Document:

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into this 26th day of February, 2014 and is effective as of this 1st day of April, 2014 (the “Effective Date”), between Sinclair Broadcast Group, Inc., a Maryland corporation (“SBG”), and Christopher Ripley (“Employee”).

 

R E C I T A L S

 

A.                                    SBG, through its direct and indirect wholly-owned subsidiaries, including but not limited to Sinclair Television Group, Inc., a Maryland corporation (“STG”), owns or operates television broadcast stations and invests in and/or manages some industry related and non-industry related businesses.

 

B.                                    The parties hereto desire that this Agreement shall state any and all understandings and agreement(s) between them (written and verbal, formal and informal) that precede the date of this Agreement and Effective Date and relate in any manner to the terms and conditions of Employee’s employment, including any prior understandings and agreements, which shall be superseded and replaced by this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION OF the mutual covenants herein contained, the parties hereto agree as follows:

 

1.                                      Duties.

 

1.1.                            Duties Upon Employment.  Upon the terms and subject to the other provisions of this Agreement, Employee will be, as of the Effective Date and continuing thereafter, to be employed by SBG as its Chief Financial Officer.  In such capacity, Employee will:

 

(a)                                 report to the Board of Directors of SBG (the “SBG Board”), the Chief Executive Officer of SBG (the “SBG CEO”), and David B. Amy (the “SBG EVP”);

 

(b)                                 have such responsibilities and perform such duties as are customarily assigned to a chief financial officer of a public company of comparable size and as may from time to time be established and assigned by the SBG Board or the SBG CEO or the SBG EVP.

 

1.2.                            Full-Time Employment.  Employee agrees to devote Employee’s full working time, attention, and best efforts exclusively to the business of SBG and its direct and indirect subsidiaries; provided, however, so long as such activities, either individually or in the aggregate, do materially interfere with the performance of Employee’s duties hereunder, Employee shall be permitted to devote some of his time and attention to: (i) service on the board of his previously existing family owned and controlled business in Canada; (ii) his previously existing owned and operated dental business in Arizona; (iii) such public and private company boards of directors of companies that are not competitive with the business of SBG and its direct and indirect subsidiaries as disclosed by the Employee and pre-approved in writing by the SBG CEO and the SBG EVP (said approvals not to be unreasonably withheld, delayed, conditioned, or denied), and (iv) certain

 

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designated charitable, community, and industry organizations as shall be pre-approved by the SBG CEO or the SBG EVP (said approvals not to be unreasonably withheld, delayed, conditioned, or denied).

 

1.3.                            Location.  During the Employment Term, Employee’s services under this Agreement shall be performed principally in the Baltimore, Maryland Metropolitan Area, or such other location(s) as may from time to time be designated by the appropriate official at SBG.  The parties acknowledge and agree that the nature of Employee’s duties hereunder shall, in any event, require reasonable travel from time to time consistent with travel obligations inherent with the title, duties, and responsibilities of the Employee or as may be from time to time reasonably directed by the SBG Board or the SBG CEO or the SBG EVP.

 

2.                                      Term.

 

2.1.                            Term.  The term of Employee’s employment under this Agreement (the “Employment Term”) shall begin on the Effective Date and continue until employment is terminated in accordance with Section 4 of this Agreement.

 

2.2.                            At Will Employment.  Notwithstanding anything else in this Agreement to the contrary, including, without limitation, the provisions of Section 2.1, Section 3, or Section 4 of this Agreement, the employment of Employee is not for a specified period of time, and SBG or Employee may terminate the employment of Employee with or without Cause (as defined in Section 4.1(c) of this Agreement) at any time for any reason.  As of the date of this Agreement, there is not, nor will there be on the Effective Date or at any time in the future, unless by a writing signed by all of the parties to this Agreement, any express or implied agreement as to the continued employment of Employee.

 

3.                                      Compensation and Benefits.

 

3.1.                            Compensation.              Subject to the terms of this Agreement, SBG shall compensate Employee in the form of salary and bonus compensation.  The Employee’s initial annual salary is Seven Hundred Fifty Thousand Dollars and No Cents ($750,000.00) (the “Base Salary”), which shall be paid to Employee consistent with Company’s policies in effect from time to time.  During each calendar year, any increases to the Base Salary shall be determined by the Compensation Committee of SBG (the “Compensation Committee”).  In addition, Employee shall have the right to earn an annual discretionary performance bonus (the “Performance Bonus”) as determined by the Compensation Committee in its absolute and complete discretion.  The amount, terms, and payment of any such Performance Bonus will be based (in whole and/or in part) upon a recommendation for same received from management of SBG to the Compensation Committee.  Any such Performance Bonus shall be determined and payable after the Compensation Committee has had the opportunity to review any information that it determines is necessary, appropriate, or relevant for or to such determination.  Any changes (increases or decreases) to the Base Salary and/or Performance Bonus may be made in any manner determined by the Compensation Committee in its sole and compete discretion without altering any other terms of this Agreement.  Any deferred portion of Employee’s total compensation will be controlled by the terms of this Agreement, as may be amended from time

 

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to time only by subsequent written agreement(s) that are executed in accordance with this Agreement and in particular Sections 11.8 and 11.14 hereof.

 

3.2.                            Vacation.  During each calendar year during the Employment Term, Employee shall be entitled to paid vacation leave in an amount equal to one (1) week plus the amount otherwise determined in accordance with such policies in effect from time to time at SBG.

 

3.3.                            Health Insurance and Other Benefits.                                      During the Employment Term, Employee shall be eligible to participate in health insurance programs that may from time to time be provided by SBG for its employees generally, and Employee shall be eligible to participate in such other employee benefits plans that may from time to time be provided by SBG to its employees generally.

 

3.4.                            Tax Issues.  To the extent taxable to Employee, Employee will be responsible for accounting for and payments of taxes on the benefits provided to Employee, and Employee will keep such records regarding uses of these benefits as SBG reasonably requires and will furnish SBG all such information as may be reasonably requested by it with respect to such benefits.

 

3.5.                            Expenses.  SBG will pay or reimburse Employee (i) all moving expenses incurred by the Employee in moving himself and his spouse and minor children (as applicable) to the Baltimore, Maryland Metropolitan Area in accordance with Sinclair’s policies with regard thereto in effect from time to time, and (ii) the reasonable pre-approved interim lodging expenses of the Employee and his spouse and minor children pending any final move to the Baltimore, Maryland Metropolitan Area.  For the avoidance of doubt, such policies shall, until the first to occur of (a) Employee’s family permanently relocating to the Baltimore area and (b) one hundred fifty (150) days from the Effective Date, entitle Employee to be reimbursed for the cost of round-trip airfare for one (1) trip per month (not to exceed five (5) trips in the aggregate) by Employee’s spouse and children between Baltimore and Los Angeles, which shall all be reimbursed in accordance with the procedures applicable to business travel.  SBG shall also reimburse Employee for reasonable travel expenses that are reasonably necessary or appropriate for a business purpose.  Any question as to whether any such travel expense is subject to reimbursement shall be determined by the SBG CEO, SBG EVP, and /or the SBG Board, as the case may be.  Employee shall also be reimbursed for all other reasonable business expenses incurred by Employee during the Employment Term on behalf of SBG in accordance with corporate policies established from time to time by SBG.  Without limiting the generality of the foregoing, any expense reimbursement pursuant to this Section 3.5 shall be subject to Employee supplying to SBG itemized accounts or receipts in accordance with SBG’s procedures and policies with respect to reimbursement of expenses in effect from time to time.

 

4.                                      Employment Termination.

 

4.1.                            Termination Events.

 

(a)                                 The Employment Term will end, and the parties will not have any rights or obligations under this Agreement (except for the rights and obligations under those

 

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Sections of this Agreement that are continuing and will survive the end of the Employment Term, as specified in Section 11.10 of this Agreement) on the earliest to occur of the following events (each a “Termination Date”):

 

(1)                                 the death of Employee;

 

(2)                                 the termination of Employment as a result of Employee’s Disability (as defined in Section 4.1(b) of this Agreement) of Employee;

 

(3)                                 the termination of Employee’s employment by Employee without Good Reason (as defined in Section 4.1(d) of this Agreement);

 

(4)                                 the termination of Employee’s employment by SBG for Cause (as defined in Section 4.1(c) of this Agreement);

 

(5)                                 the termination of Employee’s employment by SBG without Cause; or

 

(6)                                 the termination of Employee’s employment by Employee for Good Reason (as defined in Section 4.1(d) of this Agreement) within three (3) months of the inception of the event giving rise to the Good Reason; provided, however, the Employee has first given the Employer written notice of the Good Reason within ten (10) business days of its occurrence and thirty (30) days following such notice to correct it.

 

(b)                                 Except as is provided in the last sentence of this Section 4.1(b), for the purposes of this Agreement, “Disability” means Employee’s inability, whether mental or physical, to perform the normal duties of Employee’s position for ninety (90) days (which need not be consecutive) during any twelve (12) consecutive month period, and the effective date of such Disability shall be the day next following such ninetieth (90th) day.  If SBG and Employee are unable to agree as to whether Employee is disabled, the question will be decided by a physician to be paid by SBG and designated by SBG, subject to the approval of Employee (which approval may not be unreasonably withheld) whose determination will be final and binding on the parties.  Notwithstanding anything in this Section 4.1(b) or in this Agreement to the contrary, to the extent necessary to prevent a violation of section 409A of the Internal Revenue Code (and any guidance issued thereunder), “Disability” means a medically determinable physical or mental impairment which qualifies Employee for total disability benefits under the Social Security Act and/or which, in the opinion of the SBG (based upon such evidence as it deems satisfactory): (i) can be expected to result in death or to last at least twelve (12) months, and (ii) will prevent Employee from performing any substantial gainful activity.

 

(c)                                  For the purposes of this Agreement, “Cause” means any of the following:  (i) the wrongful appropriation for Employee’s own use or benefit of property or money entrusted to Employee by SBG or its direct or indirect subsidiaries, (ii) the conviction or granting of a Probation Before Judgment (or similar such finding or determination if not by a Maryland court) of a felony involving moral turpitude, deceit, or fraud, (iii) Employee’s continued willful disregard of Employee’s duties and responsibilities hereunder after written

 

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notice of such disregard and the reasonable opportunity to correct such disregard, (iv) Employee’s continued violation of SBG policy after written notice of such violations (such policy may include policies as to drug or alcohol abuse) and the reasonable opportunity to cure such violations, (v) any willful misconduct or gross negligence by Employee in the performance of his material duties and responsibilities under this Agreement; or (vi) the continued insubordination of Employee and/or Employee’s repeated failure to follow the reasonable directives of the SBG/STG CEO or the SBG Board after written notice of such insubordination or the failure to follow such reasonable directives.  Upon a termination for Cause, all of Employee’s duties as described in Section 1 of this Agreement shall terminate and the Employee’s employment under this Agreement shall cease.

 

(d)                                 For purposes of this Agreement, “Good Reason” means any of the following: (i) a more than five percent (5.0%)  reduction in Employee’s Base Salary (other than a reduction consistent with a company-wide reduction in pay affecting substantially all executive employees of SBG and its subsidiaries); (ii) the relocation of Employee’s principal place of employment more than fifty (50) miles from Baltimore, Maryland Metropolitan Area; (iii) a reduction in the material duties of Employee or a material change in Employee’s working conditions; or (iv) if Employee is no longer SBG’s Chief Financial Officer or no longer reports to the SBG CEO and SBG Board.

 

4.2.                            Termination Payments.

 

(a)                                 If Employee’s employment is terminated pursuant to Section 4.1(a)(1) (i.e., upon his death), SBG shall pay to the person or persons designated by Employee pursuant to Section 11.19 (or, if no such written designation has been made, Employee’s estate), all of the following:

 

1.                                      within thirty (30) days after the Termination Date, the pro rata portion of the Base Salary with respect to the then current year that would have been payable to Employee under Section 3.1 had the Employment Term ended on the last day of the month in which the Termination Date occurs; and

 

2.                                      a separation payment equal to one (1) month’s Base Salary in effect at the time of termination (not including bonuses) for each full year of his continuous employment with SBG (the “Separation Payment”).

 

(b)                                 If Employee’s employment is terminated pursuant to Section 4.1(a)(2) of this Agreement (i.e., upon his Disability), SBG shall pay all of the following:

 

1.                                      within thirty (30) days after the Termination Date, the pro rata portion of the Base Salary with respect to the then current year that would have been payable to Employee under Section 3.1 had the Employment Term ended on the last day of the month in which the Termination Date occurs;

 

2.                                      within thirty (30) days after the Termination Date, a payment in respect of unutilized vacation time that has accrued through the Termination Date (determined in

 

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accordance with corporate policies established by Sinclair and consistent with Section 3 of this Agreement); and

 

3.                                      the Separation Payment.

 

(c)                                  If Employee’s employment is terminated pursuant to Section 4.1(a)(3) of this Agreement (i.e., by Employee without Good Reason), SBG shall pay to the Employee within thirty (30) days after the Termination Date, the pro rata portion of the Base Salary due Employee up to and including the Termination Date, along with a payment in respect of unutilized vacation time that has accrued through the Termination Date (determined in accordance with corporate policies established by Sinclair and consistent with Section 3 of this Agreement).

 

(d)                                 If Employee’s employment is terminated pursuant to Section 4.1(a)(4) of this Agreement (i.e., by SBG for Cause), SBG shall pay to Employee within thirty (30) days after the Termination Date, the pro rata portion of the Base Salary due Employee up to and including the Termination Date, along with a payment in respect of unutilized vacation time that has accrued through the Termination Date (determined in accordance with corporate policies established by Sinclair and consistent with Section 3 of this Agreement).

 

(e)                                  If Employee’s employment is terminated pursuant to Section 4.1(a)(5) of this Agreement (i.e., by SBG without Cause) or pursuant to Section 4.1(a)(6) of this Agreement (i.e., by Employee for Good Reason), SBG shall pay Employee all of the following:

 

1.                                      within thirty (30) days after the Termination Date, the pro rata portion of the Base Salary with respect to the then current year that would have been payable to Employee under Section 3.1 of this Agreement had the Employment Term ended on the last day of the month in which the Termination Date occurs;

 

2.                                      within thirty (30) days after the Termination Date, a payment in respect of unutilized vacation time that has accrued through the Termination Date (determined in accordance with corporate policies established by Sinclair and consistent with Section 3 of this Agreement); and

 

3.                                      if the Employee is terminated before December 31, 2015, within thirty (30) days after the Termination Date, a payment equal to the sum of:

 

(i)                                     two (2) times the sum of:

 

(A)                               Employee’s annual Base Salary (in effect at the Termination Date or, if higher at any time within the ninety (90) days preceding such Termination Date, such higher Base Salary); and

 

(B)                               an amount equal to the Performance Bonus payable to Employee for his 2014 services, or if the Termination Date occurs before the determination of Employee’s eligibility for any 2014 Performance Bonus, an amount equal to 50% of his annual Base Salary); and

 

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(C)                               an amount equal to: (1) for any termination before December 31, 2014, the Effective Date value of the Section 8.1 Option, which would have been granted on December 31, 2014, (calculated in accordance with the methodologies customarily applied by SBG in the evaluation of such Section 8.1 Option grant reportable in SBG’s annual proxy statement) had such Section 8.1 Option grant been made as of the Effective Date instead of December 31, 2014; or (2) for any termination after December 31, 2014, but before December 31, 2015, the December 31,2014 grant date value of the Section 8.1 Option grants (calculated in accordance with the methodologies applied by SBG in the evaluation of such a Section 8.1 Options and as reported in SBG’s 2014 annual proxy statement).

 

4.                                      if the Employee is terminated after December 31, 2015, within thirty (30) days after the Termination Date, a payment equal to the sum of

 

(i)                                     one (1) times the sum of:

 

(A)                               Employee’s annual Base Salary (as in effect at the Termination Date or, if higher at any time within the ninety (90) days preceding such Termination Date, such higher Base Salary) and

 

(B)                               the average of any Performance Bonus(es) paid to Employee for the two (2) calendar years immediately preceding the Termination Date (or, if the Termination Date occurs on or after the determination of the 2014 Performance Bonus payable to Employee, but prior to the determination and payment of the Performance Bonus in respect of 2015, an amount equal to the Performance Bonus payable to Employee for his 2014 services, and

 

(ii)                                  the amount equal to the grant date value (calculated in accordance with the methodologies customarily applied by SBG in the evaluation of such Section 8.1 Options and reported in SBG’s annual proxy statement) applicable to the Section 8.1 Option grants last preceding the Termination Date, provided such Section 8.1 Options granted last preceding the Termination Date are exercisable on the Termination Date.

 

5.                                      Confidentiality and Non-Competition.

 

5.1.                            Confidential Information.

 

(a)                                 During Employee’s employment hereunder (and at all times thereafter), Employee shall:

 

(1)                                 keep all “Confidential Information” (as defined in Section 5.1(b) of this Agreement) in trust for the use and benefit of SBG, STG, their direct and indirect subsidiaries, and all broadcast stations owned, operated, or programmed directly or indirectly by SBG, STG, or their direct or indirect subsidiaries (collectively, the “SBG Entities”);

 

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(2)                                 not, except as (i) required by Employee’s duties under this Agreement, (ii) authorized by the SBG CEO, the SBG EVP, and/or the SBG Board, or (iii) required by law or any order, rule, or regulation of any court or governmental agency (but only after notice to SBG of such requirement), at any time during or after the termination of Employee’s employment with SBG, directly or indirectly, use, publish, disseminate, distribute, or otherwise disclose any Confidential Information;

 

(3)                                 take all reasonable steps necessary, or reasonably requested by any of the SBG Entities, to ensure that all Confidential Information is kept confidential for the use and benefit of the SBG Entities; and

 

(4)                                 upon termination of Employee’s employment or at any other time any of the SBG Entities in writing so request, promptly deliver to such SBG Entity all materials constituting Confidential Information relating to such SBG Entity (including all copies) that are in Employee’s possession or under Employee’s control.  If requested by any of the SBG Entities to return any Confidential Information, Employee will not make or retain any copy of or extract from such materials.

 

(b)                                 For purposes of this Section 5.1, Confidential Information means any proprietary or confidential information of or relating to any of the SBG Entities that is not generally available to the public.  Confidential Information includes all information developed by or for any of the SBG Entities (by the Employee or otherwise) concerning marketing used by any of the SBG Entities, suppliers, or customers (including advertisers) with which any of the SBG Entities has dealt prior to the Termination Date, plans for development of new services and expansion into new areas or markets, internal operations, financial information, operations, budgets, and any trade secrets or proprietary information of any type owned by any of the SBG Entities, together with all written, graphic, other materials relating to all or any of the same, and any trade secrets as defined in the Maryland Uniform Trade Secrets Act, as amended from time to time.

 

5.2.                            Non-Competition/Non-Hire/Non-Solicitation.

 

(a)                                 If Employee’s employment is terminated (i) pursuant to Section 4.1(a)(3) of this Agreement (i.e., by Employee without Good Reason) or (ii) pursuant to Section 4.1(a)(4) of this Agreement (i.e., for Cause), Employee shall not, for a period of twelve (12) months after termination, directly or indirectly, participate in any activity or business involved in the ownership or operation of any television broadcast station, any cable television channel, or similar enterprise within any Designated Market Area (as defined in Section 5.2 (f) of this Agreement) in which any of the SBG Entities owns, operates, programs, or supplies substantially all of the program services to a broadcast station immediately prior to such termination.  As used herein, “participate” means lending one’s name to, acting as a consultant or adviser for, being employed by, or acquiring any direct or indirect interest in any business or enterprise, whether as a stockholder, partner, officer, director, employee, consultant, or otherwise.

 

(b)                                 While employed by SBG or any of the SBG Entities, and for twelve (12) months thereafter (regardless of the reason why Employee’s employment is terminated), Employee will not directly or indirectly:

 

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(1)                                 hire, attempt to hire, or to assist any other person or entity in hiring or attempting to hire any employee of any of the SBG Entities or any person who was an employee of any of the SBG Entities within the prior twelve (12) months period; or

 

(2)                                 solicit, in competition with any of the SBG Entities, the business of any customer of any of the SBG Entities or any entity whose business any of the SBG Entities solicited during the twelve (12) months period prior to Employee’s termination.

 

provided, however, that the foregoing provision of this Section 5.2(b) shall not restrict (i) any general solicitation for employment that is not specifically directed at employees of SBG or any of its affiliates or (ii) any solicitation of any person referred by a third-party search agency through a general search not targeted at employees of SBG or any of its affiliates.

 

(c)                                  Notwithstanding anything else contained in this Section 5.2, (i) Employee may at any time own, for investment purposes only, up to five percent (5%) of the stock of any publicly-held corporation whose stock is either listed on a national stock exchange or on the NASDAQ National Market System if Employee is not otherwise affiliated with such corporation, and (ii) after the Employment Term only, Employee shall not be prohibited from participating with any entity whose earnings before interest, taxes, depreciation, and amortization (“EBITDA”) from the sale, utilization, or development of digital television spectrum, when combined with the earnings derived from the operation of television stations, is twenty-five percent (25%) or less of such entity’s total EBITDA; provided, however, Employee’s participation with such entity shall not directly or indirectly be with (A) any television division, affiliate, or subsidiary of any such entity or (B) any other division, subsidiary, or affiliate of any such entity involved in the sale, utilization, or development of the digital television spectrum owned or controlled by such entity.

 

(d)                                 In the event that (i) SBG places all or substantially all of its television broadcast stations up for sale within twelve (12) months after termination of Employee’s employment hereunder, or (ii) Employee’s employment is terminated in connection with the disposition of all or substantially all of such television broadcast stations (whether by sale of assets, equity, or otherwise), Employee agrees to be bound by, and to execute such additional instruments as may be necessary or desirable to evidence Employee’s agreement to be bound by, the terms and conditions of any non-competition provisions contained in the purchase and sale agreement for such stations, without receiving any consideration therefore beyond that expressed in this Agreement.  Notwithstanding the foregoing, in no event shall Employee be bound by, or obligated to enter into, any non-competition provisions referred to in this Section 5.2  that extend beyond twelve (12) months from the date of termination of Employee’s employment hereunder or whose scope extends the scope of the non-competition provisions set forth in Section 5.2(a) of this Agreement.

 

(e)                                  The twelve (12) month time period referred to in this Section 5.2 of this Agreement shall be tolled on a day-for-day basis for each day during which Employee participates in any activity in violation of Section 5.2 of this Agreement so that Employee shall be restricted from engaging in the conduct referred to in Section 5.2 of this Agreement for a full twelve (12) months.

 

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(f)                                   For purposes of this Section 5.2, Designated Market Area shall mean the designated market area (“DMA”) as defined by The A.C. Nielsen Company (or such other similar term as is used from time to time in the television broadcast community).

 

5.3                               Non-Disparagement.  Each party agrees and covenants that they will not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning the other party (and in the case of SBG, any SBG Entity or its businesses, or any of its employees, officers, and existing and prospective customers, suppliers, investors and other associated third parties).  This does not, in any way, restrict or impede a party hereto from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. Each party shall promptly provide written notice of any such order to the other party.

 

5.4.                            Acknowledgment.  Employee acknowledges and agrees that this Agreement (including, without limitation, the provisions of Sections 5 and 6 of this Agreement) is a condition of Employee being employed by SBG, Employee having access to Confidential Information, being eligible to receive the items referred to in Section 3 of this Agreement, Employee’s advancement at SBG/STG, and Employee being eligible to receive other special benefits at SBG/STG; and further, that this Agreement is entered into, and is reasonably necessary, to protect the SBG Entities’ investment in Employee’s training and development, and to protect the goodwill, trade secrets, business practices, and other business interests of the SBG Entities.

 

6.                                      Remedies.

 

6.1.                            Injunctive Relief.  The covenants and obligations contained in Section 5 of this Agreement relate to matters which are of a special, unique, and extraordinary character, and a violation of any of the terms of such Section will cause irreparable injury to the SBG Entities, the amount of which will be impossible to estimate or determine and which cannot be adequately compensated.  Therefore, SBG Entities will be entitled to an injunction, a restraining order, or other equitable relief from any court of competent jurisdiction (subject to such terms and conditions that the court determines appropriate) restraining any violation or threatened violation of any of such terms by Employee and such other persons as the court orders.  The parties acknowledge and agree that judicial action, rather than arbitration, is appropriate with respect to the enforcement of the provisions of Section 5 of this Agreement.  The forum for any litigation hereunder shall be the Circuit Court of Baltimore County or the United States District Court (Northern Division) sitting in Baltimore, Maryland.

 

6.2.                            Cumulative Rights and Remedies. Rights and remedies provided by Section 5 of this Agreement are cumulative and are in addition to any other rights and remedies any of the SBG Entities may have at law or equity.

 

7.                                      Absence of Restrictions.          Employee warrants and represents that Employee is not a party to or bound by any agreement, contract, or understanding, whether of employment or

 

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otherwise, with any third person or entity which would in any way restrict or prohibit Employee from undertaking or performing employment with SBG in accordance with the terms and conditions of this Agreement.

 

8.                                      Stock Options.

 

8.1                               Grant.  Provided that Employee’s employment has not terminated as of the date of any anticipated option grant under this Section 8.1, SBG shall grant to Employee an option to purchase one hundred Twenty-five thousand (125,000) shares of SBG Class A Common Stock (the “Shares”) par value $.01 per share, each year for eight consecutive years (the “Section 8.1 Options”), with the first grant of any Section 8.1 Options being made on December 31, 2014 and each successive grant of Section 8.1 Options being made on the next and succeeding anniversary dates of the first grant, with the last grant of Section 8.1 Options being on December 31, 2021.

 

8.2                               Terms.  Each Section 8.1 Option shall be granted pursuant to the terms of a written award agreement between SBG and Employee, which award agreement shall be issued pursuant to the SBG 1996 Long Term Incentive Plan, as Amended (a copy of which is attached to this Agreement as Exhibit B) or any successor plan thereto (either such plan, “LTIP”).  Each such option:

 

(i)                                     shall be immediately exercisable in full;

 

(ii)                                  shall be exercisable until the earlier to occur of

 

(a) the expiration of a period of ten (10) years from the date on which such option was granted, or

 

(b) the time at which (x) the sum of the fair market values of all of the whole Shares acquired by the Employee as a result of the exercise of any Section 8.1 Options, in each case determined as of the date of such Shares were acquired by exercise of a Section 8.1 Option, minus (y) the aggregate exercise prices payable in respect of the Shares described in subclause (x) shall first equal Twenty Million Dollars ($20,000,000);

 

(iii)                               shall have an option exercise price equal to the fair market value of the SBG Class A Common Stock on the date such Section 8.1 Option is granted, and

 

(iv)                              may contain other terms and conditions which are not inconsistent with the provisions of this Section 8.1 or the LTIP; provided that such additional terms shall not impair, diminish or limit in any way the rights of Employee from those contemplated by this Section 8.1 or impose any conditions on the exercise of, or Employee’s right to receive and retain the value provided by, any such Section 8.1 Option.

 

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9.                                      Proprietary Rights.

 

9.1.                            Work Product.  Employee acknowledges and agrees that all writings, works of authorship, technology, inventions, discoveries, ideas and other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived or reduced to practice by Employee individually or jointly with others during the period of his employment by SBG and relating in any way to the business or contemplated business, research or development of the SBG or any SBG Entity (regardless of when or where the Work Product is prepared or whose equipment or other resources is used in preparing the same) and all printed, physical and electronic copies, all improvements, rights and claims related to the foregoing, and other tangible embodiments thereof (collectively, the “Work Product”), as well as any and all rights in and to copyrights, trade secrets, trademarks (and related goodwill), mask works, patents and other intellectual property rights therein arising in any jurisdiction throughout the world and all related rights of priority under international conventions with respect thereto, including all pending and future applications and registrations therefor, and continuations, divisions, continuations-in-part, reissues, extensions and renewals thereof (collectively, the “Intellectual Property Rights”), shall be the sole and exclusive property of SBG.  For purposes of this Agreement, Work Product includes, but is not limited to, SBG group information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations know-how, computer programs, computer applications, software design, web design, work in process, databases, manuals, results, developments, reports, graphics, drawings, sketches, market studies, formulae, notes, communications, designs, styles, models, audiovisual programs, inventions, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, client information, customer lists, client lists, marketing information, advertising information, and sales information.

