers and constitutes, and
each other agreement, instrument, or document executed or to be executed by
Sellers in connection with the transactions contemplated hereby to which it is a
party has been, or when executed will be, duly executed and delivered by Sellers
and constitutes, or when executed and delivered will constitute, a valid and
legally binding obligation of Sellers, enforceable against it in accordance with
their respective terms, except that such enforceability may be limited by
(a) applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws affecting creditors’ rights generally and (b) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances.
 
 Section
4.4.                                Non-Contravention.
  Other
than requirements (if any) that there be obtained consents to assignment (or
waivers of preferential rights to purchase) from third parties, neither the
execution, delivery, and performance by Sellers of this Agreement and each other
agreement, instrument, or document executed or to Sellers’ Knowledge to be
executed by Sellers in connection with the transactions contemplated hereby to
which it is a party nor the consummation by it of the transactions contemplated
hereby and thereby do and will (a) conflict with or result in a violation
of Sellers’ Governing Documents, (b) conflict with or result in a violation
of any provision of, or constitute (with or without the giving of notice or the
passage of time or both) a default under, or give rise (with or without the
giving of notice or the passage of time or both) to any right of termination,
cancellation, or acceleration under, any bond, debenture, note, mortgage or
indenture, or any lease, contract, agreement, or other instrument or obligation
to which Sellers are a party or by which Sellers or any of their properties may
be bound, (c) result in the creation or imposition of any lien or other
encumbrance upon the properties of Sellers, or (d) violate any Applicable
Law binding upon Sellers, except, in the instance of clause (b) or
clause (c)
above, for any such conflicts, violations, defaults, terminations, cancellations
or accelerations which would not, individually or in the aggregate, have a
Material Adverse Effect.
 
 Section
4.5.                                Approvals.
  Other
than requirements (if any) that there be obtained consents to assignment (or
waivers of preferential rights to purchase) from third parties and except for
approvals required to be obtained from Governmental Entities who are lessors
under leases forming a part of the Oil and Gas Properties (or who administer
such leases on behalf of such lessors) which are obtained post-closing, no
consent, approval, order, or authorization of, or declaration, filing, or
registration with, any court or governmental agency or of any third party is
required to be obtained or made by Sellers in connection with the execution,
delivery, or performance by Sellers of this Agreement, each other agreement,
instrument, or document executed or to be executed by Sellers in connection with
the transactions contemplated hereby to which they are a party or the
consummation by them of the transactions contemplated hereby and thereby, except
for such consents, approvals, orders, authorizations, declarations, filings, or
registrations which,
  9
  if not
obtained or made (as applicable), would not, individually or in the aggregate,
have a Material Adverse Effect.
 
 Section
4.6.                                Litigation.
  Except as listed on
Section 4.6 of the Sellers Disclosure Schedule, there are no Proceedings
pending or, to Sellers’ Knowledge, threatened, against or affecting Sellers or
the Properties (including any actions challenging or pertaining to Sellers’
title to any of the Properties), or affecting the execution and delivery of this
Agreement by Sellers or the consummation of the transactions contemplated hereby
by Sellers.
 
 Section
4.7.                                Contracts.
  Section
4.7 of the Sellers Disclosure Schedule lists all Material
Contracts.  None of the Sellers is in default under any Material
Contract except as disclosed on Section 4.7 of the Sellers Disclosure Schedule
and except such defaults as would not, individually or in the aggregate, have a
Material Adverse Effect.  To Sellers’ Knowledge, all Material
Contracts are in full force and effect.  Except as disclosed on
Section 4.7 of the Sellers Disclosure Schedule, there are no futures, options,
swaps or other derivatives with respect to the sale of production that will be
binding on Sellers or the Properties after the Effective Date.  Except
as disclosed on Section 4.7 of Sellers Disclosure Schedule, as of the date
identified on such Schedule, there were no contracts for the purchase, sale or
exchange of oil, gas or other hydrocarbons produced from or attributable to the
Oil and Gas Properties that will be binding on the Buyer, the Sellers or the Oil
and Gas Properties after the Effective Date that Buyer will not be entitled to
terminate at will (without penalty) on thirty (30) days notice or
less.  No notice of default or breach has been received or delivered
by any Seller under any Material Contract, the resolution of which is currently
outstanding, and no currently effective notices have been received by any Seller
of the exercise of any premature termination, price redetermination, market-out
or curtailment of any Material Contract.
 
 Section
4.8.                                Commitments,
Abandonments or Proposals.
  Except as
listed on Section 4.8 of the Sellers Disclosure Schedule (a) no proposals are
currently outstanding by Sellers or other working interest owners to drill
additional wells, or to deepen, plug back, sidetrack or rework existing wells,
or to conduct other operations for which consent is required under the
applicable operating agreement, or to conduct any other operations other than
normal operations of existing wells on the Oil and Gas Properties, except for
operations which would require capital expenditures for such single operation,
net to Sellers’ interest, of less than $100,000, and (b) no pooling proceedings
are currently pending by Sellers or other working interest owners before the
Oklahoma Corporation Commission with respect to the Oil and Gas Properties,
except for pooling proceedings which, if Sellers participated in the proposed
operation, would require capital expenditures, net to Sellers’ interest, of less
than $100,000.
 
 Section
4.9.                                Production
Sales Contracts.
  There
exist no agreements or arrangements for the sale of Hydrocarbons from the Oil
and Gas Properties (including calls on, or other rights to purchase, production,
whether or not the same are currently being exercised) other than
(a) production sales contracts (in this Section, the
  10
  “Scheduled Production Sales
Contracts”) disclosed in Section 4.9 of the Sellers Disclosure
Schedule or (b) agreements or arrangements which are cancelable on thirty
(30) days notice or less without penalty or detriment.  To Sellers’
Knowledge, during Sellers’ Period of Ownership, all proceeds from the sale of
Hydrocarbons from the Oil and Gas Properties are being received (without offset,
abatement or reduction) by Sellers in a timely manner and are not being held in
suspense, except for such instances which would not reasonably be expected to
have a Material Adverse Effect on Sellers or the Properties taken as a
whole.
 
 Section
4.10.                                Plugging
and Abandonment.
  To
Sellers’ Knowledge, except for wells listed in Section 4.10 of the Sellers
Disclosure Schedule, there are no dry holes, or shut in or otherwise inactive
wells, located on the Oil and Gas Properties or on lands pooled or unitized
therewith, except for wells that have been properly plugged and abandoned in
accordance with Applicable Law.
 
 Section
4.11.                                Permits.
  Sellers
have all Permits necessary or appropriate to own and where Seller operates,
operate the Oil and Gas Properties as presently being owned and operated, except
for such Permits the absence of which would not be reasonably expected to have a
Material Adverse Effect, and to Sellers’ Knowledge, such Permits are in full
force and effect.  Except as set forth in Section 4.11 of the
Sellers Disclosure Schedule, Sellers have not received written notice of any
violations in respect of any Permits and to Sellers’ Knowledge, there are no
violations in respect of any Permit and no one has communicated to Sellers that
there are any violations in respect of any Permit, except for such violations
which would not reasonably be expected to have a Material Adverse
Effect.
 
 Section
4.12.                                Payment
of Expenses.
  All
expenses (including all bills for labor, materials, and supplies used or
furnished for use in connection with the Properties, and all severance,
production, ad valorem, and other similar Taxes) relating to the ownership or
operation by Sellers of the Properties, have been, and are being, paid (timely,
and before the same become delinquent) by Sellers, except such expenses and
Taxes as are disputed in good faith by Sellers and for which an adequate
accounting reserve has been established by Sellers.  Sellers are not
delinquent with respect to their obligations to bear costs and expenses relating
to the development and operation of the Oil and Gas Properties.
 
 Section
4.13.                                Compliance
with Laws.
  To
Sellers’ Knowledge, the ownership and operation of the Properties operated by
Sellers have been in compliance with all Applicable
Laws.  Notwithstanding the foregoing, this Section 4.13 does not
relate to environmental matters (including compliance with Environmental Laws or
matters that would constitute Environmental Defects), it being agreed that such
matters are covered by and dealt with in Section 4.17 and
Article VIII,
exclusively.
  11
  Section
4.14.                                Imbalances;
Prepayments.
  Section
4.14 of the Sellers Disclosure Schedule sets forth all Imbalances as of the date
set forth in such Section with respect to the Oil and Gas
Properties.  Sellers are not obligated by virtue of a take or pay
payment, advance payment or other similar payment (other than royalties,
overriding royalties and similar arrangements reflected in Exhibit C), to
deliver Hydrocarbons, or proceeds from the sale thereof, attributable to the Oil
and Gas Properties at some future time without receiving payment therefor at or
after the time of delivery.
 
 Section
4.15.                                Intellectual
Property.
  To
Sellers’ Knowledge, Sellers own or have valid licenses or other rights to use
all patents, copyrights, trademarks, software, databases, geological data,
geophysical data, engineering data, maps, interpretations, and other technical
information used by Sellers in connection with their ownership and operation of
the Properties as presently conducted, subject to the limitations contained in
the agreements governing the use of the same, which limitations are customary
for companies engaged in the business of the exploration and production of
Hydrocarbons.
 
  Section
4.16.                                Taxes.
  (a)           Except
as set forth in Section 4.16 of the Sellers Disclosure Schedule, all ad valorem
and severance Taxes due and payable for the Properties have been timely paid in
accordance with Applicable Laws and are not delinquent, or if not paid, are
being contested in good faith by one or more of the Sellers.
  (b)           With
respect to all Taxes related to the Properties, (i) all material Tax
Returns relating to the Properties required to be filed on or before the
Effective Date by Sellers with respect to any Taxes for any period ending on or
before the Effective Date have been timely filed with the appropriate
Governmental Entity, (ii) to Sellers Knowledge, such Tax Returns are true
and correct in all respects, and (iii) all Taxes reported on such Tax
Returns have been paid or provided for, except those being contested in good
faith.
  (c)           With
respect to all Taxes related to the Properties (i) there are not currently
in effect any extension or waiver by Sellers of any statute of limitations of
any jurisdiction regarding the assessment or collection of any Tax related to
the Properties, and (ii) there are no administrative Proceedings or
lawsuits pending against the Sellers with respect to the Properties by any
taxing authority.
  (d)           Neither
Seller was bound as of the Effective Date or will be bound at Closing by any tax
partnership agreement binding upon Sellers that would preclude Sellers form
being entitled to dispose of the property.
  
  Section
4.17.                                Environmental
Matters.
   12
  Sellers
have not received any notification of, individually or in the aggregate, any
pending or threatened investigation, claim, penalty or action by any
Governmental Entity or other Person relating to the environmental condition of
the Properties, and to Sellers’ Knowledge (a) there has been no release or
threat of release of any Hazardous Substance (as the terms “release” and
“Hazardous Substance” are defined under Environmental Laws) on or from any of
the Properties, or as a consequence of Sellers’ operations or activities on the
Properties, or any of them, prior to the date of this Agreement, or (b) no
condition exists on or under any of the Properties as of the date of this
Agreement which could have a Material Adverse Effect on Sellers and/or the
Properties taken as a whole.
  Section
4.18.                                Preferential
Purchase Rights and Required Consents.
  To
Sellers’ Knowledge, all preferential purchase rights which may pertain to the
transfer of the Properties to Buyer and all requirements that consent be
obtained from third parties prior to assignment of the Properties to Buyer are
set forth on Section 4.18 of the Sellers’ Disclosure Schedule.
  Section
4.19.                                Payment
of Burdens on Production.
  To
Sellers’ Knowledge, during Sellers’ Period of Ownership of Oil and Gas
Properties operated by Sellers, all delay rentals, shut-in payments, lease
extension payments, royalties, excess royalties, overriding royalty interests,
production payments, net profits interests and other payments due under or with
respect to production from the Properties have been properly and timely paid,
except for (i) suspended revenues to be disclosed to Buyer pursuant to Section 7.11 below,
and/or (ii) such failures to properly or timely pay which would not be
reasonably expected to have a Material Adverse Effect.
  Section
4.20.                                Fees and
Commissions.
  Buyer
will have no responsibility for payment of any broker’s, finder’s, financial
advisors’ or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon any arrangements made by or on behalf
of Sellers.
 
 Section
4.21.                                Disclaimer
of Warranties.
  Other
than those expressly set out in this Article IV,
Sellers hereby expressly disclaim any and all representations or warranties with
respect to the Properties or the transactions contemplated
hereby.  Subject to and without in any manner affecting or diminishing
Sellers’ indemnity obligations under Section 11.2 below,
Buyer agrees that the Properties are otherwise being sold by each Seller “where
is” and “as is”, with all faults.  Specifically as a part of (but not
in limitation of) the foregoing, Buyer acknowledges that Sellers have not made,
and Sellers hereby expressly disclaim, any representation or warranty (express,
implied, under common law, by statute or otherwise) as to the title or condition
of the Properties (INCLUDING
ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR CONFORMITY TO MODELS OR SAMPLES OF
MATERIALS).  OTHER THAN THOSE EXPRESSLY SET OUT IN
THISARTICLE IV, SELLERS MAKE NO REPRESENTATION OR
WARRANTY AS TO (I) THE AMOUNT, VALUE, QUALITY, QUANTITY, VOLUME, OR
DELIVERABILITY OF
  13
  ANY OIL, GAS, OR OTHER MINERALS OR
RESERVES (IF ANY) IN, UNDER, OR ATTRIBUTABLE TO THE PROPERTIES, (II) THE
PHYSICAL, OPERATING, REGULATORY COMPLIANCE, SAFETY, OR ENVIRONMENTAL CONDITION
OF THE PROPERTIES, BOTH SURFACE AND SUBSURFACE, INCLUDING MATTERS RELATED TO THE
PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS MATERIALS, SOLID WASTES, ASBESTOS OR
NATURALLY OCCURRING RADIOACTIVE MATERIALS (“NORM”), OR (III) THE GEOLOGICAL OR
ENGINEERING CONDITION OF THE PROPERTIES OR ANY VALUE THEREOF.  SELLERS
MAKE NO WARRANTY OR REPRESENTATION, EXPRESS, STATUTORY, OR IMPLIED, AS TO
(A) THE ACCURACY, COMPLETENESS, OR MATERIALITY OF ANY DATA, INFORMATION, OR
RECORDS FURNISHED TO BUYER IN CONNECTION WITH THE PROPERTIES OR OTHERWISE
CONSTITUTING A PORTION OF THE PROPERTIES; (B) THE PRESENCE, QUALITY, AND
QUANTITY OF HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE PROPERTIES;
(C) THE ABILITY OF THE PROPERTIES TO PRODUCE HYDROCARBONS, INCLUDING
PRODUCTION RATES, DECLINE RATES, AND RECOMPLETION OPPORTUNITIES; (D) EXCEPT
AS PROVIDED INSECTIONS
4.13AND/OR4.14, IMBALANCE OR PAYOUT ACCOUNT
INFORMATION, ALLOWABLES, OR OTHER REGULATORY MATTERS, (E) THE PRESENT OR
FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS, OR PROFITS, IF ANY, TO BE DERIVED
FROM THE PROPERTIES, (F) EXCEPT AS PROVIDED INSECTION
4.17, THE ENVIRONMENTAL
CONDITION OF THE PROPERTIES, (G) ANY PROJECTIONS AS TO EVENTS THAT COULD OR
COULD NOT OCCUR, (H) ANY OTHER MATTERS CONTAINED IN OR OMITTED FROM ANY
INFORMATION OR MATERIAL FURNISHED TO BUYER BY SELLERS OR OTHERWISE CONSTITUTING
A PORTION OF THE PROPERTIES, OR (I) ANY PORTION OF THE PROPERTIES OTHER THAN THE
PORTIONS OF THE PROPERTIES BEING SOLD OR CONVEYED BY THAT PARTICULAR SELLER. ANY
DATA, INFORMATION, OR OTHER RECORDS FURNISHED BY SELLERS PURSUANT TOSECTION
6.1OR UNDER OTHER
PROVISIONS OF THIS AGREEMENT ARE PROVIDED TO BUYER AS A CONVENIENCE AND BUYER’S
RELIANCE ON OR USE OF THE SAME IS AT BUYER’S SOLE RISK.
 
