EXHIBIT
10.20


PURCHASE AND SALE AGREEMENT


BY AND
BETWEEN


LANCE OIL
& GAS COMPANY, INC.


AND


WESTERN GAS
RESOURCES, INC.


“SELLERS”


AND


PRB OIL
& GAS, INC.


“BUYER”















 


TABLE OF CONTENTS


	
  

  	
   

  	
   

  	
   

  	
  Page

  
	
  ARTICLE 1.

  	
  DEFINITIONS

  	
   

  	
  1

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  	
  1

  
	
  ARTICLE 2.

  	
  TRANSFER OF THE PROPERTIES

  	
   

  	
  9

  
	
   

  	
  2.1

  	
  Sale and Purchase

  	
   

  	
  9

  
	
  ARTICLE 3.

  	
  PURCHASE PRICE

  	
   

  	
  9

  
	
   

  	
  3.1

  	
  Purchase Price

  	
   

  	
  9

  
	
   

  	
  3.2

  	
  Earnest Money

  	
   

  	
  9

  
	
  ARTICLE 4.

  	
  DUE DILIGENCE REVIEW

  	
   

  	
  10

  
	
   

  	
  4.1

  	
  Review of Records

  	
   

  	
  10

  
	
   

  	
  4.2

  	
  Alleged Title Defects

  	
   

  	
  10

  
	
   

  	
  4.3

  	
  Environmental Inspection

  	
   

  	
  11

  
	
   

  	
  4.4

  	
  Alleged Environmental Conditions

  	
   

  	
  11

  
	
   

  	
  4.5

  	
  Aggregate Threshold Amount

  	
   

  	
  12

  
	
   

  	
  4.6

  	
  Waiver and Release

  	
   

  	
  13

  
	
  ARTICLE 5.

  	
  ACCOUNTING

  	
   

  	
  13

  
	
   

  	
  5.1

  	
  Revenues, Expenses and Capital Expenditures

  	
   

  	
  13

  
	
   

  	
  5.2

  	
  Taxes

  	
   

  	
  14

  
	
   

  	
  5.3

  	
  Obligations and Credits

  	
   

  	
  14

  
	
   

  	
  5.4

  	
  Final Accounting Statement

  	
   

  	
  14

  
	
   

  	
  5.5

  	
  Post-Final Settlement Date

  	
   

  	
  15

  
	
  ARTICLE 6.

  	
  CASUALTY AND CONDEMNATION

  	
   

  	
  15

  
	
   

  	
  6.1

  	
  Casualty and Condemnation

  	
   

  	
  15

  
	
  ARTICLE 7.

  	
  INDEMNITIES

  	
   

  	
  15

  
	
   

  	
  7.1

  	
  Opportunity for Review

  	
   

  	
  15

  
	
   

  	
  7.2

  	
  Assumptions of Obligations, Including Environmental

  	
   

  	
  15

  
	
   

  	
  7.3

  	
  Seller’s Non-Environmental Indemnity Obligation

  	
   

  	
  16

  
	
   

  	
  7.4

  	
  Buyer’s Non-Environmental Indemnity Obligation

  	
   

  	
  16

  
	
   

  	
  7.5

  	
  NORM and Hazardous Substances

  	
   

  	
  16

  
	
   

  	
  7.6

  	
  Notice and Cooperation

  	
   

  	
  16

  
	
   

  	
  7.7

  	
  Defense of Claims

  	
   

  	
  17

  
	
   

  	
  7.8

  	
  Waiver of Certain Damages

  	
   

  	
  18

  
	
   

  	
  7.9

  	
  Limitations on Indemnities

  	
   

  	
  18

  
	
   

  	
  7.10

  	
  Payment Disputes

  	
   

  	
  18

  
	
  ARTICLE 8.

  	
  SPECIAL WARRANTY OF TITLE AND DISCLAIMERS

  	
   

  	
  18

  
	
   

  	
  8.1

  	
  Special Warranty of Title

  	
   

  	
  18

  
	
   

  	
  8.2

  	
  Disclaimer - Representations and Warranties

  	
   

  	
  18

  
	
   

  	
  8.3

  	
  Disclaimer - Statements and Information

  	
   

  	
  19

  
	
  ARTICLE 9.

  	
  SELLER’S REPRESENTATIONS AND WARRANTIES

  	
   

  	
  19

  
	
   

  	
  9.1

  	
  Organization and Good Standing

  	
   

  	
  19

  
	
   

  	
  9.2

  	
  Authority; Authorization of Agreement

  	
   

  	
  19

  
	
   

  	
  9.3

  	
  No Violations

  	
   

  	
  19

  
	
   

  	
  9.4

  	
  Absence of Certain Changes

  	
   

  	
  20

  
	
   

  	
  9.5

  	
  Operating Costs

  	
   

  	
  20

  
	
   

  	
  9.6

  	
  Pending Proceedings

  	
   

  	
  20

  



 



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  9.7

  	
  Bankruptcy

  	
   

  	
  20

  
	
   

  	
  9.8

  	
  Liability for Brokers’ Fees

  	
   

  	
  20

  
	
   

  	
  9.9

  	
  No Liens

  	
   

  	
  21

  
	
   

  	
  9.10

  	
  Judgments

  	
   

  	
  21

  
	
   

  	
  9.11

  	
  Records

  	
   

  	
  21

  
	
   

  	
  9.12

  	
  Compliance with Law

  	
   

  	
  21

  
	
   

  	
  9.13

  	
  Applicable Contracts

  	
   

  	
  21

  
	
   

  	
  9.14

  	
  Permits

  	
   

  	
  21

  
	
   

  	
  9.15

  	
  Taxes

  	
   

  	
  21

  
	
   

  	
  9.16

  	
  Lease Accounts

  	
   

  	
  21

  
	
   

  	
  9.17

  	
  Preferential Purchase Rights and Consents

  	
   

  	
  21

  
	
  ARTICLE 10.

  	
  BUYER’S REPRESENTATIONS AND WARRANTIES

  	
   

  	
  22

  
	
   

  	
  10.1

  	
  Organization and Good Standing

  	
   

  	
  22

  
	
   

  	
  10.2

  	
  Corporate Authority; Authorization of Agreement

  	
   

  	
  22

  
	
   

  	
  10.3

  	
  No Violations

  	
   

  	
  22

  
	
   

  	
  10.4

  	
  SEC Disclosure

  	
   

  	
  22

  
	
   

  	
  10.5

  	
  Independent Evaluation

  	
   

  	
  23

  
	
   

  	
  10.6

  	
  Governmental Approvals

  	
   

  	
  23

  
	
  ARTICLE 11.

  	
  ADDITIONAL AGREEMENTS

  	
   

  	
  23

  
	
   

  	
  11.1

  	
  Covenants of Sellers

  	
   

  	
  23

  
	
   

  	
  11.2

  	
  Notice of Loss

  	
   

  	
  23

  
	
   

  	
  11.3

  	
  Subsequent Operations

  	
   

  	
  23

  
	
   

  	
  11.4

  	
  Buyer’s Assumption of Obligations

  	
   

  	
  23

  
	
   

  	
  11.5

  	
  Records

  	
   

  	
  24

  
	
  ARTICLE 12.

  	
  CONDITIONS PRECEDENT TO CLOSING

  	
   

  	
  24

  
	
   

  	
  12.1

  	
  Conditions Precedent to Seller’s Obligation to Close

  	
   

  	
  24

  
	
   

  	
  12.2

  	
  Conditions Precedent to Buyer’s Obligation to Close

  	
   

  	
  24

  
	
   

  	
  12.3

  	
  Conditions Precedent to Obligation of Each Party

  	
   

  	
  24

  
	
  ARTICLE 13.

  	
  TERMINATION

  	
   

  	
  25

  
	
   

  	
  13.1

  	
  Grounds for Termination

  	
   

  	
  25

  
	
   

  	
  13.2

  	
  Effect of Termination

  	
   

  	
  25

  
	
   

  	
  13.3

  	
  Dispute over Right to Terminate

  	
   

  	
  26

  
	
   

  	
  13.4

  	
  Return of Documents

  	
   

  	
  26

  
	
   

  	
  13.5

  	
  Confidentiality

  	
   

  	
  26

  
	
  ARTICLE 14.

  	
  THE CLOSING

  	
   

  	
  26

  
	
   

  	
  14.1

  	
  Closing

  	
   

  	
  26

  
	
   

  	
  14.2

  	
  Obligations of Seller at Closing

  	
   

  	
  26

  
	
   

  	
  14.3

  	
  Obligations of Buyer at Closing

  	
   

  	
  27

  
	
  ARTICLE 15.

  	
  MISCELLANEOUS

  	
   

  	
  27

  
	
   

  	
  15.1

  	
  Notices

  	
   

  	
  27

  
	
   

  	
  15.2

  	
  Conveyance Costs

  	
   

  	
  28

  
	
   

  	
  15.3

  	
  Brokers’ Fees

  	
   

  	
  28

  
	
   

  	
  15.4

  	
  Access to Information

  	
   

  	
  28

  
	
   

  	
  15.5

  	
  Further Assurances

  	
   

  	
  28

  
	
   

  	
  15.6

  	
  Survival of Representations and Warranties

  	
   

  	
  28

  
	
   

  	
  15.7

  	
  Amendments and Severability

  	
   

  	
  29

  



 



 ii
 






 



 


	
  

  	
  15.8

  	
  Successors and Assigns

  	
   

  	
  29

  
	
   

  	
  15.9

  	
  Headings

  	
   

  	
  29

  
	
   

  	
  15.10

  	
  Governing Law

  	
   

  	
  29

  
	
   

  	
  15.11

  	
  No Partnership Created

  	
   

  	
  29

  
	
   

  	
  15.12

  	
  Public Announcements

  	
   

  	
  29

  
	
   

  	
  15.13

  	
  No Third Party Beneficiaries

  	
   

  	
  29

  
	
   

  	
  15.14

  	
  Not to be Construed Against Drafter

  	
   

  	
  29

  
	
   

  	
  15.15

  	
  Entire Agreement

  	
   

  	
  30

  
	
   

  	
  15.16

  	
  Conspicuousness of Provisions

  	
   

  	
  30

  
	
   

  	
  15.17

  	
  Arbitration

  	
   

  	
  30

  
	
   

  	
  15.18

  	
  Execution in Counterparts

  	
   

  	
  32

  



 



 iii
 






 



EXHIBITS AND SCHEDULES


 


Exhibits



	
  Exhibit A-1

  	
  Leases

  
	
  Exhibit A-1-a

  	
  Allocated Value for Leases

  
	
  Exhibit A-2

  	
  Wells

  
	
  Exhibit A-3

  	
  Allocation of Purchase Price

  
	
  Exhibit B

  	
  Amherst Facility

  
	
  Exhibit C

  	
  Form of Assignment and Conveyance

  
	
  Exhibit D

  	
  Bill of Sale

  
	
  Exhibit E

  	
  Form of Letters in Lieu

  
	
  Exhibit F

  	
  Lance Easements and WGR Easements

  
	
  Exhibit G

  	
  Lance Personal Property and WGR Personal Property

  
	
   

  	
   

  
	
  Schedules

  	
   

  
	
   

  	
   

  
	
  Schedule 9.13

  	
  Lance Applicable Contracts and WGR Applicable
  Contracts

  
	
  Schedule 9.14

  	
  Lance Permits and WGR Permits

  
	
  Schedule 9.17

  	
  Preferential Rights

  



 



 iv














 


PURCHASE AND SALE AGREEMENT


THIS
PURCHASE AND SALE AGREEMENT (this “Agreement”) is dated December 7, 2006, by
and between LANCE OIL & GAS COMPANY, INC. (“Lance”), a Delaware corporation
and WESTERN GAS RESOURCES, INC. (“WGR”),
a Delaware corporation (Lance and WGR, together
“Sellers”), and PRB Oil & Gas,
Inc, a Colorado corporation (“Buyer”).


