Document:

EXHIBIT
10.1

    

     

    PURCHASE
AND SALE AGREEMENT

     

    BETWEEN

     

    TXCO
RESOURCES INC.,

     

    TXCO
ENERGY CORP.,

     

    TEXAS
TAR SANDS INC.,

     

    OUTPUT
ACQUISITION CORP.,

     

    OPEX
ENERGY, LLC,

     

    CHARRO
ENERGY, INC.,

     

    TXCO
DRILLING CORP.,

     

    EAGLE
PASS WELL SERVICE, L.L.C.,

     

    PPL
OPERATING, INC.,

     

    MAVERICK
GAS MARKETING, LTD., AND

     

    MAVERICK-DIMMIT
PIPELINE, LTD.

     

    AS
SELLERS

     

    AND

     

    ANADARKO
E&P COMPANY LP AND

     

    NEWFIELD
EXPLORATION COMPANY

     

    AS
PURCHASERS

     

    EXECUTED
ON JANUARY 11, 2010

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    TABLE
OF CONTENTS

     

    
      
        
          
            	 
      	 
      	 
      	
                    Page

                  
	 	 
	
                    ARTICLE 1 PURCHASE AND SALE

                  	
                    2

                  
	 
      	 
      	 
      	 
      
	 
      	
                    Section 1.1

                  	
                    Purchase and Sale

                  	
                    2

                  
	 
      	
                    Section 1.2

                  	
                    Assets

                  	
                    2

                  
	 
      	
                    Section 1.3

                  	
                    Excluded Assets

                  	
                    4

                  
	 
      	
                    Section 1.4

                  	
                    Effective Time; Proration of Costs and
      Revenues

                  	
                    4

                  
	 
      	
                    Section 1.5

                  	
                    Delivery and Maintenance of
      Records

                  	
                    6

                  
	 
      	 
      	 
      
	
                    ARTICLE 2 PURCHASE PRICE

                  	
                    6

                  
	 
      	 
      	 
      	 
      
	 
      	
                    Section 2.1

                  	
                    Purchase Price

                  	
                    6

                  
	 
      	
                    Section 2.2

                  	
                    Deposit

                  	
                    7

                  
	 
      	
                    Section 2.3

                  	
                    Adjustments to Purchase
    Price

                  	
                    7

                  
	 
      	
                    Section 2.4

                  	
                    Allocation of Purchase
Price

                  	
                    9

                  
	 
      	 
      	 
      
	
                    ARTICLE 3 CONSENT TO ASSIGNMENT; PREFERENTIAL
      RIGHTS TO PURCHASE; CASUALTY AND CONDEMNATION LOSS

                  	
                    9

                  
	 
      	 
      	 
      	 
      
	 
      	
                    Section 3.1

                  	
                    Consents to Assignment and Preferential Rights to
      Purchase

                  	
                    9

                  
	 
      	
                    Section 3.2

                  	
                    Casualty and Condemnation
    Loss

                  	
                    10

                  
	 
      	 
      	 
      
	
                    ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF
      SELLERS

                  	
                    10

                  
	 
      	 
      	 
      	 
      
	 
      	
                    Section 4.1

                  	
                    Disclaimers

                  	
                    10

                  
	 
      	
                    Section 4.2

                  	
                    Existence and Qualification

                  	
                    11

                  
	 
      	
                    Section 4.3

                  	
                    Power

                  	
                    11

                  
	 
      	
                    Section 4.4

                  	
                    Authorization and
      Enforceability

                  	
                    11

                  
	 
      	
                    Section 4.5

                  	
                    No Conflicts

                  	
                    12

                  
	 
      	
                    Section 4.6

                  	
                    Liability for Brokers' Fees

                  	
                    12

                  
	 
      	
                    Section 4.7

                  	
                    Litigation and Claims

                  	
                    12

                  
	 
      	
                    Section 4.8

                  	
                    Taxes and Assessments

                  	
                    12

                  
	 
      	
                    Section 4.9

                  	
                    Preferential Rights;
    Consents

                  	
                    13

                  
	 
      	
                    Section 4.10

                  	
                    Consents

                  	
                    13

                  
	 
      	
                    Section 4.11

                  	
                    Contracts

                  	
                    13

                  
	 
      	
                    Section 4.12

                  	
                    Wells; Facilities

                  	
                    14

                  
	 
      	
                    Section 4.13

                  	
                    Marketing; Calls on
    Production

                  	
                    15

                  
	 
      	
                    Section 4.14

                  	
                    Imbalances

                  	
                    15

                  
	 
      	
                    Section 4.15

                  	
                    AFEs

                  	
                    15

                  
	 
      	
                    Section 4.16

                  	
                    Suspense Account

                  	
                    15

                  
	 
      	
                    Section 4.17

                  	
                    Capital Expenditures

                  	
                    15

                  
	 
      	
                    Section 4.18

                  	
                    Equipment

                  	
                    15

                  
	 
      	 
      	 
      
	
                    ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF
      NEWFIELD

                  	
                    16

                  
	 
      	 
      	 
      	 
      
	 
      	
                    Section 5.1

                  	
                    Existence and Qualification

                  	
                    16

                  
	 
      	
                    Section 5.2

                  	
                    Power

                  	
                    16

                  
	 
      	
                    Section 5.3

                  	
                    Authorization and
      Enforceability

                  	
                    16

                  
	 
      	
                    Section 5.4

                  	
                    No Conflicts

                  	
                    16

                  

          

        

      

    

    
      
         

      

      
        i

        
          

        

      

      
         

      

    

    

    
      
        
          	 
      	
                  Section 5.5

                	
                  Liability for Brokers' Fees

                	
                  16

                
	 
      	
                  Section 5.6

                	
                  Litigation

                	
                  16

                
	 
      	
                  Section 5.7

                	
                  Financing

                	
                  17

                
	 
      	
                  Section 5.8

                	
                  Independent Investigation

                	
                  17

                
	 
      	
                  Section 5.9

                	
                  Consents, Approvals or
    Waivers

                	
                  17

                
	 
      	 
      
	
                  ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF
      ANADARKO

                	
                  17

                
	 
      	 
      	 
      	 
      
	 
      	
                  Section 6.1

                	
                  Existence and Qualification

                	
                  17

                
	 
      	
                  Section 6.2

                	
                  Power

                	
                  17

                
	 
      	
                  Section 6.3

                	
                  Authorization and
      Enforceability

                	
                  17

                
	 
      	
                  Section 6.4

                	
                  No Conflicts

                	
                  18

                
	 
      	
                  Section 6.5

                	
                  Liability for Brokers' Fees

                	
                  18

                
	 
      	
                  Section 6.6

                	
                  Litigation

                	
                  18

                
	 
      	
                  Section 6.7

                	
                  Financing

                	
                  18

                
	 
      	
                  Section 6.8

                	
                  Independent Investigation

                	
                  18

                
	 
      	
                  Section 6.9

                	
                  Consents, Approvals or
    Waivers

                	
                  18

                
	 
      	 
      
	
                  ARTICLE 7 COVENANTS OF THE
      PARTIES

                	
                  19

                
	 
      	 
      	 
      	 
      
	 
      	
                  Section 7.1

                	
                  Access

                	
                  19

                
	 
      	
                  Section 7.2

                	
                  Government Reviews

                	
                  19

                
	 
      	
                  Section 7.3

                	
                  Notification of Breaches

                	
                  19

                
	 
      	
                  Section 7.4

                	
                  Public Announcements

                	
                  20

                
	 
      	
                  Section 7.5

                	
                  Operation of Business

                	
                  20

                
	 
      	
                  Section 7.6

                	
                  Indemnity Regarding Access

                	
                  21

                
	 
      	
                  Section 7.7

                	
                  Assumption of Obligations

                	
                  22

                
	 
      	
                  Section 7.8

                	
                  Solicitation Provisions

                	
                  22

                
	 
      	
                  Section 7.9

                	
                  Tax Matters

                	
                  22

                
	 
      	
                  Section 7.10

                	
                  [Intentionally Omitted]

                	
                  22

                
	 
      	
                  Section 7.11

                	
                  Further Assurances

                	
                  22

                
	 
      	
                  Section 7.12

                	
                  Recording

                	
                  23

                
	 
      	
                  Section 7.13

                	
                  Transition Services
    Agreements

                	
                  23

                
	 
      	
                  Section 7.14

                	
                  Schedule Updates

                	
                  23

                
	 
      	
                  Section 7.15

                	
                  Peregrine Claims

                	
                  23

                
	 
      	
                  Section 7.16

                	
                  Sale Order

                	
                  24

                
	 
      	 
      
	
                  ARTICLE 8 CONDITIONS TO
    CLOSING

                	
                  24

                
	 
      	 
      	 
      	 
      
	 
      	
                  Section 8.1

                	
                  Conditions of Sellers to
      Closing

                	
                  24

                
	 
      	
                  Section 8.2

                	
                  Conditions of Purchasers to
      Closing

                	
                  25

                
	 
      	 
      
	
                  ARTICLE 9 CLOSING

                	
                  25

                
	 
      	 
      	 
      	 
      
	 
      	
                  Section 9.1

                	
                  Time and Place of Closing

                	
                  25

                
	 
      	
                  Section 9.2

                	
                  Obligations of Sellers at
      Closing

                	
                  26

                
	 
      	
                  Section 9.3

                	
                  Obligations of Purchasers at
      Closing

                	
                  27

                
	 
      	
                  Section 9.4

                	
                  Closing Payment and Post-Closing Purchase Price
      Adjustments

                	
                  27

                
	 
      	
                  Section 9.5

                	
                  Further Assurances

                	
                  28

                
	 
      	 
      
	
                  ARTICLE 10 TERMINATION AND
      AMENDMENT

                	
                  28

                

        

      

    

    
      
         

      

      
        ii

        
          

        

      

      
         

      

    

    

    
      
        
          	 
      	
                  Section 10.1

                	
                  Termination

                	
                  28

                
	 
      	
                  Section 10.2

                	
                  Effect of Termination

                	
                  29

                
	 
      	 
      
	
                  ARTICLE 11 INDEMNIFICATION;
      LIMITATIONS

                	
                  29

                
	 
      	 
      	 
      	 
      
	 
      	
                  Section 11.1

                	
                  Indemnification.

                	
                  29

                
	 
      	
                  Section 11.2

                	
                  Indemnification Actions

                	
                  33

                
	 
      	
                  Section 11.3

                	
                  Limitation on Actions

                	
                  34

                
	 
      	 
      
	
                  ARTICLE 12 MISCELLANEOUS

                	
                  35

                
	 
      	 
      	 
      	 
      
	 
      	
                  Section 12.1

                	
                  Receipts

                	
                  35

                
	 
      	
                  Section 12.2

                	
                  Property Costs

                	
                  36

                
	 
      	
                  Section 12.3

                	
                  Counterparts

                	
                  36

                
	 
      	
                  Section 12.4

                	
                  Notice

                	
                  36

                
	 
      	
                  Section 12.5

                	
                  Sales or Use Tax, Recording Fees and Similar Taxes
      and Fees

                	
                  37

                
	 
      	
                  Section 12.6

                	
                  Expenses

                	
                  38

                
	 
      	
                  Section 12.7

                	
                  Change of Name

                	
                  38

                
	 
      	
                  Section 12.8

                	
                  Replacement of Bonds, Letters of Credit and
      Guarantees

                	
                  38

                
	 
      	
                  Section 12.9

                	
                  Governing Law; Submission to
      Jurisdiction

                	
                  38

                
	 
      	
                  Section 12.10

                	
                  Caption

                	
                  38

                
	 
      	
                  Section 12.11

                	
                  Waivers

                	
                  38

                
	 
      	
                  Section 12.12

                	
                  Assignment

                	
                  38

                
	 
      	
                  Section 12.13

                	
                  Entire Agreement

                	
                  39

                
	 
      	
                  Section 12.14

                	
                  Amendment

                	
                  39

                
	 
      	
                  Section 12.15

                	
                  No Third Party
Beneficiaries

                	
                  39

                
	 
      	
                  Section 12.16

                	
                  References

                	
                  39

                
	 
      	
                  Section 12.17

                	
                  Construction

                	
                  39

                
	 
      	
                  Section 12.18

                	
                  Limitation on Damages

                	
                  39

                
	 
      	
                  Section 12.19

                	
                  Waiver of Fees and Expenses

                	
                  40

                
	 
      	
                  Section 12.20

                	
                  Purchasers’ Liability

                	
                  40

                
	 
      	
                  Section 12.21

                	
                  Agreed Subordination by
      Newfield

                	
                  40

                
	 
      	 
      
	
                  ARTICLE 13 DEFINITIONS

                	
                  40

                

        

      

    

    
      
         

      

      
        iii

        
          

        

      

      
         

      

    

     

    
      	
              EXHIBITS:

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              Exhibit
      A

            	 
      	
              -

            	
              Leases
      and Lands

            
	 
      	
              Exhibit
      A-1

            	 
      	
              -

            	
              Interests
      in Wells

            
	 
      	
              Exhibit
      A-2

            	 
      	
              -

            	
              Gathering
      Systems

            
	 
      	
              Exhibit
      A-3

            	 
      	
              -

            	
              Contracts

            
	 
      	
              Exhibit
      A-4

            	 
      	
              -

            	
              Equipment

            
	 
      	
              Exhibit
      A-5

            	 
      	
              -

            	
              Inventory

            
	 
      	
              Exhibit
      A-6

            	 
      	
              -

            	
              Surface
      Rights

            
	 
      	
              Exhibit
      A-7

            	 
      	
              -

            	
              Seismic
      Data

            
	 
      	
              Exhibit
      A-8

            	 
      	
              -

            	
              Capital
      Expenditure Budget

            
	 
      	 
      	 
      	 
      	 
      
	
              SCHEDULES:

            	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
              Schedule
      4.7

            	
              -

            	
              Litigation

            
	 
      	
              Schedule
      4.8

            	
              -

            	
              Taxes

            
	 
      	
              Schedule
      4.9

            	
              -

            	
              Consents
      to Assignment; Preferential Rights

            
	 
      	
              Schedule
      4.10

            	
              -

            	
              Consents

            
	 
      	
              Schedule
      4.11

            	
              -

            	
              Material
      Contracts

            
	 
      	
              Schedule
      4.12

            	
              -

            	
              Plugged
      and Abandoned Wells

            
	 
      	
              Schedule
      4.14

            	
              -

            	
              Imbalances

            
	 
      	
              Schedule
      4.15

            	
              -

            	
              AFEs

            
	 
      	
              Schedule
      4.16

            	
              -

            	
              Suspense
      Revenues

            
	 
      	
              Schedule
      4.17

            	
              -

            	
              Unbudgeted
      Capital Expenditures

            
	 
      	
              Schedule
      5.9

            	
              -

            	
              Newfield
      Consents, Approvals and Waivers

            
	 
      	
              Schedule
      6.9

            	
              -

            	
              Anadarko
      Consents, Approvals and Waivers

            
	 
      	
              Schedule
      6.10

            	
              -

            	
              Employees

            

    

     

    
      
         

      

      
        iv

        
          

        

      

      
         

      

    

    PURCHASE
AND SALE AGREEMENT

     

    This
Purchase and Sale Agreement (the “Agreement”),
is executed on January 11, 2010, by and between TXCO
Resources Inc., a Delaware corporation, TXCO Energy
Corp., a Texas
corporation, Texas Tar
Sands Inc., a
Texas corporation, Output
Acquisition Corp., a Texas corporation, OPEX Energy, LLC, a Texas limited
liability company, Charro
Energy, Inc., a
Texas corporation, TXCO
Drilling
Corp., a Texas
corporation, Eagle Pass
Well Service,
L.L.C., a Texas limited liability company, PPL Operating,
Inc., a Texas
corporation, Maverick
Gas Marketing, Ltd., a Texas limited
partnership, and Maverick-Dimmit
Pipeline, Ltd., a
Texas limited partnership, (collectively, the “Sellers”),
and Anadarko
E&P Company LP, a Delaware limited partnership (“Anadarko”)
and Newfield
Exploration Company, a Delaware corporation (“Newfield”
and together with Anadarko, the “Purchasers”).  Each
Seller and each Purchaser is sometimes referred to individually as a “Party”
and collectively as the “Parties.”

     

    RECITALS:

     

    WHEREAS,
Sellers are debtors in possession under the protection of Chapter 11 of the
United States Bankruptcy Code pursuant to jointly administered cases under Case
Number 09-51807 filed with the United States Bankruptcy Court for the Western
District of Texas (San Antonio Division) (the “Bankruptcy
Court”); and

     

    WHEREAS,
Sellers own certain interests in oil and gas properties, rights and related
assets that are defined and described herein; and

     

    WHEREAS,
Sellers filed with the Bankruptcy Court a First Amended Plan of Reorganization
on December 18, 2009 (the “Plan”);
and

     

    WHEREAS,
subject to the Bankruptcy Court’s entry of an Order of the Court authorizing the
transactions contemplated herein containing terms in form and substance
reasonably satisfactory to Sellers and Purchasers and providing among other
things, for the purchase and sale of Sellers’ Assets (hereinafter defined)
pursuant to the terms of this Agreement (the “Sale
Order”), Sellers desire to sell to Purchasers and Purchasers desire to
purchase from Sellers the Assets, in the manner and upon the terms and
conditions hereafter set forth; and

     

    WHEREAS,
capitalized terms used herein shall have the meanings ascribed to them in this
Agreement as such terms are defined in Article 13
hereof.

     

    NOW,
THEREFORE, in consideration of the premises and of the mutual promises,
representations, warranties, covenants, conditions and agreements contained
herein, and for other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties hereto, intending to be legally bound
by the terms hereof, agree as follows:

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    ARTICLE
1

    PURCHASE
AND SALE

     

    Section
1.1      Purchase and
Sale.   At
the Closing, and upon the terms and subject to the conditions of this Agreement,
Sellers agree to sell and convey to Purchasers and Purchasers agree to purchase,
accept and pay for the Assets (as defined in Section 1.2).

