Document:

Stock Purchase Agreement

 Exhibit 10.1 
 STOCK PURCHASE AGREEMENT 
 among 
 BILL BARRETT CORPORATION 
 (“Purchaser”), 
 CH4 HOLDINGS, LP 
 (“Seller”) 
 and 
 CH4 CORPORATION 
 (the “Company”) 
 April 13, 2006 

 TABLE OF CONTENTS 
  

							
	  	  	Page
		
	ARTICLE 1 DEFINITIONS	  	1
			
	 1.1.
	  	 Defined Terms
	  	1
			
	 1.2.
	  	 References and Titles
	  	9
		
	ARTICLE 2 PURCHASE AND SALE	  	10
			
	 2.1.
	  	 Agreement to Purchase and Sell
	  	10
			
	 2.2.
	  	 Purchase Price and Manner of Payment
	  	10
			
	 2.3.
	  	 Excluded Assets
	  	11
			
	 2.4.
	  	 Closing
	  	11
			
	 2.5.
	  	 Taking of Necessary Action; Further Action
	  	12
		
	ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE COMPANY	  	12
			
	 3.1.
	  	 Representations of Seller
	  	12
				
		  	3.1.1	  	 Authority and Enforceability
	  	12
				
		  	3.1.2	  	 No Violations
	  	12
				
		  	3.1.3	  	 Title to Shares
	  	12
				
		  	3.1.4	  	Foreign Person	  	13
			
	 3.2.
	  	 Representations of the Company
	  	13
				
		  	3.2.1	  	 Organization of the Company
	  	13
				
		  	3.2.2	  	 Organization of the Subsidiaries
	  	13
				
		  	3.2.3	  	 Authority and Enforceability
	  	14
				
		  	3.2.4	  	 No Violations
	  	14
				
		  	3.2.5	  	 Consents and Approvals
	  	14
				
		  	3.2.6	  	 Financial Statements
	  	15
				
		  	3.2.7	  	 Capital Structure
	  	15
				
		  	3.2.8	  	 Material Agreements
	  	16
				
		  	3.2.9	  	 Bank Credit Agreement
	  	16
				
		  	3.2.10	  	 Investments
	  	16
				
		  	3.2.11	  	 Outstanding Debt
	  	16
				
		  	3.2.12	  	 Affiliate Transactions
	  	16
				
		  	3.2.13	  	 Employment Matters
	  	16
				
		  	3.2.14	  	 Employee Benefit Plans
	  	17
				
		  	3.2.15	  	 Litigation
	  	19
				
		  	3.2.16	  	 Taxes and Tax Returns
	  	19
				
		  	3.2.17	  	 Compliance with Laws and Permits
	  	21
				
		  	3.2.18	  	 Proprietary Rights
	  	21
				
		  	3.2.19	  	 Environmental Matters
	  	21
				
		  	3.2.20	  	 Insurance
	  	23
				
		  	3.2.21	  	 Governmental Regulation
	  	23
				
		  	3.2.22	  	 Brokers
	  	23
				
		  	3.2.23	  	 Oil and Gas Operations
	  	23

  

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		  	3.2.24	  	 Gas Imbalances
	  	25
				
		  	3.2.25	  	 Royalties
	  	25
				
		  	3.2.26	  	 Payout Balances
	  	25
				
		  	3.2.27	  	 Prepayments
	  	25
				
		  	3.2.28	  	 Other Mineral Related Matters
	  	25
				
		  	3.2.29	  	 Additional Drilling Obligations
	  	25
				
		  	3.2.30	  	 Financial and Product Hedging Contracts
	  	26
				
		  	3.2.31	  	 Books and Records
	  	26
				
		  	3.2.32	  	 Non-Competition Commitments
	  	26
				
		  	3.2.33	  	 Previously Owned Properties; Excluded Assets
	  	26
				
		  	3.2.34	  	 Operatorship
	  	26
				
		  	3.2.35	  	 DISCLAIMER
	  	26
		
	ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER	  	27
			
	 4.1.
	  	Organization	  	27
			
	 4.2.
	  	Authority and Enforceability	  	27
			
	 4.3.
	  	No Violations	  	28
			
	 4.4.
	  	Consents and Approvals	  	28
			
	 4.5.
	  	Litigation	  	28
			
	 4.6.
	  	Funding	  	28
			
	 4.7.
	  	Brokers	  	28
			
	 4.8.
	  	Investment Intent	  	29
		
	ARTICLE 5 COVENANTS	  	29
			
	 5.1.
	  	Conduct of Business by the Company and the Subsidiaries Pending Closing	  	29
			
	 5.2.
	  	Access to Assets, Personnel and Information	  	31
			
	 5.3.
	  	No Solicitation	  	32
			
	 5.4.
	  	Additional Arrangements	  	32
			
	 5.5.
	  	Public Announcements; Confidentiality	  	33
			
	 5.6.
	  	Notification of Certain Matters	  	33
			
	 5.7.
	  	Payment of Expenses	  	33
			
	 5.8.
	  	Continuation of the Company’s Existing Indemnification Obligations	  	33
			
	 5.9.
	  	Consents Under Bank Credit Agreement	  	34
			
	 5.10.
	  	Termination of Certain Agreements	  	34
			
	 5.11.
	  	Resignation of Directors, Officer and Employees; Termination of Agreements	  	34
			
	 5.12.
	  	Title and Environmental Defects	  	34
			
	 5.13.
	  	Additional Adjustments to Base Purchase Price	  	38
			
	 5.14.
	  	Purchase Price Calculation	  	39
			
	 5.15.
	  	Release of Claims	  	40
			
	 5.16.
	  	Company Employees	  	41
		
	ARTICLE 6 CONDITIONS	  	41
			
	 6.1.
	  	Conditions to Each Party’s Obligation to Proceed with Closing	  	41
			
	 6.2.
	  	Conditions to Obligations of Purchaser	  	42
			
	 6.3.
	  	Conditions to Obligations of Seller	  	43

  

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	ARTICLE 7 TERMINATION	  	43
			
	 7.1.
	  	 Termination Rights
	  	43
			
	 7.2.
	  	 Effect of Termination
	  	44
		
	ARTICLE 8 MISCELLANEOUS	  	44
			
	 8.1.
	  	 Limited Survival of Representations and Warranties
	  	44
			
	 8.2.
	  	 Amendment
	  	44
			
	 8.3.
	  	 Notices
	  	45
			
	 8.4.
	  	 Counterparts
	  	46
			
	 8.5.
	  	 Severability
	  	46
			
	 8.6.
	  	 Entire Agreement; No Third Party Beneficiaries
	  	46
			
	 8.7.
	  	 Applicable Law
	  	46
			
	 8.8.
	  	 No Remedy in Certain Circumstances
	  	46
			
	 8.9.
	  	 Assignment
	  	47
			
	 8.10.
	  	 Waivers
	  	47
			
	 8.11.
	  	 Confidentiality Agreement
	  	47
			
	 8.12.
	  	 Incorporation
	  	47
			
	 8.13.
	  	 Cooperation After Closing
	  	47
			
	 8.14.
	  	 Mutual Release
	  	47
			
	 8.15.
	  	 Fair Construction
	  	48
			
	 8.16.
	  	 Arbitration
	  	48
			
	 8.17
	  	 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC
	  	48
		
	SCHEDULES	  	
		
	 Disclosure Schedule
	  	
	 Schedule 2.3 – Excluded Assets
	  	

  

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 STOCK PURCHASE AGREEMENT 
 This Stock Purchase Agreement (this “Agreement”) is made and entered into as of April 13, 2006, by and among Bill Barrett
Corporation, a Delaware corporation (“Purchaser”); CH4 Holdings, LP, a Texas limited partnership (“Seller”); and CH4 Corporation, a Delaware corporation (the “Company”). 
 Recitals 
 A. Purchaser desires to buy
and Seller desires to sell all of the issued and outstanding capital stock of the Company, upon the terms and subject to the conditions set forth in this Agreement. 
 B. Purchaser and Seller desire to make certain representations, warranties, covenants and agreements in connection with such purchase and sale of stock provided for in this Agreement and also to prescribe various
conditions to such purchase and sale of stock. 
 C. The Company desires to join in the execution of this Agreement for the purpose of
evidencing consent to the consummation of the foregoing transaction and for the purpose of making certain representations and warranties to and covenants and agreements with Purchaser. 
 IN CONSIDERATION of the recitals and the mutual covenants and agreements set forth in this Agreement, Purchaser, Seller and the Company (the
“Parties”) hereby agree as follows: 
 ARTICLE 1 
 DEFINITIONS 
 1.1. Defined Terms. As used in this Agreement, each
of the following terms has the meaning given in this Section 1.1 or in the Sections referred to below: “Advisory Services Agreement” means the Advisory Services, Reimbursement and Indemnification Agreement, effective as of
August 28, 2002, between the Company and NGP (defined herein). 
 “Affiliate” means, with respect to any Person, each
other Person that directly or indirectly (through one or more intermediaries or otherwise) controls, is controlled by, or is under common control with such Person. 
 “Agreement” means this Stock Purchase Agreement, as amended, supplemented or modified from time to time. 
 “Allocated Values” means as to any particular Oil and Gas Interest of the Company, the product from multiplying the Base Purchase Price by the result of the Property Value of such Oil and Gas Interest
divided by Total Reserve Value of the Company’s Oil and Gas Interests, as set forth in the Disclosure Schedule. For purposes of calculating Title or Environmental Defects under Section 5.12, the Allocated Value for an Oil and Gas Interest
shall be the sum of the Allocated Values for all interests under the same well spacing unit. 
  

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 “Bank Credit Agreement” means the Credit Agreement, dated as of February 17, 2005,
between the Company, as borrower, and the Bank of Scotland, New York Branch, as administrative agent and lender (as amended and supplemented as of the date hereof). 
 “Base Purchase Price” has the meaning specified in Section 2.2. 
 “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or any successor statutes and any regulations promulgated thereunder. 
 “CERCLIS” means the Comprehensive Environmental Response, Compensation and Liability Information System List. 
 “CH4 Energy” means CH4 Energy, LLC, a Texas limited liability company. 
 “Closing” means the closing and consummation of the transactions contemplated by this Agreement. 
 “Closing Date” means May 8, 2006, or such other date as the Parties may mutually agree upon in writing. 
 “Code” means the Internal Revenue Code of 1986, as amended. 
 “Company” has the meaning set forth in the introductory paragraph to this Agreement. 
 “Company Certificate” means a certificate representing shares of Company Common Stock. 
 “Company Common Stock” means the common stock, par value of $0.01 per share, of the Company. 
 “Company Employee Benefit Plans” has the meaning specified in Section 3.2.14. 
 “Company Financial Statements” means the unaudited consolidated financial statements (including any related notes) of the Company and
the Subsidiaries (defined herein) as of December 31, 2005, and for the year then ended which are attached to the Disclosure Schedule. 
 “Company Permits” has the meaning specified in Section 3.2.17. 
 “Company Representative”
means any director, officer, manager, employee, agent, advisor (including legal, accounting and financial advisors), Affiliate or other representative of the Company or its Subsidiaries. 
 “Confidentiality Agreement” means the letter agreement dated February 17, 2006, between Purchaser and the Company relating to the
Company’s furnishing of information to Purchaser in connection with Purchaser’s evaluation of the possibility of acquiring the Company. 
  

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 “Confidentiality and Noncompete Agreements” means the Confidentiality and Noncompete
Agreements, dated August 28, 2002, among Seller, the Company and certain of the Company’s employees. 
 “Debt” means, for any Person, without duplication: (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other similar
instruments, (c) all indebtedness of such Person on which interest charges are customarily paid or accrued, (d) all Guarantees of such Person, (e) the unfunded or unreimbursed portion of all letters of credit issued for the account of
such Person, (f) the present value of all obligations in respect of leases that are capitalized on the books and records of such Person, (g) all obligations in respect of office leases, (h) any obligation of such Person representing
the deferred purchase price of property or services purchased by such Person other than trade payables incurred in the ordinary course of business and which are not more than 90 days past invoice date, (i) any indebtedness, liability or
obligation secured by a Lien on the assets of such Person whether or not such indebtedness, liability or obligation is otherwise non-recourse to such Person, (j) liabilities with respect to payments received in consideration of oil, gas or
other minerals yet to be acquired or produced at the time of payment (including obligations under gas balancing arrangements and “take-or-pay” contracts to deliver gas in return for payments already received and the undischarged balance of
any production payment created by such Person or for the creation of which such Person directly or indirectly received payment), and (k) all liability of such Person as a general partner or joint venturer for obligations of the nature described
in (a) through (j) preceding. 
 “Defensible Title” means such right, title and interest that (a) with
respect to Ownership Interests of any lease, unit or well, is evidenced by an instrument or instruments filed of record in accordance with the conveyance and recording laws of the applicable jurisdiction to the extent necessary to give the Company
and Purchaser, through its ownership of the Company Common Stock, the right to enjoy the benefits of possession of the Ownership Interests reflected on the Disclosure Schedule, based on the title to the Ownership Interest as it exists on the
date of this Agreement (free and clear of all royalties, overriding royalties, net profits, interests or other burdens on or measured by production of oil and gas) throughout the duration of the productive life of the relevant lease, unit or well,
and with respect to any specific Ownership Interests not yet earned under a farmout agreement, is described in and subject to a farmout agreement containing terms and provisions identical to the farmout agreement to which it relates and which is
identified on the Disclosure Schedule; (b) subject to Permitted Encumbrances, is free and clear of all Liens, claims, infringements, and other burdens; and (c) obligates the Company or the Subsidiaries to bear a percentage of the
costs and expenses of the maintenance and development of, and operations relating to the specific Ownership Interest that is not greater than the interest set forth on the Disclosure Schedule, based on the title to the Ownership Interest as
it exists on the date of this Agreement, without increase throughout the productive life of such Ownership Interest. 
 “Disclosure
Schedule” means the Disclosure Schedule attached hereto and any documents listed on such Disclosure Schedule and expressly incorporated therein by reference. 
 “Earnest Money” has the meaning specified in Section 2.2. 
  

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 “Environmental Law” means any law, common law, ordinance, regulation or policy of any
Governmental Authority, as well as any order, decree, permit, judgment or injunction issued, promulgated, approved, or entered thereunder, relating to the environment, health and safety, Hazardous Material (including the use, handling,
transportation, production, disposal, discharge or storage thereof), industrial hygiene, the environmental conditions on, under, or about any real property owned, leased or operated at any time by the Company or any of the Subsidiaries, including
soil, groundwater, and indoor and ambient air conditions or the reporting or remediation of Environmental Contamination. Environmental Laws include the Clean Air Act, as amended, the Federal Water Pollution Control Act, as amended, the Rivers and
Harbors Act of 1899, as amended, the Safe Drinking Water Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Resource Conservation and Recovery Act of 1976, as amended (“RCRA”), the Hazardous and Solid Waste Amendments Act of 1984, as amended, the Toxic Substances Control Act, as amended, the Occupational Safety and Health
Act, as amended, the Hazardous Materials Transportation Act, as amended, and any other federal, state or local law whose purpose is to conserve or protect human health, the environment, wildlife or natural resources. 
 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder. 

“Escrow Agent” means the Third Party mutually agreed upon in writing by the Parties with whom a deposit is made with instructions to
turn over such deposit upon the fulfillment of certain conditions set forth in this Agreement. 
 “Escrow Agreement” means
the certain escrow agreement to be entered into on even date herewith by and among the Escrow Agent, the Purchaser and the Seller in a form acceptable to the parties thereto. 
 “Excluded Assets” has the meaning specified in Section 2.3. 
 “GAAP” means generally accepted accounting principles, as recognized by the U.S. Financial Accounting Standards Board (or any generally
recognized successor). 
 “Governmental Action” means any authorization, application, approval, consent, exemption, filing,
license, notice, registration, permit or other requirement of, to or with any Governmental Authority. 
 “Governmental
Authority” means any national, state, county or municipal government, domestic or foreign, any agency, board, bureau, commission, court, department or other instrumentality of any such government. 
 “Guaranty” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or
other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by written or oral 

  

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agreements to keep-well, to purchase assets, goods, securities or services, to “take-or-pay,” to maintain financial statement conditions, by
“comfort letters” or by any other similar undertaking of support of otherwise); or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided, that the term “Guaranty” shall not include endorsements for collection or deposit in the ordinary course of business. For purposes of this Agreement, the amount of
any Guaranty shall be the maximum amount that the guarantor could be legally required to pay under such Guaranty. 
 “Hazardous
Material” means (a) any “hazardous substance,” as defined by CERCLA; (b) any “hazardous waste” or “solid waste,” in either case as defined by the RCRA, as amended; (c) any solid, hazardous,
dangerous or toxic chemical, material, waste or substance, within the meaning of and regulated by any Environmental Law; (d) any asbestos-containing materials in any form or condition; (e) any polychlorinated biphenyls in any form or
condition; (f) petroleum, petroleum Hydrocarbons, or any fraction or byproducts thereof; or (g) any air pollutant which is so designated by the U.S. Environmental Protection Agency as authorized by the Clean Air Act. 
 “Hedging Transaction” means any transaction involving a Product Hedging Contract. 
 “Hydrocarbons” means oil, condensate, gas, casinghead gas and other liquid or gaseous hydrocarbons. 
 “Indemnified Parties” has the meaning specified in Section 5.8. 
 “Investment” in any Person means any investment, whether by means of securities purchase (whether by direct purchase from such Person or
from an existing holder of securities of such Person), loan, advance, extension of credit, capital contribution or otherwise, in or to such Person, the Guaranty of any Debt or other obligation of such Person, or the subordination of any claim
against such Person to other Debt or other obligation of such Person; provided, that “Investments” shall not include advances made to employees of such Person for reasonable travel, entertainment and similar expenses incurred in the
ordinary course of business. 
 “Lien” means any lien, mortgage, security interest, pledge, deposit, restriction, burden,
encumbrance, rights of a vendor under any title retention or conditional sale agreement, or lease or other arrangement substantially equivalent thereto, but does not include any production payment obligation. 
 “Material Adverse Effect” means (a) when used with respect to the Company, a result or consequence that would materially adversely
affect or impair, taken as a whole (i) the condition (financial or otherwise), results of operations or business of the Company or the aggregate value of the assets of the Company and the Subsidiaries; (ii) the ability of the Company to
own, hold, develop and operate its assets; or (iii) the Company’s ability to perform its obligations hereunder or consummate the transactions contemplated hereby or prevent or materially delay the performance of this Agreement;
(b) when used with respect to Purchaser, a result or consequence that would materially adversely affect its ability to perform its obligations hereunder or consummate the transactions contemplated hereby or prevent or materially delay the
performance of this Agreement; 

  

 5 

 
and (c) when used with respect to the Subsidiaries, a result or consequence that would materially adversely affect or impair, taken as a whole
(i) the condition (financial or otherwise), results of operations or business of the Subsidiaries or the aggregate value of the Subsidiaries assets or (ii) the ability of the Subsidiaries to own, hold, develop and operate their assets.
However, the term Material Adverse Effect shall exclude any effect resulting from or related to changes or developments involving (w) general conditions applicable to the economies of the United States or the States of Texas or Wyoming;
(x) conditions affecting the oil and gas industry generally or in the States of Texas or Wyoming, (y) conditions or effects resulting from the announcement of the existence of this Agreement, in each case taken as a whole, or
(z) conditions relating to commodity prices. 
 “Material Agreement” means any written or oral agreement, contract,
commitment, or understanding to which a Person is a party, by which such Person is directly or indirectly bound, or to which any assets of such Person may be subject (other than oil, gas and mineral leases, oil and gas leases and joint operating
agreements), involving consideration with a total value in excess of one percent (1%) of the Base Purchase Price: (a) which is not cancelable by such Person upon notice of 30 days or less without liability for further payment,
(b) pursuant to which such Person acquires any material portion of the raw materials, supplies or services used or consumed by such Person in the operation of its business (unless such raw materials, supplies or services are readily available
to such Person from other sources on comparable terms), or (c) pursuant to which such Person derives any material part of its revenues. 
 “NSAI Report” means the Company’s engineering evaluation prepared by Netherland, Sewell & Associates, dated January 31, 2006, effective March 1, 2006, previously provided to the Purchaser.

 “NGP” means Natural Gas Partners VI, L.P., a Delaware limited partnership. 
 “Oil and Gas Interest(s)” means (a) direct and indirect interests in and rights with respect to oil, gas, mineral and related
properties and assets of any kind and nature, direct or indirect, including working, royalty and overriding royalty interests, production payments, operating rights, net profits interests, carried interests other non-working interests and
non-operating interests; (b) interests in and rights with respect to Hydrocarbons and other minerals or revenues therefrom and contracts in connection therewith and claims and rights thereto (including oil and gas leases, operating agreements,
unitization and pooling agreements and orders, division orders, transfer orders, mineral deeds, royalty deeds, oil and gas sales, exchange and processing contracts and agreements and, in each case, interests thereunder), surface interests, fee
interests, servitudes, reversionary interests, reservations and concessions; (c) easements, rights of way, licenses, permits, leases, and other interests associated with, appurtenant to, or necessary for the operation of any of the foregoing;
and (d) interests in equipment and machinery (including well equipment and machinery), oil and gas production, gathering, transmission, compression, treating, processing and storage facilities (including tanks, tank batteries, pipelines and
gathering systems), pumps, water plants, electric plants, gasoline and gas processing plants, salt water disposal wells and related equipment, refineries and other tangible personal property and fixtures associated with, appurtenant to, or necessary
for the operation of any of the foregoing. References in this Agreement to the “Oil and Gas Interests,” “Oil and Gas Interests of the Company” or “Company’s Oil and Gas Interests” mean the
collective Oil and Gas Interests of the Company and the Subsidiaries but does not include the Excluded Assets. 
  

