Execution Copy
  PURCHASE AND SALE AGREEMENT
 BETWEEN
 SM ENERGY COMPANY,
 POTATO CREEK, LLC,
 OPEN FLOW GAS SUPPLY CORPORATION,
 and
 SJ EXPLORATION LLC,
 SELLERS
 and
 ENDEAVOUR OPERATING CORPORATION
 BUYER
 DATED July 17, 2011




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PageARTICLE I DEFINITIONS; INTERPRETATION
    
    
    11.1 Definitions
    
    
    11.2 Interpretation
    
    
    1ARTICLE II PURCHASE AND SALE
    
    
    22.1 Purchase and Sale
    
    
    22.2 Purchase Price
    
    
    22.3 Deposit
    
    
    22.4 Adjustments to Purchase Price
    
    
    32.5 Allocated Value
    
    
    52.6 Settlement; Disputes
    
    
    52.7 Section 1031 Like-Kind Exchange
    
    
    6ARTICLE III REPRESENTATIONS AND WARRANTIES OF Sellers
    
    
    63.1 Organization, Existence
    
    
    63.2 Authorization
    
    
    73.3 No Conflicts
    
    
    73.4 Bankruptcy
    
    
    73.5 Foreign Person
    
    
    73.6 Litigation
    
    
    73.7 Material Contracts
    
    
    73.8 No Violation of Laws
    
    
    83.9 Leases
    
    
    83.10 Information
    
    
    83.11 Marketing
    
    
    93.12 Operations Matters
    
    
    93.13
Royalties, Etc.
    
    
    93.14 Imbalances
    
    
    93.15 Current Commitments
    
    
    93.16 Environmental
    
    
    93.17 Asset Taxes
    
    
    93.18 Brokers Fees
    
    
    103.19 Advance Payments
    
    
    103.20 Partnerships
    
    
    103.21 No Other Representations or Warranties; Disclosed Materials
    
    
    10ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER
    
    
    104.1 Organization; Existence
    
    
    104.2 Authorization
    
    
    104.3 No Conflicts
    
    
    114.4 Consents
    
    
    114.5 Bankruptcy
    
    
    114.6 Litigation
    
    
    114.7 Financing
    
    
    11
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Page4.8 Independent Evaluation
    
    
    114.9 Brokers Fees
    
    
    12ARTICLE V ACCESS / DISCLAIMERS
    
    
    125.1 Access
    
    
    125.2 Confidentiality
    
    
    135.3 Disclaimers
    
    
    14ARTICLE VI TITLE MATTERS; CASUALTIES
    
    
    156.1 Sellers Title
    
    
    156.2 Notice of Title Defects; Defect Adjustments
    
    
    156.3 Risk of Loss; Casualty or Condemnation Loss
    
    
    206.4 Preferential Rights and Consents to Assign
    
    
    20ARTICLE VII ENVIRONMENTAL MATTERS
    
    
    227.1 Environmental Defects
    
    
    227.2 NORM, Wastes and Other Substances
    
    
    24ARTICLE VIII CERTAIN AGREEMENTS
    
    
    258.1 Conduct of Business
    
    
    258.2 Governmental Bonds
    
    
    268.3 Amendment to Schedules
    
    
    268.4 Confidentiality Agreement
    
    
    268.5 Governmental Consents
    
    
    268.6 Further Assurances
    
    
    26ARTICLE IX CONDITIONS TO CLOSING
    
    
    269.1 Buyers Conditions to Closing
    
    
    269.2 Sellers Conditions to Closing
    
    
    27ARTICLE X TAX MATTERS
    
    
    2810.1 Asset Tax Liability
    
    
    2810.2 Transfer Taxes
    
    
    2810.3 Income Tax Reports and Returns
    
    
    2910.4 Tax Cooperation
    
    
    29ARTICLE XI CLOSING
    
    
    2911.1 Closing Date
    
    
    2911.2 Place of Closing
    
    
    2911.3 Closing Obligations
    
    
    2911.4 Records
    
    
    31ARTICLE XII ACQUISITION TERMINATION AND REMEDIES
    
    
    3112.1 Right of Termination
    
    
    3112.2 Effect of Termination
    
    
    3112.3 Return of Documentation and Confidentiality
    
    
    32ARTICLE XIII ASSUMPTION; SURVIVAL; INDEMNIFICATION
    
    
    3213.1 Assumption by Buyer
    
    
    32
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Page13.2 Indemnities of Sellers
    