WHEREAS,
Sellers desire to sell, assign and convey to Buyer and Buyer desires to purchase and accept ownership of certain oil and
gas properties, gas gathering assets and related interests located in Phillips
and Sedgwick Counties, Colorado and Chase, Deuel, Dundy, Perkins and Keith Counties, Nebraska; and


WHEREAS,
the parties have reached agreement regarding such sale and purchase.


NOW,
THEREFORE, for valuable consideration and the mutual covenants and agreements herein contained, Sellers and Buyer
agree as follows:


ARTICLE 1. DEFINITIONS


1.1           Definitions. In this
Agreement, capitalized terms have the meanings provided in this Article, unless expressly provided otherwise
in other Articles.


“Accounting
Referee” has the meaning set forth in Article 5.4.


“Affiliate”
means and includes any entity that, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with
the entity specified. Control means
ownership of greater than fifty-one percent (51%) of the voting stock, units,
or partnership interests of such
entity.


“Aggregate
Threshold Amount” has the meaning set forth in Article 4.5.


“Alleged
Environmental Condition” means an Environmental Condition asserted by Buyer in accordance with Article 4.4.


“Alleged
Title Defect” means a Title Defect (as hereinafter defined) which is asserted
by Buyer in accordance with Article
4.2.


“Allocated
Value” means the portion of the Purchase Price allocated to the various Properties as set forth on Exhibit A-1-a,
for Leases, and on Exhibit A-2, for Wells.


“Assignment”
means a document in the form of Exhibit C.


“Business Day” means a
Day (as hereinafter defined) excluding Saturdays, Sundays and U.S. legal holidays.


“Buyer’s Knowledge” means
the actual knowledge of any officer, director, or manager level employee of Buyer.



 1
 






 



“Casualty
Loss” means any loss, damage or reduction in value to the Properties resulting
from mechanical failure or defects, catastrophic occurrences, acts of God and
any other property losses which are
not the result of normal wear and tear or of natural reservoir changes.


“Claim” or “Claims” means
any and all claims, demands, suits, causes of action, losses, damages, liabilities,
fines, penalties and costs (including attorneys’ fees and costs of litigation) which are brought by or owed to a Third Party.


“Claim
Notice” has the meaning set forth in Article 7.6.


“Claimant”
has the meaning set forth in Article 15.16 regarding Arbitration.


“Close”
or “Closing” means the consummation of the transfer of title to the Properties
(as hereinafter defined) to Buyer, including execution and delivery of all
documents provided herein.


“Closing
Date” means the later of (i) December 31, 2006, or (ii) such other date as
may result from the procedures set
forth in this Agreement, or such other date as may be mutually agreed upon by the parties.


“Closing
Statement” means the statement to be prepared and delivered under Article 14.1.


“Day”
means a calendar day consisting of twenty-four (24) hours from midnight to midnight.


“Defensible
Title” means, as to the Properties, such title that, subject to and except for
the Permitted Encumbrances (as
hereinafter defined), that:


(a)                                  With
respect to each Lease shown on Exhibit A-1 or each Well shown on Exhibit
A-2, obligates Lance to bear a Working Interest for such Lease or Well not
greater than the Working Interest shown thereon for such Lease or for such
Well, without increase throughout the term of the Lease or the productive life
of such Well, as applicable, except for (i)
increases resulting from contribution
requirements with respect to defaulting co-owners under applicable operating
agreements, and (ii) increases to the extent
that they are accompanied by a proportionate increase in Lance’s Net Revenue Interest;


(b)                                 With
respect to each Well, entitles Lance to receive the “Net Revenue Interests”
set forth in Exhibit A-2 of all oil, gas and associated liquid and gaseous hydrocarbons produced, saved and marketed
from the Wells without decrease throughout the term of the productive
life of such Well, as applicable, except for (i) decreases in connection with
those operations in which Lance or Buyer may
from and after the date of this Agreement be a non-consenting co-owner, (ii) decreases resulting from the
establishment or amendment from and after the date of this Agreement of pools
or units, and (iii) decreases required
to allow other working interest owners to make up past underproduction or pipelines to make up past under deliveries; provided that disclosure thereof has
been made by Sellers to Buyer in writing



 2
 






 



(c)                                  Is free and clear of liens, encumbrances and
encroachments;


(d)                                 Is deducible from applicable federal, tribal,
state and county records; and


(e)                                  Permits Sellers and their assigns and designees
rights of ingress and egress over the Properties for purposes of oil and
gas exploration, development, gathering,
and production.


“Dispute”
has the meaning set forth in Article 15.16.


“Earnest
Money” has the meaning set forth in Article 3.2.


“Effective
Time” means 12:01 a.m. Mountain Standard Time on December 1, 2006.


“Environmental
Claims” means all Claims for pollution or environmental damages of any kind, including without limitation, those
relating to: (a) remediation and/or clean-up required by Environmental Laws; (b) injury or death of any
person or damage or loss of any property or reserve; (c) the assessment, remediation, removal, transportation or
disposal of asbestos, NORM or other potentially hazardous substances associated
with or attributable to the Properties; and/or (d) Claims relating to breach and/or violation of Environmental Laws,
common law causes of action asserting
damage to the environmental quality of a property such as negligence, gross negligence, strict liability, nuisance or
trespass, or fault imposed by statute, rule or regulation.


“Environmental
Condition” means any condition that, as of the Effective Time (as hereafter defined), is not in compliance with the
then existing Environmental Laws (as hereafter defined), including, without limitation, non-compliance of permitting
requirements and other filings and
notice requirements.


“Environmental Laws”
means all laws, statutes, ordinances, permits, orders, judgments, rules or
regulations which are promulgated, issued or enacted by a governmental entity
or tribal authority having appropriate
jurisdiction that, (a) relate to the prevention of pollution or environmental damage, (b) the remediation of
pollution or environmental damage, or (c) the protection of the environment generally; including without limitation,
the Clean Air Act, as amended, the
Clean Water Act, as amended, the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, the Federal Water Pollution Control Act,
as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Safe Drinking Water Act, as amended, the Toxic Substance and Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Hazardous and the Solid Waste
Amendments Act of 1984, as amended, and the Oil Pollution Act of 1990, as amended, and other environmental or notice
obligations based upon common law.


“Final
Accounting Statement” has the meaning set forth in Article 5.4. “Final
Settlement Date” has the meaning set forth in Article 5.4.


“Lance
Applicable Contracts” shall mean all joint operating agreements; oil, gas,
liquids, casinghead gas and condensate purchase, sales, processing,
gathering, treatment, compression, and transportation agreements; farm-out or
farm-in agreements; dry hole, bottom hole, acreage contribution, purchase and acquisition agreements; area of mutual
interest agreements; servicing



 3
 






 



contracts; and all other
executory contracts and agreements relating, in each case listed above, to the Lance Assets, as set forth on Schedule
9.13.


“Lance
Assets” means all of Lance’s right, title and interest in, to and under, the following:


(a)                                  oil, gas and mineral leases and other mineral
leases and the leasehold estates
created thereby described in Exhibit A-1 hereto (collectively, the “Leases”), including all of Lance’s working
interests, operating rights, mineral interests, overriding royalty interests,
reversionary interests, net profits
interests, net revenue interests, and any other similar or dissimilar interests, all rights in any pooled or unitized
acreage by virtue of the Leases being
a part thereof, all production from the pool or unit allocated to any such Leases, and all interests in any wells
within the pool or unit associated with
the Leases;


(b)                                 all wells described in Exhibit A-2 hereto
(the “Wells”);


(c)                                  The Lance Personal Property;


(d)                                 The Lance Applicable Contracts;


(e)                                  The Lance Easements;


(f)                                    The Lance Permits; and


(g)                                 The Lance Records.


“Lance
Easements” means the easements, surface use agreements, and right-of-way agreements, permits, licenses, servitudes or other
interests held by Lance in the course of owning and operating the Lance Assets, as described on Exhibit F
hereto.


“Lance
Permits” means to the extent assignable to Buyers, all permits, licenses, certificates, orders, approvals, authorizations,
grants, consents, concessions, warrants, franchises and similar rights
and privileges granted by a Governmental Authority that are used, or held for use exclusively for or in connection with the
ownership, development and operation of the Lance Assets, as listed in Schedule 9.14 hereto.


“Lance Personal Property”
means the equipment and other personal and mixed property (including liquid
hydrocarbon inventory in tanks), improvements situated in or upon, or used or
useful, or held for future use in connection with the exploration, development
and production of oil, gas and other
minerals, sulfur, associated gas from any of the Leases, or the treatment, storage or transportation of such substances
therefrom, including Wells, casing, tubing, derricks, tanks, batteries, boilers, separators, rods,
dehydrators, compressors, pumps, flow lines, water lines, water reservoirs, gas
lines, buildings, field offices, fixtures, machinery, gas production, gathering
or processing equipment, systems or pipelines, gas marketing systems or
pipelines, power lines, telephone and telegraph lines, and all other
fixtures and improvements, located on the
Leases or lands pooled therewith or located thereon as set forth on Exhibit
G hereto;



 4
 






 



“Lance
Records” means all contract, land, right of way, title, engineering,
environmental, operating and
maintenance, accounting, tax, files, documents, instruments, notes, papers,
reports, abstracts, surveys, maps, books, records, correspondence, and studies
to the extent relating to and used or
held solely in connection with, the ownership, operation or maintenance of the
Lance Assets.


“Laws”
means laws, statutes, ordinances, permits, decrees, orders, judgments, rules or
regulations (including without
limitation Environmental Laws) which are promulgated, issued or enacted by a governmental entity or tribal
authority having appropriate jurisdiction.


“Letters-in-Lieu”
means a document in the form of Exhibit E.


“Material,” for purposes
of Article 9, means any matter reasonably anticipated to cost or have an adverse effect on the value, operation or
use of any of the Properties in excess of two hundred and fifty thousand United
States dollars ($250,000).


“Net
Revenue Interest” with respect to any Well shall mean a party’s Working
Interest share of revenues therefrom
less such party’s proportionate share of all royalties, overriding royalties, production payments, applicable carried
interests, net profits interests, reversionary interests, and other burdens.


“Non-Environmental
Claims” means all Claims, except Environmental Claims. “NORM” means naturally occurring radioactive
materials.


“Open
Defects” means all Open Environmental Conditions and all Open Title Defects.


“Open
Environmental Conditions” means all uncured Qualifying Alleged Environmental Conditions that were submitted to Sellers on a
timely basis and that remain in dispute.


“Open
Title Defects” means all uncured Qualifying Alleged Title Defects that were submitted to Seller on a timely basis and that
remain in dispute.