     

    Section
1.2       Assets  As
used herein, the term “Assets”
means all of Sellers’ right, title, and interest in and to the
following:

     

    (a)       The
oil, gas and mineral leases, subleases and other leaseholds, royalties,
overriding royalties, net profits interests, mineral fee interests, carried
interests, Contractual Prospects, and other properties and interests described
on Exhibit A
(collectively, the “Leases
and Lands”), and any and all oil, gas, water, CO2 or
injection wells thereon, including the working interests and net revenue
interests in Leases and the wells located thereon shown on Exhibit A-1
attached hereto (the “Wells”);

     

    (b)       All
pooled, communitized or unitized acreage which includes all or a part of any
Lease or includes any Well (the “Units”),
and all tenements, hereditaments and appurtenances belonging to the Leases and
Lands and Units;

     

    (c)       All
gathering and transportation pipelines, compressors, stabilizers, processing
facilities, disposal facilities, treatment facilities, interconnects, and other
systems, facilities and plants used solely in connection with the Units, Leases
and Lands and Wells, including the gas gathering and transportation pipelines,
processing facilities, treatment facilities, interconnects, and other systems
and facilities described on Exhibit A-2 (the
“Gathering
Systems”);

     

    (d)       All
surface fee interests (including the Mula Creek Ranch), easements, permits,
licenses, servitudes, rights-of-way, surface leases and other surface rights and
water rights appurtenant to, and used or held for use solely in connection with,
the Properties, but excluding any permits and other appurtenances to the extent
transfer is restricted by third-party agreement or applicable law (the “Surface
Rights” and,
together with the Units, Leases, Lands, Wells and Gathering Systems, the “Properties”);

     

    (e)       To
the extent transferable pursuant to Applicable Law, all governmental (whether
federal, state or local) Permits, licenses, Orders, authorizations, franchises
and related instruments or rights required of Sellers under applicable Law for
the ownership, operation or use of the Leases, Lands, Wells, Gathering Systems,
Surface Rights (the “Permits”),
including Environmental Permits

     

    (f)        All
Hydrocarbons (or the proceeds from the sale of Hydrocarbons) in storage on the
Properties or in the Gathering Systems at the Effective Time and all
Hydrocarbons produced and saved attributable to the Properties after the
Effective Time and all Imbalances owed to Sellers by a Third Party as of the
Effective Time;

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    (g)       All
rights attributable to the period of time after the Effective Time under all
presently existing contracts, agreements and instruments by which the Assets are
bound, to the extent applicable to the Properties (the “Contracts”),
including operating agreements, unitization, pooling and communitization
agreements, declarations and orders, area of mutual interest agreements, joint
venture agreements, farmin and farmout agreements, exchange agreements,
transportation agreements, agreements for the sale and purchase of Hydrocarbons
and processing agreements, to the extent applicable to the Properties or the
production of Hydrocarbons from the Properties, and confidentiality agreements,
to the extent applicable to the Properties or the production of Hydrocarbons
from the Properties, including those described on Exhibit A-3, but
excluding any contracts, agreements and instruments to the extent transfer is
restricted by third-party agreement or applicable law;

     

    (h)       All
equipment, machinery, fixtures and other tangible personal property and
improvements located on the Properties or used or held for use in connection
with the operation of the Properties including the Equipment described on Exhibit A-4 (the
“Equipment”);

     

    (i)        All
surplus equipment, materials and inventory owned, leased or held for use by
Sellers, in connection with operations on the Properties including such surplus
equipment, materials and inventory, if any, described on Exhibit A-5;

     

    (j)        All
surface leases for real property used by Sellers in connection with the
operation of the Properties (including leases for field office, supply yards,
warehouses or buildings, if any, described on Exhibit A-6);

     

    (k)       All
geophysical and geological data, engineering and consulting reports, computer
data, seismic data (including raw data and any interpretative data or
information relating so such geologic, geophysical and seismic data) and other
proprietary data (in each case whether in written or electronic format) owned by
Sellers, together with any rights of Sellers to such types of intellectual
property owned or prepared by third parties and not subject to licensing
arrangements requiring purchase of a proprietary license by each successor-user,
in each case to the extent relating to the operation of the Leases, Lands,
Wells, Gathering System, Units, and Surface Rights, including the seismic data
described on Exhibit A-7;

     

    (l)        All
operating revenues and accounts receivable relating to the period after the
Effective Time, in each case associated with the Properties or the production of
Hydrocarbons attributable thereto; and

     

    (m)      The
records of Sellers relating solely to the Properties or other Assets, excluding however, (A) any
records to the extent disclosure or transfer is restricted by any third-party
license agreement, other third-party agreement or applicable law;
(B) non-transferable computer software; (C) all legal records and
legal files of Sellers and all other work product of and attorney-client
communications with any of Sellers’ legal counsel (other than
(w) environmental assessments and compliance reports (x) title
opinions, (y) Contracts and (z) records and files with respect to the
matters described on Schedule 4.7);
and (D) any other records to the extent constituting Excluded Assets (as
defined in Section 1.3)
(clauses (A) through (D) shall hereinafter be referred to as the “Excluded
Records” and subject to such exclusions, the records described in this
Section 1.2(m) shall
hereinafter be referred to as the “Records”).

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    Section
1.3      Excluded
Assets  Notwithstanding
the foregoing, the Assets shall not include, and there is excepted, reserved and
excluded from the purchase and sale contemplated hereby (collectively, the
“Excluded
Assets”):

     

    (a)       all
corporate, financial, income and franchise tax and legal records of Sellers that
relate to Sellers’ business generally (whether or not relating to the Assets),
all Excluded Records and all books, records and files that relate to the
Excluded Assets;

     

    (b)       all
of Sellers’ other mineral fee interests, royalties and/or overriding royalty
interests to the extent not specifically described in Section 1.2;

     

    (c)       all
of Sellers’ other (i) equipment, machinery, fixtures and other tangible
personal property and improvements to the extent not described on Exhibit A-4,
including all drilling rigs, and (ii) any computers and related peripheral
equipment and any inventory to the extent not described on Exhibit A-5;

     

    (d)       all
rights to any refund of Taxes or other costs or expenses borne by Sellers or
Sellers’ predecessors in interest and title attributable to periods prior to the
Effective Time;

     

    (e)       all
rights attributable to the period of time prior to the Effective Time relating
to claims, causes of action, choses in action, rights of recovery, rights of set
off, and rights of recoupment (other than claims or causes of action for
proceeds to which Purchasers are entitled under Section 1.4(b));

     

    (f)        Sellers’
area-wide bonds, permits and licenses or other permits, licenses or
authorizations used in the conduct of Sellers’ business generally and not
specifically limited to the Assets;

     

    (g)       Subject
to Section
7.15, all Sellers’ interests in, and all assets of any and all of
Sellers’ Benefit Plans; and

     

    (h)       all
rights and interests of the Sellers in and to the confidentiality agreement
between TXCO Resources Inc. and Peregrine Oil & Gas and all rights relating
to claims, causes of action, choses in action, rights of recovery, rights of set
off, and rights of recoupment in connection with such confidentiality agreement,
whether arising or relating to any period prior to or after the Effective
Time.

     

    Section
1.4       Effective Time; Proration of
Costs and Revenues.

     

    (a)       Possession
and ownership of the Assets shall be transferred from Sellers to Purchasers at
the Closing, but, subject to consummation of the Closing, certain financial
benefits and burdens of the Assets shall be transferred effective as of 7:00
a.m., local time, where the respective Assets are located, on January 1,
2010 (the “Effective
Time”), as described below.

     

    
      
         

      

      
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    (b)       Purchasers
shall be entitled to all production of Hydrocarbons from or attributable to the
Leases and Lands, Units and Wells at and after the Effective Time (and all
products and proceeds attributable thereto), and to all other income, proceeds,
receipts and credits earned with respect to the Assets at or after the Effective
Time, and shall be responsible for (and entitled to any refunds with respect to)
all Property Costs incurred at and after the Effective Time.  Sellers
shall be entitled to all production of Hydrocarbons from or attributable to
Leases and Lands, Units and Wells prior to the Effective Time (and all products
and proceeds attributable thereto), and to all other income, proceeds, receipts
and credits earned with respect to the Assets prior to the Effective Time, and
shall be responsible for (and entitled to any refunds with respect to) all
Property Costs incurred prior to the Effective Time.  “Earned”
and “incurred”,
as used in this Agreement, shall be interpreted in accordance with generally
accepted accounting principles and Council of Petroleum Accountants Society
(“COPAS”)
standards, and expenditures which are cash-called or advanced pursuant to a
joint operating agreement, unit agreement or similar agreement shall be deemed
incurred when expended by the operator of the applicable Leases and Lands, Unit
or Well, in accordance with Sellers’ current practice.

     

    (c)       “Property
Costs” means all operating expenses (including costs of insurance,
rentals, shut-in payments, title examination and curative actions, and
ad valorem, property, severance, production and similar Taxes based upon or
measured by the ownership or operation of the Assets or the production of
Hydrocarbons therefrom, but excluding any other Taxes) and capital expenditures
(including bonuses, broker's fees, and other lease acquisition costs, costs of
drilling and completing wells and costs of acquiring equipment) incurred in the
ownership and operation of the Assets in the ordinary course of business, and
overhead costs charged to the Assets under the applicable operating agreement or
if none, charged to the Assets on the same basis as charged on the date of this
Agreement (excluding any such costs and expenses to be paid which are excused,
rejected or otherwise no longer payable by Sellers pursuant to an Order of the
Bankruptcy Court).

     

    (d)       For
purposes of allocating production (and accounts receivable with respect
thereto), under this Section 1.4,
(i) liquid hydrocarbons shall be deemed to be “from or attributable to” the
Leases and Lands, Units and Wells when they pass through the pipeline connecting
into the storage facilities into which they are run or, if there are no such
storage facilities, when they pass through the meters at the point of entry into
the pipelines through which they are transported from the field, and
(ii) gaseous hydrocarbons shall be deemed to be “from or attributable to”
the Leases and Lands, Units and Wells when they pass through the delivery point
sales meters on the pipelines through which they are transported. Sellers shall
utilize reasonable interpolative procedures to arrive at an allocation of
production when exact meter readings or gauging and strapping data is not
available.  Sellers shall provide to Purchasers, no later than ten
(10) Business Days prior to Closing, evidence of all meter readings and all
gauging and strapping procedures conducted on or about the Effective Time in
connection with the Assets, together with all data necessary to support any
estimated allocation, for purposes of establishing the adjustment to the
Purchase Price pursuant to Section 2.3
hereof.  Taxes that are included in Property Costs, right-of-way fees,
insurance premiums and other Property Costs that are paid periodically shall be
prorated based on the number of days in the applicable period falling before and
the number of days in the applicable period falling at or after the Effective
Time, except that production, severance and similar Taxes measured by the
quantity of or the value of production shall be prorated based on the number of
units or value of production actually produced and sold, as applicable, before,
and at or after, the Effective Time.  In each case, Purchasers shall
be responsible for the portion allocated to the period at and after the
Effective Time and Sellers shall be responsible for the portion allocated to the
period before the Effective Time.

     

    
      
         

      

      
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    (e)       For
the avoidance of doubt, all of Sellers’ costs and expenses relating to the
filing, administration, pendency or consummation of the Bankruptcy Case shall be
the responsibility of Sellers and shall not be chargeable to Purchasers nor be
an upward adjustment to the Purchase Price.

     

    Section
1.5       Delivery and Maintenance of
Records.  Sellers,
at Purchasers’ cost, shall deliver the Records to Purchasers within ten (10)
days following Closing.  Sellers may retain the copies of such Records
at their discretion.  With respect to originals or last remaining
copies of any Records provided by Sellers to Purchasers, Purchasers, for a
period of seven (7) years following Closing, will (i) retain the Records,
(ii) provide Sellers with access to the Records following reasonable
advance notice and during normal business hours for review and copying at
Sellers’ expense in connection with any tax audit or investigation related to
Sellers,  and (iii) provide Sellers with access, following
reasonable notice and during normal business hours, to (A) materials
received or produced after Closing relating to any claim for indemnification
made under Section 11.1 of
this Agreement (excluding, however, attorney work product and attorney-client
communications with respect to any such claim being brought by Purchasers under
this Agreement) for review and copying at Sellers’ expense and
(B) Purchasers’ and their Affiliates’ officers, employees and
representatives for the purpose of discussing any such claim, provided that
Purchasers shall have the right to have its own representatives present during
any such meeting.  In addition, for a period of two (2) years
following the Closing, Purchasers will provide Sellers with access to the
Records following reasonable advance notice and during normal business hours for
review and copying at Sellers’ expense in connection with matters related to the
ownership or operation of the Excluded Assets.

     

    ARTICLE
2

    PURCHASE
PRICE

     

    Section
2.1       Purchase
Price.  The
purchase price for the Assets (the “Purchase
Price”) shall be the sum of an amount sufficient to (i) repay the
Sellers’ bank lenders (including the Sellers' debtor-in-possession financing and
revolver and/or term loan credit facilities) in full, (ii) pay all other
creditors in full, including interest thereon, as permitted by applicable law,
and (iii) pay any cure amounts of executory contracts assumed upon effectiveness
of the Sellers’ Plan of Reorganization (except the amount to cure the Claim of
Anadarko Petroleum Corporation for breach of the Confidentiality Agreement which
shall be waived at Closing) as allowed by the Bankruptcy Court; provided, however, that such
amount in total shall not exceed $310,000,000.  The Purchase Price
shall be adjusted as provided in Section 2.3.

     

    
      
         

      

      
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    Section
2.2       Deposit.

     

    (a)       The
Parties agree to execute the documents necessary to (i) return to Newfield,
concurrently with the payment of the Deposit, the $20,000,000 (including the
interest and investment income earned thereon) deposited by Newfield pursuant to
that certain Escrow Agreement, dated November 10, 2009, by and among Sellers,
Wells Fargo Bank and Newfield and (ii) return to Anadarko, concurrently with the
payment of the Deposit, the $20,000,000 (including the interest and investment
income earned thereon) deposited by Anadarko pursuant to that certain Escrow
Agreement, dated January 5, 2010, by and among Sellers, JPMorgan Chase Bank and
Anadarko.

     

    (b)       Within
two (2) Business Days following the execution of this Agreement, Purchasers
shall deposit with an Escrow Agent mutually satisfactory to the Parties an
earnest money deposit (“Deposit”)
in the amount of $20,000,000.  The Deposit shall be held by the Escrow
Agent pursuant to an Escrow Agreement in form and substance satisfactory to the
Parties. In the event that the Closing does not occur, the Deposit shall be paid
over by Escrow Agent to Purchasers with interest accrued or investment income
earned thereon promptly upon termination of this Agreement, unless such Closing
fails to occur as a result of Purchasers’ breach of this Agreement, in which
case the Deposit shall be paid over by Escrow Agent to Sellers with interest
accrued or investment income earned thereon promptly upon termination of this
Agreement.  Otherwise, the Deposit shall be paid over by Escrow Agent
to Sellers and credited against the Purchase Price at Closing.

     

    Section
2.3       Adjustments to Purchase
Price.  The
Purchase Price for the Assets shall be adjusted as follows with all such amounts
being determined in accordance with generally accepted accounting principles,
consistently applied, and COPAS standards:

     

    (a)       Reduced
by the aggregate amount of the following proceeds received by Sellers between
the Effective Time and the Closing Date, as defined below (with the period
between the Effective Time and the Closing Date referred to as the “Adjustment
Period”):  (i) proceeds from the sale of Hydrocarbons (net
of any (A) royalties, overriding royalties or other burdens on or payable
out of production, (B) gathering, processing and transportation costs not
included in Property Costs and any (C) production, severance, sales or
excise Taxes not reimbursed to Sellers by the purchaser of production) produced
from or attributable to the Properties during the Adjustment Period, and
(ii) other proceeds earned with respect to the Assets during the Adjustment
Period (provided that for purposes of this adjustment, “proceeds”
shall not be considered to include funds received by Sellers for the account of
third Persons);

     

    (b) 
     Reduced as a result of casualty or condemnation
loss by the amount determined under Section
3.2;

     

    (c)       Reduced
or increased by the amount of any positive or negative imbalance of as set forth
on Schedule 4.14
based on a price determined based on the applicable basis differential offered
to Sellers off the current prompt month futures price for natural gas as
reported on the NYMEX for the next month succeeding the Closing;

     

    
      
         

      

      
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    (d) 
     Increased by the amount of all Property Costs and
other costs attributable to the ownership and operation of the Assets which are
paid by Sellers and incurred at or after the Effective Time, except any Property
Costs and other such costs already deducted in the determination of proceeds in
Section 2.3(a)(i);

     

    (e)       Increased
by the amount of capital expenditures incurred after December 11, 2009, up
to the Effective Time in connection with fracturing operations on the
O’Meara-Webb 687 Unit 1-H Well, Dimmit County, Texas, to the extent required to
maintain Sellers’ contractual rights under the Joint Exploration Agreement dated
September 28, 2007, by and between EnCana Oil & Gas (USA), Inc. and
TXCO Energy Corp. to the extent Sellers are unable to negotiate an extension for
such operation with EnCana Oil & Gas (USA), Inc. after the Effective Time;
and

     

    (f)        Increased
by the value (determined by the price most recently paid prior to the Effective
Time for such oil less all applicable deductions) of all oil and other liquid
hydrocarbons in storage or existing in stock tanks above the pipeline connection
as of the Effective Time which is credited to the Properties, less applicable
production taxes, royalty and other burdens on the production payable on such
oil, the amount of oil in storage as of the Effective Time to be based on gauge
reports to the extent available or on alternative methods to be agreed by the
Parties.

     

    (g)       As
promptly as reasonably practicable following the effectiveness of the Plan, the
Sellers shall provide to the Purchasers a final accounting of all allowed claims
paid by the Debtors under the Plan, plus applicable interest and cure amounts
for assumed contracts (“Covered
Claims”) and, to the extent the aggregate amount of the Purchase Price
exceeds the amount paid to the holders of Covered Claims, the Sellers shall
return to the Purchasers therewith the difference between the amount paid for
the Covered Claims and the Purchase Price.

     

    The
adjustment described in Section 2.3(a)
shall serve to satisfy, up to the amount of the adjustment, Purchasers’
entitlement under Section 1.4 to
Hydrocarbon production from or attributable to the Leases and Lands, Units and
Wells during the Adjustment Period, and to the value of other income, proceeds,
receipts and credits earned with respect to the Assets during the Adjustment
Period, and Purchasers shall not have any separate rights to receive any
production or income, proceeds, receipts and credits with respect to which an
adjustment has been made.  Similarly, the adjustment described in
Section 2.3(d)
shall serve to satisfy, up to the amount of the adjustment, Purchasers’
obligation under Section 1.4 to
pay Property Costs and other costs attributable to the ownership and operation
of the Assets which are incurred during the Adjustment Period, and Purchasers
shall not be separately obligated to pay for any Property Costs or other such
costs with respect to which an adjustment has been made.

     

    Each
adjustment to the Purchase Price described in Sections 2.3(a)
through (f)
shall be applied to the portion of the Purchase Price payable to the Sellers
which owns the affected Asset.

     

    
      
         

      

      
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    Section
2.4       Allocation of Purchase
Price.  Except
as provided in Section
3.1(a), at least ten (10) days prior to the Closing, Purchasers shall
prepare and deliver to Sellers an allocation of the unadjusted Purchase Price
among each of the Assets (the “Allocated
Values”).  Any adjustments to the Purchase Price pursuant to
Sections 2.3(a)
through (f)
shall be applied to the Allocated Values for the particular affected
Assets.  Sellers and Purchasers will accept such Allocated Values for
purposes of this Agreement only and the transactions contemplated hereby, but
will otherwise make no representation or warranty as to the accuracy of such
values.  Sellers and Purchasers agree that (i) the purchase and
sale described herein is not a transaction subject to the provisions of section
1060 of the Internal Revenue Code of 1986, as amended (the “Code”),
and (ii) the Allocated Values agreed for purposes of this Section 2.4 are
not necessarily those that would be determined in accordance with the principles
of section 1060 of the Code and the Treasury Regulations thereunder. Further, if
any Party later determines that it is required to file Internal Revenue Service
Form 8594 as a result of this purchase and sale transaction, such Party will
notify the other Party prior to filing said form with the Internal Revenue
Service.

     

    ARTICLE
3

    CONSENT
TO ASSIGNMENT; PREFERENTIAL RIGHTS TO PURCHASE;

    CASUALTY
AND CONDEMNATION LOSS

     

    Section
3.1       Consents to Assignment and
Preferential Rights to Purchase.