    
    3213.3 Indemnities of Buyer
    
    
    3313.4 Limitation on Liability
    
    
    3313.5 Express Negligence
    
    
    3413.6 Exclusive Remedy for Agreement
    
    
    3413.7 Indemnification Procedures
    
    
    3413.8 Survival
    
    
    3613.9 Non-Compensatory Damages
    
    
    3613.10 Reductions in Losses
    
    
    37ARTICLE XIV MISCELLANEOUS
    
    
    3714.1 Counterparts
    
    
    3714.2 Notices
    
    
    3714.3 Expenses
    
    
    3914.4 Waivers; Rights Cumulative
    
    
    3914.5 Relationship of the Parties
    
    
    4014.6 Entire Agreement; Conflicts
    
    
    4014.7 Governing Law
    
    
    4014.8 Expert Proceedings
    
    
    4114.9 Amendment
    
    
    4114.10 Parties in Interest
    
    
    4114.11 Successors and Permitted Assigns
    
    
    4114.12 Publicity
    
    
    4114.13 Preparation of Agreement
    
    
    4214.14 Severability
    
    
    42
 iii




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SchedulesSchedule 3.6
    
    LitigationSchedule 3.7(a)
    
    Material ContractsSchedule 3.7(b)
    
    Breaches of Material ContractsSchedule 3.8
    
    Violation of LawsSchedule 3.11
    
    Marketing ContractsSchedule 3.12
    
    Operational MattersSchedule 3.14
    
    ImbalancesSchedule 3.15
    
    Current CommitmentsSchedule 3.16
    
    EnvironmentalSchedule 3.17
    
    Asset TaxesSchedule 3.20
    
    PartnershipsSchedule 5.1(f)
    
    Insurance Policy AmountsSchedule 6.4
    
    Consents and Preferential RightsSchedule 8.1
    
    Permitted OperationsExhibitsExhibit A
    
    LeasesExhibit B
    
    WellsExhibit C
    
    ContractsExhibit D
    
    Form of AssignmentExhibit E
    
    InventoryExhibit F
    
    Form of LicenseExhibit G
    
    SM LeaseExhibit H
    
    PC Lease
 iv




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THIS PURCHASE AND SALE AGREEMENT Agreement Execution Date SM Potato Creek Open Flow SJX Sellers Buyer Parties Party
 RECITALS
 WHEREAS
 WHEREAS
 NOW THEREFORE
 ARTICLE I
DEFINITIONS; INTERPRETATION
 Definitions .
 Interpretation .
 1




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ARTICLE II
PURCHASE AND SALE
 Purchase and Sale .
 Article II
  Purchase Price . Purchase Price
 Initial Deposit
 Extension Deposit
  Deposit .
 Section 2.1
 Section 2.3(a)
 Section 2.3 Section 12.2 Section 12.3
 2




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Adjustments to Purchase Price .
 Section 2.4 Section 2.4(a) Section 2.4 from or
attributable to from or attributable to
    Schedule 3.14
 3




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Section 2.4(d)
   Section 2.4(b)
 Section 6. 2(c)(i)
 Section 7. 1(b)(i)
 Section 6. 2(c)(ii) Section 7. 1(b)(iii) Section
6. 4(c)(ii) Section 6. 4(d)(i)
 Schedule 3.14 Section 2.3(d)
   Schedule 3.14 Section 2.4(b) (iii) Section 2.4(c)(v) Schedule 3.14
 4




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Allocated Value . Exhibit A Exhibit B Allocated Value Section 2.4 Exhibit A Exhibit B
 Settlement; Disputes .
 Preliminary Settlement Statement Preliminary Purchase Price
 Final
Settlement Statement Final Purchase Price Dispute Notice Section 2.6(b) Section 2.6(c)
 Accounting Arbitrator
 5




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Section 1031 Like-Kind Exchange . Section 2.7
 ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS
 Section 3.7 Section 3.22
 Organization, Existence .
 6




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Authorization .
 No Conflicts .
 Bankruptcy .
 Foreign Person .
 Litigation . Schedule 3.6
 Material Contracts .
 Schedule 3.7(a) Material Contracts
 7




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Schedule 3.7(b)
 No Violation of Laws . Schedule 3.8 Section
3.8 Section 3.16.
 Leases .
 Information .
 8




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Marketing . Schedule 3.11
 Operations Matters . Schedule 3.12
 Royalties, Etc.
 Imbalances . Schedule 3.14
 Current Commitments . Schedule 3.15 AFEs
 Environmental .
  Schedule 3.16
 Asset Taxes . Schedule 3.17
 9




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Brokers Fees .
 Advance Payments . Exhibit B
 Partnerships . Schedule 3.20
 No Other Representations or Warranties ; Disclosed Materials.
 ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
  Organization; Existence .
 Authorization .
 10