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 “Ownership Interests” means the ownership interests of the Company and the Subsidiaries
in their assets, as set forth on the Disclosure Schedule. 
 “Payout Balances” has the meaning specified in
Section 3.2.26. 
 “Permitted Encumbrances” means (a) Liens for Taxes, assessments or other governmental charges
or levies if the same shall not at the particular time in question be due and delinquent or (if foreclosure, distraint sale or other similar proceedings shall not have been commenced or, if commenced, shall have been stayed) are being contested in
good faith by appropriate proceedings; (b) Liens of carriers, warehousemen, mechanics, laborers, materialmen, landlords, vendors, workmen and operators arising by operation of law in the ordinary course of business or by a written agreement
existing as of the date hereof and necessary or incident to the exploration, development, operation and maintenance of Hydrocarbon properties and related facilities and assets for sums not yet due or being contested in good faith by appropriate
proceedings; (c) Liens incurred in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation (other than ERISA) which would not, individually or in the aggregate,
result in a Material Adverse Effect on the Company; (d) Liens incurred in the ordinary course of business to secure the performance of bids, tenders, trade contracts, leases, statutory obligations, surety and appeal bonds, performance and
repayment bonds and other obligations of a like nature; (e) Liens, easements, rights-of-way, restrictions, servitudes, permits, conditions, covenants, exceptions, reservations and other similar encumbrances incurred in the ordinary course of
business or existing on property not materially impairing the value of the assets of the Company and the Subsidiaries, taken as a whole, or interfering with the ordinary conduct of the business of the Company and the Subsidiaries, taken as a whole,
or rights to any of their assets; (f) Liens created or arising by operation of law to secure a Party’s obligations as a purchaser of oil and gas; (g) all rights to consent by, required notices to, filings with, or other actions by
Governmental Authorities to the extent customarily obtained subsequent to closing; (h) farmout, carried working interest, joint operating, unitization, royalty, overriding royalty, sales and similar agreements relating to the exploration or
development of, or production from, Hydrocarbon properties entered into in the ordinary course of business and not in violation of Section 5.1, provided the effect thereof on the working and net revenue interest of the Company or the
Subsidiaries has been properly reflected in the Ownership Interests; (i) any defects, irregularities or deficiencies in title to the Oil and Gas Interests of the Company or the Subsidiaries that do not reduce the Company’s or the
Subsidiaries’ net revenue interest, or increase the Company’s or the Subsidiaries’ working interest, in any Company Oil and Gas Interest set forth on the Disclosure Schedule, or do not adversely affect the value of any Oil and
Gas Interest of the Company or the Subsidiaries or other asset of the Company or the Subsidiaries by an amount in excess of two percent of the Base Purchase Price; (j) preferential rights to purchase and Third-Party Consents (to the extent not
triggered by the consummation of the transaction contemplated by this Agreement that are disclosed to Purchaser in the Disclosure Schedule); (k) the terms and provisions of leases and other documents and instruments affecting title disclosed to
Purchaser on the Disclosure Schedule; (l) valid, subsisting and applicable laws, rules and orders of any Governmental Authorities; and (m) Liens and other burdens described in the Disclosure Schedule. 
  

 7 

 “Person” (whether or not capitalized) means any natural person, corporation, company,
limited or general partnership, joint stock company, joint venture, association, limited liability company, limited liability partnership, trust, bank, trust company, land trust, business trust or other entity or organization, whether or not a
Governmental Authority. 
 “Product Hedging Contract” means any agreement providing for options, swaps, floors, caps,
collars, forward sales or forward purchases involving commodities or commodity prices, or indexes based on any of the foregoing and any other similar agreement or arrangement. 
 “Property Value” means as to any individual Oil and Gas Interest of the Company, either (i) the proportion of the stated Net
Present Value, discounted at 10%, effective March 1, 2006 of such oil & gas interest, as defined in the NSAI Report of that Oil and Gas Interest to all Oil and Gas Interests shown on the NSAI Reports multiplied by $73,296,605 or
(ii) if a property is not listed on the NSAI Report in T40-R72 and T40-R73 in Wyoming, then such property will be valued at $50.00 per acre. 
 “Purchase Price” has the meaning set forth in Section 2.2. 
 “Purchaser” has the meaning set
forth in the introductory paragraph of this Agreement. 
 “Purchaser Confidential Information” means any information
concerning the businesses and affairs of Purchaser and its subsidiaries that is not already generally available to the public. 
 “Purchaser Representative” means any director, officer, manager, employee, agent, advisor (including legal, accounting and financial advisors), Affiliate or other representative of Purchaser or its subsidiaries. 

“Records” means all books, records, files, and other information in the Company’s or the Subsidiaries’ possession or which
is reasonably accessible by the Company or its Subsidiaries, (including those held by Petroleum Financial, Inc.), including without limitation those pertaining to the Company’s or the Subsidiaries’ Oil and Gas Interests, wells and other
assets, those pertaining to the petroleum gathering, transportation and sale of Hydrocarbons and corporate, accounting financial and employee records. 
 “Responsible Officer” means, with respect to any (a) corporation, a Director, the Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer, any Vice President or any
manager or supervisor of such corporation; (b) limited liability company, any manager or supervisor of such entity; or (c) partnership, any general partner, manager or supervisor of such entity. 
 “Rights Agreement” means the Voting and Members Agreement, dated as of February 4, 2003, by and among the Company, Seller, NGP, and
certain employees and investors. 
 “Securities Act” means the Securities Act of 1933, as amended. 
 “Seller” has the meaning set forth in the introductory paragraph of this Agreement. 
  

 8 

 “Severance Obligations” means the obligations of the Company to certain of the
Company’s employees pursuant to the [reference the severance agreements and plans in virtual data room and otherwise known]. 
 “Shares” has the meaning set forth in Section 2.1. 
 “Swanson” means Swanson Drilling
Company, L.P., a Texas limited partnership. 
 “Swanson GP” means Swanson Operating Company, LLC, a Texas limited liability
company. 
 “Subsidiaries” means CH4 Energy, Swanson and Swanson GP, collectively. 
 “Subsidiary” means CH4 Energy, Swanson and Swanson GP, individually. 
 “Tax Returns” has the meaning specified in Section 3.2.16. 
 “Taxes” means taxes of any kind, levies or other like assessments, customs, duties, imposts, charges or fees, including income, gross
receipts, ad valorem, value added, excise, real or personal property, asset, sales, use, federal royalty, license, payroll, transaction, capital, net worth and franchise taxes, estimated taxes, withholding, employment, social security, workers’
compensation, utility, severance, production, unemployment compensation, occupation, premium, windfall profits, transfer and gains taxes or other governmental taxes imposed or payable to the United States or any state, local or foreign governmental
subdivision or agency thereof, and in each instance such term shall include any interest, penalties or additions to tax attributable to any such Tax, including penalties for the failure to file any Tax Return or report. 
 “Third-Party” means any Person other than the Company, Purchaser or Seller. 
 “Third-Party Consent” means the consent or approval of any Third Party. 
 “Title or Environmental Defect” has the meaning specified in Section 5.12(a). 
 “Total Reserve Value” means the sum of all the Property Values for all Oil and Gas Interests. 
 “Working Capital” means the net book value of all current assets minus the net book value of all current liabilities each as calculated
in accordance with GAAP; provided, however, that Working Capital shall specifically exclude any Hedging Transaction, any liabilities or obligations associated with the Bank Credit Agreement, any standby letters of credits issued by the Bank of
Oklahoma, NA, any deferred taxes, and any plugging or abandonment costs and expenses. 
 1.2. References and Titles. All references in
this Agreement to Exhibits, Schedules, Articles, Sections, subsections and other subdivisions refer to the corresponding 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 or other subdivisions of this Agreement are for convenience only, do not constitute any part of this 

  

 9 

 
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 subdivision unless expressly so limited. The words “this
Article,” “this Section” and “this subsection,” and words of similar import, refer only to the Article, Section or subsection hereof in which such words occur. The word “or” is not
exclusive, and the word “including” (in its various forms) means including without limitation. 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. 
 As used in the representations and warranties contained in this Agreement, the phrase “to the knowledge” of the representing Party shall mean the Responsible Officers of such representing Party,
individually or collectively, either (a) know that the matter being represented and warranted is true and accurate or (b) have no reason to believe that the matter being represented and warranted is not true and accurate. 
 ARTICLE 2 
 PURCHASE AND SALE

 2.1. Agreement to Purchase and Sell. At the Closing, Seller shall sell, transfer, convey, assign, and deliver to Purchaser, and
Purchaser shall purchase, acquire and accept from Seller, all of the issued and outstanding Company Common Stock (the “Shares”) upon the terms and subject to the conditions set forth in this Agreement. Seller shall at Closing
deliver to Purchaser Company Certificates for all such Company Common Stock, free and clear of all Liens, claims, charges, restrictions, equities or encumbrances of any kind, other than restrictions arising under the Securities Act and other
applicable securities laws, which Certificates shall be duly endorsed to Purchaser or accompanied by duly executed stock powers in a form satisfactory to Purchaser. 
 2.2. Purchase Price and Manner of Payment. The purchase price for all of the outstanding Company Common Stock shall be $73,700,000.00 (the “Base Purchase Price”) plus or minus the adjustments
determined pursuant to Sections 5.12, 5.13 and 5.14 (the Base Purchase Price, as so adjusted, is the “Purchase Price”). By 1:00p.m Central Standard Time on the Closing Date, Purchaser shall pay the Purchase Price to Seller by wire
transfer of same day funds to an account or accounts designated by Seller and communicated in writing to Purchaser. Notwithstanding the foregoing, the Purchase Price may be adjusted after Closing in any manner set forth herein. 
 Contemporaneous with Purchaser’s execution of this Agreement, Purchaser will deposit with the Escrow Agent an amount equal to $5,000,000.00 (the
“Earnest Money”) pursuant to the terms of the Escrow Agreement. In the event the Closing occurs, the Earnest Money shall be applied (with interest) against the Purchase Price. If the Closing does not occur, the Escrow Agent shall
pay the Earnest Money to the Company or return it to Purchaser in accordance with this paragraph and the terms of the Escrow Agreement. In the event Purchaser breaches this Agreement by failing or refusing to close the transaction contemplated
hereby on the Closing Date and each of the conditions contained in Sections 6.1 and 6.2 otherwise has been either fulfilled in all material respects or waived, the Escrow Agent shall pay the Earnest Money to the Company as liquidated damages in lieu
of all other damages (and as Seller’s and the Company’s sole remedy in such event). The Parties 

  

 10 

 
acknowledge that the extent of damages to Seller and the Company occasioned by such failure or refusal by Purchaser would be impossible or extremely
impractical to ascertain and that the amount of the Earnest Money is a fair and reasonable estimate of such damages under the circumstances. In the event the Earnest Money is not applied to the Purchase Price at Closing or retained pursuant to the
foregoing provisions of this paragraph, the Escrow Agent shall return the Earnest Money to Purchaser without interest. 
 2.3. Excluded
Assets. Assets and Subsidiaries listed on Schedule 2.3 (collectively, the “Excluded Assets”) will be, prior to or at Closing, distributed, assigned, purchased, or otherwise transferred by the Company to Seller or its
nominee. None of the representations or warranties set forth in this Agreement or any of the other provisions of this Agreement shall be applicable to the Excluded Assets other than any properties which are Excluded Assets due to the provisions of
Section 5.12(c)(iii) and any conventional oil and gas properties listed on Schedule 2.3 with respect to the representations contained in Sections 3.2.19, 3.2.25, 3.2.28, and 3.2.33. The partnership interest of Swanson and the membership
interests of Swanson GP will be sold or transferred based on an agreed fair market value of $4,200,000.00 and the conventional Oil and Gas Interests listed on Schedule 2.3 will be sold or transferred based on an agreed value of $750,000.00.
If the gain or taxable income realized by the Company due to the transfer of the Excluded Assets exceeds 60% of the Company’s net operating loss carry-forward, then any taxes on such excess taxable income or gain shall be considered a current
liability and a Base Purchase Price adjustment. 
 2.4. Closing. The Closing shall take place on the Closing Date at 9:00 a.m. at the
offices of Schlanger, Silver, Barg & Paine, L.L.P., 109 North Post Oak Lane, Suite 300, Houston, Texas 77024, or at such time and place as is agreed by Purchaser and Seller. At the Closing, 
 (a) Seller shall deliver to Purchaser: 
  

	 	(i)	stock certificates representing all of the Shares endorsed in blank and the certificates referred to in Sections 6.2(a) and (b); 

  

	 	(ii)	the releases, the non-competition agreements and other documents described in Section 5.11; 

  

	 	(iii)	such other documents, instruments, agreements and certificates as Purchaser may reasonably request in connection with the consummation of the transactions contemplated by this
Agreement; 

  

	 	(iv)	recordable releases and terminations covering all Liens on the Oil and Gas Interests of the Company; and 

  

	 	(v)	evidence of the resignation of all of the directors, officers and employees of the Company. 

 (b) Purchaser shall deliver to Seller: 
  

	 	(i)	the Purchase Price; and 

  

 11 

	 	(ii)	the certificates referred to in Sections 6.3(a) and (b). 

 (c) At the Closing Date, the Company and the Purchaser shall deliver to each other certificates dated no more than 10 days prior to the Closing Date duly issued by the appropriate Governmental Authorities in each state in which each Party
is incorporated, and from each state in which any portion of the Company’s or any Subsidiary’s assets are located, indicating that each Party is validly existing and in good standing in the applicable jurisdiction. 
 2.5. Taking of Necessary Action; Further Action. Seller and Purchaser shall use all reasonable efforts to take all such actions as may be
necessary or appropriate in order to effectuate the Closing as promptly as commercially practicable. If at any time after the Closing, any further action is necessary or desirable to carry out the purposes of this Agreement, all of the Parties shall
use all reasonable efforts to take all such lawful and necessary action. 
 ARTICLE 3 
 REPRESENTATIONS AND WARRANTIES OF 
 THE SELLER AND THE COMPANY 
 3.1. Representations of Seller. Seller hereby represents and warrants to Purchaser as
follows: 
 3.1.1 Authority and Enforceability. Seller has the requisite power and authority to enter into and deliver
this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary company action on
the part of Seller, if applicable, and no other company proceedings on the part of Seller are necessary to authorize the execution or delivery of this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Seller and constitutes a valid and binding obligation of Seller enforceable against Seller in accordance with its terms. 
 3.1.2 No Violations. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated hereby and compliance by Seller with the provisions hereof will not, conflict
with, result in any violation of or default (with or without notice or lapse of time or both) under, give rise to a right of termination, cancellation or acceleration of any obligation or to the loss of a material benefit under, or result in the
creation of any Lien on any of the properties or assets of Seller under any provision of (a) the Seller’s organizational documents, as applicable, (b) any loan or credit agreement, note, bond, mortgage, indenture, lease, permit,
concession, franchise, license or other agreement or instrument applicable to Seller, or (c) assuming the consents, approvals, authorizations or permits and filings or notifications referred to in Section 3.2.5 are duly and timely obtained
or made, any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Seller or its properties or assets. 
 3.1.3 Title to Shares. Seller is (and at the Closing will be) the sole record and beneficial owner of, and upon consummation of the transactions contemplated hereby Purchaser will acquire, the Shares, free and clear of all Liens,
other than (a) those that may arise by virtue of any actions taken by or on behalf of Purchaser or its Affiliates or (b) restrictions on transfer that may be imposed by federal or state securities laws. 
  

 12 

 3.1.4 Foreign Person. Seller is not a “foreign person” within the
meaning of Section 1445 of the Code. 
 3.2. Representations of the Company. The Company hereby represents and warrants to
Purchaser as follows: 
 3.2.1 Organization of the Company. The Company (a) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware, (b) has the requisite power and authority to own, lease and operate its properties and to conduct its business as it is presently being conducted, and (c) is
duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the character of the properties owned or leased by it or the nature of its activities makes such qualification necessary (except where any
failure to be so qualified or to be in good standing would not, individually or in the aggregate, have a Material Adverse Effect on the Company). Copies of the certificate of incorporation and bylaws of the Company have heretofore been delivered to
Purchaser, and such copies are accurate and complete as of the date hereof. 
 3.2.2 Organization of the Subsidiaries.
CH4 Energy (a) is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Texas, (b) has the requisite power and authority to own, lease and operate its properties and to conduct its
business as it is presently being conducted, and (c) is duly qualified to do business as a foreign entity and is in good standing in each jurisdiction where the character of the properties owned or leased by it or the nature of its activities
makes such qualification necessary (except where any failure to be so qualified or to be in good standing would not, individually or in the aggregate, have a Material Adverse Effect on the Company). Swanson is (a) a limited partnership duly
formed and validly existing under the laws of the State of Texas, (b) has the requisite power and authority to own, lease and operate its properties and to conduct its business as it is presently being conducted, and (c) is duly qualified
to do business as a foreign limited partnership and is in good standing in each jurisdiction where the character of the properties owned or leased by it or the nature of its activities makes such qualification necessary (except where any failure to
be so qualified or to be in good standing would not, individually or in the aggregate, have a Material Adverse Effect on the Company). Swanson GP is (a) a limited liability company duly formed, validly existing and in good standing under the
laws of the State of Texas, (b) has the requisite power and authority to own, lease and operate its properties and to conduct its business as it is presently being conducted, and (c) is duly qualified to do business as a foreign entity and
is in good standing in each jurisdiction where the character of the properties owned or leased by it or the nature of its activities makes such qualification necessary (except where any failure to be so qualified or to be in good standing would not,
individually or in the aggregate, have a Material Adverse Effect on the Company). Copies of the Articles of Organization and the Limited Liability Company Agreements of each of CH4 Energy and Swanson GP have heretofore been delivered to Purchaser,
and such copies are accurate and complete as of the date hereof. Copies of the Certificate of Limited Partnership and the partnership agreement of Swanson have heretofore been delivered to Purchaser, and such copies are accurate and complete as of
the date hereof. The Company has no additional subsidiaries other than those defined as 

  

 13 

 
Subsidiaries herein. Neither the Company nor the Subsidiaries otherwise own any interest, other than those previously mentioned, in any limited liability
company or any general or limited partnership (other than joint ventures, joint operating or ownership arrangements or tax partnerships which have been entered into in the ordinary course of business). 
 3.2.3 Authority and Enforceability. The Company has the requisite corporate power and authority to enter into and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on
the part of the Company and no other corporate proceedings on the part of the Company are necessary to authorize the execution or delivery of this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms. 
 3.2.4 No Violations. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated
hereby and compliance by the Company with the provisions hereof will not, conflict with, result in any violation of or default (with or without notice or lapse of time or both) under, give rise to a right of termination, cancellation or acceleration
of any obligation or to the loss of a material benefit under, or result in the creation of any Lien on any of the properties or assets of the Company under any provision of (a) its certificate of incorporation or bylaws (b) any loan or
credit agreement, note, bond, mortgage, indenture, lease, permit, concession, franchise, license or other agreement or instrument applicable to the Company, or (c) assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 3.2.5 are duly and timely obtained or made, any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or its properties or assets, other than (x) in the case of
clause (b) above, any such conflict, violation, default, right, loss or Lien that may arise under the Bank Credit Agreement, and (y) in the case of clause (a) or (c) above, any such conflict, violation, default, right, loss or
Lien that, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect on the Company. 
 3.2.5 Consents and Approvals. No consent, approval, order or authorization of, registration, declaration or filing with, or permit from, any Governmental Authority is required by or with respect to the Company in connection with the
execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated hereby, except for the following: (a) any such consent, approval, order, authorization, registration, declaration,
filing or permit which the failure to obtain or make would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on the Company; and (b) such filings and approvals as may be required by any
securities, corporate or other law, rule or regulation. Except as set forth in the Disclosure Schedule, no Third-Party Consent is required by or with respect to the Company in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby and no Oil and Gas Interest of the Company is subject to any preferential right to purchase which gives any Person the right to purchase an Oil and Gas Interest of the Company as a result of
the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for any consent, approval or waiver required by the terms of the Bank Credit Agreement. 
  

 14 

 3.2.6 Financial Statements. The Company Financial Statements were prepared in
accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto and except that such statements are not accompanied by notes or other textual disclosure required by GAAP) and fairly
present, in accordance with GAAP (except as disclosed in the notes to such statements), the consolidated financial position of the Company and the Subsidiaries as of their respective dates and the consolidated results of operations and the
consolidated cash flows of the Company and the Subsidiaries for the periods presented therein. Since December 31, 2005, no event has occurred or condition exists which has had or could be reasonably expected to result in a Material Adverse
Effect on the Company. Since June 1, 2005, the Company has used Petroleum Financial, Inc. to maintain its general ledger. The Company and Seller have provided to Purchaser a copy of the audit of Petroleum Financial, Inc.’s Statement of
Accounting Standards 70 compliance. The financial statements of the Company as of and for the two months ended February 28, 2006 to be delivered to the Purchaser pursuant to Section 5.14 shall be prepared in accordance with GAAP applied on
a consistent basis during the periods involved (except as may be indicated in the notes thereto and except that such statements need not be accompanied by notes or other textual disclosure required by GAAP) and will fairly present, in accordance
with GAAP (except as disclosed in the notes to such statements), the consolidated financial position of the Company and the Subsidiaries as of their respective dates and the consolidated results of operations and the consolidated cash flows of the
Company and the Subsidiaries for the periods presented therein. 
 3.2.7 Capital Structure. 
  

	 	(a)	The authorized capital stock of the Company consists of 1,000 shares of Company Common Stock, par value $0.01 per share. 

  

	 	(b)	There are issued and outstanding 1,000 shares of Company Common Stock. 

  

	 	(c)	There are issued and outstanding (i) no shares of capital stock or other voting securities of the Company, (ii) no securities of the Company or any other Person
convertible into or exchangeable or exercisable for shares of capital stock or other voting securities of the Company, and (iii) no subscriptions, options, warrants, calls, rights (including preemptive rights), commitments, understandings or
agreements to which the Company is a party or by which it is bound obligating the Company to issue, deliver, sell, purchase, redeem or acquire shares of capital stock or other voting securities of the Company (or securities convertible into or
exchangeable or exercisable for shares of capital stock or other voting securities of the Company) or obligating the Company to grant, extend or enter into any such subscription, option, warrant, call, right, commitment, understanding or agreement.

  

	 	(d)	All outstanding shares of the Company capital stock are validly issued, fully paid and nonassessable and not subject to any preemptive right. 

  

	 	(e)	 Other than the Rights Agreement, which will be terminated at the Closing, there is no stockholder agreement, voting trust or other agreement or 

  

 15 

	 	 
understanding to which the Company is a party or by which it is bound relating to the voting of any shares of the capital stock of the Company.

  

	 	(f)	There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the Company. 