     

    (a)       Promptly
after the date hereof, Sellers shall prepare and send (i) notices to those third
parties from whom any required consents to assignment requesting consents to the
Conveyances must be obtained, and (ii) notices to the holders of any applicable
preferential rights to purchase or similar rights in compliance with the terms
of such rights and requesting waivers of such rights. Any preferential purchase
right must be exercised subject to all terms and conditions set forth in this
Agreement, including the successful Closing of this Agreement pursuant to Article
9.  The consideration payable under this Agreement for any
particular Asset for purposes of preferential purchase right notices shall be
the Allocated Value for such Asset.  Upon notice to Sellers from a
holder of any preferential rights to purchase that such holder desires to
exercise such preferential rights to purchase, Purchasers shall within five (5)
business days provide to Sellers the Allocated Value for the Assets subject to
such preferential rights.  Sellers shall use commercially reasonable
efforts to cause such consents to assignment and waivers of preferential rights
to purchase or similar rights (or the exercise thereof) to be obtained and
delivered prior to Closing, provided that Sellers shall not be required to make
payments or undertake obligations to or for the benefit of the holders of such
rights in order to obtain the required consents and
waivers.  Alternatively, Sellers may seek an order of the Bankruptcy
Court to permit the Conveyances over the objections of third
parties.  Purchasers shall use commercially reasonable efforts to
cooperate with Sellers in seeking to obtain such consents to assignment, waivers
of preferential rights, or orders of the Bankruptcy Court.

     

    (b)       If
any preferential right to purchase any Assets is exercised prior to Closing,
then, for the purposes of this Agreement, such Assets shall not be included in
the transaction at Closing as Assets purchased by Purchasers and Sellers shall
either (i) pay Purchasers at Closing the Allocated Value for such Assets paid by
such holder or (ii) reduce the Purchase Price due Sellers at Closing by the
amount of the Allocated Value for such Assets.

     

    
      
         

      

      
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    (c)       Should
a third Person fail to exercise its preferential right to purchase as to any
portion of the Assets prior to Closing and the time for exercise or waiver has
not yet expired, or, should a third Person holding a consent right fail to give
its consent to the transfer of any portion of the Assets prior to Closing, then
subject to the remaining provisions of this Section 3.1, such
Assets shall be included in the transaction at Closing, and there shall be no
adjustment to the Purchase Price at Closing with respect to such preferential
right to purchase or consent requirement; provided that should the holder of a
preferential purchase right later validly exercise same, Purchasers agree to transfer the
affected Asset to the holder of the preferential purchase right on the terms and
provisions set out herein and in the applicable preferential purchase right
provision, and Purchasers shall be entitled to the consideration paid by such
holder.

     

    Section
3.2      Casualty and Condemnation
Loss.  If,
after the date of this Agreement but prior to the Closing Date, any portion of
the Assets is damaged or destroyed by fire or other casualty or is taken in
condemnation or under right of eminent domain, Purchasers shall nevertheless be required to
close and Purchasers shall elect by written notice to Sellers prior to Closing
either (i) to cause the Assets affected by any casualty to be repaired or
restored, at Sellers’ sole cost, as promptly as reasonably practicable (which
work may extend after the Closing Date), or (ii) to accept an assignment of
Sellers’ insurance proceeds and other claims against third parties with respect
to the casualty or taking.  Notwithstanding the preceding, (i) if the
aggregate losses caused by such casualties and takings exceed ten percent (10%)
of the Purchase Price, any Seller or Purchasers may, by
notice to the other at least one Business Day prior to Closing, elect to
terminate this Agreement under Section 10.1 or (ii)
if the losses caused by such casualties and takings exceed ten percent (10%) of
the Allocated Value of any Lease, Purchasers may by notice to Sellers at least
one Business Day prior to Closing elect to accept an assignment of Sellers’
insurance proceeds and other claims against third parties with respect to such
casualty and takings

     

    ARTICLE
4

    REPRESENTATIONS
AND WARRANTIES OF SELLERS

     

    Section
4.1       Disclaimers.

     

    (a)           EXCEPT
AS EXPRESSLY REPRESENTED OTHERWISE IN THIS ARTICLE 4,
SELLERS EXPRESSLY DISCLAIM ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
ORAL OR WRITTEN, INCLUDING ANY REPRESENTATION OR WARRANTY AS TO (I) TITLE
TO ANY OF THE ASSETS, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY
DESCRIPTIVE MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT,
OR ANY GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE ASSETS,
(III) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR FROM
THE ASSETS, (IV) ANY ESTIMATES OF THE VALUE OF THE ASSETS OR FUTURE
REVENUES GENERATED BY THE ASSETS, (V) THE PRODUCTION OF PETROLEUM
SUBSTANCES FROM THE ASSETS, OR WHETHER PRODUCTION HAS BEEN CONTINUOUS, OR IN
PAYING QUANTITIES, (VI) THE MAINTENANCE, REPAIR, CONDITION, QUALITY,
SUITABILITY, DESIGN OR MARKETABILITY OF THE ASSETS, OR (VII) ANY OTHER
MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE OR COMMUNICATED TO
PURCHASERS OR THEIR AFFILIATES, OR THEIR EMPLOYEES, AGENTS, CONSULTANTS,
REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO, AND FURTHER
DISCLAIM ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE  OR CONFORMITY TO MODELS OR SAMPLES
OF MATERIALS OF ANY EQUIPMENT, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE
PARTIES HERETO THAT PURCHASERS SHALL BE DEEMED TO BE OBTAINING EQUIPMENT AND
OTHER TANGIBLE PROPERTY IN ITS PRESENT STATUS, CONDITION AND STATE OF REPAIR,
“AS IS” AND “WHERE IS” WITH ALL FAULTS AND THAT PURCHASERS HAVE MADE OR CAUSED
TO BE MADE SUCH INSPECTIONS AS PURCHASERS DEEM APPROPRIATE.

    
      
         

      

      
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    (b)         Inclusion
of a matter on a Schedule attached hereto with respect to a representation or
warranty which addresses matters having a Material Adverse Effect shall not be
deemed an indication that such matter does, or may, have a Material Adverse
Effect.  Matters may be disclosed on a Schedule to this Agreement for
purposes of information only.

     

    (c)         Subject
to the foregoing provisions of this Section 4.1, and
the other terms and conditions of this Agreement, Sellers represent and warrant
to Purchasers the matters set out in Sections 4.2
through 4.18.

     

    Section
4.2         Existence and
Qualification.  Each
Seller is an entity duly created, formed, or organized and validly existing
under the laws of its state of organization and is duly authorized to conduct
its business and is in good standing in each jurisdiction where such
qualification is required, except where the failure to so qualify would not,
individually or in the aggregate, have a Material Adverse Effect. 

     

    Section
4.3         Power.  Subject
to Bankruptcy Court approval, each Seller has the requisite entity power to
enter into and perform this Agreement (and all documents required to be executed
and delivered by Sellers at Closing) and consummate the transactions
contemplated by this Agreement (and such documents).

     

    Section
4.4         Authorization and
Enforceability.  The
execution, delivery and performance of this Agreement (and all documents
required to be executed and delivered by Sellers at Closing), and the
performance of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary corporate or entity action on the part
of each Seller.  This Agreement has been duly executed and delivered
by each Seller (and all documents required hereunder to be executed and
delivered by such Seller at Closing will be duly executed and delivered by such
Seller) and subject to the approval of the Bankruptcy Court, this Agreement
constitutes, and at the Closing such documents will constitute, the valid and
binding obligations of each Seller, enforceable in accordance with their terms
except as such enforceability may be limited by applicable bankruptcy or other
similar laws affecting the rights and remedies of creditors generally as well as
by general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

    
      
         

      

      
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    Section
4.5         No
Conflicts.  Subject
to Bankruptcy Court approval, and any applicable preferential rights to purchase
and consents to assignment, the execution, delivery and performance of this
Agreement by each Seller, and the transactions contemplated by this Agreement
will not (a) violate any provision of such Seller’s Organizational
Documents, (b) result in default (with due notice or lapse of time or both)
or the creation of any lien or encumbrance other than Permitted Encumbrances or
give rise to any right of termination, cancellation or acceleration under any
note, bond, mortgage, indenture, license or agreement to which any of the
Sellers is a party or which affects the Assets, (c) violate any judgment,
order, ruling, or decree applicable to such Seller as a party in interest, or
(d) violate any Laws applicable to Sellers or any of the Assets, except any
matters described in clauses (b), (c) or (d) above which would not have a
Material Adverse Effect.

     

    Section
4.6         Liability for Brokers'
Fees.  Purchasers
shall not directly or indirectly have any responsibility, liability or expense,
as a result of undertakings or agreements of Sellers, for brokerage fees,
finder's fees, agent's commissions or other similar forms of compensation in
connection with this Agreement or any agreement or transaction contemplated
hereby.

     

    Section
4.7         Litigation and
Claims.  Except
as set forth in Schedule 4.7,
there is no claim by any Person or Governmental Body (including expropriation or
forfeiture proceedings), joint venture audits, and no legal, administrative, or
arbitration proceeding pending or, to any Sellers’ Knowledge, threatened against
any Seller or the Assets, or to which any Seller is a party, that reasonably may
be expected to (a) impair such Sellers’ title to any of the Assets,
(b)  hinder or impede the operation of all or any portion of the Assets,
(c) subject the owner or operator of the Assets to liability in favor of
any Governmental Body or other Person as the result of the alleged violation of,
or non-compliance with, any Environmental Law by any Seller or any Affiliate of
any Seller with respect to the Assets or require the owner or operator of the
Assets to remediate, remove, or respond to an Environmental Condition, or a
threatened Environmental Condition, on or affecting the Assets, or
(d) otherwise adversely affect the Assets or the ability of Sellers to
consummate the transactions contemplated in this Agreement.  Further,
except as otherwise reflected in Schedule 4.7, to
each Seller’s Knowledge there has been no Release or Threatened Release of
Environmental Contaminants at, to, from or about the Assets that requires
remediation under Applicable Law.  

     

    Section
4.8         Taxes and
Assessments.  To
each Seller’s Knowledge, each Seller has filed all material Tax returns required
to be filed by such Seller with respect to the Assets.  Except as
disclosed on Schedule 4.8, to
Sellers’ Knowledge, Sellers have paid or caused to be paid all ad valorem,
property, production, severance and similar Taxes that are currently due and
payable based upon or measured by the ownership of or the production of
Hydrocarbons from the Assets required to be shown on such returns, except those
being contested in good faith.  Except as disclosed on Schedule 4.8, no
Seller has received written notice of any pending claim against any Seller from
any applicable taxing authority for assessment of Taxes with respect to the
Assets.

    
      
         

      

      
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    Section
4.9         Preferential Rights;
Consents.  Except
as otherwise reflected in Schedule 4.9,
none of the Properties is subject to a preferential right to purchase, third
Person consent to assignment requirement, right of first refusal, right of first
offer, or similar right or restriction.

     

    Section
4.10       Consents.  Except
for Bankruptcy Court approval and approvals by Governmental Bodies customarily
obtained after the Closing and as otherwise reflected on Schedule 4.10,
no authorization, consent, approval, exemption, franchise, permit, or license
of, or filing with, any Governmental Body is required to authorize, or is
otherwise required by any Governmental Body in connection with, the valid
execution and delivery by Sellers of this Agreement, the transfer of the Assets
to Purchaser, or the performance by Sellers of their other obligations
hereunder.

     

    Section
4.11       Contracts.  Schedule 4.11 describes, with respect
to each Contract to which any Seller is a party that directly relates to or
affects the Properties including:

     

    (a)         all
existing area of mutual interests agreements and agreements that include
non-competition restrictions or other similar restrictions on doing business,
all existing purchase or sale agreements (other than with respect to production
of Hydrocarbons and the disposition of field equipment in the ordinary course),
partnership (other than tax partnerships), joint venture and/or exploration or
development program agreements;

     

    (b)         all
of the existing production sales, transportation, marketing and processing
agreements, other than such agreements which are terminable by Sellers without
penalty on sixty or fewer days’ notice;

     

    (c)         any
Contracts or agreements burdening the Properties which could reasonably be
expected to obligate any Sellers to expend in excess of $100,000 in any calendar
year;

     

    (d)         all
insurance Contracts maintained by Seller and in force upon the execution date of
this Agreement;

     

    (e)         any
Contract to sell, lease (other than the Leases) or otherwise dispose of any of
Sellers’ interest in any of the Properties;

     

    (f)     
    any existing tax partnership or tax sharing
agreement;

     

    (g)         any
material operating agreement that is in effect as of the date hereof and to
which any of the Sellers interest in any of the Properties is
subject;

     

    (h)         any
existing Contract to which any Seller is a party providing for forced or
voluntary pooling, forced or voluntary unitization, a carry, a backing, earnout,
reversionary Working Interest in favor of third parties, or other contingent
payment or obligation;

    
      
         

      

      
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    (i)          any
Contract to which any Seller is a party for drilling or well workover services
or other well services that is in effect as of the date hereof or the Closing
Date;

     

    (j)          any
Contract providing for the use, processing and/or analysis of seismic or
geophysical data or similar Contract relating to the Properties that is in
effect as of the date hereof or the Closing Date;

     

    (k)         any
Contract to which any Seller is a party relating to indebtedness for borrowed
money, letter of credit or guarantee of the indebtedness of for borrowed money
of Persons that is in effect as of the date hereof or the Closing Date for which
any of the Assets have been pledged or mortgaged as collateral
therefor;

     

    (l)          any
lease (other than the Leases) under which any Seller is the lessor or lessee of
real or personal property, which lease (i) cannot be terminated by such
Seller without penalty with less than 180 days notice, and (ii) involves an
annual base rental in excess of $100,000;

     

    (m)        any
firm transportation Contract for the transportation of Hydrocarbons or disposal
of produced waters or other oilfield waste, which requires in accordance with
its terms, payments by such Seller in excess of $100,000 within the twelve month
period ending December 31, 2009, and any interruptible transportation Contract
that any Seller reasonably anticipates will, in accordance with its terms,
involve payments by such Seller in excess of $100,000 within the twelve month
period ending December 31, 2009 (collectively “Transportation
Contracts”); and

     

    (n)         any
joint exploration agreements between Sellers and any other person related to the
Assets containing a commitment to fund, loan or pay amounts in excess of
$100,000; ((a)-(n) collectively, the “Material
Contracts”).

     

    Sellers
have furnished to Purchasers true and correct copies of all of the Material
Contracts.

     

    Section
4.12       Wells;
Facilities.  Except
as set forth in Schedule 4.12,
as of the date of this Agreement, to each Seller’s Knowledge, the Wells
described on Exhibit A-1 are
the only wells for the production of Hydrocarbons currently located on the
Leases.  All of such Wells have been drilled, completed, and operated
within the boundaries of the Leases or within the limits otherwise permitted by
the applicable Contracts and all Applicable Laws.  The production of
Hydrocarbons from such Wells has not been in excess of the allowable production
established for each Well.  Except as set forth on Schedule 4.12, all Hydrocarbon wells
located on the Leases that have permanently ceased the production of
Hydrocarbons in paying quantities, as well as all plants, pipelines, personal
property, pits, equipment, materials, appurtenances, and facilities located on
or used in connection with the Properties and that any Seller has abandoned or
otherwise permanently ceased to use, have been plugged and/or abandoned, and all
related salvage, site clearance, and surface restoration operations have been
completed, in accordance with applicable Laws (including Environmental Laws) and
in accordance with the terms of the Leases, and all costs and expenses incurred
in connection therewith have been paid in full.  Except as otherwise
provided in Schedule 4.12,
none of the Wells have been plugged or abandoned.

    
      
         

      

      
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    Section
4.13       Marketing; Calls on
Production.  All
proceeds from the sale of Hydrocarbons attributable to the interests of Sellers
in the Assets have been and are being disbursed to Sellers under appropriate
division orders, transfer orders, or similar documents signed by or otherwise
binding on Sellers, and no portion of any such proceeds is being held in
suspense, subject to a claim for refund by the purchaser of production, used as
an offset or as collateral for other obligations (whether disputed or
undisputed), or otherwise not being paid to Sellers as it becomes due in the
ordinary course of business.  There are no calls on production,
options to purchase, or similar rights in effect with respect to any portion of
Sellers’ shares of the Hydrocarbons, and all Contracts for the sale of
Hydrocarbons are terminable without penalty on no more than thirty (30) days’
prior notice.  Sellers are currently receiving the prices provided for
under such sales Contracts with respect to the
Hydrocarbons.  

     

    Section
4.14       Imbalances.  Except
as shown in Schedule 4.14,
as of the date of execution of this Agreement, no Seller has a claim
constituting an Asset, or is subject to any obligation, with respect to any
Imbalance that relates to any of the Assets.  Except for the
Imbalances (if any) shown in Schedule 4.14,
no Seller is, on the date of execution of this Agreement, nor will be after the
Effective Time, obligated by virtue of any prepayment made under any sales
contract or other contract containing a “take-or-pay” clause, or under any
production payment, forward sale, balancing, deferred production, or similar
arrangement, to deliver Hydrocarbons produced from or allocable to any Asset at
some future time without receiving full payment therefor at or after the time of
delivery.  

     

    Section
4.15       AFEs.  Except
as shown on Schedule 4.15,
as of the date of execution of this Agreement, there are no unfunded AFE’s owing
by Sellers or any other working interest owners with respect to any of the
Assets.

     

    Section
4.16       Suspense
Account.  Set
forth on Schedule 4.16 is a
true and correct description, as of the date of execution of this Agreement, of
all amounts held by Sellers attributable to third-parties with respect to
proceeds from production attributable to the Wells (as used in Schedule 4.16,
the “Suspended
Revenues”).

     

    Section
4.17      Capital
Expenditures.  Except
as shown on Sellers’ budget for Fourth Quarter 2009 and First Quarter 2010
attached hereto as Exhibit A-8 or
as set forth on Schedule 4.17, Sellers
do not anticipate and have not budgeted for any capital expenditures from the
date of this Agreement until the end of the first quarter 2010, in excess of
$100,000 with respect to any Well, any Lease or with respect to any Gathering
System.

     

    Section
4.18       Equipment.  Set
forth on Exhibit A-4 is a
true and correct description of the Equipment.

    
      
         

      

      
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    ARTICLE
5

    REPRESENTATIONS
AND WARRANTIES OF NEWFIELD

     

    Newfield
represents and warrants to Sellers the following:

     

    Section
5.1         Existence and
Qualification.  Newfield
is a corporation duly organized and validly existing under the laws of the state
of Delaware; and Newfield is duly authorized to conduct its business and is in
good standing in each jurisdiction where such qualification is required, except
where the failure to so qualify would not, individually or in the aggregate,
have a Material Adverse Effect; and Newfield is duly authorized to do business
and is in good standing in each jurisdiction where the Assets to be transferred
to it hereunder are located.

     

    Section
5.2         Power.  Newfield
has the corporate power to enter into and perform this Agreement (and all
documents required to be executed and delivered by Newfield at Closing) and
consummate the transactions contemplated by this Agreement (and such
documents).