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No Conflicts .
 Consents .
 Bankruptcy .
 Litigation .
 Financing .
 Independent Evaluation .
 11




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Brokers Fees .
 ARTICLE V
ACCESS / DISCLAIMERS
 Access .
 Section 5.1 Buyers
Representatives Third Party Operator
 Invasive Activities
 EVEN IF SUCH
 12




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LIABILITIES ARISE OUT OF OR RESULT FROM,
SOLELY OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT
LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY A MEMBER OF THE SELLERS INDEMNIFIED PARTIES,
EXCEPTING ONLY LIABILITIES RESULTING FROM OR ARISING OUT OF THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF A MEMBER OF THE SELLERS INDEMNIFIED PARTIES
 . common undertaking
  Schedule 5.1(f)
 Confidentiality .
 13




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Disclaimers .
   14




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SECTION 3.16 SECTION 7.1
 SECTION 5.3
 ARTICLE VI
TITLE MATTERS; CASUALTIES
 Sellers Title . Article VI Section 6.2
 Notice of Title Defects; Defect Adjustments .
 Title Defect Notices Defect Claim Date Section 6.2(a) Title Defect Notice Section 6.2 Section 6.2(a) Title Defect Property
 15




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provided however
 Title Benefit Notices Section 6.2 Title Benefit Notice Title Benefit Property
 Remedies for Title Defects Section 6.2(a)
  Cure Period
  16




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Section 6. 2(c)(iii)
 Remedies for Title Benefits Section 6.2 Section 6.2(g) Title Benefit Amount
 Exclusive Remedy Section 6.2(c) Section 6.2(i)
 Title Defect Amount Title Defect Amount
   Exhibit A / Exhibit B Exhibit A Exhibit B
 Exhibit A Exhibit A Exhibit A
  17




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Article VI
 Title Benefit Amount
  Exhibit B Exhibit B
 Exhibit A Exhibit A Exhibit
A
  Title Defect Threshold and Deductibles
 18




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plus Section 7.1(b)(iii) Aggregate Deductible Section 6.2(c)(ii)
 Title Dispute Resolution Section 6.2(i) Section 6.2(i) Title Arbitrator Section 6.2(i) Section 6.2(f) Section 6.2(g) Section 2.4(c)(ii) Section 6.2(c) Section 6.2(h)
 19




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Section 6.2(h) Section 2. 4(c)(ii)
 Risk of Loss; Casualty or Condemnation Loss .
  Casualty Loss
 Preferential Rights and Consents to Assign .
 Consents Preferential Rights Schedule 6.4 Schedule 6.4 Section 6.4 Schedule 6.4
  Preferential Rights
  20




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Consents
 provided however
 subsection (i) above,
 21




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Sections 9. 1(d) and 9.2(d)
 ARTICLE VII
ENVIRONMENTAL MATTERS
 Environmental Defects .
 Environmental Defects Notice Section 7.1(a) Environmental
Defect Notice Section 7.1 Section 7.1(a) Environmental Defect Property
 Remedies for Environmental Defects Section 7.1(a)
    22




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Section 7. 1(b)(iv)
  Exclusive Remedy Section 3.16 Section 7.1(b)
 Environmental Deductibles Individual Environmental Threshold Section
7.1(b)(iii) plus Section 7.1(b)(iii) Article VII
 23




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Environmental Dispute Resolution Section 7.1(e) Section 7.1(e) Environmental Arbitrator Section 7.1(e) Section 7.1 Section
2.4(c)(iii) Section
7.1(d) Section 7.1(d) Section 2.4(c)(iii)
 NORM, Wastes and Other Substances .
 24




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ARTICLE VIII
CERTAIN AGREEMENTS
 Conduct of Business . Schedule 8.1
 (a)
    
    Sellers will, and will cause their respective Affiliates to:
    (b)
    
    Sellers will not, and will cause their respective Affiliates not to:
 Schedule 3.15
 Schedule 3.7(a)
    Section 8.1 Section 8.1
 25




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Section 8.1
 Governmental Bonds .
 Amendment to Schedules . Article
IX Article XII.
 Confidentiality Agreement
 Governmental Consents
 Further Assurances
 ARTICLE IX
CONDITIONS TO CLOSING
 Buyers Conditions to Closing.
 Representations Article III
 26