“Permitted
Encumbrances” means:


(a)                                  Royalties,
overriding royalties, production payments, reversionary interests, convertible interests, net profits interests, division orders and
similar burdens encumbering the
Properties to the extent the net cumulative
effect of such burdens do not operate to reduce the Net Revenue Interests of the Wells to less than the Net
Revenue Interests set forth in Exhibit
A-2;


(b)                                 Preferential purchase rights and consents to
assignment and similar contractual provisions encumbering the Properties
with respect to which, prior to Closing, (i) waivers or consents are obtained
from the appropriate parties, or (ii) the
appropriate time period for asserting such rights have expired without an exercise of such rights;


(c)                                  All
rights to consent by, required notices to, filings with, or other actions by governmental entities or tribal authorities in
connection with the transfer of



 5
 






 



record
legal title in and to the Properties to Buyer, if the same are customarily obtained subsequent to the
transfer of title;


(d)                                 Rights
reserved to or vested in any governmental entity or tribal authority having
appropriate jurisdiction to control or regulate the Properties in any manner whatsoever, and all Laws of any such
governmental entity or tribal authority;


(e)                                  Easements, rights-of-way, servitudes, surface
leases, sub-surface leases, grazing rights, logging rights, canals,
ditches, reservoirs, pipelines, utility lines,
telephone lines, power lines, railways, streets, roads, alleys, highways
and structures on, over and through the Properties, to the extent such rights, interests or structures do not
materially interfere with the operation
of the Properties;


(f)                                    The terms and conditions of all production sales
contracts; division orders; contracts
for agreements; equipment leases; surface leases; unitization and pooling
designations, declarations, orders and agreements; processing agreements; plant
agreements; pipeline, gathering, and transportation agreements; injection, repressuring, and recycling agreements; produced water or other disposal agreements; seismic or
geophysical permits or agreements;
calls on production in agreements pertaining to the Properties; and any and all other agreements filed of record in
the county where the affected
Property is located or which are ordinary and customary in the oil and gas exploration, development, or extraction
business, or in the business of
processing of gas and gas condensate production for the extraction of products therefrom attributable to or
encumbering the Properties, including
but not limited to the Lance Applicable Contracts and the WGR Applicable Contracts;


(g)                                 Liens for taxes or assessments not yet due or not
yet delinquent or, if delinquent, that are being contested by Sellers in
good faith in the normal course of
business;


(h)                                 Liens of operators or non-operators relating to
obligations not yet due or not yet delinquent or, if delinquent, that
are being contested by Sellers in good
faith in the normal course of business;


(i)                                     Title Defect(s) and Alleged Title Defects which are
not Qualifying Alleged Title Defects or, when combined with all other
Qualifying Alleged Title Defects,
Qualifying Alleged Environmental Conditions and Casualty Losses, do not meet the Aggregate Threshold Amount and/or which Buyer has waived hereunder; and


(j)                                     Environmental
Condition(s) and Alleged Environmental Condition(s) which are not Qualifying Alleged Environmental Conditions or, when combined with all other Qualifying Alleged Title
Defects, Qualifying Alleged Environmental Conditions and Casualty
Losses, do not meet the Aggregate Threshold
Amount and/or which Buyer has waived hereunder.


“Properties”
means the Lance Assets and the WGR Assets.



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“Purchase
Price” has the meaning set forth in Article 3.1.


“Qualifying
Alleged Environmental Condition” has the meaning set forth in Article 4.4. “Qualifying
Alleged Title Defect” has the meaning set forth in Article 4.2.


“Records”
means the Lance Records and the WGR Records.


“Required
Consents” means all consents and approvals, if any, whether required
contractually or by applicable federal, state, local or tribal Law, or
otherwise necessary for the execution,
delivery and performance of this Agreement by Sellers (except for consents and approvals of governmental entities or tribal
authorities customarily obtained subsequent to the transfer of title).


“Respondent”
has the meaning set forth in Article 15.16 regarding Arbitration.


“Sellers’
Knowledge” means the actual knowledge of any officer, director, or manager level employee of such Seller.


“Title Defect” means any lien, encumbrance, encroachment or defect
associated with the Sellers’ title to their respective Properties (excluding
Permitted Encumbrances) that would cause such Seller not to have Defensible
Title.  Notwithstanding the foregoing,
the following shall not be considered Title Defects:


(1)                                  defects based solely on (i) lack of information in the
Sellers’ files, or (ii) references to a document(s) if such document(s) is not
in Sellers’ files;


(2)                                  defects in the chain of title prior to January 1, 1950,
consisting of the mere failure to recite marital status in a document or
omissions of successors of heirship or estate proceedings, unless Buyer
provides affirmative evidence that such failure or omission has resulted in
another party’s actual and superior claim of title to the relevant Property;


(3)                                  defects arising out of lack of survey, unless a survey is
required by applicable laws or regulations;


(4)                                  defects arising out of lack of corporate or other entity
authorization unless Buyer provides affirmative evidence that the action was
not authorized and results in another party’s actual and superior claim of
title to the relevant Property.


(5)                                  defects based on a gap in Sellers’ chain of title in the
BLM or MMS records as to federal leases, in the state’s records as to state
leases, or in the county or parish records as to fee Leases, unless such gap is
affirmatively shown to exist in such records by an abstract of title, title
opinion or landman’s title chain which documents shall be included in a Title
Defect Notice; and


(6)                                  defects disclosed to or known by Buyer and/or its
Affiliates prior to the execution of this Agreement.



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“Third
Party” means any person or entity, governmental or otherwise, other than the Sellers and Buyer, and their respective
Affiliates.


“WGR
Applicable Contracts” shall mean all contracts that relate exclusively to the ownership,
operation or maintenance of the WGR Assets, including all gas and liquids
purchase and sales agreements, gas and liquids storage agreements, gas and
liquids transportation agreements, waste
disposal and recycling agreements, rental contracts, gathering, treating and processing agreements, interconnect agreements, compression
service and other service agreements,
all as described on Schedule 9.13.


“WGR
Assets” means all of WGR’s right, title and interest in, to and under, the
following:


(a)                                  The gas gathering pipeline and facilities known
as the Amherst Facility as shown on the plat attached as Exhibit B
hereto (the “Amherst Facility”);


(b)                                 The WGR Easements;


(c)                                  The WGR Permits;


(d)                                 The WGR Applicable Contracts;


(e)                                  The WGR Personal Property;


(f)                                    The WGR Records;


(g)                                 All technical information, shop rights, designs,
plans, manuals, specifications and other
proprietary and nonproprietary technology and data used exclusively in connection
with the construction, ownership and operation of the Amherst Facility.


“WGR
Easements” means the easements, surface use agreements, and right-of-way
agreements, permits, licenses, servitudes or other interests held by WGR in the
course of constructing and owning the
WGR Assets, as described on Exhibit F hereto.


“WGR
Permits” means, to the extent assignable to Buyers, all permits, licenses, certificates, orders, approvals, authorizations,
grants, consents, concessions, warrants, franchises and similar rights
and privileges granted by a Governmental Authority that are used, or held for use exclusively for or in connection with, the
ownership, use, operation, maintenance, construction, or installation of the WGR Assets, as listed in Schedule
9.14 hereto.


“WGR Personal Property”
means all tangible personal property of every kind and nature which is necessary for, or which is used or held
for use exclusively for or in connection with, the ownership, operation
or maintenance of the Amherst Facility, including field equipment, tanks, pumps, pipe, valves, meters, fire equipment,
fixtures, instruments, spare parts and supplies, telecommunications equipment, supplies and materials, as described on Exhibit
G hereto, and all hydrocarbon
inventory of the Amherst Facility, including linefill.



 8
 






 



“WGR Records” means all
contract, land, right of way, title, engineering, environmental, operating and maintenance, accounting, tax, files,
documents, instruments, notes, papers, reports, abstracts, surveys, maps,
books, records, correspondence, and studies to the extent relating to and used or held solely in connection with, the
ownership, operation or maintenance of the WGR Assets.


“Working
Interest” with respect to any Well or Lease means the interest in and to such Well or Lease that is burdened with the obligation
to bear and pay costs and expenses of maintenance,
development operations and plugging and abandoning on or in connection with such Well or Lease, but without regard to the
effect of any royalties, overriding royalties, production payments, net profits interests and other similar burdens
upon, measured by, or payable out of
production therefrom.


ARTICLE 2. TRANSFER OF THE PROPERTIES


2.1           Sale and Purchase.  On the Closing Date, effective as of the
Effective Time and upon the terms and
conditions herein set forth, (a) Lance agrees to sell and assign the Lance Assets to Buyer and Buyer agrees to purchase and
accept the Lance Assets, and (b) WGR agrees to sell and assign the WGR
Assets to Buyer and Buyer agrees to purchase and accept the WGR Assets. Each of the foregoing transactions shall be
dependent upon the consummation of the other
transaction and each shall be considered to have occurred simultaneously with
the other.


ARTICLE 3. PURCHASE PRICE


3.1           Purchase Price.  The total purchase price, subject to
adjustments as set forth herein, paid to Sellers by Buyer shall be
Eleven Million Seven Hundred Thousand United States Dollars (US$11,700,000) (“Purchase Price”), payable in full at Closing by
wire transfer in immediately available funds. The Purchase Price shall
be reduced to the extent that after the
procedures in this Agreement have been followed, the Allocated Value of Open
Defects and Casualty Losses exceed the
Aggregate Threshold Amount. The Purchase Price shall be increased to the extent that Lance’s ownership
interest in any of the Lance Assets is greater than the interest set forth on Exhibit A-2.  An allocation of the Purchase Price has been made by
Buyer as between the Lance Assets and the WGR Assets and that allocation is set
forth on Exhibit A-3.  The allocation of the Purchase Price among
the Properties has been made solely by Buyer based on its independent
evaluation and appraisal of the Lance Assets and WGR Assets and is deemed to be
effective as of the Effective Time.  The
allocation is subject to adjustment in accordance with any adjustments to the
total Purchase Price as provided elsewhere herein.


3.2           Earnest Money. Upon the
execution of this Agreement, Buyer shall pay to Sellers an earnest money deposit in an amount equal to ten
(10%) percent of the Purchase Price (“Earnest
Money”). In the event of Closing, Buyer shall receive a credit toward the
Purchase Price equal to the amount of the Earnest Money. If Closing does not
occur, the provisions of Article
13.2 shall apply.



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ARTICLE 4. DUE DILIGENCE REVIEW


4.1           Review of Records.
Sellers shall make available to Buyer for its review, during normal business
hours original Lance Records and WGR Records in their respective possession relating to the Properties. Buyer shall have the
right to reasonably request copies of any and all such Lance Records or WGR Records at Buyer’s
expense.


4.2           Alleged Title Defects.


(a)                                  As soon as reasonably practicable after Buyer’s
review of the title Records, but in no
event later than December 22, 2006, Buyer
shall deliver a written notice to Sellers identifying any Properties which are
subject to Alleged Title Defect(s) with a value in excess of Five Thousand Dollars ($5,000.00) per
Alleged Title Defect (a “Qualifying
Alleged Title Defect”). Buyer shall endeavor to keep Sellers advised on a current basis of any Alleged Title
Defects as any are identified during
Buyer’s due diligence review. Buyer’s notice of Qualifying Alleged Title
Defect(s) shall include a complete description (including any supporting documentation in Buyer’s possession) of each Alleged
Title Defect being claimed and the value which Buyer attributes to each said Alleged Title Defect which shall not
exceed the Allocated Value for the
affected Property.


(b)                                 With respect to Qualifying Alleged Title
Defect(s) that are not disputed in good faith by Sellers and that when combined
with all Qualifying Alleged Environmental
Conditions and Casualty Losses exceed the Aggregate Threshold Amount, Sellers shall use commercially
reasonable efforts to cure such
Qualifying Alleged Title Defects at Sellers’ sole cost and expense. No
later than five (5) Days prior to the scheduled Closing Date, Buyer and Sellers
shall meet in an attempt to mutually agree
on a proposed resolution with respect to
any Qualifying Alleged Title Defect(s) which by such time have not been cured, agreed to or resolved between the
parties. Sellers shall have the option, in their sole discretion, of
indemnifying Buyer with respect to any Alleged Title Defect(s) in which case,
such Alleged Title Defect(s) shall be deemed cured, agreed to or resolved
between the parties.