     

    Section
5.3         Authorization and
Enforceability.  The
execution, delivery and performance of this Agreement (and all documents
required to be executed and delivered by Newfield at Closing), and the
performance of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary corporate action on the part of
Newfield.  This Agreement has been duly executed and delivered by
Newfield (and all documents required hereunder to be executed and delivered by
Newfield at Closing will be duly executed and delivered by Newfield) and this
Agreement constitutes, and at the Closing such documents will constitute, the
valid and binding obligations of Newfield, enforceable in accordance with their
terms except as such enforceability may be limited by applicable bankruptcy or
other similar laws affecting the rights and remedies of creditors generally as
well as by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

     

    Section
5.4          No
Conflicts.  The
execution, delivery and performance of this Agreement by Newfield, and the
transactions contemplated by this Agreement will not (a) violate any provision
of Newfield’s Organizational Documents, (b) result in a material default
(with due notice or lapse of time or both) or the creation of any lien or
encumbrance or give rise to any right of termination, cancellation or
acceleration under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license or agreement to which Newfield is a party,
(c) violate any judgment, order, ruling, or regulation applicable to
Newfield as a party in interest, or (d) violate any Laws applicable to
Newfield or any of its assets, except any matters described in clauses (b), (c),
or (d) above which would not have a Material Adverse Effect on
Newfield.

     

    Section
5.5         Liability for Brokers'
Fees.  Sellers
shall not directly or indirectly have any responsibility, liability or expense,
as a result of undertakings or agreements of Newfield, for brokerage fees,
finder's fees, agent's commissions or other similar forms
of compensation in connection with this Agreement or any agreement or
transaction contemplated hereby.

     

    Section
5.6         Litigation.  There
are no actions, suits or proceedings pending, or to Newfield's Knowledge,
threatened in writing before any Governmental Body against Newfield which are
reasonably likely to impair materially Newfield’s ability to perform its
obligations under this Agreement or any document required to be executed and
delivered by Newfield at Closing.

    
      
         

      

      
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    Section
5.7          Financing.  Newfield
has sufficient cash, available lines of credit or other sources of immediately
available funds (in United States dollars) to enable it to pay the Closing
Payment to Sellers at the Closing. 

     

    Section
5.8         Independent
Investigation.  Except
for the representations and warranties expressly made by Sellers in Articles 3 and
4 of this
Agreement, or in any certificate furnished or to be furnished to Newfield
pursuant to this Agreement, Newfield acknowledges that there are no
representations or warranties, express or implied, as to the Assets or prospects
thereof, and that in making its decision to enter into this Agreement and to
consummate the transactions contemplated hereby, Newfield has relied solely upon
its own independent investigation, verification, analysis and
evaluation.

     

    Section
5.9         Consents, Approvals or
Waivers.  Newfield's
execution, delivery and performance of this Agreement (and any document required
to be executed and delivered by Newfield at Closing) is not and will not be
subject to any consent, approval, or waiver from any Governmental Body or other
third Person, except (i) consents and approvals of assignments by
Governmental Bodies that are customarily obtained after Closing and (ii) as
set forth on Schedule 5.9.

     

    ARTICLE
6

    REPRESENTATIONS
AND WARRANTIES OF ANADARKO

     

    Anadarko
represents and warrants to Sellers the following:

     

    Section
6.1         Existence and
Qualification.  Anadarko
is a limited partnership duly organized and validly existing under the laws of
the state of Delaware; and Anadarko is duly authorized to conduct its business
and is in good standing in each jurisdiction where such qualification is
required, except where the failure to so qualify would not, individually or in
the aggregate, have a Material Adverse Effect; and Anadarko is duly authorized
to do business and is in good standing in each jurisdiction where the Assets to
be transferred to it hereunder are located.

     

    Section
6.2         Power.  Anadarko
has the corporate power to enter into and perform this Agreement (and all
documents required to be executed and delivered by Anadarko at Closing) and
consummate the transactions contemplated by this Agreement (and such
documents).

     

    Section
6.3         Authorization and
Enforceability.  The
execution, delivery and performance of this Agreement (and all documents
required to be executed and delivered by Anadarko at Closing), and the
performance of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all necessary corporate action on the part of
Anadarko.  This Agreement has been duly executed and delivered by
Anadarko (and all documents required hereunder to be executed and delivered by
Anadarko at Closing will be duly executed and delivered by Anadarko) and this
Agreement constitutes, and at the Closing such documents will constitute, the
valid and binding obligations of Anadarko, enforceable in accordance with their
terms except as such enforceability may be limited by applicable bankruptcy or
other similar laws affecting the rights and remedies of creditors generally as
well as by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).

    
      
         

      

      
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    Section
6.4         No Conflicts.  The
execution, delivery and performance of this Agreement by Anadarko, and the
transactions contemplated by this Agreement will not (a) violate any
provision of Anadarko’s Organizational Documents, (b) result in a material
default (with due notice or lapse of time or both) or the creation of any lien
or encumbrance or give rise to any right of termination, cancellation or
acceleration under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license or agreement to which Anadarko is a party,
(c) violate any judgment, order, ruling, or regulation applicable to
Anadarko as a party in interest, or (d) violate any Laws applicable to
Anadarko or any of its assets, except any matters described in clauses (b), (c),
or (d) above which would not have a Material Adverse Effect on
Anadarko.

     

    Section
6.5         Liability for Brokers'
Fees.  Sellers
shall not directly or indirectly have any responsibility, liability or expense,
as a result of undertakings or agreements of Anadarko, for brokerage fees,
finder's fees, agent's commissions or other similar forms of compensation in
connection with this Agreement or any agreement or transaction contemplated
hereby.

     

    Section
6.6         Litigation.  There
are no actions, suits or proceedings pending, or to Anadarko’s Knowledge,
threatened in writing before any Governmental Body against Anadarko which are
reasonably likely to impair materially Anadarko’s ability to perform its
obligations under this Agreement or any document required to be executed and
delivered by Anadarko at Closing.

     

    Section
6.7         Financing.  Anadarko
has sufficient cash, available lines of credit or other sources of immediately
available funds (in United States dollars) to enable it to pay the Closing
Payment to Sellers at the Closing.

     

    Section
6.8         Independent
Investigation.  Except
for the representations and warranties expressly made by Sellers in Articles 3 and
4 of this
Agreement, or in any certificate furnished or to be furnished to Anadarko
pursuant to this Agreement, Anadarko acknowledges that there are no
representations or warranties, express or implied, as to the Assets or prospects
thereof, and that in making its decision to enter into this Agreement and to
consummate the transactions contemplated hereby, Anadarko has relied solely upon
its own independent investigation, verification, analysis and
evaluation.

     

    Section
6.9         Consents, Approvals or
Waivers.  Anadarko’s
execution, delivery and performance of this Agreement (and any document required
to be executed and delivered by Anadarko at Closing) is not and will not be
subject to any consent, approval, or
waiver from any Governmental Body or other third Person, except
(i) consents and approvals of assignments by Governmental Bodies that are
customarily obtained after Closing and (ii) as set forth on Schedule 6.9.

    
      
         

      

      
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    ARTICLE
7

    COVENANTS
OF THE PARTIES

     

    Section
7.1         Access.  Between
the date of execution of this Agreement and the Closing Date, each Seller will
give Purchasers and its representatives access to the Assets and access to and
the right to copy, at Purchasers’ expense, the Records in such Seller’s
possession, for the purpose of conducting an investigation of the Assets, but
only to the extent that Sellers may do so without violating any obligations to
any third party and to the extent that such Seller has authority to grant such
access without breaching any restriction binding on such Seller.  Such
access by Purchasers shall be limited to such Seller’s normal business hours,
and Purchasers’ investigation shall be conducted in a manner that minimizes
interference with the operation of the Assets.  All information
obtained by Purchasers and their representatives under this Section 7.1
shall be subject to the terms of those certain respective confidentiality
agreements between TXCO Resources Inc. and each Purchaser, as may be amended
from time to time (the “Confidentiality
Agreements”).

     

    Section
7.2         Government
Reviews.  Sellers
and Purchasers shall in a timely manner (a) make all required filings, if
any, with and prepare applications to and conduct negotiations with, each
governmental agency as to which such filings, applications or negotiations are
necessary or appropriate in the consummation of the transactions contemplated
hereby, and (b) provide such information as each may reasonably request to
make such filings, prepare such applications and conduct such
negotiations.  Each Party shall cooperate with and use all reasonable
efforts to assist the other with respect to such filings, applications and
negotiations.

     

    Section
7.3         Notification of
Breaches.  Until
the Closing:

     

    (a)         Purchasers
shall notify Sellers promptly after Purchasers obtain actual Knowledge that any
representation or warranty of Sellers contained in this Agreement is untrue in
any material respect or will be untrue in any material respect as of the Closing
Date or that any covenant or agreement to be performed or observed by Sellers
prior to or on the Closing Date has not been so performed or observed in any
material respect.

     

    (b)         Sellers
shall notify Purchasers promptly after Sellers obtain actual Knowledge that any
representation or warranty of either Purchaser contained in this Agreement is
untrue in any material respect or will be untrue in any material respect as of
the Closing Date or that any covenant or agreement to be performed or observed
by either Purchaser prior to or on the Closing Date has not been so performed or
observed in a material respect.

     

    If any of
Purchasers’ or Sellers’ representations or warranties is untrue or shall become
untrue in any material respect between the date of execution of this Agreement
and the Closing Date, or if any of Purchasers’ or Sellers’ covenants or
agreements to be performed or observed prior to or on the Closing Date shall not
have been so performed or observed in any material respect, but if such breach
of representation, warranty, covenant or agreement shall (if curable) be cured
by the Closing (or, if the Closing does not occur, by the date set forth in
Section 9.1),
then such breach shall be considered not to have occurred for all purposes of
this Agreement.

    
      
         

      

      
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    Section
7.4         Public
Announcements.  No
Party shall make any press release or other public announcement regarding the
existence of this Agreement, the contents hereof or the transactions
contemplated hereby without the prior written consent of the other; provided, however, the
foregoing shall not restrict disclosures by either Purchaser or any Seller
(i) that are required by applicable securities or other laws or regulations
or the applicable rules of any stock exchange having jurisdiction over the
disclosing Party or its Affiliates, or (ii) to Governmental Bodies and
third Persons holding preferential rights to purchase or rights of consent that
may be applicable to the transactions contemplated by this Agreement, as
reasonably necessary to obtain waivers of such right or such consents. The
Parties acknowledge and understand that this Agreement will be filed with the
Bankruptcy Court and will be made available to third parties.  The
Parties agree that such disclosure shall not be deemed to violate any
confidentiality obligations owing to a Party, whether pursuant to this
Agreement, the Confidentiality Agreements, or
otherwise.  Notwithstanding anything to the contrary in the
Confidentiality Agreements, to the extent of any conflict between the provisions
of the Confidentiality Agreements and the terms hereof, the terms hereof shall
prevail.  

     

    Section
7.5         Operation of
Business.

     

    (a)         Until
the Closing, each Seller (i) will continue to conduct its business related
to the Assets in the ordinary course consistent with its past practices,
including incurring expenditures associated with lease acquisitions, renewals
and extensions, landmen, independent contractors, vendors, title opinions,
curative material, road, drillsite and pipeline construction, acquisition of
road and pipeline right-of-ways, drilling, and completing wells, construction of
gathering, compression and treating facilities, and marketing costs,
(ii) will furnish Purchasers with copies of all third-party and any
Seller-generated drilling, completion and workover AFEs in excess of $100,000
within five (5) Business Days of receipt of third-party AFEs or the approval of
any Seller generated AFE, (iii) will furnish Purchasers, on the 15th day of
each month, with a schedule setting forth the actual expenditures incurred
during the previous calendar month and an estimate of the expenditures that
Sellers believes that it will incur during the following reporting period,
(iv) will not after the Effective Time, without prior written approval of
Purchasers (which approval will not be unreasonably withheld), make capital or
workover expenditures with respect to the Assets in excess of One Hundred
Thousand Dollars ($100,000) (net to the respective Seller’s interest), except
for those capital expenditures set forth on Exhibit A-8 and
Schedule 4.17 or
when required by an emergency when there shall have been insufficient time to
obtain advance consent (provider, that such Seller will promptly notify
Purchasers of any such emergency expenditures), (v) will not enter into any
Material Contract relating to the Assets except for agreements relating to sales
of inventory and purchases of inventory from suppliers in the ordinary course of
business and consistent with past practices, (vi) will maintain insurance
coverage on the Assets presently furnished by nonaffiliated third parties in the
amounts and of the types presently in force, (vii) subject to the terms and
conditions imposed by its lenders and other contractual obligations, will use
commercially reasonable efforts to maintain in full force and effect all Leases
and Lands that are presently producing in paying quantities, (viii) will
maintain all material governmental permits and approvals affecting the Assets,
(ix) will not transfer, sell, hypothecate, encumber or otherwise dispose of
any material Properties or Equipment except for sales and dispositions of
Equipment made in the ordinary course of business consistent with past practices
absent Bankruptcy Court approval on notice and with a reasonable opportunity to
object by Purchasers, or (x) take or omit to take any action in
contravention of any of the foregoing actions.  Purchasers’ approval
of any action restricted by this Section 7.5
shall be considered granted within ten (10) days (unless a shorter time is
reasonably required by the circumstances and such shorter time is properly
specified in the notice provided to Sellers by a co-working interest owner) of
the Sellers’ notice to Purchasers requesting such consent unless Purchasers
notify Sellers to the contrary during that period.  In the event of an
emergency, Sellers may take such action as a prudent operator would take and
shall notify Purchasers of such action promptly thereafter.

    
      
         

      

      
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    (b)         Prior
to the Closing, Sellers will give Purchasers notice of all AFEs proposed either
by Sellers or any third party (each a “Proposed
AFE”).  If Sellers elect not to pay or otherwise timely satisfy
a Proposed AFE, Purchasers shall have the right (but not the obligation) to fund
the Proposed AFE.  In such event, the parties agree to seek an
emergency hearing with the Bankruptcy Court authorizing Purchasers to advance
the amount of the Proposed AFE as an administrative expense (an “AFE
Advance”).  If the Closing does not occur and this Agreement is
terminated, the Purchaser making an AFE Advance shall be reimbursed the amount
of such AFE Advance on the effective date of a plan of reorganization for
Sellers in the Bankruptcy Court.  If the Closing occurs,
(x) there will be no adjustment to the Purchase Price by reason of either
(i) any AFE Advance(s) or any amounts funded by such AFE Advance in respect
of such Proposed AFE(s) or (ii) any other damages or amounts in respect of
any proposed Proposed AFE that Sellers shall have elected not to pay or
otherwise satisfy and that Purchasers shall not have funded in accordance with
this paragraph (b), (y) Sellers shall have no obligations to repay to
Purchasers, or otherwise in respect of, any AFE Advance made in respect of a
Proposed AFE due at any time after the Effective Time, and (z) if any AFE
Advance has been made in respect of a Proposed AFE due at any time prior to the
Effective Time, the Purchase Price shall be reduced by the lesser of
(i) the amount of such AFE Advance or (ii) the Allocated Value of any
undeveloped, non-producing acreage that would have been lost or forfeited if the
subject Proposed AFE was not timely paid.

     

    (c)         Pursuant
to Agreed Order Granting Motion to Approve Lease Participation Proposal with St.
Mary Land & Exploration Company and Agreement with Newfield Exploration
Company for Purchase of Leasehold Interests Acquired Pursuant to Participation
Under Anadarko JEA, Sellers have the right to make certain elections with
respect to the St. Mary Proposal (as defined in such order).  Sellers
hereby beneficially assign to Purchasers Sellers’ rights under the order to make
such elections and to receive any reimbursements for the Election Amount (as
defined in the order).  Sellers shall promptly communicate any notices
required under the order to be delivered to St. Mary as may be directed by
Purchasers.

     

    Section
7.6         Indemnity Regarding
Access.  Purchasers agree to indemnify, defend and hold
harmless each Seller, its Affiliates, the other owners of interests in the
Properties, and all such Persons'’ directors, officers,
employees, agents and representatives from and against any and all claims,
liabilities, losses, costs and expenses (including court costs and reasonable
attorneys' fees), including claims, liabilities, losses, costs and expenses
attributable to personal injury, death, or property damage, arising out of or
relating to  access to the Assets and to the Records and other related
information prior to the Closing by Purchasers,
their Affiliates, or  their
directors, officers, employees, agents or representatives, even if caused in
whole or in part by the negligence (whether sole, joint or concurrent), strict
liability or other legal fault of any indemnified Person.

    
      
         

      

      
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    Section
7.7         Assumption of
Obligations.  By
the consummation of the transactions contemplated by this Agreement at Closing,
and without limiting the indemnification obligations of any Party under Article 11, Purchasers assume and
agree to
pay, perform and discharge all obligations of Sellers to the extent accruing
after the Effective Time under the Leases and Lands, Contracts and applicable
Law with respect to the Assets (the “Assumed
Obligations”), including (i) obligations to furnish makeup Hydrocarbons
according to the terms of applicable sales, gathering, processing, or
Transportation Contracts or in response to Hydrocarbon production imbalances,
(ii) obligations to pay revenues, royalties or other amounts payable to third
Persons with respect to the Properties, and (iii) obligations to plug wells,
dismantle facilities, close pits and restore the surface around such wells,
facilities and pits.  Other than the Assumed Obligations, Sellers
shall remain responsible, liable and obligated to pay, perform and discharge all
other obligations with respect to the Assets and the Excluded Assets (the “Retained
Obligations”), irrespective of whether such Retained Obligations have
been disclosed to Purchasers at any time prior to the Closing.

     

    Section
7.8         Solicitation
Provisions.  Following
the date hereof, Sellers agree that neither they nor any of their wholly-owned
Subsidiaries shall, and that they shall direct any of their directors, officers,
employees, investment bankers, financial advisors, attorneys, accountants or
other advisors, agents or representatives (collectively “Representatives”)
and their wholly-owned Subsidiaries’ Representatives not to, directly or
indirectly, solicit any Acquisition Proposal or engage or discuss with any Person who has made an unsolicited Acquisition Proposal (including providing access to the
Seller Data Room and access to other
non-public information for due diligence purposes to any Person).

     

    Section
7.9         Tax
Matters.  Subject
to the provisions of Section 12.5,
Sellers shall be responsible for all Taxes (other than ad valorem, property,
severance, production and similar Taxes based upon or measured by the ownership
or operation of the Assets or the production of Hydrocarbons therefrom, which
are addressed in Section 1.4)
attributable to any period of time at or prior to the Effective Time, including
income Taxes arising as a result of the gain recognized on the transfer of the
Assets, and Purchasers shall be responsible for all such Taxes attributable to
any period of time after the Effective Time.  Regardless of which
Party is responsible, Sellers shall handle payment to the appropriate
Governmental Body of all Taxes with respect to the Assets which are required to
be paid prior to Closing (and shall file all returns with respect to such
Taxes).

     

    Section
7.10        [Intentionally
Omitted].

     

    Section
7.11       Further
Assurances.  At
and after Closing, Sellers and Purchasers agree to take such further actions and
to execute, acknowledge and deliver all such further documents as are reasonably
requested by the other Party for carrying out the purposes of this Agreement or
of any document delivered pursuant to this Agreement.

    
      
         

      

      
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    Section
7.12      Recording.  As
soon as practicable after Closing, Purchasers shall record the Conveyances and
other assignments delivered at Closing in the appropriate counties as well as
with the appropriate governmental agencies and provide Sellers with copies of
all recorded or approved instruments. 