 3.2.8 Material Agreements. The Disclosure Schedule contains a complete list of the Material Agreements to which the Company
or any of the Subsidiaries is a party (other than this Agreement and related agreements) or by which the Company, the Subsidiaries or their assets are bound. The Company has made available to Purchaser or provided Purchaser with a true and correct
copy of all such Material Agreements, including all amendments and modifications thereof. Except as set forth on the Disclosure Schedule, no party to any of such Material Agreements is in material default of its obligations thereunder and no
event has occurred and no condition exists which, with the giving of notice or the passage of time or both, would constitute any such material breach or material default that would reasonably be expected to result in a Material Adverse Effect on the
Company. Each of such Material Agreements is a valid and binding obligation of the parties thereto in accordance with its terms and is in full force and effect. 
 3.2.9 Bank Credit Agreement. The Company has provided to or made available to Purchaser a true and correct copy of the Bank Credit
Agreement including all amendments and modifications thereto. No rights or obligations of any party to the Bank Credit Agreement have been waived, and no party to the Bank Credit Agreement is in default of its obligations thereunder. The Bank Credit
Agreement is a valid, binding and enforceable obligation of the parties thereto in accordance with its terms and is in full force and effect. Set forth on the Disclosure Schedule is a list of all outstanding standby letters of credits issued
by the Bank of Oklahoma, NA for the Company and its Subsidiaries. As of February 28, 2006, the total principal amount owed by the Company pursuant to the Bank Credit Agreement was $6,300,000.00. 
 3.2.10 Investments. Except as set forth on the Disclosure Schedule, neither the Company nor any of the Subsidiaries has any
outstanding Investments that are not disclosed in the Financial Statements. 
 3.2.11 Outstanding Debt. The Financial
Statements and the Disclosure Schedule, together provide a complete and accurate description of all Debt of the Company and the Subsidiaries outstanding as of the respective dates thereof. Neither the Company nor any of the Subsidiaries is in
default in payment of any Debt with respect to which it is an obligor or in default of any covenant, agreement, representation, warranty or other term of any document, instrument or agreement evidencing, securing or otherwise pertaining to any such
Debt. 
 3.2.12 Affiliate Transactions. The Disclosure Schedule contains a complete and accurate description of
all contracts, agreements and other arrangements (whether written, oral, express or implied) between the Company or any of the Subsidiaries and any Affiliate of the Company that will be in existence on the Closing Date. 
 3.2.13 Employment Matters. The Disclosure Schedule contains a complete and accurate list of all officers of the Company and
the Subsidiaries. Except as set forth in the 

  

 16 

 
Disclosure Schedule, neither the Company nor any of the Subsidiaries is a party to or obligated under any consulting, employment, severance,
termination or similar arrangement, any employee benefit, incentive or deferred compensation plan with respect to any of its employees, or any bonus, profit sharing, pension, stock option, stock purchase or similar plan or other arrangement or other
fringe benefit plan entered into or maintained for the benefit of its employees. To the extent the Company is obligated at the Closing due to the Closing to compensate any Company Representative under any employment, severance, or other arrangement
regardless of whether it is set forth in the Disclosure Schedule, or following the Closing pursuant to the terms of the Severance Obligations, the Base Purchase Price will be reduced accordingly. The Company and the Subsidiaries are in material
compliance with all laws, rules, regulations and orders relating to the employment of labor, including all such laws, rules, regulations and orders relating to wages, hours, collective bargaining, discrimination, civil rights, safety and health,
workers’ compensation and the collection and payment of withholding or Social Security Taxes and similar Taxes. Each officer, director and employee of the Company and the Subsidiaries will resign as of the Closing Date, and the Confidentiality
and Noncompete Agreements between the Company and each of its officers and between Subsidiaries and each of their officers shall be terminated on the Closing Date. Except as set forth on the Disclosure Schedule, there is no current or former
officer, director, employee, consultant, or independent contractor of the Company or any of the Subsidiaries that has filed a demand letter or a complaint (either written or verbally) against the Company, any of the Subsidiaries, or any employee of
any of them for wrongful discharge, defamation, fraud, negligent misrepresentation, negligence, intentional infliction of emotional distress, assault, battery, sexual harassment, or breach of contract claims for including but not limited to, unpaid
wages, bonuses, benefits, commissions, stock options, royalties, deferred compensation, or wrongful discharge. 
 3.2.14
Employee Benefit Plans. 
  

	 	(a)	The Disclosure Schedule sets forth a complete and accurate list of all “employee benefit plans,” as defined in Section 3(3) of ERISA, including severance pay,
sick leave, vacation pay, salary continuation for disability, compensation agreements, retirement, deferred compensation, bonus, long-term incentive, stock option, stock purchase, hospitalization, medical insurance, life insurance and scholarship
programs maintained by the Company or any Subsidiary or to which the Company or any Subsidiary sponsors, maintains or contributed or is obligated to contribute, whether or not subject to ERISA (the “Company Employee Benefit Plans”).
Except for the Company Employee Benefit Plans, the Company does not maintain, or have any fixed or contingent liability with respect to, any employee benefit, pension or other plan that is subject to ERISA. The Company has delivered to Purchaser
correct and complete copies of each Company Employee Benefit Plan, current summary plan descriptions for each plan, all related trusts, insurance, and other funding contracts which implement such Company Employee Benefit Plan, the prior three years
Forms 5500, and all correspondence with any Governmental Authorities relating to any such Company Employee Benefit Plan. Each Company Employee Benefit Plan (and each related trust, insurance contract, or fund) complies in form and in operation in
all material respects with all applicable laws, rules and regulations. 

  

 17 

	 	(b)	There is no material violation of ERISA with respect to the filing of applicable reports, documents and notices regarding any Company Employee Benefit Plan with any Governmental
Authority or the furnishing of such documents to the participants or beneficiaries of the Company Employee Benefit Plans. With respect to the Company Employee Benefit Plans, there exists no condition or set of circumstances in connection with the
Company or the Subsidiaries that would reasonably be expected to result in a liability reasonably likely to have a Material Adverse Effect on the Company under ERISA, the Code or any applicable law. With respect to the Company Employee Benefit
Plans, individually and in the aggregate, there are no unfunded benefit obligations which have not been accounted for by reserves, or otherwise properly footnoted in accordance with GAAP, on the financial statements of the Company.

  

	 	(c)	The Company Employee Benefit Plans have been maintained, in all material respects, in accordance with their terms and in accordance with all applicable federal and state laws, and
neither the Company nor any of the Subsidiaries nor any “party in interest” or “disqualified person” with respect to the Company Employee Benefit Plans, has engaged in any “prohibited transaction” within the meaning of
Section 4975 of the Code. 

  

	 	(d)	Except as otherwise set forth in the Disclosure Schedule, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby
will result in any payment becoming due to any employee or group of employees of the Company or any of the Subsidiaries. 

  

	 	(e)	The Company has no knowledge of any pending or threatened claims against the assets of any of its Company Employee Benefit Plans or the trusts established to hold the assets of
those plans or the fiduciaries of such plans. 

  

	 	(f)	Neither the Company nor any Subsidiary maintains nor have any of them established any welfare benefit plan which provides for retiree, medical liabilities or continuing benefits or
coverage for any participant or any beneficiary of any participant after such participant termination of employment except as may be required by COBRA. 

  

	 	(g)	Neither the Company nor any of the Subsidiaries has maintained, or established, or has ever participated in, a multiple employer welfare benefit arrangement within the meaning of
Section 3(40)(A) of ERISA. 

  

	 	(h)	 Except as set forth on the Disclosure Schedule, no present or former employees of the Company or the Subsidiaries are covered by any 

  

 18 

	 	 
employment agreements or plans that provide or will provide severance pay, retirement benefits, post-termination health or life insurance benefits or any
similar benefits, and the consummation of the transactions contemplated herein shall not cause any payments or benefits to any employee to be either subject to an excise tax or non-deductible to the Company under Section 4899 or 280G of the
Code, respectively. 

 3.2.15 Litigation. Except as otherwise set forth in the Disclosure
Schedule: (a) no litigation, arbitration, investigation or other proceeding is pending or, to the knowledge of the Company, the Seller or the Subsidiaries, threatened against the Seller, the Company or any of the Subsidiaries or any of
their assets before any court, arbitrator or any Governmental Authority, and (b) neither the Seller, the Company nor any Subsidiary is subject to any outstanding injunction, judgment, order, decree or ruling (other than routine oil and gas
field regulatory orders). Except as set forth on the Disclosure Schedule, there is no litigation, proceeding or investigation pending or, to the knowledge of the Company, the Seller or the Subsidiaries, threatened against or affecting the
Company, the Seller or the Subsidiaries, that questions the validity or enforceability of this Agreement or any other document, instrument or agreement to be executed and delivered by the Company, the Seller or the Subsidiaries, in connection with
the transactions contemplated hereby. 
 3.2.16 Taxes and Tax Returns. (A) All Tax Returns for tax periods ending
after December 31, 2000, that are required to be filed on or before the Closing Date (taking into account any extensions of time within which to file which have not expired) by or with respect to the Company or any of the Company’s
Subsidiaries have been or will be timely filed on or before the Closing Date; (B) all Tax Returns described in clause (A) and all Tax Returns prepared by the Seller pursuant to Subsection Y below are or will be true and complete in all
material respects; (C) all Taxes relating to the Company and its Subsidiaries shown to be due on the Tax Returns referred to in clause (A) have been or will be timely paid in full on or before the Closing Date; (D) the Company has
made all deposits required to be made by it under applicable payroll tax or Federal Insurance Contributions Act regulations; (E) all deficiencies asserted or assessments made of or against or attributable to the Company or any of its
Subsidiaries or any of their property as a result of examinations conducted by any tax authority have been paid in full; (F) no issues that have been raised by the relevant taxing authority in connection with the examination of any of the Tax
Returns referred to in clause (A) are currently pending; and (G) no extension of the statute of limitations with respect to any Taxes of the Company or any of its Subsidiaries remains in existence, except as disclosed in the Disclosure
Schedule. 
 Y. Seller shall prepare all Tax Returns that are required to be filed by the Company with respect to any tax
period ending on or before the Closing Date (including income tax returns for the short year ending on the Closing Date) that have not been prepared prior to the Closing Date. All such Tax Returns shall be prepared within 90 days of the Closing
Date. Purchaser shall cause the Company to file such Tax Returns unless in the reasonable judgment of the Purchaser such returns do not comply with applicable Tax law. If in the reasonable judgment of the Purchaser, such returns do not comply with
applicable Tax law, the Company shall discuss with the Seller all issues and concerns and if the Parties are unable to resolve such issues within 90 days after the Closing Date, then the matter will be submitted to a major accounting firm selected
by Seller but acceptable to the 

  

 19 

 
Purchaser for resolution of any such dispute. Such accounting firm shall resolve any dispute within 30 days after accepting the engagement to resolve such
dispute, and the determination of such accounting firm shall be binding on the Seller and Purchaser. Purchaser recognizes that the Seller will need access to the personnel, accountants and Records of the Company to prepare Tax Returns after the
Closing Date. Purchaser shall cause the Company to provide the Seller with reasonable access to the personnel, accountants and Records of the Company for such purposes and shall cause the employees of Company to provide reasonable assistance as
Seller may reasonably require. The amount of assistance required to be provided shall be consistent with the amount of assistance provided by the Company’s employees with respect to comparable Tax Returns filed before the Closing Date. The
Company shall be responsible for paying Taxes with respect to the Tax Returns described in this Section Y to the extent such Taxes accrue through February 28, 2006, provided that, to the extent that the balance sheet as of December 31,
2005 included in the Financial Statements included inadequate accruals to cover such Taxes, the Seller shall be required to pay the shortfall to the Company to enable the Company to pay such Taxes; provided (i) that there shall be no such
adjustment to the extent that any accrued taxes are reflected in Working Capital of the Company as of February 28, 2006 and (ii) that this obligation shall terminate 180 days after the Closing. 
 W. Seller represents: 
  

	 	(a)	Seller has made available to Purchaser (A) true and correct copies of all Tax Returns filed by the Company and the Company’s Subsidiaries for each of their three most
recent fiscal years for which such returns have been filed and (B) any audit report issued within the last three years relating to Taxes due from or with respect to the Company and the Company’s Subsidiaries. 

  

	 	(b)	Seller has previously disclosed all types of Taxes paid and all types of Tax Returns filed by or on behalf of the Company and the Company’s Subsidiaries with respect to its
three most recent fiscal years. No claim has been made by a taxing authority in a jurisdiction where Tax Returns are not filed by the Company or the Company’s Subsidiaries that the Company is or may be subject to taxation by that jurisdiction.

  

	 	(c)	No closing agreements, private letter rulings (or comparable rulings), technical advice memoranda or similar agreements or rulings have been entered into, requested of or issued by
any taxing authority with respect to the Company or the Company’s Subsidiaries. 

  

	 	(d)	Neither the Company nor any of the Company’s Subsidiaries has entered into any compensatory agreements that would constitute an “excess parachute payment” under
Section 280G of the Code. 

  

	 	(e)	Neither the Company nor any of the Company’s Subsidiaries is a party to any agreements pursuant to which it is required to indemnify or hold harmless any party against
potential tax liabilities, other than indemnities relating to withholding taxes that are part of agreements entered into in the ordinary course of business. 

  

 20 

 3.2.17 Compliance with Laws and Permits. Neither the Company nor any of the
Subsidiaries is in violation of, or in default in any material respect under, and no event has occurred that (with notice or the lapse of time or both) would constitute a violation of or default under: (a) its certificate of incorporation,
bylaws, certificate of limited partnership or partnership agreement, (b) any applicable law, rule, regulation, order, writ, decree or judgment of any Governmental Authority, or (c) any Material Agreement to which the Company or any of the
Subsidiaries is a party or by which its properties are bound, except, with respect to clauses (b) and (c) above, for any violation or default that would not, individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect on the Company or any of the Subsidiaries. The Company and the Subsidiaries have obtained and hold all permits, licenses, variances, exemptions, orders, franchises, approvals and authorizations of all Governmental Authorities
necessary for the lawful conduct of business or the lawful ownership, use and operation of their assets (“Company Permits”), except for Company Permits which the failure to obtain or hold would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect on the Company or any of the Subsidiaries. The Company and the Subsidiaries are in compliance with the terms of the Company Permits, except where the failure to comply would not,
individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on the Company or any of the Subsidiaries. No investigation or review by any Governmental Authority with respect to the Company or any of the
Subsidiaries is pending or, to the knowledge of the Company or the Subsidiaries, threatened, except as set forth in the Disclosure Schedule. 
 3.2.18 Proprietary Rights. The Company and the Subsidiaries have ownership of, or valid licenses to use, all trademarks, copyrights, patents and other proprietary rights and intellectual property (including
seismic data) used in their respective businesses. To the knowledge of the Company and each Subsidiary, the operation of the respective businesses of the Company and the Subsidiaries does not infringe any patent, copyright, trademark or other
proprietary rights of others, and, neither the Company nor any of the Subsidiaries has received any notice from any Third Party of any such alleged infringement by the Company or any Subsidiary. The Company and the Subsidiaries have taken reasonable
steps to establish and preserve their respective ownership of all patents, copyrights, trademarks, trade secrets and other proprietary rights. Neither the Company nor any of the Subsidiaries is aware of any infringement by others of any patents,
copyrights, trademarks or other proprietary rights that the Company or any of the Subsidiaries possesses. 
 3.2.19
Environmental Matters. Except as set forth in the Disclosure Schedule and except for matters as would not reasonably be expected to result in a Material Adverse Effect on the Company or any Subsidiary, to the knowledge of the Company
and each Subsidiary: 
  

	 	(a)	the Company and the Subsidiaries have conducted their respective businesses and operated their assets, and are conducting their respective businesses and operating their assets, and
the condition of all facilities and properties (including off-site storage or disposal of any Hazardous Materials from such facilities or properties) currently or formerly owned, leased or operated by the Company or the Subsidiaries, are in
compliance with all Environmental Laws; 

  

 21 

	 	(b)	neither the Company nor any of the Subsidiaries has been notified by any Governmental Authority or other third party that any of the operations or assets of the Company or any of
the Subsidiaries are the subject of any investigation or inquiry by any Governmental Authority or other Third Party evaluating whether any remedial action is needed to respond to a release or threatened release of any Hazardous Material or to the
improper storage or disposal (including storage or disposal at offsite locations) of any Hazardous Material; 

  

	 	(c)	neither the Company, any of the Subsidiaries nor any other Person has filed any notice under any federal, state or local law indicating that (i) the Company or any of the
Subsidiaries is responsible for the improper release into the environment, or the improper storage or disposal, of any Hazardous Material, or (ii) any Hazardous Material is improperly stored or disposed of upon any property of the Company or
the Subsidiaries; 

  

	 	(d)	neither the Company nor any of the Subsidiaries has any contingent liability in connection with (i) the release or threatened release into the environment at, beneath or on any
property now or previously owned or leased by the Company or any Subsidiary, or (ii) the storage or disposal of any Hazardous Material; 

  

	 	(e)	neither the Company nor any of the Subsidiaries has received any claim, complaint, notice, inquiry or request for information involving any matter which remains unresolved as of the
date hereof with respect to any alleged violation of any Environmental Law or regarding potential liability under any Environmental Law relating to operations or conditions of any facilities or property (including off-site storage or disposal of any
Hazardous Material from such facilities or property) currently or formerly owned, leased or operated by the Company or any of the Subsidiaries; 

  

	 	(f)	no property now or previously owned, leased or operated by the Company or any of the Subsidiaries is listed on the National Priorities List pursuant to CERCLA or on the CERCLIS or
on any other federal or state list as sites requiring investigation or cleanup; 

  

	 	(g)	neither the Company nor any of the Subsidiaries is directly transporting, has directly transported, is directly arranging for the transportation of, or has directly arranged for the
transportation of, any Hazardous Material to any location which is listed on the National Priorities List pursuant to CERCLA, on the CERCLIS, or on any other federal or state list or which is the subject of federal, state or local enforcement
actions or other investigations that may lead to claims against the Company or any of the Subsidiaries for remedial work, damage to natural resources or personal injury, including claims under CERCLA; 

  

 22 

	 	(h)	there are no sites, locations or operations at which the Company or any of the Subsidiaries is currently undertaking, or has completed, any remedial or response action relating to
any such disposal or release, as required by Environmental Laws; 

  

	 	(i)	all underground storage tanks and solid waste disposal facilities owned or operated by the Company or any of the Subsidiaries are used and operated in compliance with Environmental
Laws; and 

  

	 	(j)	there are no physical or environmental conditions existing on any property owned or leased by the Company or any of the Subsidiaries resulting from the Company’s or the
Subsidiaries’ operations or activities, past or present, at any location, that could reasonably be expected to give rise to any on-site or off-site remedial obligations under any applicable Environmental Laws, other than normal and ordinary
remedial work associated with plugging and abandoning of oil & gas facilities. 

 3.2.20
Insurance. The Disclosure Schedule sets forth a true and correct list of all insurance policies and other surety arrangements of any kind or nature which are in force and to which the Company or any Subsidiary is a named party or
beneficiary, specifying the insurance carrier, the type of insurance coverage, the policy number, the aggregate amount of insurance coverage per claim or per occurrence, as the same may be, applicable self-retention limits and/or self or
co-insurance requirements and describing in detail each pending claim thereunder. None of such policies or binders was obtained through the use of false or misleading information or the failure to provide the insurer with all information requested
in order to evaluate the liabilities and risks insured. There are no billed but unpaid premiums past due under any such policy or binder. Except as otherwise set forth in the Disclosure Schedule: (a) there are no outstanding claims under
any such policies or binders, and (b) no notice of cancellation or non-renewal of any such policies or binders has been received. 
 3.2.21 Governmental Regulation. Neither the Company nor any of the Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Investment Company Act of 1940 or any
state public utilities laws. 
 3.2.22 Brokers. Except as set forth on the Disclosure Schedule, no broker,
finder, investment banker or other Person is or will be, in connection with the transactions contemplated by this Agreement, entitled to any brokerage, finder’s or other fee or compensation based on any arrangement or agreement made by or on
behalf of the Seller, the Company or any of the Subsidiaries and for which Purchaser, the Seller, the Company or any of the Subsidiaries will have any obligation or liability. 
 3.2.23 Oil and Gas Operations. Except as otherwise set forth in the Disclosure Schedule, and except for matters as would not
reasonably be expected to result in a Material Adverse Effect on the Company or any Subsidiary, to the knowledge of the Company or the Subsidiaries, all wells included in the Company’s Oil and Gas Interests have been drilled and (if completed)
completed, operated and produced in accordance with generally accepted oil and gas 

  

 23 

 
field practices and in compliance in all material respects with applicable oil and gas leases, pooling and unit agreements, and applicable laws, rules,
regulations, judgments, orders and decrees issued by any court or Governmental Authority. No well included in the Company’s or any Subsidiary’s Oil and Gas Interests is subject to penalties on allowables because of any overproduction or
any other violation of applicable laws that would prevent such well from being entitled to its full legal and regular allowable from and after the Closing Date as prescribed by any Governmental Authority. Except as otherwise set forth in the
Disclosure Schedule, to the knowledge of the Company and the Subsidiaries: 
  

	 	(a)	there are no wells that the Company or any of the Subsidiaries are currently obligated by law or contract to plug and abandon; 

  

	 	(b)	there are no wells that are subject to exceptions to a requirement to plug and abandon issued by a regulatory authority having jurisdiction over the applicable lease;

  

	 	(c)	there are no wells that have been plugged and abandoned but have not been plugged in accordance, in all material respects, with all applicable requirements of each regulatory
authority having jurisdiction over the Company’s and the Subsidiaries’ Oil and Gas Interests; 

  

	 	(d)	with respect to the oil, gas and other mineral leases, unit agreements, pooling agreements, communitization agreements and other documents creating interests comprising the
Company’s and the Subsidiaries’ Oil and Gas Interests: (i) the Company and the Subsidiaries have fulfilled all requirements in all material respects for filings, certificates, disclosures of parties in interest, and other similar
matters contained in (or otherwise applicable thereto by law, rule or regulation) such leases or other documents and are fully qualified to own and hold all such leases or other interests, (ii) there are no provisions applicable to such leases
or other documents which increase the royalty share of the lessor thereunder, and (iii) upon the establishment and maintenance of production in commercial quantities, the leases and other interest are to be in full force and effect over the
economic life of the property involved and do not have terms fixed by a certain number of years; 

  

	 	(e)	proceeds from the sale of Hydrocarbons produced from the Company’s Oil and Gas Interests are being received by the Company or the Subsidiaries in a timely manner and are not
being held in suspense for any reason (except for amounts in legal suspense that do not exceed $200,000 in the aggregate); and 

  

	 	(f)	no person has any call upon, option to purchase, preferential right to purchase or similar rights with respect to the Company’s or the Subsidiaries’ Oil and Gas Interests
or to the production therefrom. 