 

9.2.                            Work Made for Hire; Assignment.  Employee acknowledges that, by reason of being employed by SBG at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is “work made for hire” as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by SBG.  To the extent that the foregoing does not apply, Employee hereby irrevocably assigns to SBG, for no additional consideration, Employee’s entire right, title and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim and recover for all past, present and future infringement, misappropriation or dilution thereof, and all rights corresponding thereto throughout the world.  Nothing contained in this Agreement shall be construed to reduce or limit SBG’s rights, title or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that SBG would have had in the absence of this Agreement.

 

9.3                               Further Assurances; Power of Attorney.  During and after his employment, Employee agrees to reasonably cooperate with SBG to (a) apply for, obtain, perfect and transfer to the SBG the Work Product as well as an Intellectual Property Right in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, executing and delivering to SBG any and all applications, oaths, declarations, affidavits, waivers, assignments and other documents and instruments as shall be

 

12

 

requested by SBG.  Employee hereby irrevocably grants SBG power of attorney to execute and deliver any such documents on Employee’s behalf in his name and to do all other lawfully permitted acts to transfer the Work Product to SBG and further the transfer, issuance, prosecution and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if Employee does not promptly cooperate with SBG’s request (without limiting the rights SBG shall have in such circumstances by operation of law).  The power of attorney is coupled with an interest and shall not be affected by Employee’s subsequent incapacity.

 

9.4.                            No License.  Employee understands that this Agreement does not, and shall not be construed to, grant Employee any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software or other tools made available to him by SBG.

 

10.                               Security.  Employee agrees and covenants (a) to comply with all SBG security policies and procedures as in force from time to time including without limitation those regarding computer equipment, telephone systems, voicemail systems, facilities access, monitoring, key cards, access codes, SBG intranet internet, social media and instant messaging systems, computer systems, e-mail systems, computer networks, document storage systems, software, data security, encryption, firewalls, passwords, and any and all other SBG resources and communication technologies (collectively, the “Facilities Information Technology and Access Resources”); (b) not to access or use any Facilities and Information Technology Resources except as authorized by the SBG; and (iii) not to access or use any Facilities and Information Technology Resources in any manner after the termination of Employee’s employment by the SBG, whether termination is voluntary or involuntary.  Employee agrees to notify SBG promptly in the event he learns of any violation of the foregoing by others, or of any other misappropriation or unauthorized access, use, reproduction, or tampering with any Facilities and Information Technology Access Resources or other SBG Entity property or materials by others.

 

11.                               Miscellaneous.

 

11.1.                     Attorneys’ Fees.  In any action, litigation, or proceeding (collectively, “Action”) between the parties arising out of or in relation to this Agreement, the prevailing party in the Action will be awarded, in addition to any damages, injunctions, or other relief, and without regard to whether such Action is prosecuted to final appeal, such party’s costs and expenses, including reasonable attorneys’ fees.  Subject to SBG’s receipt of an itemized statement of account from the attorney for the Employee, SBG shall pay Employee’s attorney directly or, if such attorney has already been paid by the Employee, shall reimburse Employee for Employee’s attorney’s fees incurred in the negotiation of this Agreement, up to a maximum of Twenty Thousand Dollars and no cents ($20,000.00).

 

11.2.                     Headings.  The descriptive headings of the Sections of this Agreement are inserted for convenience only, and do not constitute a part of this Agreement.

 

13

 

11.3.                     Notices.  All notices and other communications hereunder shall be in writing and shall be deemed given upon (a) oral or written confirmation of a receipt of a facsimile transmission, (b) confirmed delivery of a standard overnight courier or when delivered by hand, or (c) the expiration of five (5) business days after the date mailed, postage prepaid, to the parties at the following addresses:

 

	
If   to SBG to:
    	
Sinclair   Broadcast Group, Inc.
    
	
 
    	
10706   Beaver Dam Road
    
	
 
    	
Cockeysville,   Maryland 21030
    
	
 
    	
Attn:
    	
Chief   Executive Officer
    
	
 
    	
 
    
	
With   a copy to:
    	
Steven   A. Thomas, Esquire
    
	
 
    	
Thomas &   Libowitz, P.A.
    
	
 
    	
100   Light Street, Suite 1100
    
	
 
    	
Baltimore,   Maryland 21202
    
	
 
    	
 
    
	
If   to Employee to:
    	
Employee’s   address as listed
    
	
 
    	
from   time to time, in the
    
	
 
    	
personnel   records of
    
	
 
    	
SBG   (or any affiliate thereof)
    
	
 
    	
 
    
	
With   a copy to:
    	
Lawrence   K. Cagney, Esquire
    
	
 
    	
Debevoise &   Plimpton, LLP
    
	
 
    	
919   Third Avenue
    
	
 
    	
New   York, New York 10022
    

 

or to such other address as will be furnished in writing by any party.  Any such notice or communication will be deemed to have been given as of the date so mailed.

 

11.4.                     Assignment.  SBG may not assign, transfer, or delegate SBG’s rights or obligations under this Agreement and any attempt to do so is void; provided, SBG may assign this Agreement to any subsidiary of SBG, any parent of SBG; provided such assignment shall not relieve SBG of its obligations hereunder, and Employee hereby consents and agrees to be bound by any such assignment by SBG.  Employee may not assign, transfer, or delegate Employee’s rights or obligations under this Agreement and any attempt to do so is void.  This Agreement is binding on and inures to the benefit of the parties, their successors and assigns, and the executors, administrators, and other legal representatives of Employee.  No other third parties, other than SBG Entities, shall have, or are intended to have, any rights under this Agreement.

 

11.5.                     Counterparts.  This Agreement may be signed in one or more counterparts.

 

11.6.                     Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF MARYLAND (REGARDLESS OF THE LAWS THAT MIGHT BE APPLICABLE UNDER PRINCIPLES OF CONFLICTS OF LAW) AS TO ALL

 

14

 

MATTERS (INCLUDING VALIDITY, CONSTRUCTION, EFFECT, AND PERFORMANCE.)

 

11.7.                     Severability.  If the scope of any provision contained in this Agreement is too broad to permit enforcement of such provision to its full extent, then such provision shall be enforced to the maximum extent permitted by law, and Employee hereby consents that such scope may be reformed or modified accordingly and enforced as reformed or modified in any proceeding brought to enforce such provision.  Subject to the immediately preceding sentence, whenever possible, each provision of this Agreement will be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision, to the extent of such prohibition or invalidity, shall not be deemed to be a part of this Agreement, and shall not invalidate the remainder of such provision or the remaining provisions of this Agreement.

 

11.8.                     Entire Agreement.  This Agreement constitutes the entire agreement of Employee and SBG regarding Employee’s employment by SBG.  This Agreement amends, supersedes, and replaces all prior agreements and understandings, written or verbal, formal or informal, among the parties with respect to the employment of Employee by SBG, including the subject matter of this Agreement.  This Agreement may not be amended or modified except by agreement in writing, signed by the party against whom enforcement of any waiver, amendment, modification, or discharge is sought.  Notwithstanding anything herein to the contrary, this Agreement is not intended to supersede, amend, replace or in any way effect any Restricted Stock Award Agreement between SBG and Employee, all of which agreements shall remain in full force and effect without modification thereto.

 

11.9.                     Interpretation.                This Agreement is being entered into among competent and experienced businessmen (who have had an opportunity to consult with counsel), and any ambiguous language in this Agreement will not necessarily be construed against any particular party as the drafter of such language.

 

11.10.              Continuing Obligations.  The provisions contained in the following Sections of this Agreement will continue and survive the termination of this Agreement: Sections 4.1, 4.2, 5, 6, 8 and 9.

 

11.11.              Taxes.  SBG may withhold from any payments under this Agreement all applicable federal, state, city, or other taxes required by applicable law to be so withheld.

 

11.12.              Waiver of Jury Trial.  SBG AND EMPLOYEE DO HEREBY JOINTLY AND SEVERALLY WAIVE THEIR RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BOTH ARE PARTIES ARISING OUT OF, OR IN ANY MANNER PERTAINING TO, THIS AGREEMENT.  IT IS UNDERSTOOD AND AGREED THAT THIS WAIVER CONSTITUTES A WAIVER OF THE RIGHT TO TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS.  THIS WAIVER IS KNOWINGLY, VOLUNTARILY, AND WILLINGLY MADE BY EMPLOYEE AND SBG, AND EACH REPRESENTS AND WARRANTS TO THE OTHER THAT NO REPRESENTATIONS OF FACTS OR

 

15

 

OPINION HAVE BEEN MADE BY ANY PERSON TO INDUCE THIS WAIVER OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. STILL FURTHER, EMPLOYEE  AND SBG EACH REPRESENTS TO THE OTHER THAT EACH HAS BEEN REPRESENTED BY COUNSEL SELECTED BY SUCH PARTY TO REVIEW OR PREPARE THIS AGREEMENT OR, IF NOT REPRESENTED, THAT SUCH PARTY HAS BEEN ADVISED, AND HAS HAD THE OPPORTUNITY, TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL TO REVIEW THIS AGREEMENT PRIOR TO SIGNING THIS AGREEMENT.

 

11.13.              Exclusion from ERISA and Retirement and Fringe Benefit Computation.  Employee and SBG do hereby jointly and severally acknowledge and agree that this Agreement shall not be regarded as an “employee benefit plan” under 29 U.S.C. § 1002(3); provided, however, that if this Agreement is ever regarded as an “employee benefit plan” under 29 U.S.C. § 1002(3), Employee and SBG acknowledge and agree that this Agreement shall be regarded as a plan which is unfunded and is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees under 29 U.S.C. § 1051(2).  Unless specifically provided otherwise pursuant to a separate plan or agreement, any payment of the Special Incentive Bonus under this Agreement shall not be taken into account as “wages,” “salary” or “compensation” in determining eligibility or benefits under (i) any pension, retirement, profit sharing or other qualified or nonqualified plan of deferred compensation, (ii) any employee welfare or fringe benefit plan, including, but not limited to, group life insurance and disability, or (iii) any form of extraordinary pay, including, but not limited to, bonuses, sick pay, and vacation pay.

 

11.14.              Section 409A Compliance.  This Agreement may not be amended in any way that results in a violation of section 409A of the Internal Revenue Code or any regulatory or other guidance issued by the Internal Revenue Service thereunder.  In particular, except to the extent permitted by regulatory or other guidance issued by the Internal Revenue Service under section 409A(a)(3) of the Internal Revenue Code, no amendment of this Agreement shall in any way (including a change in form of distribution) result in acceleration of the timing or amount of any payment (or any portion thereof) of deferred compensation that is due under this Agreement.  An amendment that permits acceleration for any one or more of the reasons that constitute exceptions to the prohibition on acceleration of payments, pursuant to Treas. Regs. § 1.409A-3(j) (as presently written or as hereafter amended, finalized, replaced or supplemented), shall not be deemed to be in violation of this Section 9.14.  Notwithstanding any provision of this Agreement to the contrary, if at the time of any Earned Bonus Date, as defined in Section 8.1 of this Agreement, Employee is regarded as a “specified employee” within the meaning of section 409A(a)(2)(B) of the Code and the regulations promulgated thereunder, he may not receive any payment(s) of “deferred compensation” upon any “separation from service” as determined by SBG in accordance with section 409A(a)(2)(A)(i) of the Internal Revenue Code and the regulations promulgated thereunder, unless such payment(s) are made on or after the date that is six months after the date of such separation from service (or if earlier, the date of death of such specified employee.)   Instead, any such payments to which such specified employee would otherwise be entitled during the first six (6) months following such separation from service shall be accumulated and paid on the first day of the seventh month following the date of separation from service.

 

16

 

11.15.              No Right to Employment.  Nothing herein contained is intended to or shall be construed as conferring upon Employee any right to continue in the employ of SBG.

 

11.16.              Enforcement.  The location of any arbitration regarding this Agreement shall be Baltimore County, Maryland.  The forum for any litigation involving this Agreement shall be the Circuit Court of Baltimore County or the United States District Court (Northern Division) sitting in Baltimore, Maryland.  In the event that either party institutes an action to enforce or interpret any provision of this Agreement, the non-prevailing party shall pay to the prevailing party all costs and expenses (including a reasonable sum for attorneys’ fees and all expert witness fees) incurred by the prevailing party in connection with any such action as determined by the finder of fact in such proceeding.

 

11.17.              Independent Legal Counsel.  The undersigned understand and acknowledge that this Agreement was prepared by counsel for SBG.  The undersigned understand that Employee and SBG may be adverse to each other regarding terms and conditions set forth in this Agreement.  The undersigned acknowledge that counsel to SBG has not represented Employee in connection with the preparation of this Agreement nor provided Employee with any legal or other advice in connection with this Agreement and that Employee has been advised and urged to seek independent professional legal, tax, and financial advice in connection with deciding to enter into this Agreement.

 

11.18.              Arbitration and Extension of Time.  EXCEPT AS SPECIFICALLY PROVIDED IN SECTION 6 OF THIS AGREEMENT, ANY DISPUTE OR CONTROVERSY ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE DETERMINED AND SETTLED BY ARBITRATION IN BALTIMORE COUNTY, MARYLAND IN ACCORDANCE WITH THE COMMERCIAL RULES OF THE AMERICAN ARBITRATION ASSOCIATION THEN IN EFFECT, AND THE FEDERAL ARBITRATION ACT, 9 U.S.C. § 1 ET SEQ., AND JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATOR(S) MAY BE ENTERED IN ANY COURT OF COMPETENT JURISDICTION.  THE EXPENSES OF THE ARBITRATION SHALL BE BORNE BY THE NON-PREVAILING PARTY TO THE ARBITRATION, INCLUDING, BUT NOT LIMITED TO, THE COST OF EXPERTS, EVIDENCE, AND LEGAL COUNSEL, AS DETERMINED BY THE ARBITRATOR(S) IN ANY SUCH PROCEEDING.  WHENEVER ANY ACTION IS REQUIRED TO BE TAKEN UNDER THIS AGREEMENT WITHIN A SPECIFIED PERIOD OF TIME AND THE TAKING OF SUCH ACTION IS MATERIALLY AFFECTED BY A MATTER SUBMITTED TO ARBITRATION, SUCH PERIOD SHALL AUTOMATICALLY BE EXTENDED BY THE NUMBER OF DAYS, PLUS TEN (10) THAT ARE TAKEN FOR THE DETERMINATION OF THAT MATTER BY THE ARBITRATOR(S).  NOTWITHSTANDING THE FOREGOING, THE PARTIES AGREE TO USE THEIR BEST REASONABLE EFFORTS TO MINIMIZE THE COSTS AND FREQUENCY OF ARBITRATION HEREUNDER.

 

17

 

11.19.              Payment to Beneficiaries and Beneficiary Designation.

 

(a)                                 In the event of Employee’s death at a time when Employee is entitled to receive but has not yet received any cash payments pursuant to this Agreement, any such remaining payments shall be paid to Employee’s beneficiaries.

 

(b)                                 Simultaneously with the execution of this Agreement, Employee shall designate one or more beneficiaries to receive the cash payments referred to in Section 9.19(a) of this Agreement.  Such beneficiary designation shall be set forth in Exhibit A attached hereto and made a part hereof, and may be modified by Employee at any time, and from time to time, by execution of a new Exhibit A.  Each designation of beneficiary will revoke all prior designations by Employee.

 

(c)                                  If the primary beneficiaries named by Employee die before Employee, and there are no living contingent beneficiaries named by Employee, SBG shall direct distribution of the cash payments payable pursuant to this Agreement to the legal representative of the estate of Employee.

 

11.20.              Payments to Minors.  If any person to whom any cash payment is due under this Agreement is a minor, or is reasonably found by SBG to be incompetent by reason of physical or mental disability, SBG shall have the right to cause such payments becoming due to such person to be made to another for his benefit, without responsibility of SBG to see to the application of the payment of any such payments, and such payment will constitute a complete discharge of the liabilities of SBG with respect thereto.

 

11.21.                                      Publicity.  Employee hereby irrevocably consents to customary uses and displays, by any SBG entity and its agents, representatives and licensees (consistent with SBG’s use of similar information of other executives of SBG), of Employee’s name, voice, likeness, image, appearance and biographical information in, on or in connection with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes and all other printed and electronic forms and media throughout the world, at any time during the period of his employment by the SBG, for all legitimate commercial and business purposes of SBG (“Permitted Uses”) without further consent from or royalty, payment or other compensation to Employee. Employee hereby forever waives and releases SBG and its directors, officers, employees and agents from any and all claims, actions, damages, losses, costs, expenses and liability of any kind, arising under any legal or equitable theory whatsoever at any time during or after the period of his employment by SBG, arising directly or indirectly from SBG and its agents’, representatives’ and licensees’ exercise of their rights in connection with any Permitted Uses.

 

[THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.]

 

[THE SIGNATURES OF THE PARTIES APPEAR ON THE IMMEDIATELY FOLLOWING PAGE]

 

18

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first written above.

 

	
 
    	
 
    	
 
    
	
 
    	
 
    	
SINCLAIR   BROADCAST GROUP, INC.
    
	
 
    	
 
    	
(on   behalf of itself and any applicable Sinclair
    
	
 
    	
 
    	
Entities)
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
EMPLOYEE:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Christopher   Ripley
    

 

19

 

[BENEFICIARY DESIGNATION FORM APPEARS AS EXHIBIT “A”]

EXHIBIT A

 

EMPLOYMENT AGREEMENT

BETWEEN SINCLAIR BROADCAST GROUP, INC. AND THE UNDERSIGNED EMPLOYEE

 

DESIGNATION OF BENEFICIARY

 

By virtue of my right under the Agreement by and between Sinclair Broadcast Group, Inc. and Christopher Ripley to designate the beneficiary(ies) of benefits payable under the Agreement, and subject to any future exercise of said right by me, I hereby direct that any and all such benefits shall be paid, in accordance with the terms of the Agreement, to the person(s) named below who are living at the time of my death, and, unless otherwise expressly indicated, in equal shares among them if more than one such person shall be living at the time of my death:

 

	
PRIMARY   BENEFICIARIES:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Name
    	
 
    	
Relationship
    	
 
    	
Address
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Name
    	
 
    	
Relationship
    	
 
    	
Address
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Name
    	
 
    	
Relationship
    	
 
    	
Address
    

 

In the event that no primary beneficiary shall be living at the time of my death, I hereby direct that any remaining payment(s) shall be made to those person(s) named below who are living at the time of my death, and, unless otherwise expressly indicated, in equal shares among them if more than one such person shall be living at the time of my death:

 

	
CONTINGENT   BENEFICIARIES:
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Name
    	
 
    	
Relationship
    	
 
    	
Address
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Name
    	
 
    	
Relationship
    	
 
    	
Address
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
Name
    	
 
    	
Relationship
    	
 
    	
Address
    

 

i

 

In the further event that none of the persons named above, either as primary or contingent beneficiaries, shall be living at the time of my death, any remaining payment(s) shall be made to my estate pursuant to the Agreement.

 

NOTE: If so specified in the above designations, “person” includes a trust or corporation.

 

	
 
    	
Christopher   Ripley
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Witness
    	
 
    	
(Employee   Signature)
    	
Date
    
	
 
    	
 
    	
 
    
	
RECEIPT   ACKNOWLEDGED:
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Date
    	
 
    	
 
    	
 
    
							

 

ii

 

EXHIBIT B

1996 Long-Term Incentive Plan

 

I

 

ALTERNATIVE METHOD OF COMPLIANCE WITH ERISA

REPORTING AND DISCLOSURE REQUIREMENTS

Statement Pursuant to DOL Regulations §2520.104-23

 

	
TO:
    	
Top   Hat Plan Exemption
    	
 
    
	
 
    	
Pension   and Welfare Benefits Administration
    	
 
    
	
 
    	
Room N-1513
    	
 
    
	
 
    	
U.S.   Department of Labor
    	
 
    
	
 
    	
200   Constitution Avenue, NW.
    	
 
    
	
 
    	
Washington,   D.C. 20210
    	
 
    
	
 
    	
 
    
	
FROM:
    	
Sinclair   Broadcast Group, Inc.
    	
 
    
	
 
    	
10706   Beaver Dam Road
    	
 
    
	
 
    	
Cockeysville,   Maryland 21030
    	
 
    
	
 
    	
EIN:
    	
                                             
    	
 
    
	
 
    	
 
    	
 
    
	
DATE:
    	
 
    	
 
    
					

 

	
NAME OF ARRANGEMENT:
    	
Sinclair   Broadcast Group, Inc. Deferred Compensation Plan
    
	
 
    
	
DATE ADOPTED:
    	
 
    	
 
    
	
 
    
	
NUMBER OF EMPLOYEES:
    	
4
    
				

 

The above named employer maintains an arrangement primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.

 

This is a protective filing only.  The SBG does not believe that the arrangement constitutes an employee benefit plan under 29 USC §1002(3).

 

The arrangement currently covers four members of a select group of management or highly compensated employees. The address and SBG identification number of the above named SBG is:

 

	
 
    	
SINCLAIR   BROADCAST GROUP, INC.
    
	
 
    	
10706   Beaver Dam Road
    
	
 
    	
Cockeysville,   Maryland 21030
    
	
 
    	
EIN:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Sincerely,
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
SINCLAIR   BROADCAST GROUP, INC.
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    

 

aQEPR 8-K 2014.5.02 EX 10.1

EXHIBT 10.1

                                            

Execution Version

PURCHASE AND SALE AGREEMENT

between

QEP ENERGY COMPANY 
as Seller
and
CIMAREX ENERGY CO. 
as Buyer

dated
May 2, 2014

i

EXHIBT 10.1

	
					
	TABLE OF CONTENTS
	Page

	 
	 
	 

	ARTICLE I
	 
	 

	DEFINITIONS AND INTERPRETATION
	 

	1.1
	

	Defined Terms
	1
	

	1.2
	

	References and Rules of Construction
	1
	

	ARTICLE II
	 

	PURCHASE AND SALE
	 

	2.1
	

	Purchase and Sale
	1
	

	2.2
	

	Excluded Assets
	2
	

	2.3
	

	Revenues and Expenses
	2
	

	ARTICLE III
	 

	PURCHASE PRICE
	 

	3.1
	

	Purchase Price
	3
	

	3.2
	

	Deposit
	3
	

	3.3
	

	Adjustments to Purchase Price
	4
	

	3.4
	

	Adjustment Methodology
	6
	

	3.5
	

	Preliminary Settlement Statement
	6
	

	3.6
	

	Final Settlement Statement
	6
	

	3.7
	

	Disputes
	6
	

	3.8
	

	Allocation of Purchase Price / Allocated Values
	7
	

	3.9
	

	Allocation for Imbalances at Closing
	7
	

	ARTICLE IV
	 

	REPRESENTATIONS AND WARRANTIES OF SELLER
	 

	4.1
	

	Organization, Existence and Qualification
	7
	

	4.2
	

	Authority, Approval and Enforceability
	7
	

	4.3
	

	No Conflicts
	8
	

	4.4
	

	Consents
	8
	

	4.5
	

	Bankruptcy
	8
	

	4.6
	

	Foreign Person
	8
	

	4.7
	

	Litigation
	8
	

	4.8
	

	Material Contracts
	8
	

	4.9
	

	No Violation of Laws
	9
	

	4.10
	

	Preferential Purchase Rights
	9
	

	4.11
	

	Royalties, Etc
	9
	

	4.12
	

	Imbalances
	9
	

	4.13
	

	Current Commitments
	9
	

	4.14
	

	Asset Taxes
	10
	

	4.15
	

	Brokers’ Fees
	10
	

	4.16
	

	Violations of Environmental Laws
	10
	

	4.17
	

	Governmental Permits
	10
	

	4.18
	

	Take-or-Pay
	10
	

	4.19
	

	Calls on Production
	10
	

ii

EXHIBT 10.1

	
					
	4.20
	

	Appurtenant Assets
	11
	

	4.21
	

	Necessary Surface Rights
	11
	

	4.22
	

	Property Operation; Non-Producing Wells
	11
	

	4.23
	

	Non-Consent Operations
	11
	

	4.24
	

	Tax Partnerships
	11
	

	ARTICLE V
	 

	REPRESENTATIONS AND WARRANTIES OF BUYER
	 

	5.1
	

	Organization, Existence and Qualification
	11
	

	5.2
	

	Authority, Approval and Enforceability
	11
	

	5.3
	

	No Conflicts
	12
	

	5.4
	

	Consents
	12
	

	5.5
	

	Bankruptcy
	12
	

	5.6
	

	Litigation
	12
	

	5.7
	

	Financing
	12
	

	5.8
	

	Regulatory
	12
	

	5.9
	

	Independent Evaluation
	12
	

	5.10
	

	Brokers’ Fees
	13
	

	5.11
	

	Accredited Investor
	13
	

	ARTICLE VI
	 

	CERTAIN AGREEMENTS
	 

	6.1
	

	Conduct of Business
	13
	

	6.2
	

	Successor Operator
	14
	

	6.3
	

	Governmental Bonds
	14
	

	6.4
	

	Record Retention
	14
	

	6.5
	

	Guarantees
	14
	

	6.6
	

	Notifications
	15
	

	6.7
	

	Amendment to Schedules
	15
	

	6.8
	

	Intentionally Deleted
	15
	

	6.9
	

	Certain Litigation Matters
	15
	

	6.10
	

	Employees Matters
	16
	

	6.11
	

	Intentionally Deleted
	16
	

	6.12
	

	Section 754 Election
	16
	

	ARTICLE VII
	 

	BUYER’S CONDITIONS TO CLOSING
	 

	7.1
	

	Representations
	16
	

	7.2
	

	Performance
	17
	

	7.3
	

	No Legal Proceedings
	17
	

	7.4
	

	Title Defects and Environmental Defects
	17
	

	7.5
	

	Closing Deliverables
	17
	

	ARTICLE VIII
	 

	SELLER’S CONDITIONS TO CLOSING
	 

	8.1
	

	Representations
	17
	

	8.2
	

	Performance
	17
	

	8.3
	

	No Legal Proceedings
	17
	

	8.4
	

	Title Defects and Environmental Defects
	17
	

	8.5
	

	Replacement Bonds and Guarantees
	18
	

iii

EXHIBT 10.1

	
					
	8.6
	

	Closing Deliverables
	18
	

	ARTICLE IX
	 

	CLOSING
	 
	 

	9.1
	

	Date of Closing
	18
	

	9.2
	

	Place of Closing
	18
	

	9.3
	

	Closing Obligations
	18
	

	9.4
	

	Records
	19
	

	ARTICLE X
	 

	ACCESS/DISCLAIMERS
	 

	10.1
	

	Access
	19
	

	10.2
	

	Confidentiality
	20
	

	10.3
	

	Disclaimers
	21
	

	ARTICLE XI
	 

	TITLE MATTERS; CASUALTY; TRANSFER RESTRICTIONS
	 

	11.1
	

	Seller’s Title
	22
	

	11.2
	

	Notice of Title Defects; Defect Adjustments
	23
	

	11.3
	

	Casualty Loss
	27
	

	11.4
	

	Preferential Purchase Rights and Consents to Assign
	28
	

	ARTICLE XII
	 

	ENVIRONMENTAL MATTERS
	 

	12.1
	

	Notice of Environmental Defects
	29
	

	12.2
	

	NORM, Asbestos, Wastes and Other Substances
	32
	

	ARTICLE XIII
	 

	ASSUMPTION; INDEMNIFICATION; SURVIVAL
	 

	13.1
	

	Assumption by Buyer
	32
	

	13.2
	

	Indemnities of Seller
	32
	

	13.3
	

	Indemnities of Buyer
	33
	

	13.4
	

	Limitation on Liability
	33
	

	13.5
	

	Express Negligence
	34
	

	13.6
	

	Exclusive Remedy
	34
	

	13.7
	

	Indemnification Procedures
	34
	

	13.8
	

	Survival
	36
	

	13.9
	

	Waiver of Right to Rescission
	36
	

	13.10
	

	Insurance, Taxes
	36
	

	13.11
	

	Non-Compensatory Damages
	37
	

	13.12
	

	Disclaimer of Application of Anti-Indemnity Statutes
	37
	

	ARTICLE XIV
	 

	TERMINATION, DEFAULT AND REMEDIES
	 

	14.1
	

	Right of Termination
	37
	

	14.2
	

	Effect of Termination
	37
	

	14.3
	

	Return of Documentation and Confidentiality
	38
	

	ARTICLE XV
	 

	DEFINED TERMS
	 

	15.1
	

	Defined Terms
	38
	

	ARTICLE XVI
	 

iv

EXHIBT 10.1

	
					
	MISCELLANEOUS
	 

	16.1
	

	Appendices, Exhibits and Schedules
	50
	

	16.2
	

	Expenses and Taxes
	50
	

	16.3
	

	Assignment
	51
	

	16.4
	

	Preparation of Agreement
	51
	

	16.5
	

	Publicity
	51
	

	16.6
	

	Notices
	52
	

	16.7
	

	Further Cooperation
	52
	

	16.8
	

	Filings, Notices and Certain Governmental Approvals
	52
	

	16.9
	

	Entire Agreement; Conflicts
	53
	

	16.10
	

	Parties in Interest
	53
	

	16.11
	

	Amendment
	53
	

	16.12
	

	Waiver; Rights Cumulative
	53
	

	16.13
	

	Governing Law; Jurisdiction
	54
	

	16.14
	

	Severability
	54
	

	16.15
	

	Removal of Name
	54
	

	16.16
	

	Counterparts
	55
	

	16.17
	

	Like-Kind Exchange
	55
	

v

EXHIBT 10.1

LIST OF EXHIBITS AND SCHEDULES

	
			
	 
	 
	 

	Exhibit A
	 ̄
	Leases and Mineral Fee Interests

	Exhibit A-1
	 ̄
	Wells and Well Locations

	Exhibit A-2
	 ̄
	Certain Leases and Mineral Fee Interests

	Exhibit A-3
	 ̄
	Surface Fee Interests

	Exhibit A-4
	 ̄
	Plat

	Exhibit B-1
	 ̄
	Form of Assignment and Bill of Sale

	Exhibit B-2
	 ̄
	Form of Mineral Deed

	Exhibit B-3
	 ̄
	Form of Surface Deed

	Exhibit B-4
	 ̄
	Form of Transition Services Agreement

	Exhibit C
	 ̄
	Excluded Assets

	Exhibit D
	 ̄
	Target Formations

	Exhibit E
	 ̄
	URC Related Interests

	 
	 
	 

	Schedule 3.8
	 ̄
	Allocated Values

	Schedule 4.4
	 ̄
	Consents

	Schedule 4.7
	 ̄
	Litigation

	Schedule 4.8(a)
	 ̄
	Material Contracts

	Schedule 4.8(b)
	 ̄
	Defaults under Material Contracts

	Schedule 4.9
	 ̄
	Violation of Laws

	Schedule 4.10
	 ̄
	Preferential Purchase Rights

	Schedule 4.11
	 ̄
	Royalties, Etc.