(c)                                If as of the scheduled Closing Date there are Open
Title Defect(s) in excess of the
Aggregate Threshold Amount, the parties shall refer such Open Title Defects, to binding resolution before
an attorney licensed in the state
where the affected portion of the Properties is located who is familiar with
the types of leases or properties involved in or affected by the Open Title Defect and who has at least fifteen (15)
years of oil and gas title experience
and satisfies the independence and neutrality standards set forth in Article 15.16(b). The title attorney shall
resolve the Open Title Defects
submitted by the parties in accordance with the procedure set forth in
Article 15.16(c). If the parties are not able to agree on a title attorney,



 10
 






 



JAG
(as defined in Article 15.16(b)) shall appoint the title attorney. The decision of the title attorney regarding any Open
Title Defect shall be final as
between the parties.


4.3           Environmental Inspection.
Upon execution of this Agreement, Sellers shall grant Buyer access to
the Properties, for the purpose of inspecting the environmental condition of
the same. Buyer shall have the right, where
authorized by Sellers (which authorization shall not be unreasonably
withheld) to conduct tests related to the environmental condition of the
Properties so long as the tests do not unreasonably interfere with the
operation of the Properties. Buyer’s access to the Properties shall be at Buyer’s sole
risk, cost and expense, and Buyer shall release Sellers and other working interest owners of the Properties from
and shall fully protect, indemnify and
defend Sellers and the other working interest owners of the Properties and their respective officers, agents,
employees and Affiliates and hold them harmless
from and against any and all Claims relating to, arising out of, or connected, directly or indirectly, with Buyer’s acts or
omissions in the exercise of its rights hereunder, including without limitation, Claims relating to
(a) injury or death of any person or persons
whomsoever, (b) damage to or loss of any property or resource, (c) pollution, environmental damage or violation of Environmental
Laws, (d) common law causes of action
such as negligence, gross negligence, strict liability, nuisance or trespass,
or (e) fault imposed by statute, rule,
regulation or otherwise. The indemnity obligation and release provided herein shall apply regardless of cause or
of any negligent acts or omissions of representatives of Sellers or
other working interest owners of the Properties and/or their respective
officers, agents, employees and Affiliates that occurred during Buyer’s
exercise of its rights hereunder. Buyer additionally agrees to comply with the
rules, procedures and instructions
issued by Sellers while on the Properties.


4.4           Alleged Environmental Conditions.


(a)                                  As
soon as reasonably practical after Buyer’s review of the environmental condition of the Properties, but in no event
later than December 22, 2006,  Buyer shall deliver a written notice to
Sellers of identifying any Properties which are subject to Alleged
Environmental Conditions with an
estimated remediation cost in excess of Ten Thousand Dollars ($10,000.00)
per Alleged Environmental Condition (“Qualifying Alleged Environmental
Condition”). Buyer shall endeavor to keep
Sellers advised on a current basis of any Alleged Environmental Condition as any are identified during Buyer’s due
diligence review. Buyer’s notice of Qualifying Alleged Environmental
Condition(s) shall include a
complete description of each individual environmental condition which Buyer
takes exception to (including any supporting documentation in Buyer’s
possession) and the costs which Buyer in good faith attributes to remediating the same which shall not exceed the
Allocated Value for the affected
Property.


(b)                               With
respect to all Qualifying Alleged Environmental Conditions that are not disputed in good faith by Sellers and that when
combined with all Alleged Title
Defects and Casualty Losses exceed the Aggregate



 11
 






 



Threshold Amount, Sellers shall use commercially
reasonable efforts to cure such
Qualifying Alleged Environmental Condition prior to the scheduled Closing Date, at Sellers’ sole cost and expense. Immediately
prior to the scheduled Closing Date, Buyer and Sellers shall meet in an attempt to mutually agree on an
acceptable resolution addressing any such Qualifying Alleged
Environmental Condition(s) which by such time
have not been cured, agreed to or resolved by the parties.


(c)                                  If as of the scheduled Closing Date there are Open
Environmental Conditions in excess
of the Aggregate Threshold Amount the parties shall refer such Open
Environmental Condition to binding resolution before an attorney or environmental engineering firm licensed in the state where
the affected portion of the Properties
is located, who is familiar with Environmental
Laws, who has at least fifteen (15) years of Environmental Laws experience and satisfies the independence and
neutrality standards set forth in
Article 15.16(b). The environmental engineer or attorney shall resolve all Open Environmental Conditions submitted
by the parties in accordance with the procedure set forth in Article
15.16(c). If the parties are not able to agree on an environmental attorney or
engineer, JAG shall appoint the environmental attorney or engineer. The
decision of the environmental attorney or engineer
regarding any Open Environmental Condition
shall be final as between the parties.


4.5           Aggregate Threshold Amount and
Value.


(a)                                  Notwithstanding anything herein
to the contrary, Sellers shall have no obligation
under this Agreement: to cure Qualifying Alleged Title Defects or Qualifying Alleged Environmental
Condition; to compensate Buyer; or to reduce the Purchase Price, unless
and until the aggregate value of all Open
Defects added to the amount of all Casualty Losses equals two hundred
fifty thousand United States dollars ($250,000) (the “Aggregate Threshold Amount”).


(b)                               If the total value of all Open Defects and Casualty
Losses exceeds the Aggregate
Threshold Amount, Closing shall not be delayed, postponed or canceled. The Closing shall be without prejudice to
the rights of Buyer and Sellers to resolve all remaining Open Defects in
accordance with this Article 4 and Article
15.16. To the extent the total value of all Open Defects and Casualty Losses are greater than the Aggregate Threshold Amount, the Allocated Value of the affected
Properties shall be deducted from the Purchase Price payable at Closing
and the affected Properties shall be removed from the applicable Conveyance and Assignment, pending Sellers’ ongoing curative efforts or the decision from the title
attorney, environmental attorney or engineer, as applicable. Once the Open
Defect has been cured by Sellers or
the decision has been rendered, Buyer shall, within five (5) days of such cure or decision, pay Sellers the
Allocated Value of the Property if the
Open Defect has been cured or



 12
 






 



the amount due as determined
by the decision of the arbitrator/expert, and Sellers shall execute and deliver to Buyer a Conveyance and
Assignment containing such affected
Property.


(c)                                  The value attributable to an Alleged Title Defect
shall be an amount determined to be
reasonably required to cure or remove the Alleged Title Defect but shall not exceed:


(i)                                     With respect to an Alleged Title Defect affecting
Leases, the value per acre as set
forth on Exhibit A-1-a, multiplied by the number of acres of the
affected Lease, multiplied by the decimal interest
therein affected by the Open Defect; and


(ii)                                With
respect to an Alleged Title Defect affecting Wells, the value as set forth on Exhibit A-2, proportionately
reduced to the percentage of Sellers’ interest affected by the Alleged
Title Defect.


(d)                               The
value attributable to an Alleged Environmental Condition shall be the reasonably anticipated cost to cure or remedy the
Environmental Condition but shall
not exceed the Allocated Value of the affected Property.


4.6           Waiver and Release. Except for claims Buyer asserts under the special warranty of title contained in Article 8.1, all title objections or
issues that could have been raised as Qualifying Alleged Title Defects and all
Environmental Conditions or issues that could
have been raised as Qualifying Alleged Environmental Conditions that are not
raised by Buyer in a written notice delivered on a timely basis pursuant
to this Article 4 shall be waived by Buyer for all purposes, and Buyer shall
have no right to seek an adjustment to the
Purchase Price, make a claim against Sellers or seek indemnification from
Sellers associated with such omitted
or untimely Title Defects, Alleged Title Defects, Environmental Conditions or Alleged Environmental
Conditions.


ARTICLE 5. ACCOUNTING


5.1
          Revenues, Expenses and
Capital Expenditures. All revenues attributable to the operation of the
Properties prior to the Effective Time shall be owned by and for the account of
Sellers. Sellers shall be entitled to all
operating revenues and shall be responsible for all operating expenses and related accounts payable
arising in the ordinary course of business attributable to the Properties, in each case to the extent they relate to
the time prior to the Effective Time.
Buyer shall be entitled to all operating revenues and shall be responsible for
the payment of all operating
expenses and related accounts payable arising in the ordinary course of business attributable to the Properties, in each
case to the extent they relate to time after the Effective Time. The
actual amounts or values associated with the above shall be accounted for to
the extent known in the Closing Statement with the final reconciliation
contained in the Final Accounting Statement.
At Closing Buyer shall assume liability for suspense funds, if any, associated
with the acquired Properties as of the Effective Time. These suspense funds, if
any, shall be reflected as a Purchase Price
reduction in the Closing Statement.



 13
 






 



5.2           Taxes. All taxes and
assessments, including without limitation, excise taxes, ad valorem taxes and
any other federal, state, local or tribal taxes or assessments attributable to
the ownership or operation of the Properties
prior to the Effective Time shall remain Sellers’ responsibility, and all deductions, credits and
refunds pertaining to the aforementioned taxes and assessments, no matter when received, shall belong
to Sellers. All taxes and assessments, including without limitation,
excise taxes, ad valorem taxes and any other federal, state, local or tribal taxes and assessments attributable to the
ownership or operation of the Properties after the Effective Time (excluding franchise and income
taxes of the Sellers from the Effective Time through the Closing) shall be Buyer’s responsibility, and all deductions,
credits and refunds pertaining to the
aforementioned taxes and assessments, no matter when received, shall belong to Buyer. The actual amounts or values associated
with the above, if any, shall be accounted for to the extent known in the Closing Statement and
finally reconciled in the Final Accounting Statement. Ad valorem taxes, real property and personal property taxes
which have not been assessed and paid for calendar year 2006 shall be
estimated based on the prior year assessment, prorated
through the Effective Time and reflected in Closing Statement as a reduction in
the Purchase Price. Such reduction shall be deemed final and conclusive
between the parties for all purposes. Buyer shall be solely responsible for all
transfer, sales, use or similar taxes resulting from or associated with the transaction contemplated under this
Agreement.


5.3
          Obligations and
Credits. All prepaid insurance premiums, utility charges, taxes, rentals
and any other prepaids applicable to periods of time after the Effective Time,
if any, and attributable to the Properties
shall be reimbursed to Sellers by Buyer; and accrued payables applicable to periods of time prior to the
Effective Time, if any, and attributable to the Properties shall be the responsibility of Sellers. The actual
amounts or values associated with the above shall be accounted for in the Closing Statement or Final Accounting
Statement.