  

 24 

 3.2.24 Gas Imbalances. To the knowledge of the Company and the Subsidiaries,
except as reflected on the Disclosure Schedule: (a) there are no aggregate production, pipeline, transportation or processing imbalances existing with respect to the Company’s or the Subsidiaries’ Oil and Gas Interests that are
in the aggregate in excess of 20,000 mcf at any time, and (b) neither the Company nor any of the Subsidiaries has received deficiency payments under gas contracts for which any party has a right to take deficiency gas from the Company or any of
the Subsidiaries, nor has the Company nor any of the Subsidiaries received any payments for production which are subject to refund or recoupment out of future production. 
 3.2.25 Royalties. Except as set forth in the Disclosure Schedule, all royalties, overriding royalties, compensatory
royalties and other payments due from or in respect of production with respect to the Company’s or any Subsidiary’s Oil and Gas Interests, have been or will be, prior to the Closing, properly and correctly paid or provided for in all
material respects. Neither the Company nor any of the Subsidiaries has received any claims or demands (whether written or oral) that royalties and other payments due by it under the oil and gas leases comprising the Company’s or any
Subsidiary’s Oil and Gas Interests have not been properly and timely paid, or that any conditions necessary to keep the oil and gas leases comprising the Company’s or any Subsidiary’s Oil and Gas Interests in force have not been fully
performed. 
 3.2.26 Payout Balances. The Payout Balance for any well owned and operated by the Company or any of the
Subsidiaries is properly reflected in the Disclosure Schedule as of the respective dates shown thereon. To the knowledge of the Company and the Subsidiaries, based on information given to the Company and the Subsidiaries by third-party
operators for all wells not operated by the Company or any of the Subsidiaries, the Payout Balance for any such third-party operated well in which the Company or any of the Subsidiaries owns an Oil and Gas Interest is properly reflected in the
Disclosure Schedule as of the respective dates shown thereon. “Payout Balance(s)” means the status, as of the dates of the Company’s calculations, of the recovery by the Company, a Subsidiary or a Third Party of a cost
amount specified in the contract relating to a well out of the revenue from such well where the net revenue interest of the Company or the Subsidiaries therein will be reduced when such amount has been recovered. 
 3.2.27 Prepayments. Except as reflected in the Disclosure Schedule, no prepayment for Hydrocarbon sales has been received by
the Company or any of the Subsidiaries for Hydrocarbons which have not been delivered as of the date hereof. 
 3.2.28
Other Mineral Related Matters. Except as set forth in the Disclosure Schedule, as of the execution date of this Agreement, neither the Company nor any of the Subsidiaries was obligated by virtue of any prepayment arrangement,
“take or pay” arrangement, production payment arrangement, gas balancing agreement or otherwise, to deliver or to suffer the delivery of Hydrocarbons produced in connection with any of the Company’s Oil and Gas Interests at some
future time (or make a cash payment in lieu thereof) without then or thereafter receiving full payment therefor without deduction or credit on account of such arrangement from the price that would otherwise be received. 
 3.2.29 Additional Drilling Obligations. Except as set forth in the Disclosure Schedule: (a) neither the Company nor any
of the Subsidiaries has any obligation, including 

  

 25 

 
obligations implied in law, to drill additional wells or conduct other material development operations in order to earn or continue to hold during the
primary term of any lease any portion of the Company’s or any Subsidiary’s Oil and Gas Interests, and (b) neither the Company nor any of the Subsidiaries has been advised by a lessor under any lease affecting the Company’s or any
Subsidiary’s Oil and Gas Interests of any requirements or demands to drill additional wells or conduct additional development operations. 
 3.2.30 Financial and Product Hedging Contracts. The Disclosure Schedule summarizes the outstanding hedging positions under all outstanding Product Hedging Contracts and financial hedging positions of the
Company and the Subsidiaries (including fixed price controls, collars, swaps, caps, hedges and puts) as of the date reflected on the Disclosure Schedule. 
 3.2.31 Books and Records. All Records of the Company and the Subsidiaries (a) have been prepared, assembled and maintained in
accordance with usual and customary policies and procedures, (b) fairly and accurately reflect the ownership, use, enjoyment and operation by the Company and the Subsidiaries of their assets, and (c) there have been no deficiencies,
significant deficiencies and/or material weaknesses in the Company’s and the Subsidiaries’ books, records and files which would reasonably be expected to cause a Material Adverse Effect on the Company or any Subsidiary. 
 3.2.32 Non-Competition Commitments. There are no agreements or arrangements that will be binding on the Company, any of the
Subsidiaries or the Company’s or any Subsidiary’s Oil and Gas Interests after Closing that limit the ability of the owner of the Company’s and the Subsidiaries’ Oil and Gas Interests to compete in any line of business or with any
Person in any geographical area, except customary area of mutual interest provisions contained in agreements listed on the Disclosure Schedule that cover properties in the immediate vicinity of the lands subject to such agreements.

 3.2.33 Previously Owned Properties; Excluded Assets. Except as set forth on the Disclosure Schedule, neither
the Company nor any of the Subsidiaries have any obligation or liability, contingent or otherwise, with respect to any Oil and Gas Interests previously owned or leased by the Company or a Subsidiary but not currently owned or leased or, as of the
Closing Date, with respect to any Excluded Assets. 
 3.2.34 Operatorship. The Company does not have knowledge of any
pending vote, or any request for a vote (whether written or oral), to have the Company or a Subsidiary removed as the named “operator” from any of the Oil and Gas Interests for which the Company or any Subsidiary is currently designated as
the “operator” and no Oil and Gas Interest for which the Company or any Subsidiary is currently designated as the “operator” is subject to any change of “operator” as a result of the consummation of the transactions
contemplated hereby. 
 3.2.35 NSAI Report. Except as highlighted on the NSAI Report included in the Disclosure
Schedules, the NSAI Report accurately reflects the Company’s working interests and net revenue interests in the Company’s Oil and Gas Interests, including any carried interests. 
  

 26 

 3.2.36 DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE 3, SELLER AND
THE COMPANY MAKE NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF THE COMPANY OR ANY OF THE SUBSIDIARIES, OR ANY OF THE COMPANY’S OR ANY SUBSIDIARY’S ASSETS, LIABILITIES OR OPERATIONS, INCLUDING WITH
RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE EXPRESSLY DISCLAIMED. PURCHASER ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THE EXTENT SPECIFICALLY SET FORTH IN THIS ARTICLE 3,
PURCHASER IS PURCHASING THE SHARES ON AN “AS-IS, WHERE-IS” BASIS. THE COMPANY, THE SUBSIDIARIES AND THE SELLER EXPRESSLY DISCLAIM ANY AND ALL LIABILITY AND RESPONSIBILITY FOR DATA, INFORMATION AND MATERIALS, FURNISHED AT ANY TIME TO
PURCHASER, ITS OFFICERS, AGENTS, EMPLOYEES OR AFFILIATES IN CONNECTION WITH THE TRANSACTION CONTEMPLATED HEREIN. EXCEPT AS EXPRESSLY PROVIDED IN THIS ARTICLE 3, THE COMPANY’S OIL AND GAS INTERESTS ARE “AS-IS, WHERE-IS,” AND WITH ALL
FAULTS IN THEIR PRESENT CONDITION AND STATE OF REPAIR, WITHOUT RECOURSE, AND THE COMPANY AND SELLER DISCLAIM ANY AND ALL REPRESENTATIONS CONCERNING THE COMPANY’S OIL AND GAS INTERESTS, EXPRESS, STATUTORY, IMPLIED OR OTHERWISE. 

ARTICLE 4 
 REPRESENTATIONS AND
WARRANTIES OF PURCHASER 
 Purchaser represents and warrants to the Company and Seller as follows: 
 4.1. Organization. Purchaser (a) is a corporation duly organized, validly existing and in good standing under the laws of the State of
Delaware, (b) has the requisite power and authority to own, lease and operate its properties and to conduct its business as it is presently being conducted, and (c) is duly qualified to do business as a foreign corporation, and is in good
standing, in each jurisdiction where the character of the properties owned or leased by it or the nature of its activities makes such qualification necessary (except where any failure to be so qualified as a foreign corporation or to be in good
standing would not, individually or in the aggregate, have a Material Adverse Effect on Purchaser). 
 4.2. Authority and
Enforceability. Purchaser has the requisite power and authority to enter into and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Purchaser, including approval by the Board of Directors of Purchaser, and no other corporate proceedings on the part of Purchaser
are necessary to authorize the execution or delivery of this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Purchaser and (assuming that this Agreement constitutes
a valid and binding obligation of Seller and the Company) constitutes a legal, valid and binding obligation of Purchaser enforceable against Purchaser in accordance with its terms. 
  

 27 

 4.3. No Violations. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance by Purchaser with the provisions hereof will not, conflict with, result in any violation of or default (with or without notice or lapse of time or both) under, give rise to a right
of termination, cancellation or acceleration of any obligation or to the loss of a material benefit under, or result in the creation of any Lien on any of the properties or assets of Purchaser under, any provision of (a) the organizational
documents of Purchaser; (b) any loan or credit agreement, note, bond, mortgage, indenture, lease, permit, concession, franchise, license or other agreement or instrument applicable to Purchaser except as will be waived at or prior to Closing;
or (c) assuming the consents, approvals, authorizations or permits and filings or notifications referred to in Section 4.4 are duly and timely obtained or made, any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Purchaser or any of its respective properties or assets, other than, in the case of clause (b) or (c) above, any such conflict, violation, default, right, loss or Lien that, individually or in the aggregate, would not have a
Material Adverse Effect on Purchaser. 
 4.4. Consents and Approvals. No consent, approval, order or authorization of, registration,
declaration or filing with, or permit from, any Governmental Authority is required by or with respect to Purchaser in connection with the execution and delivery of this Agreement by Purchaser or the consummation by Purchaser of the transactions
contemplated hereby, except for the following: (a) any such consent, approval, order, authorization, registration, declaration, filing or permit which the failure to obtain or make would not, individually or in the aggregate, have a Material
Adverse Effect on Purchaser, and (b) such filings and approvals as may be required by any securities, corporate or other law, rule or regulation. No Third-Party Consent is required by or with respect to Purchaser in connection with the
execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for any Third-Party Consent which the failure to obtain would not, individually or in the aggregate, have a Material Adverse Effect on
Purchaser. 
 4.5. Litigation. There is no litigation, proceeding or investigation pending or, to the knowledge of Purchaser,
threatened against or affecting Purchaser (a) that questions the validity or enforceability of this Agreement or any other document, instrument or agreement to be executed and delivered by Purchaser in connection with the transactions
contemplated hereby, or (b) with respect to which there is a reasonable likelihood of a determination which, individually or in the aggregate, would materially hinder or impair the consummation of the transaction contemplated by this Agreement.

 4.6. Funding. Purchaser has available adequate funds or the means to obtain adequate funds in an aggregate amount sufficient to pay
(a) all amounts required to be paid by Purchaser under this Agreement, and (b) all expenses incurred by Purchaser in connection with this Agreement and the transactions contemplated hereby. 
 4.7. Brokers. No broker, finder, investment banker or other Person is or will be, in connection with the transactions contemplated by this
Agreement, entitled to any brokerage, finder’s or other fee or compensation based on any arrangement or agreement made by or on behalf of Purchaser and for which Seller, the Company or any of the Subsidiaries will have any obligation or
liability. Purchaser shall indemnify and hold Seller harmless from any and all claims, liabilities, 

  

 28 

 
damages, costs and expenses asserted against Seller by any Person claiming to have acted on behalf of Purchaser, or to have been retained by Purchaser, as a
broker in connection with the transaction contemplated by this Agreement. 
 4.8. Investment Intent. Purchaser acknowledges that the
Shares being purchased by Purchaser under this Agreement are not registered under the Securities Act or registered or qualified for sale under any state securities law and cannot be resold without registration under or an exemption from the
Securities Act. Purchaser is acquiring the Shares for its own account for investment and not with a view toward the sale or distribution of the Shares. Purchaser has sufficient knowledge and experience in financial and business matters to enable it
to evaluate the risks of investment in such Shares and has the ability to bear the economic risks of such investment. 
 ARTICLE 5

 COVENANTS 
 5.1.
Conduct of Business by the Company and the Subsidiaries Pending Closing. Except as contemplated by this Agreement or to the extent that Purchaser shall otherwise consent in writing, during the period from the date of this Agreement to the
Closing, the Company shall not, and will not permit any of the Subsidiaries to engage in any practice, take any action, or enter into any transaction, except in the ordinary course of business and in connection with the transfer of the Excluded
Assets, and the Company will use all commercially reasonable efforts to preserve in all material respects its business organizations, assets, prospects and advantageous business relationships and to maintain satisfactory relationships with its
licensors, licensees, suppliers, contractors, distributors, customers and others having advantageous business relationships with it. Without limiting the generality of the foregoing, the Company will not, and will not permit any of the Subsidiaries,
to take any of the following actions with respect to the Company or any of the Subsidiaries, without the prior written consent of Purchaser: 
  

	 	(a)	authorize or effect any change in its certificate of incorporation, bylaws, certificate of limited partnership or partnership agreement, except that each of the Company and the
Subsidiaries will amend its certificate of incorporation or certificate of limited partnership prior to Closing to change its name to a name selected by Purchaser and not containing the name “CH4”; 

  

	 	(b)	grant any options, warrants, or other rights to purchase or obtain any of its capital stock or issue, sell, or otherwise dispose of any of its capital stock;

  

	 	(c)	declare, set aside, or pay any dividend or distribution with respect to its capital stock (whether in cash or in kind), or redeem, repurchase, or otherwise acquire any of its
capital stock, except that prior to Closing the Company may declare and distribute to Seller or its nominee a dividend consisting of the Excluded Assets; 

  

	 	(d)	issue any note, bond, or other Debt security or create, incur, assume, or guarantee any indebtedness for borrowed money or capitalized lease obligation outside the ordinary course
of business; 

  

 29 

	 	(e)	impose any security interest upon any of its assets outside the ordinary course of business other than pursuant to the Bank Credit Agreement and the Product Hedging Contracts;

  

	 	(f)	make any capital investment in, make any loan to, or acquire the securities or assets of any other Person outside the ordinary course of business; 

  

	 	(g)	make any change in employment terms for any of its directors, officers or employees outside the ordinary course of business except for such actions as are otherwise provided for
herein; 

  

	 	(h)	enter into, adopt or amend any employment agreement or pension plan, or grant, or become obligated to grant, any increase in the compensation payable or to become payable to any of
its officers, managers or directors or any general increase in the compensation payable or to become payable to its employees except for such actions as are otherwise specifically provided for herein; 

  

	 	(i)	pay, discharge or satisfy any material claims, liabilities or obligations (absolute, accrued, contingent or otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or reserved against on the Company Financial Statements or subsequently incurred in the ordinary course of business, or disclosed pursuant to this Agreement and other than payments under the Bank
Credit Agreement and the Product Hedging Contracts, payments of current liabilities and other payments that are considered in the Purchase Price adjustment set forth in Section 5.13; 

  

	 	(j)	acquire (including by lease) any material assets or properties or dispose of, mortgage or encumber any material assets or properties, other than in the ordinary course of business
and except that prior to Closing the Company may transfer to Seller or its nominee the Excluded Assets; 

  

	 	(k)	waive, release, grant or transfer any material rights or modify or change in any material respect any material existing license, lease, contract or other document, other than in the
ordinary course of business and other than actions otherwise contemplated by this Agreement; 

  

	 	(l)	make any capital expenditures, unless such expenditure is made in the ordinary course of business and is in the aggregate no more than $700,000; 

  

	 	(m)	modify the terms of or close out any of its positions on its Product Hedging Contracts or enter into any new hedging positions; 

  

	 	(n)	enter into a Material Agreement or change or modify a Material Agreement (with the exception of agreements relating to the transfer of the Excluded Assets); or

  

	 	(o)	commit to any of the foregoing. 

  

 30 

 5.2. Access to Assets, Personnel and Information 
  

	 	(a)	From the date hereof until the Closing, the Company will afford to Purchaser and the Purchaser Representatives, at Purchaser’s sole risk and expense, access at reasonable times
to any of the assets, Records, facilities, audit work papers and payroll records of the Company and the Subsidiaries and shall, upon request, furnish promptly to Purchaser (at Purchaser’s expense) a copy of any file, book, Record, contract,
permit, correspondence, or other written information, document or data concerning the Company or the Subsidiaries (or their assets) that is within the possession or control of the Company or the Subsidiaries. During such period, the Company will
make available to a reasonable number of Purchaser Representatives adequate office space and facilities at the office facilities of the Company. The confidentiality of all such documents and information furnished to Purchaser shall be maintained by
Purchaser and treated the same as Purchaser would treat its own confidential information. 

  

	 	(b)	Purchaser and the Purchaser Representatives shall have the right and opportunity to make an environmental and physical assessment of the assets of the Company and the Subsidiaries
and, in connection therewith, shall have the right to enter and inspect such assets and all buildings and improvements thereon. Purchaser may not, without the prior written consent of the Company, which consent shall not be unreasonably withheld,
conduct any soil or water tests or borings or other invasive tests or examinations with respect to the assets of the Company and the Subsidiaries. The Company shall be provided 48 hours prior notice of any such inspection, and the Company
Representatives shall have the right to witness all such inspections. Purchaser shall (and shall cause the Purchaser Representatives to) keep any data or information acquired by any such examinations and the results of any analyses of such data and
information strictly confidential, and will not (and will cause the Purchaser Representatives not to) disclose any of such data, information or results to any Person unless otherwise required by law or regulation and then only after written notice
to the Company of the determination of the need for disclosure. Purchaser shall indemnify, defend and hold the Company and the Company Representatives harmless from and against any and all claims to the extent arising out of or as a result of the
activities of Purchaser and the Purchaser Representatives on the assets of the Company or the Subsidiaries in connection with conducting such environmental and physical assessment, except to the extent of and limited by the negligence or willful
misconduct of the Company, the Subsidiaries or any Representative of the Company. 

  

	 	(c)	From the date hereof until the Closing, the Company and the Subsidiaries shall fully and accurately disclose to Purchaser and the Purchaser Representatives all information that is
(i) reasonably requested by Purchaser or any of the Purchaser Representatives, (ii) known to the Company, and (iii) relevant in any manner or degree to the value, ownership, use, operation, development or transferability of the assets
of the Company or any of the Subsidiaries. 

  

	 	(d)	 Each of the Company and the Purchaser, respectively, shall hold, and shall cause each of its officers, directors, employees, accountants, counsel, advisors and any

  

 31 

	 	 
other Representative to hold all information received by the Company or the Purchaser pursuant to this Section 5.2 in confidence, and shall not use any
information obtained pursuant to this Section 5.2 for any purpose unrelated to the consummation of the transactions contemplated by this Agreement. 

  

	 	(e)	Notwithstanding anything in this Section 5.2 to the contrary: (i) the Company shall not be obligated under the terms of this Section 5.2 to disclose to Purchaser or
the Purchaser Representatives, or grant Purchaser or the Purchaser Representatives access to, information that is within the Company’s or any Subsidiary’s possession or control but subject to a valid and binding confidentiality agreement
with a Third Party entered into prior to March 1, 2006 that prohibits such disclosure without first obtaining the consent of such Third Party, and the Company, to the extent reasonably requested by Purchaser, will use reasonable efforts to
obtain any such consent; and (ii) Purchaser shall not be obligated under the terms of this Section 5.2 to disclose to the Company or the Company Representatives, or grant the Company or the Company Representatives access to, information
that is within Purchaser’s possession or control but subject to a valid and binding confidentiality agreement with a Third Party that prohibits such disclosure without first obtaining the consent of such Third Party, and Purchaser, to the
extent reasonably requested by Seller or the Company will use its reasonable efforts to obtain any such consent. 

 5.3. No
Solicitation. Immediately following the execution of this Agreement, neither the Company, the Seller, nor the Subsidiaries shall solicit, initiate, knowingly encourage the submission of, or conduct discussions or negotiations with respect to any
offer or proposal to acquire all or any part of the Company Common Stock or all or any material portion of the assets or business of the Company or the Subsidiaries (other than the transactions contemplated by this Agreement or in connection with
the distribution, assignment, purchase or transfer of the Excluded Assets), whether by merger, purchase of assets, tender offer, exchange offer or otherwise. The Company or the Seller shall notify Purchaser immediately if any Third Party engages in
any discussions or makes any offer with respect to the foregoing. 
 5.4. Additional Arrangements. Subject to the terms and conditions
herein provided, each of the Parties shall take, or cause to be taken, all actions and shall do, or cause to be done, all things necessary, appropriate or desirable under any applicable laws and regulations or under applicable governing agreements
to consummate and make effective the transactions contemplated by this Agreement, including using reasonable efforts to obtain all necessary waivers, consents and approvals and effecting all necessary registrations and filings. Each of the Parties
shall take, or cause to be taken (including actions which Seller shall cause the Company and/or the Subsidiaries to take), all actions or shall do, or cause to be done, all things necessary, appropriate or desirable to cause the covenants and
conditions applicable to the transactions contemplated hereby to be performed or satisfied as soon as practicable. In addition, if any Governmental Authority shall have issued any order, decree, ruling or injunction, or taken any other action that
would have the effect of restraining, enjoining or otherwise prohibiting or preventing the consummation of the transactions contemplated hereby, each of the Parties shall use reasonable efforts to have such order, decree, ruling or injunction or
other action declared ineffective as soon as practicable. 
  

 32 

 5.5. Public Announcements; Confidentiality. Prior to the Closing, the Parties shall consult with
each other before any Party issues any press release or otherwise makes any public statements with respect to the transactions contemplated by this Agreement, and none of the Parties shall issue any press release or make any such public statement
prior to obtaining the written approval of the other Parties; provided, however, that such approval shall not be required where such release or announcement is required by applicable law; and provided further, that any Party may respond to inquiries
by the press or others regarding the transactions contemplated by this Agreement, so long as such responses are consistent with such Party’s previously issued press releases. The Company and Seller agree that they will not use or disclose to
any Third Party any Purchaser Confidential Information. The Parties acknowledge and agree that non-public information concerning the progress of the transaction contemplated by this Agreement is confidential information and Purchaser Confidential
Information. 
 5.6. Notification of Certain Matters. The Company and Seller shall give prompt notice to Purchaser of (a) any
representation or warranty contained in Article 3 being untrue or inaccurate when made; (b) the occurrence of any event or development that would cause (or could reasonably be expected to cause) any representation or warranty contained in
Article 3 to be untrue or inaccurate on the Closing Date; or (c) any failure of the Company or Seller to comply with or satisfy any covenant, condition, or agreement to be complied with or satisfied by them hereunder. Purchaser shall give
prompt notice to Seller of (x) any representation or warranty contained in Article 4 being untrue or inaccurate when made; (y) the occurrence of any event or development that would cause (or could reasonably be expected to cause) any
representation or warranty contained in Article 4 to be untrue or inaccurate on the Closing Date; or (z) any failure of Purchaser to comply with or satisfy any covenant, condition, or agreement to be complied with or satisfied by it
hereunder. No disclosure by any Party pursuant to this Section 5.6, however, shall be deemed to amend or supplement the Disclosure Schedule or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant.