	Schedule 4.12
	 ̄
	Imbalances

	Schedule 4.13
	 ̄
	Current Commitments

	Schedule 4.14
	 ̄
	Asset Taxes

	Schedule 4.22
	 ̄
	Property Operation; Non-Producing Wells

	Schedule 4.24
	 ̄
	Tax Partnerships

	Schedule 6.1
	 ̄
	Conduct of Business

	Schedule 6.5
	 ̄
	Guarantees

	Schedule 6.10
	 ̄
	Employees Matters

vi

EXHIBT 10.1

PURCHASE AND SALE AGREEMENT

This PURCHASE AND SALE AGREEMENT (this “Agreement”) is executed as of the 2nd day of May, 2014 (the “Execution Date”), and is between QEP Energy Company, a Texas corporation (“Seller”), and Cimarex Energy Co., a Delaware corporation (“Buyer”).  Seller and Buyer are each referred to as a “Party” and collectively referred to as the “Parties.” 
RECITALS
Seller desires to sell and assign, and Buyer desires to purchase and pay for, all of Seller’s right, title and interest in and to the Assets (as defined hereinafter) effective as of the Effective Time (as defined hereinafter).
NOW, THEREFORE, for and in consideration of the mutual promises contained herein, the benefits to be derived by each Party hereunder, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows:
ARTTICLE I
DEFINITIONS AND INTERPRETATION

1.1Defined Terms.  Capitalized terms used herein shall have the meanings set forth in Section 15.1, unless the context otherwise requires.

1.2References and Rules of Construction.  All references in this Agreement to Appendices, Exhibits, Schedules, Articles, Sections, subsections and other subdivisions refer to the corresponding Appendices, Exhibits, Schedules, Articles, Sections, subsections and other subdivisions of or to this Agreement unless expressly provided otherwise.  Titles appearing at the beginning of any Articles, Sections, subsections and other subdivisions of this Agreement are for convenience only, do not constitute any part of this Agreement, and shall be disregarded in construing the language hereof.  The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer to this Agreement as a whole and not to any particular Article, Section, subsection or other subdivision unless expressly so limited.  The words “this Article,” “this Section,” and “this subsection,” and words of similar import, refer only to Article, Section or subsection hereof in which such words occur.  References in this Agreement to any agreement, including this Agreement, refer to such agreement as it may be amended, supplemented or otherwise modified from time to time.  Wherever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limiting the foregoing in any respect.”  All references to “$” or “dollars” shall be deemed references to United States Dollars.  Each accounting term not defined herein will have the meaning given to it under GAAP as interpreted as of the Execution Date.  Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.

ARTICLE II
PURCHASE AND SALE
2.1Purchase and Sale.  Subject to the terms and conditions of this Agreement, Seller agrees to sell, and Buyer agrees to purchase and pay for, as of the Effective Time, all of Seller’s right, title and interest 

1

EXHIBT 10.1

in and to the assets described in Section 2.1(a) through Section 2.1(h) below (such interests, less and except the Excluded Assets, collectively, the “Assets”):

(a)the oil and gas leases of Seller in Blaine, Caddo, Canadian, Custer, Dewey, Grady and Kingfisher Counties, Oklahoma set forth on Exhibit A, subject to any reservations or depth restrictions described on Exhibit A, together with any and all other right, title and interest of Seller in and to the leasehold estates created thereby, including any overriding royalty interests, subject to the terms, conditions, covenants and obligations set forth in such leases and/or on Exhibit A (such interest in such leases, the “Leases”), and the mineral fee interests set forth on Exhibit A (the “Mineral Fee Interests”); and in addition, the Leases and Mineral Fee Interests shall include all of Seller’s right, title and interest in the lands specifically described on Exhibit A, all lands described in or covered by the Leases whether or not such lands are specifically or correctly described in Exhibit A, and all of Seller’s right, title and interest in all other oil and gas leasehold interests, mineral fee interests and other oil and gas interests of every kind and nature covering lands within the outlined area on the plat attached hereto as Exhibit A-4;

(b)all wells located on any of the properties described in Section 2.1(a) including the Leases or on any other lease with which any such property or Lease has been unitized (such interest in such wells, including the wells set forth on Exhibit A-1, the “Wells”), and all Hydrocarbons produced therefrom or allocated thereto from and after the Effective Time (including all Hydrocarbons in storage or existing in pipelines, plants and/or tanks (including inventory) as of the Effective Time);

(c)all rights and interests in, under or derived from all unitization and pooling orders or agreements in effect with respect to any of the Leases or Wells and the units created thereby (the “Units”);

(d)to the extent that they may be assigned, all Applicable Contracts and all rights thereunder;

(e)the surface fee interests set forth on Exhibit A-3, and to the extent that they may be assigned, all permits, licenses, servitudes, easements and rights-of-way to the extent used primarily in connection with the ownership or operation of any of the Leases, Wells, Units or other Assets; 

(f)all equipment, machinery, fixtures and other personal, movable and mixed property, operational and nonoperational, known or unknown, located on any of the Leases, Mineral Fee Interests, Wells, Units or other Assets or primarily used in connection therewith, including pipelines, gathering systems, manifolds, well equipment, casing, tubing, pumps, motors, fixtures, machinery, compression equipment, flow lines, processing and separation facilities, pads, structures, materials and other items primarily used in the operation thereof (collectively, the “Personal Property”);

(g)all Imbalances relating to the Assets; and

(h)all of the files, records, information and data, in the native format as currently stored by Seller or its Affiliates and primarily relating to the Assets in Seller’s or its Affiliates’ possession, including:  (i) land and title records (including abstracts of title, title opinions and title curative documents); (ii) Applicable Contract files; (iii) hardcopy correspondence files; (iv) operations, environmental, production and accounting records consisting of existing hardcopy files and production and accounting records in Excel format reflecting current ownership decks, well master files, division of interest files, working interest owner name and address files, and revenue and joint interest billing accounting information, and (v) facility and well records (collectively, “Records”).

2

EXHIBT 10.1

2.2Excluded Assets.  Seller shall reserve and retain all of the Excluded Assets.

2.3Revenues and Expenses.  Subject to the provisions hereof, Seller shall remain entitled to all of the rights of ownership (including the right to all production, proceeds of production and other proceeds) and shall remain responsible (by payment, through the adjustments to the Purchase Price hereunder or otherwise) for all Operating Expenses, in each case, attributable to the Assets for the period of time prior to the Effective Time.  Subject to the provisions hereof, and subject to the occurrence of Closing, Buyer shall be entitled to all of the rights of ownership (including the right to all production, proceeds of production and other proceeds), and shall be responsible (by payment, through the adjustments to the Purchase Price hereunder or otherwise) for (i) all Operating Expenses, in each case, attributable to the Assets for the period of time from and after the Effective Time and (ii) all operating expenses and capital expenditures relating to each Well that has not been completed and placed on production prior to the Effective Time, whether or not such expenses were incurred before or after the Effective Time (the “Designated Well Costs”).  “Operating Expenses” means (other than the Designated Well Costs) all operating expenses (including costs of insurance and Asset Taxes) and all capital expenditures incurred in the ownership and operation of the Assets in the ordinary course of business and, where applicable, in accordance with the relevant operating or unit agreement or pooling order, if any, and overhead costs charged to the Assets under the relevant operating or unit agreement or pooling order, if any, but excluding Liabilities attributable to (i) personal injury or death, property damage or violation of any Law, (ii) Decommissioning Obligations, (iii) environmental matters, including obligations to remediate any contamination of water or Personal Property under applicable Environmental Laws, (iv) obligations with respect to Imbalances, or (v) obligations to pay Working Interests, royalties, overriding royalties or other interest owners revenues or proceeds attributable to sales of Hydrocarbons relating to the Assets, including those held in suspense.  After Closing, each Party shall be entitled to participate in all joint interest audits and other audits of Operating Expenses for which such Party is entirely or in part responsible under the terms of this Section 2.3.
ARTICLE III
PURCHASE PRICE

3.1Purchase Price.  The purchase price for (a) the transfer of the Assets and the transactions contemplated hereby and (b) the assumption by Buyer of the Assumed Obligations shall be $497,366,360.00 (the “Purchase Price”), as adjusted in accordance with this Agreement and payable by Buyer to Seller at Closing by wire transfer in immediately available funds to a bank account of Seller (the details of which shall be provided by Seller to Buyer in the Preliminary Settlement Statement).

3.2Deposit.  

(a)Concurrently with the execution of this Agreement, Buyer has deposited by wire transfer in same day funds with Seller the sum of $49,736,636.00, representing ten percent (10%) of the Purchase Price (such amount, excluding any interest earned thereon, the “Deposit”).  If Closing occurs, the Deposit shall be applied toward the Adjusted Purchase Price at Closing.

(b)If (i) all conditions precedent to the obligations of Buyer set forth in Article VII (other than those actions or deliveries to occur at Closing) have been met or waived by Buyer, and (ii) the transactions contemplated by this Agreement are not consummated because of:  (A) the failure of Buyer to materially perform any of its obligations hereunder, or (B) the failure of any of Buyer’s representations or warranties hereunder to be true and correct in all material respects as of the Execution Date and Closing, then, in such event, Seller shall have the option to: (1) terminate this Agreement and retain the Deposit together with any interest or income thereon, free of any claims by Buyer with respect thereto, as partial 

3

EXHIBT 10.1

payment of its damages and seek its remaining damages from Buyer or (2) seek all remedies available at law or in equity, including specific performance. 
 
(c)If this Agreement is terminated by the mutual written agreement of Buyer and Seller, or if Closing does not occur for any reason other than as set forth in Section 3.2(b), then Buyer shall be entitled to a refund of the Deposit together with any interest or income actually earned thereon, free of any claims by Seller with respect thereto.
  
(d)In the event of a termination of this Agreement pursuant to Section 3.2(b) or Section 3.2(c) above, Buyer and Seller shall, in each case, have the rights and obligations set forth in Section 14.2.

3.3Adjustments to Purchase Price.  The Purchase Price shall be adjusted as follows, and the resulting amount shall be herein called the “Adjusted Purchase Price”:

(a)The Purchase Price shall be adjusted upward by the following amounts (without duplication):

i.an amount equal to the value of all Hydrocarbons attributable to the Assets in storage or existing in pipelines, plants and/or tanks (including inventory) and upstream of the pipeline connection or upstream of the sales meter as of the Effective Time, the value to be based upon the contract price in effect as of the Effective Time (or the sales price, if there is no contract price, in effect as of the Effective Time), less (A) Burdens on such production and (B) severance Taxes deducted by the purchaser of such production; 

ii.an amount equal to all Operating Expenses and all other costs and expenses paid by Seller that are attributable to the Assets during the period following the Effective Time, whether paid before or after the Effective Time, including (A) bond and insurance premiums paid by or on behalf of Seller with respect to the period following the Effective Time, (B) Burdens, (C) rentals and other lease maintenance payments and (D) Asset Taxes;  

iii.an amount equal to all of the Designated Well Costs paid by Seller, whether paid before or after the Effective Time;

iv.the Title Benefit Amounts of any Title Benefits for which the Title Benefit Amounts have been determined prior to Closing;

v.except to the extent taken into account in Section 3.3(a)(ii)(D), the amount of all Asset Taxes allocated to Buyer in accordance with Section 16.2 but paid by Seller;

vi.subject to Section 3.9, to the extent that Seller is underproduced as shown with respect to the net Well Imbalances set forth in Schedule 4.12, as complete and final settlement of all Well Imbalances attributable to the Assets, the sum of $175,977.00 which is an amount equal to the product of the underproduced volumes times $3.00/MMBtu for gaseous Hydrocarbons;

vii.subject to Section 3.9, to the extent that Seller has overdelivered any Hydrocarbons as of the Effective Time as shown with respect to the net Pipeline Imbalances set forth in Schedule 4.12, as complete and final settlement of all Pipeline Imbalances attributable to the Assets, a sum in an amount equal to the product of the overdelivered volumes times (A) $3.00/MMBtu for gaseous Hydrocarbons;

4

EXHIBT 10.1

viii.the portion of the Overhead Costs attributable to the Assets from and after the Effective Time up to the Closing Date; and

ix.any other amount provided for elsewhere in this Agreement or otherwise agreed upon by Seller and Buyer.

(b)The Purchase Price shall be adjusted downward by the following amounts (without duplication):

i.an amount equal to all proceeds actually received by Seller attributable to the sale of Hydrocarbons (1) produced from or allocable to the Assets during the period following the Effective Time or (2) contained in storage or existing in pipelines, plants and/or tanks (including inventory) as of the Effective Time for which an upward adjustment to the Purchase Price was made pursuant to Section 3.3(a)(i), in each case, net of (A) expenses (other than Operating Expenses and other expenses taken into account pursuant to Section 3.3(a)) directly incurred in earning or receiving such proceeds, and (B) any sales, excise or similar Taxes in connection therewith not reimbursed to Seller by a Third Party purchaser;

ii.if Seller makes the election under Section 11.2(d)(i) with respect to a Title Defect, the Title Defect Amount with respect to such Title Defect if the Title Defect Amount has been determined prior to Closing;

iii.if Seller makes the election under Section 12.1(b)(i) with respect to an Environmental Defect, the Remediation Amount with respect to such Environmental Defect if the Remediation Amount has been determined prior to Closing;

iv.the Allocated Value of the Assets excluded from the transactions contemplated hereby pursuant to Section 11.2(d)(iii), Section 11.4(a)(i), Section 11.4(b)(i) or Section 12.1(b)(ii);

v.except to the extent taken into account in Section 3.3(a)(i)(B), the amount of all Asset Taxes allocated to Seller in accordance with Section 16.2 but payable by Buyer;

vi.subject to Section 3.9, to the extent that Seller is overproduced as shown with respect to the net Well Imbalances set forth in Schedule 4.12, as complete and final settlement of all Well Imbalances attributable to the Assets, a sum in an amount equal to the product of the overproduced volumes times $3.00/MMBtu for gaseous Hydrocarbons;
 
vii.subject to Section 3.9, to the extent that Seller has underdelivered any Hydrocarbons as of the Effective Time as shown with respect to the net Pipeline Imbalances set forth in Schedule 4.12, as complete and final settlement of all Pipeline Imbalances attributable to the Assets, the sum of $6,552.00 which is an amount equal to the product of the underdelivered volumes times $3.00/MMBtu for gaseous Hydrocarbons; 

viii.an amount equal to all proceeds from sales of Hydrocarbons relating to the Assets and payable to owners of Working Interests, royalties, overriding royalties and other similar interests (in each case) that are held by Seller in suspense as of the Closing Date (such items that are being held in suspense as of March 31, 2014 are set forth in Schedule 4.11); and

5

EXHIBT 10.1

ix.any other amount provided for elsewhere in this Agreement or otherwise agreed upon by Seller and Buyer.

3.4Adjustment Methodology.  When available, actual figures will be used for the adjustments to the Purchase Price at Closing.  To the extent actual figures are not available, estimates will be used subject to final adjustments in accordance with Section 3.6 and Section 3.7.

3.5Preliminary Settlement Statement.  Not less than five (5) Business Days prior to Closing, Seller shall prepare and submit to Buyer for review a draft settlement statement (the “Preliminary Settlement Statement”) that shall set forth the Adjusted Purchase Price, reflecting each adjustment made in accordance with this Agreement as of the date of preparation of such Preliminary Settlement Statement and the calculation of the adjustments used to determine such amount, together with the designation of Seller’s accounts for the wire transfers of funds as required by Section 3.1 and Section 9.3(e).  Within two (2) Business Days after receipt of the Preliminary Settlement Statement, Buyer will deliver to Seller a written report containing all changes, with explanation therefor, that Buyer proposes to be made to the Preliminary Settlement Statement.  The Parties shall in good faith attempt to agree on the Preliminary Settlement Statement as soon as possible after Seller’s receipt of Buyer’s written report.  The Preliminary Settlement Statement, as agreed upon by the Parties, will be used to adjust the Purchase Price at Closing; provided that if the Parties do not agree upon an adjustment set forth in the Preliminary Settlement Statement, then the amount of such adjustment used to adjust the Purchase Price at Closing shall be that amount set forth in the draft Preliminary Settlement Statement delivered by Seller to Buyer pursuant to this Section 3.5. 

3.6Final Settlement Statement.  

(a)On or before one hundred twenty (120) days after Closing, a final settlement statement (the “Final Settlement Statement”) will be prepared by Seller, based on actual income and expenses during the Interim Period and which takes into account all final adjustments made to the Purchase Price and shows the resulting final Purchase Price (the “Final Price”).  The Final Settlement Statement shall set forth the actual proration of the amounts required by this Agreement.  As soon as practicable, and in any event within thirty (30) days, after receipt of the Final Settlement Statement, Buyer shall return to Seller a written report containing any proposed changes to the Final Settlement Statement and an explanation of any such changes and the reasons therefor (the “Dispute Notice”).  Any changes not so specified in the Dispute Notice shall be deemed waived, and Seller’s determinations with respect to all such elements of the Final Settlement Statement that are not addressed specifically in the Dispute Notice shall prevail.  If Buyer fails to timely deliver a Dispute Notice to Seller containing changes Buyer proposes to be made to the Final Settlement Statement, the Final Settlement Statement as delivered by Seller will be deemed to be correct and will be final and binding on the Parties and not subject to further audit or arbitration.  If the Final Price set forth in the Final Settlement Statement is mutually agreed upon by Seller and Buyer, the Final Settlement Statement and the Final Price, shall be final and binding on the Parties hereto.  Any difference in the Adjusted Purchase Price as paid at Closing pursuant to the Preliminary Settlement Statement and the Final Price shall be paid by the owing Party to the owed Party within ten (10) days after final determination of such owed amounts in accordance herewith.  All amounts paid pursuant to this Section 3.6 shall be delivered in United States currency by wire transfer of immediately available funds to the account specified in writing by the relevant Party. 

(b)Subject to matters for which a Party has an indemnity obligation pursuant to Article XIII, the Final Settlement Statement shall be the final accounting for any and all Operating Expenses, and there shall be no adjustment for, or obligation to pay, any Operating Expenses between the Parties following the Final Settlement Statement.

6

EXHIBT 10.1

3.7Disputes.  If Seller and Buyer are unable to resolve the matters addressed in the Dispute Notice (if any), each of Buyer and Seller shall, within fifteen (15) Business Days after the delivery of such Dispute Notice, summarize its position with regard to such dispute in a written document of twenty (20) pages or less and submit such summaries to the Denver, Colorado office of Deloitte & Touche LLP or such other Person as the Parties may mutually select (the “Accounting Arbitrator”), together with the Dispute Notice, the Final Settlement Statement and any other documentation such Party may desire to submit.  Within ten (10) Business Days after receiving the Parties’ respective submissions, the Accounting Arbitrator shall render a decision choosing either Seller’s position or Buyer’s position with respect to each matter addressed in any Dispute Notice, based on the materials submitted to the Accounting Arbitrator as described above.  Any decision rendered by the Accounting Arbitrator pursuant hereto shall be final, conclusive and binding on Seller and Buyer and will be enforceable against the Parties in any court of competent jurisdiction.  The costs of the Accounting Arbitrator shall be borne one-half by Buyer and one-half by Seller.
 
3.8Allocation of Purchase Price / Allocated Values.  Buyer and Seller agree that the Purchase Price shall be allocated among the Assets for all purposes as set forth in Schedule 3.8 to this Agreement (the “Allocated Values”).  Buyer and Seller agree that such allocation is reasonable and shall not take any position inconsistent therewith, including in notices to Preferential Purchase Right holders.  For Tax purposes, each Party shall utilize the Allocated Values, as updated by mutual agreement of the Parties to reflect any adjustment to the Purchase Price pursuant to this Agreement and any Assumed Obligations or other items treated as consideration for federal income Tax purposes, in accordance with Section 1060 of the Code for purposes of all federal, state and local Tax returns and reports, including Internal Revenue Service Form 8594, and neither any Party nor its Affiliates shall take any position on any Tax return that is inconsistent with such Allocated Values, as adjusted; provided, however, that neither Party shall be unreasonably impeded in its ability and discretion to negotiate, compromise and/or settle any Tax audit, claim or similar proceedings.  Each Party shall provide to the other the first Party’s taxpayer identification number and address.

3.9Allocation for Imbalances at Closing.  If, prior to Closing, either Party discovers an error in the Imbalances set forth in Schedule 4.12, then the Purchase Price shall be further adjusted at Closing pursuant to Section 3.3(a)(vi), Section 3.3(a)(vii), Section 3.3(b)(vi) or Section 3.3(b)(vii), as applicable, and Schedule 4.12 will be deemed amended immediately prior to Closing to reflect the Imbalances for which the Purchase Price is so adjusted.  

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER

Subject to the matters specifically listed or disclosed in the Schedules to this Agreement (as added, supplemented or amended pursuant to Section 6.7), Seller represents and warrants to Buyer the following:
4.1Organization, Existence and Qualification.  Seller is a corporation duly formed and validly existing under the Laws of the State of Texas.  Seller has all requisite power and authority to own and operate its property (including its interests in the Assets) and to carry on its business as now conducted.  Seller is duly licensed or qualified to do business as a foreign corporation in all jurisdictions in which it carries on business or owns assets and such qualification is required by Law, except where the failure to be so qualified would not have a Material Adverse Effect.

4.2Authority, Approval and Enforceability.  Seller has full power and authority to enter into and perform this Agreement, the Transaction Documents to which it is a party and the transactions contemplated herein and therein.  The execution, delivery and performance by Seller of this Agreement have been duly 

7

EXHIBT 10.1

and validly authorized and approved by all necessary corporate action on the part of Seller.  Assuming the due authorization, execution and delivery by Buyer, this Agreement is, and the Transaction Documents to which Seller is a party, when executed and delivered by Seller, will be, the valid and binding obligations of Seller and enforceable against Seller in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and similar Laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

4.3No Conflicts.  Assuming the receipt of all Consents and the waiver of, or compliance with, all Preferential Purchase Rights, the execution, delivery and performance by Seller of this Agreement and the Transaction Documents to which it is a party and the consummation of the transactions contemplated herein will not (a) conflict with or result in a breach of any provisions of the organizational documents of Seller, (b) except for Permitted Encumbrances, result in a default or the creation of any Encumbrance or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license or other Applicable Contract to which Seller is a party or by which Seller or the Assets may be bound or (c) violate any Law applicable to Seller or any of the Assets, except in the case of clauses (b) and (c) where such default, Encumbrance, termination, cancellation, acceleration or violation would not have a Material Adverse Effect.

4.4Consents.  Except (a) as set forth in Schedule 4.4, (b) for Customary Post-Closing Consents, (c) under Contracts that are terminable upon not greater than sixty (60) days’ notice without payment of any fee, and (d) for Preferential Purchase Rights, there are no restrictions on assignment, including requirements for consents from Third Parties to any assignment (in each case), that Seller is required to obtain in connection with the transfer of the Assets by Seller to Buyer or the consummation of the transactions contemplated by this Agreement by Seller (each, a “Consent”).

4.5Bankruptcy.  There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to Seller’s Knowledge, threatened in writing against Seller or any Affiliate of Seller.  

4.6Foreign Person.  Seller is not a “foreign person” within the meaning of Section 1445 of the Code.

4.7Litigation.  Except as set forth in Schedule 4.7(A), Schedule 4.7(B) and Schedule 4.7(C), as of the Execution Date, to Seller’s Knowledge, there is no suit, action, litigation or arbitration by any Person or before any Governmental Authority pending or threatened in writing against Seller with respect to the Assets.

4.8Material Contracts.  

(a)Except for Contracts entered into in accordance with Section 6.1, Schedule 4.8(a) sets forth all Applicable Contracts of the type described below (collectively, the “Material Contracts”):

i.any Applicable Contract that can reasonably be expected to result in aggregate payments by Seller of more than $200,000 during the current or any subsequent calendar year (based solely on the terms thereof and current volumes, without regard to any expected increase in volumes or revenues); 

ii.any Applicable Contract that can reasonably be expected to result in aggregate revenues to Seller of more than $200,000 during the current or any subsequent calendar year (based solely on the terms thereof and current volumes, without regard to any expected increase in volumes or revenues);

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iii.any Hydrocarbon purchase and sale, transportation, processing or similar Applicable Contract that is not terminable without penalty upon sixty (60) days’ or less notice;
iv.any indenture, mortgage, loan, credit or sale-leaseback or similar Applicable Contract that can reasonably be expected to result in aggregate payments by Seller during the current or any subsequent calendar year; 

v.any Applicable Contract that constitutes a lease under which Seller is the lessor or the lessee of real or Personal Property which lease (A) cannot be terminated by Seller without penalty upon sixty (60) days’ or less notice and (B) involves an annual base rental of more than $100,000;

vi.any farmout agreement, participation agreement, exploration agreement, development agreement, joint operating agreement, unit agreement or similar Applicable Contract; 

vii.any area of mutual interest agreements and agreements that include non-competition restrictions or other similar restrictions on doing business, and partnership agreements (other than tax partnerships), relating to the Assets; 

viii.any contracts or agreements providing for a call upon, option to purchase or similar right under any agreements with respect to the Hydrocarbons from the Assets; and

ix.any Applicable Contract between Seller and any Affiliate of Seller that will not be terminated prior to Closing.  

