IN
THIS AGREEMENT;
(B)
BREACH OF COVENANTS.
ALL LOSSES ARISING FROM
THE BREACH BY SELLER OR THE COMPANY OF ANY COVENANT SET FORTH IN THIS AGREEMENT;
AND
(C)
OWNERSHIP AND OPERATION.
ALL LOSSES ARISING
FROM THE COMPANY'S BUSINESS OR THE OWNERSHIP OR OPERATION OF THE COMPANY AND THE
OIL AND GAS PROPERTIES PRIOR TO THE EFFECTIVE TIME DIRECTLY ASSOCIATED WITH THE
FOLLOWING MATTERS:
(I)
DAMAGES TO PERSONS OR PROPERTY, OR DEATH, FOR CLAIMS
ASSERTED BY ANY THIRD PARTY AND ACCRUING PRIOR TO THE EFFECTIVE TIME;
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(II)
THE VIOLATION BY THE COMPANY OR ITS AFFILIATES OF THE TERMS
OF ANY AGREEMENT BINDING UPON THE COMPANY OR ITS AFFILIATES;
(III)
CLAIMS AGAINST THE COMPANY OR ITS AFFILIATES BY CO-OWNERS,
PARTNERS, JOINT VENTURERS AND OTHER PARTICIPANTS IN THE WELLS;
(IV)
THE IMPROPER PAYMENT OF ROYALTIES, RENTALS AND SIMILAR PAYMENTS
BY THE COMPANY OR ITS AFFILIATES UNDER THE LEASES PRIOR TO THE EFFECTIVE TIME;
(V)
THE LITIGATION MATTERS SET FORTH ON SCHEDULE 7.1(G);
(VI)
AD VALOREM, PROPERTY, SEVERANCE, FRANCHISE, INCOME, PAYROLL AND
OTHER TAXES ATTRIBUTABLE TO THE PERIOD OF TIME PRIOR TO THE EFFECTIVE TIME;
(VII)
ANY CONTAMINATION OR CONDITION THAT IS THE RESULT OF ANY OFF-SITE
DISPOSAL BY THE COMPANY OR ITS AFFILIATES OF ANY POLLUTANTS, CONTAMINANTS OR
HAZARDOUS MATERIAL ON, IN OR BELOW ANY PROPERTIES NOT INCLUDED IN THE ASSETS
PRIOR TO THE EFFECTIVE TIME;
(VIII)
COSTS AND EXPENSES RELATING TO THE OWNERSHIP OR OPERATION OF THE OIL
AND GAS PROPERTIES THAT ARE UNPAID AS OF THE CLOSING DATE AND THAT ARE
ATTRIBUTABLE TO THE PERIOD OF TIME PRIOR TO THE EFFECTIVE TIME;
(IX)
ALL LOSSES RELATING TO ANY OF THE EXCLUDED ASSETS OR EXCLUDED
LIABILITIES OR THE ASSIGNMENT THEREOF.
(D)
NOTWITHSTANDING THE ABOVE, THE FOLLOWING
LIMITATIONS SHALL APPLY TO SELLER'S INDEMNIFICATION OBLIGATIONS:
(I)
SELLER SHALL NOT BE OBLIGATED TO INDEMNIFY BUYER FOR ANY
LOSS UNLESS BUYER HAS DELIVERED A WRITTEN NOTICE OF SUCH LOSS WITHIN THE
SURVIVAL PERIOD (AS DEFINED BELOW) APPLICABLE TO SUCH LOSS.
ANY LOSS FOR WHICH
SELLER DOES NOT RECEIVE WRITTEN NOTICE BEFORE THE END OF THE SURVIVAL PERIOD
SHALL BE DEEMED TO BE AN ASSUMED LIABILITY.
THE "SURVIVAL PERIOD" APPLICABLE TO
LOSSES SHALL MEAN:
(1)
WITH REGARD TO A BREACH OF REPRESENTATIONS
AND WARRANTIES CONTAINED IN SECTIONS 7.1(A), (B), (C), (D), (G), (J), (O),
(S) (T), (U) AND (EE) FOR AN INDEFINITE PERIOD FOLLOWING THE CLOSING;
(2)
WITH REGARD TO A BREACH OF ALL OF THE OTHER
REPRESENTATIONS AND WARRANTIES BY SELLER IN THIS AGREEMENT FOR A PERIOD OF ONE
(1) YEAR FOLLOWING THE CLOSING;
40
(3)
WITH REGARD TO A BREACH OF A COVENANT BY
SELLER, FOR A PERIOD OR ONE (1) YEAR FOLLOWING THE CLOSING; AND
(4)
WITH REGARD TO THE MATTERS COVERED BY
SECTION 14.1 (C), FOR ONE YEAR FOLLOWING THE CLOSING.
(II)
SELLER SHALL HAVE NO LIABILITY OR OBLIGATION FOR ANY LOSSES,
UNLESS AND UNTIL AND ONLY TO THE EXTENT THAT THE AGGREGATE LOSSES FOR WHICH
BUYER IS ENTITLED TO RECOVER UNDER THIS AGREEMENT EXCEEDS THREE PERCENT (3%) OF
THE