     

    Section
7.13       Transition Services
Agreements.  Prior
to the Closing, at Purchasers’ option, the Parties shall use their reasonable
efforts to negotiate and enter into Transition Services Agreements on terms and
conditions mutually acceptable to the Parties providing for Sellers’ provision
to Purchasers of certain services in connection with the operations, land and
accounting related to the Properties, including, among other terms,
reimbursement to Sellers of all direct and indirect costs associated with
providing such services, including all general and administrative
overhead.

     

    Section
7.14       Schedule
Updates.  Sellers
or Purchasers may, from time to time prior to the Closing, by written notice to
the other Parties, supplement or amend any Schedule delivered by Sellers or
Purchasers hereunder.  For purposes of determining whether Purchaser’s
conditions set forth in Section 8.2(a)
have been fulfilled, Sellers’ Schedules shall be deemed to include only that
information contained therein on the date of this Agreement and shall be deemed
to exclude all information contained in any supplement or amendment thereto, but
if the Closing shall occur, then any matters disclosed to Purchasers pursuant to
any such supplement or amendment after the date of this Agreement and prior to
the Closing shall be deemed incorporated into such Schedules for purposes of
Article 11.

     

    Section
7.15       Peregrine
Claims.  Sellers
are currently considering the pursuit of certain claims and causes of action
relating to certain potential breaches of one or more confidentiality agreements
between one or more Sellers and one or more third parties, such potential claims
and causes of action relating to certain oil and gas leases and/or other Assets
located in Maverick County, Texas, and Dimmit County, Texas (the “Peregrine
Claims”).  After the Closing, Newfield shall promptly pay as
incurred all costs incurred by Sellers in pursuing the Peregrine Claims
(including costs and expenses of legal counsel); provided, however, that either
Sellers, on the one hand, or Newfield, on the other hand, may upon at least 30
days’ advance written notice to the other terminate such obligations (a “Termination
Notice”), whereupon Newfield shall pay all such remaining unpaid costs
and expenses incurred in prosecution of the Peregrine Claims and, if such
Termination Notice was given by Sellers, Sellers shall promptly assign, without
recourse, their rights under and in respect of the Peregrine Claims to
Newfield.  Any recoveries by Sellers in respect of the Peregrine
Claims shall be for the account of Sellers.  If in connection with the
Peregrine Claims, Sellers acquire any oil and gas leases and/or other real
property interests in Maverick County, Texas, or Dimmit County, Texas, from the
counterparties in such claims, then Seller shall give Newfield written notice
thereof, whereupon Newfield shall have an option, exercisable by written notice
to Sellers for a period of sixty (60) days after Sellers’ notice to Newfield, to
acquire all of Sellers’ right, title and interest in and to such oil and gas
leases and/or other real property interests in consideration of Newfield’s
payment to Sellers of cash in an amount equal to one hundred ten percent (110%)
of the aggregate consideration, if any, paid by Sellers for same together with
any remaining unpaid costs and expenses incurred by Seller in pursuing the
Peregrine Claims; provided, however, that if Newfield shall give a Termination
Notice prior to the date on which Sellers acquire such oil and gas leases and/or
other real property interests then such option shall terminate upon the giving
of such Termination Notice.

    
      
         

      

      
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    Section
7.16       Sale
Order.  Sellers
shall use their reasonable best efforts to secure approval of the Sale Order in
a form reasonably acceptable to Purchasers on or prior to January 31,
2010.

     

    ARTICLE
8

    CONDITIONS
TO CLOSING

     

    Section
8.1         Conditions of Sellers to
Closing.  The
obligations of Sellers to consummate the transactions contemplated by this
Agreement are subject, at the option of Sellers, to the satisfaction on or prior
to Closing of each of the following conditions:

     

    (a)         Representations.  The
representations and warranties of Purchasers set forth in Articles 5 and
6 shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date, except for
breaches, if any, by one Purchaser as would not prevent the other Purchaser from
consummating the transactions contemplated hereunder;

     

    (b)         Performance.  Purchasers
shall have performed and observed, in all material respects, all covenants and
agreements to be performed or observed by it under this Agreement prior to or on
the Closing Date, except for breaches, if any, by one Purchaser as would not
prevent the other Purchaser from consummating the transactions contemplated
hereunder;

     

    (c)         Bankruptcy Court
Approval. The Bankruptcy Court shall have issued a Final Order confirming
Sellers’ Plan of Reorganization in a form reasonably acceptable to the
Sellers.

     

    (d)         Pending
Litigation.  On the Closing Date, no suit, action or other
proceeding by a third-party (including any Governmental Body) seeking to
restrain, enjoin or otherwise prohibit the consummation of the transactions
contemplated by this Agreement, or seeking substantial damages in connection
therewith, shall be pending before any Governmental Body;

     

    (e)         Deliveries.  Purchasers
shall have delivered to Sellers duly executed counterparts of the Conveyances
and the other documents and certificates to be delivered by Purchasers under
Section 9.3;

     

    (f)          Casualty and Condemnation
Losses.  The aggregate sum of all casualty and condemnation
losses under Section
3.2 shall not be more than ten percent (10%) of the unadjusted Purchase
Price;

     

    (g)         Payment.  Purchasers
shall have paid the Closing Payment; and

     

    (h)         Plan.   All
conditions precedent to the occurrence of the effectiveness of the Plan shall
have been satisfied or waived in writing in accordance with the
Plan.

    
      
         

      

      
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    Section
8.2         Conditions of Purchasers to Closing.  The
obligations of Purchasers to consummate the transactions contemplated by this
Agreement are subject, at the option of Purchasers, to the satisfaction on or
prior to Closing of each of the following conditions:

     

    (a)          Representations.  The
representations and warranties of Sellers set forth in Article 4 shall be
true and correct as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date (other than representations and
warranties that refer to a specified date which need only be true and correct on
and as of such specified date), except for such breaches, if any, as would not
have a Material Adverse Effect;

     

    (b)         Performance.  Sellers
shall have performed and observed, in all material respects, all covenants and
agreements to be performed or observed by them under this Agreement prior to or
on the Closing Date;

     

    (c)         Bankruptcy Court
Approval. The
Bankruptcy Court shall have issued a Final Order confirming Sellers’ Plan of
Reorganization in a form reasonably acceptable to Purchaser;

     

    (d)         Pending
Litigation.  On the Closing Date, no suit, action or other
proceeding by a third-party (including any Governmental Body) seeking to
restrain, enjoin or otherwise prohibit the consummation of the transactions
contemplated by this Agreement, or seeking substantial damages in connection
therewith, shall be pending before any Governmental Body;

     

    (e)         Deliveries.  Sellers
shall have delivered to Purchasers duly executed
counterparts of the Conveyances and the other documents and certificates to be
delivered by Sellers under Section 9.2;

     

    (f)          Casualty and Condemnation
Losses.  The aggregate sum of all casualty and condemnation
losses under Section
3.2 shall not be more than ten percent (10%) of the unadjusted Purchase
Price;

     

    (g)         Plan.   
All conditions precedent to the occurrence of the effectiveness of the Plan
shall have been satisfied or waived in writing in accordance with the Plan;
and

     

    (h)         Assignment of Contractual
Prospects.  Purchasers shall receive an assignment of each of
the Material Contracts covering the Contractual Prospects in form and substance
reasonably satisfactory to Purchasers.

     

    ARTICLE
9

    CLOSING

     

    Section
9.1          Time and Place of
Closing.

     

    (a)          Consummation
of the purchase and sale transaction as contemplated by this Agreement (the
“Closing”),
shall be governed by the Sale Order and any other applicable orders entered by
the Bankruptcy Court.

    
      
         

      

      
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    (b)           Unless
otherwise agreed to in writing by Purchasers and Sellers, Closing shall take
place at the offices of Sellers, located at 777 Sonterra Blvd., Suite 350, San
Antonio, Texas 78258, at 10:00 a.m., local time, on January 29, 2010, or if
all conditions in Article 8 to be
satisfied prior to Closing have not yet been satisfied or waived, as soon
thereafter as such conditions have been satisfied or waived, subject to the
rights of the Parties under Article 10.

     

    (c)           The
date on which the Closing occurs is herein referred to as the “Closing
Date.”

     

    Section
9.2          Obligations of Sellers at
Closing.  At
the Closing, upon the terms and subject to the conditions of this Agreement, and
subject to the simultaneous performance by Purchasers of their obligations pursuant to Section 9.3, Sellers
shall deliver or cause to be delivered to Purchasers, among other things, the
following:

     

    (a)           Conveyances
to the Purchaser designated by Purchasers in sufficient duplicate originals to
allow recording in all appropriate jurisdictions and offices, duly executed and
acknowledged by Sellers;

     

    (b)           assignments to the Purchaser
designated by Purchasers, on appropriate forms, of state and of federal
leases comprising portions of the Assets, where applicable, duly executed and
acknowledged by Sellers;

     

    (c)           letters-in-lieu
of transfer orders to the Purchaser designated by Purchasers covering the Assets;

     

    (d)           a
certificate duly executed by an authorized officer of each Seller, dated as of
Closing, certifying on behalf of such Seller that the conditions set forth in
Sections 8.2(a)
and 8.2(b) have
been fulfilled;

     

    (e)           a
certificate duly executed by the secretary or any assistant secretary of each Seller, dated as of the
Closing, (i) attaching and certifying on behalf of such Seller complete and
correct copies of (A) the Organizational Documents of such Seller, each as in
effect as of the Closing, (B) the resolutions of the Board of Directors of such
Seller authorizing the execution, delivery, and performance by such Seller of
this Agreement and the transactions contemplated hereby, and (C) any required
approval by the stockholders of such Seller of this Agreement and the
transactions contemplated hereby and (ii) certifying on behalf of such Seller
the incumbency of each officer of Sellers executing this Agreement or any
document delivered in connection with the Closing;

     

    (f)           an
executed statement described in Treasury
Regulation § 1.1445-2(b)(2) certifying that no Seller is a foreign person within
the meaning of the Code; and

     

    (g)           executed
change-of-operator forms in favor of the
Purchaser designated by
Purchasers for each Lease and
Land, Unit or Well operated by any Seller
that each such Purchaser intends to operate
after Closing, which Sellers shall file; provided, however, that if the operator
of a Lease and Land, Unit or Well must be elected or designated after Closing,
the applicable instruments will be not be filed until after the election or
designation, as applicable, and the Purchasers
provide Sellers with notice of such election or
designation.

    
      
         

      

      
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    Section
9.3          Obligations of Purchasers at
Closing.  At
the Closing, upon the terms and subject to the conditions of this Agreement, and
subject to the simultaneous performance by each Seller of its obligations
pursuant to Section 9.2,
Purchasers shall deliver or cause to be delivered to Sellers, among other
things, the following:

     

    (a)           a
wire transfer of the Closing Payment in same-day funds;

     

    (b)           Conveyances
of the Assets duly executed party by the Purchaser acquiring the respective
Assets, as designated by Purchasers;

     

    (c)           letters-in-lieu
of transfer orders covering the Assets, duly executed by the Purchaser acquiring
the respective Assets, as designated by Purchasers, and such change of operator
forms as may be required to reflect the change of operatorship with respect to
the Properties duly executed by such Party;

     

    (d)           a
certificate by an authorized corporate officer of each Purchaser, dated as of
Closing, certifying on behalf of such Purchaser that  the conditions
set forth in Sections
8.1(a) and 8.1(b) have been
fulfilled; and

     

    (e)           a
certificate duly executed by the secretary or any assistant secretary of each
Purchaser, dated as of the Closing, (i) attaching, and certifying on behalf of
such Purchaser as complete and correct, copies of such Purchaser’s
Organizational Documents, each as in effect as of the Closing, and (ii)
certifying on behalf of such Purchaser: (A) that the Board of Directors of such
Purchaser has authorized the execution, delivery and performance by such
Purchaser of this Agreement and the transactions contemplated hereby, (B) that
no approvals are required by the stockholders or partners, as applicable, of
such Purchaser with
respect to this Agreement and the transactions contemplated hereby, and (C) the
incumbency of each officer of such Purchaser executing this Agreement or any
document delivered in connection with the Closing;

     

    provided
that, notwithstanding anything to the contrary in this Agreement, if a Purchaser
is not participating in the transactions contemplated by this Agreement, the
foregoing deliveries will only be made by the participating
Purchaser.  If Newfield does not participate in the transactions
contemplated in this Agreement and Anadarko is the sole Purchaser at Closing,
references to Newfield in Section 7.15 shall
refer to Anadarko.

     

    Section
9.4          Closing Payment and
Post-Closing Purchase Price Adjustments.

     

    (a)           Not
later than five (5) Business Days prior to the Closing Date, Sellers shall
prepare and deliver to Purchasers, using and based upon the best information
available to Sellers, a preliminary settlement statement estimating the adjusted
Purchase Price after giving effect to all Purchase Price adjustments set forth
in Section 2.3.  The
estimate delivered in accordance with this Section 9.4(a)
shall constitute the dollar amount to be paid by Purchasers to Sellers at the
Closing (the “Closing
Payment”).

    
      
         

      

      
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    (b)           As
soon as reasonably practicable after the Closing but not later than the 90th day
following the Closing Date, Sellers shall prepare and deliver to Purchasers a
statement setting forth the final calculation of the adjusted Purchase Price and
showing the calculation of each adjustment, based, to the extent possible on
actual credits, charges, receipts and other items before and after the Effective
Time.  Sellers shall at Purchasers’ request supply reasonable
documentation available to support any credit, charge, receipt or other
item.  As soon as reasonably practicable but not later than the 30th
day following receipt of Sellers’ statement hereunder, Purchasers shall deliver
to Sellers a written report containing any changes that Purchasers propose be
made to such Statement.  The Parties shall undertake to agree on the
final statement of the adjusted Purchase Price no later than 120 days after the
Closing Date.  In the event that the Parties cannot reach agreement
within such period of time, either Party may refer the remaining matters in
dispute to the Bankruptcy Court.  Upon final determination by the
Bankruptcy Court (x) Purchasers shall pay to Sellers the amount by which the
adjusted Purchase Price exceeds the Closing Payment or (y) Sellers shall
pay to Purchasers the amount by which the Closing Payment exceeds the adjusted
Purchase Price, as applicable. Any post-closing payment pursuant to this Section 9.4
shall bear interest from the Effective Time to the date of payment at the Agreed
Interest Rate.

     

    All
payments made or to be made under this Agreement to Sellers as may be specified
by Sellers in writing; provided, however, that
$1,100,000 of the Closing Payment shall be deposited with the Escrow Agent to be
held pursuant to the Escrow Agreement until both Royalty Appeals are either
dismissed or resolved through the entry of a Final Order, after which time such
$1,100,000 amount shall be paid over by the Escrow Agent to Sellers with
interest.  “Royalty Appeals” shall mean the appeals styled Weatherford International v. TXCO
Resources Inc., Case No. 5:09-cv-00569-FB, which is currently pending in
the United States District Court for the Western District of Texas and the
appeal styled, Halliburton
Energy Services, Inc. et al v. TXCO Resources Inc. et al, Case No.
5:09-cv-00580-FB, which is currently pending in the United States District Court
for the Western District of Texas, both of which involve the Bankruptcy Courts
entry of the Order on Motion for Authority to Pay or Honor Prepetition Royalty
Obligations and Other Obligations under Oil & Gas Leases, whereby the
Bankruptcy Court approved the Sellers’ request to pay all prepetition royalty
obligations in the ordinary course of their business. All payments made or to be
made hereunder to Purchasers shall be by electronic transfer of immediately
available funds to a party and bank and account specified by Purchasers in
writing to Sellers.

     

    Section
9.5          Further
Assurances.  At
the Closing and thereafter as may be necessary, each Seller and Purchasers shall
execute and deliver such other instruments and documents and take such other
actions as may be reasonably necessary to evidence and effectuate the
transactions contemplated by this Agreement.

     

    ARTICLE
10

    TERMINATION
AND AMENDMENT

     

    Section
10.1        Termination.  This
Agreement may be terminated at any time prior to Closing by:

    
      
         

      

      
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    (a)          the
mutual prior written consent of the Sellers and Purchasers;

     

    (b)          Sellers
or Purchasers pursuant to Section
3.2;

     

    (c)          either Purchaser if the
Bankruptcy Court does not enter the Sale Order in form reasonably acceptable to
the parties on or before January 31, 2010;

     

    (d)          Purchasers,
if the Sale Order is not a Final Order by February 15, 2010; or

     

    (e)          either
Purchaser or any Seller, if Closing has not occurred on or before February 28, 2010,

     

    provided, however, that no
Party shall be entitled to terminate this Agreement under this Section 10.1 if
the Closing has failed to occur because such Party negligently or willfully
failed to perform or observe in any material respect its covenants and
agreements hereunder.

     

    Section
10.2        Effect of
Termination.  If
this Agreement is terminated pursuant to Section 10.1,
this Agreement shall become void and of no further force or effect (except for
the provisions of Sections 7.4,
7.6, 12.6, 12.9, 12.17 and 12.18 and of the
Confidentiality Agreements which shall continue in full force and effect) and
Sellers shall be free immediately to enjoy all rights of ownership of the Assets
and to sell, transfer, encumber or otherwise dispose of the Assets to any party
without any restriction under this Agreement.  Notwithstanding
anything to the contrary in this Agreement, the termination of this Agreement
under Section 10.1(e)
shall not relieve any Party from liability for any willful or negligent failure
to perform or observe in any material respect any of its agreements or covenants
contained herein which are to be performed or observed at or prior to Closing.
In the event this Agreement terminates under Section 10.1(e)
and any Party has willfully or negligently failed to perform or observe in any
material respect any of its agreements or covenants contained herein which are
to be performed at or prior to Closing, then the other Parties shall be entitled
to all remedies available at law or in equity and shall be entitled to recover
court costs and attorneys' fees in addition to any other relief to which such
Parties maybe entitled; provided, however, if Purchasers fail to close and such
failure constitutes a breach of this Agreement, Sellers’ sole remedy and
recourse shall be the retention of the Deposits as liquidated damages, and in
this regard, the Parties agree that in such event Sellers’ damages are uncertain
and speculative and the portion of the Deposits retained pursuant to Section 2.2(b) hereof
is calculated by reference to Sellers’ anticipated damages and not established
as a penalty.

     

    ARTICLE
11

    INDEMNIFICATION;
LIMITATIONS

     

    Section
11.1        Indemnification.

     

    (a)          From
and after Closing,

     

    
      	
               
      

            	
              (i)

            	
              Anadarko
      shall indemnify, defend and hold harmless Sellers from and against all
      Damages incurred or suffered by
Seller:

            

    

    
      
         

      

      
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              1)

            	
              caused
      by or arising out of or resulting from the ownership, use or operation of
      the Anadarko Assets at any time to the extent such Damages are related
      solely to Environmental Conditions of the Anadarko Assets designated on
      Sellers’ Identified Environmental Conditions, and as to any other Damages
      at any time after the Effective Time, including the Assumed
      Obligations,

            

    

     

    
      	
               
      

            	
              2)

            	
              caused
      by or arising out of or resulting from Anadarko’s breach of any of its
      covenants or agreements contained in Article 7,
      or

            

    

     

    
      	
               
      

            	
              3)

            	
              caused
      by or arising out of or resulting from any breach of any representation or
      warranty made by Anadarko contained in Article 6 of
      this Agreement or in the certificates delivered by Anadarko at Closing
      pursuant to Section 9.3(d),

            

    

     

    even if such Damages are caused in
whole or in part by the negligence (whether sole, joint or concurrent but not
gross negligence or willful misconduct), strict liability or other legal fault
of any Indemnified Person, but excepting in each case Damages against
which Sellers would be required to indemnify Purchasers under Section 11.1(b)
at the time the claim notice is presented by Purchasers.