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Performance
 No Legal Proceedings
 Title Defects; Environmental Defects; Preferential Rights; Consents Section 6.2(c)(i) less Section 6.2(g) plus Section 6.3(b) plus Section 7.1(b)(i) plus Section 7.1(b)(iii) plus Section 6.4(c)(i) plus Section 6.4(d)(i)
 Closing Deliverables Section 11.3
 Sellers Conditions to Closing.
 Representations Article
IV
 Performance
 No Legal Proceedings
 Title Defects; Environmental Defects; Preferential Rights; Consents . Section 6.2(c)(i) less
 27




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Section 6.2(g) plus Section 6.3(b) plus Section 7.1(b)(i) plus Section
7.1(b)(iii) plus Section 6.4(c)(i) plus Section 6.4(d)(i)
 Closing Deliverables Section 11.3
 ARTICLE X
TAX MATTERS
 Asset Tax Liability . Section 2.4 Section 10.1 10.1.
 Transfer Taxes . Subject Transfer Taxes
 28




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Income Tax Reports and Returns .
 Tax Cooperation . Tax Proceeding
 ARTICLE XI
CLOSING
 Closing Date . Closing Closing
Date Closing Date
Extension Election
 Place of Closing .
 Closing Obligations .
   29




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Section 2.5(a)
      Section 9.2(a) Section 9.2(b)
 Section 9.1(a) Section 9.1(b)
  30




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Records . Section 11.3
 ARTICLE XII
ACQUISITION TERMINATION AND REMEDIES
 Right of Termination .
 Section 9.2 Section 9.2(d)
 Section 9.1 Section 9.1(d)
 Section 9.2(d) Section 9.1(d)
 Section 11.1
 clause (a) (b) (d)
 Effect of Termination . Section 12.1 Section 2.3 Sections
5. 1(c) 5.1(f) Section 5.2 Section 5.3 Section 12.2 Section 13.9
 31




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Return of Documentation and Confidentiality .
 ARTICLE XIII
ASSUMPTION; SURVIVAL; INDEMNIFICATION
 Assumption by Buyer . Article XIII Section 2.4 Assumed Obligations
   Indemnities of Sellers. Section 13.4 Article XIII
 32




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Buyer Indemnified Parties
     Article III
  Indemnities of Buyer . Sellers
Indemnified Parties
 Article IV
   Limitation on Liability .
 Section 13.2 Article XIII
 33




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Article XIII
 Section 13.2
 Express Negligence. SECTION 5.1(c)
 Exclusive Remedy for Agreement . Section 5.1(c) Section 13.2 Section 13.3 Section 11. 3(m) Section 11.3(n) Article XIII Section 5. 1(c) Section 5.2
 Indemnification Procedures . Section 5.1(c) Section 13.2 Section 13.3
 Article XIII Indemnifying Party Article
XIII
 34




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Indemnified Party Article XIII
 Section 5.1(c) Section 13.2 Section 13.3 Section 13.7 Claim
Notice Third Party Claim Section 13.7 Section 5.1(c) Section 13.2 Section 13.3
  Section 13.7(d)
  35




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Survival .
 Sections 3.1 3.4 Section 3.13 Sections 3.5 3.12 Sections 3.14 3.21 Article IV
 Section 13.2(a) Section 13.2(e) Section 13.8(a) Section 13.2
 Non-Compensatory Damages .
 36




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Reductions in Losses. Article 13
 ARTICLE XIV
MISCELLANEOUS
 Counterparts .
 Notices .
  
 37




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38




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th
  
 Section
14.2
 Expenses .
 Waivers; Rights Cumulative .
 39




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Relationship of the Parties .
 Entire Agreement; Conflicts .
 Governing Law .
 40




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Expert Proceedings . AAA
 Amendment .
 Parties in Interest .
 Successors and Permitted Assigns .
 Publicity .
  Section 14.12(a)
 41




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Preparation of Agreement .
 Severability .
 Signature Page Follows
 42




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IN WITNESS WHEREOF
 SELLERS:SM ENERGY COMPANYBy:
    
    /s/ Kenneth J. Knott
 Kenneth
J. Knott, Vice President-BusinessDevelopment and LandOPEN FLOW GAS SUPPLY CORPORATIONBy:
    
    /s/ Kevin L. Shannon
 Kevin
L. Shannon, PresidentPOTATO CREEK LLCBy: Open Flow Gas Supply Corporation, 
       Managing MemberBy:
    
    /s/ Kevin L. Shannon
 Kevin
L. Shannon, PresidentSJ EXPLORATION LLCBy:
    
    /s/ Christine Mari-Mazzola
 Christine
Mari-Mazzola, Treasurer, SouthJersey ExplorationBUYER:ENDEAVOUR OPERATING CORPORATIONBy:
    