 5.7. Payment of Expenses. Each Party shall pay its own expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby, whether or not Closing occurs. To the extent such expenses are paid for by the Company or any of the Subsidiaries, the amount of such payment shall be a downward Base Purchase
Price adjustment. 
 5.8. Continuation of the Company’s Existing Indemnification Obligations. From and after the Closing, the
Company or its successor shall indemnify and hold harmless Seller and each Person who has been at any time prior to the Closing, an officer, director or controlling shareholder of the Company (collectively, the “Indemnified
Parties”) but only to the extent that such Indemnified Party was entitled to indemnification from the Company immediately prior to the date hereof under applicable law, the articles of incorporation and bylaws of the Company or under
contracts between such Indemnified Party and the Company (including indemnification as provided to NGP under the Advisory Services Agreement), regardless of whether such contracts are terminated on or after the Closing. The procedures associated
with such indemnification shall be the same as those associated with the Indemnified Parties’ indemnification from the Company immediately prior to the date hereof (provided, however, that Purchaser shall be under no obligation to deposit trust
funds pursuant to any “change-in-control” or similar provisions). The provisions of 

  

 33 

 
this Section 5.8 are intended to be for the benefit of, and shall be enforceable by, the Parties, each Indemnified Party and their respective heirs and
representatives. Notwithstanding the above, the indemnification obligation set forth in this Section 5.8 shall not apply to claims for indemnification resulting from litigation, arbitration, investigations or proceedings that should have been
disclosed to Purchaser on the Disclosure Schedule in connection with the representation and warranty given under Section 3.2.15 and were not so disclosed, nor shall the indemnification provisions of this Section 5.8 apply to
litigation, arbitration, investigations or proceedings resulting from disputes related to this Agreement. Company and Seller (jointly and severally), shall indemnify Purchaser against, and hold Purchaser harmless from, any damage, claim, loss, cost,
liability or expense, including without limitation, interest, penalties, reasonable attorneys’ fees and Purchaser’s expenses of investigation, response action or remedial action (collectively “Damages”), incident to,
arising out of, in connection with or related to, whether directly or indirectly, (i) the distribution, assignment, purchase or transfer of the Excluded Assets; and (ii) any Damages deriving from the business activities of the Excluded
Assets; provided however, that such indemnification shall terminate to the extent notice of such indemnification claim was not given within six months following the Closing Date. 
 5.9. Consents Under Bank Credit Agreement. The Parties shall work together in order to obtain any and all consents, approvals or waivers required
by the terms of the Bank Credit Agreement as may be required to avoid a breach or default or any right of acceleration or cancellation thereunder as a result of the execution, delivery or performance of this Agreement; provided, however, failure of
the Parties to obtain any such consent, approval or waiver shall not constitute a failure of a condition to Purchaser’s or any Seller’s obligation to proceed to close as long as the credit facility is paid off in full at Closing.

 5.10. Termination of Certain Agreements. Effective upon the Closing, the Advisory Services Agreement and the Rights Agreement shall
be terminated and no Party shall have further rights or obligations thereunder, except for the continuation of indemnity rights as provided in Section 5.8. 
 5.11. Resignation of Directors, Officer and Employees; Termination of Agreements. Each director and officer of the Company and the Subsidiaries and each employee of the Company and the Subsidiaries who are not
on the list of employees that the Purchaser intends to employ following the Closing shall resign his/her position with the Company and the Subsidiaries effective at Closing and execute a mutual release in a form to be agreed upon by the Parties, and
all outstanding agreements between the Company, the Subsidiaries and such person, including the Confidentiality and Noncompete Agreements in force at Closing, shall be terminated by the Company and/or the Subsidiaries prior to Closing. The Company
shall not terminate any of the employees on the list of employees designated by the Purchaser as employees that the Purchaser desires to continue to employ following the Closing. The officers listed on Schedule 5.11 shall execute at the Closing
non-competition agreements in the form of Exhibit A attached hereto. 
 5.12. Title and Environmental Defects 
  

	 	(a)	 Purchaser may conduct, at its sole cost, such title examination, regarding whether the Company or any of the Subsidiaries has Defensible Title, or investigation,
and other 

  

 34 

	 	 
examinations and investigations, as it may in its sole discretion choose to conduct with respect to the Company’s Oil and Gas Interests in order to
determine whether any Title or Environmental Defects exist. Purchaser must deliver to the Company in writing on or before May 1, 2006, a written notice specifying each defect associated with the Company’s or any Subsidiary’s Oil and
Gas Interests that it asserts pursuant to this Section 5.12 or Sections 3.2.19 or 3.2.35 (a “Title or Environmental Defect”), a description of each such Title or Environmental Defect, the amount of the adjustment to the Base
Purchase Price that it asserts based on such defect and its method of calculating such adjustment. If such notice is not timely submitted, Purchaser will be deemed to have waived its basis for a Base Purchase Price adjustment based on
Section 3.2.19, Section 3.2.35 and this Section 5.12, as well as waived its basis for any claim or other assertion of rights or damages based on such provisions. 

  

	 	(b)	Upon timely delivery of a notice under Section 5.12(a), Purchaser and Seller will in good faith negotiate the validity of the claim and the amount of any adjustment to the Base
Purchase Price using the following criteria. 

  

	 	(i)	No single Title Defect shall be taken into account as an adjustment to the Base Purchase Price unless the value of such defect is determined to be more than the greater of
(i) $5,000 or (ii) three percent (3%) of the Allocated Value of such property and no single Environmental Defect shall be taken into account as an adjustment to the Base Purchase Price unless the value of such defect is determined to
be more than the greater of (i) $5,000 or (ii) three percent of the Allocated Value of such property (the “Individual Defect Threshold”). 

  

	 	(ii)	No adjustment will be made to the Base Purchase Price under this Section 5.12 unless the net total of all individual adjustments that exceed the Individual Defect Threshold
under this Section 5.12 exceeds three percent (3%) of the Base Purchase Price in the aggregate and only by the amount exceeding three percent (3%) of the Base Purchase Price (the “Aggregate Defect Threshold”); by way
of example, if the net total of all individual adjustments that exceed the Individual Defect Threshold equals four percent (4%) of the Base Purchase Price, then an adjustment of one percent (1%) of the Base Purchase Price may, subject to
Section 5.12(d), be made to the Base Purchase Price. 

  

	 	(iii)	 If the requested adjustment is based on the Company or any of the Subsidiaries owning a net revenue interest for a well, unit rights or leasehold rights less than
that shown in the Disclosure Schedule, then a downward adjustment shall be calculated by multiplying the Allocated Value set forth for such well, unit rights or leasehold rights on the Disclosure Schedule by a fraction (A) the
numerator of which is an amount equal to the net revenue interest shown on the Disclosure Schedule for such well, unit rights or leasehold rights less the decimal share to which the Company or the 

  

 35 

	 	 
Subsidiaries would be entitled as a result of its ownership interest in such well, unit rights or leasehold rights which is unaffected by such Title Defect
and (B) the denominator of which is the net revenue interest shown for such well, unit rights or leasehold rights on the Disclosure Schedule. Any downward adjustments requested by Purchaser in subsections (i) and (ii) above may
be offset by upward adjustments if it is determined by Purchaser and the Company that the Company’s or the Subsidiaries’ net revenue interest for all or part of the Oil and Gas Interests of the Company is greater than that shown on the
Disclosure Schedule. 

  

	 	(iv)	If the adjustment is based on the Company or the Subsidiaries owning a working interest that is larger than the working interest shown on the Disclosure Schedule, but without
a proportionate increase in the Company’s or the Subsidiaries’ net revenue interest, then the adjustment is calculated by determining the effective net revenue interest that results from such larger working interest, determining what the
net revenue interest would be using such effective net revenue interest and the working interest shown on the Disclosure Schedule and then calculating the adjustment in the manner set forth in clause (iii) preceding.

  

	 	(v)	If the adjustment is based on a Lien or other monetary charge upon an Oil and Gas Interest of the Company or a liability to remediate or otherwise cure an Environmental Defect
related to an Oil and Gas Interest of the Company that is liquidated in amount, then the adjustment is the amount necessary to remove such Lien or other monetary charge from or a liability to remediate or otherwise cure an Environmental Defect
relating to, the affected Oil and Gas Interest of the Company. 

  

	 	(vi)	If the adjustment is based on an obligation, burden or liability upon the affected Oil and Gas Interest for which Purchaser’s economic detriment is not liquidated but can be
estimated with reasonable certainty, then the adjustment is the amount necessary to compensate Purchaser at Closing for the adverse economic effect on the affected Oil and Gas Interest. 

  

	 	(c)	If the value of a Title or Environmental Defect that remains uncured by Closing and, consequently, the adjustment to the Base Purchase Price cannot be determined based on the above
criteria or if the Parties cannot otherwise agree on the amount of an adjustment, then Purchaser shall select one of the following options to resolve the impasse: 

  

	 	(i)	The Base Purchase Price shall be reduced by an amount determined by a Third Party agreed to by Seller and Purchaser as being the value of such Title or Environmental Defect, taking
into consideration the Allocated Value of the affected property, the portion of the affected property subject to such Title or Environmental Defect, the legal affect of such Title or Environmental Defect on the affected property and any other factor
reasonably relevant to the value of the Title or Environmental Defect, as determined in the reasonable discretion of the Third Party 

  

 36 

	 	(ii)	Seller and Purchaser will enter into a separate written agreement whereby Seller will as soon as reasonably practicable after Closing, but not later than six months from the Closing
Date, cure or remove such Title or Environmental Defect to the reasonable satisfaction of a Third Party to be agreed on by Seller and Purchaser and the value of any such Title or Environmental Defect shall be withheld from the Base Purchase Price
and deposited with the Escrow Agent until the Title or Environmental Defect is so cured; or 

  

	 	(iii)	Purchaser may exclude the affected Oil and Gas Interest, in which event the affected Oil and Gas Interest shall be deleted from this Agreement and the Base Purchase Price shall be
reduced by an amount equal to the Allocated Value of such affected property. In the event such affected property is excluded from this Agreement, Seller shall indemnify Purchaser for any expenses incurred in connection with the inspection of the
affected property provided however that such indemnification shall not apply to any liability that arises or is incurred as a result of the willful misconduct or gross negligence of the Purchaser. 

  

	 	(d)	If the Aggregate Defect Threshold is exceeded by the net total of asserted Title and Environmental Defects which each exceeds the Individual Defect Threshold and therefore the Base
Purchase Price would be decreased by adjustments made pursuant to this Section 5.12, Purchaser may at its sole option and upon its written notice to Seller, do any of the following or a combination thereof: 

  

	 	(i)	The Base Purchase Price shall be reduced by an amount determined by a Third Party agreed to by Seller and Purchaser as being the value of the asserted Title and Environmental
Defects, taking into consideration the Allocated Value of each affected property, the portion of each affected property subject to such Title or Environmental Defects, the legal affect of such Title or Environmental Defects on each affected property
and any other factor reasonably relevant to the value of the Title or Environmental Defects, as determined in the reasonable discretion of the Third Party; 

  

	 	(ii)	Seller and Purchaser will enter into a separate written agreement whereby Seller will as soon as reasonably practicable after Closing, but not later than six months from the Closing
Date, cure or remove some or all of such Title or Environmental Defects to the reasonable satisfaction of a Third Party to be agreed upon by Seller and Purchaser and the value of any such Title or Environmental Defect shall be withheld from the Base
Purchase Price and deposited with the Escrow Agent until the Title or Environmental Defect is so cured; or 

  

 37 

	 	(iii)	Purchaser may exclude any affected property, in which event the affected property selected by Purchaser shall be deleted from this Agreement and the Base Purchase Price shall be
reduced by an amount equal to the Allocated Value of such selected affected property. In the event such affected property is excluded from this Agreement, Seller shall indemnify Purchaser for any expenses incurred in connection with the inspection
of the affected property provided however that such indemnification shall not apply to any liability that arises or is incurred as a result of the willful misconduct or gross negligence of the Purchaser. 

  

	 	(e)	If the total amount of Title and/or Environmental Defects is ten percent (10%) of the Base Purchase Price or more, then Seller or Purchaser may terminate this Agreement upon
written notice to the other on or before May1, 2006, and this Agreement shall be void and of no further force or effect, except for the provisions of Sections 2.2 (with respect to Earnest Money), 4.7 (with respect to indemnification), 5.2(b) (but
only to the extent of the confidentiality and indemnification provisions), 5.5 (with respect to the indemnification provisions) and 5.7 (regarding payment of expenses) and the Confidentiality Agreement. Seller shall be free to immediately enjoy all
rights of ownership and to sell, transfer, encumber or otherwise dispose of the Shares or any of the Company’s Oil and Gas Interests to any Party without any restriction under this Agreement. Notwithstanding the above, Purchaser may waive the
Title or Environmental Defect amount over ten percent (10%) of the Base Purchase Price and close the transaction contemplated by this Agreement in which case Seller shall have no further liability to Purchaser for any such waived Defects.

  

	 	(f)	The Company and Purchaser will reasonably cooperate, at Seller’s expense, with Seller after the Closing to cure Title and Environmental Defects that Seller has elected to cure.

 5.13. Additional Adjustments to Base Purchase Price. The Base Purchase Price will be adjusted: 
  

	 	(a)	upward or downward by any positive or negative (as the case may be) balance of Working Capital as of February 28, 2006; 

  

	 	(b)	downward by the aggregate amount of bonuses (and related taxes) of any kind paid by the Company or the Subsidiaries during the period beginning March 1, 2006, and ending on the
Closing Date or payable by the Company or any Subsidiary as of the Closing Date, including as set forth in the Disclosure Schedule pursuant to Section 3.2.14(d), to the extent not otherwise reflected in adjustments to the Base Purchase
Price; 

  

	 	(c)	 downward by the aggregate amount of fees and expenses paid by the Company to Schlanger, Silver, Barg & Paine, LLP, any other legal counsel or any other
Third Party in connection with the transactions contemplated by this Agreement or the proposed sale of the Company in general, including preparation of 2005 and 2006 

  

 38 

	 	 
(through the Closing Date) tax returns, to the extent not otherwise reflected in adjustments to the Base Purchase Price; and 

  

	 	(d)	downward if the gain or taxable income realized by the Company due to the transfer of the Excluded Assets exceeds [60]% of the Company’s net operating loss carry forward, then
any taxes on such excess taxable income or gain shall be considered a current liability and a Base Purchase Price adjustment. 

  

	 	(e)	downward by the amount of any costs or other liabilities incurred by the Company related to the transfer of the Excluded Assets pursuant to Section 2.3.

 5.14. Purchase Price Calculation 
  

	 	(a)	No later than three business days before Closing, the Company shall have prepared, in consultation with Purchaser, and delivered to Purchaser a statement (the “Closing
Statement”) setting forth the Purchase Price as adjusted pursuant to Sections 5.12 and 5.13 together with unaudited consolidated financial statements of the Company and the Subsidiaries as of and for the two months ended February 28,
2006. At Closing, the Escrow Agent shall retain Five Million Dollars ($5,000,000) from the Purchase Price (the “Holdback”) to cover any potential deficiencies in the Purchase Price calculation pursuant to Section 5.13 and to
protect Purchaser against any breaches of any of the representations, warranties and covenants by the Company or the Seller set forth in this Agreement. If information becomes available within 150 days following the Closing that causes either
Purchaser or Seller to assert that the adjustments to the Base Purchase Price as of the Closing Date pursuant to Section 5.12 or 5.13 (“Closing Adjustments”) were incorrect and that subsequent adjustments (the “Proposed
Adjustments”) should be made, the claiming Party shall give notice of the Proposed Adjustments to the other Party and to the Escrow Agent, and the Parties shall in good faith work together to reconcile any disagreement they have concerning the
Proposed Adjustments and to agree to a final adjustment (the “Final Adjustment”) to the Purchase Price. If the Parties have not agreed to the Final Adjustment within 180 days following the Closing Date, a public accounting firm selected by
Seller but reasonably acceptable to Purchaser (the “Accountant”) shall perform an audit and determine the Final Adjustment. The Parties agree that the Accountant’s determination of the Final Adjustment shall be conclusive, and
the Accountant’s fees associated with the audit of such Final Adjustment shall be paid one-half by Seller and one-half by Purchaser. 

  

	 	(b)	 At any time on or before the date that is 180 days after the Closing Date (the “Claim Period”), Purchaser will have the right to notify the Seller and the
Escrow Agent in writing pursuant to the Escrow Agreement that Purchaser is making a claim with respect to the Escrow for a breach of the Company’s or the Seller’s representations, warranties and/or covenants contained herein (each such
claim, a “Breach”). Such notice will specify the nature of the Breach with reasonable detail and specificity and the amount Purchaser proposes to be paid out of the Escrow with respect to such Breach. In the event the Seller disputes any
of Purchaser’s claims of Breach, the 

  

 39 

	 	 
Seller will notify the Purchaser and the Escrow Agent in writing thereof within 10 days after receipt of such notice. In the event the Seller and Purchaser
are unable to resolve such dispute within 45 days after receipt by the Escrow Agent of the notice of dispute, such dispute will be submitted to arbitration as provided in Section 8.16. 

  

	 	(c)	At any time subsequent to the Claim Period that there has been a final determination, pursuant to Section 5.14(a) above, concerning the Final Adjustment, then the following
shall occur: 

  

	 	(i)	the Escrow Agent shall deliver to Seller that portion, if any, of the Holdback that exceeds the sum of (A) the amount, if any, by which the Final Adjustment pursuant to
Section 5.14(a) above provides for an increase in the Purchase Price, and (B) the aggregate amounts, if any, claimed pursuant to Section 5.14(b) above, by Purchaser, for Breaches. If the Final Adjustment pursuant to 5.14(a) above
provides for a decrease in the Purchase Price, then there will be no amount added or subtracted pursuant to clause (A) of the foregoing sentence. Amounts withheld in the Escrow with respect to asserted Breaches shall be disposed of pursuant to
the provisions of Sections 5.14(c)(ii) and (iii) immediately below. 

  

	 	(ii)	Upon the determination by the Parties of each Breach claimed by Purchaser pursuant to Section 5.14(b), the Escrow Agent will be authorized to release additional portions of the
Holdback to Seller, but only to the extent that is justified by the calculation set forth above in Section 5.14(c)(i) immediately above. 

  

	 	(iii)	At such time that all claims for Breaches made by Purchaser pursuant to Section 5.14(b) have been finalized, then the Seller shall be paid the amount, if any, of the Holdback
to which Seller is entitled pursuant to the calculation set forth in Section 5.14(c)(i), and the Purchaser shall be paid whatever portion of the Holdback remains thereafter. 

 Notwithstanding any other provision of this Agreement to the contrary, after the Closing, Purchaser’s sole and exclusive remedy for any breach by the Seller or
the Company of any of the representations, warranties and covenants in this Agreement shall be to exercise Purchaser’s rights under this Section 15.14 and the Escrow Agreement. 
 5.15. Release of Claims. As of the Closing: 
  

	 	(a)	 Seller hereby agrees to forever waive, release and discharge and not to assert any and all rights Seller may have pursuant to any applicable law or otherwise to
make a claim against or otherwise demand or receive payment from (i) the Company arising out of or with respect to the untruth, inaccuracy or breach of any representation or warranty of the Company set forth in this Agreement or the breach by
the Company of any covenant or agreement of the Company set forth in this Agreement or (ii) the Company or any officer, director, employee, controlling stockholder, advisor or agent of the Company arising out of or with respect to any act or
omission of any such 

  

 40 

	 	 
Person in such Person’s role as an officer, director, employee, controlling stockholder, advisor or agent of the Company, other than (A) liability
for obligations for wages and benefits for periods prior to the Closing (other than any reimbursements of employee expenses incurred in the ordinary course of business) and (B) as provided in Section 5.8. 

  

	 	(b)	Seller does hereby forever waive, release and discharge the Company and the Subsidiaries and each officer, director, employee, controlling stockholder, advisor and agent of the
Company and the Subsidiaries from any and all losses that relate to or arise out of any dealings, relationships or transactions, prior to the Closing, by and between Seller and the Company, the Subsidiaries and/or any of the other released Persons,
whether arising under contract, at law or in equity, that Seller ever had, now has or hereafter can, shall or may have, whether or not now known, other than (i) liability for obligations for wages and benefits for periods prior to the Closing
and (ii) as provided in Section 5.8. 

  

	 	(c)	Seller understands and agrees that pursuant to this Section 5.15, Seller expressly waives all claims (other than those expressly reserved as set forth in this
Section 5.15), even those that Seller may not know or suspect to exist, which if known may have materially affected the decision to provide this release, and Seller waives any rights under applicable law that provide to the contrary.

 5.16. Company Employees. Purchaser shall, or shall cause the Company to, fulfill the coverage continuation
obligations described in Section 4980B of the Code and Section 601 of ERISA for a period of 18 months following the Closing for all of the employees of the Company and its Subsidiaries at the Closing Date (regardless of whether
Section 4980B of the Code or Section 601 of ERISA actually applies to the Company); provided, that Purchaser and the Company are not required to bear the cost of such coverage but may charge such employees reasonable premiums with respect
to such coverage. The provisions of this Section 5.16 are intended to be for the benefit of, and shall be enforceable by, the parties hereto and the employees of the Company and its Subsidiaries covered by the Company Employee Benefit Plans at
the Closing Date and their respective heirs and representatives. 
 ARTICLE 6 
 CONDITIONS 
 6.1. Conditions to Each Party’s Obligation to Proceed with
Closing. The respective obligations of each Party to proceed with Closing shall be subject to the satisfaction, at or prior to the Closing Date, of the following conditions: 
  

	 	(a)	 Approvals. All filings required to be made prior to the Closing with, and all consents, approvals, permits and authorizations required to be obtained prior
to the Closing from, any Governmental Authority or other person in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by the Parties shall have been made or obtained (as the case
may be), except where, in the reasonable discretion of Purchaser, the failure to obtain 

  

 41 

	 	 
such consents, approvals, permits and authorizations would not be reasonably likely to result in a Material Adverse Effect on the Company or the Subsidiaries
or on Purchaser, as the case may be, or to materially adversely affect the consummation of the transactions contemplated by this Agreement. 

  

	 	(b)	No Injunctions or Restraints. No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the transaction contemplated by this Agreement shall be in effect; provided, however, that prior to invoking this condition, each Party shall use all reasonable efforts to have any such decree,
ruling, injunction or order vacated, and, if necessary, the Closing shall be delayed for up to 30 days while such efforts are taking place. 