 Section
4.22.                                Disclosures.
  The
matters set forth on the Sellers Disclosure Schedule are not necessarily matters
that Sellers are required to disclose or matter that would constitute a breach
of any representation or warranty had such matters not been
disclosed.
 
 ARTICLE
V
  Representations and
Warranties of Buyer
  Section
5.1.                                Organization
and Existence.
  Buyer is
a corporation, duly organized, legally existing and in good standing under the
laws of the State of Delaware, and is qualified to do business and in good
standing in each of the states in which Oil and Gas Properties are located where
the laws of such state would require a
  14
  corporation
owning the Oil and Gas Properties located in such state to so
qualify.  Buyer is also qualified to own and operate oil and gas
properties with all applicable governmental agencies having jurisdiction over
the Oil and Gas Properties, to the extent such qualification is necessary or
appropriate or will be necessary or appropriate upon consummation of the
transactions contemplated hereby.
 
 Section
5.2.                                Power and
Authority.
  Buyer has
full corporate power and authority to execute, deliver, and perform this
Agreement and each other agreement, instrument, or document executed or to be
executed by Buyer in connection with the transactions contemplated hereby to
which it is a party and to consummate the transactions contemplated hereby and
thereby.  The execution, delivery, and performance by Buyer of this
Agreement and each other agreement, instrument, or document executed or to be
executed by Buyer in connection with the transactions contemplated hereby to
which it is a party, and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action
of Buyer.
 
 Section
5.3.                                Valid and
Binding Agreement.
  This
Agreement has been duly executed and delivered by Buyer and constitutes, and
each other agreement, instrument, or document executed or to be executed by
Buyer in connection with the transactions contemplated hereby to which it is a
party has been, or when executed will be, duly executed and delivered by Buyer
and constitutes, or when executed and delivered will constitute, a valid and
legally binding obligation of Buyer, enforceable against it in accordance with
their respective terms, except that such enforceability may be limited by
(a) applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws affecting creditors’ rights generally, and (b) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances.
 
 Section
5.4.                                Non-Contravention.
  Neither
the execution, delivery, and performance by Buyer of this Agreement and each
other agreement, instrument, or document executed or to Buyer’s Knowledge to be
executed by Buyer in connection with the transactions contemplated hereby to
which it is a party and the consummation by it of the transactions contemplated
hereby and thereby do not and will not (i) conflict with or result in a
violation of Buyer’s Governing Documents, (ii) conflict with or result in a
violation of any provision of, or constitute (with or without the giving of
notice or the passage of time or both) a default under, or give rise (with or
without the giving of notice or the passage of time or both) to any right of
termination, cancellation, or acceleration under, any bond, debenture, note,
mortgage, indenture, or any lease, contract, agreement, or other instrument or
obligation to which Buyer is a party or by which Buyer or any of its properties
may be bound, (iii) result in the creation or imposition of any lien or
other encumbrance upon the properties of Buyer, or (iv) violate any
Applicable Law binding upon Buyer, except, in the instance of clauses (ii) and
(iii) above, for which any such conflicts, violations, defaults, terminations,
cancellations or accelerations which would not, individually or in the
aggregate, have a Material Adverse Effect.
  15
  Section
5.5.                                Approvals.
  Other
than requirements (if any) that there be obtained consents to assignment (or
waivers of preferential rights to purchase) from third parties, no consent,
approval, order, or authorization of, or declaration, filing, or registration
with, any court or governmental agency or of any third party is required to be
obtained or made by Buyer in connection with the execution, delivery, or
performance by Buyer of this Agreement and each other agreement, instrument, or
document executed or to be executed by Buyer in connection with the transactions
contemplated hereby to which it is a party or the consummation by it of the
transactions contemplated hereby and thereby, except, for such consents,
approvals, orders, authorizations, declarations, filings, or registrations
which, if not obtained or made (as applicable), would not, individually or in
the aggregate, have a Material Adverse Effect.
 
 Section
5.6.                                Pending
Litigation.
  There are
no Proceedings pending or, to Buyer’s Knowledge, threatened against or affecting
the execution and delivery of this Agreement by Buyer or the consummation of the
transactions contemplated hereby by Buyer.
 
 Section
5.7.                                Knowledgeable
Purchaser.
  Buyer is
a knowledgeable purchaser, owner and operator of oil and gas properties, has the
ability to evaluate (and in fact has evaluated) the Properties for
purchase.  Buyer is an “accredited investor,” as defined in Regulation
D promulgated pursuant to the Securities Act, and is acquiring the Properties
for its own account and not with the intent to make a distribution within the
meaning of the Securities Act (and the rules and regulations pertaining thereto)
or a distribution thereof in violation of any other applicable securities
laws.   In making the decision to enter into this Agreement and
to consummate the transactions contemplated hereby, Buyer has relied only on
Sellers’ representations and warranties under Article IV and its
own independent due diligence investigation of the Properties.  Buyer
acknowledges that it has been advised by and has relied on its own expertise and
legal, land, tax, reservoir engineering, and other professional counsel
concerning this transaction, the Properties and the value thereof.
 
 Section
5.8.                                Funds.
  Buyer
has, and at Closing Buyer will have sufficient cash and other sources of
immediately available funds, as are necessary in order to pay the Adjusted
Purchase Price to Sellers at the Closing and otherwise consummate the
transactions contemplated hereby.
 
 Section
5.9.                                Fees and
Commissions.
  No
broker, investment banker, financial advisor or other Person is entitled to any
broker’s, finder’s, financial advisor’s or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Buyer.
  16
  ARTICLE
VI
  Certain Covenants of Sellers
Pending Closing
  Section
6.1.                                Access to
Files.
  Subject
to the terms of the Confidentiality Agreement and Article IX, from the
date hereof until the Closing Date, Sellers will give Buyer, and its attorneys
and other authorized representatives, access at all reasonable times and in a
manner so as to not interfere with the normal business operations of the Sellers
to the Properties and to any contract files, lease or other title files,
production files, well files, and other files of Sellers pertaining to the
ownership or operation of the Properties, and Sellers will use their Reasonable
Best Efforts to arrange for Buyer, and its attorneys and other representatives,
to have access to any such files in the office of Sellers.
 
 Section
6.2.Conduct
of Operations.
  From the
date hereof until the Closing Date, Sellers will (i) continue the routine
operation of the Oil and Gas Properties in the ordinary course of business as
previously conducted prior to the date of this Agreement; (ii) continue the
routine renewal of Leases scheduled to expire on or before the Closing Date, the
costs associated with such Lease renewal program being allocated between the
parties as of the Effective Date; (iii) fulfill all contractual obligations and
conditions imposed on Sellers respecting the Oil and Gas Properties in the
ordinary course of business as previously conducted including, without
limitation, the timely payment of royalties, delay rentals, shut-in royalty
payments and other payments required under Leases and Material Contracts;
(iv) operate the Oil and Gas Properties in material compliance with all
Applicable Laws and Environmental Laws and Material Contracts, and (v) continue
in the ordinary course of business with all approved capital expenditures
respecting the Oil and Gas Properties.  Without expanding any
obligations that Sellers may have to Buyer, it is expressly agreed that Sellers
shall never have any liability to Buyer with respect to operation of an Oil and
Gas Property greater than that which it might have as the operator to a
non-operator under Applicable Law and under the applicable operating agreement
(or, in the absence of such an agreement, under the AAPL 610 (1989 Revision)
form Operating Agreement).
 
 Section
6.3.Restrictions
on Certain Actions.
  From the
date hereof until the Closing Date, Sellers will not, without Buyer’s prior
written consent in connection with the Properties:
 
 (a)           expend
any funds, or make any commitments to expend funds (including entering into new
agreements which would obligate Sellers to expend funds), or otherwise incur any
other obligations or liabilities, other than to pay expenses or to incur
liabilities in the ordinary course of business as previously conducted prior to
the date of this Agreement in connection with operation of the Properties after
the Effective Date, except in the event of an emergency requiring immediate
action to protect life or preserve the Properties;
  (b)           except
where necessary to prevent the termination of a Lease or other material
agreement governing Sellers’ interest in the Properties, propose the drilling of
any additional wells, or propose the deepening, plugging back or reworking of
any
   17
  existing
wells, or propose the conducting of any other operations which require consent
under the applicable operating agreement, or propose the conducting of any other
operations other than the normal operation of the existing wells on the Oil and
Gas Properties, or propose the abandonment of any wells on the Oil and Gas
Properties (and Sellers agree that they will advise and seek Buyer’s direction
as to any such proposals made by third parties and will respond to each such
proposal made by a third party in the manner requested by Buyer);
  (c)           sell,
transfer, or abandon any portion of the Properties other than items of
materials, supplies, machinery, equipment, improvements, or other personal
property or fixtures forming a part of the Properties (and then only if the same
is replaced with an item of substantially equal suitability, free of liens and
security interests, which replacement item will then, for the purposes of this
Agreement, become part of the Properties);
  (d)           voluntarily
relinquish operations of any Oil and Gas Property currently operated by Sellers
to anyone other than Buyer; or
  (e)           release
(or permit to terminate), or modify or reduce its rights under, any Lease
forming a part of the Oil and Gas Properties, or any Material Agreement, or
modify any existing production sales contracts or enter into any new production
sales contracts, except contracts terminable by Sellers with notice of thirty
(30) days or less.
  Section
6.4.Lease
Renewals and Top Leasing.
  As
provided in Section
6.2 above, Sellers will continue the routine renewal of Leases scheduled
to expire on or before the Closing Date, except as to any such Leases as the
parties agree not to renew.  Sellers recognize the importance to Buyer
that no Leases lapse that are scheduled to expire in the 2008 calendar
year.  Accordingly, Sellers covenant and agree that Buyer shall have
the right to top lease any Lease that Sellers fail to timely renew, or, any
other Lease that is scheduled to expire on or before December 31,
2008.  Should Buyer incur lease bonus or other expenses in connection
with a top lease that proved necessary due to Sellers’ failure to renew a Lease
expiring on or before the Effective Date, Buyer shall receive a credit against
the Purchase Price at Closing equal to Buyer’s third-party expenses incurred in
acquiring such top lease.  Should the purchase and sale contemplated
in this Agreement fail to occur for any reason other than the breach or failure
to perform by Sellers, Sellers shall have the right, but not the obligation, to
purchase from Buyer any and all top leases acquired by Buyer under this Section 6.4, which
option shall be exercised (if at all) through Sellers’ delivery of written
notice to Buyer within thirty (30) days from and after the termination of this
Agreement.  If Sellers timely exercise such option, Buyer will assign
such top leases to Sellers upon Sellers’ cash payment to Buyer of Buyer’s
third-party costs incurred in Buyer’s purchase of such top leases.
  Section
6.5.Payment
of Expenses.
  Sellers
will cause all expenses (including all bills for labor, materials, and supplies
used or furnished for use in connection with the Properties and all severance,
production, and similar Taxes) relating to the ownership or operation of the
Properties prior to the Effective Date to be
  18
  promptly
paid and discharged, except for expenses disputed in good faith and respecting
which Sellers have agreed to remain responsible and hold Buyer harmless with
respect thereto.
 
 Section
6.6.Preferential
Rights and Third Party Consents.
  Sellers
will use Reasonable Best Efforts to request, from the appropriate parties (and
in accordance with the documents creating such rights and/or requirements),
waivers of the preferential rights to purchase, or requirements that consent to
assignment be obtained, which are identified in Section 4.18 of the Sellers
Disclosure Schedule.  Sellers shall have no obligation to assure that
such waivers are obtained, and if all such waivers (or any other waivers of
preferential rights to purchase or requirements that consent be obtained to
assignment, even if the same are not listed on such Section 4.18) are not
obtained, Buyer may treat any waiver which is not obtained as a matter which
causes Sellers’ title to not be sufficient to meet the standards set forth in
Article VIII
(except the following shall not apply: (i) the $50,000 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 unobtained waiver is a waiver of a preferential
right to purchase, and if both Buyer and Sellers agree to the treatment of such
matter (and agree upon an appropriate allocation of the Purchase Price), Sellers
will tender (at the agreed allocated portion of the Purchase Price) the required
interest in the Property affected by such unwaived preferential right to
purchase to the holder, or holders, of such right who have elected not to waive
such preferential right to purchase, and if, and to the extent that, such
preferential right to purchase is exercised by such party or parties, such
interest in such Property will be excluded from the transaction contemplated
hereby and the Purchase Price will be reduced by the amount paid, or to be paid,
by the party exercising such preferential right to purchase (and Sellers shall
collect such amount from such purchaser).
 
 ARTICLE
VII
  Additional Pre-Closing and
Post-Closing Agreements of Both Parties
  Section
7.1.                                Reasonable
Best Efforts.
  Each
party hereto agrees that it will not voluntarily undertake any course of action
inconsistent with the provisions or intent of this Agreement and will use its
Reasonable Best Efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things reasonably necessary, proper, or advisable under
Applicable Laws to consummate the transactions contemplated by this Agreement,
including (i) cooperation in determining whether any consents, approvals,
orders, authorizations, waivers, declarations, filings, or registrations of or
with any Governmental Entity or third party are required in connection with the
consummation of the transactions contemplated hereby; (ii) Reasonable Best
Efforts to obtain any such consents approvals, orders, authorizations, and
waivers and to effect any such declarations, filings, and registrations;
(iii) Reasonable Best Efforts to cause to be lifted or rescinded any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby;
(iv) Reasonable Best Efforts to defend, and cooperation in defending, all
Proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby; and (v) the execution of any additional instruments
necessary to consummate the transactions contemplated hereby.
  19
  Section
7.2.                                Notice of
Litigation.
  Until the
Closing, (i) Buyer, upon learning of the same, shall promptly notify
Sellers of any Proceeding which is commenced or threatened against Buyer and
which affects this Agreement, the Properties or the transactions contemplated
hereby, and (ii)  Sellers, upon learning of the same, shall promptly notify
Buyer of any Proceeding which is commenced or threatened against Sellers which
affects this Agreement, the Properties or the transactions contemplated
hereby.
  Section
7.3.                                Notification
of Certain Matters.
  Until the
Closing, Sellers shall give prompt notice to Buyer of:  (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which, to Sellers’ Knowledge, would be likely to cause any representation or
warranty made by Sellers in Article IV to be
untrue or inaccurate at or prior to the Closing, and (ii) any failure of
Sellers to comply with or satisfy any covenant, condition, or agreement to be
complied with or satisfied by Sellers hereunder prior to
Closing.  Until the Closing, Buyer shall give prompt notice to Sellers
of:  (i) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which, to Buyer’s Knowledge, would be likely to
cause any representation or warranty contained in Article V to be
untrue or inaccurate at or prior to the Closing, and (ii) any failure of
Buyer to comply with or satisfy any covenant, condition, or agreement to be
complied with or satisfied by Buyer hereunder prior to Closing.  The
delivery of any notice pursuant to this Section 7.3 shall not
be deemed to (x) modify the representations or warranties hereunder of the
party delivering such notice, (y) modify the conditions set forth in Article IX, or
(z) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
 
 Section
7.4.                                Fees and
Expenses.
  (a)           Except
as otherwise provided herein, (i) all fees and expenses incurred in connection
with this Agreement by Sellers will be borne by and paid by Sellers, and (ii)
all fees and expenses incurred in connection with this Agreement by Buyer will
be borne by and paid by Buyer.
  (b)           All
required documentary, filing and recording fees and expenses in connection with
the filing and recording of the Assignment and other instruments required to
convey title to the Properties to Buyer shall be borne by
Buyer.  Buyer shall assume responsibility for, and shall bear and pay,
any applicable state sales and use Taxes (including any applicable interest or
penalties) incurred or imposed with respect to the transactions contemplated by
this Agreement.
  Section
7.5.                                Public
Announcements.
  Except as
may be required by Applicable Law, neither Buyer nor Sellers shall issue any
press release or otherwise make any statement to the public generally with
respect to this Agreement or the transactions contemplated hereby without the
prior consent of the other party (which consent shall not be unreasonably
withheld and which consent, if given verbally, shall be confirmed in writing
within one Business Day thereafter).  Any such press release or
statement required by Applicable Law shall only be made after reasonable notice
to the other parties.
  20
  Section
7.6.                                Casualty Loss Prior to
Closing.
  In the
event of damage by fire or other casualty to any of the Properties after the
Effective Date and prior to the Closing, then this Agreement shall remain in
full force and effect, and (unless Buyer and Sellers shall otherwise agree) in
such event:
 