     

    
      	
               
      

            	
              (ii)

            	
              Newfield
      shall indemnify, defend and hold harmless Sellers from and against all
      Damages incurred or suffered by
Seller:

            

    

     

    
      	
               
      

            	
              1)

            	
              caused
      by or arising out of or resulting from the ownership, use or operation of
      the Newfield Assets at any time to the extent such Damages are related
      solely to Environmental Conditions of the Newfield Assets designated on
      Sellers’ Identified Environmental Conditions, and as to any other Damages
      at any time after the Effective Time, including the Assumed
      Obligations,

            

    

     

    
      	
               
      

            	
              2)

            	
              caused
      by or arising out of or resulting from Newfield’s breach of any of its
      covenants or agreements contained in Article 7,
      or

            

    

     

    
      	
               
      

            	
              3)

            	
              caused
      by or arising out of or resulting from any breach of any representation or
      warranty made by Newfield contained in Article 5 of
      this Agreement or in the certificates delivered by Newfield at Closing
      pursuant to Section 9.3(d),

            

    

     

    even if such Damages are caused in
whole or in part by the negligence (whether sole, joint or concurrent but not
gross negligence or willful misconduct), strict liability or other legal fault
of any Indemnified Person, but excepting in each case Damages against
which Sellers would be required to indemnify Purchasers under Section 11.1(b)
at the time the claim notice is presented by Purchasers.

    
      
         

      

      
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    (b)          For
a period of one hundred eighty (180) days after Closing, Sellers shall
indemnify, defend and hold harmless Purchasers against and from all Damages
incurred or suffered by Purchasers:

     

    
      	
               
      

            	
              (i)

            	
              caused
      by or arising out of or resulting from the ownership, use or operation of
      the Assets before the Effective Time, including the Retained
      Obligations,

            

    

     

    
      	
               
      

            	
              (ii)

            	
              caused
      by or arising out of or resulting from Sellers’ breach of any of Sellers’
      covenants or agreements contained in Article 7,
      or

            

    

     

    
      	
               
      

            	
              (iii)

            	
              caused
      by or arising out of or resulting from any breach of any representation or
      warranty made by Sellers contained in Article 4
      of this Agreement (other than Sellers’ representations under Sections 4.7
      and 4.12
      with respect to Environmental Condition of the Assets), or in the
      certificate delivered by Sellers at Closing pursuant to Section 9.2(d);
      provided,
      however,
      that Purchasers shall be deemed to have waived in full any breach of any
      Seller’s representations and warranties contained in Article 4 of
      which any Purchasers have Knowledge at the date of this Agreement or, if
      the Closing occurs, at the Closing and Purchasers hereby waive any right
      to indemnification under this Article 11
      with respect to any such breaches;

            

    

     

    even
if such Damages are caused in whole or in part by the negligence (whether sole,
joint or concurrent but not gross negligence or willful misconduct), strict
liability or other legal fault of any Indemnified Person.

     

    (c)          Notwithstanding
anything to the contrary contained in this Agreement, this Section 11.1
contains the Parties’ exclusive remedy against each other after the Closing with
respect to breaches of the representations, warranties, covenants and agreements
of the Parties contained in this Agreement and the certificate delivered by each
Party at Closing pursuant to Sections 9.2(d)
or 9.3(d), as
applicable.  Except for the remedies contained in this Section 11.1 and
Section 3.2,
effective as of the Closing, Sellers and Purchasers each release, remise and
forever discharge the other and its Affiliates and all such Parties’
stockholders, officers, directors, employees, agents, advisors and
representatives from any and all suits, legal or administrative proceedings,
claims, demands, damages, losses, costs, liabilities, interest, or causes of
action whatsoever, in law or in equity, known or unknown, which such Parties
might now or subsequently may have, based on, relating to or arising out of this
Agreement, Sellers’ ownership, use or operation of the Assets, or the condition,
quality, status or nature of the Assets, including, without limitation, rights
to contribution under the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or any other Environmental Law, breaches
of statutory or implied warranties, nuisance or other tort actions, rights to
punitive damages and common law rights of contribution, rights under agreements
between Sellers and any Persons who are Affiliates of Sellers, and rights under
insurance maintained by Sellers or any Person who is an Affiliate of Sellers,
even if caused in whole or in
part by the negligence (whether sole, joint or concurrent), strict liability or
other legal fault of any released Person, excluding, however, any
existing contractual rights between (i) Purchasers or any of Purchasers’
Affiliates and (ii) Sellers or any of Sellers’ Affiliates under contracts
between them relating to the Assets.

    
      
         

      

      
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    (d)          Claims
for Property Costs shall be exclusively handled pursuant to the Purchase Price
adjustments in Section 2.3, and
pursuant to Section 11.2, and
shall not be subject to indemnification under this Section 11.1.

     

    (e)          “Damages”,
for purposes of this Article 11, shall
mean the amount of any actual liability, loss, cost, expense, claim, award or
judgment incurred or suffered by any Indemnified Person arising out of or
resulting from the indemnified matter, whether attributable to personal injury
or death, property damage, contract claims, torts, or otherwise, including
reasonable fees and expenses of attorneys, consultants, accountants or other
agents and experts reasonably incident to matters indemnified against, and the
costs of investigation and/or monitoring of such matters, and the costs of
enforcement of the indemnity; provided, however, that
Purchasers and Sellers shall not be entitled to indemnification under this Section 11.1
for, and “Damages” shall not include, (i) loss of profits or other
consequential damages suffered by the Party claiming indemnification, or any
punitive damages, (ii) any liability, loss, cost, expense, claim, award or
judgment that does not individually exceed one hundred thousand dollars
($100,000), except that such limitation shall not apply with respect to any
failure on the part of Purchasers to satisfy any liability or obligation assumed
pursuant hereto, and (iii) any liability, loss, cost, expense, claim, award
or judgment to the extent resulting from or increased by the actions or
omissions of any Indemnified Person after the Closing Date.

     

    (f)           The
indemnity of each Party provided in this Section 11.1
shall be for the benefit of and extend to such Party's present and former
Affiliates, and their and their directors, officers, employees, and
agents.  Any claim for indemnity under this Section 11.1 by
any such Affiliate, director, officer, employee, or agent must be brought and
administered by the applicable Party to this Agreement.  No
Indemnified Person other than Sellers and Purchasers shall have any rights
against either Sellers or Purchasers under the terms of this Section 11.1
except as may be exercised on their behalf by Purchasers or Sellers, as
applicable, pursuant to this Section 11.1(f).  Sellers
and Purchasers may elect to exercise or not exercise indemnification rights
under this Section 11.1(f)
on behalf of the other parties affiliated with it in their sole discretion and
shall have no liability to any such other Indemnified Party for any action or
inaction under this Section 11.1(f).

    
      
         

      

      
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    (g)          Purchasers
shall not conduct (or have conducted on its behalf) any material remediation
operations with respect to any claimed Damages relating to a breach of Sellers’
representation or warranty regarding compliance with Environmental Laws or any
Claim relating to the subject matter of such representation or warranty without
first giving Sellers notice of the remediation with reasonable detail at least
30 days prior thereto (or such shorter period of time as shall be required by
any Governmental Authority).  Sellers shall have the option (in its
sole discretion) to conduct (or have conducted on its behalf) such remediation
operations.  If Sellers shall not have notified Purchasers of their
agreement to conduct such remediation operations within such specified period,
then Purchasers may conduct (or have conducted on its behalf) such
operations.  Purchasers and Sellers agree that any remediation
activities undertaken with respect to the Assets, whether conducted by
Purchasers or Sellers, shall be reasonable in extent and cost effective and
shall not be designed or implemented in such a manner as to exceed what is
required to cause a condition to be brought into compliance with Environmental
Laws.  All remediation activities conducted by Sellers under this
Agreement shall be conducted to the extent reasonably possible so as not to
interfere substantially with Purchasers’ operation of the Assets.

     

    Section
11.2        Indemnification
Actions.  All
claims for indemnification under Section 11.1
shall be asserted and resolved as follows:

     

    (a)          For
purposes of this Article 11, the term
“Indemnifying
Person” when used in connection with particular Damages shall mean the
Person or Persons having an obligation to indemnify another Person or Persons
with respect to such Damages pursuant to this Article 11, and the
term “Indemnified
Person” when used in connection with particular Damages shall mean the
Person or Persons having the right to be indemnified with respect to such
Damages by another Person or Persons pursuant to this Article 11.

     

    (b)          To
make claim for indemnification under Section 11.1, an
Indemnified Person shall notify the Indemnifying Person of its claim under this
Section 11.2,
including the specific details of and specific basis under this Agreement for
its claim (the “Claim
Notice”).  In the event that the claim for indemnification is
based upon a claim by a third party against the Indemnified Person (a “Claim”),
the Indemnified Person shall provide its Claim Notice promptly after the
Indemnified Person has actual knowledge of the Claim and shall enclose a copy of
all papers (if any) served with respect to the Claim; provided that the failure
of any Indemnified Person to give notice of a Claim as provided in this Section 11.2
shall not relieve the Indemnifying Person of its obligations under Section 11.1
except to the extent such failure results in insufficient time being available
to permit the Indemnifying Person to effectively defend against the Claim or
otherwise prejudices the Indemnifying Person's ability to defend against the
Claim.  In the event that the claim for indemnification is based upon
an inaccuracy or breach of a representation, warranty, covenant or agreement,
the Claim Notice shall specify the representation, warranty, covenant or
agreement which was inaccurate or breached.

    
      
         

      

      
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    (c)          If
the Indemnifying Person admits its obligation to indemnify the Indemnified
Person, it shall have the right and obligation to diligently defend, at its sole
cost and expense, the Claim.  The Indemnifying Person shall have full
control of such defense and proceedings, including any compromise or settlement
thereof.  If requested by the Indemnifying Person, the Indemnified
Person agrees to cooperate in contesting any Claim which the Indemnifying Person
elects to contest (provided, however, that the
Indemnified Person shall not be required to bring any counterclaim or
cross-complaint against any Person).  The Indemnified Person may at
its own expense participate in, but not control, any defense or settlement of
any Claim controlled by the Indemnifying Person pursuant to this Section 11.2(d).  An
Indemnifying Person shall not, without the written consent of the Indemnified
Person, settle any Claim or consent to the entry of any judgment with respect
thereto which (i) does not result in a final resolution of the Indemnified
Person's liability with respect to the Claim (including, in the case of a
settlement, an unconditional written release of the Indemnified Person) or
(ii) may materially and adversely affect the Indemnified Person (other than
as a result of money damages covered by the indemnity).

     

    (d)          If
the Indemnifying Person does not admit its obligation or admits its obligation
but fails to diligently defend or settle the Claim, then the Indemnified Person
shall have the right to defend against the Claim (at the sole cost and expense
of the Indemnifying Person, if the Indemnified Person is entitled to
indemnification hereunder), with counsel of the Indemnified Person's choosing,
subject to the right of the Indemnifying Person to admit its obligation and
assume the defense of the Claim at any time prior to settlement or final
determination thereof.  If the Indemnifying Person has not yet
admitted its obligation to provide indemnification with respect to a Claim, the
Indemnified Person shall send written notice to the Indemnifying Person of any
proposed settlement and the Indemnifying Person shall have the option for 10
days following receipt of such notice to (i) admit in writing its
obligation to provide indemnification with respect to the Claim and (ii) if
its obligation is so admitted, reject, in its reasonable judgment, the proposed
settlement.  If the Indemnified Person settles any Claim over the
objection of the Indemnifying Person after the Indemnifying Person has timely
admitted its obligation in writing and assumed the defense of the Claim, the
Indemnified Person shall be deemed to have waived any right to indemnity
therefor.

     

    Section
11.3        Limitation on
Actions.  Notwithstanding
the remaining provisions hereof, the provisions of this Article 11 are
subject to the following:

     

    (a)          The
representations and warranties of the Parties set forth in this Agreement or any
certificate or other instrument delivered pursuant hereto, as well as the
covenants and agreements set forth herein or therein that are contemplated to be
performed prior to the Closing, shall survive the Closing for a period of one
hundred eighty (180) days after the Closing (unless a shorter period is
expressly provided within the applicable section).  The covenants and
agreements set forth herein or therein that are contemplated to be performed
after the Closing, shall survive the Closing without time limit except as may
otherwise be expressly provided herein or therein.  Representations,
warranties, covenants and agreements shall be of no further force and effect
after the date of their expiration, provided that there shall be no termination
of any bona fide claim asserted pursuant to this Agreement with respect to such
a representation, warranty, covenant or agreement prior to its expiration
date.

     

    (b)          The
indemnities in Sections
11.1(a)(i)(2), 11.1(a)(i)(3), 11.1(a)(ii)(2), 11.1(a)(iii)(3) and
11.1(b) shall
terminate as of the date that is one hundred eighty (180) days after the
Closing, except in each case as to matters for which a specific written claim
for indemnity has been delivered to the Indemnifying Person on or before such
termination date.  The indemnities in Sections
11.1(a)(i)(1) and 11.1(a)(ii)(1) shall
continue without time limit.

    
      
         

      

      
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    (c)          Sellers
shall not have any liability for any indemnification under Section 11.1
until and unless the aggregate amount of the liability for all Damages for which
claim notices are delivered exceeds Two Million Five Hundred Thousand Dollars
($2,500,000) (the “Indemnity
Deductible”), and then only to the extent such damages exceed the
Indemnity Deductible.  The adjustments to the Purchase Price under
Section 2.3, any
further adjustments with respect to production, income, proceeds, receipts and
credits under Section 12.1,
any further adjustments with respect to Property Costs under Section 12.2 and
any payments in respect of any of the preceding shall not be limited by this
Section
11.3(c).

     

    (d)          The
maximum aggregate amount for which Sellers may be liable for indemnification
under Section 11.1
shall be limited to Two Million Dollars ($2,000,000).

     

    (e)          The
amount of any Damages for which an Indemnified Person is entitled to indemnity
under this Article
11 shall be reduced by the amount of insurance proceeds realized by the
Indemnified Person or its Affiliates with respect to such Damages (net of any
collection costs, and excluding the proceeds of any insurance policy issued or
underwritten by the Indemnified Person or its Affiliates).

     

    (f)           In
no event shall the Purchasers have any obligation hereunder to indemnify any
Seller who does not actually convey any portion of the Assets to Purchasers
under this Agreement or otherwise have any direct or indirect interest in any
portion of the Assets.  Likewise, no Seller who does not actually
convey any portion of the Assets to Purchasers under this Agreement or otherwise
have any direct or indirect interest in any portion of the Assets shall have any
obligation hereunder to indemnify the Purchasers.  Upon the request of
any Party hereto, the Parties agree to enter into any amendment to this
Agreement reasonably necessary to remove any Seller who does not actually convey
any portion of the Assets to Purchasers under this Agreement or otherwise have
any direct or indirect interest in any portion of the Assets as a Party to this
Agreement.

     

    ARTICLE
12

    MISCELLANEOUS

     

    Section
12.1    Receipts.  Except
as otherwise provided in this Agreement, any production from or attributable to
the Assets (and all products and proceeds attributable thereto) and any other
income, proceeds, receipts and credits attributable to the Assets which are not
reflected in the adjustments to the Purchase Price following the final
adjustment pursuant to Section 9.4(b)
shall be treated as follows:  (a) all production of Hydrocarbons
from or attributable to the Assets (and all products and proceeds attributable
thereto) and all other income, proceeds, receipts and credits earned with
respect to the Assets to which Purchasers are entitled under Section 1.4
shall be the sole property and entitlement of Purchasers, and, to the extent
received by Sellers, Sellers shall fully disclose, account for and remit the
same promptly to Purchasers, and (b) all production of Hydrocarbons from or
attributable to the Assets (and all products and proceeds attributable thereto)
and all other income, proceeds, receipts and credits earned with respect to the
Assets to which Sellers are entitled under Section 1.4
shall be the sole property and entitlement of Sellers and, to the extent
received by Purchasers, Purchasers shall fully disclose, account for and remit
the same promptly to Sellers.

    
      
         

      

      
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    Section
12.2    Property
Costs.  Except
as otherwise provided in this Agreement, any Property Costs which are not
reflected in the adjustments to the Purchase Price following the final
adjustment pursuant to Section 9.4(b)
shall be treated as follows: (a) all Property Costs for which Sellers are
responsible under Section 1.4
shall be the sole obligation of Sellers and Sellers shall promptly pay, or if
paid by Purchasers, promptly reimburse Purchasers for and hold Purchasers
harmless from and against same; and (b) all Property Costs for which
Purchasers are responsible under Section 1.4
shall be the sole obligation of Purchasers and Purchasers shall promptly pay, or
if paid by Sellers, promptly reimburse Sellers for and hold Sellers harmless
from and against same.  Sellers are entitled to resolve all joint
interest audits and other audits of Property Costs covering periods for which
Sellers are in whole or in part responsible, provided that Sellers shall not
agree to any adjustments to previously assessed costs for which Purchasers are
liable without the prior written consent of Purchasers, such consent not to be
unreasonably withheld.  Sellers shall provide Purchasers with a copy
of all applicable audit reports and written audit agreements received by Sellers
and relating to periods for which Purchasers are partially
responsible.

     

    Section
12.3     Counterparts.  This
Agreement may be executed in counterparts, each of which shall be deemed an
original instrument, but all such counterparts together shall constitute but one
agreement.

     

    Section
12.4     Notice.  All
notices which are required or may be given pursuant to this Agreement shall be
sufficient in all respects if given in writing and delivered personally, by
telecopy or by registered or certified mail, postage prepaid, as
follows:

     

    If to
Sellers:

     

    TXCO
Resources Inc.

    777 W.
Sonterra Blvd., Suite 350

    San
Antonio, Texas 78258

    Attn:  James
E. Sigmon, Chairman of the Board and CEO

    Facsimile:
(210) 496-3232

     

    With a
copy to:

     

    TXCO
Resources Inc.

    777 W.
Sonterra Blvd., Suite 350

    San
Antonio, Texas 78258

    Attn:  M.
Frank Russell, General Counsel

    Facsimile:
(210) 496-3232

    
      
         

      

      
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    If to
Anadarko:

     

    Anadarko
E&P Company LP

    1201 Lake
Robbins Drive

    The
Woodlands, Texas  77380

    Attn:
Joseph F. Carroll, Vice President - Transactions

    Facsimile:  (832)
636-5889

     

    With a
copy to:

     

    Anadarko
E&P Company LP

    1201 Lake
Robbins Drive

    The
Woodlands, Texas  77380

    Attn:
Robert K. Reeves, General Counsel

    Facsimile:  (832)
636-3214

     

    If to
Newfield:

     

    Newfield
Exploration Company

    363 N.
Sam Houston Pkwy. E., Suite 2020

    Houston,
Texas 77060

    Attn: W.
Mark Blumenshine,

    Vice
President – Land

    Facsimile:  (281)
405-4242

     

    With a
copy to:

     

    Newfield
Exploration Company

    363 N.
Sam Houston Pkwy. E., Suite 2020

    Houston,
Texas 77060

    Attn:  Darrell
R. Jones

    Legal
Counsel

    Facsimile:
(281) 405-4228

     

    Any Party
may change its address for notice by notice to the other in the manner set forth
above.  All notices shall be deemed to have been duly given at the
time of receipt by the Party to which such notice is addressed.