(b)Except as set forth in Schedule 4.8(b) and except for such matters that would not have a Material Adverse Effect, there exists no default under any Material Contract by Seller or, to Seller’s Knowledge, by any other Person that is a party to such Material Contract, and no event has occurred that with notice or lapse of time or both would constitute any default under any such Material Contract by Seller or, to Seller’s Knowledge, any other Person who is a party to such Material Contract. 

4.9No Violation of Laws.  To Seller’s Knowledge, except as set forth in Schedule 4.9 and except where such violations would not have a Material Adverse Effect, as of the Execution Date, Seller is not and no Third Party operator is in violation of any applicable Laws with respect to their respective ownership and operation of the Assets.  For the avoidance of doubt, this Section 4.9 does not include any matters with respect to Environmental Laws, which shall be exclusively addressed in Section 4.16 and Article XII.

4.10Preferential Purchase Rights.  To Seller’s Knowledge, except as set forth in Schedule 4.10, there are no preferential purchase rights, rights of first refusal or other similar rights that are applicable to the transfer of the Assets in connection with the transactions contemplated hereby (each a “Preferential Purchase Right”).
  
4.11Royalties, Etc.  Except as would not have a Material Adverse Effect, except for such items that are being held in suspense for which the Purchase Price is adjusted pursuant to Section 3.3(b)(viii) (as set forth in Schedule 4.11 as of March 31, 2014), and except as set forth on Schedule 4.11, to Seller’s Knowledge, Seller has paid all Burdens with respect to the Assets due by Seller, or if not paid, is contesting such Burdens in good faith in the normal course of business.

4.12Imbalances.  To Seller’s Knowledge, Schedule 4.12 sets forth all material Imbalances associated with the Assets as of the applicable dates set forth on Schedule 4.12.

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4.13Current Commitments.  To Seller’s Knowledge, Schedule 4.13 sets forth, as of the Execution Date, all approved authorizations for expenditures and other approved capital commitments, individually in excess of $200,000 net to Seller’s applicable interest (the “AFEs”), relating to the Assets to drill or rework wells or for other capital expenditures pursuant to any of the Material Contracts for which all of the activities anticipated in such AFEs have not been completed by the Execution Date.

4.14Asset Taxes.  Except as set forth in Schedule 4.14, during the period of Seller’s ownership of the Assets, all Asset Taxes that have become due and payable by Seller before the Effective Time have been properly paid, other than any Asset Taxes which are being contested in good faith.  There are no extensions or waivers of any statute of limitations with respect to Asset Taxes, and there are no Tax liens burdening the Assets except for liens for Taxes not yet due and payable.  Seller has timely filed or caused to be timely filed all material Tax returns, reports, statements and other filings with respect to Asset Taxes required to be filed by Seller before the Effective Time.

4.15Brokers’ Fees.  Seller has incurred no liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Buyer or any Affiliate of Buyer shall have any responsibility. 

4.16Violations of Environmental Laws.  As of the Execution Date, neither Seller nor, to Seller’s Knowledge, any Third Party operator has received written notice from any Governmental Authority asserting that Seller or the Third Party operator, as applicable, is in violation of Environmental Laws with respect to any Asset that has not already been corrected to the satisfaction of the relevant Governmental Authority.  Neither Seller nor, to Seller’s Knowledge, any Third Party operator has entered into, nor is a party (directly or as a successor in interest) to, any agreement with any Governmental Authority that (a) is in existence as of the date of this Agreement, (b) is based on an alleged violation of Environmental Laws and (c) imposes any material liability on the owner or operator of the Assets.

4.17Governmental Permits.  Seller and, to Seller’s Knowledge, any Third Party operator, as applicable, has obtained and is in compliance in all material respects with all permits, licenses and authorizations from Governmental Authorities (each a “Permit”) required to operate the Assets.  All such Permits are in full force and effect and no violations exist under such Permits except those that would not have a Material Adverse Effect.  To Seller’s Knowledge, no proceeding is pending or threatened relating to the challenging, revocation or limitation of any such Permits.  For the avoidance of doubt, this Section 4.17 does not include any matters with respect to Environmental Laws, which shall be exclusively addressed in Section 4.16 and Article XII.

4.18Take-or-Pay.  Except as set forth on Schedule 4.8, neither of Seller nor any of its Affiliates is obligated by any prepayment arrangement, “take-or-pay” requirement or any other agreement to sell, gather, deliver, process or transport any Hydrocarbons with respect to the Assets without then or thereafter receiving full payment therefor.  Other than Imbalances, no Person is entitled to receive any portion of Seller’s or any of its Affiliates’ Hydrocarbons, or to receive cash or other payments from Seller or any of its Affiliates, to balance any disproportionate allocation of such Hydrocarbons with respect to the Assets.  Other than Imbalances, neither of Seller nor any of its Affiliates is obligated to pay any penalties or other amounts under any agreement with respect to the Assets as a result of the delivery of quantities of Hydrocarbons under or in excess of any such agreement’s requirements.

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4.19Calls on Production.  Except as set forth on Schedule 4.8 and except for Imbalances, no Third Party has any calls on production, options to purchase production, or other similar rights with respect to the Assets.

4.20Appurtenant Assets.  Except for personal property, fixtures and equipment of the types set forth in the definition of Excluded Assets, (a) the Assets include all of the personal property, fixtures and equipment (or leases for the use thereof) employed by Seller in its current ownership and operation of the Assets (the “Appurtenant Assets”); and (b) the Appurtenant Assets constitute, taken as a whole, sufficient personal property, fixtures and equipment for the ownership and, if operated by Seller, the operation of the Assets immediately following the Closing in substantially the same manner as conducted on the date of this Agreement.  The Appurtenant Assets, taken as a whole, are in a sufficient state of repair to permit the operations of the Assets (that are operated by Seller) immediately following the Closing in substantially the same manner as conducted on the date of this Agreement.

4.21Necessary Surface Rights.  The Assets include all the easements and other surface rights materially necessary for oil and gas operations as conducted by Seller with respect to the Assets immediately prior to the Execution Date.

4.22Property Operation; Non-Producing Wells.  Schedule 4.22 lists the Wells operated by Seller that are temporarily abandoned.  As to the Wells operated by Seller, other than the temporarily abandoned Wells set forth on Schedule 4.22, each abandoned well associated with the Assets is plugged in compliance with the applicable Laws.  To Seller’s Knowledge, no Third Party operator has given Seller written notice of any material unresolved problem with Governmental Authorities or landowners concerning wells on the lands included in the Assets operated by such Person that have been temporarily abandoned or previously plugged.

4.23Non-Consent Operations.  As of the Execution Date, there are no operations (including drilling operations) associated with the Assets with respect to which Seller is currently or will become a non-consenting or non-participating party.

4.24Tax Partnerships.  Except as provided in Schedule 4.24, none of the Assets is subject to tax partnership reporting requirements under applicable provisions of the Code.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Seller the following:
5.1Organization, Existence and Qualification.  Buyer is a corporation duly incorporated, validly existing, and in good standing under the Laws of the State of Delaware and has all requisite power and authority to own and operate its property and to carry on its business as now conducted.  Buyer is duly licensed or qualified to do business as a foreign corporation in all jurisdictions in which it carries on business or owns assets and such qualification is required by Law except where the failure to be so qualified would not have a material adverse effect upon the ability of Buyer to consummate the transactions contemplated by this Agreement or perform its obligations hereunder.

5.2Authority, Approval and Enforceability.  Buyer has full power and authority to enter into and perform this Agreement, the Transaction Documents to which it is a party and the transactions contemplated herein and therein.  The execution, delivery and performance by Buyer of this Agreement have 

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been duly and validly authorized and approved by all necessary corporate action on the part of Buyer.  Assuming the due authorization, execution and delivery by Seller, this Agreement is, and the Transaction Documents to which Buyer is a party, when executed and delivered by Buyer, will be, the valid and binding obligations of Buyer and enforceable against Buyer in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium and similar Laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

5.3No Conflicts.  The execution, delivery and performance by Buyer of this Agreement and the Transaction Documents to which it is a party and the consummation of the transactions contemplated herein will not (a) conflict with or result in a breach of any provisions of the organizational documents of Buyer, (b) result in a default or the creation of any Encumbrance or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license or other agreement to which Buyer is a party or by which Buyer or any of its property may be bound or (c) violate any Law applicable to Buyer or any of its property, except in the case of clauses (b) and (c) where such default, Encumbrance, termination, cancellation, acceleration or violation would not have a material adverse effect upon the ability of Buyer to consummate the transactions contemplated by this Agreement or perform its obligations hereunder.

5.4Consents.  There are no consents or other restrictions on assignment, including requirements for consents from Third Parties to any assignment, (in each case) that Buyer is required to obtain in connection with the consummation of the transactions contemplated by this Agreement by Buyer.

5.5Bankruptcy.  There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to Buyer’s knowledge, threatened in writing against Buyer or any Affiliate of Buyer.

5.6Litigation.  As of the Execution Date, there is no suit, action, litigation or arbitration by any Person or before any Governmental Authority pending, or to Buyer’s knowledge, threatened in writing against Buyer that would have a material adverse effect upon the ability of Buyer to consummate the transactions contemplated by this Agreement or perform its obligations hereunder.
5.7Financing.  Buyer has, and Buyer shall have as of the Closing Date, sufficient cash in immediately available funds with which to pay the Purchase Price, consummate the transactions contemplated by this Agreement and perform its obligations under this Agreement and the Transaction Documents.

5.8Regulatory.  Buyer is and hereafter shall continue to be qualified per applicable Law to own and assume operatorship of the Assets in all jurisdictions where the Assets are located, and the consummation of the transactions contemplated by this Agreement will not cause Buyer to be disqualified as such an owner or operator.  To the extent required by any applicable Laws, Buyer has maintained, and will hereafter continue to maintain, lease bonds, area-wide bonds or any other surety bonds as may be required by, and in accordance with, all applicable Laws governing the ownership and operation of the Assets and has filed any and all required reports necessary for such ownership and/or operation with all Governmental Authorities having jurisdiction over such ownership and/or operation.

5.9Independent Evaluation.  Buyer is sophisticated in the evaluation, purchase, ownership and operation of oil and gas properties and related facilities.  In making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer (a) has relied or shall rely solely on its own independent investigation and evaluation of the Assets and the advice of its own legal, Tax, economic, environmental, engineering, geological and geophysical advisors and the express provisions of this Agreement and not on any comments, statements, projections or other materials made or given by any 

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representatives or consultants or advisors of Seller, and (b) has satisfied itself through its own due diligence as to the environmental and physical condition of and contractual arrangements and other matters affecting the Assets.  Buyer has no knowledge of any fact that results in the breach of any representation, warranty or covenant of Seller given hereunder.

5.10Brokers’ Fees.  Buyer has incurred no liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Seller or Seller’s Affiliates shall have any responsibility.

5.11Accredited Investor.  Buyer is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended, and will acquire the Assets for its own account and not with a view to a sale or distribution thereof in violation of the Securities Act of 1933, as amended, and the rules and regulations thereunder, any applicable state blue sky Laws or any other applicable securities Laws.

ARTICLE VI
CERTAIN AGREEMENTS
6.1Conduct of Business.  

(a)Except (w) as set forth in Schedule 6.1, (x) for the operations covered by the AFEs and other capital commitments described in Schedule 4.13, (y) for actions taken in connection with emergency situations or to maintain a lease and (z) as expressly contemplated by this Agreement or as expressly consented to in writing by Buyer (which consent shall not be unreasonably delayed, withheld or conditioned), Seller shall, from and after the Execution Date and until Closing:

i.maintain, and if Seller is the operator thereof, operate, the Assets in the usual, regular and ordinary manner consistent with its past practice; and

ii.maintain the books of account and Records relating to the Assets in the usual, regular and ordinary manner, in accordance with the usual accounting practices of Seller.

(b)Except (w) as set forth in Schedule 6.1, (x) for the operations covered by the AFEs and other capital commitments described in Schedule 4.13, (y) for actions taken in connection with emergency situations or to maintain a lease and (z) as expressly contemplated by this Agreement or as expressly consented to in writing by Buyer (which consent shall not be unreasonably delayed, withheld or conditioned), Seller shall, from and after the Execution Date and until Closing:

i.not propose any operation reasonably expected to cost Seller in excess of $100,000;

ii.not consent to any operation proposed by a Third Party that is reasonably expected to cost Seller in excess of $100,000;

iii.not enter into an Applicable Contract that, if entered into on or prior to the Execution Date, would be required to be listed in Schedule 4.8(a), or terminate (unless such Material Contract terminates pursuant to its stated terms) or materially amend or change the terms of any Material Contract;

iv.not transfer, sell, mortgage, pledge or dispose of any portion of the Assets other than (A) the sale and/or disposal of Hydrocarbons in the ordinary course of business and (B) sales of equipment 

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that is no longer necessary in the operation of the Assets or for which replacement equipment has been obtained; 

v.not reduce or terminate existing insurance; and

vi.not commit to do any of the foregoing.

(c)    Buyer acknowledges that Seller owns undivided interests in certain of the properties comprising the Assets that it is not the operator thereof, and Buyer agrees that the acts or omissions of the other Working Interest owners (including the operators) who are not Seller or any Affiliate of Seller shall not constitute a breach of the provisions of this Section 6.1, and no action required by a vote of Working Interest owners shall constitute such a breach so long as Seller has voted its interest in a manner that complies with the provisions of this Section 6.1.
6.2Successor Operator.  While Buyer acknowledges that it desires to succeed Seller as operator of those Assets or portions thereof that Seller may presently operate, Buyer acknowledges and agrees that Seller cannot and does not covenant or warrant that Buyer shall become successor operator of such Assets since the Assets or portions thereof may be subject to operating or other agreements that control the appointment of a successor operator.  Seller agrees, however, that, as to the Assets it operates, it shall use its commercially reasonable efforts to support Buyer’s efforts to become successor operator of such Assets (to the extent permitted under any applicable joint operating agreement) effective as of Closing (at Buyer’s sole cost and expense) and to designate and/or appoint, to the extent legally possible and permitted under any applicable joint operating agreement, Buyer as successor operator of such Assets effective as of Closing. 

6.3Governmental Bonds.  Buyer acknowledges that none of the bonds, letters of credit and guarantees, if any, posted by Seller or its Affiliates with Governmental Authorities and relating to the Assets are transferable to Buyer.  On or before the Closing Date, Buyer shall obtain, or cause to be obtained in the name of Buyer, replacements for such bonds, letters of credit and guarantees to the extent such replacements are necessary (a) for Buyer’s ownership of the Assets and (b) to permit the cancellation of the bonds, letters of credit and guarantees posted by Seller and/or its Affiliates with respect to the Assets.  In addition, at or prior to Closing, Buyer shall deliver to Seller evidence of the posting of bonds or other security with all applicable Governmental Authorities meeting the requirements of such Governmental Authorities to own and, if applicable, operate the Assets. 
 
6.4Record Retention.  Buyer shall and shall cause its successors and assigns to, for a period of seven (7) years following Closing, (a) retain the Records, (b) provide Seller, its Affiliates and its and their respective officers, employees and representatives with access to the Records (to the extent that Seller has not retained the original or a copy) during normal business hours for review and copying at Seller’s expense, and (c) provide Seller, its Affiliates and its and their respective officers, employees and representatives with access, during normal business hours, to materials received or produced after Closing relating to any indemnity claim made under Section 13.2 for review and copying at Seller’s expense.  At the end of such seven (7) year period and prior to destroying any of the Records, Buyer shall notify Seller in advance of such destruction and provide Seller a reasonable opportunity to copy any or all of such Records at Seller’s sole cost and expense.

6.5Guarantees.  Buyer shall cooperate with Seller in order to cause Seller and its Affiliates to be released, as of the Closing Date, from all guarantees, including any performance bonds previously put in place by Seller, set forth in Schedule 6.5 (the “Guarantees”).  Without limiting the foregoing, if required by the counterparty to any Guarantee, Buyer shall provide, effective as of the Closing Date, substitute 

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arrangements of Buyer or its Affiliates covering all periods covered by the Guarantees, such substitute arrangements to be equivalent or better in terms of type of security and creditworthiness of the party providing the security as compared to the Guarantees.  In the event that any counterparty to any such Guarantee does not release Seller and its Affiliates, then, from and after Closing, Buyer shall indemnify Seller or its relevant Affiliate against all amounts incurred by Seller or its relevant Affiliate under such Guarantee (and all costs incurred in connection with such Guarantee) if applicable to Assets acquired by Buyer.  Notwithstanding anything to the contrary contained in this Agreement, any cash placed in escrow by Seller or any Affiliate of Seller pursuant to the Guarantees must be returned to Seller, and shall be deemed an Excluded Asset for all purposes hereunder.  

6.6Notifications.  Each Party will notify the other Party promptly after any officer of the first Party obtains actual knowledge that any representation or warranty of the other Party contained in this Agreement is, becomes or will be untrue in any material respect on or before the Closing Date.  No breach of any representation, warranty, covenant, agreement or condition of this Agreement shall be deemed to be a breach of this Agreement for any purpose under this Agreement, and no Party or any Affiliate of a Party shall have any claim or recourse against the other Party or any Affiliate of the other Party, or their respective directors, officers, employees, buyers, controlling Persons, agents, advisors or representatives with respect to such breach, if the first Party or any Affiliate of the first Party, or any of their respective officers or representatives, had knowledge prior to the Execution Date of such breach or of the threat of such breach or the circumstances giving rise to such breach.

6.7Amendment to Schedules.  Buyer agrees that, with respect to the representations and warranties of Seller contained in this Agreement, Seller shall have the continuing right until Closing to add, supplement or amend the Schedules to its representations and warranties with respect to any matter hereafter arising or discovered which, if existing or known on the Execution Date or thereafter, would have been required to be set forth or described in such Schedules.  For all purposes of this Agreement, including for purposes of determining whether the conditions set forth in Article VII have been fulfilled, the Schedules to Seller’s representations and warranties contained in this Agreement shall be deemed to include only that information contained therein on the Execution Date and shall be deemed to exclude all information contained in any addition, supplement or amendment thereto; provided, however, that if Closing shall occur, then all matters disclosed pursuant to any such addition, supplement or amendment at or prior to Closing shall be waived and Buyer shall not be entitled to make a claim with respect thereto pursuant to the terms of this Agreement or otherwise.

6.8Intentionally Deleted.

6.9Certain Litigation Matters.  

(a)Buyer agrees that it will comply with the terms and requirements of the Chieftain Litigation Settlement to the extent relating to the post-Closing operations of the Assets, including (i) the methodology for payment of future royalties agreed to in the Chieftain Litigation Settlement, (ii) to the extent not done so prior to Closing, the covenant to seek amendments to existing processing contracts to maximize the value or volume of liquids recovered thereunder to the joint benefit of the royalty owners and the producer, (iii) the covenant to allow Chieftain Royalty Company to audit the relevant records on behalf of the Chieftain Class to ensure compliance with the methodology for payment of future royalties and (iv) to the extent not done so prior to Closing, the covenant to file a notice of settlement concerning royalty payments in the relevant counties and indexed against the relevant Assets.  Notwithstanding anything in this Agreement to the contrary, Buyer acknowledges that it is responsible for complying with the terms and requirements of the Chieftain Litigation Settlement to the extent relating to the post-Closing operations 

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of the Assets and agrees that it has no, and will have no, claim against Seller relating to the requirements of the Chieftain Litigation Settlement, the results of such compliance on operations and/or Buyer’s failure to comply with such requirements.

(b)Subject to the terms of this Section 6.9(b), the Parties acknowledge and agree that Seller shall have the sole authority to defend the Searle Litigation.  Buyer agrees to cooperate reasonably in connection with such defense, and such reasonable cooperation shall include access, during normal business hours from and after the Closing, to the Records and Buyer’s personnel.  Seller shall not, without the written consent of Buyer (which consent shall not be unreasonably delayed, withheld or conditioned), settle any claim with respect to the Searle Litigation or consent to the entry of any judgment with respect thereto; provided, however, that such consent of Buyer shall not be required in the event that no money damages are incurred by Buyer and there is no material adverse effect on the ownership and operation of the Assets from and after the date of such settlement or judgment.

6.10Employees Matters.  

(a)Buyer may, in its discretion, within fourteen (14) days prior to the Closing Date, offer employment, conditioned upon the occurrence of the Closing and effective as of the Closing Date, to any of Seller’s employees set forth on Schedule 6.10 (collectively, the “Identified Employees”) who are employed as of the Closing Date by Seller.  Each offer of employment pursuant to the preceding sentence shall comply with the requirements of Law.  No later than the date that is seven (7) days prior to the Closing Date, Buyer shall notify Seller as to each Identified Employee who has accepted employment with Buyer or any of its Affiliates and each Identified Employee who has rejected Buyer’s or its Affiliate’s offer of employment.  Buyer shall indemnify and hold harmless each Seller Indemnified Party from and against any and all Liabilities relating to or arising out of Buyer’s or its Affiliate’s employment offer process described in this Section 6.10(a) (including any claim of discrimination or other illegality in such selection and offer process).

(b)Subject to the provisions of Section 6.10(a), from the Execution Date until the one (1) year anniversary of either the Closing Date or the termination of this Agreement, Buyer will not, and will cause its Affiliates not to, directly or indirectly, solicit for employment (including by contracting through an independent contractor, consultant or other Third Party) or employ (including as a consultant) any officer or employee of Seller or its Affiliates without obtaining the prior written consent of Seller.  This Section 6.10(b) shall not apply to general solicitations of employment not specifically directed towards officers or employees of Seller or its Affiliates.

6.11Intentionally Deleted.  

6.12Section 754 Election.  If Buyer requests prior to Closing, Seller will use its commercially reasonable efforts to cause each tax partnership, if any, that is set forth on Schedule 4.24 to either (a) have in effect a valid election under Section 754 of the Code for any taxable year that includes the Closing Date or (b) obtain all necessary consents therefor.

ARTICLE VII
BUYER’S CONDITIONS TO CLOSING

The obligations of Buyer to consummate the transactions provided for herein are subject, at the option of Buyer, to the fulfillment by Seller or waiver by Buyer, on or prior to Closing of each of the following conditions:

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7.1Representations.  The representations and warranties of Seller set forth in Article IV shall be true and correct in all respects on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made or given on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date), except for those breaches, if any, of such representations and warranties that would not have a Material Adverse Effect. 
 
7.2Performance.  Seller shall have materially performed or complied with all obligations, agreements and covenants contained in this Agreement as to which performance or compliance by Seller is required prior to or at the Closing Date.

7.3No Legal Proceedings.  No material suit, action, litigation or other proceeding by any Third Party shall be pending before any Governmental Authority seeking to restrain, prohibit, enjoin or declare illegal, or seeking substantial damages in connection with, the transactions contemplated by this Agreement.

7.4Title Defects and Environmental Defects.  In each case subject to the Individual Title Defect Threshold, the Individual Environmental Threshold, the Aggregate Title Defect Threshold and the Environmental Defect Deductible, as applicable, the sum of (a) all Title Defect Amounts determined under Section 11.2(g) prior to Closing, less the sum of all Title Benefit Amounts determined under Section 11.2(h) prior to Closing, plus (b) all Remediation Amounts for Environmental Defects determined under Article XII prior to Closing, plus (c) the Allocated Values of all Assets affected by a Casualty Loss prior to the Closing Date shall be less than twenty-five percent (25%) of the Purchase Price.

7.5Closing Deliverables.  Seller shall have delivered (or be ready, willing and able to deliver at Closing) to Buyer the documents and other items required to be delivered by Seller under Section 9.3.

ARTICLE VIII
SELLER’S CONDITIONS TO CLOSING
The obligations of Seller to consummate the transactions provided for herein are subject, at the option of Seller, to the fulfillment by Buyer or waiver by Seller on or prior to Closing of each of the following conditions:
8.1Representations.  The representations and warranties of Buyer set forth in Article V shall be true and correct in all material respects on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made or given on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date).

8.2Performance.  Buyer shall have materially performed or complied with all obligations, agreements and covenants contained in this Agreement as to which performance or compliance by Buyer is required prior to or at the Closing Date.

8.3No Legal Proceedings.  No material suit, action, litigation or other proceeding by any Third Party shall be pending before any Governmental Authority seeking to restrain, prohibit or declare illegal, or seeking substantial damages in connection with, the transactions contemplated by this Agreement.

8.4Title Defects and Environmental Defects.  In each case subject to the Individual Title Defect Threshold, the Individual Environmental Threshold, the Aggregate Title Defect Threshold and the Environmental Defect Deductible, as applicable, the sum of (a) all Title Defect Amounts determined under 

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EXHIBT 10.1

Section 11.2(g) prior to Closing, less the sum of all Title Benefit Amounts determined under Section 11.2(h) prior to Closing, plus (b) all Remediation Amounts for Environmental Defects determined under Article XII prior to Closing, plus (c) the Allocated Values of all Assets affected by a Casualty Loss prior to the Closing Date shall be less than twenty-five percent (25%) of the Purchase Price. 

8.5Replacement Bonds and Guarantees.  Buyer shall have obtained, in the name of Buyer:  (a) replacements for Seller’s and/or its Affiliates’ bonds, letters of credit and guarantees, to the extent required by Section 6.3 and (b) replacements for the Guarantees to the extent required by Section 6.5.

8.6Closing Deliverables.  Buyer shall have delivered (or be ready, willing and able to deliver at Closing) to Seller the documents and other items required to be delivered by Buyer under Section 9.3.

ARTICLE IX
CLOSING

9.1Date of Closing.  Subject to the conditions stated in this Agreement, the sale by Seller and the purchase by Buyer of the Assets pursuant to this Agreement (the “Closing”) shall occur on or before June 30, 2014, or on such date as Buyer and Seller may agree upon in writing.  The date on which the Closing actually occurs shall be the “Closing Date.” 

9.2Place of Closing.  Closing shall be held at the offices of Vinson & Elkins LLP, 1001 Fannin Street, Suite 2500, Houston, Texas 77002, or such other place as mutually agreed upon by the Parties.

9.3Closing Obligations.  At Closing, the following documents shall be delivered and the following events shall occur, the execution of each document and the occurrence of each event being a condition precedent to the others and each being deemed to have occurred simultaneously with the others:

(a)Seller and Buyer shall execute, acknowledge and deliver the Assignment in sufficient counterparts to facilitate recording in the applicable counties covering the Assets.

(b)Seller and Buyer shall execute and deliver assignments, on appropriate forms, of federal Leases, state Leases and Indian Leases included in the Assets in sufficient counterparts to facilitate filing with the applicable Governmental Authority.

(c)Seller shall execute, acknowledge and deliver (i) the mineral deed(s), substantially in the form attached to this Agreement as Exhibit B-2 and conveying the Mineral Fee Interests from Seller to Buyer and (ii) the surface deed, substantially in the form attached to this Agreement as Exhibit B-3 and conveying Seller’s right, title and interest in and to the surface fee interests set forth on Exhibit A-3 from Seller to Buyer, in each case, in sufficient counterparts to facilitate recording in the applicable counties covering such Assets.

(d)Seller and Buyer shall execute and deliver the Preliminary Settlement Statement.

(e)Buyer shall deliver to Seller, to the accounts designated in the Preliminary Settlement Statement, by direct bank or wire transfer in same day funds, the Adjusted Purchase Price after giving effect to the Deposit.

(f)Seller shall deliver, on forms supplied by Buyer and reasonably acceptable to Seller, transfer orders or letters in lieu thereof directing all purchasers of production to make payment to Buyer 

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EXHIBT 10.1

of proceeds attributable to production from the Assets from and after the Effective Time, for delivery by Buyer to the purchasers of production.

(g)Seller shall deliver an executed statement described in Treasury Regulation §1.1445-2(b)(2) certifying that Seller is not a “foreign person” within the meaning of the Code.

(h)To the extent required under any applicable Law or Governmental Authority for any federal or state Lease, Seller and Buyer shall deliver federal and state change of operator forms designating Buyer as the operator of the Wells and the Leases currently operated by Seller.

(i)An authorized officer of Seller shall execute and deliver a certificate, dated as of Closing Date, certifying that the conditions set forth in Section 7.1 and Section 7.2 have been fulfilled and, if applicable, any exceptions to such conditions that have been waived by Buyer.