 (a)           as
to each such Property so damaged which is an Oil and Gas Property, then, at
Seller’s election, either (i) such Property shall be treated as if it had
an asserted Title Defect associated with it and the procedure provided for in
Article VIII
shall be applicable thereto (except the following shall not apply: (A) the
$50,000 threshold provided for in Section 8.1(c), (B)
Section
8.1(d)(iii)(B), and (C) Section 8.5(a)), or
(ii) the Purchase Price will not be adjusted, and if Sellers should be
entitled to make any claims under any insurance policy with respect to such
damage, Sellers shall, at its election, either collect (and when collected pay
over to Buyer), or assign to Buyer, such claims,
  (b)           as
to each such Property which is other than an Oil and Gas Property, Sellers
shall, at its election, either collect (and when collected pay over to Buyer),
or assign to Buyer, any and all insurance claims relating to such loss, and
Buyer shall take title to the Property affected by such loss without reduction
of the Purchase Price, and
  (c)           notwithstanding
paragraphs (a)
and (b) above,
should Sellers make any claim under applicable insurance policies but the monies
recoverable under such policies (i) are less than the full Allocated Value for
the Property affected by the casualty, in the case of a total loss, or (ii) are
insufficient to compensate Buyer for the diminution in value to the Property
affected by the casualty, in the case of a partial loss (in either case, a
“Casualty Deficit”), the parties agree that Buyer
shall be entitled at Closing to a credit against the Purchase Price equal to the
Casualty Deficit.  If Sellers and Buyer are unable to agree as to the
monetary amount constituting a Casualty Deficit (in the case of partial losses
only), such matters shall be considered a Defect Dispute to be resolved by the
Independent Expert pursuant to Section 8.3
below.
  Section
7.7.                                Governmental
Bonds.
  At or
prior to Closing, Buyer shall deliver to Sellers evidence that Buyer has
completed all action necessary to permit Buyer to post bonds or other security
immediately following the Closing with all applicable Governmental Entities
meeting the requirements of such Governmental Entities to own, and where
appropriate, operate, the Properties.
 
 Section
7.8.                                Assumed
Obligations.
  At
Closing, Buyer shall assume and agree to pay, perform and discharge the Assumed
Obligations.
 
 Section
7.9.Operational
Transition.
  IT IS
RECOGNIZED THAT THERE IS NO ASSURANCE GIVEN BY SELLERS THAT BUYER SHALL SUCCEED
SELLERS AS OPERATOR OF ANY OIL AND GAS
  21
  PROPERTY
WHERE OTHER PARTIES OWN INTERESTS IN THE WELLS LOCATED THEREON, but Sellers
shall cooperate with Buyer to see that Buyer shall succeed Sellers as operator
of all the Sellers operated properties, by: (a) delivering at Closing, signed
counterparts of letters addressed to non-operating working interest owners of
the Sellers operated Oil and Gas Properties advising them of the sale of those
Oil and Gas Properties by Sellers to Buyer; and seeking such owners’
consideration of Buyer’s selection as successor to Seller as operator, and (b)
executing applicable change of operator forms in favor of Buyer for filing with
the applicable Governmental Agencies.
 
 Section
7.10.Books and
Records.
  At or
promptly after Closing, but in no event later than 30 days after the Closing,
Sellers will deliver to Buyer, at Sellers’ expense, all related books and
records that are a part of the Properties to a location designated by Buyer;
provided that Buyer shall pay any expenses incurred by Sellers with respect to
any electronic transfers or conversions of Sellers’ records.  Sellers
(or its Affiliates) shall have the right to have reasonable access during
Buyer’s reasonable and customary business hours to inspect and copy (at Sellers’
or such Affiliate’s expense) the books and records so delivered under this Section 7.10 for the
six-year period commencing on the Closing Date.
 
 Section
7.11.Suspended
Funds.
  As soon
as practicable after the Closing Date, but no later than 60 days thereafter,
Sellers shall provide to Buyer a listing in Excel spreadsheet format, showing
all proceeds from production attributable to the wells which are currently held
in suspense by Sellers and the reason for suspending such proceeds, and shall
transfer to Buyer all those suspended proceeds (the “Suspended
Proceeds”).  Thereafter, Buyer shall be responsible for proper
distribution of the Suspended Proceeds to the parties lawfully entitled to them
to the extent and only to the extend of Suspended Proceeds, except Sellers shall
remain liable for (i) interest and penalties, if any, associated with the
Suspended Proceeds for failure, prior to the Closing Date, to escheat such
Suspended Proceeds to the applicable Governmental Entities in accordance with
Applicable Law, and (ii) damages, costs and expenses arising from claims by
third parties that the Suspended Proceeds were wrongfully or improperly placed
in suspense by Sellers.
 
 Section
7.12.Letters-in-Lieu.
  At
Closing, Sellers shall execute and deliver letters in lieu of transfer orders
(or similar documentation) in form reasonably acceptable to Buyer and
Sellers.
 
 Section
7.13.Logos and
Names.
  As soon
as practicable after the Closing, Buyer will remove or cause to be removed the
names and marks used by Sellers and all variations and derivatives thereof and
logos relating thereto from the Properties.
  22
  Section
7.14.    Further
Assurances.
  At the
Closing, and from time to time following the Closing, at the request of any
party hereto and without further consideration, the other party or parties
hereto shall execute and deliver to such requesting party such instruments and
documents and take such other action (but without incurring any material
financial obligation) as such requesting party may reasonably request in order
to consummate more fully and effectively the transactions contemplated
hereby.
 
 Section
7.15.Participation
Option Agreement.
  As
additional consideration for the sale of the Assets from Sellers to Buyer, Buyer
and Sellers agree to execute a Participation Option Agreement in a form to be
mutually agreed upon by the parties no later than ten (10) Business Days after
the date of this Agreement (the “Participation Option
Agreement”), granting Sellers an election at casing point to acquire
1/8th of
Buyer’s working interest in certain qualifying wells (as further and more
specifically described in the Participation Option Agreement).
 
 
 Section
7.16.                                Financial
Information.
 
 (a)           Sellers
will use its Reasonable Best Efforts to provide to Buyer (and Buyer’s auditors
and accountants), as soon as practicable after the date of this Agreement, but
no later than October 30, 2008, statements of revenues and direct operating
expenses, and reserve reports for the business and operations conducted by
Sellers relating to the Properties for Sellers’ Period of Ownership, conforming
with the rules of the Securities and Exchange Commission.  Sellers
will provide suitable electronic detail in the form of reserve reports and lease
operating statements by Property.  Sellers will provide to Buyer any
additional financial information related to the Properties given to Sellers by
Dominion Exploration & Production, Inc. (or its Affiliates) that is readily
available to Sellers; provided, however, that Sellers will have no obligation to
seek any additional financial information related to the Properties from
Dominion Exploration & Production, Inc. (or its Affiliates).
 
 (b)           Sellers
shall afford to Buyer and any of its Affiliates, and their respective
accountants, counsel and representatives full access during normal business
hours for three years following the Closing Date to all of Sellers’ financial
and accounting records, and contracts and other documentation reasonably related
thereto, to the extent (i) such records and other information are not part of
the books and records of Sellers delivered to Buyer pursuant to this Agreement,
and (ii) such records and other information are reasonably necessary for Buyer
and any of its Affiliates in connection with (A) the preparation of pro forma
financial statements related to the transactions contemplated by this Agreement,
(B) the preparation of any report or other filing required for compliance with
federal or state securities laws, including prospectuses or offering memoranda
relating to securities offerings, by Buyer or any of its Affiliates, (C) a
subsequent audit of the financial statements of Sellers in connection with a
change in external audit firms, (D) a subsequent restatement of the financial
statements of the financial statements of Sellers, or (E) any inquiry,
investigation or legal proceeding by any Governmental Authority
  23
  related
to the financial statements of Sellers; provided that Buyer and its Affiliates
may not waive any legal or other privilege in connection with any such inquiry,
investigation, or legal proceeding.
 
 (c)           Buyer
shall promptly pay and/or reimburse Sellers for all out-of-pocket costs incurred
in connection with the preparation and provision of any financial information
provided pursuant to this Section 7.16.
 
 Section
7.17.                                Hedging of
Production.
 
 Sellers
shall, at Buyer’s request and in close coordination with Buyer, enter into
transferable hedges under terms acceptable to Buyer respecting not less than
seventy-five (75%) of the daily oil and natural gas production from the Oil and
Gas Properties with the Bank of America, N.A. or other hedging counterparty
acceptable to Buyer.  The parties understand and agree that (i) such
hedging arrangements shall not be undertaken without the prior approval of
Buyer, (ii) such hedging arrangements shall be at no cost to Sellers, and (iii)
such hedging arrangements shall be coordinated to take effect upon termination
of the Existing Hedges.
 