     

    Section
12.5    Sales or Use Tax, Recording
Fees and Similar Taxes and Fees.  Purchasers
shall bear any sales, use, excise, real property transfer or gain, gross
receipts, goods and services, registration, capital, documentary, stamp or
transfer Taxes, recording fees and similar Taxes and fees incurred and imposed
upon, or with respect to, the property transfers or other transactions
contemplated hereby.  If such transfers or transactions are exempt
from any such taxes or fees upon the filing of an appropriate certificate or
other evidence of exemption, Purchasers will timely furnish to Sellers such
certificate or evidence.

    
      
         

      

      
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    Section
12.6    Expenses.  All
expenses incurred by Sellers in connection with or related to the authorization,
preparation or execution of this Agreement, the conveyances delivered hereunder
and the Exhibits and Schedules hereto and thereto, and all other matters related
to the Closing, including all fees and expenses of counsel, accountants and
financial advisers employed by Sellers, shall be borne solely and entirely by
Sellers, and all such expenses incurred by each Purchaser shall be borne solely
and entirely by such Purchaser.

     

    Section
12.7    Change of
Name.  As
promptly as practicable, but in any case within thirty (30) days after the
Closing Date, Purchasers shall eliminate, at Purchasers’ cost, the names of
“TXCO Resources Inc.”, or any Affiliates of Sellers and any variants thereof
from the Assets acquired pursuant to this Agreement, including the removal of
any signs on the Assets that include such names, and except with respect to such
grace period for eliminating existing usage, shall have no right to use any
logos, trademarks or trade names belonging to Sellers or any of their
Affiliates.

     

    Section
12.8    Replacement of Bonds,
Letters of Credit and Guarantees.  The
Parties understand that none of the bonds, letters of credit and guarantees, if
any, posted by Sellers with Governmental Bodies and relating to the Assets will
be transferred to the parties designated by the Purchasers.  Promptly
following Closing, Purchasers shall obtain, or cause to be obtained in the name
of such designated party, replacements for such bonds, letters of credit and
guarantees, to the extent such replacements are necessary to permit the
cancellation of the bonds, letters of credit and guarantees posted by Sellers or
to consummate the transactions contemplated by this Agreement..

     

    Section
12.9    Governing Law; Submission to
Jurisdiction.  This
Agreement and the legal relations between the Parties shall be governed by and
construed in accordance with the laws of the State of Texas without regard to
principles of conflicts of laws otherwise applicable to such determinations
except that the conveyances delivered hereunder shall be governed by the laws of
the state in which the transferred Assets are located.  To the extent
the Bankruptcy Court does not have jurisdiction over any controversy arising
hereunder, each Party submits to the exclusive jurisdiction of the state and
federal courts located in Bexar County of the State of Texas for purposes of
resolving any dispute, claim or controversy arising out of, in relation to or in
connection with this Agreement.

     

    Section
12.10  Caption.  The
captions in this Agreement are for convenience only and shall not be considered
a part of or affect the construction or interpretation of any provision of this
Agreement.

     

    Section
12.11  Waivers.  Any
failure by any Party or Parties to comply with any of its or their obligations,
agreements or conditions herein contained may be waived by the Party or Parties
to whom such compliance is owed by an instrument signed by such Party or Parties
and expressly identified as a waiver, but not in any other manner.  No
waiver of, or consent to a change in, any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of, or consent to a change in,
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.

     

    Section
12.12  Assignment.  No
party hereto shall assign all or any part of this Agreement,
nor shall any Party assign or delegate any of its rights or duties hereunder,
without the prior written consent of the other Parties.  Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the Parties and their respective successors and permitted
assigns.

    
      
         

      

      
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    Section
12.13  Entire
Agreement.  The
Confidentiality Agreements, this Agreement and the documents to be executed
hereunder and the Exhibits and Schedules attached hereto constitute the entire
agreement between the Parties pertaining to the subject matter hereof, and
supersede all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties pertaining to the subject matter
hereof.

     

    Section
12.14  Amendment  This
Agreement may be amended or modified only by an agreement in writing executed by
all Parties and expressly identified as an amendment or
modification.

     

    Section
12.15  No
Third Party Beneficiaries  Nothing
in this Agreement shall entitle any Person other than Purchasers and Sellers to
any claims, cause of action, remedy or right of any kind, except the rights
expressly provided to the Persons described in Section 11.1(f).

     

    Section
12.16  References.  In
this Agreement:

     

    (a)          References
to any gender includes a reference to all other genders;

     

    (b)          References
to the singular includes the plural, and vice versa;

     

    (c)          Reference
to any Article or Section means an Article or Section of this
Agreement;

     

    (d)          Reference
to any Exhibit or Schedule means an Exhibit or Schedule to this Agreement, all
of which are incorporated into and made a part of this Agreement;

     

    (e)          Unless
expressly provided to the contrary, “hereunder”,
“hereof”,
“herein”
and words of similar import are references to this Agreement as a whole and not
any particular Section or other provision of this Agreement; and

     

    (f)           “Include”
and “including”
shall mean include or including without limiting the generality of the
description preceding such term.

     

    Section
12.17 Construction.  Purchasers
are Parties capable of making such investigation, inspection, review and
evaluation of the Assets as a prudent purchaser would deem appropriate under the
circumstances including with respect to all matters relating to the Assets,
their value, operation and suitability.  Each of Sellers and
Purchasers have had the opportunity to exercise business discretion in relation
to the negotiation of the details of the transaction contemplated
hereby.  This Agreement is the result of arm's-length negotiations
from equal bargaining positions.

     

    Section
12.18  Limitation on
Damages.  Notwithstanding
anything to the contrary contained
herein, none of Purchasers, Sellers or any of their respective Affiliates shall
be entitled to punitive damages in connection with this Agreement and the
transactions contemplated hereby and Purchasers and Sellers, for themselves and
on behalf of their Affiliates, hereby expressly waives any right to punitive
damages in connection with this Agreement and the transactions contemplated
hereby.

    
      
         

      

      
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    Section
12.19  Waiver of Fees and
Expenses.  Newfield
hereby irrevocably waives and releases any rights to receive, and agrees to
forego, any and all fees and expense reimbursements or payments it or its
Affiliates, agents or representatives may be entitled pursuant to section 9.2(b)
of that certain Purchase and Sale Agreement dated as of November 6, 2009, by and
among Sellers and Newfield. For the avoidance of doubt, the release contained
herein shall not be affected by Newfield’s continued participation in the
transactions contemplated herein (whether as a result of its assignment of
rights hereunder pursuant to Section 12.12 herein or otherwise).

     

    Section
12.20  Purchasers’
Liability.  Notwithstanding
anything to the contrary herein,  the Parties agree that, (a) prior to
and at Closing, Anadarko and Newfield shall be jointly and severally liable for
Purchasers’ obligations and liabilities under this Agreement and (b) after
Closing, Anadarko and Newfield shall be severally, but not jointly, liable for
Purchasers’ obligations and liabilities hereunder and that post-Closing
liability relates to ownership of the Anadarko Assets and the Newfield Assets,
respectively.

     

    Section
12.21  Agreed Subordination by
Newfield.  Newfield
hereby agrees to irrevocably subordinate the rights it has as the holder of
claims and interests relating in and to preferred stock of TXCO Resources Inc.
for which a notice of redemption was sent to TXCO Resources Inc. prior to the
filing of the Debtors’ case with the Bankruptcy Court (the “Noticed
Preferred Stock”), including rights to payments, recoveries or proceeds
to which it or its Affiliates may be entitled thereunder, to the rights of the
holders of preferred stock of TXCO Resources Inc. which did not deliver a notice
of redemption to TXCO Resources Inc. prior to the filing of the Debtors’ case
with the Bankruptcy Court.  Newfield further agrees to subordinate up
to $10,000,000 of its claim and interests in and to such Noticed Preferred Stock
to the rights of holders of common stock of TXCO Resources Inc. to receive
distribution under the Plan.  For the avoidance of doubt, the
subordination of Newfield’s rights contained in this Section 12.21 shall
not be affected by Newfield’s failure to participate in the consummation of the
transactions completed hereunder.

     

    ARTICLE
13

    DEFINITIONS

     

    “Acquisition
Proposal” means any proposal or offer for a merger, recapitalization,
share exchange, debt-for-equity exchange, distribution of securities for the
benefit of stakeholders of Sellers, consolidation or similar transaction
involving a sale or purchase (directly or through a proposed investment in
equity securities, debt securities or claims of creditors) of all or
substantially all of the assets of Sellers or all or substantially all of the
equity securities of Sellers, other than the transactions contemplated by the
terms of this Agreement.  For the avoidance of doubt, an Acquisition
Proposal does not include a proposal or offer for an Alternative
Plan.

     

    “Adjustment
Period” has the meaning set forth in Section 2.3(a).

     

    “AFE
Advance” has the
meaning set forth in Section
7.5(b).

    
      
         

      

      
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    “Affiliate”
with respect to any Person, means any person that directly or indirectly
controls, is controlled by or is under common control with such Person, with
control in such context meaning the ability to direct the management and
policies of a Person through ownership of voting shares or other equity rights,
pursuant to a written agreement, or otherwise.

     

    “Agreed
Interest Rate” shall be three percent (3%) per annum.

     

    “Agreement”
has the meaning set forth in the first paragraph of this Agreement.

     

    “Allocated
Value” has the meaning set forth in Section 2.4.

     

    “Anadarko
Assets” means the Assets conveyed at Closing to Anadarko or any of its
Affiliates.

     

    “Applicable
Law” means any Law to which a specified Person, or the Assets is
subject.

     

    “Assets”
has the meaning set forth in Section 1.2.

     

    “Assumed
Obligations” has the meaning set forth in Section
7.7.

     

    “Bankruptcy
Cases” means the chapter 11 cases commenced by Sellers on or after May
17, 2009 (including any case commenced after the date of this Agreement),
jointly administered under Case No. 09-51807, in the Western District of Texas,
San Antonio Division.

     

    “Bankruptcy
Code” means title 11 of the United States Code.

     

    “Bankruptcy
Court” means the United States Bankruptcy Court for the Western District
of Texas (San Antonio Division).

     

    “Business
Day” means each calendar day except Saturdays, Sundays, and Federal
holidays.

     

    “Claim”
has the meaning set forth in Section 11.2(b).

     

    “Claim
Notice” has the meaning set forth in Section 11.2(b).

     

    “Closing”
has the meaning set forth in Section 9.1(a).

     

    “Closing
Date” has the meaning set forth in Section 9.1(c).

     

    “Closing
Payment” has the meaning set forth in Section 9.4(a).

     

    “Code”
has the meaning set forth in Section 2.4.

     

    “Committee”
shall mean the official committee of unsecured creditors of Sellers appointed in
connection with the Bankruptcy Cases.

     

    “Confidentiality
Agreement” has the meaning set forth in Section 7.1.

    
      
         

      

      
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    “Contracts”
has the meaning set forth in Section 1.2(g).

     

    “Contractual
Prospects” means such Lands and Leases pursuant to which Sellers hold the
right to acquire or earn title thereto under the Material Contracts listed under
Schedule
4.11.

     

    “Conveyance”
means the conveyance to be delivered by Sellers to Purchasers in form and
substance mutually agreeable to the Parties.

     

    “COPAS”
means the Council of Petroleum Accountants Society.

    

    “Covered
Claims” has the meaning set forth in Section
2.3(g).

     

    “Damages”
has the meaning set forth in Section 11.1(e).

     

    “Defensible
Title” means that title of Sellers which, subject to Permitted
Encumbrances:

     

    (a)           Entitles
Sellers to receive throughout the duration of any Lease or the productive life
of any Well (in each case after satisfaction of all royalties, overriding
royalties, nonparticipating royalties, net profits interests or other similar
burdens on or measured by production of Hydrocarbons), not less than the “net
revenue interest” share shown in Exhibit A of all
Hydrocarbons produced, saved and marketed from such Lease or Well, except
decreases in connection with those operations in which Sellers may be a
nonconsenting co-owner, decreases resulting from the establishment or amendment
of pools or units, and decreases required to allow co-owners to make up past
underproduction or pipelines to make up past under deliveries and except as
stated in such Exhibit A-1;

     

    (b)           Obligates
Sellers to bear a percentage of the costs and expenses for the maintenance and
development of, and operations relating to, any Lease or Well not greater than
the “working interest” shown in Exhibit A without
increase throughout the duration of such Lease or Well, except as stated in
Exhibit A and
except increases resulting from contribution requirements with respect to
defaulting co-owners under applicable operating agreements or applicable Law and
increases that are accompanied by at least a proportionate increase in Sellers’
net revenue interest;

     

    (c)           Is
free and clear of all Encumbrances other than Permitted Encumbrances;
and

     

    (d)           Notwithstanding
(a) and (b) above, for the Lands, Leases and Wells within the Contractual
Prospects, Defensible Title shall mean (i) such title as Sellers have the right
to acquire in the Contractual Prospects in accordance with the terms of the
Material Contracts related to such Contractual Prospects and (ii) Sellers are
not in breach of any of the Material Contracts related thereto.

     

    “Deposit”
has the meaning set forth in Section
2.2.

     

    “Effective
Time” has the meaning set forth in Section 1.4(a).

    
      
         

      

      
        42

        
          

        

      

      
         

      

    

     

    “Encumbrance”
means any lien, charge, encumbrance, obligation, or other defect (including a
discrepancy in net revenue interest or working interest as set forth in Exhibit A).

     

    “Environmental
Condition” means: (a) any event or condition (including any Release
or threatened release) with respect to air, land, soil, surface, subsurface
strata, surface water, ground water, or sediment that causes the Assets to
become subject to (or their owner or operator to have Liability or be
potentially liable for) any investigation, reporting, removal, remediation, or
response action under, or not be in compliance with, any Environmental Law or
any permit pursuant to any Environmental Law; (b) the existence of any written
or oral Claim pending or threatened that reasonably may be expected to subject
the Assets or the owner or the operator of the Assets to Liability under any
Environmental Law as it pertains to the Assets or the existence of any event or
condition on the Assets described in this definition; (c) the failure of
the Assets to be in compliance, or the owner or operator of the Assets to comply
with all applicable Environmental Laws with respect to the Assets; (d) the
failure of the owner or operator of the Assets to obtain or maintain in full
force and effect any Permit required under applicable Environmental Laws with
respect to the Assets; or (e) any event or condition described in the
preceding clauses (a), (b), (c), and (d) that results, or could reasonably be
expected to result, in Liability for any investigation, removal, remediation, or
response action, or any other Person for injury to or death of any Person,
Persons, or other living thing, or damage, loss, or destruction of property
located on the Assets.  An event or circumstance that results in the
inaccuracy or breach of the representations and warranties contained in Section 4.7
(insofar only as such representation and warranty relates to environmental
matters) shall constitute an Environmental Condition.  The term “Environmental
Condition” includes any release, disposal, spilling, leaking, migration,
pouring, emission, emptying, discharge, injection, escape, transmission,
leaching, or dumping (collectively, a “Release”),
or any threatened Release, of any contaminants on, to or from, or related in any
way to the use, ownership, or operation of, the Assets that has not been
remediated in accordance with all applicable Environmental Laws.

     

    “Environmental
Laws” means, as the same have been amended to the date hereof, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
§ 9601 et
seq.; the
Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; the Federal
Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Clean Air
Act, 42 U.S.C. § 7401 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the Toxic
Substances Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil Pollution Act,
33 U.S.C. § 2701 et seq.; the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq.; and the Safe
Drinking Water Act, 42 U.S.C. §§ 300f through 300j; and all similar Laws as
of the date hereof of any Governmental Body having jurisdiction over the
property in question addressing pollution or protection of the environment or
biological or cultural resources and all regulations implementing the
foregoing.

     

    “Environmental
Permits” means
all permits required by the Sellers by Environmental Laws for the occupation of
the Properties and the operation of the Leases, Lands, Wells, Units and Surface
Rights.

     

    “ERISA”
means the Employee Retirement Income Security Act of 1974, as
amended.

     

    “Equipment”
has the meaning set forth in Section 1.2(h).

    
      
         

      

      
        43

        
          

        

      

      
         

      

    

     

    “Escrow
Agent” means the escrow agent under the Escrow Agreement.

     

    “Escrow
Agreement” means the escrow agreement among Sellers, Purchasers and the
Escrow Agent to be entered into pursuant to Section
2.2(b).

     

    “Excluded
Assets” has the meaning set forth in Section 1.3.

     

    “Excluded
Records” has the meaning set forth in Section 1.2(m).

     

    “Final
Order” means (i) an Order of the Bankruptcy Court as to which the time to
appeal, petition for certiorari or motion for re-argument or rehearing has
expired and as to which no appeal, petition for certiorari or other proceedings
or motion for re-argument or rehearing shall then be pending or (ii) if an
appeal, writ of certiorari, motion for re-argument or rehearing thereof has been
filed or sought, such order of the Bankruptcy Court shall not have been
stayed.

     

    “Gathering
Systems” has the meaning set forth in Section 1.2(c).

     

    “Governmental
Body” means any federal, state, local, municipal, or other governments;
any governmental, regulatory or administrative agency, commission, body or other
authority exercising or entitled to exercise any administrative, executive,
judicial, legislative, police, regulatory or taxing authority or power; and any
court or governmental tribunal.

     

    “Hydrocarbons”
means oil, gas, condensate and other gaseous and liquid hydrocarbons or any
combination thereof and sulphur extracted from hydrocarbons.

     

    “Imbalance”
means any imbalance between (a) the quantity of Hydrocarbons produced from any
Well and allocated to a Person from time to time and the share of such
production to which such Person is actually entitled by virtue of its ownership
interest in such Well, (b) the quantity of Hydrocarbons produced from or
allocable to the Assets delivered, and the quantity of such Hydrocarbons
received, in each case for gathering, transportation, or storage for the account
of a Person, (c) the quantity of Hydrocarbons produced from or allocable to the
Assets delivered for processing or refining, and the quantity of products or
residue Hydrocarbons redelivered, in each case for the account of a Person, and
(d) other similar types of Hydrocarbon-related imbalances attributable to the
Assets.

     

    “Indemnified
Person” has the meaning set forth in Section 11.2(a).

     

    “Indemnifying
Person” has the meaning set forth in Section 11.2(a).

     

    “Indemnity
Deductible” has the meaning set forth in Section
11.3(c).

     

    “Knowledge”
means the knowledge of a Person’s officers and directors as of the date hereof
and the Closing after inquiry of such Person’s employees charged with
responsibility for a particular area of such Person’s operations.

     

    “Laws”
means all statutes, rules, regulations, ordinances, orders, and codes of
Governmental Bodies.

    
      
         

      

      
        44

        
          

        

      

      
         

      

    

     

    “Leases
and Lands” has the meaning set forth in Section 1.2(a).

     

    “Liabilities”
means, for purposes of this Agreement, any and all losses, judgments, damages,
liabilities, injuries, costs, expenses, interest, penalties, taxes, fines,
obligations, and deficiencies.

     

    “Material
Adverse Effect” means any material adverse effect on the ownership,
operation or value of the Assets, as currently operated, taken as a whole, provided, however, that “Material Adverse
Effect” shall not include material adverse effects resulting from general
changes in Hydrocarbon prices, general changes in industry, economic or
political conditions or general changes in Laws or in regulatory
policies.