5.4
          Final Accounting
Statement. As soon as reasonably practicable, but in no event later than
ninety (90) Days after Closing, Sellers shall deliver to Buyer a post-closing
statement setting forth a detailed final calculation of all post-closing
adjustments applicable to the periods before
and after the Effective Time (“Final Accounting Statement”). As soon as
reasonably practicable, but in no
event later than thirty (30) Days after Buyer receives the Final Accounting
Statement, Buyer shall deliver to Sellers a written report containing any
changes Buyer proposes to be made to
such statement. If Buyer fails to deliver such report to Sellers, the Final Accounting Statement delivered by Sellers shall
be deemed to be true and correct and binding on and non-appealable by the
parties. As soon as reasonably practicable, but in no event later than fifteen (15) Days after Sellers receive
Buyer’s proposed changes to the Final Accounting Settlement, the parties shall meet and undertake to agree on the final
post-closing adjustments. If the
parties fail to agree on the final post-closing adjustments within such fifteen
(15) Day period, the disputed items shall be resolved by submitting the
same to a firm of independent nationally recognized
accountants mutually acceptable to the parties (the “Accounting Referee”). The Accounting Referee shall resolve the dispute(s)
regarding the Final Accounting Statement within thirty (30) Days after having the relevant materials submitted for
review. The decision of the Accounting Referee shall be binding and
non-appealable by the parties. The fees and expenses associated with the
Accounting Referee shall be borne half by Buyer and half by Sellers. The date upon which all amounts associated with the
Final Accounting Statement are agreed to by the parties or determined by decision of the Accounting Referee, is referred
to as the “Final Settlement Date.” Any amounts owed by either party
to the other as a result of the Final



 14
 






 



Accounting Statement shall be paid
within five (5) Business Days after the Final Settlement Date.


5.5           Post-Final Settlement Date.
Any revenues received or costs and expenses paid by Buyer after the Final
Settlement Date which are attributable to the ownership or operation of the Properties prior to the Effective Time shall be
billed or reimbursed to Sellers, as appropriate. Any revenues received or costs and expenses paid by Sellers after the
Final Settlement Date which are
attributable to the ownership or operation of the Properties after the
Effective Time shall be reimbursed
or billed to Buyer.


ARTICLE 6. CASUALTY AND CONDEMNATION


6.1
          Casualty and
Condemnation. If any part of the Properties shall (a) be destroyed prior to
Closing by a Casualty Loss, or (b) be taken in condemnation or if proceedings
for such purposes shall be pending; Sellers
shall promptly notify Buyer in writing of the nature and extent of the Casualty Loss or taking. If the value of the
Casualty Loss or taking exceeds
twenty-five thousand United States dollars ($25,000), then either Buyer or Sellers may terminate this Agreement prior to
the Closing. If either party terminates this Agreement in accordance with this Article, neither party shall have any
further obligations, as expressly provided in this Agreement, and
Sellers shall return to Buyer the Earnest Money.  If neither
party terminates this Agreement, this Agreement shall remain in full force and
effect, and Sellers and Buyer shall
agree on a reduction in the Purchase Price to the extent of the Casualty
Losses.  Sellers shall retain any and all sums paid to Sellers, unpaid
awards, insurance proceeds and other payments associated
with or attributable to such Casualty Loss or taking.


ARTICLE 7. INDEMNITIES


7.1
          Opportunity for Review. Each party represents that it has had an adequate
opportunity to review the following indemnity and release provisions,
including the opportunity to submit the same
to legal counsel for review and comment. Based upon the foregoing representation, the parties agree to the
provisions set forth below.


7.2
          Assumption of Obligations, Including Environmental. Effective at the Effective Time, subject to Section 7.1 and except as otherwise
expressly set out in this Agreement,
Buyer assumes all rights, liabilities, duties, obligations, risk of loss,
Claims, Losses and any related responsibility for the ownership,
operation or use of the Properties and the
business related thereto and any condition (including Environmental Claims) of
or on the Properties attributable to
any period of time, whether before, on or after the Effective Time. From and after the Closing Date,
Sellers shall have no obligation whatsoever, under this Agreement or otherwise to protect, indemnify,
defend or hold harmless Buyer, its officers,
agents, employees and Affiliates (“Buyer Indemnitees”) from and against any Environmental
Claims relating to, arising out of, or connected, directly or indirectly, with the ownership or operation of the Properties, no
matter when asserted, and Buyer expressly
releases Sellers, their officers, agents, employees and Affiliates (“Seller Indemnitees”)
from the same. The indemnity obligation and release provided herein shall apply regardless of cause or of any negligent acts
or omissions of any Seller Indemnitee.



 15














 


7.3           Sellers’
Indemnity Obligation. After Closing Sellers shall, individually and severally, release Buyer from and shall fully
protect, indemnify and defend Buyer Indemnitees
and hold them harmless from and against any and all Claims relating to, arising out of, or connected, directly or
indirectly, with:


(a)                                the breach of any of the
representations, warranties, covenants or agreements of such Seller contained in this Agreement to the extent that such survive Closing in accordance with
Article 15.5; and


(b)                               amounts payable or other
obligations, liabilities or Claims arising pursuant or related to any Lance Contracts or WGR Contracts, as applicable, but only to the extent such amounts or
obligations relate to periods prior
to the Effective Time.


7.4
          Buyer’s Indemnity Obligation. After Closing, Buyer shall release Sellers from and shall fully protect, indemnify and defend
Seller Indemnitees, and hold them harmless
from and against any and all Claims relating to, arising out of, or connected, directly or indirectly, with:


(a)                                  the breach of any of the
representations, warranties, covenants, or agreements of Buyer contained in this Agreement; and


(b)                                 to the extent that Sellers are not required to indemnify Buyers Indemnitees in accordance with Section 7.3,
all liabilities or obligations of any kind or nature, resulting from or
arising out of the ownership, use or
operation of the Properties by Buyer, whether arising out of or relating to periods before, on or after the Effective
Time. The indemnity obligation and release provided herein shall apply regardless of cause or of any negligent
acts or omissions of any Seller
Indemnitee.


7.5           NORM and Hazardous Substances. The parties acknowledge that the Properties may contain asbestos, NORM or other potentially hazardous
substances, and that special procedures may be required for the assessment,
remediation, removal, transportation
or disposal of said asbestos, NORM or other potentially hazardous substances. Buyer agrees to assume any and all
liability associated with or attributable to the assessment,
remediation, removal, transportation and disposal of the asbestos, NORM or
other potentially hazardous substances associated with or attributable to the
Properties and will conduct said activities
in accordance with all applicable Laws.


7.6
          Notice and Cooperation. If a Claim is asserted against a party for
which the party would be liable under
the provisions of this Article, it is a condition precedent to the indemnifying party’s obligations hereunder that the
indemnified party gives the indemnifying party written notice of such Claim
setting forth full particulars of the Claim, as known by the indemnified
party, including a copy of the Claim (if it was a written Claim) (a “Claim
Notice”). The indemnified party shall make a reasonable
effort to notify the indemnifying party of any Claim within one (1) month of receipt of a Claim but shall in all
events effect such notice within



 16
 






 



such time as will allow the
indemnifying party to defend against such Claim and no later than three (3) calendar months after receipt of the
Claim by the indemnified party.


If
the indemnifying party receives a Claim Notice which the indemnifying party
believes in good faith that it is not obligated to assume and indemnify
the indemnified party sending the Claim Notice, the indemnifying party shall
deliver written notice to indemnified party rejecting the Claim Notice within fifteen (15) Days after receipt. The parties
shall promptly meet to discuss the
responsibility for the Claim described in the Claim Notice. If the parties fail
to agree on which party is
responsible for the Claim, the parties shall refer the matter to arbitration
under Article 15. If the matter has not been arbitrated and the party who
received the original demand or Claim
is required to provide its own defense and satisfy any settlement or judgment,
then such actions shall be without prejudice to or waiver of that party’s
right to seek reimbursement for all costs,
expenses (including attorneys fees and court costs) and damages incurred in
connection with the Claim.


7.7           Defense of Claims.


(a)                                  Counsel.  Upon receipt of a Claim Notice, unless
disputed, the indemnifying party
shall, at the sole cost and expense of the indemnifying party, assume the defense thereof with counsel
selected by the indemnifying party and
reasonably satisfactory to the indemnified party. The indemnified party shall cooperate in all
reasonable respects in such defense.
If any Claim involves Claims with respect to which Buyer indemnifies Seller and also Claims for which Seller
indemnifies Buyer, each party shall have the right to assume the defense of and
hire counsel for that portion of the Claim for which it may have
liability. The indemnified party shall have
the right to employ separate counsel in any Claim and to participate in the defense thereof, provided the fees and expenses of counsel employed by an indemnified
party shall be at the sole expense of
the indemnified party, unless otherwise agreed between the parties.


(b)                                 Settlement.
If the indemnifying party does not promptly notify the indemnified party that it has undertaken the defense thereof, the
indemnified party has the right to defend, at the expense of the indemnifying party, the Claim with counsel of its
own choosing, subject to the right of the indemnifying party to assume
the defense of any Claim at any time prior to
settlement or final determination thereof. If the indemnified party has
exercised the right to defend hereunder, the indemnified party shall
nevertheless be obligated to send a written notice to the indemnifying party of
any proposed settlement of any Claim. The indemnifying
party must either accept the settlement within thirty (30) Days of receipt of such notice, unless the
settlement offer is limited to a shorter
period of time in which case the indemnifying party shall have such
shorter period of time in which to accept the proposed settlement, or
immediately undertake the defense of the Claim and indemnify the indemnified party against all costs, expenses, and
liabilities associated



 17
 






 



therewith.
If the indemnifying party fails or refuses to accept a proposed settlement, and does not assume defense of the
Claim, the indemnified party may, at
its sole election, defend or settle the Claim, and the indemnifying party shall, upon demand by the
indemnified party, reimburse the indemnified party for all costs, liabilities
and expenses incurred by the
indemnified party in the defense or settlement of the Claim.


7.8
          Waiver of
Certain Damages. Each of the parties hereby waives, and agrees not to seek consequential, punitive or special
damages of any kind from the other with respect to any Claim or dispute, arising out of or relating to this
Agreement or breach hereof. This
provision does not diminish or affect in any way the parties’ rights and obligations under any indemnities from Third Party
Claims provided for in this Agreement.


7.9
          Limitations on Indemnities.
In no event shall an indemnifying party have any obligation of indemnification to the other party if the Claim for
which indemnity is sought was caused
by gross negligence or willful misconduct on the part of the indemnified party
and/or its officers, directors, employees, agents or Affiliates, nor shall any
indemnity provisions in this Agreement apply or be deemed to apply to
matters affecting lands other than those
which are included in the Properties.


7.10         Payment Disputes.
Notwithstanding the provisions of Article 7.2 and 7.3 above, if a Claim is brought after Closing by a third
party against Buyer or Sellers alleging improper payment of royalty,
severance, production, privilege, ad valorem or gross receipts taxes and any related penalties and interest assessed in
connection therewith relating to the Properties for periods prior to or
after the Effective Time, Buyer, as the custodian of the Records, shall defend such Claim or, at Sellers election, to the extent
that the Claim is asserted in writing within one (1) year after Closing and relates to periods prior to the Effective
Date, Sellers may assume defense of the claim and Buyer shall fully cooperate
with Sellers in providing access to and copies of any required Records.
In the event that Buyer has defended such Claim, Sellers shall reimburse Buyer
for the portion of the amount actually paid to the Third Party in satisfaction
of the Claim.


ARTICLE 8. SPECIAL WARRANTY OF TITLE AND DISCLAIMERS


8.1
          Special Warranty of Title.
Sellers shall warrant and defend Defensible Title to the Properties against
every person whomsoever lawfully claiming the Properties or any part thereof by, through or under Sellers, but
not otherwise.