 ARTICLE
VIII
  Due Diligence
Examination
  Section
8.1.                                Title Due
Diligence Examination.
  (a)           From
the date of this Agreement until 5:00 p.m. (local time in Houston, Texas) five
(5) Business Days prior to the Closing (the “Examination Period”), Sellers
shall afford to Buyer and its authorized representatives reasonable access
during normal business hours and in a manner so as to not unduly interfere with
the normal business operations of the Sellers to the office, personnel and books
and records of Sellers in order for Buyer to conduct a title examination as it
may in its sole discretion choose to conduct with respect to the Oil and Gas
Properties in order to determine whether Title Defects (as defined below) exist
(“Buyer’s Title
Review”).  Such books and records shall include all title
opinions, title files, ownership maps, lease files, assignments, division
orders, operating records and agreements, well files, financial and accounting
records, geological, geophysical and engineering records, in each case insofar
as same may now be in existence and in the possession of Sellers, excluding,
however, any information that Sellers are prohibited from disclosing by bona
fide, third party confidentiality restrictions; provided, that if requested by
Buyer, Sellers shall use their Reasonable Best Efforts to obtain a waiver of any
such restrictions in favor of Buyer.  The cost and expense of Buyer’s
Title Review, if any, shall be borne solely by Buyer.
  (b)           If
Buyer discovers any Title Defect affecting any of the Oil and Gas Properties,
Buyer shall notify Sellers prior to the expiration of the Examination Period of
such alleged Title Defect.  To be effective, such notice (“Title Defect Notice”) must
(i) be in writing, (ii) be received by Sellers prior to the expiration
of the Examination Period, (iii) describe the Title Defect in reasonable
detail (including any alleged variance in the Net Revenue Interest),
(iv) identify the specific Oil and Gas Property affected by such Title
Defect, and (v) include the value of such Title Defect as determined by
Buyer
   24
  in good
faith.  Buyer will provide Sellers with Title Defect Notices, if any,
as soon as practicable upon discovery and will use Reasonable Best Efforts to
provide Sellers with updates of any alleged Title Defects.  Any
matters that may otherwise constitute Title Defects, but of which Sellers have
not been specifically notified by Buyer in accordance with the foregoing, shall
be deemed to have been waived by Buyer for all purposes.  Upon the
receipt of such effective Title Defect Notice from Buyer, Sellers shall, in
addition to the remedies set forth in Section 8.1(c)
(the “Remedies for Title
Defects”), use Sellers’ Reasonable Best Efforts to cure such Title Defect
at any time prior to the Closing.  The Oil and Gas Property affected
by such uncured Title Defect shall be a “Title Defect
Property”.
  (c)           With
respect to each Title Defect that is not cured on or before the Closing, the
Purchase Price shall be reduced, subject to this Article VIII, by
the Title Defect Amount with respect to such Title Defect
Property.  The “Title
Defect Amount” shall mean, with respect to a Title Defect Property, and
except in connection with Section 8.1(d)(i)(D),
the amount in excess of $50,000 by which such Title Defect Property is impaired
as a result of the existence of one or more Title Defects, which amount shall be
determined as follows:
  (i)           The
Title Defect Amount with respect to a Title Defect Property shall be determined
by taking into consideration the “Allocated Value” (as set forth
in Exhibit C
attached hereto) of the Oil and Gas Property subject to such Title Defect, the
portion of the Oil and Gas Property subject to such Title Defect, and the legal
effect of such Title Defect on the Oil and Gas Property affected thereby;
provided, however, that:  (A) if such Title Defect is in the
nature of Sellers’ Net Revenue Interest in an Oil and Gas Property being less
than the Net Revenue Interest set forth in Exhibit C
hereto, then the Title Defect Amount shall equal the Allocated Value for the
relevant Oil and Gas Property multiplied by the percentage reduction in such Net
Revenue Interest as a result of such Title Defect or (B) if such Title
Defect is in the nature of a Lien, then the Title Defect Amount shall equal the
amount required to fully discharge such Lien; and
  (ii)           If
the Title Defect results from any matter not described in Section 8.1(c)(i),
the Title Defect Amount shall be an amount equal to the difference between the
value of the Title Defect Property affected by such Title Defect with such Title
Defect and the value of such Title Defect Property without such Title Defect
(taking into account the portion of the Allocated Value of the Title Defect
Property).
  (d)           As
used in this Section 8.1:
  (i)           “Defensible Title” means, as of
the date of this Agreement and the Closing Date (and all periods in between),
with respect to the Oil and Gas Properties, such record title and ownership by
Sellers that:
  (A)           entitles
Sellers to receive and retain, without reduction, suspension or termination, not
less than the percentage set forth in Exhibit C as
Sellers’ Net Revenue Interest of all Hydrocarbons produced,
   25
  saved,
and marketed from each Lease comprising such Oil and Gas Property as set forth
in Exhibit C,
through plugging, abandonment, and salvage of all wells comprising or included
in such Oil and Gas Property, and except for changes or adjustments that result
from the establishment of units, changes in existing units (or the participating
areas therein), or the entry into of pooling or unitization agreements after the
date hereof unless made in breach of the provisions of Section 6.3;
  (B)           obligates
Sellers to bear not greater than the percentage set forth in Exhibit C as
Sellers’ Working Interest of the costs and expenses relating to the maintenance,
development and operation of each Lease comprising such Oil and Gas Property,
through plugging, abandonment and salvage of all wells comprising or included in
such Oil and Gas Property, and except for changes or adjustments that result
from the establishment of units, changes in existing units (or the participating
areas therein), or the entry into of pooling or unitization agreements after the
date hereof unless made in breach of the provisions of Section 6.3;
  (C)           is
free and clear of all Liens, except Permitted Encumbrances;
  (D)           reflects
that all consents to assignment, notices of assignment or preferential purchase
rights which are applicable to or must be complied with in connection with the
transaction contemplated by this Agreement, or any prior sale, assignment or the
transfer of such Oil and Gas Property, have either been obtained and complied
with, or are deemed waived by Buyer pursuant to this Agreement, to the extent
the failure to obtain or comply with the same could render this transaction or
any such sale, assignment or transfer (or any right or interest affected
thereby) void or voidable or could result in Buyer or Sellers incurring any
liability.
  (ii)         “Permitted Encumbrances” shall
mean (A) Liens for Taxes which are not yet delinquent or which are being
contested in good faith and respecting which, should Sellers’ challenge of such
Taxes prove unsuccessful, the responsibility for the same would be allocated to
Buyer pursuant to Section 2.2(a)(i)
above; (B) normal and customary Liens of co-owners under operating
agreements, unitization agreements, and pooling orders relating to the Oil and
Gas Properties, which obligations are not yet due and pursuant to which Sellers
are not in default; (C) mechanic’s and materialman’s Liens relating to the
Oil and Gas Properties, which obligations are not yet due and pursuant to which
Sellers are not in default; (D) Liens in the ordinary course of business
consisting of minor defects and irregularities in title or other restrictions
(whether created by or arising out of joint operating agreements, farm-out
agreements, leases and assignments, contracts for purchases of Hydrocarbons or
similar agreements, or otherwise in the ordinary course of business) that are of
the nature customarily accepted by prudent purchasers of oil and gas properties
and do not decrease the Net Revenue Interest, increase the Working Interest
(without a proportionate increase in the Net Revenue Interest) or affect the
value of any property
   26
  encumbered
thereby; (E) all approvals required to be obtained from Governmental
Entities that are lessors under Leases forming a part of the Oil and Gas
Properties (or who administer such Leases on behalf of such lessors) which are
customarily obtained post-closing; (F) preferential rights to purchase and
consent to transfer requirements of any Person (to the extent same have been
complied with in connection with the prior sale, assignment or the transfer of
such Oil and Gas Property and are not triggered by the consummation of the
transactions contemplated herein) or are deemed waived by Buyer under the
Agreement; (G) Liens under the Credit Facility (provided such Liens are
released at Closing); (H) Liens under the Existing Hedges (provided such
Liens are released at Closing); and (I) conventional rights of reassignment
normally actuated by an intent to abandon or release a lease and requiring
notice to the holders of such rights.
  (iii)           “Title Defect” shall mean any
particular defect in or failure of Sellers’ ownership of any Oil and Gas
Property:  (A) that causes Sellers to not have Defensible Title
to such Oil and Gas Property, (B) that has attributable thereto a Title Defect
Amount in excess of $50,000 (except as otherwise provided for in Section 6.6 and Section 7.6(a)) and
(C) regarding which a Title Defect Notice has been timely and otherwise
validly delivered.  Notwithstanding any other provision in this
Agreement to the contrary, the following matters shall not constitute, and shall
not be asserted as, a Title Defect:  (A) defects or
irregularities arising out of lack of corporate authorization; (B) defects
or irregularities that have been cured or remedied by the applicable statutes of
limitation or statutes for prescription; (C) defects or irregularities in
the chain of title consisting of the failure to recite marital status in
documents or immaterial irregularities or omissions of heirship Proceedings;
(D) minor defects or irregularities in title which for a period of five
years or more have not delayed or prevented Sellers (or Sellers’ predecessor)
from receiving their Net Revenue Interest share of the proceeds of production
and have not caused Sellers to bear a share of expenses and costs greater than
its Working Interest share from each Lease, unit or Well; and (E) defects
or irregularities resulting from or related to probate Proceedings or the lack
thereof which defects or irregularities have been outstanding for five years or
more; provided, however, matters covered by subparagraphs (A), (C), (D) and (E)
above shall constitute a Title Defect if Buyer provides Sellers with
sufficiently clear evidence of an actual claim or the high probability of a
claim of title made or being made by a third party based on such
matter.
  (e)           If
Sellers and Buyer are unable to reach an agreement as to whether a Title Defect
exists or, if it does exist, the Title Defect Amount attributable such Title
Defect, the provisions of Section 8.3
shall be applicable.
  Section
8.2.                                Environmental
Due Diligence Examination.
  (a)           During
the Examination Period, Buyer shall have the right, or the right to cause an
environmental consultant reasonably acceptable to Sellers (“Buyer’s Environmental
Consultant”), to conduct a Phase I environmental assessment of the Oil
and Gas Properties and to conduct any further Phase I or other
non-invasive
   27
  environmental
assessment of the Oil and Gas Properties it deems appropriate, to the extent
Sellers have the authority to grant such right to Buyer. (“Buyer’s Environmental
Review”).  No less than three Business Days prior to the
proposed commencement date of Buyer’s Environmental Review, Buyer shall furnish
Sellers written notice specifying the nature of the review and the estimated
times and locations of Buyer’s site assessments.  The cost and expense
of Buyer’s Environmental Review, if any, shall be borne solely by
Buyer.  No Person, other than Buyer’s Environmental Consultant and
Buyer’s employees may conduct Buyer’s Environmental Review.  Sellers
shall have the right to have representatives thereof present to observe Buyer’s
Environmental Review conducted in Sellers’ offices or on Sellers’
properties.  Buyer agrees to conduct Buyer’s Environmental Review in a
manner so as not to unduly interfere with the business operations of Sellers and
in compliance with all Applicable Laws, and Buyer shall exercise due care with
respect to Sellers’ properties and their condition.  If the initial
environmental assessment of Buyer’s Environmental Consultant indicates the
existence of a potential materially adverse environmental condition or
Substantial Environmental Concern respecting any of the Oil and Gas Properties,
Buyer shall notify Sellers and coordinate with Sellers all activities relating
to a Phase II or additional environmental assessment of such Oil and Gas
Property, unless Sellers elect to exclude the affected Oil and Gas Property from
the sale contemplated by this Agreement, in which event the Purchase Price shall
be reduced by the Allocated Value of the excluded Oil and Gas
Property.
  (b)           Prior
to the Closing, unless otherwise required by Applicable Law, Buyer shall (and
shall cause Buyer’s Environmental Consultant, if applicable, to) treat
confidentially any matters revealed by Buyer’s Environmental Review and any
reports or data generated from such review (the “Environmental Information”),
and Buyer shall not (and shall cause Buyer’s Environmental Consultant, if
applicable, to not) disclose any Environmental Information to any Governmental
Entity or other third party without the prior written consent of Sellers (unless
so required under Applicable Law).  Prior to the Closing, unless
otherwise required by Applicable Law, Buyer may use the Environmental
Information only in connection with the transactions contemplated by this
Agreement.  If Buyer, Buyer’s Environmental Consultant, if applicable,
or any third party to whom Buyer has provided any Environmental Information
become legally compelled to disclose any of the Environmental Information, Buyer
shall provide Sellers with prompt notice and Sellers, at Sellers’ expense, may
file any protective order, or seek any other remedy, as it deems appropriate
under the circumstances.  If this Agreement is terminated prior to the
Closing, Buyer shall deliver the Environmental Information to Sellers, which
Environmental Information shall become the sole property of
Sellers.  Upon Sellers’ written request to Buyer, Buyer shall provide
copies of the Environmental Information to Sellers without charge.
  (c)           If
Buyer or Buyer’s Environmental Consultant, if applicable, discovers any
Environmental Defect (as herein defined), Buyer shall notify Sellers prior to
the expiration of the Examination Period of such alleged Environmental
Defect.  To be effective, such notice (an “Environmental Defect Notice”)
must (i) be in writing; (ii) be received by Sellers prior to the
expiration of the Examination Period; (iii) describe the Environmental
Defect in reasonable detail, including (A) the specific Oil and Gas
   28
  Properties
affected by or associated with such Environmental Defect, (B) if applicable, a
site plan showing the location of all field notes and the field conditions
observed, (C) the written conclusion of Buyer’s Environmental Consultant,
if applicable, that an Environmental Defect is believed to exist, which
conclusion shall be reasonably substantiated by the factual data gathered in
Buyer’s Environmental Review, and (D) if specified in the report of Buyer’s
Environmental Consultant, a reasonably specific citation of the provisions of
the Environmental Laws alleged to be violated and the related facts that
substantiate such violation; (iv) describe the procedures recommended to
correct, eliminate or pay the Environmental Defect, together with any related
recommendations from Buyer’s Environmental Consultant, if applicable;
(v) set forth Buyer’s good faith estimate of the Environmental Defect
Value, including the basis for such estimate; and (vi) indicate if the
Environmental Defect represents a Substantial Environmental Concern in the
opinion of Buyer’s Environmental Consultant.  Any matters that may
otherwise constitute Environmental Defects, but of which Sellers have not been
specifically notified by Buyer in accordance with the foregoing, together with
any environmental matter that does not constitute an Environmental Defect, shall
be deemed to have been waived by Buyer for purposes of this Section 8.2.  Upon
the receipt of such effective notice from Buyer, Sellers shall have the option,
but not the obligation, to attempt to cure such Environmental Defect at any time
prior to the Closing, at the sole cost and expense of Sellers.  If
Sellers and Buyer are unable to reach an agreement as to whether an
Environmental Defect exists or, if it does exist, the amount of the
Environmental Defect Value attributable thereto, the provisions of Section 8.3
shall be applicable.
  (d)           If
any Environmental Defect described in a notice delivered in accordance with
Section 8.2 is
not cured on or before the Closing, then the Purchase Price shall be reduced,
subject to Sections
8.3 and 8.5, by the
Environmental Defect Value of such Environmental Defect.
  (e)           As
used in this Article
VIII:
  (i)           “Environmental Defect” shall
mean, with respect to any given Oil and Gas Property, a violation of
Environmental Laws in effect as of the Effective Date in the jurisdiction in
which such Oil and Gas Property is located, an obligation under Environmental
Laws to complete any corrective action at the Oil and Gas Property, or any
Environmental Liability arising from or attributable to any condition, event,
circumstance, activity, practice, incident, action, or omission existing or
occurring prior to the Closing Date, or the use, release, storage, treatment,
transportation, or disposal of Hazardous Materials prior to the Closing Date,
(A) regarding which an Environmental Defect Notice has been timely and
otherwise validly delivered, (B) that has an Environmental Defect Value
attributable thereto in excess of $50,000, and (C) is not otherwise
disclosed, in Section 8.2 of Sellers’ Disclosure Schedule.
  (ii)           “Environmental Defect Value”
shall mean the amount (A) the net present value of the reasonably estimated
costs and expenses in excess of $50,000 to correct such Environmental Defect in
the most cost effective manner reasonably available, consistent with
Environmental Laws, or (B) the net present
   29
  value in
excess of $50,000, of the amount of Environmental Liabilities reasonably
believed will be incurred or required to be paid by Sellers with respect
thereto. The parties recognize that the calculation of an Environmental Defect
Value may require the use of assumptions and extrapolations; however, it is
acknowledged and agreed that any such assumptions and extrapolations will be
consistent with the known factual information and reasonable in
nature.
  (iii)           “Substantial Environmental
Concern” shall mean any Environmental Defect for which Buyer’s
Environmental Consultant estimates the cost of compliance, cure or remediation
to exceed $2,500,000.
  Section
8.3.                                Disputes
Regarding Title Defects or Environmental Defects.
  (a)           Disputes
respecting Title Defects or Environmental Defects will be resolved under the
provisions of Section
8.3(b) below, except for disputes relating to a Substantial Environmental
Concern which will be treated in accordance with Section 8.4
below.  Section 8.3(b) shall
only apply to a Substantial Environmental Concern with respect to disputes
relating to whether such Substantial Environmental Concern has been remediated
in accordance with Section
8.4(b).
 
 (b)           If
Sellers and Buyer are unable to reach an agreement as to whether a Title Defect
or an Environmental Defect, other than a defect constituting a Substantial
Environmental Concern, exists, or if it does exist, the Title Defect Amount or
Environmental Defect Value attributable to such Title Defect or such
Environmental Defect or disputes relating to the remediation of Substantial
Environmental Concerns pursuant to Section 8.4(b) or
Post-Closing Defects pursuant to Section 8.5(d) (a
“Defect Dispute”), each
party shall have the right to submit a Defect Dispute to an independent expert
(the “Independent
Expert”), who shall serve as sole arbitrator.  The Independent
Expert shall be appointed by mutual agreement of Sellers and Buyer from among
candidates (including lawyers) with experience and expertise in the area that is
the subject of such Defect Dispute, and failing such agreement, such Independent
Expert for such Defect Dispute shall be selected in accordance with the
Commercial Arbitration Rules of the AAA (the “Rules”).  Defect
Disputes to be resolved by an Independent Expert shall be resolved in accordance
with mutually agreed procedures and rules and failing such agreement, in
accordance with the Rules.  The Independent Expert shall be instructed
by the parties to resolve such Defect Dispute as soon as reasonably practicable
in light of the circumstances.  The decision and award of the
Independent Expert shall be binding upon the parties as an award under the
Federal Arbitration Act and final and nonappealable to the maximum extent
permitted by law, and judgment thereon may be entered in a court of competent
jurisdiction and enforced by any party as a final judgment of such
court.
  Section
8.4.                                Substantial Environmental
Concerns.
  (a)           Any
Oil and Gas Property affected by a Substantial Environmental Concern shall not
be assigned to Buyer at Closing.  Sellers may elect to either (i)
exclude such Oil and Gas Property from this transaction and if Sellers so elect,
the Allocated
  30
  Value of
the Oil and Gas Property to which the Substantial Environmental Concern pertains
shall be deducted from the Adjusted Purchase Price otherwise payable at Closing,
or (ii) attempt to Cure the Substantial Environmental Concern.  If
Sellers elect to attempt to Cure such defect, the Allocated Value of the Oil and
Gas Property shall be deducted from the Adjusted Purchase Price and paid into an
escrow account (the “Defects
Escrow”) established with a federally insured savings or banking
institution mutually acceptable to Buyer and Sellers (the “Defects Escrow Agent”)
pursuant to the terms of an escrow agreement in a form acceptable to the Defects
Escrow Agent and reasonably acceptable to Buyer and Sellers (the “Defects Escrow
Agreement”).
 