  

	 	(c)	Termination of Bank Credit Agreement. Purchaser and Seller shall have made arrangements with the lender under the Bank Credit Agreement so that concurrently with the Closing
(i) Purchaser pays in full the outstanding principal, interest, fees and expenses due on loans outstanding under the Bank Credit Agreement, and (ii) all security interests and Liens held by the agent or lender under the Bank Credit
Agreement are released and terminated. 

 6.2. Conditions to Obligations of Purchaser. The obligations of
Purchaser to proceed with Closing are subject to the satisfaction of the following conditions, any or all of which may be waived in whole or in part by Purchaser: 
  

	 	(a)	Representations and Warranties. The representations and warranties of Seller and the Company set forth in Article 3 shall be true and correct in all material respects as of
the Closing Date as though made on and as of that time (except that any such representations and warranties which expressly relate only to an earlier date shall be true and correct on the Closing Date as of such earlier date), and Purchaser shall
have received a certificate signed by a Responsible Officer of Seller and the Company to such effect; provided, however, that the condition set forth in this Section 6.2(a) shall not be applicable to the representation and warranty regarding
Environmental Matters in Section 3.2.19 (which representation and warranty is addressed in Section 5.12). 

  

	 	(b)	Performance of Covenants and Agreements by the Company and Seller. The Company, the Subsidiaries and Seller shall have performed in all material respects all covenants and
agreements required to be performed by it under this Agreement at or prior to the Closing Date, and Purchaser shall have received a certificate signed by a Responsible Officer of the Seller and the Company to such effect. 

 

	 	(c)	The Company, CH4 Energy and the Seller shall have completed the full distribution, assignment, purchase or transfer of the Excluded Assets, including all the rights, benefits and
liabilities pertaining to such Excluded Assets. 

  

 42 

	 	(d)	The Company and each of Richard Brannon, Jack Brannon, Jon Stephenson and Clinton Koerth shall have entered into a non-compete agreement in a form attached hereto as Exhibit A.

 6.3. Conditions to Obligations of Seller. The obligations of Seller to proceed with Closing are subject to the
satisfaction of the following conditions, any or all of which may be waived in whole or in part by Seller: 
  

	 	(a)	Representations and Warranties. The representations and warranties of Purchaser set forth in Article 4 shall be true and correct in all material respects as of the
Closing Date as though made on and as of that time (except that any such representations and warranties which expressly relate only to an earlier date shall be true and correct on the Closing Date as of such earlier date), and Seller shall have
received a certificate signed by a Responsible Officer of Purchaser to such effect. 

  

	 	(b)	Performance of Covenants and Agreements by Purchaser. Purchaser shall have performed in all material respects all covenants and agreements required to be performed by them
under this Agreement at or prior to the Closing Date, and Seller shall have received a certificate signed by a Responsible Officer of Purchaser to such effect. 

 ARTICLE 7 
 TERMINATION 
 7.1. Termination Rights. This Agreement may be terminated at any time prior to the Closing: 
  

	 	(a)	By mutual written agreement of Purchaser and Seller; 

  

	 	(b)	By either Seller or Purchaser if (i) the Closing has not occurred by May 15, 2006 (provided, however, that the right to terminate this Agreement pursuant to this
clause (i) shall not be available to any Party whose breach of any representation or warranty or failure to perform any covenant or agreement under this Agreement (which, in the case of Seller, shall include breach or failure by the Company)
has been the cause of or resulted in the failure of Closing to occur on or before such date); or (ii) any Governmental Authority shall have issued an order, decree or ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting Closing and such order, decree, ruling or other action shall have become final and nonappealable (provided, however, that the right to terminate this Agreement pursuant to this clause (ii) shall not be available to any
Party until such Party has used all reasonable efforts to remove such injunction, order or decree and such efforts may continue up to 30 days after the Closing Date); 

  

	 	(c)	By Purchaser if Seller has failed to comply in any material respect with any of Seller’s covenants or agreements contained in this Agreement and such failure has not been, or
cannot be, cured within 10 business days after notice and demand for cure thereof; 

  

 43 

	 	(d)	By Seller (i) if Purchaser has failed to comply in any material respect with any of its respective covenants or agreements contained in this Agreement, and such breach or
failure has not been cured within 10 business days after notice and a demand for cure thereof, or (ii) if the adjustments to the Base Purchase Price exceed ten percent (10%) of the Base Purchase Price and Purchaser has not waived the
amounts in excess of ten percent (10%) of the Base Purchase Price pursuant to Section 5.12(e); or 

  

	 	(e)	By either Party if the conditions of Section 6.1 have not been satisfied or by Purchaser if the conditions of Section 6.2 have not been satisfied or by Seller if the
conditions of Section 6.3 have not been satisfied. 

 7.2. Effect of Termination. If this Agreement is terminated
by either Seller or Purchaser pursuant to the provisions of Section 7.1, this Agreement shall forthwith become void without liability to any Party to this Agreement except for, and there shall be no further obligation on the part of any Party
or its respective Affiliates, except pursuant to, the provisions of Sections 2.2 (with respect to the Earnest Money), 4.7 (with respect to the indemnification provisions contained therein), 5.2(b) (but only to the extent of the confidentiality and
indemnification provisions contained therein), 5.5 (with respect to the confidentiality provisions contained therein) and 5.7 (regarding payment of expenses) and the Confidentiality Agreement (which shall continue pursuant to its terms); provided,
however, subject to the provisions of Section 2.2, that a termination of this Agreement shall not relieve any Party from any liability for damages incurred as a result of a breach by such Party of its covenants, agreements or other obligations
hereunder occurring prior to such termination; however, in no event will any Party be liable to any other Party for incidental, consequential, exemplary, punitive or special damages of any kind or for lost or imputed profits. Seller shall be free to
immediately enjoy all rights of ownership and to sell, transfer, encumber or otherwise dispose of the Shares or any of the Company’s Oil and Gas Interests to any other Person without any restriction under this Agreement. 
 ARTICLE 8 
 MISCELLANEOUS

 8.1. Limited Survival of Representations and Warranties. The representations and warranties contained in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Closing only for a period of 180 days following the Closing Date, but the aggregate recovery available pursuant to a breached representation or warranty shall not exceed the
amount of the Holdback retained by the Escrow Agent at Closing. Accordingly, on the date 180 days following the Closing Date, no Party shall have any liability to any other Party based on any representation or warranty made herein or in any
instrument delivered pursuant to this Agreement. 
 8.2. Amendment. This Agreement may not be amended except by a written instrument
signed on behalf of each of the Parties. 
  

 44 

 8.3. Notices. Any notice or other communication required or permitted hereunder shall be in
writing and either delivered personally, by facsimile transmission or by registered or certified mail (postage prepaid and return receipt requested) and shall be deemed given when received (or, if mailed, five business days after the date of
mailing) at the following addresses or facsimile transmission numbers (or at such other address or facsimile transmission number for a Party as shall be specified by like notice): 
  

	 	(a)	If to Purchaser: 

 Bill Barrett Corporation 
 Attn: Manager, Acquisitions and Divestitures 
 1099 18th Street, Suite 2300 
 Denver, Colorado 80202 
 Fax: (303) 291-0420 
 with a copy (which shall not constitute notice) to: 
 Alan L. Talesnick 
 Patton Boggs LLP 
 1660 Lincoln Street, Suite 1900 
 Denver, Colorado 80264 
 Fax: (303) 894-9239 
  

	 	(b)	If to Seller or the Company: 

 Jack Brannon 
 1000 West Weatherford, Suite 200 
 Fort Worth,
Texas 76102 
 Fax: (817) 924-8697 
 with copies (which shall not constitute notice) to: 
 Kyle Longhofer 
 Schlanger, Silver, Barg & Paine, LLP 
 109 North Post Oak Lane, Suite 300 
 Houston, Texas 77024 
 Fax: (713) 785-2091 
  

 45 

 and 
 Natural Gas Partners 
 Attn: Christopher Ray 
 125 E. John Carpenter Fwy., Suite 600 
 Irving, Texas 75062 
 Fax: (972) 432-1441 
 8.4.
Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the Parties and
delivered to the other Parties, it being understood that all Parties need not sign the same counterpart. 
 8.5. Severability. Any
term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, such provision
shall be interpreted to be only as broad as necessary to be enforceable. 
 8.6. Entire Agreement; No Third Party Beneficiaries. This
Agreement (together with the Confidentiality Agreement and the documents and instruments delivered by the Parties in connection with this Agreement): (a) constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the Parties with respect to the subject matter hereof; and (b) except as provided in Section 5.2 or 5.8, is solely for the benefit of the Parties and their respective successors, legal
representatives and assigns and does not confer on any other person any rights or remedies hereunder. No Party is entering into this Agreement on a basis of any promises or representations other than those appearing within the four corners of this
Agreement. 
 8.7. Applicable Law. This Agreement shall be governed in all respects, including validity, interpretation and effect, by
the laws of the State of Texas regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 
 8.8. No Remedy in Certain Circumstances. Each Party agrees that, should any court or other competent authority hold any provision of this Agreement or part hereof to be null, void or unenforceable, or order any Party to take any
action inconsistent herewith or not to take an action consistent herewith or required hereby, the validity, legality and enforceability of the remaining provisions and obligations contained or set forth herein shall not in any way be affected or
impaired thereby, unless the foregoing inconsistent action or the failure to take an action constitutes a material breach of this Agreement or makes this Agreement impossible to perform, in which case this Agreement shall terminate pursuant to
Article 7. Except as otherwise contemplated by this Agreement, to the extent that, a Party took an action pursuant to an order or judgment of a court or other competent Governmental Authority, inconsistent herewith or failed to take action
consistent herewith or required hereby such Party shall not incur any liability or obligation unless such Party breached its obligations under Section 5.4 or did not in good faith seek to resist or object to the imposition or entering of such
order or judgment. 
  

 46 

 8.9. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the Parties (whether by operation of law or otherwise) without the prior written consent of the other Parties, except that Purchaser may assign, in its sole discretion, its rights, interests and obligations hereunder to
any wholly-owned subsidiary, provided that Purchaser shall notify Seller of any such assignment and remain responsible for all of its obligations hereunder. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the Parties and their respective successors and assigns. 
 8.10. Waivers. At any time prior to the Closing,
the Parties may, to the extent legally allowed: (a) extend the time for the performance of any of the obligations or other acts of the other Parties, (b) waive any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant, and (c) waive performance of any of the covenants or agreements, or satisfaction of any of the conditions, contained herein. Any agreement on the part of a Party to any such extension or waiver shall be valid
only if set forth in a written instrument signed on behalf of such Party. Except as provided in this Agreement, no action taken pursuant to this Agreement, including any investigation by or on behalf of any Party, shall be deemed to constitute a
waiver by the Party taking such action of compliance with any representations, warranties, covenants or agreements contained in this Agreement. The waiver by any Party of a breach of any provision hereof shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provisions hereof. 
 8.11. Confidentiality Agreement. The Confidentiality
Agreement is hereby incorporated herein by reference and shall constitute a part of this Agreement for all purposes and shall remain in full force and effect following the execution of this Agreement until terminated in accordance with its terms.
Any and all information received by Purchaser pursuant to the terms and provisions of this Agreement shall be governed by the applicable terms and provisions of the Confidentiality Agreement. 
 8.12. Incorporation. Exhibits and Schedules referred to herein are attached to and by this reference incorporated herein for all purposes.

 8.13. Cooperation After Closing. Each Party shall, at any time and from time to time after Closing, execute, acknowledge (where
appropriate) and deliver such further instruments and documents and take such other action as may be reasonably requested by another Party in order to carry out the intent and purpose of this Agreement. Seller agrees that, upon receipt after Closing
of checks, mail or other property or documents which are the property of the Company, Seller will promptly forward such items to the Company at Purchaser’s address as set forth in Section 8.3. 
 8.14. Mutual Release 
  

	 	(a)	 Subject to the occurrence of the Closing and as of the date 365 days after the Closing Date, Purchaser and the Company release and forever discharge Seller and
their Affiliates and the shareholders, director, officers, agents, controlling persons, 

  

 47 

	 	 
representatives, advisors and employees of Seller and its Affiliates, and their respective heirs, executors, administrators, successors and assigns, from any
and all actions, causes of action, suits, debts, claims and demands of the Company or Purchaser, or their Affiliates, related to the Company (except for rights or obligations arising under this Agreement) that arise out of acts, events, conditions
or omissions occurring or existing from the beginning of the world to and including the Closing Date, provided that Seller shall have given full disclosure of all facts and circumstances as they existed as of the Closing Date. Notwithstanding the
foregoing, the release shall not apply to any claim, contest, dispute, litigation or arbitration filed within 365 days of the Closing Date which remains unresolved 365 days after the Closing Date. 

  

	 	(b)	Subject to the occurrence of the Closing and as of 365 days after the Closing Date, Seller releases and forever discharges Purchaser and the Company from any and all actions, causes
of action, suits, debts, claims and demands of Seller or its Affiliates related to the Company (except for rights or obligations arising under this Agreement) that arise out of acts, events, conditions or omissions occurring or existing from the
beginning of the world to and including the Closing Date. [Notwithstanding the foregoing, this release shall not apply to Purchaser’s violations of Article 4 until 365 days after the Closing Date.] 

 8.15. Fair Construction. This Agreement shall be deemed to be the joint work product of Purchaser and Seller without regard to the identity of the
draftsperson, and any rule of construction that a document shall be interpreted or construed against the drafting Party shall not be applicable. 
 8.16. Arbitration. Any dispute under this Agreement not involving a Title Defect, an Environmental Defect or the Final Statement will be submitted to binding arbitration to be conducted in Dallas County, Texas, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, except that there will be one arbitrator selected by Purchaser, one arbitrator selected by the Seller and a third arbitrator selected by those two arbitrators. The arbitrators
will be instructed and empowered to take reasonable steps to expedite the arbitration and the arbitrators’ judgment will be final and binding upon the Parties subject solely to challenge on the grounds of fraud or gross misconduct. The
arbitration will be held in Dallas County, Texas. Judgment upon any verdict in arbitration may be entered in any court of competent jurisdiction. Unless otherwise expressly set forth in this Agreement, the procedures specified in this
Section 8.16 will be the sole and exclusive procedures for the resolution of disputes and controversies between the parties arising out of or relating to this Agreement. Notwithstanding the foregoing, a party may seek a preliminary injunction
or other provisional judicial relief if in such party’s judgment such action is necessary to avoid irreparable damage or to preserve the status quo. 
 8.17 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF PURCHASER AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY A JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY 

  

 48 

 
TRANSACTION CONTEMPLATED HEREBY OR ASSOCIATED HEREWITH, (B) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH LITIGATION OR ARBITRATION ANY “SPECIAL DAMAGES,” AS DEFINED BELOW, (C) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT
SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS CONTAINED IN THIS PARAGRAPH. AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS
WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO. 
 [The remainder of this page is intentionally
blank.] 
  

 49 

 IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized
representatives, on the date first written above. 
  

									
	“Seller”	 		 	“Purchaser”
			
	 CH4 Holdings, LP
	 		 	 Bill Barrett Corporation

					
	 By:
	 	 /s/ Richard Brannon
	 		 	 By:
	 	 /s/ Fredrick J. Barrett

		 	 Name: Richard Brannon
	 		 		 	 Name: Fredrick J. Barrett

		 	 President
	 		 		 	 Title: Chief Executive Officer

				
	“Company”	 		 		 	
				
	 CH4 Corporation
	 		 		 	
					
	 By:
	 	 /s/ Richard Brannon
	 		 		 	
		 	 Name: Richard Brannon
	 		 		 	
		 	 President
	 		 		 	

  

 50Subscription Agreement to purchase common stock and Class A warrant

 Exhibit 10.2 
 EMPIRE ENERGY CORPORATION INTERNATIONAL 
 (a Nevada Corporation) 
 16801 West 116th Street, Suite 100 
 Lenexa, KS
66219 
  
  
  
  

 SUBSCRIPTION AGREEMENT

  
  
  
  
  
 Instructions 
  
  
 PLEASE COMPLETE AND SIGN TWO COPIES OF THE SUBSCRIPTION AGREEMENT 

 SUBSCRIPTION AGREEMENT 
 FOR 
 EMPIRE ENERGY CORPORATION INTERNATIONAL 
 (a Nevada Corporation) 
 1.    Stock Subscription: The undersigned, RAB SPECIAL SITUATIONS (MASTER) FUND LIMITED (“Subscriber”) hereby subscribes for 17,100,000 shares of Common Stock, $0.001
par value, of Empire Energy Corporation International, a Nevada Corporation (“Empire Energy” or the “Company”) at an offering price of $0.11 per share of Class A Common Stock (“Common Stock”), together with
warrants in the form attached hereto as Schedule “A” for the purchase of 8,550,000 shares of Common Stock, $0.001 par value (the “Warrant Shares”), at an exercise price of $0.13 to be exercisable for a period of
thirty-six months (36) following the Closing Date (the “Warrants”) (collectively the Common Stock, the Warrants and the Warrant Shares are known as the “Securities”) for and in consideration of $1,881,000 to be paid in
cash at closing (the “Purchase Price”). All figures are in United States Dollars unless otherwise specified. There is no minimum subscription. Such Subscription is subject to the following terms and conditions: 
  

	 	a.	Tender of Purchase Price: Subscriber tenders to Empire Energy the purchase price by a wire transfer to Ballard Spahr Andrews & Ingersoll, LLP, legal counsel
for Empire Energy, pursuant to written instructions set forth on Schedule “B”. 

  

	 	b.	Closing: Upon receipt by Empire Energy of the consideration agreed to herein, prior to 12:00 p.m. on March 31, 2006, or such other time as may be agreed
to by the Empire Energy and the Subscriber (the “Closing Date”). All funds will be delivered to Empire Energy. The Securities subscribed for herein will not be deemed issued to, or owned by, the Subscriber until the Subscription Agreement
has been executed by Subscriber and countersigned by Empire Energy, and all payments required to be made herein have been wired to Ballard Spahr Andrews & Ingersoll, LLP, as set forth in Section l(a) of this Agreement. The Closing is subject to
the fulfillment of the following conditions (the “Conditions”) which Conditions Empire Energy and the Subscriber covenant to exercise its reasonable best efforts to have fulfilled on or prior to the Closing Date: 

 

	 	(i)	for the benefit of Empire Energy, the Subscriber shall have tendered the Purchase Price to Empire Energy; 

  

	 	(ii)	for the benefit of the Subscriber, all relevant documentation and approvals as may be required, by applicable securities statutes, regulations, policy statements and interpretation
notes, by applicable securities regulatory authorities and by applicable rules shall have been obtained and, where applicable, executed by or on behalf of the Subscriber; 

  

	 	(iii)	 for the benefit of the Subscriber, Empire Energy’s board of directors shall have authorized and approved the execution and delivery of this 

  

 2 

	 	 
Agreement, the issuance and delivery of the Securities, the allotment and issuance of such Securities; 

  

	 	(iv)	Empire Energy (for the benefit of the Subscriber) and the Subscriber (for the benefit of Empire Energy) shall have complied with its covenants contained in this Agreement to be
complied with prior to Closing, and Empire Energy for the benefit of the Subscriber shall have delivered a Certificate of a senior officer of the Company (acting without personal liability) to that effect to the Subscriber in the form attached
hereto as Schedule “C”; and 

  

	 	(v)	the representations and warranties of Empire Energy (for the benefit of the Subscriber) and the Subscriber (for the benefit of Empire Energy) set forth in this Agreement shall be
true and correct as of the Closing Date. 

 Either party may waive in writing in whole or in part by the party benefiting such
party before Closing upon such terms as it may consider appropriate in its sole discretion. 
  

	 	c.	Issuance of Securities: After the Closing Date, Empire Energy will deliver the certificates within five (5) days representing the Securities, including the
Common Stock, the Warrants and Common Stock issuable upon exercise of the Warrant, to the Subscriber (unless Subscriber otherwise instructs Empire Energy in writing). The Certificates representing the Securities, delivered pursuant to this
Subscription bear a legend in the following form, unless such Securities have been registered under the Securities Act of 1933, as amended (“1933 Act”) or where exempted: 

 “THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR (I) TO THE COMPANY, (II) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE
904 OF REGULATION S UNDER THE 1933 ACT, (III) IN COMPLIANCE WITH THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, OR (IV) IN COMPLIANCE WITH ANOTHER EXEMPTION FROM REGISTRATION, IN EACH CASE AFTER
PROVIDING AN OPINION OF COUNSEL OR OTHER EVIDENCE SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY BE MADE WITHOUT REGISTRATION UNDER THE 1933 ACT. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE
1933 ACT.” 
  

 3 

	 	d.	If the Certificates representing the Securities have been held for a period of at least one (1) year and if Rule 144 the 1933 Act, is applicable (there being no representations by
Empire Energy that Rule 144 is applicable), then the undersigned may make sales of the Securities only under the terms and conditions prescribed by Rule 144 of the 1933 Act or Exemptions therefrom. Empire Energy shall use commercially reasonable
efforts to cause its legal counsel to deliver an opinion or such other documentation as may reasonably be required to effect sales of the Securities under Rule 144. 

 2.    Representations and Warranties: Subscriber hereby represents and warrants to Empire Energy and acknowledges that Empire Energy is relying on such representations
and warranties: 
  

	 	a.	SUBSCRIBER UNDERSTANDS THAT THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES AGENCY.

  

	 	b.	Subscriber is not an underwriter and acquired the Securities, solely for investment for its own account and not with a view to, or for, resale in connection with any distribution of
securities within the meaning of the 1933 Act; and is not being purchased with a view to or for the resale, distribution, subdivision or fractionalization thereof; and the undersigned has no contract, undertaking, understanding, agreement, or
arrangement, formal or informal, with any person to sell, transfer, or pledge to any person the securities for which it hereby subscribes, or any part thereof; and it understands that the legal consequences of the foregoing representations and
warranties to mean that it must bear the economic risk of the investment for an indefinite period of time because the Securities have not been registered under the 1933 Act, and, therefore, may be resold only if registered under the 1933 Act or an
exemption from such registration is available. 

  

	 	c.	Subscriber understands the speculative nature and risks of investments associated with Empire Energy, and confirms that the Securities would be suitable and consistent with its
investment program and that its financial position enables Subscriber to bear the risks of this investment; and that there may not be any public market for the securities for herein. 