8.2
          Disclaimer - Representations and Warranties. Buyer acknowledges and agrees that Buyer is purchasing the Properties on
an “AS-IS, WHERE-IS” basis, and with all
faults in their present condition and state of repair, without recourse. Except
as expressly set forth in Article 9
of this Agreement, Sellers shall be deemed to have expressly disclaimed
any and all representations and warranties concerning the Properties, express, statutory, implied or otherwise, including without
limitation, any warranty of title other than the special warranty given in Article 8.1, the quality of
hydrocarbon reserves, the



 18
 






 



quantity of hydrocarbon reserves, the amount of
revenues, the amount of operating costs, condition
(physical or environmental), compliance with applicable Laws, absence of
defects (latent or patent), safety, state of repair, merchantability or
fitness for a particular purpose. At
Closing, Buyer expressly release Sellers from the same; provided, however,
that Buyer shall have the right to enforce any representations and warranties
given to Seller by a third party to the extent such are assignable to Buyer.


8.3
          Disclaimer - Statements and Information.  Except as
expressly set forth in this Agreement, Sellers disclaim any and all
liability and responsibility for and associated with the quality, accuracy,
completeness or materiality of the Records, data, information and materials furnished (orally or in writing) at
any time to Buyer, its officers, agents, employees and Affiliates in connection with the transaction
contemplated herein, including without
limitation, the quality of hydrocarbon reserves, the quantity of hydrocarbon reserves, the amount of revenues, the amount of
operating costs, the financial data, the contract data, the
environmental condition of the Properties, the physical condition of the Properties and the continued financial viability of
the Properties, and Buyer expressly releases
Sellers from the same.


ARTICLE 9. SELLER’S REPRESENTATIONS AND WARRANTIES


Each
Seller represents and warrants, individually and only as to itself, to Buyer
that on the date hereof and as of the Closing Date the statements
contained in this Article 9 are true and correct.


9.1
          Organization and Good Standing. Each Seller is a corporation duly incorporated,
validly existing and in good standing under the Laws of the State of
Delaware, is duly qualified to do business in each State in which the
Properties are located and has all requisite power and authority to own its interest in the Properties.


9.2
          Authority;
Authorization of Agreement. Each Seller has all requisite power and
authority to execute and deliver this Agreement, to consummate the transactions
contemplated herein and to perform all of
the terms and conditions to be performed by it as provided for in this Agreement.
The execution and delivery of this Agreement, the performance of all of the
terms and conditions to be performed by it
and the consummation of the transactions contemplated herein have been
duly authorized and approved by all necessary corporate action on the part of each Seller. This Agreement has been duly executed
and delivered by each Seller and constitutes the valid and binding obligation of such Seller, enforceable against it
in accordance with its terms.


9.3
          No Violations. The execution and delivery of this Agreement by Sellers does not, and
the fulfillment and compliance with the terms and conditions hereof and the
consummation of the transactions
contemplated herein, will not:


(a)                                  Conflict with or require the consent of any person
or entity under any of the terms,
conditions or provisions of the certificate of incorporation or bylaws of Sellers;



 19
 






 



(b)                                 Violate
any provision of, or require any filing, consent or approval under any Law applicable to or binding upon Sellers
(assuming receipt of all consents and
approvals of governmental entities customarily obtained subsequent to the transfers of title);


(c)                                  Conflict with, result in a breach of, constitute
a default under or constitute an event
that with notice or lapse of time, or both, would constitute a default under, accelerate or permit the
acceleration of the performance required
by, or require any consent, authorization or approval under, (i) any mortgage, indenture, loan, credit agreement or
other agreement, evidencing
indebtedness for borrowed money to which either Seller is a party or by which either Seller is bound, or (ii)
any order, judgment or decree of any
governmental entity; or


(d)                                 Result
in the creation or imposition of any lien or encumbrance upon the Properties.


9.4           Absence of Certain Changes.
Between the date of execution of this Agreement and the Closing Date, there has not been without Buyer’s prior written
consent, any of the following
entered into by Sellers:


(a)                                  A sale, lease or other disposition of the
Properties;


(b)                                 A mortgage, pledge or grant of a lien or security
interest in any of the Properties;
or


(c)                                  A contract or commitment to do either of the
foregoing; and


(d)                                 Take any actions which could have a Material
adverse effect on the Properties.


9.5           Operating Costs.  All costs incurred in connection with the
operation of the Properties, other
than any costs or charges that are being contested by Sellers in good faith,
have been fully paid and discharged by
Sellers, except normal expenses incurred in operating the Properties within the previous sixty (60) Days or
as to which Sellers have not yet been billed.


9.6           Pending Proceedings.  There is no action, suit or proceeding
pending against either Seller which
could have a material adverse effect on the value or operation of the Properties or that could prevent the consummation
of the transactions contemplated by this Agreement, and to Sellers’ Knowledge, there is no such action, suit or
proceeding threatened against either
Seller.


9.7
          Bankruptcy.  There are no bankruptcy,
reorganization or receivership proceedings pending, being contemplated by, or, to Sellers’ Knowledge, threatened
against either Seller.


9.8           Liability for Brokers’ Fees.  Sellers have not incurred any liability,
contingent or otherwise, for brokers’ or
finders’ fees relating to the transactions contemplated by this Agreement for which Buyer shall have any
responsibility whatsoever.



 20
 






 



9.9
          No Liens.  Except for Permitted Encumbrances, the
Properties will be conveyed to Buyer at the
Closing free and clear of all liens and encumbrances.


9.10         Judgments.  There are no unsatisfied judgments or
injunctions issued by a court of competent
jurisdiction or other governmental agency outstanding against either Seller
that would be reasonably expected to materially interfere with the ownership
and operation of the Properties or
impair their ability to consummate the transaction contemplated hereby.


9.11         Records.  The Records are files, or copies thereof,
that Sellers have used in the normal
course of their business to own or operate the Properties. Sellers make no
representations or warranties
regarding the accuracy of any of the Records and any all implied warranties are
expressly disclaimed.


9.12         Compliance with Law. With
respect to the Properties, to Sellers’ Knowledge, neither Seller has received written notice (i) of a
violation of any statute, law, ordinance, regulation, permit, rule or
order of any foreign, federal, state, tribal or local government or any other governmental department or agency, or any
judgment, decree or order of any court, applicable to their business or operations which remains uncured, and
which would have a material adverse
effect on any of the Properties, (ii)
from any government authority with jurisdiction over the Properties that
the Properties are not in substantial compliance with applicable laws, or (iii) a violation of any Environmental Law(s).


9.13         Applicable Contracts. Schedule
9.13 is a list of the Lance Applicable Contracts and WGR Applicable
Contracts.  To Sellers’ Knowledge, all
such agreements are in full force and effect
and Sellers are not in default thereunder, and Sellers have not received a
written notice of default with
respect to such agreements that remains uncured.


9.14         Permits.  Schedule 9.14 is a list of all Lance
Permits and WGR Permits. To Sellers’ Knowledge (i) all permits are in
force and effect, (ii) all fees relating thereto have been paid, and (iii) all
filings and notices required to be made with any governmental authority have been made.


9.15         Taxes. During Sellers’ period of
ownership to the Closing Date, all taxes relating to the Properties have been
paid when due, unless contested in good
faith by appropriate proceedings. All income taxes of Sellers and obligations relating
thereto that could result in a lien or other claim against any of the
Properties have been properly paid, unless
contested in good faith by appropriate proceedings.


9.16         Lease Accounts. All federal,
state and royalty accounts with respect to the Properties are current,
and all payments required thereunder have been made except amounts, if any, held in suspense accounts in the ordinary
course of business as referenced in Article 5.1 above and disclosed to Buyer in writing prior to Closing.


9.17         Preferential Purchase Rights.  Schedule 9.17 is a list of the
Properties, if any, subject to
preferential purchase rights.



 21
 






 



ARTICLE 10. BUYER’S REPRESENTATIONS AND WARRANTIES


Buyer
represents and warrants to Sellers that to the best of Buyer’s knowledge on the
date hereof and as of the Closing Date the statements in this Article 10 are
true and correct.


10.1         Organization and Good Standing.
Buyer is a corporation duly incorporated,
validly existing and in good standing under the Laws of the State of Colorado, is or will be duly qualified to do
business in all States in which the Properties are located and has all requisite corporate power and
authority to own and lease the Properties.


10.2         Corporate Authority; Authorization
of Agreement. Buyer has all requisite corporate power and authority to execute and deliver this Agreement, to
consummate the transactions
contemplated herein and to perform all the terms and conditions to be performed
by it as provided for in this Agreement. The execution and delivery of
this Agreement by Buyer, the performance by
Buyer of all the terms and conditions to be performed by it and the consummation
of the transactions contemplated herein have been duly authorized and approved by all necessary corporate action. This Agreement
has been duly executed and delivered by Buyer and constitutes the valid and binding obligation of Buyer,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency
or other Laws relating to or affecting the enforcement of creditors’ rights and
general principles of equity (regardless of whether such enforceability
is considered in a proceeding at law or in
equity).


10.3         No Violations. The execution and
delivery of this Agreement by Buyer does not, and the fulfillment and compliance
with the terms and conditions hereof and the consummation of the transactions contemplated herein, will
not:


(a)                                  Conflict with or require the consent of any person
or entity under any of the terms,
conditions or provisions of the certificate of incorporation or bylaws of Buyer;


(b)                                 Violate
any provision of, or require any filing, consent or approval under any Law applicable to or binding upon Buyer; or


(c)                                  Conflict with, result in a breach of, constitute
a default under or constitute an event
that with notice or lapse of time, or both, would constitute a default under, accelerate or permit the
acceleration of the performance required
by, or require any consent, authorization or approval under, (i) any mortgage, indenture, loan, credit agreement or
other agreement evidencing
indebtedness for borrowed money to which Buyer is a party or by which Buyer is bound, or (ii) any order,
judgment or decree of any governmental
entity.


10.4         SEC Disclosure. Buyer is
acquiring the Properties for its own account for use in its trade or business,
and not with a view toward or for sale in connection with any distribution thereof, nor with any present intention of making
a distribution thereof within the meaning of the Securities Act of 1933, as amended.



 22
 






 



10.5         Independent Evaluation. Buyer represents that it is sophisticated in the evaluation, purchase, operation
and ownership of oil and gas properties. In making its decision to enter into
this Agreement and to consummate the transaction contemplated herein,
Buyer represents that it has relied solely on its own independent investigation
and evaluation of the Properties and that at
Closing Buyer will have satisfied itself as to the title, physical condition and the environmental
condition of the Properties.


10.6         Governmental Approvals. No
approval, consent, waiver, authorization or other order of, and no declaration, filing, registration,
qualification or recording with, any person, including any governmental
authority, is required to be obtained or made by or on behalf of the Buyer in connection with the execution, delivery or
performance of this Agreement or the consummation
of the Closing hereunder in accordance with the terms and conditions of this Agreement.


ARTICLE 11. ADDITIONAL AGREEMENTS


11.1         Covenants of Sellers. From the
date hereof until Closing, without first obtaining the consent of Buyer, Sellers will not:


(a)                                  waive any right of material value relating to the
Properties;


(b)                                 convey, encumber, mortgage, pledge or dispose of
any of the Properties;


(c)                                  enter
into, modify or terminate any Lance Applicable Contracts or WGR Applicable Contracts; or


(d)                                 contract or commit itself to do any of the
foregoing.


11.2         Notice of Loss. From the date
hereof until Closing, Sellers shall promptly notify Buyer of any loss or damage to the Properties, or any part thereof, known
to Sellers and in the aggregate
exceeding Ten Thousand and No/100 United States Dollars (US $10,000).


11.3         Subsequent Operations. Lance
makes no representations or warranties to Buyer as to the transferability or assignability of the position of operator
under the joint operating agreements
pertaining to the Properties. Buyer acknowledges that the rights and
obligations associated with operatorship of the Properties are governed
by the applicable agreement(s) and that operatorship of the Properties will be
decided in accordance with the terms of said agreement(s).