 (b)           Sellers
shall have a period of 180 days within which to cure a Substantial Environmental
Concern.  If Sellers and Buyer mutually agree that a Substantial
Environmental Concern affecting an Oil and Gas Property has been Cured, then
within two Business Days after such determination, Sellers shall assign such Oil
and Gas Property to Buyer by assignment substantially in the form of Exhibit D and the Allocated
Value of such Oil and Gas Property (together with any interest earned thereon)
shall be released from the Defects Escrow to Sellers in accordance with the
terms of the Defects Escrow Agreement.  If Sellers and Buyer mutually
agree that a Substantial Environmental Concern has not been Cured within the 180
day period, then within two Business Days after such determination, the amount
paid by Buyer into the Defects Escrow with respect thereto (together with any
interest earned thereon) shall be released to Buyer in accordance with the terms
of the Defects Escrow Agreement.  If, at the end of the 180 day
period, Sellers and Buyer are unable to agree with the sufficiency of the Cure
of a Substantial Environmental Concern, then the Allocated Value for the Oil and
Gas Property affected by such Substantial Environmental Concern shall remain in
the Defects Escrow pending resolution of such disagreement in the manner
provided in Section
8.3(b).
  Section
8.5                                Adjustments
to Purchase Price for Defects.
  (a)           Notwithstanding
anything to the contrary contained in this Agreement, no adjustment of the
Purchase Price shall be made for Title Defects unless the aggregate of Title
Defect Amounts, as determined in accordance with this Agreement, equals or
exceeds the sum of $1,000,000, in which event the Purchase Price shall be
adjusted downward by the amount such Title Defect Amounts exceed
$1,000,000.
  (b)           Notwithstanding
anything to the contrary contained in this Agreement, except for reduction of
the Adjusted Purchase Price for Substantial Environmental Concerns (the
Allocated Value of which shall be deducted from the Purchase Price without
application of any threshold or deductible), no adjustment of the Purchase Price
shall be made for Environmental Defects unless the aggregate of Environmental
Defect Values, as determined in accordance with this Agreement, equals or
exceeds the sum of $1,000,000, in which event the Purchase Price shall be
adjusted downward by the amount such Environmental Defect Values exceed
$1,000,000.
  (c)           Notwithstanding
anything herein to the contrary, if Sellers are unable to cure a Title Defect (a
“Post-Closing Defect”)
on or prior to Closing, Sellers shall have the option, by notice in writing to
Buyer on or before Closing, to attempt to cure such
   31
  Post-Closing
Defect within the 90-day period commencing with the Closing Date (the “Cure Period”).  In
such event, the transactions contemplated hereby will close as provided herein,
but an amount equal to the applicable Title Defect Amount to which the
Post-Closing Defect pertains shall be deducted from the Adjusted Purchase Price
otherwise payable at Closing and paid into the Defects Escrow.The amount so
deposited into the Defects Escrow with respect to a Post-Closing Defect will
remain therein until released as provided in Section 8.5(d).
  (d)           Buyer
will act in good faith and reasonably cooperate with the Sellers after the
Closing to cure a Post-Closing Defect respecting an Oil and Gas Property
assigned to Buyer, provided that Buyer shall not be required to expend any
monies in connection therewith and Sellers shall conduct their activities so as
to not unreasonably interfere with Buyer’s operations.  If Sellers and
Buyer mutually agree that a Post-Closing Defect has been cured, then within two
Business Days after such determination, the amount withheld in the Defects
Escrow with respect thereto (together with any interest earned thereon) shall be
released to Sellers in accordance with the terms of the Defects Escrow
Agreement.  If Sellers and Buyer mutually agree that a Post-Closing
Defect has been partially cured, then Sellers and Buyer shall mutually determine
the portion of the amount retained in the Defects Escrow with respect thereto
(together with any interest earned thereon) that should be paid to Buyer to
compensate it for the uncured portion thereof (together with interest earned
thereon), and the remaining portion of such amount shall be released to Sellers
(together with any interest earned thereon) in accordance with the terms of the
Defects Escrow Agreement.  If Sellers and Buyer mutually agree that a
Post-Closing Defect has not been cured, then within two Business Days after such
determination, the amount withheld in the Defects Escrow with respect thereto
(together with any interest earned thereon) shall be released to Buyer in
accordance with the terms of the Defects Escrow Agreement.  If, at the
end of the Cure Period, Sellers have been unable to cure a Post-Closing Defect
(and there is no dispute as to whether or not it has been cured), the amount
withheld in the Defects Escrow with respect thereto (together with any interest
earned thereon) shall be released to Buyer in accordance with the terms of the
Defects Escrow Agreement.  If, at the end of the Cure Period, Sellers
and Buyer are unable to agree whether there has been a satisfactory resolution
of a Post-Closing Defect, then such disagreement shall be resolved as provided
in Section 8.3(b).
  Section
8.6                                Buyer
Indemnification.
  BUYER
HEREBY INDEMNIFIES AND SHALL DEFEND AND HOLD SELLERS, AFFILIATES THEREOF, AND
ITS AND THEIR RESPECTIVE OWNERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
REPRESENTATIVES, CONTRACTORS, SUCCESSORS, AND ASSIGNS HARMLESS FROM AND AGAINST
ANY AND ALL OF THE FOLLOWING CLAIMS ARISING FROM BUYER’S INSPECTING AND
OBSERVING THE PROPERTIES:  (I) CLAIMS FOR PERSONAL INJURIES TO OR
DEATH OF EMPLOYEES OF BUYER, ITS CONTRACTORS, AGENTS, CONSULTANTS, AND
REPRESENTATIVES, AND DAMAGE TO THE PROPERTY OF BUYER OR OTHERS ACTING ON BEHALF
OF BUYER, EXCEPT FOR INJURIES OR DEATH CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SELLERS, AFFILIATES THEREOF OR ITS OR THEIR RESPECTIVE EMPLOYEES,
CONTRACTORS, AGENTS,
  32
  CONSULTANTS,
OR REPRESENTATIVES; AND (II) CLAIMS FOR PERSONAL INJURIES TO OR DEATH OF
EMPLOYEES OF SELLERS OR THIRD PARTIES, AND DAMAGE TO THE PROPERTY OF SELLERS OR
THIRD PARTIES, TO THE EXTENT CAUSED BY THE NEGLIGENCE, GROSS NEGLIGENCE, OR
WILLFUL MISCONDUCT OF BUYER.  TO THE EXTENT PROVIDED ABOVE, THE
FOREGOING INDEMNITY INCLUDES, AND THE PARTIES INTEND IT TO INCLUDE, AN
INDEMNIFICATION OF THE INDEMNIFIED PARTIES FROM AND AGAINST CLAIMS ARISING OUT
OF OR RESULTING, IN WHOLE OR PART, FROM THE CONDITION OF THE PROPERTY OR THE
SOLE, JOINT, COMPARATIVE, OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF ANY OF
THE INDEMNIFIED PARTIES.  THE PARTIES HERETO AGREE THAT THE FOREGOING
COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS CONSPICUOUS.
 
 ARTICLE
IX
  Conditions Precedent to the
Obligations of the Parties
  Section
9.1.                                Conditions
Precedent to the Obligations of Buyer.
  The
obligations of Buyer under this Agreement are subject to each of the following
conditions being met:
 
 (a)           Each
of the representations and warranties of Sellers contained in Article IV shall
be true and correct in all respects as of the date made (and having been deemed
to have been made again on and as of the Closing Date), except (i) as
affected by transactions contemplated or permitted by this Agreement,
(ii) to the extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall have been
true and correct in all material respects as of such specified date, and
(iii) any such inaccuracies or breaches which, in the aggregate, have not
had or could not reasonably be expected to have, a Material Adverse
Effect.
  (b)           Sellers
shall have performed and complied in all material respects with (or compliance
therewith shall have been waived by Buyer) each and every covenant, agreement
and condition required by this Agreement to be performed or complied with by
Sellers prior to or at the Closing.
  (c)           Sellers
shall have delivered a certificate executed by an executive officer of Sellers
dated as of the Closing Date, representing and certifying in such detail as
Buyer may reasonably request that the conditions set forth in subsections (a)
and (b) above
have been fulfilled.
  (d)           No
Proceeding (excluding any Proceeding initiated by Buyer or any of its
Affiliates) shall, on the Closing Date, be pending or threatened before any
Governmental Entity seeking to restrain, prohibit, or obtain damages or other
relief in connection with the consummation of the transactions contemplated by
this Agreement.
  (e)           Buyer
shall have received a release of Liens with respect to the Properties, executed
in recordable form by the Lender, and in form and substance agreeable to
Buyer.
   33
  (f)           Buyer
shall have received an assignment of the Properties executed and delivered by
Sellers, which assignment shall be substantially in the form of the instrument
attached hereto as Exhibit D in all
material respects (the “Assignment”).
  (g)           Buyer
shall have received a certificate that each of the Sellers is not a “foreign
person”, executed and delivered by Sellers that complies with Section 1445
of the Code and the United States Department of Treasury regulations promulgated
thereunder.
  (h)           Buyer
shall have received all other agreements, instruments and documents which are
required by other terms of this Agreement to be executed or delivered by Sellers
or any other party to Buyer prior to or in connection with the
Closing.
  (i)           If
applicable, the waiting period under the HSR Act shall have expired or been
terminated.
  (j)           Evidence
of replacement bonds guarantees and letters of credit, pursuant to Section
12.10.
  (k)           Buyer
shall have received the Participation Option Agreement, executed and delivered
by Sellers.
 
 Section
9.2.                                Conditions
Precedent to the Obligations of Sellers.
  The
obligations of Sellers under this Agreement are subject to each of the following
conditions being met:
 
 (a)           Each
of the representations and warranties of Buyer contained in Article V shall be
true and correct in all material respects as of the date made and (having been
deemed to have been made again on and as of the Closing Date in the same
language) shall be true and correct in all material respects on and as of the
Closing Date, except as affected by transactions permitted by this Agreement and
except to the extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall have been
true and correct in all material respects as of such specified
date.
  (b)           Buyer
shall have performed and complied in all material respects with (or compliance
therewith shall have been waived by Sellers) each and every covenant, agreement
and condition required by this Agreement to be performed or complied with by
Buyer prior to or at the Closing.
  (c)           Buyer
shall have delivered a certificate executed by an executive officer of Buyer
dated as of the Closing Date, representing and certifying in such detail as
Sellers may reasonably request that the conditions set forth in subsections (a)
and (b) above
have been fulfilled.
   34
  (d)           No
Proceeding (excluding any Proceeding initiated by Sellers or any of their
Affiliates) shall, on the Closing Date, be pending or threatened before any
Governmental Entity seeking to restrain, prohibit, or obtain damages or other
relief in connection with the consummation of the transactions contemplated by
this Agreement.
  (e)           Sellers
shall have received all other agreements, instruments and documents which are
required by other terms of this Agreement to be executed or delivered by Buyer
or any other party to Sellers prior to or in connection with the
Closing.
  (f)           If
necessary to effectuate Buyer’s assumption of the Assumed Obligations, Sellers
shall have received an instrument in form and substance reasonably agreeable to
Sellers effectuating such assumption.
  (g)           If
applicable, the waiting period under the HSR Act shall have expired or been
terminated.
  (h)           Sellers
shall have received all required waivers and consents under the Credit Facility;
provided, however, Sellers shall use their Reasonable Best Efforts to obtain all
such waivers and consents not later than fifteen (15) Business Days after the
execution date of this Agreement.
  (i)           Sellers
shall have received the Participation Option Agreement, executed and delivered
by Buyer.
  ARTICLE
X
  Termination, Amendment and
Waiver
  Section
10.1.                                Termination.
  This
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing in the following manner:
 
 (a)           by
mutual written consent of Sellers and Buyer; or
  (b)           by
either Sellers or Buyer, if:
  (i)           the
Closing shall not have occurred on or before 5:00 p.m., local Houston, Texas
time, on September 30, 2008, unless such failure to close shall be due to a
breach of this Agreement by the party seeking to terminate this Agreement
pursuant to this clause (i);
or
  (ii)           there
shall be any statute, rule, or regulation that makes consummation of the
transactions contemplated hereby illegal or otherwise prohibited or a
Governmental Entity shall have issued an order, decree, or ruling or taken any
other action permanently restraining, enjoining, or otherwise prohibiting the
consummation of the transactions contemplated hereby, and such
   35
  order,
decree, ruling, or other action shall have become final and nonappealable;
or
  (c)           by
Buyer or Sellers, if the aggregate amount of the Title Defect Amounts and the
Environmental Defect Values (inclusive of the Allocated Values for all Oil and
Gas Properties to be excluded from the Closing pursuant to Section 8.4 due to
Substantial Environmental Concerns) exceeds fifteen percent (15%) of the
Purchase Price; or
  (d)           by
Sellers, if (i) there shall be a material breach of any representation and
warranty of Buyer contained in Article V, or (ii)
there shall be a material breach by Buyer of any of its covenants and agreements
contained in this Agreement, which breach, in the case of clause (i) or
clause (ii), is
not capable of being cured or, if it is capable of being cured, has not been
cured by the 10th
Business Day following written notice to Buyer from the Sellers of such breach;
or
  (e)           by
Buyer, if (i) there shall be a breach of any representation and warranty of
Sellers contained in Article IV, other
than any such breaches which, in the aggregate, have not had or could not
reasonably be expected to have a Material Adverse Effect, or (ii) there shall be
a material breach by Sellers of any of their covenants and agreements contained
in this Agreement, which breach, in the case of clause (i) or
clause (ii), is
not capable of being cured or, if it is capable of being cured, has not been
cured by the 10th
Business Day following written notice to Sellers from Buyer of such
breach.
  Section
10.2.                                Effect of
Termination.
  In the
event of the termination of this Agreement pursuant to Section 10.1 by
Sellers, on the one hand, or Buyer, on the other, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall become void
and have no effect, except that the agreements contained in this Article X, in
Sections 7.4,
7.5 and 8.6 and in Articles XII and
XIIIshall survive the
termination hereof.   Except as expressly provided in this Section 10.2, nothing
contained herein shall relieve any party from liability for damages actually
incurred as a result of any breach of this Agreement.  If this
Agreement is terminated by Sellers pursuant to (i) Section 10.1(b)(i)
(and Buyer is in material breach of this Agreement) or (ii) Section 10.1(d),
Sellers shall be entitled to the Deposit as liquidated damages and as Sellers’
sole remedy at law or in equity.  In this regard, the parties agree
that the Deposit is not a penalty; rather, it is a reasonable sum in light of
the anticipated or actual harm which Sellers would incur by Buyer’s default
hereunder, and that the actual injury caused to Sellers by Buyer’s unexcused
failure to purchase the Assets would be most difficult or impossible to
ascertain.  If this Agreement is terminated under Section 10.1 for
any other reason, the Deposit shall be returned to Buyer.
 
 Section
10.3.                                Amendment.
  This
Agreement may not be amended except by an instrument in writing signed by or on
behalf of all the parties hereto.
  36
  Section
10.4.                                Waiver.
  Sellers,
on the one hand, or Buyer, on the other, may:  (i) waive any
inaccuracies in the representations and warranties of the other contained herein
or in any document, certificate, or writing delivered pursuant hereto, or
(ii) waive compliance by the other with any of the other’s agreements or
fulfillment of any conditions to its own obligations contained
herein.  Any agreement on the part of a party hereto to any such
waiver shall be valid only if set forth in an instrument in writing signed by or
on behalf of such party.  No failure or delay by a party hereto in
exercising any right, power, or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege.
 
  ARTICLE
XI
  Survival of Representations,
Warranties and Covenants;Indemnification
  Section
11.1.                                Survival.
  (a)           Sellers’
environmental representations and warranties contained in Sections 4.12, 4.13, 4.17,
4.18 and 4.19 shall automatically expire as of the
Closing.  All other representations and warranties of the parties
contained in this Agreement shall terminate on the last day of the sixth (6th) full
calendar month following the Closing Date; the intent being that all Article IV and Article V
representations and warranties by Sellers (i.e., other than Sections 4.12, 4.13, 4.17,
4.18 and 4.19) and Buyer, respectively, shall survive the Closing and
remain in effect thereafter for the period, and only for the period, that the
Indemnified Party is entitled to indemnification based on a breach of such
representations and warranties contained in this Article
XI.
  (b)           No
party hereto shall have any indemnification obligation pursuant to this Article XI or
otherwise in respect of any representation, warranty or covenant unless
(i) it shall have received from the party seeking indemnification written
notice of the existence of the claim for or in respect of which indemnification
in respect of such representation, warranty or covenant is being sought and
(ii) such notice is received on or before the Survival
Date.  Such notice shall set forth with reasonable specificity
(i) the basis under this Agreement, and the facts that otherwise form the
basis of such claim, (ii) the estimate of the amount of such claim (which
estimate shall not be conclusive of the final amount of such claim) and an
explanation of the calculation of such estimate, including a statement of any
significant assumptions employed therein, and (iii) the date on and manner
in which the party delivering such notice became aware of the existence of such
claim.
  Section
11.2.                                Sellers’
Indemnification Obligations.
  Sellers
shall, on the Closing Date, agree (and, upon delivery to Buyer of the
Assignment, shall be deemed to have agreed), subject to the limitations and
procedures contained in this Article XI,
following the Closing, to indemnify and hold Buyer, its Affiliates and its and
their respective successors and permitted assigns and all of their respective
stockholders, partners, members, managers, directors, officer, employees, agents
and representatives harmless from and against
  37
  any and
all claims, obligations, actions, liabilities, damages or expenses
(collectively, “Buyer’s
Losses”):
 (a)           resulting
from any breach of the surviving representations and warranties made by Sellers
in Article IV,
or any certificate delivered at Closing; or
  (b)           relating
to the Retained Obligations.
  provided,
however, that Sellers’ indemnification obligations for Buyer’s Losses under this
Section 11.2
shall (i) not include any claims, obligations, liabilities, damages or expenses
that do not individually exceed Fifty Thousand Dollars ($50,000), (ii) expire on
the last day of the sixth (6th) full
calendar month following the Closing Date (the “Survival Date”), except for
Buyer’s Losses for which a notice is received by Sellers as provided in this
Agreement prior to such date; and further provided that Sellers’ indemnification
for Buyer’s Losses under Section 11.2(b) shall
not expire but shall remain in effect until such Retained Obligations are fully
satisfied.
  Section
11.3.                                Buyer’s
Indemnification Obligations.
  Buyer
shall, on the Closing Date, agree (and, upon delivery to Buyer of the
Assignment, shall be deemed to have agreed), subject to the limitations and
procedures contained in this Article XI,
following the Closing, to indemnify and hold Sellers, their Affiliates and their
respective successors and permitted assigns and all of their respective
stockholders, partners, members, managers, directors, officer, employees, agents
and representatives harmless from and against any and all claims, obligations,
actions, liabilities, damages, costs or expenses, (collectively, “Sellers’
Losses”):
 