(j)An authorized officer of Buyer shall execute and deliver a certificate, dated as of Closing, certifying that the conditions set forth in Section 8.1 and Section 8.2 have been fulfilled and, if applicable, any exceptions to such conditions that have been waived by Seller.

(k)Buyer shall deliver any instruments and documents required by Section 6.3, Section 6.5 and/or Section 6.8.

(l)Seller and Buyer shall execute and deliver the Transition Services Agreement.

(m)Seller and Buyer shall execute and deliver any other agreements, instruments and documents which are required by other terms of this Agreement to be executed and/or delivered at Closing.

9.4Records.  In addition to the obligations set forth under Section 9.3 above, but notwithstanding anything herein to the contrary, no later than thirty (30) Business Days after the Closing Date, Seller shall make available to Buyer the Records for pickup from Seller’s offices during normal business hours; provided that digital Records in their native format as currently stored by Seller necessary to allow Buyer to perform expenditure accounting and joint interest accounting functions as of Closing shall be delivered no later than five (5) Business Days prior to Closing.

ARTICLE X
ACCESS/DISCLAIMERS
10.1Access.  

(a)From and after the Execution Date and up to and including the Closing Date (or earlier termination of this Agreement), but subject to the other provisions of this Section 10.1 and obtaining any required consents of Third Parties, including Third Party operators of the Assets, Seller shall afford to Buyer and its officers, employees, agents, accountants, consultants, attorneys and other authorized representatives (“Buyer’s Representatives”) reasonable access, during normal business hours, to the Assets and all Records in Seller’s or any of its Affiliates’ possession to the extent necessary to conduct the title or environmental review described in this Agreement.  All investigations and due diligence conducted by Buyer or any Buyer’s Representative shall be conducted at Buyer’s sole cost, risk and expense and any conclusions made from any examination done by Buyer or any Buyer’s Representative shall result from Buyer’s own independent review and judgment. 

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EXHIBT 10.1

(b)Buyer shall be entitled to conduct a Phase I environmental property assessment with respect to the Assets; provided that any sampling or invasive activity by Buyer or Buyer’s Representatives shall require the prior written consent of Seller.  Buyer shall give Seller reasonable prior written notice before entering onto any of the Assets, and Seller or its designee shall have the right to accompany Buyer and Buyer’s Representatives whenever they are on site on the Assets.  Notwithstanding anything herein to the contrary, Buyer shall not have access to, and shall not be permitted to conduct any environmental due diligence (including any Phase I environmental property assessment) with respect to, any Assets with respect to which Seller does not have the authority to grant access for such due diligence.

(c)Buyer shall coordinate its environmental property assessments and physical inspections of the Assets with Seller and all Third Party operators to minimize any inconvenience to or interruption of the conduct of business by Seller or such Third Party operators.  Buyer shall abide by Seller’s, and any Third Party operator’s, safety rules, regulations and operating policies while conducting its due diligence evaluation of the Assets, including any environmental or other inspection or assessment of the Assets and, to the extent required by Seller or any Third Party operator, execute and deliver any required access agreement of Seller or any such Third Party operator.  Buyer hereby defends, indemnifies and holds harmless the operators of the Assets and the Seller Indemnified Parties from and against any and all Liabilities arising out of, resulting from or relating to any field visit, environmental property assessment or other due diligence activity conducted by Buyer or any Buyer’s Representative with respect to the Assets, even if such 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 Seller Indemnified Parties, excepting only Liabilities TO THE EXTENT actually resulting FROM the gross negligence or willful misconduct of a member of THE Seller Indemnified Parties.

(d)Buyer agrees to provide to Seller promptly, but in no event less than five (5) days after receipt or creation, copies of all final reports and test results prepared by Buyer and/or any of Buyer’s Representatives which contain data collected or generated from Buyer’s due diligence with respect to the Assets.  Seller shall not be deemed by its receipt of said documents or otherwise to have made any representation or warranty, express, implied or statutory, as to the condition of the Assets or to the accuracy of said documents or the information contained therein. 

(e)Upon completion of Buyer’s due diligence, Buyer shall at its sole cost and expense and without any cost or expense to Seller or its Affiliates (i) repair all damage done to the Assets in connection with Buyer’s due diligence, (ii) restore the Assets to the approximate same condition as, or better condition than, they were prior to commencement of Buyer’s due diligence and (iii) remove all equipment, tools and other property brought onto the Assets in connection with Buyer’s due diligence.  Any disturbance to the Assets (including the leasehold associated therewith) resulting from Buyer’s due diligence will be promptly corrected by Buyer.

(f)During all periods that Buyer and/or any of Buyer’s Representatives are on the Assets, Buyer shall maintain, at its sole expense and with insurers reasonably satisfactory to Seller, policies of insurance of the types and in the amounts reasonably requested by Seller.  Coverage under all insurance required to be carried by Buyer hereunder will (i) be primary insurance, (ii) list the Seller Indemnified Parties as additional insureds, (iii) waive subrogation against the Seller Indemnified Parties and (iv) provide for ten (10) days’ prior written notice to Seller in the event of cancellation, expiration or modification of the policy or reduction in coverage.  Upon request by Seller, Buyer shall provide evidence of such insurance to Seller prior to entering the Assets.

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EXHIBT 10.1

10.2Confidentiality.  Buyer acknowledges that, pursuant to its right of access to the Records or the Assets, Buyer and/or Buyer’s Representatives will become privy to confidential and other information of Seller or its Affiliates, and Buyer shall ensure that such confidential information (i) shall not be used for any purpose other than in connection with the transactions contemplated hereby and (ii) shall be held confidential by Buyer and Buyer’s Representatives in accordance with the terms of the Confidentiality Agreement.  If Closing should occur, the foregoing confidentiality restriction on Buyer, including the Confidentiality Agreement, shall terminate (except as to (a) such portion of the Assets that are not conveyed to Buyer pursuant to the provisions of this Agreement, (b) the Excluded Assets and (c) information related to Seller or its Affiliates or to assets other than the Assets). 

10.3Disclaimers.  

(a)EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN ARTICLE IV OR SECTION 11.1(b), (I) SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, AND (II) SELLER EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO BUYER OR ANY OF ITS AFFILIATES, EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO BUYER BY ANY OFFICER, DIRECTOR, EMPLOYEE, AGENT, CONSULTANT, REPRESENTATIVE OR ADVISOR OF SELLER OR ANY OF ITS AFFILIATES).

(b)EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED OTHERWISE IN ARTICLE IV OR SECTION 11.1(b), AND WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (I) TITLE TO ANY OF THE ASSETS, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY ENGINEERING, GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION RELATING TO THE ASSETS, (III) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR FROM THE ASSETS, (IV) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE REVENUES TO BE GENERATED BY THE ASSETS, (V) THE PRODUCTION OF OR ABILITY TO PRODUCE HYDROCARBONS FROM THE ASSETS, (VI) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE ASSETS, (VII) THE CONTENT, CHARACTER OR NATURE OF ANY INFORMATION MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY SELLER OR THIRD PARTIES WITH RESPECT TO THE ASSETS, (VIII) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE TO BUYER OR ITS AFFILIATES, OR ITS OR THEIR RESPECTIVE EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO AND (IX) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT.  EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED OTHERWISE IN ARTICLE IV OR SECTION 11.1(b), SELLER FURTHER DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, OF MERCHANTABILITY, FREEDOM FROM LATENT VICES OR DEFECTS, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY OF THE ASSETS, RIGHTS OF A PURCHASER UNDER 

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EXHIBT 10.1

APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES THAT BUYER SHALL BE DEEMED TO BE OBTAINING THE ASSETS IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS OR DEFECTS (KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR UNDISCOVERABLE), AND THAT BUYER HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS BUYER DEEMS APPROPRIATE. 

(c)EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN SECTION 4.16, SELLER HAS NOT AND WILL NOT MAKE ANY REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR THE PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF THE ASSETS, AND NOTHING IN THIS AGREEMENT OR OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR WARRANTY.  SUBJECT TO BUYER’S RIGHTS UNDER SECTION 12.1, BUYER SHALL BE DEEMED TO BE TAKING THE ASSETS “AS IS” AND “WHERE IS” WITH ALL FAULTS FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION, AND BUYER HAS MADE OR CAUSED TO BE MADE SUCH ENVIRONMENTAL INSPECTIONS AS BUYER DEEMS APPROPRIATE.

(d)Seller and Buyer agree that, to the extent required by applicable law to be effective, the disclaimers of certain representations and warranties contained in this Section 10.3 are “conspicuous” disclaimers for the purpose of any applicable law.

ARTICLE XI
TITLE MATTERS; CASUALTY; TRANSFER RESTRICTIONS
11.1Seller’s Title.  

(a)General Disclaimer of Title Warranties and Representations.  Except for the special warranty of title as set forth in Section 11.1(b) and without limiting Buyer’s remedies for Title Defects set forth in this Article XI, Seller makes no warranty or representation, express, implied, statutory or otherwise, with respect to Seller’s title to any of the Assets, and Buyer hereby acknowledges and agrees that Buyer’s sole remedy for any defect of title, including any Title Defect, with respect to any of the Assets (i) before Closing, shall be as set forth in Section 11.2 and (ii) after Closing, shall be pursuant to the special warranty of title set forth in Section 11.1(b).

(b)Special Warranty of Title.  If Closing occurs, then effective as of the Closing Date and until the end of the Survival Period, Seller warrants Defensible Title, without duplication, to (i) the Wells and Well Locations set forth on Exhibit A-1 (subject to the depth restrictions set forth on Exhibit A and Exhibit A-1, and, for a Well, limited to any currently producing formations, and, for a Well Location, limited to the applicable Target Formations set forth on Exhibit A-1 for such Well Location) and (ii) the Leases and the Mineral Fee Interests set forth on Exhibit A-2 (subject to the depth restrictions set forth on Exhibit A-2 and limited to the applicable Target Formations set forth on Exhibit A-2) unto Buyer against every Person whomsoever lawfully claiming or to claim the same or any part thereof by, through or under Seller or its Affiliates, but not otherwise, subject, however, to the Permitted Encumbrances and to any matters of record in the applicable counties or in the applicable state or federal records prior to the Title Claim Date; provided, however, that, except with respect to any liability of Seller for any claim asserted in writing by Buyer to Seller in accordance with Section 11.1(c) on or before the expiration of the Survival Period for 

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EXHIBT 10.1

breach of such special warranty, such special warranty shall cease and terminate at the end of such Survival Period. 

(c)Recovery on Special Warranty.  

i.Buyer’s Assertion of Title Warranty Breaches.  Prior to the expiration of the period of time commencing as of the Closing Date and ending at 5 p.m. Central Time on the three (3) year anniversary thereof (the “Survival Period”), Buyer shall furnish Seller a Title Defect Notice meeting the requirements of Section 11.2(a) setting forth any matters which Buyer intends to assert as a breach of Seller’s special warranty in Section 11.1(b).  For all purposes of this Agreement, Buyer shall be deemed to have waived, and Seller shall have no further liability for, any breach of Seller’s special warranty that Buyer fails to assert by a Title Defect Notice given to Seller on or before the expiration of the Survival Period.  Seller shall have a reasonable opportunity, but not the obligation, to cure any Title Defect asserted by Buyer pursuant to this Section 11.1(c)(i).  Buyer agrees to reasonably cooperate with any attempt by Seller to cure any such Title Defect. 

ii.Limitations on Special Warranty.  For purposes of Seller’s special warranty of title, the value of the Leases, Mineral Fee Interests, Wells and/or Well Locations set forth in Schedule 3.8, as appropriate ((1) for a Well, subject to the depth restrictions set forth on Exhibit A and Exhibit A-1 and limited to any currently producing formations, (2) for a Well Location, subject to the depth restrictions set forth on Exhibit A and Exhibit A-1 and limited to the applicable Target Formations set forth on Exhibit A-1 for such Well Location, (3) for a Lease set forth on Exhibit A-2, subject to the depth restrictions set forth on Exhibit A-2 and limited to the applicable Target Formations set forth on Exhibit A-2 for such Lease, and (4) for the Mineral Fee Interest set forth on Exhibit A-2, subject to the depth restrictions set forth on Exhibit A-2 and limited to the applicable Target Formations set forth on Exhibit A-2 for such Mineral Fee Interest), shall be deemed to be the Allocated Value thereof, as adjusted herein.  Recovery on Seller’s special warranty of title shall be limited to an amount (without any interest accruing thereon) equal to the reduction in the Purchase Price to which Buyer would have been entitled had Buyer asserted the defect giving rise to such breach of Seller’s special warranty of title as a Title Defect prior to the Title Claim Date pursuant to Section 11.2, except that the Individual Title Defect Threshold and the Aggregate Title Defect Threshold shall not apply.  Seller shall be entitled to offset any amount owed by Seller for breach of its special warranty of title with respect to any Asset by the amount of any Title Benefits with respect to such Asset as to which Seller gives Buyer notice after the Title Claim Date. 

11.2Notice of Title Defects; Defect Adjustments.  

(a)Title Defect Notices.  Buyer must deliver, no later than forty-five (45) days after the Execution Date (the “Title Claim Date”), claim notices to Seller meeting the requirements of this Section 11.2(a) (collectively, the “Title Defect Notices” and, individually, a “Title Defect Notice”) setting forth any matters which, in Buyer’s reasonable opinion, constitute Title Defects and which Buyer intends to assert as a Title Defect pursuant to this Section 11.2(a).  For all purposes of this Agreement and notwithstanding anything herein to the contrary, Buyer shall be deemed to have waived, and Seller shall have no liability for, any Title Defect which Buyer fails to assert as a Title Defect by a properly delivered Title Defect Notice received by Seller on or before the Title Claim Date; provided, however, that, for purposes of Seller’s special warranty of title under Section 11.1(b), such waiver shall not apply to any matter that, prior to the Title Claim Date, is neither reflected of record in the applicable counties or in the applicable state or federal records nor discovered by any of Buyer’s or any of its Affiliate’s employees, title attorneys, landmen or other title examiners while conducting Buyer’s due diligence with respect to the Assets.  To be effective, each Title Defect Notice shall be in writing, and shall include (i) a description 

23

EXHIBT 10.1

of the alleged Title Defect and the Asset (including the legal description of such Asset and the Leases applicable to such Asset), or portion thereof, affected by such Title Defect (each a “Title Defect Property”), (ii) the Allocated Value of each Title Defect Property, (iii) supporting documents reasonably necessary for Seller to verify the existence of such alleged Title Defect, (iv) Buyer’s preferred manner of curing each Title Defect and Buyer’s proposed documentation for such cure and (v) the amount by which Buyer reasonably believes the Allocated Value of each Title Defect Property is reduced by such alleged Title Defect and the computations upon which Buyer’s belief is based.  To give Seller an opportunity to commence reviewing and curing Title Defects, Buyer agrees to use reasonable efforts to give Seller, on or before the end of each calendar week prior to the Title Claim Date, written notice of all alleged Title Defects (as well as any claims that would be claims under the special warranty set forth in Section 11.1) discovered by Buyer during the preceding calendar week, which notice may be preliminary in nature and supplemented prior to the Title Claim Date.  Buyer shall also, promptly upon discovery, furnish Seller with written notice of any Title Benefit which is discovered by any of Buyer’s or any of its Affiliate’s employees, title attorneys, landmen or other title examiners while conducting Buyer’s due diligence with respect to the Assets prior to the Title Claim Date. 

(b)Title Benefit Notices.  Seller shall have the right, but not the obligation, to deliver to Buyer on or before the Title Claim Date with respect to each Title Benefit a notice (a “Title Benefit Notice”) including (i) a description of the alleged Title Benefit and the Asset, or portion thereof, affected by such alleged Title Benefit (each a “Title Benefit Property”), and (ii) the amount by which Seller reasonably believes the Allocated Value of such Title Benefit Property is increased by such alleged Title Benefit and the computations upon which Seller’s belief is based.  Except as set forth in Section 11.1(c)(ii) and Section 11.2(a), Seller shall be deemed to have waived all Title Benefits for which a Title Benefit Notice has not been delivered on or before the Title Claim Date.

(c)Seller’s Right to Cure.  Seller shall have the right, but not the obligation, to attempt, at its sole cost, to cure at any time prior to one hundred twenty (120) days after Closing (the “Cure Period”), any Title Defects of which it has been advised by Buyer.  During the period of time from Closing to the expiration of the Cure Period, Buyer agrees to afford Seller and its officers, employees and other authorized representatives reasonable access, during normal business hours, to the Assets and all Records in Buyer’s or any of its Affiliates’ possession in order to facilitate Seller’s attempt to cure any such Title Defects.  No reduction shall be made to the Purchase Price with respect to any Title Defect for which Seller has provided notice to Buyer prior to or on the Closing Date that Seller intends to attempt to cure the Title Defect during the Cure Period.  An election by Seller to attempt to cure a Title Defect shall be without prejudice to its rights under Section 11.2(j) and shall not constitute an admission against interest or a waiver of Seller’s right to dispute the existence, nature or value of, or cost to cure, the alleged Title Defect. 

(d)Remedies for Title Defects.  Subject to Seller’s continuing right to dispute the existence of a Title Defect and/or the Title Defect Amount asserted with respect thereto, and subject to the rights of the Parties pursuant to Section 14.1(c), in the event that any Title Defect timely asserted by Buyer in accordance with Section 11.2(a) is not waived in writing by Buyer or cured during the Cure Period, Seller shall, at its sole option, elect to: 

i.subject to the Individual Title Defect Threshold and the Aggregate Title Defect Threshold, reduce the Purchase Price or Final Price, as applicable, by the Title Defect Amount determined pursuant to Section 11.2(g) or Section 11.2(j);

ii.indemnify Buyer, but only with Buyer’s consent, against all Liability (up to the Allocated Value of the applicable Title Defect Property) resulting from such Title Defect with respect to 

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EXHIBT 10.1

such Title Defect Property pursuant to an indemnity agreement in a form and substance mutually agreed upon by the Parties (a “Title Indemnity Agreement”);

iii.retain the entirety of the Title Defect Property that is subject to such Title Defect, together with all associated Assets, in which event the Purchase Price or Final Price, as applicable, shall be reduced by an amount equal to the Allocated Value of such Title Defect Property and such associated Assets; or

iv.if applicable, terminate this Agreement pursuant to Section 14.1(c).

(e)Remedies for Title Benefits.  With respect to each Title Benefit Property reported under Section 11.2(b), the Purchase Price shall be increased by an amount equal to the increase in the Allocated Value for such Title Benefit Property caused by such Title Benefit, as determined pursuant to Section 11.2(h) or Section 11.2(j) (the “Title Benefit Amount”) and as adjusted in accordance with the following terms and conditions: (i) in no event shall there be any adjustments to the Purchase Price for any individual Title Benefit for which the Title Benefit Amount does not exceed an amount equal to the Individual Title Defect Threshold; and (ii) in no event shall there be any adjustment to the Purchase Price for any Title Benefit that exceeds the amount equal to the Individual Title Defect Threshold unless (A) the amount of the sum of the aggregate Title Benefit Amounts of all such Title Benefits that exceed the amount equal to the Individual Title Defect Threshold exceeds (B) an amount equal to the Aggregate Title Defect Threshold, after which point the Purchase Price shall be increased by the aggregate of the Title Benefit Amounts from the first dollar.

(f)Exclusive Remedy.  Except for Buyer’s rights under Seller’s special warranty of title under Section 11.1(b) and Buyer’s rights to terminate this Agreement pursuant to Section 14.1(c), the provisions set forth in Section 11.2(d) shall be the exclusive right and remedy of Buyer with respect to Seller’s failure to have Defensible Title with respect to any Asset or any other title matter.

(g)Title Defect Amount.  The amount by which the Allocated Value of a Title Defect Property is reduced as a result of the existence of a Title Defect shall be the “Title Defect Amount” and shall be determined in accordance with the following terms and conditions (without duplication):

i.if Buyer and Seller agree on the Title Defect Amount, then that amount shall be the Title Defect Amount;

ii.if the Title Defect is an Encumbrance that is undisputed and liquidated in amount, then the Title Defect Amount shall be the amount necessary to be paid to remove the Title Defect from the Title Defect Property;

iii.if the Title Defect represents a discrepancy between (A) Seller’s Net Revenue Interest for any Title Defect Property and (B) the Net Revenue Interest set forth for such Title Defect Property on Exhibit A-1, then the Title Defect Amount shall be the product of the Allocated Value of such Title Defect Property multiplied by a fraction, the numerator of which is the Net Revenue Interest decrease and the denominator of which is the Net Revenue Interest set forth for such Title Defect Property on Exhibit A-1;

iv.if the Title Defect represents a discrepancy where (A) the actual Net Acres for any Title Defect Property is less than (B) the Net Acres for such Title Defect Property as stated on Exhibit A-2, then the Title Defect Amount shall be the product obtained by multiplying such difference by the Allocated Value (on a per Net Acre dollar amount) for such Title Defect Property as set forth on Schedule 3.8;

25

EXHIBT 10.1

v.if the Title Defect represents an obligation or Encumbrance upon or other defect in title to the Title Defect Property of a type not described above, then the Title Defect Amount shall be determined by taking into account the Allocated Value of the Title Defect Property, the portion of the Title Defect Property affected by the Title Defect, the legal effect of the Title Defect, the potential economic effect of the Title Defect over the life of the Title Defect Property, the values placed upon the Title Defect by Buyer and Seller and such other reasonable factors as are necessary to make a proper evaluation; provided, however, that if such Title Defect is reasonably capable of being cured, the Title Defect Amount shall not be greater than the reasonable cost and expense of curing such Title Defect;

vi.the Title Defect Amount with respect to a Title Defect Property shall be determined without duplication of any costs or losses included in another Title Defect Amount hereunder; and

vii.notwithstanding anything to the contrary in this Article XI, the aggregate Title Defect Amounts attributable to the effects of all Title Defects upon any Title Defect Property shall not exceed the lesser of (A) the Allocated Value of such Title Defect Property and (B) the reasonable cost to cure such Title Defects. 

(h)Title Benefit Amount.  The Title Benefit Amount resulting from a Title Benefit shall be determined in accordance with the following methodology, terms and conditions (without duplication):

i.if Buyer and Seller agree on the Title Benefit Amount, then that amount shall be the Title Benefit Amount; 

ii.if the Title Benefit represents a discrepancy between (A) Seller’s Net Revenue Interest for any Title Benefit Property and (B) the Net Revenue Interest set forth for such Title Benefit Property on Exhibit A-1, then the Title Benefit Amount shall be the product of the Allocated Value of such Title Benefit Property multiplied by a fraction, the numerator of which is the Net Revenue Interest increase and the denominator of which is the Net Revenue Interest set forth for such Title Benefit Property on Exhibit A-1;

iii.if the Title Benefit represents a discrepancy where (A) the actual Net Acres for any Title Benefit Property is greater than (B) the Net Acres for such Title Benefit Property stated on Exhibit A-2, then the Title Benefit Amount shall be the product obtained by multiplying such difference by the Allocated Value (on a per Net Acre dollar amount) for such Title Benefit Property as set forth on Schedule 3.8; and

iv.if the Title Benefit is of a type not described above, then the Title Benefit Amounts shall be determined by taking into account the Allocated Value of Title Benefit Property, the portion of such Title Benefit Property affected by such Title Benefit, the legal effect of the Title Benefit, the potential economic effect of the Title Benefit over the life of such Title Benefit Property, the values placed upon the Title Benefit by Buyer and Seller and such other reasonable factors as are necessary to make a proper evaluation.

(i)Title Defect Thresholds.  Notwithstanding anything herein to the contrary, (x) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller for any individual Title Defect for which the Title Defect Amount (in the aggregate for all Assets affected by such Title Defect) does not exceed $25,000 for Title Defects relating to the Well Locations set forth on Exhibit A-1 and the Assets set forth on Exhibit A-2 and $50,000 for Title Defects relating to the Wells set forth on 

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EXHIBT 10.1

Exhibit A-1 (in each case, the “Individual Title Defect Threshold”); and (y) in no event shall there be any adjustment to the Purchase Price or other remedies provided by Seller for any Title Defect that exceeds the applicable Individual Title Defect Threshold unless (A) the aggregate Title Defect Amounts of all such Title Defects that exceed the applicable Individual Title Defect Threshold (but excluding any such Title Defects cured by Seller) exceeds (B) the Aggregate Title Defect Threshold, after which point Buyer shall be entitled to adjustments to the Purchase Price or other applicable remedies available hereunder, as to the aggregate of the Title Defect Amounts from the first dollar.  For the avoidance of doubt, if Seller retains any Title Defect Property pursuant to Section 11.2(d)(iii), the Title Defect Amount related to such Title Defect Property will not be counted towards the Aggregate Title Defect Threshold and will not be considered for purposes of Section 7.4 and/or Section 8.4.

(j)Title Dispute Resolution.  Seller and Buyer shall attempt to agree on matters regarding (i) all Title Defects, Title Benefits, Title Defect Amounts and Title Benefit Amounts, and (ii) the adequacy of any curative materials provided by Seller to cure an alleged Title Defect (the “Disputed Title Matters”) prior to Closing.  If Seller and Buyer are unable to agree by Closing (or by the end of the Cure Period if Seller elects to attempt to cure a Title Defect after Closing), the Disputed Title Matters shall be exclusively and finally resolved pursuant to this Section 11.2(j).  There shall be a single arbitrator, who shall be a title attorney with at least ten (10) years’ experience in oil and gas titles involving properties in the regional area in which the Title Defect Properties are located, as selected by mutual agreement of Buyer and Seller within fifteen (15) days after the Closing or the end of the Cure Period, as applicable, or, absent such agreement, by the Denver, Colorado office of the American Arbitration Association (the “Title Arbitrator”).  Each of Buyer and Seller shall submit to the Title Arbitrator its proposed resolution of the Disputed Title Matter.  The proposed resolution of the Disputed Title Matter shall include the best offer of the submitting Party in a single monetary amount that such Party is willing to pay or accept (as applicable) to settle the Disputed Title Matter.  The Title Arbitrator shall be limited to awarding only one or the other of the two proposed settlement amounts.  The arbitration proceeding shall be held in Denver, Colorado and shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this Section 11.2(j).  The Title Arbitrator’s determination shall be made within twenty (20) days after submission of the matters in dispute and shall be final and binding upon both Parties, without right of appeal.  In making his determination, the Title Arbitrator shall be bound by the rules set forth in Section 11.2(g) and Section 11.2(h) and, subject to the foregoing, may consider such other matters as, in the opinion of the Title Arbitrator, are necessary to make a proper determination.  The Title Arbitrator, however, may not award Buyer a greater Title Defect Amount than the Title Defect Amount claimed by Buyer in its applicable Title Defect Notice.  The Title Arbitrator shall act as an expert for the limited purpose of determining the specific Disputed Title Matter submitted by either Party and may not award damages, interest or penalties to either Party with respect to any matter.  Seller and Buyer shall each bear its own legal fees and other costs of presenting its case to the Title Arbitrator.  Each of Seller and Buyer shall bear one-half of the costs and expenses of the Title Arbitrator.  To the extent that the award of the Title Arbitrator with respect to any Title Defect Amount or Title Benefit Amount is not taken into account as an adjustment to the Purchase Price pursuant to Section 3.5 or Section 3.6(a), then, within ten (10) days after the Title Arbitrator delivers written notice to Buyer and Seller of his award with respect to a Title Defect Amount or a Title Benefit Amount, and, subject to Section 11.2(i), (i) Buyer shall pay to Seller the amount, if any, so awarded by the Title Arbitrator to Seller, and (ii) Seller shall pay to Buyer the amount, if any, so awarded by the Title Arbitrator to Buyer.  Nothing herein shall operate to cause Closing to be delayed on account of any arbitration conducted pursuant to this Section 11.2(j) and, to the extent any adjustments are not agreed upon by the Parties as of Closing, the Purchase Price shall not be adjusted therefor at Closing and subsequent adjustments to the Purchase Price, if any, will be made pursuant to Section 3.6 or this Section 11.2. 

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EXHIBT 10.1

11.3Casualty Loss.  

(a)Notwithstanding anything herein to the contrary, from and after the Effective Time, if Closing occurs, Buyer shall assume all risk of loss with respect to production of Hydrocarbons through normal depletion (including watering out of any well, collapsed casing or sand infiltration of any well) and the depreciation of Personal Property due to ordinary wear and tear, in each case, with respect to the Assets, and Buyer shall not assert such matters as Casualty Losses or Title Defects hereunder.