  

	 	d.	The Securities subscribed for herein may not be transferred, encumbered, sold, hypothecated, or otherwise disposed of to any person, except in compliance with the 1933 Act and
applicable state securities or “blue sky” laws. Without limiting the generality or application of any other covenants, representations, warranties or acknowledgements of the Subscriber respecting resale of the Securities, if the Subscriber
decides to offer, sell or otherwise transfer any of the Securities, it will not offer, sell or otherwise transfer any of such Securities directly or indirectly, unless: 

  

	 	(i)	the sale is to the Company; 

  

 4 

	 	(ii)	the sale is made outside the United States in a transaction satisfying the requirements of Regulation S under the 1933 Act and in compliance with applicable local laws and
regulations; 

  

	 	(iii)	the sale is made pursuant to the exemption from the registration requirements under the 1933 Act provided by Rule 144 thereunder and in accordance with any applicable state
securities or “blue sky” laws; 

  

	 	(iv)	the Securities are sold in a transaction that does not require registration under the 1933 Act or any applicable state laws and regulations governing the offer and sale of
Securities, and it has prior to such sale furnished to the Company an opinion of counsel to that effect, which opinion and counsel shall be reasonably satisfactory to the Company; or 

  

	 	(v)	the Securities are registered under the 1933 Act and any applicable state laws and regulations governing the offer and sale of such Securities, 

 and the Subscriber understands that the Company may instruct its registrar and transfer agent not to record any transfer of the Securities without first
being notified by the Company that it is satisfied that such transfer is exempt from or not subject to the registration requirements of the 1933 Act and applicable state securities laws. 
  

	 	e.	At the time of subscription, Subscriber reviewed the economic consequences of the purchase of the Securities with its attorney and/or other financial advisor, was afforded access to
the books and records of the Company, conducted an independent investigation of the business of the Company, and was fully familiar with the financial affairs of the Company. Subscriber consulted with its counsel with respect to the 1933 Act and
applicable federal and state securities laws. Company has not provided Subscriber with any representations, statements, or warranties as to the Securities. Subscriber has reviewed the Company’s Form 10-K for the year ended December 31, 2004;
the Form 10-QSB for the quarters ended March 31, 2005, June 30, 2005 and September 30, 2005; and the current reports filed since January 1, 2005, all of which are filed electronically on EDGAR, (collectively, the “2005 SEC Reports”).

  

	 	f.	Subscriber had the opportunity to ask questions of the Company and receive additional information from the Company to the extent that the Company possessed such information, or
could acquire it without unreasonable effort or expense, necessary to evaluate the merits and risks of an investment in Empire Energy. 

  

	 	g.	Subscriber confirms that it is able (i) to bear the economic risk of the investment, (ii) to hold the Securities for an indefinite period of time, and (iii) to afford a complete
loss of its investment; and represents that it has adequate means of providing for its current needs and possible personal contingencies, and that it has no need for liquidity in this investment; (iv) this investment is suitable for Subscriber based
upon his investment holdings and financial situation and needs, and this investment does not exceed ten percent of Subscriber’s net worth; (v) Subscriber has by reason of its business or financial experience could be reasonably assumed to have
the capacity to protect its own interests in connection with this transaction. 

  

 5 

	 	h.	The Subscriber has not purchased the Securities as a result of any form of general solicitation or general advertising, including advertisements, articles, notices or other
communications published in any newspaper, magazine or similar media or broadcast over radio, or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising. 

  

	 	i.	The Subscriber is not an affiliate of the Company nor is any affiliate of the Subscriber an affiliate of the Company. 

  

	 	j.	The Subscriber represents that it is not a U.S. Person as defined in Rule 902(k) of Regulation S (a “U.S. Person”), that at the time of the acquisition of the Units it
will not be a U.S. Person, that the Subscriber is not, and at the time of the acquisition of the Units will not be, acquiring the Units for the account or benefit of a U.S. Person, and that the Subscriber is normally resident at the address provided
by the Subscriber on the signature page hereof. 

  

	 	k.	The Subscriber acknowledges and agrees that all offers and sales of the Securities, as applicable, by the Subscriber shall be made only in accordance with the provisions of
Regulation S, pursuant to registration of the securities under the 1933 Act, or pursuant to an available exemption from the registration requirements of the 1933 Act. The Subscriber acknowledges and agrees that it cannot engage in hedging
transactions with regard to the Securities prior to the expiration of the one-year distribution compliance period specified in paragraph (b)(3) in Rule 903 promulgated under the 1933 Act unless in compliance with the 1933 Act.

  

	 	l.	The Subscriber is outside the United States; provided, that delivery of the Units may be effected in the United States through the Subscriber’s agent as long as the Subscriber
is outside the United States at the time of such delivery. 

  

	 	m.	The Subscriber has no present intention to sell or otherwise transfer the Securities except in accordance with Regulation S, pursuant to registration under the 1933 Act, or pursuant
to an available exemption from registration under the 1933 Act, in each case in accordance with all applicable securities laws. 

  

	 	n.	The Subscriber understands that the Company is required, under Rule 903 of Regulation S, to refuse to register the transfer of any of the Securities to be received by the Subscriber
pursuant to this Subscription that are not transferred pursuant to a registration statement under the 1933 Act, in compliance with Regulation S, or otherwise pursuant to an available exemption from registration. 

  

	 	o.	 The Subscriber, and each beneficial person for whom it is contracting hereunder, is responsible for obtaining such legal and tax advice as it considers appropriate
in 

  

 6 

	 	 
connection with the execution, delivery and performance of this Subscription and the transactions contemplated hereunder. 

 All information which the Subscriber has provided concerning the Subscriber is correct and complete as of the date set forth below, and if there should
be any change in such information prior to the acceptance of this Agreement by the Company, the Subscriber will immediately provide such information to the Company. 
 3.    Company Representations, Warranties and Covenants. Empire Energy represents, warrants and covenants that, except as set forth on Schedule 3 attached hereto, at the
Closing Date (an acknowledges that the Subscriber is relying on such representations, warranties and covenants): 
  

	 	a.	each of Empire Energy and each of its subsidiaries is a valid and subsisting corporation duly incorporated and in good standing under the laws of its jurisdiction of incorporation,
and Empire Energy has no subsidiaries other than as set forth in the Company’s 2005 SEC Reports; 

  

	 	b.	each of Empire Energy and each of its subsidiaries is duly registered and licensed to carry on business in the jurisdictions in which it carries on business or owns property where
so required by the laws of that jurisdiction; 

  

	 	c.	Empire Energy and its subsidiaries own, possess or has obtained, and is operating in compliance with, all governmental, administrative and third party licenses, permits,
certificates, registrations, approvals, consents and other authorizations (collectively, “Permits”) necessary to own or lease (as the case may be) and operate its properties, and to conduct its businesses or operations as currently
conducted, except such Permits the failure of which to obtain would not have a material adverse effect on the business, properties, operations, financial condition or results of operations of Empire Energy, and neither Empire Energy nor any of its
subsidiaries has received any notice of proceedings relating to the revocation, modification or suspension of any Permits), if such proceedings would have a material adverse effect on Empire Energy, or any circumstance which would lead it to believe
that such proceedings are reasonably likely; 

  

	 	d.	the business and operations of Empire Energy and its subsidiaries have been conducted in accordance with all applicable laws, rules and regulations of all governmental authorities,
except for such violations which would not, individually or in the aggregate, have a material adverse effect on the financial condition or business of Empire Energy and its subsidiaries; 

  

	 	e.	 as of February 28, 2006, the authorized capital of Empire Energy consists of 300,000,000 shares of Common Stock. Schedule 3(e) of this Agreement sets forth issued
and outstanding capital of Empire Energy, including, but not limited to, shares of Class A Common Stock, shares of Class B Common Stock, exchangeable shares, options, warrants and other securities convertible into equity securities of Empire Energy
(collective, the “Outstanding Securities”). There are 

  

 7 

	 	 
no other securities of Empire Energy issued, or, except as set forth in Section 3(e) of this Agreement, reserved for issuance, or authorized or outstanding.
All of the Outstanding Securities are duly authorized, validly issued, fully paid and non-assessable and none were issued in violation of any preemptive or subscription rights of any person; 

  

	 	f.	Empire Energy will reserve or set aside sufficient shares of common stock in its treasury to issue the Securities, and all such Securities will upon payment of the recited
consideration and issuance be duly and validly issued as fully paid and non-assessable; 

  

	 	g.	the issuance of the Securities will not be subject to any pre-emptive right or other contractual right to purchase securities granted by Empire Energy or to which Empire Energy is
bound; 

  

	 	h.	the issue and sale of the Securities by Empire Energy does not and will not conflict with, and does not and will not result in a breach of, any of the terms of its incorporating
documents or any agreement or instrument to which Empire Energy is a party; 

  

	 	i.	the Company has complied and will comply fully with the requirements of all applicable corporate and securities laws in all matters relating to the Offering;

  

	 	j.	there are no legal or governmental actions, suits, proceedings or investigations pending or, to Empire Energy’ knowledge, threatened, to which Empire Energy or any of its
subsidiaries is or may be a party or of which property owned or leased by Empire Energy or any of its subsidiaries is or may be the subject, or related to environmental, title, discrimination or other matters, which actions, suits, proceedings or
investigations, individually or in the aggregate, could have a material adverse effect on Empire Energy; 

  

	 	k.	there are no judgments against Empire Energy or any of its subsidiaries, if any, which are unsatisfied, nor is Empire Energy or any of its subsidiaries, if any, subject to any
injunction, judgment, decree or order of any court, regulatory body, administrative agency or other governmental body; 

  

	 	l.	this Agreement has been or will be by the Closing Date, duly authorized by all necessary corporate action on the part of Empire Energy, and Empire Energy has full corporate power
and authority to undertake the Private Placement; 

  

	 	m.	this Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and legally binding obligation of the Company enforceable against it in
accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting the rights of creditors generally and except as limited by the application of
equitable principles when equitable remedies are sought, and by the fact that rights to indemnity, contribution and waiver, and the ability to sever unenforceable terms, may be limited by applicable law; 

  

 8 

	 	n.	neither Empire Energy nor any of its subsidiaries is in violation of its organizational or incorporating documents nor in violation of, or in default under, any lien, mortgage,
lease, agreement or instrument, except for such defaults which would not, individually or in the aggregate, have a material adverse effect on the financial condition, properties or business of Empire Energy or it subsidiaries;

  

	 	o.	subject to the accuracy of the representations and warranties of the Subscriber contained in this Agreement, the offer, sale and issuance of the Securities as contemplated by this
Agreement are exempt from the registration requirements of the 1933 Act, from the registration or qualifications requirements of the state securities or “blue sky” laws and regulations of any applicable state or other applicable
jurisdiction; 

  

	 	p.	Empire Energy’ shares of common stock are quoted for trading on the National Association of Securities Dealers over-the-counter electronic bulletin board (the
“OTCBB”), 

  

	 	q.	no order ceasing, halting or suspending trading in securities of Empire Energy nor prohibiting the sale of such securities has been issued to and is outstanding against Empire
Energy or its directors, officers or promoters, and, to the best of Empire Energy knowledge, no investigations or proceedings for such purposes are pending or threatened; 

  

	 	r.	neither Empire Energy nor any subsidiary thereof will have taken any action which would be reasonably expected to result in the delisting or suspension of quotation of Empire
Energy’ shares of common stock on or from the OTCBB and Empire Energy will have complied, in all material respects, with the rules and regulations of eligibility on the OTCBB; 

  

	 	s.	except for Libertas Capital, no person, firm or corporation acting or purporting to act at the request of Empire Energy is entitled to any brokerage, agency or finder’s fee in
connection with the purchase and sale of the Securities described herein; 

  

	 	t.	Empire Energy is a “reporting issuer” under section 12 of the Securities Exchange Act of 1934, as amended (the “1934 Act”) and to Empire Energy’s knowledge
is not in default of any of the requirements of the 1934 Act; 

  

	 	u.	 as of their respective filing dates, each report, schedule, registration statement and proxy filed by Empire Energy with the United States Securities and Exchange
Commission (“SEC”) (each, an “SEC Report” and collectively, the “SEC Reports”) (and if any SEC Report filed prior to the date of this Agreement was amended or superseded by a filing prior to the date of this Agreement,
then also on the date of filing of such amendment or superseding filing), (i) to Empire Energy’s knowledge where required, were prepared in all material respects in accordance with the requirements of the 1933 Act, or the 1934 Act, as the case
may be, and the rules and regulations promulgated under such Acts applicable to 

  

 9 

	 	 
such SEC Reports, (ii) did not contain any untrue statements of a material fact and did not omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading and (iii) to Empire Energy’s knowledge are all the forms, reports and documents required to be filed by Empire Energy with the SEC since that time. Empire
Energy’s subsidiaries are not required to file any reports or other documents with the SEC. Each set of audited consolidated financial statements and unaudited interim financial statements of Empire Energy (including any notes thereto) included
in the SEC Reports (i) to Empire Energy’s knowledge, complies as to form in all material respects with the published rules and regulations of the SEC with respect thereto, and (ii) have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis (except as may be indicated therein or in the notes thereto) and fairly present, in all material respects, the financial position of Empire Energy as of the dates thereof and the results
of its operations and cash flows for the periods then ended subject, in the case of the unaudited interim financial statements, to normal year-end adjustments which were not or are not expected to be material in amount. To Empire Energy’s
knowledge, no events or other factual matters exist which would require Empire Energy to file any amendments or modifications to any SEC Reports which have not yet been filed with the SEC but which are required to be filed with the SEC pursuant to
the 1933 Act or the 1934 Act; 

  

	 	v.	Each SEC Report containing financial statements that has been filed with or submitted to the SEC since July 31,2002, was accompanied by the certifications required to be filed or
submitted by Empire Energy’ chief executive officer and chief financial officer pursuant to the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); to Empire Energy’s knowledge at the time of filing or submission of
each such certification, such certification was true and accurate and complied with the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder; such certifications contain no qualifications or exceptions to the matters certified
therein and have not been modified or withdrawn; and neither Empire Energy nor any of its officers has received notice from any governmental entity questioning or challenging the accuracy, completeness, form or manner of filing or submission of such
certification; 

  

	 	w.	there is no fact known to Empire Energy which Empire Energy has not publicly disclosed which materially adversely affects, or so far as Empire Energy can reasonably foresee, will
materially adversely affect, the assets, liabilities (contingent or otherwise), capital, affairs, business, prospects, operations or condition (financial or otherwise) of Empire Energy or the ability of Empire Energy to perform its obligations under
this Agreement; 

  

	 	x.	 Empire Energy and its subsidiaries, if any, have filed all federal, state, local and foreign tax returns which are required to be filed, or have requested
extensions thereof, and have paid all taxes required to be paid by them and any other assessment, fine or penalty levied against them, to the extent that any of the 

  

 10 

	 	 
foregoing is due and payable, except for such assessments, fines and penalties which are currently being contested in good faith;

  

	 	y.	Empire Energy has established on its books and records reserves which are adequate for the payment of all taxes not yet due and payable and there are no liens for taxes on the
assets of Empire Energy or its subsidiaries, if any, except for taxes not yet due, and there are no audits of any of the tax returns of Empire Energy which are known by Empire Energy’ management to be pending, and there are no claims which have
been or may be asserted relating to any such tax returns which, if determined adversely, would result in the assertion by any governmental agency of any deficiency which would have a material adverse effect on the properties, business or assets of
Empire Energy; 

  

	 	z.	is not an “investment company” within the meaning of the Investment Company Act of 1940; 

  

	 	aa.	neither Empire Energy nor any of its affiliates, nor any person acting on its or their behalf (i) has made or will make any “directed selling efforts” (as such term is
defined in Regulation S of the 1933 Act) in the United States, or (ii) has engaged in or will engage in any form of “general solicitation” or “general advertising” (as such terms are defined in Rule 502 (c) under Regulation D of
the 1933 Act) in the United States with respect to offers or sales of the Securities; 

  

	 	bb.	the Company has not, for a period of six months prior to the date hereof, sold, offered for sale or solicited, and will not for a period of six months after the Closing Date, offer,
sell or solicit, any offer to buy any of its securities in a manner that would be integrated with the offer and sale of the Units and would cause the exemption from registration set forth in Rule 506 of Regulation D or Rule 903 of Regulation S of
the 1933 Act to become unavailable with respect to the offer and sale of the Securities; 

  

	 	cc.	all securities previously issued by the Company were issued pursuant to registration under the 1933 Act or an available exemption thereunder; 

  

	 	dd.	the warranties and representations, as limited by Schedule 3, in this section are true and correct and will remain so as of the Closing Date; and 

  

	 	ee.	 Empire Energy shall indemnify, defend and hold the Subscriber (which term shall, for the purposes of this Section, include the Subscriber or its shareholders,
managers, partners, directors, officers, members, employees, direct or indirect investors, agents and affiliates and assignees and the stockholders, partners, directors, members, managers, officers, employees direct or indirect investors and agents
of such affiliates and assignees) harmless against any and all liabilities, loss, cost or damage, together with all reasonable costs and expenses related thereto (including reasonable legal and accounting fees and expenses), arising from, relating
to, or connected with an untrue, inaccurate or breached statement, representation, warranty or covenant of Empire Energy contained herein. Empire 

  

 11 

	 	 
Energy undertakes to notify the Subscriber immediately of any change in any representation, warranty or other material information relating to Empire Energy
set forth in this Agreement which takes place prior to the Closing Date. 

  

	4.	Registration Rights 

  

	 	a.	Empire Energy shall prepare and file with the SEC (the “SEC”) within one hundred twenty (120) calendar days after the Closing Date a registration statement (on Form S-3,
SB-1, SB-2, S-l, or other appropriate registration statement form reasonably acceptable to the Subscriber) under the 1933 Act (the “Registration Statement”), at the sole expense of Empire Energy (except as specifically provided in Section
c hereof), in respect of the Subscriber, so as to permit a public offering and resale of the Common Stock and Common Stock acquirable upon exercise of the Warrants (collectively, the “Registrable Securities”) in the United States under the
1933 Act by the Subscriber as selling stockholder and not as underwriter. Empire Energy shall use its best efforts to cause such Registration Statement to become effective as soon as possible thereafter, but in no event later than one hundred eighty
calendar days after the Closing Date, and within five (5) calendar days of the SEC clearance to request acceleration of effectiveness. Empire Energy will notify the Subscriber of the effectiveness of the Registration Statement (the “Effective
Date”) within three (3) Trading Days (days in which the OTCBB is open for quotation) (each, a “Trading Day”). 

  

	 	b.	Empire Energy will maintain the Registration Statement or post-effective amendment filed under this Section 4 effective under the 1933 Act until the earlier of the date (i) all of
the Registrable Securities have been sold pursuant to such Registration Statement, (ii) the Subscriber receives an opinion of counsel to Empire Energy, which opinion and counsel shall be reasonably acceptable to the Subscriber, that the Registrable
Securities may be sold under the provisions of Rule 144 without limitation as to volume, (iii) all Registrable Securities, (or all Common Stock and Warrants, in the case of Warrants not then exercised) have been otherwise transferred to persons who
may trade the Registrable Securities without restriction under the 1933 Act, and Empire Energy has delivered a new certificate or other evidence of ownership for such Registrable Securities not bearing a restrictive legend, (iv) all Registrable
Securities may be sold without any time, volume or manner limitations pursuant to Rule 144(k) or any similar provision then in effect under the 1933 Act in the opinion of counsel to Empire Energy, which counsel shall be reasonably acceptable to the
Subscriber, (v) Empire Energy obtains the written consent of the Subscriber, or (vi) two (2) years from the Effective Date (the “Effectiveness Period”). 

  

	 	c.	 All fees, disbursements and out-of-pocket expenses and costs incurred by Empire Energy in connection with the preparation and filing of the Registration Statement
and in complying with applicable securities and “blue sky” laws (including, without limitation, all attorneys’ fees of Empire Energy, registration, qualification, notification and filing fees, printing expenses, escrow fees, blue sky

  

 12 

	 	 
fees and expenses and the expense of any special audits incident to or required by any such registration) shall be borne by Empire Energy. The Subscriber
shall bear the cost of underwriting and/or brokerage discounts, fees and commissions, if any, applicable to the Registrable Securities being registered and the fees and expenses of its counsel. The Subscriber and its counsel shall have a reasonable
period, not to exceed five (5) Trading Days, to review the proposed Registration Statement or any amendment thereto, prior to filing with the SEC. Empire Energy shall qualify any of the Registrable Securities for sale in such states as the
Subscriber reasonably designates. However, Empire Energy shall not be required to qualify in any state which will require an escrow or other restriction relating to Empire Energy and/or the sellers, or which will require Empire Energy to qualify to
do business in such state or require Empire Energy to file therein any general consent to service of process. Empire Energy at its expense will supply the Subscriber with copies of the applicable Registration Statement and the prospectus included
therein and other related documents in such quantities as may be reasonably requested by the Subscriber. 

  

	 	d.	Prior to the effectiveness of the Registration Statement filed pursuant to Section 4(a), the rights to cause Empire Energy to register Registrable Securities granted to the
Subscriber by Empire Energy under this Section 4 may be assigned in full by a Subscriber in connection with a transfer by such Subscriber of not less than 500,000 Common Shares or not less than 125,000 Warrants, in either case in a single
transaction to a single transferee purchasing as principal, provided, however, that (i) such transfer is otherwise effected in accordance with applicable securities laws; (ii) such Subscriber gives prior written notice to Empire Energy; and (iii)
such transferee agrees to comply with the terms and provisions of this Agreement, and such transfer is otherwise in compliance with this Agreement. 

  

	 	e.	If at any time or from time to time after the Effective Date, Empire Energy notifies the Subscriber in writing of the existence of a Potential Material Event (as defined in Section
(f) below), the Subscriber shall not offer or sell any Registrable Securities or engage in any other transaction involving or relating to Registrable Securities, from the time of the giving of notice with respect to a Potential Material Event until
the Subscriber receives written notice from Empire Energy that such Potential Material Event either has been disclosed to the public or no longer constitutes a Potential Material Event. If a Potential Material Event shall occur prior to the date a
Registration Statement is required to be filed, then Empire Energy’s obligation to file such Registration Statement shall be delayed without penalty for not more than thirty (30) calendar days. Empire Energy must, if lawful, give the Subscriber
notice in writing at least two (2) Trading Days prior to the first day of the blackout period. 