 (a)           resulting
from any misrepresentation or breach of any warranty, covenant or agreement of
Buyer contained in this Agreement or any certificate delivered by Buyer at the
Closing; or
  (b)           relating
to the Assumed Obligations.
  provided,
however, that Buyer’s indemnification obligations for Sellers’ Losses under
Section 11.3
shall (i) not include any claims, obligations, liabilities, damages or expenses
that do not individually exceed Fifty Thousand Dollars ($50,000.00), and (ii)
expire on the Survival Date, except for Sellers’ Losses for which a notice is
received by Buyer as provided in this Agreement prior to such date; and further
provided, however, that Buyer’s indemnification obligations for Sellers’ Losses
under Section
11.3(b) shall not expire but shall remain in effect until such Sellers’
Losses are fully satisfied.
  Section
11.4.                                Net
Amounts.
  Any
amounts recoverable by any party pursuant to this Article XI with
respect to any Buyer’s Losses or Sellers’ Losses, as the case may be, shall be
decreased by any insurance proceeds or other amounts relating to such Buyer’s
Losses or Sellers’ Losses, as the case may be, paid to such Indemnified Party by
any Person (other than any Affiliate of such Indemnified Party) not a party to
this Agreement.
  38
  Section
11.5.                                Indemnification
Proceedings.
  In the
event that any claim or demand for which a party (an “Indemnifying Party”), would be
liable to the another party under Section 11.2 or
Section 11.3 (an
“Indemnified Party”) is
asserted against or sought to be collected from an Indemnified Party by a third
party, the Indemnified Party shall with reasonable promptness notify the
Indemnifying Party of such claim or demand, but the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
under this Article XI,
except to the extent the Indemnifying Party demonstrates that the defense of
such claim or demand is materially prejudiced thereby.  The
Indemnifying Party shall have 30 days from receipt of the above notice from the
Indemnified Party (in this Section 11.5,
the “Notice Period”) to
notify the Indemnified Party whether or not the Indemnifying Party desires, at
the Indemnifying Party’s sole cost and expense, to defend the Indemnified Party
against such claim or demand; provided, that the Indemnified Party is hereby
authorized prior to and during the Notice Period to file any motion, answer or
other pleading that it shall deem necessary or appropriate to protect its
interests or those of the Indemnifying Party and not prejudicial to the
Indemnifying Party.  If the Indemnifying Party elects to assume the
defense of any such claim or demand, the Indemnified Party shall have the right
to employ separate counsel at its own expense and to participate in the defense
thereof.  If the Indemnifying Party elects not to assume the defense
of such claim or demand (or fails to give notice to the Indemnified Party during
the Notice Period), the Indemnified Party shall be entitled to assume the
defense of such claim or demand with counsel of its own choice, at the expense
of the Indemnifying Party.  If the claim or demand is asserted against
both the Indemnifying Party and the Indemnified Party and based on the advice of
counsel reasonably satisfactory to the Indemnifying Party it is determined that
there is a conflict of interest which renders it inappropriate for the same
counsel to represent both the Indemnifying Party and the Indemnified Party, the
Indemnifying Party shall be responsible for paying separate counsel for the
Indemnified Party; provided, however, that the Indemnifying Party shall not be
responsible for paying for more than one separate firm of attorneys to represent
all of the Indemnified Parties, regardless of the number of Indemnified
Parties.  If the Indemnifying Party elects to assume the defense of
such claim or demand, (i) no compromise or settlement thereof may be
effected by the Indemnifying Party without the Indemnified Party’s written
consent (which shall not be unreasonably withheld) unless the sole relief
provided is monetary damages that are paid in full by the Indemnifying Party and
(ii) the Indemnifying Party shall have no liability with respect to any
compromise or settlement thereof effected without its written consent (which
shall not be unreasonably withheld).
 
 Section
11.6.                                Indemnification
Exclusive Remedy.
  Indemnification
pursuant to the provisions of this Article XI shall
be the exclusive remedy of the parties hereto for any misrepresentation or
breach of any warranty, covenant or agreement contained in this Agreement or in
any closing document executed and delivered pursuant to the provisions hereof or
thereof, or any other claim arising out of the transactions contemplated by this
Agreement.
  39
  Section
11.7.                                Limited
to Actual Damages.
  The
indemnification obligations of the parties pursuant to this Article XI shall
be limited to actual Buyer’s Losses or Sellers’ Losses, as the case may be, and
shall not include incidental, consequential, indirect, punitive, or exemplary
damages, provided that any incidental, consequential, indirect, punitive, or
exemplary damages recovered by a third party (including a Governmental Entity,
but excluding any Affiliate of any party) against a party entitled to indemnity
pursuant to this Article XI shall
be included in the damages recoverable under such indemnity.
 
 Section
11.8.                                Indemnification
Despite Negligence.
  It
is the express intention of the parties hereto that each party to be indemnified
pursuant to this Article XI shall be indemnified and held harmless from and
against all Buyer’s Losses or Sellers’ Losses, as the case may be, as to which
indemnity is provided for under this Article XI, notwithstanding that any
such damages arise out of or result from the ordinary, strict, sole, or
contributory negligence of such party and regardless of whether any other party
(including the other parties to this Agreement) is or is not also negligent;
provided, however, nothing herein is intended or shall be construed to as an
indemnification by one party for the gross negligence or willful misconduct of
the other party.  The parties hereto acknowledge that the foregoing
complies with the express negligence rule and is conspicuous.
 
 Section
11.9.                                Tax
Treatment of Indemnification Amounts.
  Sellers
and Buyer agree that any amounts recoverable by any party pursuant to this Article XI with
respect to any Buyer’s Losses or Sellers’ Losses shall be treated as adjustments
to the Purchase Price for all Tax purposes.
 
 Section
11.10.                                Aggregate
Indemnity Limits.
  Notwithstanding
anything to the contrary contained elsewhere in the Agreement, Sellers shall not
be required to indemnify Buyer under this Article XI for
aggregate Buyer’s Losses in excess of fifteen percent (15%) of the Purchase
Price.
 
 
 ARTICLE
XII
  Miscellaneous
Matters
  Section
12.1.                                Notices.
  All
notices, requests, demands, and other communications required or permitted to be
given or made hereunder by any party hereto shall be in writing and shall be
deemed to have been duly given or made if (i) delivered personally,
(ii) transmitted by first class registered or certified mail, postage
prepaid, return receipt requested, (iii) sent by a recognized prepaid
overnight courier service (which provides a receipt), or (iv) sent by
email, facsimile transmission, with receipt acknowledged, to the parties at the
following addresses (or at such other addresses as shall be specified by the
parties by like notice):
  40
  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:                                                      Laredo
Petroleum, Inc.
 15 West Sixth Street, Suite
1800
 Tulsa,
Oklahoma  74119
 Attention:   Randy A.
Foutch, President and
 Chief
Executive Officer
 Fax No.:  (918) 513-4571,
Email: randy@laredopetro.com
 
 Such
notices, requests, demands, and other communications shall be effective upon
receipt.
 
 Section
12.2.                                Prorations,
Deposits and Taxes.
  No sales,
transfer or similar tax will be collected at Closing in connection with this
transaction.  If, however, this transaction is later deemed to be
subject to sales, transfer or similar tax, for any reason, Buyer agrees to be
solely responsible, and shall indemnify and hold Sellers (and their affiliates,
and Sellers’ and their affiliates’ directors, officers, employees, attorneys,
contractors and agents) harmless, for any and all sales, transfer or other
similar taxes (including related penalty, interest or legal costs) due by virtue
of this transaction on the Properties transferred pursuant hereto and Buyer
shall remit such taxes at that time.  Seller and Buyer agree to
cooperate with each other in demonstrating that the requirements for exemptions
from such taxes have been met.
 
 
 For the
avoidance of doubt, and notwithstanding any provision in this Agreement to the
contrary, Buyer acknowledges that its obligations under this Section 12.2 will
survive Closing.
 
 Section
12.3.                                Entire
Agreement.
  This
Agreement, the Sellers Disclosure Schedule, together with the Exhibits,
Schedules, Annexes and other writings referred to herein or delivered pursuant
hereto, constitute the entire agreement between the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof; provided that any Confidentiality Agreement executed by
Buyer and Sellers, in connection with the transaction contemplated hereby
remains in full force and effect and is not superseded or modified by this
Agreement.
 
 Section
12.4.                                Injunctive
or Other Relief.
  The
parties hereto acknowledge and agree that irreparable damage would occur in the
event any of the provisions of this Agreement were not performed in accordance
with their specific terms
  41
  or were
otherwise breached.  It is accordingly agreed that the parties shall
be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement, and shall be entitled to enforce specifically the
provisions of this Agreement, in any court of the United States or any state
thereof having jurisdiction, in addition to any other remedy to which the
parties may be entitled under this Agreement or at law or in equity. In the
event of any such legal or equitable action hereunder, or any default in the
performance of any term or condition of this Agreement, the prevailing party
shall be entitled to recover all costs and expenses associated therewith,
including reasonable attorneys' fees.
 
 Section
12.5.                                Binding
Effect; Assignment; No Third Party Benefit.
  This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors, and permitted
assigns.  Except as otherwise expressly provided in this Agreement,
neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties.  Except as provided in Section 8.5 and
Article XI,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person other than the parties hereto, and their respective heirs, legal
representatives, successors, and permitted assigns, any rights, benefits, or
remedies of any nature whatsoever under or by reason of this
Agreement.
 
 Section
12.6.                                Severability.
  If any
provision of this Agreement is held to be unenforceable, this Agreement shall be
considered divisible and such provision shall be deemed inoperative to the
extent it is deemed unenforceable, and in all other respects this Agreement
shall remain in full force and effect; provided, however, that if any such
provision may be made enforceable by limitation thereof, then such provision
shall be deemed to be so limited and shall be enforceable to the maximum extent
permitted by Applicable Law.
 
 Section
12.7.                                GOVERNING
LAW.
  THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF OKLAHOMA, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS THEREOF.
 
 Section
12.8.                                Counterparts.
  This
instrument may be executed in any number of identical counterparts, each of
which for all purposes shall be deemed an original, and all of which shall
constitute collectively, one instrument.  It is not necessary that
each party hereto execute the same counterpart so long as identical counterparts
are executed by each such party hereto.  This instrument may be
validly executed and delivered by facsimile or other electronic
transmission.
 
 Section
12.9.                                WAIVER OF
CONSUMER RIGHTS.
  BUYER
HEREBY WAIVES ITS RIGHTS UNDER THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER
PROTECTION ACT, SECTION 17.41 ET SEQ., BUSINESS AND COMMERCE CODE, A LAW
THAT GIVES CONSUMERS SPECIAL RIGHTS AND
 42
  PROTECTIONS,
AND ANY SIMILAR LAW IN ANY OTHER STATE TO THE EXTENT SUCH ACT OR SIMILAR LAW
WOULD OTHERWISE APPLY.  AFTER CONSULTATION WITH AN ATTORNEY OF BUYER’S
OWN SELECTION, BUYER VOLUNTARILY CONSENTS TO THIS WAIVER.
 
 Section
12.10.                                  Replacement
Bonds, Letters of Credit and Guarantees.
  The
parties understand that none of the bonds, letters of credit and guarantees, if
any, posted by Sellers or any other Affiliate with any Governmental Authority or
third Person and relating to the Sellers or the Properties are to be transferred
to Buyer.  On or before Closing, Buyer shall obtain, or cause to be
obtained in the name of Buyer, replacements for such bonds, letters of credit
and guarantees, and shall cause, effective as of the Closing, cancellation or
return to Sellers of the bonds, letters of credit or guarantees posted by
Sellers.  Buyer may also provide evidence that such replacements are
not necessary as a result of existing bonds, letters of credit or guarantees
that Buyer has previously posted as long as such existing bonds, letters of
credit or guarantees are adequate to secure the release of those posted by
Sellers.  Except for bonds, letters of credit and guarantees related
primarily to the Excluded Assets, Schedule 12.10
identifies the bonds, letters of credit and guarantees posted by Sellers as of
the date noted on such schedule.
 
 Section
12.11.                                  Further
Assurances.
  Sellers
will from time to time execute and deliver to Buyer such further instruments and
take such other actions as Buyer may reasonably request, in order to more
effectively convey, assign, transfer and deliver the Properties, as of the
Effective Date, to Buyer.  To this end, should any of the Oil and Gas
Properties be owned of record by any Affiliate of Sellers, Sellers shall cause
such Affiliate to execute and deliver to Buyer at Closing an Assignment covering
such Affiliate’s interest in the affected Oil and Gas Property.
  
 
 ARTICLE
XIII
 Definitions and
References
  Section
13.1.                                Certain
Defined Terms.
  When used
in this Agreement, the following terms shall have the respective meanings
assigned to them in this Section 14.1:
 
 “AAA” means the American
Arbitration Association.
 
 “Affiliate” means any Person
directly or indirectly controlling, controlled by or under common control with a
Person.
 
 “Agreement” means this Asset
Purchase and Sale Agreement, as hereafter amended or modified in accordance with
the terms hereof.
 
  43
  “Applicable Law” means any
statute, law, principle of common law, rule, regulation, judgment, order,
ordinance, requirement, code, writ, injunction, or decree of any Governmental
Entity, exclusive of Environmental Laws.
  “Assumed Obligations” means,
subject to and without altering, affecting or in any manner diminishing Sellers’
representations, warranties, covenants and indemnities set forth in the
Agreement, all obligations to timely fulfill, perform, pay, and discharge (or
cause to be timely fulfilled, performed, paid or discharged) all of the costs,
obligations and liabilities of Sellers, known or unknown, with respect to: (a)
the Properties; and (b) the contract operating agreements described on Schedule
4.7; regardless of whether such obligations arose prior to or after the
Effective Date, including but not limited to: (i) the obligation to
(x) plug and abandon or remove and dispose of all wells, platforms,
structures, flow lines, pipelines and other equipment, pits and holding ponds
now or hereafter located on the Oil and Gas Properties, (y) cap and bury
all flow lines and other pipelines now or hereafter located on the Oil and Gas
Properties, and (z) remedy all Environmental Liabilities with respect to
the Oil and Gas Properties, including any actual or potential NORM contamination
or chloride or other contamination of groundwater; (ii)  obligations
and liabilities arising from or in connection with any Imbalances, whether
before, on or after the Effective Date; (iii) obligations to pay working
interests, royalties, overriding royalties and other interests held in suspense
and transferred to Buyer pursuant to Section 7.11
(iv)  all Taxes assessed with respect to a period which begins on or
after the Effective Date; and (v) obligations with respect to the disputes,
actions, suits and proceedings including those described on Section 4.6 of the
Sellers Disclosure Schedule (and any other actions, suits or proceedings arising
out of the same facts or circumstances), regardless of the Properties to which
such disputes, actions and proceedings relate; provided, that Assumed
Obligations does not mean or include Sellers’ obligations and liabilities with
respect to the Retained Obligations and otherwise expressly assigned to Sellers
under this Agreement.
 
 “Business Day” means a day
other than a Saturday, Sunday or day on which commercial banks in the State of
Oklahoma are authorized or required to be closed for business.
 
 “Code” means the Internal
Revenue Code of 1986, or any comparable successor statute thereto, as
amended.
 
 “Confidentiality Agreement”
means that certain Confidentiality Agreement by and between Dominion Resources,
Inc., among others, as predecessor in interest to Sellers and Buyer dated June
13, 2007.
 