    /s/ James J. Emme
 James
J. Emme, Executive Vice President,North America
 Signature
Page  Purchase and Sale Agreement




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Annex I
 Definitions
 AAA Section 14.8
 Accounting Arbitrator Section 2.6(c)
 AFE Section 3.15
 Affiliate
 Aggregate Deductible Section 6.2(h)
 Agreement
 Allocated Value Section 2.5
 Applicable Contracts
 Applicable Operating Agreements Applicable Operating Agreement
 Asset Taxes
 Assets Exhibit
A Leases Units Hydrocarbons
 Annex




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Exhibit B Wells Equipment Surface Contracts Exhibit C Contracts Records
 Assignments Exhibit D
 Assumed Obligations Section 13.1
 Burdens
 Business Day
 Annex




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Buyer
 Buyer Indemnified Parties Section 13.2
 Buyers Representatives Section 5.1(a)
 Casualty Loss Section 6.3(b)
 Claim Notice Section 13.7(b)
 Closing Section 11.1
 Closing Amount
 Closing Date Section 11.1
 Closing Date Extension Election Section 11.1
 Code
 Confidentiality Agreement
 Consents Section 6. 4(a) .
 Contract
 Control
 Cure Period Section 6. 2(c)(ii)
 Customary Post-Closing Consents
 Defect Claim Date Section 6.2(a)
 Defensible Title
 Annex




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Exhibit B Exhibit B Section 8.1 Exhibit B
 Exhibit B Exhibit B Exhibit B
 Exhibit A Exhibit A Exhibit A
  Dispute
 Dispute Notice Section 2.6(b)
 Effective Time
 Encumbrance Encumber
 Environmental Arbitrator Section 7.1(e)
 Environmental Condition
 Annex




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Environmental Defect Schedule 3.16
 Environmental Defect Notice Section 7.1(a)
 Environmental Defect Property Section 7.1(a)
 Environmental Laws Environmental Laws
 Equipment
 Execution Date
 Excluded Assets Section 6.3 l
 Annex




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Section 6.2(c)(ii) Section 6.4(a)(ii) Section 6.4(b)(i) Section 7.1(b)(iii)
 Extension Deposit
 Final Settlement Statement Section 2.6(b)
 Franchise Tax Liability
 GAAP
 Governmental Authority
 Hazardous Substances Section 7.2
 Hydrocarbons
 Imbalance
 Income Tax Liability
 Annex




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Indemnified Party Section 13.7(a)
 Indemnifying Party Section 13.7(a)
 Individual Environmental Threshold Section 7.1(d)
 Individual Title Defect Threshold
 Initial Deposit
 Interim Period
 Invasive Activities Section 5.1(b)
 Inventory Exhibit E
 Knowledge
 Laws
 Leases
 Liabilities
 Material Adverse Effect Material Adverse Effect Section 12.1(d) Article VIII
 Annex




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Material Contracts Section 3.7(a)
 Month
 Net Acre multiplied by multiplied by
 Net Revenue Interest
 NORM
 Operating Expenses Article X
 Operator
 Party Parties
 PC Lease Exhibit H
 Permitted Encumbrances
  Annex




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Exhibit
B Exhibit B Exhibit
B Exhibit A
       Exhibit B Exhibit B Exhibit B Exhibit
A
  Annex




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Exhibit A Exhibit
B Schedule 3.6
 Exhibit B Exhibit B Exhibit B Exhibit A
 Person
 Personal Property
 Potato Creek
 Potato Creek Seismic License Exhibit F
 Preferential Right Section 6.4(a)
 Preliminary Purchase Price Section 2.6(a)
 Preliminary Settlement Statement Section 2.6(a)
 Annex




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Proprietary Seismic Data
 Purchase Price Section 2.2
 Records
 Remediation
 Remediation Amount
 Schedules
 Sellers Indemnified Parties Section 13.3
 SM
 SM Lease Exhibit G
 SM Seismic License Exhibit F
 Surface Contracts
 Taxes Tax
 Tax Return
 Third Party Claim Section 13.7(b)
 Annex




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Third Party Operator Section 5.1(a)
 Title Arbitrator Section 6.2(i)
 Title Benefit Exhibit B Exhibit B Exhibit A
 Title Benefit Amount Section 6.2(d)
 Title Benefit Notice Section 6.2(b)
 Title Benefit Property Section 6.2(b)
 Title Defect
       Annex




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Section 8.1;
 
 Title Defect Amount Section 6.2(f)
 Title Defect Notice Section 6.2(a)
 Title Defect Property Section 6.2(a)
 Treasury Regulations
 Unit
 Well
 Working Interest
 Annex