(b)If, after the Execution Date but prior to the Closing Date, any portion of the Assets is damaged or destroyed by fire or other casualty or is taken in condemnation or under right of eminent domain (each, a “Casualty Loss”), and the Closing thereafter occurs, Seller, at Closing, shall pay to Buyer all sums paid to Seller by Third Parties by reason of any Casualty Loss insofar as with respect to the Assets and shall assign, transfer and set over to Buyer or subrogate Buyer to all of Seller’s right, title and interest (if any) in insurance claims, unpaid awards, and other rights against Third Parties (excluding any Liabilities, other than insurance claims, of or against any Seller Indemnified Parties) arising out of such Casualty Loss insofar as with respect to the Assets; provided, however, that Seller shall reserve and retain (and Buyer shall assign to Seller) all right, title, interest and claims against Third Parties for the recovery of Seller’s costs and expenses incurred prior to Closing in repairing such Casualty Loss and/or pursuing or asserting any such insurance claims or other rights against Third Parties. 

11.4Preferential Purchase Rights and Consents to Assign.  

(a)With respect to each Preferential Purchase Right set forth in Schedule 4.10, Seller, prior to Closing, shall send to the holder of each such Preferential Purchase Right a notice in material compliance with the contractual provisions applicable to such Preferential Purchase Right, which notice shall be subject to Buyer’s prior approval.

i.If, prior to Closing, any holder of a Preferential Purchase Right notifies Seller that it intends to consummate the purchase of the Asset to which its Preferential Purchase Right applies, then the Asset subject to such Preferential Purchase Right shall be excluded from the Assets to be assigned to Buyer at Closing (but only to the extent of the portion of such Asset affected by the Preferential Purchase Right), and the Purchase Price shall be reduced by the Allocated Value of the Asset (or portion thereof) so excluded.  Seller shall be entitled to all proceeds paid by any Person exercising a Preferential Purchase Right prior to Closing.  If such holder of such Preferential Purchase Right thereafter fails to consummate the purchase of the Asset (or portion thereof) covered by such Preferential Purchase Right on or before sixty (60) days following the Closing Date, (A) Seller shall so notify Buyer, (B) Buyer shall purchase, on or before ten (10) days following receipt of such notice, such Asset (or portion thereof) that was so excluded from Seller, under the terms of this Agreement and for a price equal to the amount by which the Purchase Price was reduced at Closing with respect to such excluded Asset (or portion thereof) and (C) Seller shall assign to Buyer the Asset (or portion thereof) so excluded at Closing pursuant to an instrument in substantially the same form as the Assignment.  If, as of Closing, the time for exercising a Preferential Purchase Right has not expired and such Preferential Purchase Right has not been exercised or waived, then the Asset subject to such Preferential Purchase Right shall be included in the Assets to be assigned to Buyer at Closing, and Buyer shall be solely responsible for complying with the terms of such Preferential Purchase Right and shall be entitled to the proceeds, if any, associated with the exercise of such Preferential Purchase Right.

ii.All Assets for which any applicable Preferential Purchase Right has been waived, or as to which the period to exercise the applicable Preferential Purchase Right has expired without 

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EXHIBT 10.1

exercise by the holder thereof, in each case, prior to Closing, shall be sold to Buyer at Closing pursuant to the provisions of this Agreement.

(b)With respect to each Consent (other than Customary Post-Closing Consents) set forth in Schedule 4.4, Seller, prior to Closing, shall send to the holder of each such Consent a notice in material compliance with the contractual provisions applicable to such Consent seeking such holder’s consent to the transactions contemplated hereby.

i.If (A) Seller fails to obtain a Consent (other than Customary Post-Closing Consents) set forth in Schedule 4.4 prior to Closing and the failure to obtain such Consent would cause (1) the assignment of the Assets affected thereby to Buyer to be void or (2) the termination of a Lease or Contract under the express terms thereof or (B) a Consent (other than Customary Post-Closing Consents) requested by Seller is denied in writing, then, in each case, the Asset (or portion thereof) affected by such un-obtained Consent shall be excluded from the Assets to be assigned to Buyer at Closing, and the Purchase Price shall be reduced by the Allocated Value of such Asset (or portion thereof) so excluded.  In the event that a Consent (other than Customary Post-Closing Consents and with respect to an Asset excluded pursuant to this Section 11.4(b)(i)) that was not obtained prior to Closing is obtained within one hundred eighty (180) days following Closing, then, within ten (10) days after such Consent is obtained (x) Buyer shall purchase the Asset (or portion thereof) that was so excluded as a result of such previously un-obtained Consent and pay to Seller the amount by which the Purchase Price was reduced at Closing with respect to the Asset (or portion thereof) so excluded and (y) Seller shall assign to Buyer the Asset (or portion thereof) so excluded at Closing pursuant to an instrument in substantially the same form as the Assignment. 

ii.If (A) Seller fails to obtain a Consent (other than Customary Post-Closing Consents) set forth in Schedule 4.4 prior to Closing and the failure to obtain such Consent would not cause (1) the assignment of the Asset (or portion thereof) affected thereby to Buyer to be void or (2) the termination of a Lease or Contract under the express terms thereof and (B) such Consent requested by Seller is not denied in writing by the holder thereof, then the Asset (or portion thereof) subject to such un-obtained Consent shall nevertheless be assigned by Seller to Buyer at Closing as part of the Assets and Buyer shall have no claim against, and Seller shall have no Liability for, the failure to obtain such Consent.

iii.Prior to Closing, Seller and Buyer shall use their commercially reasonable efforts to obtain all Consents (other than Customary Post-Closing Consents) listed on Schedule 4.4; provided, however, that neither Party shall be required to incur any Liability or pay any money in order to obtain any such Consent.  Subject to the foregoing, Buyer agrees to provide Seller with any information or documentation that may be reasonably requested by Seller and/or the Third Party holder(s) of such Consents in order to facilitate the process of obtaining such Consents.

ARTICLE XII
ENVIRONMENTAL MATTERS

12.1Notice of Environmental Defects.  

a.Environmental Defects Notice.  Buyer must deliver no later than forty-five (45) days after the Execution Date (the “Environmental Claim Date”) claim notices to Seller meeting the requirements of this Section 12.1(a) (collectively, the “Environmental Defect Notices” and, individually, an “Environmental Defect Notice”) setting forth any matters which, in Buyer’s reasonable opinion, constitute Environmental Defects and which Buyer intends to assert as Environmental Defects pursuant to this Section 12.1.  For all purposes of this Agreement, Buyer shall be deemed to have waived, and Seller 

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EXHIBT 10.1

shall have no liability for, any Environmental Defect which Buyer fails to assert as an Environmental Defect by a properly delivered Environmental Defect Notice received by Seller on or before the Environmental Claim Date.  To be effective, each Environmental Defect Notice shall be in writing and shall include (i) a description of the matter constituting the alleged Environmental Condition (including the applicable Environmental Law violated or implicated thereby) and the Assets affected by such alleged Environmental Condition, (ii) the Allocated Value of the Assets (or portions thereof) affected by such alleged Environmental Condition, (iii) supporting documents reasonably necessary for Seller to verify the existence of such alleged Environmental Condition, and (iv) a calculation of the Remediation Amount (itemized in reasonable detail) that Buyer asserts is attributable to such alleged Environmental Defect.  Buyer’s calculation of the Remediation Amount included in the Environmental Defect Notice must describe in reasonable detail the Remediation proposed for the alleged Environmental Condition that gives rise to the asserted Environmental Defect and identify all assumptions used by Buyer in calculating the Remediation Amount, including the standards that Buyer asserts must be met to comply with Environmental Laws.  Seller shall have the right, but not the obligation, to cure any asserted Environmental Defect on or before the expiration of the Cure Period.  To the extent that Seller has provided notice to Buyer prior to or on the Closing Date that Seller intends to attempt to cure the asserted Environmental Defect during the Cure Period, the Assets (or portion thereof) affected by such asserted Environmental Defect shall be excluded from the Assets to be assigned to Buyer at Closing, and the Purchase Price shall be reduced by the Allocated Value of such Asset (or portion of) so excluded.  In the event that any asserted Environmental Defect is cured prior to the expiration of the Cure Period, then, within ten (10) days after such cure (A) Buyer shall purchase the Asset (or portion thereof) that was so excluded in accordance with the immediately preceding sentence and pay to Seller the amount by which the Purchase Price was reduced at Closing with respect to the Asset (or portion thereof) so excluded and (B) Seller shall assign to Buyer the Asset (or portion thereof) so excluded at Closing pursuant to an instrument in substantially the same form as the Assignment.  To give Seller an opportunity to commence reviewing and curing Environmental Defects, Buyer agrees to use reasonable efforts to give Seller, on or before the end of each calendar week prior to the Environmental Claim Date, written notice of all alleged Environmental Defects discovered by Buyer during the preceding calendar week, which notice may be preliminary in nature and supplemented prior to the Environmental Claim Date.
b.Remedies for Environmental Defects.  Subject to Seller’s continuing right to dispute the existence of an Environmental Defect and/or the Remediation Amount asserted with respect thereto, and subject to the rights of the Parties pursuant to Section 14.1(c), in the event that any Environmental Defect timely asserted by Buyer in accordance with Section 12.1(a) is not waived in writing by Buyer or cured during the Cure Period, Seller shall, at its sole option, elect to:

i.subject to the Individual Environmental Threshold and the Environmental Defect Deductible, reduce the Purchase Price by the Remediation Amount;

ii.retain the entirety of the Asset that is subject to such Environmental Defect, together with all associated Assets, in which event the Purchase Price shall be reduced by an amount equal to the Allocated Value of such Asset and such associated Assets; 

iii.with Buyer’s consent, indemnify Buyer against all Liability resulting from such Environmental Defect with respect to the Assets pursuant to an indemnity agreement in a form and substance mutually agreeable to the Parties (each, an “Environmental Indemnity Agreement”); or

iv.if applicable, terminate this Agreement pursuant to Section 14.1(c). 
If Seller elects the option set forth in clause (i) above, Buyer shall be deemed to have assumed responsibility for all of the costs and expenses attributable to the Remediation of the Environmental Condition attributable to such Environmental Defect and for all Liabilities with respect thereto and such responsibility of Buyer 

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EXHIBT 10.1

shall be deemed to constitute part of the Assumed Obligations hereunder.  If the Parties are unable to reach agreement with respect to any Environmental Defect or Remediation Amount as set forth in clauses (i) through (iii) above, then such dispute shall be submitted to arbitration under Section 12.1(e) and the Asset (or portion thereof) affected by such asserted Environmental Defect shall be removed from the Assets to be assigned to Buyer at Closing, and the Purchase Price shall be reduced by the Allocated Value of such Asset (or portion thereof) so removed.
c.Exclusive Remedy.  Except for Buyer’s rights to terminate this Agreement pursuant to Section 14.1(c), the provisions set forth in Section 12.1(b) shall be the exclusive right and remedy of Buyer with respect to any Environmental Defect with respect to any Asset or other environmental matter.

d.Environmental Deductibles.  Notwithstanding anything herein to the contrary, (i) in no event shall there be any adjustment to the Purchase Price or other remedies provided by Seller for any individual Environmental Defect for which the Remediation Amount does not exceed $75,000 (the “Individual Environmental Threshold”); and (ii) in no event shall there be any adjustment to the Purchase Price or other remedies provided by Seller for any Environmental Defect for which the Remediation Amount exceeds the Individual Environmental Threshold unless (A) the aggregate Remediation Amounts of all such Environmental Defects that exceed the Individual Environmental Threshold (but excluding any Environmental Defects cured by Seller) exceeds (B) the Environmental Defect Deductible, after which point Buyer shall be entitled to adjustments to the Purchase Price or other applicable remedies available hereunder, but only with respect to the amount by which the aggregate amount of such Remediation Amounts exceeds the Environmental Defect Deductible.  For the avoidance of doubt, if Seller retains any Assets pursuant to Section 12.1(b)(ii), the Remediation Amounts relating to such retained Assets will not be counted towards the Environmental Defect Deductible and will not be considered for purposes of Section 7.4 and/or Section 8.4.

e.Environmental Dispute Resolution.  Seller and Buyer shall attempt to agree on (i) all Environmental Defects and Remediation Amounts prior to Closing and (ii) the adequacy of any cure by Seller of any asserted Environmental Defect prior to the end of the Cure Period (items (i) and (ii), collectively, the “Disputed Environmental Matters”).  If Seller and Buyer are unable to agree by Closing (or by the end of the Cure Period if Seller elects to attempt to cure an asserted Environmental Defect after Closing), the Disputed Environmental Matters shall be exclusively and finally resolved by arbitration pursuant to this Section 12.1(e).  There shall be a single arbitrator, who shall be an environmental attorney with at least ten (10) years’ experience in environmental matters involving oil and gas producing properties in the regional area in which the affected Assets are located, as selected by mutual agreement of Buyer and Seller within fifteen (15) days after the Closing Date or the end of the Cure Period, as applicable, or, absent such agreement, by the Denver, Colorado office of the American Arbitration Association (the “Environmental Arbitrator”).  The arbitration proceeding shall be held in Denver, Colorado and shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, to the extent such rules do not conflict with the terms of this Section 12.1.  The Environmental Arbitrator’s determination shall be made within twenty (20) days after submission of the matters in dispute and shall be final and binding upon both Parties, without right of appeal.  In making his determination, the Environmental Arbitrator shall be bound by the rules set forth in this Section 12.1 and, subject to the foregoing, may consider such other matters as in the opinion of the Environmental Arbitrator are necessary or helpful to make a proper determination.  The Environmental Arbitrator, however, may not award Buyer any greater Remediation Amount than the Remediation Amount claimed by Buyer in its applicable Environmental Defect Notice.  The Environmental Arbitrator shall act as an expert for the limited purpose of determining the specific Disputed Environmental Matters submitted by either Party and may not award damages, interest or penalties to either Party with respect to any matter.  Seller and Buyer shall each bear its own legal fees 

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EXHIBT 10.1

and other costs of presenting its case to the Environmental Arbitrator.  Each of Seller and Buyer shall bear one-half of the costs and expenses of the Environmental Arbitrator.  To the extent that any Asset (or portion thereof) is removed from the Assets to be assigned to Buyer at Closing pursuant to the last sentence of Section 12.1(b), then, within ten (10) days after the Environmental Arbitrator delivers written notice to Buyer and Seller of his award with respect to any Disputed Environmental Matter, Seller shall sell, assign and convey, and Buyer shall purchase and accept, the Asset (or portion thereof) so removed from Closing pursuant to an instrument in substantially the same form as the Assignment, and Buyer shall pay to Seller the Allocated Value for such Asset (or portion thereof) so removed from Closing (subject to any applicable adjustments contemplated in this Agreement) less the Remediation Amount, if any, determined for such Asset (or portion thereof) in accordance with the Environmental Arbitrator’s written notice; provided that, in the event the Remediation Amount with respect to such Asset (or portion thereof) exceeds the Allocated Value thereof, such Asset (or portion thereof) shall be deemed Excluded Assets hereunder.  Nothing herein shall operate to cause Closing to be delayed on account of any arbitration conducted pursuant to this Section 12.1(e), and, to the extent any adjustments are not agreed upon by the Parties as of Closing, the Purchase Price shall be adjusted therefor at Closing pursuant to Section 12.1(b) and/or this Section 12.1(e).

12.2NORM, Asbestos, Wastes and Other Substances.  Buyer acknowledges that the Assets have been used for exploration, development, and production of oil and gas and that there may be petroleum, produced water, wastes or other substances or materials located in, on or under the Assets or associated with the Assets.  Equipment and sites included in the Assets may contain asbestos, NORM or other Hazardous Substances.  NORM may affix or attach itself to the inside of wells, materials and equipment as scale, or in other forms.  The wells, materials and equipment located on the Assets or included in the Assets may contain NORM, asbestos and other wastes or Hazardous Substances.  NORM containing material and/or other wastes or Hazardous Substances may have come in contact with various environmental media, including, water, soils or sediment.  Special procedures may be required for the assessment, remediation, removal, transportation, or disposal of environmental media, wastes, asbestos, NORM and other Hazardous Substances from the Assets.  The presence of NORM or asbestos-containing materials that are non-friable cannot be claimed as an Environmental Defect, except to the extent constituting a violation of Environmental Laws.

ARTICLE XIII
ASSUMPTION; INDEMNIFICATION; SURVIVAL

13.1Assumption by Buyer.  Without limiting Buyer’s rights to indemnity under this Article XIII, Buyer’s rights under any Title Indemnity Agreement or Environmental Indemnity Agreement, and the provisions of Sections 11.2(d) and 12.1(b) with respect to the Title Defects and Environmental Defects that Seller elects to cure but does not cure during the Cure Period, from and after Closing, Buyer assumes and hereby agrees to fulfill, perform, pay and discharge (or cause to be fulfilled, performed, paid and discharged) (a) all obligations and Liabilities, known or unknown, arising from, based upon, related to or associated with the Assets, regardless of whether such obligations or Liabilities arose prior to, on or after the Effective Time, including obligations and Liabilities relating in any manner to the use, ownership or operation of the Assets, including obligations to (i) furnish makeup gas and/or settle Imbalances according to the terms of applicable gas sales, processing, gathering or transportation Contracts, (ii) pay Working Interests, royalties, overriding royalties and other interest owners’ revenues or proceeds attributable to sales of Hydrocarbons, including those held in suspense (including those amounts for which the Purchase Price was adjusted pursuant to Section 3.3(b)(viii)), (iii) Decommission the Assets (the “Decommissioning Obligations”), (iv) clean up and/or remediate the Assets in accordance with applicable Contracts and Laws, and (v) perform all obligations applicable to or imposed on the lessee, owner or operator under the Leases and the Applicable Contracts, or as required by Law, and (b) all obligations and Liabilities, known or unknown, arising from, based upon, 

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EXHIBT 10.1

related to or associated with (i) Buyer’s compliance (or failure thereof) with the terms and requirements of the Chieftain Litigation Settlement to the extent relating to the post-Closing operations of the Assets and (ii) regardless of whether such obligations or Liabilities arose prior to, on or after the Effective Time, the litigation, claims or other matters set forth in Schedule 4.7(A), (all of said obligations and Liabilities described in clauses (a) and (b), subject to the exclusions below, herein being referred to as the “Assumed Obligations”).

13.2Indemnities of Seller.  Effective as of Closing, subject to the limitations set forth in Section 13.4 and Section 13.8 or otherwise in this Agreement, Seller shall be responsible for, shall pay on a current basis, and hereby agrees to defend, indemnify, hold harmless and forever release Buyer and its Affiliates, and all of its and their respective equityholders, partners, members, directors, officers, managers, employees, agents and representatives (collectively, the “Buyer Indemnified Parties”) from and against any and all Liabilities, whether or not relating to Third Party Claims or incurred in the investigation or defense of any of the same or in asserting, preserving or enforcing any of their respective rights hereunder, arising from, based upon, related to or associated with the following (all of said Liabilities described in clauses (c), (d), (e) and (f) herein being referred to as the “Retained Liabilities”):

(a)any breach by Seller of any of its representations or warranties contained in Article IV;
 
(b)any breach by Seller of any of its covenants or agreements under this Agreement; 

(c)any Liabilities to Third Parties for personal injury or death, or for Seller’s payment of royalties and overriding royalties (except as related to the Chieftain Litigation Settlement) attributable to Seller’s operation or ownership of the Assets prior to the Effective Time;

(d)any Liabilities with respect to the matters set forth on Schedule 4.7(B), and any Liabilities with respect to the Searle Litigation attributable to the period of time prior to the Closing Date; 

(e)any Liabilities arising with respect to the distribution of proceeds in respect of the URC Related Interests attributable to the operation of the Assets prior to the Closing Date; or

(f)any and all Liabilities arising from or related to the ownership or operation of the Excluded Assets before, on or after the Effective Time.

13.3Indemnities of Buyer.  Effective as of Closing, Buyer and its successors and assigns shall assume and be responsible for, shall pay on a current basis, and hereby agrees to defend, indemnify, hold harmless and forever release Seller and its Affiliates, and all of its and their respective equityholders, partners, members, directors, officers, managers, employees, agents and representatives (collectively, the “Seller Indemnified Parties”) from and against any and all Liabilities, whether or not relating to Third Party Claims or incurred in the investigation or defense of any of the same or in asserting, preserving or enforcing any of their respective rights hereunder, arising from, based upon, related to or associated with:

(a)any breach by Buyer of any of its representations or warranties contained in Article V; 

(b)any breach by Buyer of any of its covenants or agreements under this Agreement; or

(c)the Assumed Obligations, except to the extent included in the Retained Liabilities as limited by Section 13.4 and Section 13.8.

13.4Limitation on Liability.  

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EXHIBT 10.1

(a)Seller shall not have any liability for any indemnification under Section 13.2 of this Agreement (i) for any individual Liability unless the amount with respect to such Liability exceeds $75,000, and (ii) until and unless the aggregate amount of all Liabilities for which Claim Notices are delivered by Buyer exceeds the Indemnity Deductible, and then only to the extent such Liabilities exceed the Indemnity Deductible; provided that the adjustments to the Purchase Price under Section 3.3, Section 3.5, Section 3.6 or Section 3.7 and any payments in respect thereof shall not be limited by this Section 13.4(a).

(b)Notwithstanding anything to the contrary contained in this Agreement, Seller shall not be required to indemnify Buyer for aggregate Liabilities in excess of an amount equal to twenty percent (20%) of the Purchase Price; provided that (i) Sections 13.4(a) and 13.4(b) shall not apply to or limit any recovery on or with respect to Seller’s indemnification obligation as provided in Section 13.2(e) or Seller’s special warranty of title as provided in Sections 11.1(b) and 11.1(c) and (ii) the adjustments to the Purchase Price under Section 3.3, Section 3.5, Section 3.6 and Section 3.7 and any payments in respect thereof shall not be limited by this Section 13.4(b).  

13.5Express Negligence.  EXCEPT AS OTHERWISE PROVIDED IN SECTION 6.5, SECTION 6.10(a) AND SECTION 10.1(c), THE DEFENSE, INDEMNIFICATION, HOLD HARMLESS, RELEASE AND ASSUMED OBLIGATIONS PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LIABILITIES, LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE OR RESULTED SOLELY OR IN PART FROM THE GROSS, SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY ANY INDEMNIFIED PARTY.  BUYER AND SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS “CONSPICUOUS.”

13.6Exclusive Remedy.  Notwithstanding anything to the contrary contained in this Agreement, the Parties agree that, from and after Closing, Section 6.5, Section 6.10(a), Section 10.1(c), Section 11.1(c), Section 13.2 and Section 13.3, any Title Indemnity Agreement or Environmental Indemnity Agreement entered into by the Parties, and the provisions of Sections 11.2(d) and 12.1(b) with respect to the Title Defects and Environmental Defects that Seller elects to cure but does not cure during the Cure Period, contain the Parties’ exclusive remedies against each other with respect to the transactions contemplated hereby, including breaches of the representations, warranties, covenants and agreements of the Parties contained in this Agreement or in any document or certificate delivered pursuant to this Agreement.  Except as specified in Section 11.1(c), Section 13.2 and any Title Indemnity Agreement or Environmental Indemnity Agreement entered into by the Parties, effective as of Closing, Buyer, on its own behalf and on behalf of the Buyer Indemnified Parties, hereby releases, remises and forever discharges Seller and its Affiliates and all of such Persons’ equityholders, partners, members, directors, officers, employees, agents and representatives from any and all suits, legal or administrative proceedings, claims, demands, damages, losses, costs, Liabilities, interest or causes of action whatsoever, at Law or in equity, known or unknown, which Buyer or the Buyer Indemnified Parties might now or subsequently have, based on, relating to or arising out of this Agreement, the transactions contemplated by this Agreement, the ownership, use or operation of any of the Assets prior to Closing or the condition, quality, status or nature of any of the Assets prior to Closing, including rights to contribution under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, breaches of statutory or implied warranties, nuisance or other tort actions, rights to punitive damages, common law rights of contribution and rights under insurance maintained by Seller or any of its Affiliates (except as provided in Section 11.3(b)).

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EXHIBT 10.1

13.7Indemnification Procedures.  All claims for indemnification under Section 6.5, Section 6.10(a), Section 10.1(c), Section 13.2 and Section 13.3 shall be asserted and resolved as follows:

(a)For purposes of Section 6.5, Section 6.10(a), Section 10.1(c) and this Article XIII, the term “Indemnifying Party” when used in connection with particular Liabilities shall mean the Party or Parties having an obligation to indemnify the other Party and/or other Persons with respect to such Liabilities pursuant to Section 6.5, Section 6.10(a), Section 10.1(c) or this Article XIII, and the term “Indemnified Party” when used in connection with particular Liabilities shall mean the Party and/or other Persons having the right to be indemnified with respect to such Liabilities by the Indemnifying Party pursuant to Section 6.5, Section 6.10(a), Section 10.1(c) or this Article XIII.

(b)To make a claim for indemnification under Section 6.5, Section 6.10(a), Section 10.1(c), Section 13.2 or Section 13.3, an Indemnified Party shall notify the Indemnifying Party of its claim under this Section 13.7, including the specific details of and specific basis under this Agreement for its claim (the “Claim Notice”).  In the event that the claim for indemnification is based upon a claim by a Third Party against the Indemnified Party (a “Third Party Claim”), the Indemnified Party shall provide its Claim Notice promptly after the Indemnified Party has actual knowledge of the Third Party Claim and shall enclose a copy of all papers (if any) served with respect to the Third Party Claim; provided that the failure of any Indemnified Party to give notice of a Third Party Claim as provided in this Section 13.7(b) shall not relieve the Indemnifying Party of its obligations under Section 6.5, Section 6.10(a), Section 10.1(c), Section 13.2 or Section 13.3 (as applicable) except to the extent such failure results in insufficient time being available to permit the Indemnifying Party to effectively defend against the Third Party Claim or otherwise materially prejudices the Indemnifying Party’s ability to defend against the Third Party Claim.  In the event that the claim for indemnification is based upon an inaccuracy or breach of a representation, warranty, covenant or agreement, the Claim Notice shall specify the representation, warranty, covenant or agreement that was inaccurate or breached.
(c)In the case of a claim for indemnification based upon a Third Party Claim, the Indemnifying Party shall have thirty (30) days from its receipt of the Claim Notice to notify the Indemnified Party whether it admits or denies its obligation to defend and indemnify the Indemnified Party against such Third Party Claim at the sole cost and expense of the Indemnifying Party.  The Indemnified Party is authorized, prior to and during such thirty (30) day period, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the Indemnifying Party and that is not prejudicial to the Indemnifying Party.

(d)If the Indemnifying Party admits its obligation to defend and indemnify the Indemnified Party against a Third Party Claim, it shall have the right and obligation to diligently defend, at its sole cost and expense, the Indemnified Party against such Third Party Claim.  The Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement thereof.  If requested by the Indemnifying Party, the Indemnified Party agrees to cooperate in contesting any Third Party Claim which the Indemnifying Party elects to contest.  The Indemnified Party may participate in, but not control, at its own expense, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this Section 13.7(d).  An Indemnifying Party shall not, without the written consent of the Indemnified Party, (i) settle any Third Party Claim or consent to the entry of any judgment with respect thereto which does not include an unconditional written release of the Indemnified Party from all liability in respect of such Third Party Claim or (ii) settle any Third Party Claim or consent to the entry of any judgment with respect thereto in any manner that may materially and adversely affect the Indemnified Party (other than as a result of money damages covered by the indemnity).

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(e)If the Indemnifying Party does not admit its obligation or admits its obligation to defend and indemnify the Indemnified Party against a Third Party Claim, but fails to diligently prosecute, indemnify against or settle the Third Party Claim, then the Indemnified Party shall have the right to defend against the Third Party Claim at the sole cost and expense of the Indemnifying Party, with counsel of the Indemnified Party’s choosing, subject to the right of the Indemnifying Party to admit its liability and assume the defense of the Third Party Claim at any time prior to settlement or final determination thereof.  If the Indemnifying Party has not yet admitted its obligation to defend and indemnify the Indemnified Party against a Third Party Claim, the Indemnified Party shall send written notice to the Indemnifying Party of any proposed settlement and the Indemnifying Party shall have the option for ten (10) days following receipt of such notice to (i) admit in writing its liability to indemnify the Indemnified Party from and against the liability and consent to such settlement, (ii) if liability is so admitted, reject, in its reasonable judgment, the proposed settlement, or (iii) deny liability.  Any failure by the Indemnifying Party to respond to such notice shall be deemed to be an election under subsection (iii) above.