11.4         Buyer’s Assumption of Obligations.
Except as otherwise provided in this Agreement,
Buyer agrees to assume and shall timely perform and discharge all duties and obligations
of the owner of the Properties relating to the period of time after the
Effective Time, including without limitation,
duties and obligations under all the contracts associated with the Properties.
Sellers shall incur no liability for Buyer’s failure to properly perform or
discharge such duties and
obligations. Buyer agrees to accept full responsibility for Lance’s
proportionate share of the costs and expenses associated with or
attributable to the plugging and abandonment of all wells, equipment and
facilities conveyed to Buyer under this Agreement and the remediation, restoration and clean up of the
Properties. In conducting the duties and obligations



 23
 






 



hereunder, Buyer shall comply with
the applicable Laws of any governmental entity having appropriate jurisdiction.


11.5         Records. Within thirty (30) Days
after Closing (except as provided below), Sellers shall furnish to Buyer
all Records; provided, however, Sellers shall be entitled to
retain copies of any or all such Records
and to retain as long as needed (a) the originals of any Records required
in connection with litigation or other proceedings pending or threatened
against Sellers or the Properties as of the
Closing Date, and/or (b) the originals of any Records required in connection with the Final Accounting Statement. At
Sellers’ expense, photocopies of any and all Records retained by Sellers shall
be furnished to Buyer within thirty (30) Days after Closing, and the originals of such Records shall be furnished to
Buyer within thirty (30) Days after Sellers’ need for said Records ceases.
Buyer agrees to maintain the Records received from Sellers in accordance herewith for a period of seven (7) years
after the Closing and to afford Sellers reasonable access to the Records as requested by Sellers.


ARTICLE 12. CONDITIONS PRECEDENT TO CLOSING


12.1         Conditions Precedent to Seller’s
Obligation to Close. Sellers shall be obligated to consummate the sale as contemplated by this Agreement on the Closing
Date, provided the following
conditions precedent have been satisfied or have been waived by Sellers:


(a)                                  All
representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects
at and as of Closing as though such
representations and warranties were made at and as of such time; and


(b)                                 Buyer shall have complied in all material
respects with all obligations and conditions contained in this Agreement
to be performed or complied with on or
prior to the Closing.


12.2         Conditions Precedent to Buyer’s Obligation
to Close. Buyer shall be obligated to consummate
the purchase as contemplated by this Agreement on the Closing Date, provided
the following conditions precedent
have been satisfied or have been waived by Buyer:


(a)                                  All
representations and warranties of Sellers contained in this Agreement shall be true and correct in all material respects
at and as of Closing as though such
representations and warranties were made at and as of such time; and


(b)                                 Sellers shall have complied in all material
respects with all obligations and conditions contained in this Agreement
to be performed or complied with on or
prior to the Closing.


12.3         Conditions Precedent to Obligation
of Each Party. The parties shall be obligated to consummate the sale and purchase as contemplated in this Agreement on
the Closing Date, provided the
following conditions precedent have been satisfied or have been waived by the
party or parties benefited or affected thereby:



 24
 






 



(a)                                  No
suit, action or other proceedings shall be pending before any court or
governmental entity in which it is sought by a person or entity other than the parties hereto or any of their Affiliates,
officers, directors, or employees to
restrain, enjoin or otherwise prohibit the consummation of the
transactions contemplated by this Agreement, or to obtain substantial damages in connection with the transaction
contemplated herein, nor shall there be any investigation by a
governmental entity pending which might result
in any such suit, action or other proceedings seeking to restrain, enjoin or
otherwise prohibit the consummation of the transaction contemplated by this Agreement;


(b)                                 All Required Consents shall have been obtained and
delivered to Buyer by the Closing;
and


(c)                                  All
preferential rights of purchase, if any, that may be applicable to such Properties shall have been waived, or the time to
elect under such preferential rights
shall have elapsed, prior to Closing.


ARTICLE 13. TERMINATION


13.1         Grounds for Termination.
This Agreement may be terminated at any time prior to Closing:


(a)                                  By the mutual written agreement of Sellers and
Buyer;


(b)                                 By either Seller or Buyer if the consummation of
the transactions contemplated herein would violate any non-appealable
final order, decree or judgment of any
governmental entity having appropriate jurisdiction enjoining or awarding substantial damages in
connection with the consummation of
the transactions contemplated herein;


(c)                                  By either Seller or Buyer pursuant to Article 6.1
if the total value of all Casualty
Losses and Open Defects exceeds two hundred fifty thousand United States
dollars ($250,000); or


(d)                                 Notwithstanding
anything contained in this Agreement to the contrary, by Buyer or either Seller if Closing shall not have
occurred by December 31, 2006.


13.2         Effect of Termination.
If this Agreement is terminated in accordance with Article 13.1, such termination shall be without liability
of any party to this Agreement or any officer, director, Affiliate, or employee of such party, except the Earnest Money
shall be returned to Buyer as provided in Article 3.2 above and the
obligations provided in Articles 13.3, 13.4, 13.5 and 15.3 shall survive termination. If this Agreement is terminated as
a result of Buyer’s failure or refusal
to perform an obligation hereunder (including without limitation Closing on the
Closing Date) or breach of Article
12.1, Sellers shall be entitled to retain the Earnest Money as a liquidated damage to reimburse Sellers for their
out-of-pocket fees and expenses incurred in connection with the transactions contemplated by this Agreement. If
Closing does not occur as a



 25
 






 



result of either Seller’s breach
or as a result of termination by Buyer in accordance with the provisions of this Agreement, the Earnest Money
shall be refunded to Buyer.


13.3         Dispute over Right to Terminate.
If there is a dispute between the parties over either party’s right to
terminate this Agreement under Article 13.1, Closing shall not occur as scheduled.
The party which disputes the other party’s right to terminate may initiate
arbitration proceedings in accordance with
Article 15.16 within thirty (30) Days of the date on which Closing was scheduled to occur and, if arbitration
is so initiated, the dispute will be resolved through such arbitration
proceeding. If the party which disputes the termination right does not initiate
an arbitration proceeding to resolve the dispute within the time period
specified hereinabove, such party shall be
deemed to have waived its right to object to such termination.


13.4         Return of Documents. If this
Agreement is terminated prior to Closing, each party shall return to the party which owns or is otherwise entitled
thereto all books, records, maps,
files, papers and other property in such party’s possession relating to the
transaction contemplated by this
Agreement.


13.5         Confidentiality. In the event of
termination of this Agreement, the parties agree to keep all the terms
of this transaction confidential for a period of two (2) years after termination
of this Agreement.


ARTICLE 14. THE CLOSING


14.1         Closing. Three (3) Days prior to
the Closing Date, Sellers shall provide Buyer with a Closing Statement setting
forth the Purchase Price, as adjusted in accordance with this Agreement
for all known adjustments as of that date. Sellers shall additionally provide
Buyer with wiring instructions designating
the account or accounts to which the Purchase Price is to be delivered in accordance with Article 14.3(b).
Closing shall be held in Sellers’ office or any other location that is mutually agreeable to Sellers
and Buyer.


14.2         Obligations of Seller at Closing.
At the Closing, Sellers shall deliver to Buyer, unless waived by Buyer, the following:


(a)                                  An Assignment and Conveyance of the Lance Leases,
Wells and Lance Easements,
substantially in the form attached hereto as Exhibit C. The Assignment shall be executed and acknowledged in
three (3) multiple originals or such
greater number as agreed between the parties or as required by any applicable Law;


(b)                               An Assignment and Conveyance of the WGR
Easements, substantially in the form attached hereto as Exhibit C. The
Assignment shall be executed and acknowledged in three (3) multiple
originals or such greater number as agreed
between the parties or as required by any applicable Law;


(c)                                  A
Bill of Sale for the remaining Lance Assets, to the extent not conveyed by 14.2(a) above, substantially in the form
attached hereto as Exhibit D.



 26
 






 



(d)                               A
Bill of Sale for the remaining WGR Assets, to the extent not conveyed by 14.2(b) above, substantially in the form
attached hereto as Exhibit D.


(e)                                Evidence of waiver or lapse of any unexercised
preferential purchase rights that
may be applicable to the sale of the Properties;


(f)                                    Any necessary Letters-in-Lieu of division orders
or transfer orders as may be
prepared by Buyer and presented to Sellers;


(g)                                 A Section 1445 Non-foreign Affidavit; and


(h)                                 Such other instruments as necessary to carry out
Sellers’ obligations under this
Agreement.


14.3         Obligations of Buyer at Closing.
At the Closing, Buyer shall deliver to Seller, unless waived by Seller, the following:


(a)                                The Assignment and Conveyance documents, executed
and properly acknowledged, referred
to in Article 14.2(a) and (b);


(b)                                 The Bill of Sale documents, executed and properly
acknowledged, referred to in Article
14.2(c) and (d);


(c)                                  The adjusted Purchase Price, less Earnest Money, by
wire transfer in accordance with
Article 3 hereof;


(d)                                 Letters-in-Lieu
of division orders or transfer orders executed by an authorized officer of Buyer substantially in the form of Exhibit E;
and


(e)                                  Such other instruments as necessary to carry out
Buyer’s obligations under this
Agreement.


ARTICLE 15. MISCELLANEOUS


15.1         Notices. All notices and other
communications required, permitted or desired to be given hereunder must be in writing and sent by U.S. mail, properly
addressed as shown below, and with all postage and other charges fully
prepaid or by hand delivery or by facsimile transmission. Date of service by
mail is three Business Days following the date of mailing and hand delivery is
the date on which such notice is delivered to the addressee and by facsimile is
the date sent (as evidenced by fax machine
confirmation of receipt), or if such date is not on a Business Day, then on the next date which is a
Business Day. Each party may change its address by notifying the other party in writing.



 27
 






 



 


	
   

  	
  If to Sellers:

  	
  Western Gas Resources, Inc.

  
	
   

  	
   

  	
  1099 18th Street, Suite 1200

  
	
   

  	
   

  	
  Denver, CO 80202

  
	
   

  	
   

  	
  Attn: Mark Petry

  
	
   

  	
   

  	
  E-mail: Mark.Petry@anadarko.com

  
	
   

  	
   

  	
  Telephone: 303-252-6066

  
	
   

  	
   

  	
  Facsimile: 720-264-0426

  
	
   

  	
   

  	
   

  
	
   

  	
  If to Buyer:

  	
  PRB Oil & Gas, Inc.

  
	
   

  	
   

  	
  1875 Lawrence
  Street, Suite 450

  
	
   

  	
   

  	
  Denver, Colorado
  80202

  
	
   

  	
   

  	
  Attention: Mr.
  Paul Ritzdorf\

  
	
   

  	
   

  	
  E-mail:
  pritzdorf@prbenergy.com

  
	
   

  	
   

  	
  Telephone:
  303-308-1330

  
	
   

  	
   

  	
  Facsimile: 303-308-1590

  



 


15.2         Conveyance Costs. Buyer shall be
solely responsible for filing and recording any documents related to the transfer of the Properties from Sellers to Buyer
and for all costs and fees associated therewith, including filing any
necessary transfer of ownership documents with appropriate federal, state, local and tribal authorities as required by
applicable Law. Within thirty (30)
Days after Closing, Buyer shall furnish Sellers with all recording data and
evidence of all required filings.