 “Credit Facility”means
collectively, the Third Amended and Restated Credit Agreement dated August 31,
2007 (as amended by the First Amendment to the Third Amended and Restated Credit
Agreement dated November 2, 2007 and the Second Amendment to the Third Amended
and Restated Credit Agreement dated January 31, 2008) among Linn Energy, LLC as
Borrower and BNP Paribas as Administrative Agent and the Lenders signatory
thereto; and the Second Lien Term Loan Agreement dated January 31, 2008 among
Linn Energy, LLC as Borrower and BNP Paribas as Administrative Agent, RBC
Capital Markets as Syndication Agent and the Lenders signatory
thereto.
  44
  “Cure” or “Cured” means, in the context
of Section 8.4
and the parties’ agreement respecting Substantial Environmental Concerns, such
actions taken by Sellers which would substantially remove, cure or remediate the
Environmental Defect constituting the Substantial Environmental Concern in
accordance with applicable Environmental Laws.
 
 “Dollars”or“$” means U.S.
Dollars.
 
 “Effective Date” means July 1,
2008.
 
 “Environmental Laws” means all
national, state, municipal or local laws, rules, regulations, statutes,
ordinances or orders of any Governmental Entity pertaining to the protection of
human health or the environment, including the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund Amendments
and Reauthorization Act, 42 U.S.C. § 9601 et seq. (“CERCLA”), the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. § 6901 et seq., the Federal Water Pollution Control Act, as amended by
the Clean Water Act, 33 U.S.C. § 1251 et seq., the Clean Air Act, 42 U.S.C.
§7401 et seq., the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq., and
any similar state or local statutes.
 
 “Environmental Liabilities”
means any and all damages (including any remedial, removal, response, abatement,
clean-up, investigation and/or monitoring costs and associated legal costs)
incurred or imposed (a) pursuant to any agreement order, notice of
responsibility, directive (including directives embodied in Environmental Laws),
injunctions, judgment or similar documents (including settlements) arising out
of, in connection with, or under Environmental Laws, or (b) pursuant to any
claim by a Governmental Entity or any other Person for personal injury, property
damage, damage to natural resources, remediation, or payment or reimbursement of
response costs incurred or expended by such Governmental Entity or other Person
pursuant to common law or statute and related to the use or release of Hazardous
Materials.
 
 “ERISA” means the Employee
Retirement Income Security Act of 1974, as amended.
 
 “ERISA Affiliate” means, with
respect to any entity, any entity, trade or business that is a under common
control with such entity, within the meaning of Section 414(b), (c), (m) or (o)
of the Code or Section 4001 of ERISA.
 
 “Existing Hedges” mean any
Hedges affecting the Properties on the Closing Date.
 
 “Governing Documents” means,
when used with respect to an entity, the documents governing the formation and
operation of such entity, including (i) in the instance of a corporation,
the articles or incorporation and bylaws of such corporation, (ii) in the
instance of a partnership, the partnership agreement, and (iii) in the
instance of a limited liability company, the certificate of formation and
limited liability company agreement.
 
 “Governmental Entity” means any
court or tribunal in any jurisdiction (domestic or foreign) or any federal,
state, county, municipal or other governmental or quasi-governmental body,
agency, authority, department, board, commission, bureau or
instrumentality.
  45
  “Hazardous Materials” means
(i) any substance or material that is listed, defined or otherwise
designated as a “hazardous substance” under Section 101(14) of CERCLA,
(ii) any petroleum or petroleum products, (iii) radioactive materials,
urea formaldehyde, asbestos and PCBs and (iv) any other chemical substance
or waste that is regulated by any Governmental Entity under any Environmental
Law.
 
 “Hedge” means any future
derivative, swap, collar, put, call, cap, option or other contract that is
intended to benefit from, relate to, or reduce or eliminate the risk of
fluctuations in interest rates, basis risk or the price of commodities,
including Hydrocarbons.
 
 “Hydrocarbons” means oil, gas,
other liquid or gaseous hydrocarbons, or any of them or any combination thereof,
and all products and substances extracted, separated, processed and produced
therefrom.
 
 “Imbalances” means gas
production, pipeline, storage, processing or other imbalance attributable to
Hydrocarbons produced from the Oil and Gas Properties.
 
 “Knowledge” of Sellers (or
similar references to Sellers’ knowledge) means all information of which either
the Chief Executive Officer, President and Chief Operating Officer, Senior Vice
President, Operations and the Executive Vice President and Chief Financial
Officer, of Sellers, and the Vice President-Operation, Midcontinent, located in
Oklahoma City, Oklahoma, having supervisory authority over matters relating to
the ownership, operation, maintenance and development of the Properties have, or
should have upon reasonable inquiry, actual knowledge. Knowledge of Buyer (or
similar references to Buyer’s knowledge) means all information of which either
the Chief Executive Officer, President and Chief Operating Officer, Senior Vice
President, Operations and the Vice President and Chief Financial Officer, of
Buyer, and Vice President of Exploration have, or should have upon reasonable
inquiry, actual knowledge.
 
 “Laws” means all statutes,
rules, regulations, ordinances, orders, and codes of Governmental
Authorities.
 
 “Leases” means oil, gas or
mineral leases, leasehold estates, operating rights and other rights authorizing
the owner thereof to explore or drill for and produce Hydrocarbons and other
minerals, contractual rights to acquire any such of the foregoing interest,
which have been earned by performance, and fee mineral, royalty and overriding
royalty interest, net profits interest, production payments and other interest
payable out of Hydrocarbon production, in each case, in which Sellers have an
interest.
 
 “Lender” means the lenders
party to the Credit Facility.
 
 “Lien” means any claim, lien,
mortgage, security interest, pledge, charge, option, right-of-way, easement,
encroachment, or encumbrance of any kind.
 
 “Material Adverse Effect” means
any change, development, or effect (individually or in the aggregate) which is,
or is reasonably likely to be, materially adverse (i) to the business,
assets, results of operations or condition (financial or otherwise) of a party,
or (ii) to the ability of a party to perform on a timely basis any
obligation under this Agreement or any agreement,
  46
  instrument,
or document entered into or delivered in connection herewith; provided, however,
that changes, developments or effects relating to (x) the economy in general
(including any effects on the economy arising as a result of acts of terrorism
or the credit markets), (y) changes in Hydrocarbon commodity prices or other
changes affecting the U.S. oil and gas industry generally, or (z) the
announcement of the transactions contemplated hereby, shall not be deemed to
constitute a Material Adverse Effect with respect to Sellers and shall not be
considered in determining whether a Material Adverse Effect has occurred with
respect to Sellers.
 
 “Material
Contract”  means any contract which can reasonably be expected
in the case of (A) below to generate gross revenue per year for the owner of the
Properties in excess of Five Hundred Thousand Dollars ($500,000) or in the case
of (B), (C), (D), (E), or (F) below could require expenditures per year by the
owner of the Properties in excess of Five Hundred Thousand Dollars ($500,000)
and which is not (i) terminable by either party at will (without penalty) on
thirty (30) days notice or less and (ii) is of one or more of the following
types:
 
 (A)           contracts
for the purchase, sale or exchange of oil, gas, or other
hydrocarbons;
  (B)           contracts
for the gathering, treatment, processing, handling, storage or transportation of
oil, gas or other hydrocarbons;
  (C)           contracts
for the use of drilling rigs;
  (D)           purchase
agreements, farmin and farmout agreements, exploration agreements, participation
agreements and similar agreements providing for the earning of an equity
interest;
  (E)           partnership
agreements, joint venture agreements and similar agreements;
  (F)           operating
agreements, unit agreements, and unit operating agreements;
  (G)           seismic
licenses and contracts; and
  (H)           contracts
for the construction and installation of equipment with guaranteed production
throughput requirements where amounts owed if the guaranteed throughput is not
delivered exceed Five Hundred Thousand Dollars ($500,000).
  “Mcf” means one thousand cubic
feet.
  “Net Revenue Interest” means an
interest (expressed as a percentage or decimal fraction) in and to all
Hydrocarbons produced and saved from or attributable to an Oil and Gas
Property.
 
 “Permits” means licenses,
permits, franchises, consents, approvals, variances, exemptions, and other
authorizations of or from Governmental Entities.
  47
  “Person” means any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, enterprise, unincorporated organization, or Governmental
Entity.
 
 “Proceedings” means all
proceedings, actions, claims, suits, investigations, and inquiries by or before
any arbitrator or Governmental Entity.
  “Reasonable Best Efforts” means
a party’s reasonable best efforts in accordance with reasonable commercial
practice; provided, however, no party shall be required to file or threaten
litigation in order to have performed “Reasonable Best Efforts” nor, in
performing Reasonable Best Efforts under Sections 1.2(i) or
8.1(b), shall
Sellers be obligated to expend more than the aggregate sum of $50,000 in curing
all Title Defects.
 
 “Retained Obligations” means
Sellers’ obligations and liabilities (i) under the Credit Facility or any
amounts that may be due and owing Sellers’ officers, employees or owners,
(ii) with respect to the Excluded Assets, or (iii) with respect to
royalties, and Taxes attributable to the Properties for all periods prior to the
Effective Date.
 
 “Securities Act” shall mean the
Securities Act of 1933, as amended, and all rules and regulations under such
Act.
 
 “Sellers Disclosure Schedule”
shall mean Schedule 4 attached hereto, which sets forth additional information
regarding the representations and warranties of Sellers contained herein and
information called for hereby.
 
 “Sellers’ Period of Ownership”
shall mean the period of time commencing August 31, 2007 and ending on the
Closing Date.
 
 “Tax Returns” mean any return,
report, statement, form or similar statement required to be filed with respect
to any Taxes (including any attached schedules), including, without limitation,
any information return, claim for refund, amended return or declaration of
estimated Taxes.
 
 “Tax” or“Taxes” means any income taxes
or similar assessments or any sales, excise, occupation, use, ad valorem,
property, production, severance, transportation, employment, payroll, franchise,
or other tax imposed by any United States federal, state, or local (or any
foreign or provincial) taxing authority, including any interest, penalties, or
additions attributable thereto.
 
 “Working Interest” means the
percentage of costs and expenses attributable to the maintenance, development
and operation of an Oil and Gas Property.
 
 Section
13.2.                                Certain
Additional Defined Terms.
  In
addition to such terms as are defined in the preamble to this Agreement and in
Section 14.1,
the following terms are used in this Agreement as defined in the Articles or
Sections set forth opposite such terms:
  48
  
 Defined
      Term
              ReferenceAccounting
      Dispute
              Section
      2.3(c)Accounting
      Referee
              Section
      2.3(c)Adjusted
      Purchase Price
              Section
      2.1Allocated
      Value
              Section
      8.1(c)(i)Assignment
              Section
      9.1(f)Buyer’s
      Environmental Consultant
              Section
      8.2(a)Buyer’s
      Environmental Review
              Section
      8.2(a)Buyer’s
      Losses
              Section
      11.2Buyer’s
      Title Review
              Section
      8.1(a)Casualty
      Deficit
              Section
      7.6(c)Closing
              Article
      IIIClosing
      Date
              Article
      IIICure
      Period
              Section
      8.5(c)Defect
      Dispute
              Section
      8.3(b)Defects
      Escrow
              Section
      8.4(a)Defects
      Escrow Agent
              Section
      8.4(a)Defects
      Escrow Agreement
              Section
      8.4(a)Defensible
      Title
              Section
      8.1(d)(i)Deposit
              Section
      2.4(a)Environmental
      Defect
              Section
      8.2(e)(i)Environmental
      Defect Notice
              Section
      8.2(c)Environmental
      Defect Value
              Section
      8.2(e)(ii)Environmental
      Information
              Section
      8.2(b)Examination
      Period
              Section
      8.1(a)Excluded
      Assets
              Section
      1.2Indemnified
      Party
              Section
      11.5Indemnifying
      Party
              Section
      11.5Independent
      Expert
              Section
      8.3(b)Notice
      Period
              Section
      11.5Oil
      and Gas Properties
              Section
      1.1Permitted
      Encumbrances
              Section
      8.1(d)(ii)Post-Closing
      Defect
              Section
      8.5(c)Properties
              Section
      1.1Purchase
      Price
              Section
      2.1Records
              Section
      1.1(f)Remedies
      for Title Defects
              Section
      8.1(b)Request
      Date
              Section
      2.3(c)Rules
              Section
      8.3(b)Scheduled
      Production Sales Contracts
              Section
      4.9Sellers’
      Losses
              Section
      11.3Substantial
      Environmental Concern
              Section
      8.2(e)(iii)Suspended
      Proceeds
              Section
      7.11Survival
      Date
              Section
      11.2Title
      Defect
              Section
      8.1(d)(iii)Title
      Defect Amount
              Section
      8.1(c)
  49
  Defined
      Term
              ReferenceTitle
      Defect Property
              Section
      8.1(b)
 
  Section
13.3.                                References,
Titles and Construction.
  (a)           All
references in this Agreement to articles, sections, subsections and other
subdivisions refer to corresponding articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise.
  (b)           Titles
appearing at the beginning of any of such subdivisions are for convenience only
and shall not constitute part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions.
  (c)           The
words “this Agreement”, “this instrument”, “herein”, “hereof”, “hereby”,
“hereunder” and words of similar import refer to this Agreement as a whole and
not to any particular subdivision unless expressly so limited.
  (d)           Words
in the singular form shall be construed to include the plural and vice versa, unless the
context otherwise requires.  Pronouns in masculine, feminine and
neuter genders shall be construed to include any other gender.
  (e)           Unless
the context otherwise requires or unless otherwise provided herein, the terms
defined in this Agreement which refer to a particular agreement, instrument or
document also refer to and include all renewals, extensions, modifications,
amendments or restatements of such agreement, instrument or document, provided
that nothing contained in this subsection shall be construed to authorize such
renewal, extension, modification, amendment or restatement.
  (f)           Examples
shall not be construed to limit, expressly or by implication, the matter they
illustrate.
  (g)           The
word “or” is not intended to be exclusive and the word “includes” and its
derivatives means “includes, but is not limited to” and corresponding derivative
expressions.
  (h)           No
consideration shall be given to the fact or presumption that one party had a
greater or lesser hand in drafting this Agreement.
  (i)           All
references herein to “$” or “dollars” shall refer to U.S. Dollars.
  (j)           Each
Annex, Exhibit and Schedule attached hereto is incorporated herein by reference
for all purposes and references to this Agreement shall also include all
Annexes, Exhibits or Schedules unless the context in which used shall otherwise
require.
   [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
  50
  IN WITNESS WHEREOF, this
Agreement is executed by the parties hereto on the date set forth
above.
  SELLERS:
  
  LINN
ENERGY HOLDINGS, LLC, a Delaware limited liability company
  By:  /s/ Mark E. Ellis________________
 Mark E.
Ellis, President and Chief Operating Officer
  LINN
OPERATING, INC., a Delaware corporation
  By:  /s/ Mark E. Ellis________________
 Mark E.
Ellis, President and Chief Operating Officer
  
  MID-CONTINENT
I, LLC, a Delaware limited liability company
  
  By:  /s/ Mark E. Ellis________________
 Mark E.
Ellis, President and Chief Operating Officer
  
  MID-CONTINENT
II, LLC, a Delaware limited liability company
  
  By:  /s/ Mark E. Ellis________________
 Mark E.
Ellis, President and Chief Operating Officer
  SIGNATURE
PAGE TO ASSET PURCHASE AND SALE AGREEMENT- Verden Region
   
  
  LINN
EXPLORATION MIDCONTINENT, an Oklahoma limited liability company
  
  By:  /s/ Mark E. Ellis________________
 Mark E.
Ellis, President and Chief Operating Officer
  
  BUYER:
  LAREDO
PETROLEUM, INC., a Delaware corporation
  By:  /s/ Jerry R.
Schuyler_____________
 Jerry R.
Schuyler
 Executive
Vice President & Chief Operating Officer
 