(f)In the case of a claim for indemnification not based upon a Third Party Claim, the Indemnifying Party shall have thirty (30) days from its receipt of the Claim Notice to (i) cure the Liabilities complained of, (ii) admit its liability for such Liability or (iii) dispute the claim for such Liabilities.  If the Indemnifying Party does not notify the Indemnified Party within such thirty (30) day period that it has cured the Liabilities or that it disputes the claim for such Liabilities, the amount of such Liabilities shall conclusively be deemed a liability of the Indemnifying Party hereunder. 

13.8Survival.  

(a)Except for the Specified Representations, the representations and warranties of the Parties in Article IV and Article V and the covenants and agreements of the Parties in Sections 6.1 and 9.4 shall survive Closing for a period of nine (9) months.  The Specified Representations shall survive Closing without time limit.  The representation and warranty of Seller in Section 11.1(b) shall terminate as of the expiration of the Survival Period.  Subject to the foregoing and Section 13.8(b), the remainder of this Agreement shall survive Closing without time limit.  Representations, warranties, covenants and agreements shall be of no further force or effect after the date of their expiration; provided that there shall be no termination of any bona fide claim asserted pursuant to this Agreement with respect to such a representation, warranty, covenant or agreement prior to its expiration date.

(b)The indemnities in Section 13.2(a), Section 13.2(b), Section 13.3(a) and Section 13.3(b) shall terminate as of the expiration date of each respective representation, warranty, covenant or agreement that is subject to indemnification, except in each case as to matters for which a specific written claim for indemnity has been delivered to the Indemnifying Party on or before such expiration date.  Seller’s indemnities in Section 13.2(c) shall terminate nine (9) months after the Closing.  Seller’s indemnities in Section 13.2(d) shall terminate after the expiration of any applicable statute of limitations.  Seller’s indemnities in Section 13.2(e) shall survive Closing without time limit.  Seller’s indemnities in Section 13.2(f) and Buyer’s indemnities in Section 6.5, Section 6.10(a), Section 10.1(c) and Section 13.3(c) shall survive Closing without time limit and shall be deemed covenants running with the Assets (provided that Buyer and its successors and assigns shall not be released from any of, and shall remain jointly and severally liable to the Seller Indemnified Parties for, the obligations and Liabilities of Buyer under such Sections of this Agreement upon any transfer or assignment of any Asset).

13.9Waiver of Right to Rescission.  Seller and Buyer acknowledge that, following Closing, the payment of money, as limited by the terms of this Agreement, shall be adequate compensation for breach of any representation, warranty, covenant or agreement contained herein or for any other claim arising in 

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EXHIBT 10.1

connection with or with respect to the transactions contemplated by this Agreement.  As the payment of money shall be adequate compensation, following Closing, Buyer and Seller waive any right to rescind this Agreement or any of the transactions contemplated hereby.

13.10Insurance, Taxes.  The amount of any Liabilities for which any of the Buyer Indemnified Parties is entitled to indemnification under this Agreement or in connection with or with respect to the transactions contemplated by this Agreement shall be reduced by any corresponding (a) Tax benefit created or generated by the incurrence of the Liability and (b) insurance proceeds from insurance policies carried by a Party realized or that could reasonably be expected to be realized by such Party if a claim were properly pursued under the relevant insurance arrangements.

13.11Non-Compensatory Damages.  None of the Buyer Indemnified Parties nor the Seller Indemnified Parties shall be entitled to recover from Seller or Buyer, as applicable, or their respective Affiliates, any special, indirect, consequential, punitive, exemplary, remote or speculative damages (including damages for lost profits of any kind) arising under or in connection with this Agreement or the transactions contemplated hereby, except to the extent any such Party suffers such damages to a Third Party, which damages (including costs of defense and reasonable attorneys’ fees incurred in connection with defending against such damages) shall not be excluded by this provision as to recovery hereunder.  Subject to the preceding sentence, each of Buyer, on behalf of each of the Buyer Indemnified Parties, and Seller, on behalf of each of the Seller Indemnified Parties, waives any right to recover any special, indirect, consequential, punitive, exemplary, remote or speculative damages (including damages for lost profits of any kind) arising in connection with or with respect to this Agreement or the transactions contemplated hereby. 

13.12Disclaimer of Application of Anti-Indemnity Statutes.  The Parties acknowledge and agree that the provisions of any anti-indemnity statute relating to oilfield services and associated activities shall not be applicable to this Agreement and/or the transactions contemplated hereby.

ARTICLE XIV
TERMINATION, DEFAULT AND REMEDIES

14.1Right of Termination.  This Agreement and the transactions contemplated herein may be terminated at any time prior to Closing:

(a)by Seller, at Seller’s option, if any of the conditions set forth in Article VIII have not been satisfied on or before the Closing Date, and, following written notice thereof from Seller to Buyer specifying the reason such condition is unsatisfied (including any breach by Buyer of this Agreement), such condition remains unsatisfied for a period of ten (10) Business Days after Buyer’s receipt of written notice thereof from Seller;

(b)by Buyer, at Buyer’s option, if any of the conditions set forth in Article VII have not been satisfied on or before the Closing Date, and, following written notice thereof from Buyer to Seller specifying the reason such condition is unsatisfied (including any breach by Seller of this Agreement), such condition remains unsatisfied for a period of ten (10) Business Days after Seller’s receipt of written notice thereof from Buyer;

(c)by Buyer if the condition set forth in Section 7.4 has not been satisfied on or before the Closing Date or by Seller if the condition set forth in Section 8.4 is not satisfied on or before the Closing Date; or

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EXHIBT 10.1

(d)by Seller or Buyer if Closing shall not have occurred on or before July 30, 2014;  
provided, however, that no Party shall have the right to terminate this Agreement pursuant to clause (a), (b) or (d) above if such Party or its Affiliates are at such time in material breach of any provision of this Agreement.
14.2Effect of Termination.  If the obligation to close the transactions contemplated by this Agreement is terminated pursuant to any provision of Section 14.1 hereof, then, except as provided in Section 3.2 and except for the provisions of Sections 10.1(c) through (f), 10.2, 10.3, 13.11, this Section 14.2, Section 14.3, Article I and Article XVI (other than Sections 16.2(b), 16.7 and 16.8) and such of the defined terms set forth in Section 15.1 to give context to such Sections, this Agreement shall forthwith become void, and the Parties shall have no liability or obligation hereunder except and to the extent such termination results from the material breach by a Party of any of its covenants or agreements hereunder in which case the other Party shall have the right to seek all remedies available at law or in equity, including specific performance, for such material breach; provided that if Seller is entitled to and elects to retain the Deposit as partial payment of its damages pursuant to Section 3.2, then Seller shall not also be entitled to seek specific performance. 

14.3Return of Documentation and Confidentiality.  Upon termination of this Agreement, Buyer shall return to Seller all title, engineering, geological and geophysical data, environmental assessments and/or reports, maps and other information furnished by Seller to Buyer or prepared by or on behalf of Buyer in connection with its due diligence investigation of the Assets, in each case in accordance with the Confidentiality Agreement, and an officer of Buyer shall certify same to Seller in writing.  

ARTICLE XV
DEFINED TERMS

15.1Defined Terms.  Capitalized terms used herein shall have the meanings set forth in this Section 15.1 unless the context requires otherwise.

“Accounting Arbitrator” shall have the meaning set forth in Section 3.7.
“Adjusted Purchase Price” shall have the meaning set forth in Section 3.3.
“AFEs” shall have the meaning set forth in Section 4.13.
“Affiliate” shall mean any Person that, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, another Person.  The term “control” and its derivatives with respect to any Person mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
“Aggregate Title Defect Threshold” shall mean an amount equal to one percent (1%) of the Purchase Price.
“Agreement” shall have the meaning set forth in the introductory paragraph herein.
“Allocated Values” shall have the meaning set forth in Section 3.8.
“Applicable Contracts” shall mean all Contracts to which Seller is a party or is bound relating to any of the Assets and (in each case) that will be binding on Buyer after Closing, including: communitization agreements; net profits agreements; production payment agreements; area of mutual interest agreements; 

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EXHIBT 10.1

joint venture agreements; confidentiality agreements; farmin and farmout agreements; bottom hole agreements; crude oil, condensate and natural gas purchase and sale, gathering, transportation and marketing agreements; hydrocarbon storage agreements; acreage contribution agreements; operating agreements; balancing agreements; pooling declarations or agreements; unitization agreements; processing agreements; saltwater disposal agreements; facilities or equipment leases; and other similar contracts and agreements, but exclusive of any master service agreements and Contracts relating to the Excluded Assets. 
“Appurtenant Assets” shall have the meaning set forth in Section 4.20.
“Asset Taxes” shall mean ad valorem, property, severance, production, sales, use and similar Taxes (which for the avoidance of doubt, does not include income, franchise or similar Taxes) based upon or measured by the ownership or operation of the Assets or the production of Hydrocarbons therefrom or the receipt of proceeds therefrom.
“Assets” shall have the meaning set forth in Section 2.1.
“Assignment” shall mean the Assignment and Bill of Sale from Seller to Buyer, pertaining to the Assets, substantially in the form attached to this Agreement as Exhibit B-1.
“Assumed Obligations” shall have the meaning set forth in Section 13.1.
“Burden” shall mean any and all royalties (including lessor’s royalty), overriding royalties, production payments, net profits interests and other burdens upon, measured by or payable out of production.
“Business Day” shall mean a day (other than a Saturday or Sunday) on which commercial banks in Denver, Colorado are generally open for business.
“Buyer” shall have the meaning set forth in the introductory paragraph herein.
“Buyer Indemnified Parties” shall have the meaning set forth in Section 13.2.
“Buyer’s Representatives” shall have the meaning set forth in Section 10.1(a).
“Casualty Loss” shall have the meaning set forth in Section 11.3(b).
“Chieftain Class” shall mean the royalty owners within the description of the certified class in the Chieftain Class Action Litigation and who have not filed a request for exclusion.
“Chieftain Class Action Litigation” shall mean that class action which was pending in the United States District Court, Western District of Oklahoma, styled and numbered: Chieftain Royalty Company and Jack Lancet, on behalf of themselves and the class, as representatives of the class v. QEP Energy Company, Case No. CIV-11-212-R.
“Chieftain Litigation Settlement” shall mean the Stipulation and Agreement of Settlement, dated February 13, 2013, between Chieftain Royalty Company and Jack Lancet, on behalf of themselves and the Chieftain Class, as representatives of the Chieftain Class, and Seller settling all claims in the Chieftain Class Action Litigation.
“Claim Notice” shall have the meaning set forth in Section 13.7(b).
“Closing” shall have the meaning set forth in Section 9.1.

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EXHIBT 10.1

“Closing Date” shall have the meaning set forth in Section 9.1.
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Confidentiality Agreement” shall mean that certain Confidentiality Agreement between Seller and Buyer dated as of February 4, 2014.
“Consent” shall have the meaning set forth in Section 4.4.
“Contract” shall mean any written or oral contract, agreement or any other legally binding arrangement, but excluding, however, any Lease, pooling order, easement, right-of-way, permit or other instrument creating or evidencing an interest in the Assets or any real or immovable property related to or used in connection with the operations of any Assets.
“Cure Period” shall have the meaning set forth in Section 11.2(c).
“Customary Post-Closing Consents” shall mean the consents and approvals from Governmental Authorities for the assignment of the Assets to Buyer that are customarily obtained after the assignment of properties similar to the Assets.
“Decommission” and “Decommissioning” shall mean all dismantling and decommissioning activities and obligations as are required by Law, any Governmental Authority or agreements including all well plugging, replugging and abandonment, facility dismantlement and removal, pipeline and flowline removal, dismantlement and removal of all other property of any kind related to or associated with operations or activities and associated site clearance, site restoration and site remediation.
“Decommissioning Obligations” shall have the meaning set forth in Section 13.1.
“Defensible Title” shall mean such title of Seller with respect to the Wells and Well Locations set forth on Exhibit A-1 and the Leases and the Mineral Fee Interests set forth on Exhibit A-2 that, as of the Effective Time and the Execution Date and subject to Permitted Encumbrances:
(a)    with respect to each Well or Well Location set forth on Exhibit A-1 (subject to the depth restrictions set forth on Exhibit A and Exhibit A-1, and, for a Well, limited to any currently producing formations, and, for a Well Location, limited to the applicable Target Formations set forth on Exhibit A-1 for such Well Location), entitles Seller to receive not less than the Net Revenue Interest set forth on Exhibit A-1 for such Well or Well Location, except for (i) decreases in connection with those operations in which Seller or its successors or assigns may from and after the Execution Date elect to be a non-consenting co-owner, (ii) decreases resulting from the establishment or amendment from and after the Execution Date of pools or units, (iii) decreases required to allow other Working Interest owners to make up past underproduction or pipelines to make up past under deliveries, and (iv) as otherwise set forth on Exhibit A-1;
(b)    with respect to each Lease or Mineral Fee Interest set forth on Exhibit A-2 (subject to the depth restrictions set forth on Exhibit A-2 and the applicable Target Formations set forth on Exhibit A-2), entitles Seller to receive not less than the Net Acres set forth on Exhibit A-2 for such Lease or such Mineral Fee Interest, except for (i) decreases in connection with those operations in which Seller or its successors or assigns may from and after the Execution Date elect to be a non-consenting co-owner, (ii) decreases resulting from the establishment or amendment from and after the Execution Date of pools or units, (iii) decreases required to allow other Working Interest owners to make up 

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EXHIBT 10.1

past underproduction or pipelines to make up past under deliveries, and (iv) as otherwise set forth on Exhibit A-2; 
(c)    with respect to each Well or Well Location set forth on Exhibit A-1 (subject to the depth restrictions set forth on Exhibit A and Exhibit A-1, and, for a Well, limited to any currently producing formations, and, for a Well Location, limited to the applicable Target Formations set forth on Exhibit A-1 for such Well Location), obligates Seller to bear not more than the Working Interest set forth on Exhibit A-1 for such Well or Well Location, except (i) increases resulting from contribution requirements with respect to defaulting co-owners under applicable operating agreements, (ii) increases to the extent that such increases are accompanied by a proportionate increase in Seller’s Net Revenue Interest, and (iii) as otherwise set forth on Exhibit A-1; and
(d)    is free and clear of all Encumbrances.
“Deposit” shall have the meaning set forth in Section 3.2(a).
“Designated Well Costs” shall have the meaning set forth in Section 2.3.
“Devon” shall mean Devon Energy Production Company, L.P.
“Dispute Notice” shall have the meaning set forth in Section 3.6(a).
“Disputed Environmental Matters” shall have the meaning set forth in Section 12.1(e).
“Disputed Title Matters” shall have the meaning set forth in Section 11.2(j).
“Effective Time” shall mean 7:00 a.m. (Central Time) on January 1, 2014.
“email” shall have the meaning set forth in Section 16.6.
“Encumbrance” shall mean any lien, mortgage, security interest, pledge, charge or similar encumbrance.
“Environmental Arbitrator” shall have the meaning set forth in Section 12.1(e).
“Environmental Claim Date” shall have the meaning set forth in Section 12.1(a).
“Environmental Condition” shall mean (a) a condition existing on the Execution Date with respect to the air, soil, subsurface, surface waters, ground waters and/or sediments that causes an Asset (or Seller with respect to an Asset) not to be in compliance with any Environmental Law or (b) the existence as of the Execution Date with respect to the Assets or the operation thereof of any environmental pollution, contamination or degradation where remedial or corrective action is presently required (or if known, would be presently required) under Environmental Laws.
“Environmental Defect” shall mean an Environmental Condition with respect to an Asset.
“Environmental Defect Deductible” shall mean an amount equal to one percent (1%) of the Purchase Price.
“Environmental Defect Notice” shall have the meaning set forth in Section 12.1(a).
“Environmental Indemnity Agreement” shall have the meaning set forth in Section 12.1(b)(iii).

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EXHIBT 10.1

“Environmental Laws” shall mean all applicable Laws in effect as of the Execution Date, including common law, relating to the protection of the public health, welfare and the environment, including, those Laws relating to the storage, handling and use of chemicals and other Hazardous Substances and those Laws relating to the generation, processing, treatment, storage, transportation, disposal or other management thereof.  The term “Environmental Laws” does not include good or desirable operating practices or standards that may be employed or adopted by other oil and gas well operators or recommended by a Governmental Authority.
“Exchange” shall have the meaning set forth in Section 16.17.
“Excluded Assets” shall mean (a) all of Seller’s corporate minute books, financial records and other business records that relate to Seller’s business generally (including the ownership and operation of the Assets); (b) to the extent that they do not relate to the Assumed Obligations for which Buyer is providing indemnification hereunder, all trade credits, all accounts, all receivables and all other proceeds, income or revenues attributable to the Assets and attributable to any period of time prior to the Effective Time; (c) to the extent that they do not relate to the Assumed Obligations for which Buyer is providing indemnification hereunder, Seller’s rights with respect to all claims and causes of action of Seller arising under or with respect to any Contract that are attributable to periods of time prior to the Effective Time (including claims for adjustments or refunds); (d) subject to Section 11.3 and to the extent that they do not relate to the Assumed Obligations for which Buyer is providing indemnification hereunder, all rights and interests of Seller (i) under any policy or agreement of insurance or indemnity, (ii) under any bond or (iii) to any insurance or condemnation proceeds or awards arising, in each case, from acts, omissions or events or damage to or destruction of property; (e) Seller’s rights with respect to all Hydrocarbons produced and sold from the Assets with respect to all periods prior to the Effective Time; (f) all claims of Seller or its Affiliates for refunds of, rights to receive funds from any Governmental Authority or loss carry forwards with respect to (i) production or any other Taxes attributable to any period prior to the Effective Time, (ii) income or franchise Taxes or (iii) any Taxes attributable to the Excluded Assets; (g) all of Seller’s personal computers and associated peripherals and all of Seller’s radio and telephone equipment; (h) all of Seller’s proprietary computer software, patents, trade secrets, copyrights, names, trademarks, logos and other intellectual property; (i) all documents and instruments of Seller that may be protected by an attorney-client privilege or any attorney work product doctrine; (j) all data of Seller that cannot be disclosed to Buyer as a result of confidentiality arrangements under agreements with Third Parties; (k) all audit rights of Seller arising under any of the Applicable Contracts or otherwise with respect to any period prior to the Effective Time or to any of the Excluded Assets, except for any Imbalances assumed by Buyer; (l) all geophysical and other seismic and related technical data and information relating to the Assets which Seller may not disclose, assign or transfer under its existing agreements and licenses without making any additional payments or incurring any liabilities or obligations; (m) documents prepared or received by Seller or its Affiliates with respect to (i) lists of prospective purchasers for such transactions compiled by Seller, (ii) bids submitted by other prospective purchasers of the Assets, (iii) analyses by Seller or its Affiliates of any bids submitted by any prospective purchaser, (iv) correspondence between or among Seller, its respective representatives, and any prospective purchaser other than Buyer and (v) correspondence between Seller or any of its representatives with respect to any of the bids, the prospective purchasers or the transactions contemplated by this Agreement; (n) any leases and other assets specifically listed on Exhibit C; (o) any Hedge Contracts; (p) any debt instruments of Seller; (q) the vehicles set forth on Exhibit C; (r) all of Seller’s personnel files and records and (s) any assets described in Section 2.1(d) or Section 2.1(e) that are not assignable. 
“Execution Date” shall have the meaning set forth in the introductory paragraph herein.
“Final Price” shall have the meaning set forth in Section 3.6(a).

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EXHIBT 10.1

“Final Settlement Statement” shall have the meaning set forth in Section 3.6(a).
“GAAP” shall mean United States generally accepted accounting principles.
“Governmental Authority” shall mean any federal, state, local, municipal, tribal or other government; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or Taxing Authority or power, and any court or governmental tribunal, including any tribal authority having or asserting jurisdiction.
“Guarantees” shall have the meaning set forth in Section 6.5.
“Hazardous Substances” shall mean any pollutants, contaminants, toxins or hazardous or extremely hazardous substances, materials, wastes, constituents, compounds or chemicals that are regulated by, or may form the basis of liability under, any Environmental Laws, including NORM and other substances referenced in Section 12.2.
“Hedge Contract” shall mean any Contract to which Seller or any of its Affiliates is a party with respect to any swap, forward, future or derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions.
“Hydrocarbons” shall mean oil and gas and other hydrocarbons produced or processed in association therewith.
“Identified Employees” shall have the meaning set forth in Section 6.10(a).
“Imbalances” shall mean all Well Imbalances and Pipeline Imbalances.
“Indemnified Party” shall have the meaning set forth in Section 13.7(a).
“Indemnifying Party” shall have the meaning set forth in Section 13.7(a).
“Indemnity Deductible” shall mean an amount equal to one percent (1%) of the Purchase Price.
“Individual Environmental Threshold” shall have the meaning set forth in Section 12.1(d).
“Individual Title Defect Threshold” shall have the meaning set forth in Section 11.2(i).
“Interim Period” shall mean that period of time commencing with the Effective Time and ending at 7:00 a.m. (Central Time) on the Closing Date.
“Knowledge” shall mean with respect to Seller, the actual knowledge (without investigation) of the following Persons:  Jim Mueggenborg, field operations; Mike Reitz, Operation Manager; Alice Ley, Vice President and Controller; Mike Watanabe, Vice President, Land; Richard Gill, Manager, Title and Lease; Harriet Connolly, landman; and Otto Svendsen, General Manager, Midcontinent Division.
“Law” shall mean any applicable statute, law, rule, regulation, ordinance, order, code, ruling, writ, injunction, decree or other official act of or by any Governmental Authority.
“Leases” shall have the meaning set forth in Section 2.1(a).

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EXHIBT 10.1

“Liabilities” shall mean any and all claims, obligations, causes of action, payments, charges, judgments, assessments, liabilities, losses, damages, penalties, fines and costs and expenses, including any attorneys’ fees, legal or other expenses incurred in connection therewith and including liabilities, costs, losses and damages for personal injury or death or property damage or environmental damage or Remediation.
“Material Adverse Effect” shall mean an event or circumstance that, individually or in the aggregate, results in a material adverse effect on the ownership, operation or value of the Assets taken as a whole and as currently operated as of the Execution Date or a material adverse effect on the ability of Seller to consummate the transactions contemplated by this Agreement and perform its obligations hereunder; provided, however, that a Material Adverse Effect shall not include any material adverse effect resulting from:  (a) entering into this Agreement or the announcement of the transactions contemplated by this Agreement; (b) any action or omission of Seller taken in accordance with the terms of this Agreement without the violation thereof or with the prior written consent of Buyer; (c) changes in general market, economic, financial or political conditions (including changes in commodity prices, fuel supply or transportation markets, interest or rates) in the area in which the Assets are located, the United States or worldwide; (d) changes in conditions or developments generally applicable to the oil and gas industry in the area where the Assets are located; (e) acts of God, including hurricanes, tornados, storms or other naturally occurring events; (f) acts or failures to act of Governmental Authorities; (g) civil unrest, any outbreak of disease or hostilities, terrorist activities or war or any similar disorder; (h) matters that are cured or no longer exist by the earlier of Closing and the termination of this Agreement; (i) a change in Laws and any interpretations thereof from and after the Execution Date; (j) any reclassification or recalculation of reserves in the ordinary course of business; (k) changes in the prices of Hydrocarbons; and (l) natural declines in well performance. 
“Material Contracts” shall have the meaning set forth in Section 4.8(a).
“Mineral Fee Interests” shall have the meaning set forth in Section 2.1(a).
“Net Acre” shall mean, as computed separately (a) with respect to each Lease or each Mineral Fee Interest, as applicable, set forth on Exhibit A-2, in each case subject to the depth restrictions set forth on Exhibit A-2 and with respect to the applicable Target Formations set forth on Exhibit A-2 only, (i) the number of gross acres in the lands covered by such Lease or such Mineral Fee Interest, as applicable, multiplied by (ii) the undivided percentage interest in oil, gas and other minerals covered by such Lease or such Mineral Fee Interest, as applicable, in such lands, multiplied by (iii) Seller’s portion of such undivided percentage interest that is burdened with the obligation to bear and pay costs and expenses, and (b) with respect to each other property included in the Assets, (i) the number of gross acres in the lands covered by such Asset, multiplied by (ii) the undivided percentage interest in oil, gas and other minerals covered by such Asset in such lands, multiplied by (iii) Seller’s portion of such undivided percentage interest that is burdened with the obligation to bear and pay costs and expenses. 
“Net Revenue Interest” shall mean, with respect to any Well or Well Location set forth on Exhibit A-1 (subject to the depth restrictions set forth on Exhibit A and Exhibit A-1, and, for a Well, limited to any currently producing formations, and, for a Well Location, limited to the applicable Target Formations set forth on Exhibit A-1 for such Well Location), the interest in and to all Hydrocarbons produced, saved and sold from or allocated to such Well or Well Location (subject to the depth restrictions set forth on Exhibit A and Exhibit A-1, and, for a Well, limited to any currently producing formations, and, for a Well Location, limited to the applicable Target Formations set forth on Exhibit A-1 for such Well Location), after giving effect to all Burdens.
“NORM” shall mean naturally occurring radioactive material.