  

	 	f.	 “Potential Material Event” means any of the following: (i) the possession by Empire Energy of material information not ripe for disclosure in a
registration statement, as determined in good faith by the Chief Executive Officer or the Board of Directors of Empire Energy that disclosure of such information in a Registration Statement would be detrimental to the business and affairs of Empire

  

 13 

	 	 
Energy; or (ii) any material engagement or activity by Empire Energy which would, in the good faith determination of the Chief Executive Officer or the Board
of Directors of Empire Energy, be adversely affected by disclosure in a registration statement at such time, which determination shall be accompanied by a good faith determination by the Chief Executive Officer or the Board of Directors of Empire
Energy that the applicable Registration Statement would be materially misleading absent the inclusion of such information; provided that, (i) Empire Energy shall not use such right with respect to the Registration Statement for more than an
aggregate of 90 days in any 12-month period; and (ii) the number of days Empire Energy is required to keep the Registration Statement effective shall be extended by the number of days for which the Company shall have used such right.

  

	 	g.	The Subscriber will cooperate with Empire Energy in all respects in connection with this Agreement, including timely supplying all information reasonably requested by Empire Energy
(which shall include all information regarding the Subscriber and proposed manner of sale of the Registrable Securities required to be disclosed in any Registration Statement) and executing and returning all documents reasonably requested in
connection with the registration and sale of the Registrable Securities and entering into and performing its obligations under any underwriting agreement, if the offering is an underwritten offering, in usual and customary form, with the managing
underwriter or underwriters of such underwritten offering. Any delay or delays caused by the Subscriber, or by any other purchaser of securities of Empire Energy having registration rights similar to those contained herein, by failure to cooperate
as required hereunder shall not constitute a breach or default of Empire Energy under this Agreement. 

  

	 	h.	Whenever Empire Energy is required by any of the provisions of this Agreement to effect the registration of any of the Registrable Securities under the 1933 Act, Empire Energy shall
(except as otherwise provided in this Agreement), as expeditiously as possible, subject to the assistance and cooperation as reasonably required of the Subscriber with respect to each Registration Statement: 

  

	 	(i)	(A) prior to the filing with the SEC of any Registration Statement (including any amendments thereto) and the distribution or delivery of any prospectus (including any supplements
thereto), provide draft copies thereof to the Subscriber and reflect in such documents all such comments as the Subscriber (and its counsel), reasonably may propose respecting the Selling Shareholders and Plan of Distribution sections (or
equivalents) and (B) furnish to the Subscriber such numbers of copies of a prospectus including a preliminary prospectus or any amendment or supplement to any prospectus, as applicable, in conformity with the requirements of the 1933 Act, and such
other documents, as the Subscriber may reasonably request in order to facilitate the public sale or other disposition of the Registrable Securities owned by the Subscriber; 

  

 14 

	 	(ii)	register and qualify the Registrable Securities covered by the Registration Statement under such other securities or blue sky laws of such jurisdictions as the Subscriber shall
reasonably request (subject to the limitations set forth in Section (b) above), and do any and all other acts and things which may be necessary or advisable to enable the Subscriber to consummate the public sale or other disposition in such
jurisdiction of the securities owned by the Subscriber; 

  

	 	(iii)	cause the Registrable Securities to be quoted or listed on each service on which the Common Stock of Empire Energy is then quoted or listed; 

  

	 	(iv)	notify the Subscriber, at any time when a prospectus relating thereto covered by the Registration Statement is required to be delivered under the 1933 Act, of the happening of any
event of which it has knowledge as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the circumstances then existing, and Empire Energy shall prepare and file a curative amendment as promptly as commercially reasonable; 

  

	 	(v)	as promptly as practicable after becoming aware of such event, notify the Subscriber, (or, in the event of an underwritten offering, the managing underwriters) of the issuance by
the SEC of any stop order or other suspension of the effectiveness of the Registration Statement at the earliest possible time and take all lawful action to effect the withdrawal, recession or removal of such stop order or other suspension; and

  

	 	(vi)	provide a transfer agent and registrar for all securities registered pursuant to the Registration Statement and a CUSIP number for all such securities. 

  

	 	j.	With respect to any sale of Registrable Securities pursuant to a Registration Statement filed pursuant to this Section 4, the Subscriber hereby covenants with Empire Energy (i) not
to make any sale of the Registrable Securities without effectively causing the prospectus delivery requirements under the Securities Act to be satisfied and (ii) to notify Empire Energy promptly upon disposition of all of the Registrable Securities.

  

	 	k.	In addition to the registration rights set forth in Section 4(a), if the Registration Statement filed pursuant to Section 4(a) is not filed within 120 calendar days from the Closing
Date, or otherwise declared effective by the SEC, then the Subscribers shall also have certain “piggyback” registration rights as follows: 

  

	 	(i)	If at any time after the issuance of the Registrable Securities, Empire Energy shall file with the SEC a registration statement under the 1933 Act registering any shares of equity
securities, Empire Energy shall give written notice to each Subscriber prior to such filing. 

  

 15 

	 	(ii)	Within twenty (20) calendar days after such notice from Empire Energy, each Subscriber shall give written notice to Empire Energy whether or not such Subscriber desires to have all
of such Subscriber’s Registrable Securities included in the registration statement. If any Subscriber fails to give such notice within such period, such Subscriber shall not have the right to have Subscriber’s Registrable Securities
registered pursuant to such registration statement. If any Subscriber gives such notice, then Empire Energy shall include such Subscriber’s Registrable Securities in the registration statement, at Company’s sole cost and expense, subject
to the remaining terms of this Section 4(k). 

  

	 	(iii)	If the registration statement relates to an underwritten offering, and the underwriter shall determine in writing that the total number of shares of equity securities to be included
in the offering, including the Registrable Securities, shall exceed the amount which the underwriter deems to be appropriate for the offering, the number of shares of the Registrable Securities shall be reduced in the same proportion as the
remainder of the shares in the offering and such participating Subscriber’s Registrable Securities included in such registration statement will be reduced proportionately. For this purpose, if other securities in the registration statement are
derivative securities, their underlying shares shall be included in the computation. Each participating Subscriber shall enter into such agreements as may be reasonably required by the underwriters and each Subscriber shall pay the underwriters
commissions relating to the sale of their respective Registrable Securities. 

  

	 	(iv)	The Subscribers shall have an unlimited number of opportunities to have the Registrable Securities registered under this Section 4(k) provided that Empire Energy shall not be
required to register any Registrable Security or keep any Registration Statement effective beyond such period required under Section 4(b) of this Agreement. 

  

	 	(v)	The Subscriber shall furnish in writing to Empire Energy such information as Empire Energy shall reasonably require in connection with a registration statement.

  

	 	l.	 Empire Energy acknowledges that there is no adequate remedy at law for failure by it to comply with the provisions of Section 4 of this Agreement and that such
failure would not be adequately compensable in damages, and therefore agrees that its agreements contained in such Section 4 may be specifically enforced. If Empire Energy shall fail to file such registration statement when required pursuant to
Section a or to keep any registration statement effective as provided in Section 4 or otherwise fails to comply with its obligations and agreements in this Section 4, then, in addition to any other rights or remedies the Subscriber may have at law
or in equity, including without limitation, the right of rescission, Empire Energy shall indemnify and hold harmless the Subscriber from and against any and all manner or loss which it may incur as a result of such failure. 

  

 16 

	 	 
In addition, Empire Energy shall also reimburse the Subscriber for any and all reasonable legal fees and expenses incurred by it in enforcing their rights
pursuant to Section 4, regardless of whether any litigation was commenced. 

  

	 	m.	Notwithstanding anything to the contrary contained in this Agreement, Empire Energy and the Subscriber agree that in the event that the Registration Statement to be filed by Empire
Energy pursuant to paragraph 4(a) above (i) is not filed with the SEC within one hundred twenty (120) days from the Closing Date, or (ii) such Registration Statement is not declared effective by the SEC within one hundred and eighty (180) days, then
Empire Energy shall (x) for the period commencing on one hundred twenty first (121st) day after the Closing Date and on the first day of each month thereafter until the date that the Registration Statement is filed and (y) for the period commencing
on the one hundred eighty first (181st) day after the Closing Date and on the first day of each month thereafter until the Registration Statement is declared effective by the SEC, issue to Subscriber as liquidated damages and not as a penalty for
such failure 171,000 Common Shares per month. 

  

	5.	Indemnity and Contribution 

  

	 	a.	 Empire Energy agrees to indemnify and hold harmless each Subscriber, their respective officers, directors, employees, partners, legal counsel and accountants, and
each person controlling such Subscriber within the meaning of Section 15 of the 1933 Act, and each person who controls any underwriter within the meaning of Section 15 of the 1933 Act, from and against any losses, claims, damages, expenses or
liabilities (or actions or proceedings in respect thereof) to which such Subscriber or such other indemnified person may become subject (including in settlement of litigation, whether commenced or threatened) insofar as such losses, claims, damages,
expenses or liabilities (or actions or proceedings in respect thereof) arise out of a claim by any third party, the US Securities and Exchange Commission or other regulatory body (“Third Party Action”), based upon, any untrue statement or
alleged untrue statement of a material fact or omission or alleged omission to state a material fact in the Registration Statement, including all documents filed as a part thereof and information deemed to be a part thereof, on the effective date
thereof, or any amendment or supplements thereto, or arise out of any failure by Empire Energy to fulfill any undertaking or covenant included in the Registration Statement. Empire Energy will, as incurred, reimburse such Subscriber, each of its
respective officers, directors, employees, partners, legal counsel and accountants, and each person controlling such Subscriber, and each person who controls any such underwriter, for any legal or other expenses reasonably incurred in investigating,
defending or preparing to defend, settling, compromising or paying such Third Party action, proceeding or claim; provided, however, that Empire Energy shall not be liable in any such case to the extent that such loss, claim, damage, expense
or liability (or action or proceeding in respect thereof) arises out of, or is based upon, (i) the failure of any Subscriber, or any of their agents, affiliates or persons acting on their behalf, to comply with the covenants and agreements contained
in this Agreement with 

  

 17 

	 	 
respect to the sale of Registrable Securities, (ii) an untrue statement or omission in such Registration Statement in reliance upon and in conformity with
written information furnished to Empire Energy by an instrument duly executed by or on behalf of the Subscriber, or any of its agents, affiliates or persons acting on its behalf, and stated to be specifically for use in preparation of the
Registration Statement and not corrected in a timely manner by the Subscriber in writing or (iii) an untrue statement or omission in any prospectus that is corrected in any subsequent prospectus, or supplement or amendment thereto, that was
delivered to the Subscriber prior to the pertinent sale or sales by such Subscriber and not delivered by the Subscriber to the individual or entity to which it made such sale(s) prior to such sale(s). 

  

	 	b.	The Subscriber agrees to indemnify and hold harmless Empire Energy from and against any losses, claims, damages, expenses or liabilities (or actions or proceedings in respect
thereof) to which Empire Energy may become subject (under the 1933 Act or otherwise) insofar as such losses, claims, damages, expenses or liabilities (or actions or proceedings in respect thereof) arise out of a Third Party Action, or are based upon
(i) the failure of the Subscriber or any of its agents, affiliates or persons acting on its behalf, to comply with the covenants and agreements contained in this Agreement with respect to the sale of Registrable Securities; or (ii) an untrue
statement or alleged untrue statement of a material fact or omission to state a material fact in the Registration Statement in reliance upon and in conformity with written information furnished to Empire Energy by an instrument duly executed by or
on behalf of such Subscriber and stated to be specifically for use in preparation of the Registration Statement; provided, however, that the Subscriber shall not be liable in any such case for (i) any untrue statement or alleged untrue statement or
omission in any prospectus or Registration Statement which statement has been corrected, in writing, by such Subscriber and delivered to Empire Energy before the sale from which such loss occurred; or (ii) an untrue statement or omission in any
prospectus that is corrected in any subsequent prospectus, or supplement or amendment thereto, that was delivered to the Subscriber prior to the pertinent sale or sales by the Subscriber and delivered by the Subscriber to the individual or entity to
which it made such sale(s) prior to such sale(s), and the Subscriber, severally and not jointly, will, as incurred, reimburse Empire Energy for any legal or other expenses reasonably incurred in investigating, defending or preparing to defend any
such action, proceeding or claim. Notwithstanding the foregoing, the Subscriber shall not be liable or required to indemnify Empire Energy in the aggregate for any amount in excess of the net amount received by the Subscriber from the sale of the
Registrable Securities, to which such loss, claim, damage, expense or liability (or action proceeding in respect thereof) relates. 

  

	 	c.	 Promptly after receipt by any indemnified person of a notice of a claim or the beginning of any action in respect of which indemnity is to be sought against an
indemnifying person pursuant to this Section 5, such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action and, subject to the provisions hereinafter stated, in case any such 

  

 18 

	 	 
action shall be brought against an indemnified person, the indemnifying person shall be entitled to participate therein, and, to the extent that it shall
wish, to assume the defense thereof. After notice from me indemnifying person to such indemnified person of the indemnifying person’s election to assume the defense thereof, the indemnifying person shall not be liable to such indemnified person
for any legal expenses subsequently incurred by such indemnified person in connection with the defense thereof; provided, however, that if there exists or shall exist a conflict of interest that would, in the opinion of counsel to the indemnified
party, make it inappropriate under applicable laws or codes of professional responsibility for the same counsel to represent both the indemnified person and such indemnifying person or any affiliate or associate thereof, the indemnified person shall
be entitled to retain its own counsel at the expense of such indemnifying person; provided, further, that the indemnifying person shall not be obligated to assume the expenses of more than one counsel to represent all indemnified persons. In the
event of such separate counsel, such counsel shall agree to reasonably cooperate. 

  

	 	d.	 If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in
respect of any losses, claims, damages, expenses or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of
such losses, claims, damages, expenses or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative fault of Empire Energy on the one hand and the Subscriber, or its agents, affiliates or
persons acting on its behalf, on the other in connection with the statements or omissions which resulted in such losses, claims, damages, expenses or liabilities (or actions or proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information
supplied by Empire Energy on the one hand or the Subscriber, or its agents, affiliates or persons acting on its behalf, on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such
statement or omission. Empire Energy and the Subscriber agree that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by any other method of allocation which does not take into account the equitable
considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages, expenses or liabilities (or actions or proceedings in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. In any event, the Subscriber shall not be liable or required to contribute to Empire Energy in the
aggregate for any amount in excess 

  

 19 

	 	 
of the net amount received by the Subscriber from the sale of its Registrable Securities. 

 6.    Governing Law: This Subscription Agreement shall be binding upon the parties hereto, their heirs, executors,
successors, and legal representatives. The laws of the State of Nevada shall govern the rights of the parties as to this Agreement. 
 7.    Indemnification: Subscriber acknowledges that it understands the meaning and legal consequences of the representations and warranties contained herein, and it hereby agrees to indemnify
and hold harmless Empire Energy and any other person or entity relying upon such information thereof from and against any and all loss, damage or liability due to or arising out of a breach of any representation, warranty, or acknowledgement of
Subscriber contained in this Agreement. 
 8.    Nonassignability: Except as otherwise expressly provided
herein, this Agreement may not be assigned by Subscriber. 
 9.    Entire Agreement: This instrument contains
the entire agreement among the parties with respect to the acquisition of the shares and the other transactions contemplated hereby, and mere are no representations, covenants or other agreements except as stated or referred to herein. 

10.    Amendment: This Agreement may be amended or modified only by a writing signed by the party or parties to be
charged with such amendment or modification. 
 11.    Binding On Successors: All of the terms, provisions
and conditions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, and legal representatives. 
 12.    Titles: The titles of the sections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 

13.    Counterparts: This Agreement may be executed in one or more counterparts, each of which shall be deemed an
original and all of which shall be deemed an original and all of which taken together shall constitute one and the same document, notwithstanding that all parties are not signatories to the same counterpart. 
 14.    Severability: The unenforceability or invalidity of any provision of this Agreement shall not affect the enforceability
or validity of the balance of this Agreement. 
 15.    Disclosure Requited Under State Law: The offering and
sale of the Securities is intended to be exempt from registration under the securities laws of certain states. Subscribers who reside or purchase the Securities may be required to make additional disclosures by the securities laws of various states
and agrees to provide such additional disclosures as requested by Empire Energy upon written request. 
 16.    Notices: All notes or other communications hereunder (except payment) shall be in writing and shall be deemed to have been duly given if delivered personally or sent by registered

  

 20 

 
or certified mail postage prepaid, or by Express Mail Service or similar courier, addressed as follows: 
  

			
		
	If to Subscriber:	 	At the address designated on the signature page of this Agreement.
		
	With copy to:	 	Dorsey & Whitney LLP Suite 4700, Republic Plaza 370 Seventeenth St. Denver, CO 80202 Attn: Kenneth Sam, Esq. Fax: (303) 629-3450
		
	If to the Company:	 	EMPIRE ENERGY CORPORATION INTERNATIONAL 16801 West 116th Street, Suite 100 Lenexa, KS 66219
		
	With copy to:	 	Ballard Spahr Andrews & Ingersoll, LLP 1225 17th Street, Suite 2300 Denver, CO 80202 Attn: Roger V. Davidson, Esq. Fax (303) 296-3956

 17.    Time of the Essence: Time shall be of the essence of this
Agreement in all respects. 
 18.    Facsimile and Counterpart Subscriptions: Empire Energy shall be entitled
to rely on delivery of a facsimile copy of this Agreement executed by the subscriber, and acceptance by Empire Energy of such executed Agreement shall be legally effective to create a valid and binding agreement between the Subscriber and Empire
Energy in accordance with the terms hereof. In addition, this Agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall constitute one and the same document. 
 19.    Future Assurances: Each of the parties hereto will from time to time execute and deliver all such further
documents and instruments and do all acts and things as the other party may, either before or after the Closing, reasonably require to effectively carry out or better evidence or perfect the full intent and meaning of this Agreement. 
 SUBSCRIBER HEREBY DECLARES AND AFFIRMS THAT IT HAS READ THE WITHIN AND FOREGOING SUBSCRIPTION AGREEMENT, IS FAMILIAR WITH THE CONTENTS THEREOF AND AGREES TO ABIDE BY THE
TERMS AND CONDITIONS THEREIN SET FORTH, AND KNOWS THE STATEMENTS THEREIN TO BE TRUE AND CORRECT. 
 ****** 
 IN WITNESS WHEREOF, Subscriber executed this Agreement this _________ day of ____________________, 2006. 
 SUBSCRIBER: 
 RAB SPECIAL SITUATIONS (MASTER) FUND LIMITED 
  

 21 

 By: _______________________________________________ 
 Title: _______________________________________________ 
  

					
	Subscriber
Information	 	Registration Information
	 	 	 
	Name of Purchaser:	 	 RAB Special Situations (Master) Fund Limited
 c/o RAB Capital Limited
 No. 1 Adam Street
	 	Registration of the certificates representing the Common Shares should be made exactly as follows (if space is insufficient, attach a
list):
	 	 	 
	Street Address:	 	 London W2CN 6LE
	 	 
	 	 	 
	City and State:	 	United Kingdom	 	 
	 	 	 
	Postal/Zip Code:	 	 Phone: 44 20 7389 7000
 Fax: 44 20 7389 7050
	 	 
	 	 	 
	Contact Name:	 	 	 	 
	 	 	 
	 	 	 	 	 
	 	 	 
	Phone No.	 	 	 	 
	 	 	 
	 	 	 	 	 
	 	 	 
	Fax No.	 	 	 	 

  
  

					
	 Delivery of Certificates
  
 The certificates representing the Common Shares are to be delivered as follows (if different from the address(es) set forth
above):
  

	 Street Address:
  
 City, State, Postal/Zip Code:
	 	  
  
  
  

  
  

					
	  
 Contact Name/Phone No.:
  
	 	  
  
  

 This Subscription Agreement is hereby accepted by the Company this 14th day of March , 2006.

  

			
	EMPIRE ENERGY CORPORATION INTERNATIONAL
		
	By:	 	  
	Title:	 	 Malcolm Bendall
 President and Chief Executive
Officer

  

 22 

 Schedule 3 

 Schedule “A” 
 Warrant Certificate 

 Schedule “B” 
 Wire Instructions 
 Wire funds as follows: 
  

			
	 	 
	 Intermediary
Bank:
	 	PNC Bank, Philadelphia
	 	 
	 ABA
Number:
	 	031 0000 53
	 	 
	 For Credit
of:
	 	Ballard Spahr Andrews & Ingersoll, LLP
	 	 
	 Account
No.:
	 	US $1,881,000
	 	 
	 Reference:
	 	Empire Energy Corporation International - Roger V. Davidson, Esq. Denver

 Schedule “C” 
 Officer’s Certificate 
 TO: RAB Special Situations (Master) Fund Limited (the
“Subscriber”) 
 This is the Officer’s Certificate (“Certificate”) required to be delivered to the Subscriber at closing in
connection with the subscription of Units of Empire Energy Corporation International (the “Corporation”) by the Subscriber pursuant to the terms and conditions of the Subscription Agreement (the “Subscription Agreement”) dated
for reference March 14, 2006, between the Company and the Subscriber. The Closing Date shall be March 14, 2006. 
 Terms that are capitalized in this
Certificate and that are not otherwise defined in this Certificate have the same meaning ascribed to them in the Subscription Agreement and the Letter. 
 I,
Malcolm Bendall, President of the Company, hereby certify, not in my personal capacity but as an officer of the Company, for and on behalf of the Company as follows: 
  

	 	1.	As President of the Company, I am fully familiar with the assets, liabilities, business and affairs of the Company and have conducted such inquiries and verified such facts, as I
have considered necessary for the purposes of executing this Certificate. 

  

	 	2.	The Company has in all material respects performed or complied with all covenants, agreements and conditions contained in the Subscription Agreement, the Share Exchange Agreement
and the Letter. 

  

	 	3.	The representations and warranties of the Company contained in the Subscription Agreement and the Letter (except for representations and warranties that speak as of a specific date)
are true and correct as of the date of this Certificate. 

  

	 	4.	As of the Closing Date (and including the securities issued by the Company in connection with the Offering), the Company’s authorized capital will consist of 300,000,000 Common
Shares of which 188,840,418 Class A Common Shares and 103,386 Class B Common Shares will be issued and outstanding, and the Company will have options exercisable to acquire 9,947,631 Common Shares at an average exercise price of $0.23, Class A
Warrants exercisable to acquire 8,550,000 Common Shares at an average exercise price of $0.13, Class B Warrants exercisable to acquire 5,000,000 Common Shares at an average exercise price of $0.18, and a Convertible Debenture exercisable to acquire
10,000,000 Common Shares at an average exercise price of $0.15. Except as set forth in this Certificate, as of the date of the Closing Date, the Company will have no other convertible securities or convertible debt outstanding.

 DATED as of the 14th day of March 2006. 
  

	
	
	/S/ MALCOLM BENDALL
	 Name: Malcolm Bendall
 Title:
President

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