   SIGNATURE
PAGE TO ASSET PURCHASE AND SALE AGREEMENT- Verden Region
   
  EXHIBIT
A
  LEASES
   
  EXHIBIT
A-1
    PLAT
OF AREA OF INCLUDED INTERESTS
  
   
  EXHIBIT B
  EXCLUDED
ASSETS
   
  EXHIBIT
C
  REPRESENTED
INTERESTS; ALLOCATION OF PURCHASE PRICE
   
  EXHIBIT
D
  FORM
OF ASSIGNMENT
  THE STATE
OF OKLAHOMA
  COUNTIES
OF ______________
  ASSIGNMENT AND BILL OF
SALE
  [LINN
ENERGY HOLDINGS, LLC, a Delaware limited liability company/LINN OPERATING, INC.,
a Delaware corporation/MID-CONTINENT I, LLC, a Delaware
Corporation/MID-CONTINENT II, LLC, a Delaware Corporation/LINN EXPLORATION
MIDCONTINENT, an Okalahoma limited liability company] (jointly “Grantor”), for
Ten Dollars and other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledge), does hereby GRANT, BARGAIN, SELL,
CONVEY, ASSIGN, TRANSFER, SET OVER, AND DELIVER unto LAREDO PETROLEUM, INC., a
Delaware corporation (herein called “Grantee”), whose address is15 West Sixth Street,
Suite 1800, Tulsa, Oklahoma 74119,the following described
properties, rights and interests:
  1.1           All
right, title and interest of Grantor in and to the Leases described on Exhibit A
attached hereto and made a part hereof for all purposes (and any ratifications,
amendments, renewals or extensions to such Leases, whether or not such
ratifications, amendments, renewals or extensions are described on such Exhibit
A);
  1.2           Without
limitation of the foregoing but subject to the provisions in this Assignment and
Bill of Sale regarding Excluded Properties, all other right, title and interest
(of whatever kind or character, whether legal or equitable, and whether vested
or contingent) of Grantor in and to the oil, gas, and other minerals in and
under or that may be produced from the lands described in Exhibits A
hereto or described in any of the Leases described on such Exhibit A, or
included within the area outlined in red on the Plat attached as Exhibit A-1 hereto
(including interests in Leases, overriding royalties, production payments and
net profits interests in such lands or such Leases, and fee mineral interests,
fee royalty interests, and other interests in so far as they cover such lands),
even though Grantor’s interests therein may be incorrectly described in, or
omitted from, such Exhibit
A;
  1.3           All
rights, titles and interests of Grantor in and to, or otherwise derived from,
all presently existing and valid oil, gas, or mineral unitization, pooling, or
communitization agreements, declarations, and/or orders and in and to the
properties covered and the units created thereby (including all units formed
under orders, rules, regulations, or other official acts of any federal, state,
or other authority having jurisdiction, voluntary unitization agreements,
designations and/or declarations) relating to the properties described in paragraphs  1.1
and 1.2  above;
  1.4           All
rights, titles, and interests of Grantor in and to the Material Contracts and
all presently existing and valid production sales (and sales related) contracts,
operating agreements, and other agreements and contracts which relate to any of
the properties described in paragraphs 1.1, 1.2and 1.3
above, or which relate to the exploration, development, operation,
or
   
  maintenance
thereof or the treatment, storage, transportation or marketing of production
therefrom (or allocated thereto);
  1.5           All
rights, titles, and interests of Grantor in and to all materials, supplies,
machinery, equipment, improvements and other personal property and fixtures
(including all wells, wellhead equipment, pumping units, flowlines, tanks,
buildings, injection facilities, saltwater disposal facilities, compression
facilities, gathering systems, and other equipment), and all easements,
rights-of-way, surface tracts, surface leases and other surface rights, all
Permits and licenses, and all other appurtenances being used or held for use in
connection with, or otherwise related to, the exploration, development,
operation or maintenance of any of the properties described in paragraphs 1.1, 1.2and 1.3
above, or the treatment, storage, transportation, or marketing of production
therefrom (or allocated thereto);
  1.6           Subject
to any third party rights, all of Grantor’s lease files, title opinions,
production records, well files, accounting records (but not including general
financial and accounting records attributable to Grantor or Grantor’s business),
seismic records and surveys, gravity maps, electric logs, geological or
geophysical data and records, and other files, documents and records of every
kind and description which relate to the properties described above (the
“Records”); provided, however that Grantor may retain (at its expense) copies of
any or all of the Records;
  1.7           To
the extent transferable, all of Grantor’s right to enforce representations,
warranties and indemnities under agreements with third parties in favor of
Grantor respecting one or more of the properties and interests described in
paragraphs 1.1,
1.2 and 1.3
above.
  The
properties, rights and interests specified in the foregoing paragraphs 1.1 through 1.7 exclusive of the
Excluded Properties (defined below), are herein sometimes collectively called
the “Subject Properties.”
  Any
provision contained in this Assignment and Bill of Sale notwithstanding, the
Subject Properties do not include, and there is hereby expressly excepted and
excluded therefrom and reserved to Grantor, all other assets, properties, and
business of Grantor, including the following:
  2.1           Any
accounts receivable or accounts payable accruing before the Effective
Date;
  2.2           All
of Grantor’s right, title, and interest in any oil, gas, or mineral Leases,
overriding royalties, production payments, net profits interests, fee mineral
interests, fee royalty interests and other interests in oil, gas, and other
minerals not included within the area outlined in red on the Plat attached as
Exhibit A-1
hereto or expressly included in the definition of Oil and Gas Properties and all
oil, gas or other hydrocarbon production from or attributable to the Subject
Properties with respect to all periods prior to the Effective Date, all proceeds
attributable thereto, and all Hydrocarbons that, at the Effective Date, are
owned by Grantor and are in storage or within processing plants;
  2.3           Any
rebate or refund of costs, Taxes, or expenses borne by Grantor or Grantor’s
predecessors in title attributable to periods prior to the Effective
Date;
   
  2.4           Any
and all proceeds from the settlements of contract disputes with purchasers of
Hydrocarbons from the Subject Properties, including settlement of take-or-pay
disputes, insofar as said proceeds are attributable to periods of time prior to
the Effective Date;
  2.5           Any
and all proceeds from settlements with regard to reclassification of oil or gas
produced from the Subject Properties, insofar as said proceeds are attributable
to periods of time prior to the Effective Date;
  2.6           All
contracts of insurance or indemnity insofar as such contracts apply to periods
prior to the Effective Date;
  2.7           All
claims (including insurance claims) and causes of action of Grantor against one
or more third parties arising from acts, omission, or events occurring prior to
the Effective Date and all claims under any joint interest audit attributable to
any period prior to the Effective Date;
  2.8           All
limited liability company, financial, tax, and legal (other than title) books
and records of Grantor;
  2.9           Subject
to the Participation Option Agreement (hereinafter described), any geological,
geophysical or seismic data, materials, or information, including maps,
interpretations, records, or other technical information related to or based
upon any such data, materials or information, and any other asset, data,
materials, or information, the transfer of which is restricted or prohibited
under the terms of any third party license, confidentiality agreement, or other
agreement or the transfer of which would require the payment of a fee or other
consideration to any third party.
  2.10           All
share drive and accounting servers related to the Subject Properties regardless
of where such servers are located;
  2.11           All
of Grantor’s accounting or other administrative systems, computer software,
patents, trade secrets, copyrights, names, trademarks, logos, and other
intellectual property;
  2.12           All
documents and instruments of Grantor that are protected by an attorney-client
privilege (exclusive of title opinions in respect of the Oil and Gas Properties
and all documents and instruments related to any matters in Grantor’s Disclosure
Schedule);
  2.13           All
of the other properties, interests and assets described on Exhibit B,
together with any rights, liabilities, or obligations associated with such
assets;
  2.14           The
Existing Hedges and all hedging transactions and any gains or losses
attributable to any hedging activities;
  2.15           Any
other right or interest in and to the Subject Properties to the extent
attributable to the period prior to the Effective Date;
   
  2.16           All
bonds, letters of credit and guarantees if any, posted by Grantor or any
Affiliate with any Governmental Authority or third person and relating to the
Subject Properties; and
  2.17           All
(a) correspondence or other documents or instruments of Grantor relating to the
transactions contemplated hereby, (b) lists of other prospective purchasers of
Grantor or the Subject Properties compiled by Grantor, (c) bids submitted to
Grantor by other prospective purchasers of Grantor or the Subject Properties,
(d) analyses by Grantor or any Affiliates thereof submitted by other prospective
purchasers of Grantor or the Subject Properties and (e) correspondence between
or among Grantor or its Affiliates or their respective representatives with
respect to, or with, any other prospective purchasers from Grantor or the
Subject Properties.
  2.18           Eighty
percent (80%) of Sellers’ total interest in (i) the wellbore of the Weber 3-4
Well (API # 01522984A) in Section 4-6N-9W of Caddo County, Oklahoma and
(ii) the McGuire 1-24 Well (API # 05123416) in Section 24-3N-8W of Grady County,
Oklahoma, together with the right to deepen, sidetrack or recomplete either of
the foregoing; and
  2.19           All
rights, titles, interests and obligations retained by Grantor or granted to
Grantor pursuant to that certain Participation Option Agreement executed by
Grantor and Grantee on even date herewith.
  
  
  The
properties and interests specified in the foregoing paragraphs 2.1 through 2.19 are herein
collectively called the “Excluded Properties”.  It is understood that
certain of the Excluded Properties may not be embraced by the term “Subject
Properties”.  The fact that certain assets have been expressly
excluded is not intended to suggest that had they not been excluded they would
have constituted Subject Properties and may not be used to interpret the meaning
of any word or phrase used in describing the Subject Properties.
  This
Assignment and Bill of Sale is made by Grantor and accepted by Grantee subject
to all matters shown of record in __________ Counties, Oklahoma and the other
public records of that State.
  This
Assignment and Bill of Sale is made subject to that certain Asset Purchase and
Sale Agreement (the Agreement”) between Grantor and Grantee dated May 30,
2008.  The Agreement contains certain representations, warranties,
covenants, indemnities and agreements between the parties, some of which may
survive the delivery of this Assignment and Bill of Sale, as more particularly
provided for therein, but third parties may conclusively rely on this Assignment
and Bill of Sale to vest title to the Subject Properties in
Grantee.  The Agreement also contains certain defined terms which are
used in this Assignment and Bill of Sale with the same meaning as set out in
this Assignment and Bill of Sale.
  TO HAVE
AND TO HOLD the Subject Properties unto Grantee, and its successors and assigns,
forever.
   
  GRANTOR DOES NOT WARRANT
THE TITLE TO THE SUBJECT PROPERTIES ASSIGNED HEREIN, EITHER EXPRESS OR
IMPLIED. WITHOUT LIMITATION OF THE FOREGOING, THE SUBJECT PROPERTIES ARE
CONVEYED PURSUANT HERETO WITHOUT ANY WARRANTY OR REPRESENTATION WHETHER EXPRESS,
IMPLIED, STATUTORY OR OTHERWISE, RELATING TO THE CONDITION, QUANTITY, QUALITY,
FITNESS FOR A PARTICULAR PURPOSE, CONFORMITY TO THE MODELS OR SAMPLES OF
MATERIALS OR MERCHANTABILITY OF ANY EQUIPMENT OR ITS FITNESS FOR ANY PURPOSE,
ANDWITHOUT ANY OTHER EXPRESS, IMPLIED, STATUTORY OR OTHER WARRANTY OR
REPRESENTATION WHATSOEVER.  SUBJECT TO AND WITHOUT IN ANY MANNER
DIMINISHING GRANTOR’S INDEMNITY OBLIGATIONS UNDER THE AGREEMENT, GRANTEE HAS
INSPECTED, OR WAIVED GRANTEE’S RIGHT TO INSPECT, THE SUBJECT PROPERTIES FOR ALL
PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION,
BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO CONDITIONS
SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS
SUBSTANCES, SOLID WASTES OR NATURALLY OCCURRING RADIOACTIVE MATERIALS
(“NORM”).  GRANTEE IS RELYING UPON (A) GRANTOR’S REPRESENTATIONS UNDER
THE AGREEMENT AND (B) GRANTEE’S OWN INSPECTION OF THE SUBJECT PROPERTIES, AND
GRANTEE SHALL ACCEPT ALL OF THE SAME SUBJECT TO GRANTOR’S INDEMNITY UNDER THE
AGREEMENT BUT OTHERWISE IN THEIR “AS IS, WHERE IS” CONDITION.  ALSO
WITHOUT LIMITATION OF THE FOREGOING, GRANTOR MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AS TO THE ACCURACY OR
COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS, INFORMATION OR
MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR MADE AVAILABLE TO GRANTEE IN
CONNECTION WITH THIS ASSIGNMENT INCLUDING, WITHOUT LIMITATION, RELATIVE TO
PRICING ASSUMPTIONS, OR QUALITY OR QUANTITY OF HYDROCARBON RESERVES (IF ANY)
ATTRIBUTABLE TO THE SUBJECT PROPERTIES OR THE ABILITY OR POTENTIAL OF THE
SUBJECT PROPERTIES TO PRODUCE HYDROCARBONS OR ANY OTHER MATTERS CONTAINED IN THE
MATERIALS FURNISHED OR MADE AVAILABLE TO GRANTEE BY GRANTOR OR BY GRANTOR’S
AGENTS OR REPRESENTATIVES.  ANY AND ALL SUCH DATA, RECORDS, REPORTS,
PROJECTIONS, INFORMATION AND OTHER MATERIALS (WRITTEN OR ORAL) FURNISHED BY
GRANTOR OR OTHERWISE MADE AVAILABLE OR DISCLOSED TO GRANTEE ARE PROVIDED AS A
CONVENIENCE AND SHALL NOT CREATE OR GIVE RISE TO ANY LIABILITY OF OR AGAINST
GRANTOR AND ANY RELIANCE ON OR USE OF THE SAME SHALL BE AT GRANTEE’S SOLE RISK
TO THE MAXIMUM EXTENT PERMITTED BY LAW.
  Grantor
agrees to execute and deliver to Grantee, from time to time, such other and
additional instruments, notices, division orders, transfer orders and other
documents, and to do all such other and further acts and things as may be
necessary to more fully and effectively grant, convey and assign to Grantee the
Subject Properties.
   
  This
Assignment is being executed in several counterparts all of which are identical,
except that, to facilitate recordation, certain counterparts hereof may contain
only that portion of Exhibit A which contains specific descriptions of the
Subject Properties located in the recording jurisdiction in which the particular
counterpart is to be recorded.  All of such counterparts together
shall constitute one and the same instrument.  Complete copies of this
Assignment containing the entire Exhibit A have been recorded in [ ̃] County, and
retained by Grantor and Grantee.
  IN
WITNESS WHEREOF this Assignment has been executed by the parties hereto on the
dates of their respective acknowledgments effective as to runs of oil and
deliveries of gas, and for all other purposes, as of 7:00 a.m. local time at the
locations of the Subject Properties, respectively, on July 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:  ______________________________
  MID-CONTINENT
I, LLC, a Delaware limited liability company
  
  By:  _______________________________
 Name:  _____________________________
 Title:  ______________________________
  
   
  MID-CONTINENT
II, LLC, a Delaware limited liability company
  
  By:  _______________________________
 Name:  _____________________________
 Title:  ______________________________
  
  
  LINN
EXPLORATION MIDCONTINENT, an Oklahoma limited liability company
  
  By:  _______________________________
 Name:  _____________________________
 Title:  ______________________________
  
  “GRANTEE”
  LAREDO
PETROLEUM, INC., a Delaware corporation
  By:  _______________________________
 Name:  _____________________________
 Title:  ______________________________
 
 
 
 [ACKNOWLEDGMENTS]
   
  SCHEDULE
2.5
  PURCHASE
PRICE TAX ALLOCATIONS
  
 SCHEDULE
4
  SELLERS
DISCLOSURE SCHEDULE
  4.6  Litigation
  4.7  Material
Contracts
  4.8  Commitments,
Abandonments or Proposals
  4.9  Production
Sales Contracts
  4.10  Plugging
and Abandonment
  4.11  Permits
  4.14  Imbalances;
Prepayments
  4.16  Taxes
  4.19  Preferential
Rights and Third Party Consents
   
  SCHEDULE
12.10
  SELLERS
BONDS