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EXHIBT 10.1

“Operating Expenses” shall have the meaning set forth in Section 2.3.
“Overhead Costs” shall mean with respect to those Assets that are operated by Seller, the amount of $700,000 as an overhead charge attributable to such Assets during the Interim Period.
“Party” and “Parties” shall have the meaning set forth in the introductory paragraph herein.
“Permit” shall have the meaning set forth in Section 4.17.
“Permitted Encumbrances” shall mean:
(a)the terms and conditions of all Leases and all Burdens if the net cumulative effect of such Leases and Burdens (i) does not operate to reduce the Net Revenue Interest of Seller with respect to any Well or Well Location set forth on Exhibit A-1 to an amount less than the Net Revenue Interest set forth on Exhibit A-1 for such Well or Well Location, (ii) does not obligate Seller to bear a Working Interest with respect to any Well or Well Location set forth on Exhibit A-1 in any amount greater than the Working Interest set forth on Exhibit A-1 for such Well or Well Location (unless the Net Revenue Interest for such Well or Well Location is greater than the Net Revenue Interest set forth on Exhibit A-1 in the same or greater proportion as any increase in such Working Interest), and (iii) does not operate to reduce the Net Acres of Seller with respect to any Lease or any Mineral Fee Interest set forth on Exhibit A-2, as applicable, to an amount less than the Net Acres set forth on Exhibit A-2 for such Lease or for such Mineral Fee Interest, as applicable;

(b)preferential rights to purchase and required consents to assignment and similar agreements, subject to compliance with the provisions of this Agreement;

(c)liens for Taxes or assessments not yet due or delinquent or, if delinquent, that are being contested in good faith in the normal course of business;

(d)Customary Post-Closing Consents;

(e)conventional rights of reassignment;

(f)such Title Defects as Buyer may have waived or is deemed to have waived pursuant to the terms of this Agreement;

(g)all applicable Laws and all rights reserved to or vested in any Governmental Authority (i) to control or regulate any Asset in any manner; (ii) by the terms of any right, power, franchise, grant, license or permit, or by any provision of Law, to terminate such right, power, franchise, grant, license or permit or to purchase, condemn, expropriate or recapture or to designate a purchaser of any of the Assets; (iii) to use such property in a manner which does not materially impair the use of such property for the purposes for which it is currently owned and operated; or (iv) to enforce any obligations or duties affecting the Assets to any Governmental Authority with respect to any franchise, grant, license or permit;

(h)rights of a common owner of any interest in rights-of-way, permits or easements held by Seller and such common owner as tenants in common or through common ownership;

(i)easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way, surface leases and other rights in the Assets for the purpose of operations, facilities, roads, alleys, highways, railways, pipelines, transmission lines, transportation lines, distribution lines, power lines, telephone lines, 

45

EXHIBT 10.1

removal of timber, grazing, logging operations, canals, ditches, reservoirs and other like purposes, or for the joint or common use of real estate, rights-of-way, facilities and equipment, which, in each case, do not materially impair the operation or use of the Assets as currently operated and used;

(j)vendors, carriers, warehousemen’s, repairmen’s, mechanics’, workmen’s, materialmen’s, construction or other like liens arising by operation of Law in the ordinary course of business or incident to the construction or improvement of any property in respect of obligations which are not yet due or which are being contested in good faith by appropriate proceedings by or on behalf of Seller;

(k)liens created under Leases and/or operating agreements or by operation of Law in respect of obligations that are not yet due or that are being contested in good faith by appropriate proceedings by or on behalf of Seller;

(l)with respect to any interest in the Assets acquired through compulsory pooling, failure of the records of any Governmental Authority to reflect Seller as the owner of an Asset;

(m)any Encumbrance affecting the Assets that is discharged by Seller at or prior to Closing;
(n)any matters referenced and set forth on Exhibit A, Exhibit A-1, Exhibit A-2 or Exhibit A-3 and all litigation set forth in Schedule 4.7;

(o)mortgage liens burdening a lessor’s interest in the Assets;

(p)the terms and conditions of all Contracts (including the Applicable Contracts) if the net cumulative effect of such Contracts (i) does not operate to reduce the Net Revenue Interest of Seller with respect to any Well or Well Location set forth on Exhibit A-1 to an amount less than the Net Revenue Interest set forth on Exhibit A-1 for such Well or Well Location, (ii) does not obligate Seller to bear a Working Interest with respect to any Well or Well Location set forth on Exhibit A-1 in any amount greater than the Working Interest set forth on Exhibit A-1 for such Well or Well Location (unless the Net Revenue Interest for such Well or Well Location is greater than the Net Revenue Interest set forth on Exhibit A-1 in the same or greater proportion as any increase in such Working Interest), and (iii) does not operate to reduce the Net Acres of Seller with respect to any Lease or any Mineral Fee Interest set forth on Exhibit A-2, as applicable, to an amount less than the Net Acres set forth on Exhibit A-2 for such Lease or for such Mineral Fee Interest, as applicable; and

(q)all other Encumbrances, instruments, obligations, defects and irregularities affecting the Assets that, individually or in the aggregate, (i) are not such as to materially interfere with the operation or use of any of the Assets (as currently operated and used), (ii) do not reduce the Net Revenue Interest of Seller with respect to any Well or Well Location set forth on Exhibit A-1 to an amount less than the Net Revenue Interest set forth on Exhibit A-1 for such Well or Well Location, (iii) do not obligate Seller to bear a Working Interest in any amount greater than the Working Interest set forth on Exhibit A-1 for such Well or Well Location (unless the Net Revenue Interest for such Well or Well Location is greater than the Net Revenue Interest set forth on Exhibit A-1 in the same or greater proportion as any increase in such Working Interest), and (iv) do not reduce the Net Acres of Seller with respect to any Lease or any Mineral Fee Interest set forth on Exhibit A-2, as applicable, to an amount less than the Net Acres set forth on Exhibit A-2 for such Lease or for such Mineral Fee Interest, as applicable. 

“Person” shall mean any individual, firm, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, Governmental Authority or any other entity.

46

EXHIBT 10.1

“Personal Property” shall have the meaning set forth in Section 2.1(f).
“Pipeline Imbalance” shall mean any marketing imbalance between the quantity of Hydrocarbons attributable to the Assets required to be delivered by Seller under any Contract relating to the purchase and sale, gathering, transportation, storage, processing (including any production handling and processing at a separation facility) or marketing of Hydrocarbons and the quantity of Hydrocarbons attributable to the Assets actually delivered by Seller pursuant to the relevant Contract, together with any appurtenant rights and obligations concerning production balancing at the delivery point into the relevant sale, gathering, transportation, storage or processing facility.
“Preferential Purchase Right” shall have the meaning set forth in Section 4.10.
“Preliminary Settlement Statement” shall have the meaning set forth in Section 3.5.
“Purchase Price” shall have the meaning set forth in Section 3.1.
“Records” shall have the meaning set forth in Section 2.1(h).
“Remediation” shall mean, with respect to an Environmental Condition, the implementation and completion of any remedial, removal, response, construction, closure, disposal or other corrective actions required under Environmental Laws to correct or remove such Environmental Condition.
“Remediation Amount” shall mean, with respect to an Environmental Condition, the present value as of the Closing Date (using an annual discount rate of ten percent (10%)) of the cost (net to Seller’s interest prior to the consummation of the transactions contemplated by this Agreement) of the most cost-effective Remediation of such Environmental Condition.
“Retained Liabilities” shall have the meaning set forth in Section 13.2.
“Searle Litigation” shall mean that action which was pending in the District Court, Caddo County, Oklahoma, set forth in Schedule 4.7(C) and styled and numbered: Jack B. Searle, Tamara D. Searle, OGI, Inc., John A. Smallwood, Linsi N. C. Smallwood, Marc O. Fox and Connie E. Fox v. QEP Energy Company (including predecessors, successors and affiliates), Case No. CJ-2013-134.
“Seller” shall have the meaning set forth in the introductory paragraph of this Agreement.
“Seller Indemnified Parties” shall have the meaning set forth in Section 13.3.
“Specified Representations” shall mean the representations and warranties in Sections 4.1, 4.2, 4.15, 5.1, 5.2, 5.9, 5.10 and 5.11.
“Survival Period” shall have the meaning set forth in Section 11.1(c)(i).
“Target Formations” shall mean the geological formations set forth in Exhibit D.
“Taxes” shall mean any taxes, assessments and other governmental charges imposed by any Governmental Authority, including net income, gross income, profits, gross receipts, license, employment, stamp, occupation, premium, alternative or add-on minimum, ad valorem, real property, personal property, transfer, real property transfer, value added, sales, use, environmental (including taxes under Code Section 59A), customs, duties, capital stock, franchise, excise, withholding, social security (or similar), unemployment, disability, payroll, fuel, excess profits, windfall profit, severance, estimated or other tax, 

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EXHIBT 10.1

including any interest, penalty or addition thereto, whether disputed or not, and any reasonable expenses incurred in connection with the determination, settlement or litigation of the Tax liability. 
“Taxing Authority” shall mean, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision, including any governmental or quasi-governmental entity or agency that imposes, or is charged with collecting, social security or similar charges or premiums.
“Third Party” shall mean any Person other than a Party to this Agreement or an Affiliate of a Party to this Agreement.
“Third Party Claim” shall have the meaning set forth in Section 13.7(b).
“Title Arbitrator” shall have the meaning set forth in Section 11.2(j).
“Title Benefit” shall mean, (a) with respect to each Well and Well Location shown on Exhibit A-1, any right, circumstance or condition that operates to (i) increase the Net Revenue Interest of Seller above that shown for such Well or Well Location on Exhibit A-1 to the extent the same does not cause a greater than proportionate increase in Seller’s Working Interest therein above that shown on Exhibit A-1, or (ii) to decrease the Working Interest of Seller in any Well or Well Location below that shown for such Well or Well Location on Exhibit A-1 to the extent the same causes a decrease in Seller’s Working Interest that is proportionately greater than the decrease in Seller’s Net Revenue Interest therein below that shown on Exhibit A-1, and (b) with respect to each Lease or each Mineral Fee Interest shown on Exhibit A-2 or any other property included in the Assets, as applicable, any right, circumstance or condition that operates to increase the Net Acres of Seller above that shown for such Lease, Mineral Fee Interest or other property shown on Exhibit A-2, if applicable.
“Title Benefit Amount” shall have the meaning set forth in Section 11.2(e).
“Title Benefit Notice” shall have the meaning set forth in Section 11.2(b).
“Title Benefit Property” shall have the meaning set forth in Section 11.2(b).
“Title Claim Date” shall have the meaning set forth in Section 11.2(a).
“Title Defect” shall mean any Encumbrance, defect or other matter that causes Seller not to have Defensible Title in and to the Wells or the Well Locations set forth on Exhibit A-1, the Leases or the Mineral Fee Interests set forth on Exhibit A-2 as of the Effective Time, without duplication; provided that the following shall not be considered Title Defects:
(a)    defects arising out of lack of corporate or other entity authorization unless Buyer provides affirmative evidence that such corporate or other entity action was not authorized and results in another Person’s superior claim of title to the relevant Asset;
(b)    defects based on a gap in Seller’s chain of title in the applicable federal, state or county records, 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;
(c)    defects based upon the failure to record any federal, state or Indian Leases or any assignments of interests in such Leases in any applicable county records;

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EXHIBT 10.1

(d)    defects based on the failure to recite marital status in a document or omission of successors or heirship or estate proceedings; 
(e)    any Encumbrance or loss of title resulting from Seller’s conduct of business in compliance with this Agreement;
(f)    defects based upon the exercise of any Preferential Purchase Rights or failure to obtain any Consents; 
(g)    defects arising from any prior oil and gas lease relating to the lands covered by a Lease not being surrendered of record, unless Buyer provides affirmative evidence that such prior oil and gas lease is still in effect and results in another Person’s actual and superior claim of title to the relevant Lease or Well;
(h)    defects that affect only which Person has the right to receive royalty payments (rather than the amount or the proper payment of such royalty payment);
(i)    defects based solely on: (i) lack of information in Seller’s files; (ii) references to an unrecorded document(s) to which neither Seller nor any Affiliate is a party, if such document is dated earlier than January 1, 1960 and is not in Seller’s files; or (iii) Tax assessment, Tax payment or similar records (or the absence of such activities or records); 
(j)    defects or irregularities that would customarily be waived by a reasonable owner or operator of oil and gas properties; 
(k)    the expiration of a Lease by its terms after September 1, 2014;
(l)    defects arising out of lack of survey, unless a survey is expressly required by applicable Laws;
(m)    defects that have been cured by applicable Laws of limitations or presumptions;
(n)    defects arising from any change in applicable Law after the Execution Date, including changes that would raise the minimum landowner royalty; and
(o)    defects or irregularities resulting from or related to probate proceedings or the lack thereof, which defects or irregularities have been outstanding for seven and a half (7.5) years or more.  
“Title Defect Amount” shall have the meaning set forth in Section 11.2(g).
“Title Defect Notice” shall have the meaning set forth in Section 11.2(a).
“Title Defect Property” shall have the meaning set forth in Section 11.2(a).
“Title Indemnity Agreement” shall have the meaning set forth in Section 11.2(d)(ii).
“Transaction Documents” shall mean those documents executed pursuant to or in connection with this Agreement.
“Transition Services Agreement” shall mean the Transition Services Agreement between Seller and Buyer, substantially in the form attached to this Agreement as Exhibit B-4. 

49

EXHIBT 10.1

“Treasury Regulations” shall mean the regulations promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Code.  All references herein to sections of the Treasury Regulations shall include any corresponding provision or provisions of succeeding, similar, substitute, proposed or final Treasury Regulations.
“Units” shall have the meaning set forth in Section 2.1(c).
“URC Related Interests” shall mean the interests set forth on Exhibit E.
“Wells” shall have the meaning set forth in Section 2.1(b).
“Well Imbalance” shall mean any imbalance at the wellhead between the amount of Hydrocarbons produced from a Well and allocable to the interests of Seller therein and the shares of production from the relevant Well to which Seller is entitled, together with any appurtenant rights and obligations concerning future in kind and/or cash balancing at the wellhead.
“Well Location” shall mean each well location set forth on Exhibit A-1 and the applicable spacing unit or governmental spacing unit, described in that certain virtual data room maintained and updated from time to time by BMO Capital and existing approved spacing, associated with such well location.
“Working Interest” shall mean, with respect to any Well or Well Location set forth on Exhibit A-1 (subject to the depth restrictions set forth on Exhibit A and Exhibit A-1, and, for a Well, limited to any currently producing formations, and, for a Well Location, limited to the applicable Target Formations set forth on Exhibit A-1 for such Well Location), the interest in and to such currently producing formations (for such Well) or such applicable Target Formations (for such Well Location) that is burdened with the obligation to bear and pay costs and expenses of maintenance, development and operations on or in connection with such currently producing formations (for such Well) or such applicable Target Formations (for such Well Location), but without regard to the effect of any Burdens.

ARTICLE XVI
MISCELLANEOUS

16.1Appendices, Exhibits and Schedules.  All of the Appendices, Exhibits and Schedules referred to in this Agreement are hereby incorporated into this Agreement by reference and constitute a part of this Agreement.  Each Party to this Agreement and its counsel has received a complete set of Appendices, Exhibits and Schedules prior to and as of the execution of this Agreement.

16.2Expenses and Taxes.  

(a)Except as otherwise specifically provided herein, all fees, costs and expenses incurred by Buyer or Seller in negotiating this Agreement or in consummating the transactions contemplated by this Agreement shall be paid by the Party incurring the same, including, legal and accounting fees, costs and expenses.  

(b)All required documentary, filing and recording fees and expenses in connection with the filing and recording of the assignments, conveyances or other instruments required to convey title to the Assets to Buyer shall be borne by Buyer.  Seller shall retain responsibility for, and shall bear and pay, all federal income Taxes, state income Taxes, and other similar income Taxes incurred or imposed with 

50

EXHIBT 10.1

respect to (i) the transactions described in this Agreement or (ii) the ownership of the Assets, the production of Hydrocarbons, or the receipt of proceeds therefrom for all periods prior to the Closing Date.  Buyer shall assume responsibility for, and shall bear and pay, all state sales and use Taxes and real property transfer and documentary stamp Taxes incurred or imposed with respect to the transactions described in this Agreement.  Seller shall be allocated and bear all Asset Taxes for any period or portion thereof ending prior to the Effective Time (for purposes of this Section, the period for ad valorem and property Taxes begins on January 1st and ends on December 31st of the particular year), and Buyer shall be allocated and bear all Asset Taxes for any period or portion thereof that begins on or after the Effective Time.  For purposes of determining the allocations described in the preceding sentence, (A) Asset Taxes that are attributable to the severance or production of Hydrocarbons shall be allocated to the period in which the severance or production giving rise to such Asset Taxes occurred, (B) Asset Taxes that are based upon or related to income or receipts or imposed on a transactional basis (other than such Asset Taxes described in clause (A)), shall be allocated to the period in which the transaction giving rise to such Asset Taxes occurred, and (C) Asset Taxes that are ad valorem, property or other Asset Taxes imposed on a periodic basis pertaining to a taxable period beginning before and ending after the Effective Time shall be allocated between the portion of such period ending immediately prior to the date on which the Effective Time occurs and the portion of such period beginning on the date on which the Effective Time occurs by prorating each such Asset Tax based on the number of days in the applicable period that occur before the date on which the Effective Time occurs, on the one hand, and the number of days in such period that occur on or after the date on which the Effective Time occurs, on the other hand.  Notwithstanding anything herein to the contrary, subject to Buyer’s indemnification rights under Section 13.2, Buyer shall be responsible for filing all Tax returns, reports, statements and other filings for Asset Taxes that are required to be filed after the Closing Date and paying all Asset Taxes that become due and payable after the Closing Date.

16.3Assignment.  Subject to the provisions of Section 16.17, this Agreement may not be assigned by Buyer without the prior written consent of Seller.  In the event Seller consents to any such assignment, such assignment shall not relieve Buyer of any obligations and responsibilities hereunder, including obligations and responsibilities arising following such assignment.  Buyer shall be permitted to assign to Devon prior to Closing Buyer’s right to be assigned fifty percent (50%) of the Assets; in the event of such assignment, Buyer shall continue to be solely entitled to all other rights and benefits under this Agreement with respect to the fifty percent (50%) of the Assets so assigned, including rights to assert claims of indemnity and breach of special warranty under this Agreement with respect to the fifty percent (50%) of the Assets so assigned.  Any assignment or other transfer by Buyer or its successors and assigns of any of the Assets (including the assignment to Devon described in the preceding sentence) shall not relieve Buyer or its successors or assigns of any of their obligations (including indemnity obligations) hereunder, as to the Assets so assigned or transferred. 

16.4Preparation of Agreement.  Both Seller and Buyer and their respective counsel participated in the preparation of this Agreement. In the event of any ambiguity in this Agreement, no presumption shall arise based on the identity of the draftsman of this Agreement.

16.5Publicity.  Seller and Buyer shall promptly consult with each other with regard to all press releases or other public or private announcements issued or made at or prior to Closing concerning this Agreement or the transactions contemplated herein, and, except as may be required by applicable Laws or the applicable rules and regulations of any Governmental Authority or stock exchange, neither Buyer nor Seller shall issue any such press release or other public or private announcement without the prior written consent of the other Party, which shall not be unreasonably withheld or delayed.  The Parties shall be obligated to hold all specific terms and provisions of this Agreement strictly confidential until the expiration of the two (2)-year period after the Closing; provided, however, that the foregoing shall not (a) restrict disclosures 

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EXHIBT 10.1

by Buyer or Seller that are required by applicable securities or other Laws or regulations or the applicable rules of any stock exchange having jurisdiction over the disclosing Party or its Affiliates, provided that such disclosures shall be made only to the extent required thereunder, (b) prevent Buyer or Seller from recording the Assignment and any federal or state assignments delivered at Closing or from complying with any disclosure requirements of Governmental Authorities that are applicable to the transfer of the Assets from Seller to Buyer, (c) prevent Buyer or Seller from making any disclosure of information relating to this Agreement if made in a manner, under conditions and to Persons that would be permitted under the Confidentiality Agreement so long as such Person continues to hold such information confidential on the same terms as set forth in this Section 16.5 and (d) prevent Seller from making disclosures in connection with complying with Preferential Purchase Rights and other transfer restrictions applicable to the transactions contemplated hereby.

16.6Notices.  All notices and communications required or permitted to be given hereunder shall be in writing and shall be delivered personally, or sent by bonded overnight courier, or mailed by U.S. Express Mail or by certified or registered United States Mail with all postage fully prepaid, or sent by electronic mail (“email”) transmission (provided that a receipt of such email is requested and received), addressed to the appropriate Party at the address for such Party shown below or at such other address as such Party shall have theretofore designated by written notice delivered to the Party giving such notice:

If to Seller:
QEP Resources, Inc.
Independence Plaza
1050 17th Street, Suite 500
Denver, CO 80265
Attention:  Austin S. Murr, Senior Vice President, Land and Business Development
Email: Austin.Murr@qepres.com

If to Buyer:
Cimarex Energy Co.
1700 Lincoln Street, Suite 1800
Denver, CO 80203
Attention:  Stephen P. Bell, Executive Vice President, Business Development
Email:  Sbell@cimarex.com

Any notice given in accordance herewith shall be deemed to have been given only when delivered to the addressee in person, or by courier, or transmitted by email transmission during normal business hours on a Business Day (or if delivered or transmitted after normal business hours on a Business Day or on a day other than a Business Day, then on the next Business Day), or upon actual receipt by the addressee during normal business hours on a Business Day after such notice has either been delivered to an overnight courier or deposited in the United States Mail, as the case may be (or if delivered after normal business hours on a Business Day or on a day other than a Business Day, then on the next Business Day).  The Parties may change the address and the email address to which such communications are to be addressed by giving written notice to the other Parties in the manner provided in this Section 16.6.  If the date specified in this Agreement for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (and the expiration date of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day.

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EXHIBT 10.1

16.7Further Cooperation.  After Closing, Buyer and Seller shall execute and deliver, or shall cause to be executed and delivered, from time to time such further instruments of conveyance and transfer, and shall take such other actions as any Party may reasonably request, to convey and deliver the Assets to Buyer, to perfect Buyer’s title thereto, and to accomplish the orderly transfer of the Assets to Buyer in the manner contemplated by this Agreement.  

16.8Filings, Notices and Certain Governmental Approvals.  Promptly after Closing, Buyer shall (a) record all assignments executed at Closing in the records of the applicable Governmental Authority (including any federal or state agencies, if applicable), (b) if applicable, send notices to vendors supplying goods and services for the Assets and to the operator of such Assets of the assignment of such Assets to Buyer, (c) actively pursue the unconditional approval of all applicable Governmental Authorities of the assignment of the Assets to Buyer and (d) actively pursue all other consents and approvals that may be required in connection with the assignment of the Assets to Buyer and the assumption of the Liabilities assumed by Buyer hereunder, in each case, that shall not have been obtained prior to Closing.  Buyer obligates itself to take any and all action required by any Governmental Authority in order to obtain such unconditional approval, including the posting of any and all bonds or other security that may be required in excess of its existing lease, pipeline or area-wide bond.

16.9Entire Agreement; Conflicts.  THIS AGREEMENT, THE APPENDICES, EXHIBITS AND SCHEDULES HERETO, THE TRANSACTION DOCUMENTS AND THE CONFIDENTIALITY AGREEMENT COLLECTIVELY CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES PERTAINING TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ALL PRIOR AGREEMENTS, UNDERSTANDINGS, NEGOTIATIONS AND DISCUSSIONS, WHETHER ORAL OR WRITTEN, OF THE PARTIES PERTAINING TO THE SUBJECT MATTER HEREOF.  THERE ARE NO WARRANTIES, REPRESENTATIONS OR OTHER AGREEMENTS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, AND NEITHER SELLER NOR BUYER SHALL BE BOUND BY OR LIABLE FOR ANY ALLEGED REPRESENTATION, PROMISE, INDUCEMENT OR STATEMENTS OF INTENTION NOT SO SET FORTH.  IN THE EVENT OF A CONFLICT BETWEEN (A) THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE TERMS AND PROVISIONS OF ANY SCHEDULE OR EXHIBIT HERETO OR (B) THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE TERMS AND PROVISIONS OF ANY TRANSACTION DOCUMENT, THE TERMS AND PROVISIONS OF THIS AGREEMENT SHALL GOVERN AND CONTROL; PROVIDED, HOWEVER, THAT THE INCLUSION IN ANY OF THE SCHEDULES AND EXHIBITS HERETO OR ANY TRANSACTION DOCUMENT OF TERMS AND PROVISIONS NOT ADDRESSED IN THIS AGREEMENT SHALL NOT BE DEEMED A CONFLICT, AND ALL SUCH ADDITIONAL PROVISIONS SHALL BE GIVEN FULL FORCE AND EFFECT, SUBJECT TO THE PROVISIONS OF THIS SECTION 16.9.  

16.10Parties in Interest.  The terms and provisions of this Agreement shall be binding upon and inure to the benefit of Seller and Buyer and their respective successors and permitted assigns.  Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the Parties or their successors and permitted assigns, or the Parties’ respective related Indemnified Parties hereunder any rights, remedies, obligations or Liabilities under or by reason of this Agreement; provided that only a Party and its successors and assigns will have the right to enforce the provisions of this Agreement on its own behalf or on behalf of any of its related Indemnified Parties (but shall not be obligated to do so).

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EXHIBT 10.1

16.11Amendment.  This Agreement may be amended, restated, supplemented or otherwise modified only by an instrument in writing executed by both Parties and expressly identified as an amendment, restatement, supplement or modification.

16.12Waiver; Rights Cumulative.  Any of the terms, covenants, representations, warranties or conditions hereof may be waived only by a written instrument executed by or on behalf of the Party waiving compliance.  No course of dealing on the part of Seller or Buyer or their respective officers, employees, agents, or representatives, and no failure by Seller or Buyer to exercise any of its rights under this Agreement, shall, in any such case, operate as a waiver thereof or affect in any way the right of such Party at a later time to enforce the performance of such provision.  No waiver by any Party of any condition, or any breach of any term, covenant, representation or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other term, covenant, representation or warranty.  The rights of Seller and Buyer under this Agreement shall be cumulative, and the exercise or partial exercise of any such right shall not preclude the exercise of any other right.

16.13Governing Law; Jurisdiction.  

(a)This Agreement and any claim, controversy or dispute arising under or related to this Agreement or the transactions contemplated hereby or the rights, duties and relationship of the parties hereto and thereto, shall be governed by and construed and enforced in accordance with the laws of the State of Colorado, excluding any conflicts of law, rule or principle that might refer construction of provisions to the Laws of another jurisdiction.

(b)The Parties agree that the appropriate, exclusive and convenient forum for any disputes between any of the Parties arising out of this Agreement, the Transaction Documents or the transactions contemplated hereby shall be in any state or federal court in Denver, Colorado and each of the Parties irrevocably submits to the jurisdiction of such courts solely in respect of any proceeding arising out of or related to this Agreement.  The Parties further agree that the Parties shall not bring suit with respect to any disputes arising out of this Agreement, the Transaction Documents or the transactions contemplated hereby in any court or jurisdiction other than the above specified courts.  The Parties further agree, to the extent permitted by Law, that a final and nonappealable judgment against a Party in any action or proceeding contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and amount of such judgment.

(c)To the extent that any Party or any of its Affiliates has acquired, or hereafter may acquire, any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, such Party (on its own behalf and on behalf of its Affiliates) hereby irrevocably (i) waives such immunity in respect of its obligations with respect to this Agreement and (ii) submits to the personal jurisdiction of any court described in Section 16.13(b).  

(d)THE PARTIES HERETO AGREE THAT THEY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 

54

EXHIBT 10.1

16.14Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any adverse manner to any Party.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

16.15Removal of Name.  As promptly as practicable, but in any case within thirty (30) days after the Closing Date, Buyer shall eliminate the names “QEP Energy”, “QEP” and any variants thereof from the Assets and, except with respect to such grace period for eliminating existing usage, shall have no right to use any logos, trademarks or trade names belonging to Seller or any of its Affiliates.

16.16Counterparts.  This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one agreement.  Any signature hereto delivered by a Party by facsimile or other electronic transmission shall be deemed an original signature hereto.

16.17Like-Kind Exchange.  Buyer and Seller agree that either or both of Seller and Buyer may elect to treat the acquisition or sale of the Assets as an exchange of like-kind property under Section 1031 of the Code (an “Exchange”).  Each Party agrees to use reasonable efforts to cooperate with the other Party in the completion of such an Exchange including an Exchange subject to the procedures outlined in Treasury Regulation Section 1.1031(k)-1 and/or Internal Revenue Service Revenue Procedure 2000-37.  Each of Seller and Buyer shall have the right at any time prior to Closing to assign all or a part of its rights under this Agreement to a qualified intermediary (as that term is defined in Treasury Regulation Section 1.1031(k)-1(g)(4)(iii)) or an exchange accommodation titleholder (as that term is defined in Internal Revenue Service Revenue Procedure 2000-37) to effect an Exchange.  In connection with any such Exchange, any exchange accommodation titleholder shall have taken all steps necessary to own the Assets under applicable Law.  Each Party acknowledges and agrees that neither an assignment of a Party’s rights under this Agreement nor any other actions taken by a Party or any other person in connection with the Exchange shall release any Party from, or modify, any of its liabilities and obligations (including indemnity obligations to each other) under this Agreement, and no Party makes any representations as to any particular tax treatment that may be afforded to any other Party by reason of such assignment or any other actions taken in connection with the Exchange.  Any Party electing to treat the acquisition or sale of the Assets as an Exchange shall be obligated to pay all additional costs incurred hereunder as a result of the Exchange, and in consideration for the cooperation of the other Party, the Party electing Exchange treatment shall agree to pay all costs associated with the Exchange and to indemnify and hold the other Party, its Affiliates, and their respective former, current and future partners, members, shareholders, owners, officers, directors, managers, employees, agents and representatives harmless from and against any and all liabilities and taxes arising out of, based upon, attributable to or resulting from the Exchange or transactions or actions taken in connection with the Exchange that would not have been incurred by the other Party but for the electing Party’s Exchange election.

[Remainder of page intentionally left blank.  Signature page follows.]

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EXHIBT 10.1

IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of the date first written above.
SELLER:
    
QEP ENERGY COMPANY

By:    /s/ Austin Murr        
Name:    Austin Murr
Title:    Senior Vice President, 
Business Development

BUYER:

CIMAREX ENERGY CO.

By:    /s/  Stephen P. Bell    
Name:    Stephen P. Bell
Title:    Executive Vice President, 
Business Development

[SIGNATURE PAGE TO PRUCHASE AND SALE AGREEMENT}

56

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