15.3         Brokers’ Fees. Neither party has
retained any brokers, agents or finders to act on behalf of either party in this matter, other than that Sellers have
retained Meagher Oil & Gas Properties,
Inc. to assist Sellers. Each party agrees to
release, protect, indemnify, defend and hold the other harmless from and against any and all Claims with
respect to any commissions, finders’
fees or other remuneration due to any broker, agent or finder claiming by, through or under such party.


15.4         Access to Information. From the
date hereof, Sellers will (i) give Buyer and its authorized
representatives adequate and reasonable access, during normal business hours,
to the offices, properties, books and records of Sellers relating to the
Properties (including for the purposes of conducting a Financial Audit);
(ii) furnish to Buyer and its authorized representatives such financial
and operating data and other information relating to the Properties as may be
reasonably requested; and (iii) cooperate with Sellers in connection therewith.


15.5         Further Assurances. From and
after Closing, at the request of Buyer but without further consideration, Sellers shall execute and deliver or use
reasonable efforts to cause to be executed
and delivered such other instruments of conveyance and take such other actions
as Buyer reasonably may request to
more effectively put Buyer in possession of the Properties.


15.6         Survival of Representations and
Warranties. The representations and warranties contained in Articles 9.1, 9.2, 9.3, 9.8 and Article 10, and the special
warranty of title in Article 8.1 of this Agreement shall survive Closing. No
warranties or representations shall be superseded by or merged into the
Assignment. The parties have made no representations or warranties, except
those expressly set forth in this Agreement.



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All other representations,
warranties, indemnities, covenants and agreements of Sellers shall terminate at Closing.


15.7         Amendments and Severability. No
amendments or other changes to this Agreement shall be effective or
binding on any of the parties unless the same shall be in writing and signed by Sellers and Buyer. The invalidity of
any one or more provisions of this Agreement
shall not affect the validity of this Agreement as a whole, and in case of any
such invalidity, this Agreement shall
be construed as if the invalid provision had not been included herein.


15.8         Successors and Assigns. This
Agreement shall not be assigned, either in whole or in part, without the express written consent of the non-assigning party.
The terms, covenants and conditions
contained in this Agreement shall be binding upon and shall inure to the
benefit of Sellers and Buyer and
their respective successors and assigns.


15.9         Headings. The titles and
headings set forth in this Agreement have been included solely for ease of reference and shall not be considered in the
interpretation or construction of this
Agreement.


15.10       Governing Law. This Agreement
shall be governed by and construed under the Laws of the State of Colorado, excluding any choice of law rules which
may direct the application of the
Laws of another jurisdiction.


15.11       No Partnership Created. It is not
the purpose or intention of this Agreement to create (and it shall not be construed as creating) a joint venture,
partnership or any type of association,
and the parties are not authorized to act as agent or principal for each other
with respect to any matter related
hereto.


15.12       Public Announcements. Buyer shall
not issue a public statement or press release with
respect to the transaction contemplated herein (including the price and other
terms) without the prior written
consent of Sellers, except as required by Law or listing agreement with a national
security exchange and then only after prior consultation with the Sellers.
Buyer shall have the right to disclose the transaction as required by law;
provided that Buyer agrees that in any such
disclosures, Sellers shall not be identified without their prior written
consent.


15.13       No Third Party Beneficiaries.
Nothing contained in this Agreement shall entitle anyone other than Sellers or Buyer or their authorized successors and
assigns to any claim, cause of
action, remedy or right of any kind whatsoever.


15.14       Not to be Construed Against Drafter.
The parties acknowledge that they have had an adequate opportunity to review each and
every provision contained in this Agreement
and to submit the same to legal counsel for review and comment, including expressly
but without limitation all waivers and indemnities in this Agreement. Based on
said review and consultation, the parties agree with each and every term
contained in this Agreement. Based on the foregoing, the parties agree that the
rule of construction that a contract be construed against the drafter, if any,
shall not be applied in the interpretation and
construction of this Agreement.



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15.15       Entire Agreement. This Agreement
supersedes all prior and contemporaneous negotiations, understandings,
letters of intent and agreements (whether oral or written) between the parties relating to the Properties and
constitutes the entire understanding and agreement between the parties with respect to the sale and
purchase of the Properties.


15.16       Conspicuousness of Provisions. The
parties acknowledge that the provisions contained in this Agreement that are
set out in “bold” satisfy the requirement of
the express negligence rule and any
other requirement at law or in equity that provisions contained in a contract be conspicuously marked or highlighted.


15.17       Arbitration. Notwithstanding
anything in this Agreement to the contrary, all disputes, other than
those relating to the Final Accounting Statement which shall be resolved in accordance with Article 5.4 hereof, between the
parties shall be solely and finally settled as follows:


(a)                                  Any
controversy, dispute or claim arising out of, in connection with, or in relation to, the interpretation, performance,
and enforceability of this Agreement
(a “Dispute”), will be solely and finally settled by binding arbitration (“Arbitration”), without right of appeal. Subject to the immediately preceding sentence, any of the parties
may demand arbitration by written notice to the other of the Dispute(s)
and the remedy(s) sought (“Demand for
Arbitration”), setting forth a summary of the Dispute and the party’s
position, along with a list of three (3) arbitrator candidates, including a brief
description of each arbitrator’s background and experience (provided such experience satisfies the criteria set forth in Articles 4.2(c) and 4.4(c),
if applicable. The party receiving the Demand for Arbitration shall
provide the other party with a response, including any affirmative defenses or
counterclaims, and a list of three (3)
arbitrator candidates, including a brief description of each arbitrator’s background and experience, within five
(5) Business Days from the date of
receipt of the Demand for Arbitration. In the event of any counterclaims being filed by a party, the other
party shall have five (5) Business
Days to provide the other party with a response. Any Demand for
Arbitration and any counterclaims arising as a result thereof shall be
initiated in accordance with any time limits provided under this Agreement for such a Dispute to be brought, and if
no time limit is provided, within the
time period allowed by any applicable statute of limitations.


(b)                                 The Arbitration will be conducted before a single
arbitrator at a neutral location in
Denver, Colorado. The arbitrator shall also acknowledge and agree to follow the arbitration procedures set
forth herein and to make good faith
efforts to meet the time lines provided hereunder. If the parties are unable to agree upon an arbitrator
within ten (10) Business Days from the date of a party’s receipt of a
Demand for Arbitration, then the Judicial
Arbiter Group, Denver, Colorado (“JAG”) shall select the arbitrator for the parties. No party may have any ex parte



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communications with the arbitrator regarding any matter
related to the Arbitration.


(c)                                  The
arbitration hearing shall be scheduled within five (5) Business Days after the arbitrator is selected and shall be
scheduled to take place no later than
sixty (60) days from the date of the Demand for Arbitration. The arbitration shall be conducted in accordance with
the following:


(i)                                     The parties may be represented by counsel.


(ii)                                  Each party shall provide the other with copies of
all non-privileged documents and
information that is relevant to the Dispute,
on which it bases or supports its position(s) or which it intends to introduce
at the arbitration hearing, and shall provide the other party with such documents or information within twenty (20) Business Days of the date of the Demand for
Arbitration. Each party shall disclose to the other the names and
addresses of all persons with knowledge
relevant to the Dispute, including expert
witnesses, who a party intends to call as a witness at the arbitration hearing.


(iii)                             No later than five (5) Business Days before
the arbitration hearing, each of the parties shall provide the other and the arbitrator with a concise written statement of the
facts and evidence a party intends to
present at the arbitration hearing together with a discussion of the
applicable law and the basis for the
requested remedy or aware or the denial of the relief sought. Unless
good cause is shown, no rebuttal statements or other pre-hearing written submissions will be allowed.


(iv)                            The arbitrator shall determine the order of proof
which will be similar to that used
for federal judicial proceedings.


(v)                                 The arbitrator shall arrange for a stenographic or
other record to be made of the arbitration hearing and both parties
shall bear the cost thereof.


(vi)                            The arbitration hearing may proceed in the absence
of a party who fails to attend.
However, the arbitrator shall not render a decision solely on the basis of a party’s failure to attend the hearing.


(vii)                         The parties may jointly stipulate to a waiver of
the hearing and agree to submit the
Dispute to the arbitrator based solely on the written submissions and other evidence as the parties may agree.


(viii)                      The rules of evidence do not have to be strictly
adhered to; provided, however, that the arbitrator shall apply
applicable laws or



 31
 






 



rules
pertaining to any applicable privileges and/or work product. The arbitrator shall attempt to allow each of the parties the opportunity to present material and relevant
evidence at the hearing and the
arbitrator may be guided in this respect by the Federal Rules of Evidence.


(ix)                              The arbitrator will issue its decision (the “Decision”)
within fifteen (15) Business
Days after the close of the arbitration hearing.
The arbitrator may grant any remedy or relief that the arbitrator deems
to be just and equitable, including, but not limited
to specific performance. The Decision shall be in writing signed by the arbitrator and shall address each
Dispute or issue presented for
Arbitration by the parties, including the basis or reason(s) for the Decision. Within five (5)
Business Days of the issuance of the
Decision, a party may serve a request on the other party and the arbitrator requesting a correction of
any computation, typographical or
other similar error in the Decision.  A party opposing such a request shall file its
opposition within three (3) Business
Days of being served with the request for the correction. Thereafter, the arbitrator shall have three (3) Business Days to take appropriate action on the request and,
serve its corrected, modified or
revised Decision, if any, upon the parties in writing (the “Revised
Decision”). The Revised Decision shall be
considered final, for purposes of any judicial proceeding to enforce or vacate the Revised Decision. All
proceedings to enforce, confirm, modify or vacate the Revised Decision
will be controlled by and pursuant to the
Federal Arbitration Act, 9 U.S.C. § 1 et. seq. and
any applicable law of the State of Colorado
before any state or federal court having jurisdiction thereof.


(x)                                 The
arbitrator may award sanctions, as appropriate, for a party’s willful failure to comply with any of its
obligations hereunder, including the assessment of costs, the exclusion of evidence
or any other relief as deemed
equitable and just by the arbitrator.


(d)                               The parties shall bear equally the fees and
expenses of the Arbitration, unless the arbitrator decides otherwise,
and each party shall bear the costs of its own
counsel, witnesses (if any) and employees, unless the arbitrator decides otherwise. 
The parties intend that this agreement to arbitrate be valid, enforceable and irrevocable.


15.18       Execution in Counterparts. This
Agreement may be executed in counterparts, which shall when taken together constitute one (1) valid and binding
agreement. Facsimile signatures shall be effective and binding on all
parties. Counterpart originals of all signatures provided by facsimile shall be
provided to all parties within thirty (30) Days after execution of this Agreement.


[SIGNATURE
PAGES FOLLOW]



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The parties have executed this
Agreement as of the date first set forth above.


	
   

  	
  SELLERS:

  	
  LANCE OIL & GAS COMPANY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  Mark R. Petry

  	
   

  
	
   

  	
   

  	
  Name: Mark R.
  Petry

  
	
   

  	
   

  	
  Title:
  Attorney-In-Fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WESTERN GAS
  RESOURCES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  Mark R. Petry

  	
   

  
	
   

  	
   

  	
  Name: Mark R.
  Petry

  
	
   

  	
   

  	
  Title:
  Attorney-In-Fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BUYER:

  	
  PRB OIL & GAS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/ Robert W. Wright

  	
   

  
	
   

  	
   

  	
  Name:

  	
    Robert W. Wright

  	
   

  
	
   

  	
   

  	
  Title:

  	
    Chief Executive Officer

  	
   

  
									



 



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