     

    “Material
Contracts” has the meaning set forth in Section
4.11.

     

    “Newfield
Assets” means the Assets other than the Anadarko Assets.

     

    “Noticed
Preferred Stock” has the meaning set forth in Section
12.21.

     

    “Order”
means any writ, judgment, decree, injunction or similar order, writ, ruling,
directive or other requirement of any Governmental Authority (in each such case
whether preliminary or final).

     

    “Organizational
Documents” means the articles of incorporation, certificate of
incorporation, charter, bylaws, articles of formation, regulations, operating
agreement, certificate of limited partnership, partnership agreement, and all
other similar documents, instruments, or certificates executed, adopted, or
filed in connection with the creation, formation, or organization of a Person,
including any amendments thereto.

     

    “Party”
or “Parties”
has the meaning set forth in the first paragraph of this Agreement.

     

    “Peregrine
Claims” has the meaning set forth in Section
7.15.

     

    “Permits”
has the meaning set forth in Section
1.2(e).

     

    “Permitted
Encumbrances” means any or all of the following:

     

    (e)          Lessors'
royalties and any overriding royalties, reversionary interests and other burdens
to the extent that they do not, individually or in the aggregate, reduce
Sellers’ net revenue interests below that shown in Exhibit A-1 or
increase Sellers’ working interest above that shown in Exhibit A-1 without a
corresponding increase in the net revenue interest;

     

    (f)           Third-party
consent requirements and similar restrictions with respect to which waivers or
consents are obtained by Sellers from the appropriate parties prior to the
Closing Date or the appropriate time period for asserting the right has
expired;

     

    (g)          Liens
for current Taxes or assessments not yet delinquent;

    
      
         

      

      
        45

        
          

        

      

      
         

      

    

     

    (h)          Materialman's,
mechanic's, repairman's, employee's, contractor's, operator's and other similar
liens or charges arising in the ordinary course of business for amounts not yet
delinquent (including any amounts being withheld as provided by
law);

     

    (i)           All
rights to consent, by required notices to, filings with, or other actions by
Governmental Bodies in connection with the sale or conveyance of oil and gas
leases or interests therein if they are customarily obtained subsequent to the
sale or conveyance;

     

    (j)           Rights
of reassignment arising upon final intention to abandon or release the Assets,
or any of them;

     

    (k)           Easements,
rights-of-way, servitudes, permits, surface leases and other rights in respect
of surface operations which do not, individually or in the aggregate, materially
detract from the value of or materially interfere with the use or ownership of
the Assets subject thereto or affected thereby (as currently used or
owned);

     

    (l)           All
rights reserved to or vested in any Governmental Body to control or regulate any
of the Assets in any manner and all obligations and duties under all applicable
laws, rules and orders of any such Governmental Body or under any franchise,
grant, license or permit issued by any such Governmental Body;

     

    (m)          Any
Encumbrance on or affecting the Assets which is discharged at or prior to
Closing;

     

    (n)           The
litigation matters described in Schedule 4.7;
or

     

    (o)           Any
of the following to the extent that they do not, individually or in the
aggregate, reduce Sellers’ net revenue interests below that shown in Exhibit A-1 or
increase Sellers’ working interest above that shown in Exhibit A-1 without a
corresponding increase in the net revenue:

     

    (p)           The
occurrence of payout under any farmout agreement, joint operating agreement or
similar arrangement, or the exercise of any other back-in right or reversionary
interest held by a third Person;

     

    (q)           Any
lease amendment, or any consent by any non-participating royalty interest or
non-executive mineral interest, authorizing the lessee or executive rights
holder to pool a leasehold interest, royalty interest, or mineral interest
constituting part of any Property, or to pool another leasehold interest,
royalty interest, or mineral interest with any Property.

     

    “Person”
means any individual, firm, corporation, partnership, limited liability company,
joint venture, association, trust, unincorporated organization, Government Body
or any other entity.

     

    “Plan”
has the meaning set forth in the recitals to this Agreement.

     

    “Properties”
has the meaning set forth in Section 1.2(d).

    
      
         

      

      
        46

        
          

        

      

      
         

      

    

     

    “Property
Costs” has the meaning set forth in Section 1.4(c).

     

    “Proposed
AFE” has the meaning set forth in Section
7.5(b).

     

    “Purchase
Price” has the meaning set forth in Section 2.1.

     

    “Purchaser”
has the meaning set forth in the first paragraph of this Agreement.

     

    “Records”
has the meaning set forth in Section 1.2(m).

     

    “Release”
has the meaning set forth within the definition of Environmental Condition
above.

     

    “Representatives”
has the meaning set forth in Section 7.8(a)

     

    “Retained
Obligations” has the meaning set forth in Section
7.7.

     

    “Sale
Order” has the meaning set forth in the recitals to this
Agreement.

     

    “Seller”
or “Sellers”
has the meaning set forth in the first paragraph of this Agreement.

     

    “Sellers’
Benefit Plans” mean any employee pension benefit plans as defined in
Section 3(2) of ERISA, employee welfare benefit plans as defined in Section 3(1)
of ERISA, whether or not excluded from coverage under specific titles or
subtitles of ERISA and any employee benefit programs, payroll practices,
policies, contracts, arrangement and practices that cover or are available to
employees.

     

    “Subsidiary”
means with respect to any Person, any corporation, limited liability company,
joint venture or partnership of which such Person (a) beneficially owns, either
directly or indirectly, more than 50% of (i) the total combined voting power of
all classes of voting securities of such entity, (ii) the total combined equity
interests, or (iii) the capital or profit interest, in the case of a
partnership; or (b) otherwise has the power to vote or to direct the voting of
sufficient securities to elect a majority of the board of directors or similar
governing body.

     

    “Surface
Rights” has the meaning set forth in Section
1.2(d).

     

    “Suspended
Revenues” has the meaning set forth in Section
4.16.

     

    “Taxes”
means all federal, state, local, and foreign income, profits, franchise,
margins, sales, use, ad valorem, property, severance, production, excise, stamp,
documentary, real property transfer or gain, gross receipts, goods and services,
registration, capital, transfer, or withholding taxes or other assessments,
duties, fees or charges imposed by any Governmental Body, including any
interest, penalties or additional amounts which may be imposed with respect
thereto.

     

    “Termination
Notice” has the meaning set forth in Section
7.15.

    
      
         

      

      
        47

        
          

        

      

      
         

      

    

     

    “Transition
Services Agreements” means
the agreements pursuant to which Sellers agree to provide services related to
the operations, land and accounting necessary to operate the Properties during a
to-be-determined period of time following the Closing.

     

    “Transportation
Contract” has the meaning set forth in Section
4.11.

     

    “Units”
has the meaning set forth in Section 1.2(b).

     

    “Wells”
has the meaning set forth in Section 1.2(a).

     

    [signature
page follows]

    
      
         

      

      
        48

        
          

        

      

      
         

      

    

     

    IN WITNESS WHEREOF, this
Agreement has been signed by each of the Parties hereto on the date first above
written.

     

    
      
        
          
            	 
      	
                    SELLERS:

                  
	 
      	 
      
	 
      	
                    TXCO
      RESOURCES INC.

                  
	 
      	 
      	 
      
	 
      	
                    By:
      

                  	
                    /s/ James E. Sigmon

                  
	 
      	 
      	
                    Name:
      James E. Sigmon

                  
	 
      	 
      	
                    Title:  
      Chairman and Chief Executive Officer

                  
	 
      	 
      	 
      
	 
      	
                    TXCO
      ENERGY CORP.

                  
	 
      	 
      	 
      
	 
      	
                    By:
      

                  	
                    /s/ James E. Sigmon

                  
	 
      	 
      	
                    Name:
      James E. Sigmon

                  
	 
      	 
      	
                    Title:  
      Chairman and Chief Executive Officer

                  
	 
      	 
      	 
      
	 
      	
                    TEXAS
      TAR SANDS INC.

                  
	 	 
	 
      	
                    By:
      

                  	
                    /s/ James E. Sigmon

                  
	 
      	 
      	
                    Name:
      James E. Sigmon

                  
	 
      	 
      	
                    Title:  
      Chairman and Chief Executive Officer

                  
	 
      	 
      	 
      
	 
      	
                    OUTPUT
      ACQUISITION CORP.

                  
	 
      	 
      	 
      
	 
      	
                    By:
      

                  	
                    /s/ James E. Sigmon

                  
	 
      	 
      	
                    Name:
      James E. Sigmon

                  
	 
      	 
      	
                    Title:  
      Chairman and Chief Executive Officer

                  
	 
      	 
      	 
      
	 
      	
                    OPEX
      ENERGY, LLC

                  
	 
      	 
      	 
      
	 
      	
                    By:
      

                  	
                    /s/ James E. Sigmon

                  
	 
      	 
      	
                    Name:
      James E. Sigmon

                  
	 
      	 
      	
                    Title:  
      Chairman and Chief Executive
Officer

                  

          

        

      

    

    

    Signature
Page to Joint Purchase and Sale Agreement - Seller

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      
        	 
      	
                CHARRO
      ENERGY, INC.

              
	 
      	 
      	 
      
	 
      	
                By:
      

              	
                /s/ James E. Sigmon

              
	 
      	 
      	
                Name:
      James E. Sigmon

              
	 
      	 
      	
                Title:  
      Chairman and Chief Executive Officer

              
	 
      	 
      
	 
      	
                TXCO
      DRILLING CORP.

              
	 
      	 
      	 
      
	 
      	
                By:
      

              	
                /s/ James E. Sigmon

              
	 
      	 
      	
                Name:
      James E. Sigmon

              
	 
      	 
      	
                Title:  
      Chairman and Chief Executive Officer

              
	 
      	 
      
	 
      	
                EAGLE
      PASS WELL SERVICE, L.L.C.

              
	 
      	 
      	 
      
	 
      	
                By:
      

              	
                /s/ James E. Sigmon

              
	 
      	 
      	
                Name:
      James E. Sigmon

              
	 
      	 
      	
                Title:  
      Chairman and Chief Executive Officer

              
	 
      	 
      
	 
      	
                PPL
      OPERATING, INC.

              
	 
      	 
      	 
      
	 
      	
                By:
      

              	
                /s/ James E. Sigmon

              
	 
      	 
      	
                Name:
      James E. Sigmon

              
	 
      	 
      	
                Title:
        Chairman and Chief Executive Officer

              
	 
      	 
      
	 
      	
                MAVERICK
      GAS MARKETING, LTD.

              
	 
      	 
      	 
      
	 
      	
                By:
      

              	
                /s/ James E. Sigmon

              
	 
      	 
      	
                Name:
      James E. Sigmon

              
	 
      	 
      	
                Title:  
      Chairman and Chief Executive Officer

              
	 
      	 
      
	 
      	
                MAVERICK-DIMMIT
      PIPELINE, LTD.

              
	 
      	 
      	 
      
	 
      	
                By:
      

              	
                /s/ James E. Sigmon

              
	 
      	 
      	
                Name:
      James E. Sigmon

              
	 
      	 
      	
                Title:  
      Chairman and Chief Executive
Officer

              

      

    

    

    Signature
Page to Joint Purchase and Sale Agreement - Seller

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      
        	 
      	
                PURCHASERS:

              
	 
      	 
      
	 
      	
                ANADARKO
      E&P COMPANY LP

              
	 
      	 
      	 
      
	 
      	
                By:
      

              	
                /s/ Joseph F. Carroll

              
	 
      	 
      	
                Name:
      Joseph F. Carroll

              
	 
      	 
      	
                Title:  
      Attorney-in-fact

              
	 
      	 
      
	 
      	
                NEWFIELD
      EXPLORATION COMPANY

              
	 
      	 
      	 
      
	 
      	
                By:
      

              	
                /s/ William D. Schneider

              
	 
      	 
      	
                Name:
      William D. Schneider

              
	 
      	 
      	
                Title:  
      Vice President – Onshore

              
	 
      	 
      	
                 Gulf
      Coast & International

              

      

    

    

    Signature
Page to Joint Purchase and Sale Agreement - PurchaserUnassociated Document

    AGREEMENT OF
LEASE

    The Abbey
at 355 Madison Ave Morris Township, NJ 07960

    

    THIS AGREEMENT OF LEASE (this
“Lease”) dated
as of  January 1, 2009,  is entered into by and between
NYC  Skyline Realty
LLC a Limited Liability company, having an office, at 85 Roxiticus Road,
Far Hills NJ 07931,(hereinafter called "Landlord"), and,
Boomerange Systems, Inc., a Delaware corporation, company having an office at ,
355 Madison Ave. Township of Morris, NJ 07961 (hereinafter called "Tenant").

    

    The
parties to this Lease hereby agree with each other as follows:

    

    PREAMBLE

    

    A.           BASIC LEASE PROVISIONS AND
DEFINITIONS

    

    In addition to other terms elsewhere
defined in this Lease, the following terms whenever used in this Lease should
have only the meanings set forth in this Article, unless such meanings are
expressly modified, limited or expanded elsewhere herein.

     

    
      
        
          
            
              
                
                  	
                          (1)           Exhibits:

                        	
                          The
      following Exhibits attached to this Lease are incorporated herein and made
      a part hereof:

                        
	 
      	  
      	 
      	 
      
	 
      	 
      	
                          Exhibit A:

                        	
                          Site
      Plan (Office Park)

                        
	 
      	 
      	
                          Exhibit B:

                        	
                          Lease
      Plan (Demised Premises)

                        
	 
      	 
      	
                          Exhibit C:

                        	
                          Rules
      and Regulations

                        
	 
      	 
      	
                          Exhibit D:

                        	
                          Personal
      Guarantee

                        

                

              

            

          

        

      
 

    (2)           Demised
Premises:  The demise premises within the building as outlined
or otherwise designated as the “Demised Premises” in
Exhibit B
hereof and being approximately 1,454 gross leaseable square
feet.

    

    (3)           Term:  The
Term of this Lease shall be for an initial period of Five (5) years, unless
otherwise extended or terminated in accordance with the terms
hereof.

    

    (4)           Effective
Date,  The Effective date  is the date the tenant
Takes possession of space,  the Effective Date of this Lease shall
be  January 1, 2009.

    

    (5)           Annual Base
Rent:  Tenant shall pay Annual Base Rent ("Base Rent") in equal
monthly installments in advance commencing on January 1, 2009, (the “Rent Commencement
Date”) and thereafter on the first (1st) day of
each calendar month included in the Term, as follows:

     

    
      	
              Boomerange
      Lease 4.13.09

            	
              Page
      1 of 35

            	 
      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    
      
        
          
            
              
                	
                        Lease

                        Year(s)

                      	 	
                        Annual Base Rent

                      
	
                        1

                      	 	
                        $53,434.50
      annual /  $4,452.87 monthly / $36.75 per square
    foot

                      
	
                        2 -
      5

                      	 	
                        Subject
      to an annual 4% increase over the prior Lease Year’s Base
    Rent

                      

              

            

          

        

      

    

    

    FIRST RENEWAL TERM ANNUAL
BASE RENT:

    

    
      
        
          
            
              
                
                  	
                          Lease

                          Year(s)

                        	 	
                          Annual Base Rent

                        
	
                          6-10

                        	 	
                          Subject
      to an annual 4 % increase over the prior Lease Year's Base
      Rent

                        

                

              

            

          

        

      

    

    

    SECOND RENEWAL TERM ANNUAL
BASE RENT:

    

    
      
        
          
            
              
                	
                        Lease

                        Year(s)

                      	 	
                        Annual Base Rent

                      
	
                        11-15

                      	 	
                        Subject
      to an annual 4 % increase over the prior Lease Year's Base
      Rent

                      

              

            

          

        

      

    

    

    The term
Lease Year as used herein shall mean a period of twelve consecutive full
calendar months. The first Lease Year shall begin on the Lease Commencement
Date. Each succeeding Lease Year shall commence upon the anniversary date of the
first Lease Year.

    

    (5)           
Tenant’s Proportionate
Share: The term Tenant’s “Proportionate Share” shall mean a fraction, the
numerator of which shall be the gross leaseable square feet of the Demised
Premises and the denominator of which shall be the gross leaseable area of the
Office Park (i.e.,
20,000 square feet).  For purposes of this Lease, Tenant’s
Proportionate Share shall be equal to 7.27%.

    It is hereby agreed that Tenant shall
pay  an initial estimated amount of $1,938.66 payable in equal monthly
installments (i.e.,
$16.00 per square foot) on account of  Tenant’s Proportionate
Share of Taxes and Common Area Charges and (as such terms are hereinafter
defined in Article
3 and Article
5, respectively) as “Additional Rent"
together with Tenant's monthly payment of Base Rent and all other charges and
amounts payable by Tenant to Landlord under this Lease (Base Rent, Additional
Rent and all other charges, hereinafter collectively referred to as "Rent") during
the  Initial Term and the Renewal Term, if applicable; said amount to
be adjusted by Landlord from time-to-time and reconciled
annually.   All payments of Rent due under this Lease shall be
due and payable in full on the first (1st) day of
each month during the Term and any Renewal Term(s) of this Lease.

     

    
      
        	
                Boomerange
      Lease 4.13.09

              	
                Page 2
      of 35

              	 
      

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    
      	 	
              (6) 

            	
              Common Area
      Charge:  Pro-rata in accordance with Article
      5D.

            

    

    

    
      	
               
      

            	
              (7)

            	
              Permitted
      Use:  Tenant shall occupy the Demised Premises as office
      space.

            

    

    

    
      	
               
      

            	
              (8)

            	
              Security: Four
      Thousand Four Hundred Eighteen with 87/100 Dollars
      ($4,418.87).

            

    

    

    
      	
               
      

            	
              (9)

            	
              The
      Abby:  Those parcels of real property with buildings and
      improvements thereon as shown on Exhibit A
      hereof, located at 355 Madison Ave, Morris Township NJ. Subject to change
      at Landlord sole discretion.

            

    

    

    
      	  	
              (10) 

            	
              Tenant's
      address:  355 Madison Ave Morris Township
    NJ

            

    

    

    
      	  	
              (11) 

            	
              Landlord's
      address:  85 Roxiticus Road, Far Hills, NJ
      07931

            

    

     

    
      
        	
                Boomerange
      Lease 4.13.09

              	
                Page 3
      of 35

              	 
      

      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    GENERAL TERMS AND
CONDITIONS

    

    1.           A.           TERM AND COMMENCEMENT
DATE.

    

    This Lease shall remain in full force
and effect from the date first written above (the “Commencement Date”)
and expiring  on the later of (i)December 31, 2013 or (ii) Five years
from the Commencement Date,   (the “Expiration Date”),
unless otherwise extended or terminated in accordance with the terms
hereof.

    

    B.           RENEWAL
OPTION.

    

    Provided that at the time of such
exercise (i) Tenant is not in default beyond any applicable cure period at the
time Tenant delivers the renewal notice, (ii) this Lease is in full force and
effect and (iii) Tenant is in possession of the Demised Premises, Tenant shall
have the right and option to extend the initial Term of this Lease for two (2)
renewal terms of Five (5) years (each a "Renewal Term") at the
annual and monthly rentals provided in Preamble (4)
above.  Tenant may exercise its option to renew this Lease for said
Renewal Term by giving written notice to Landlord not less than one (1) year
prior to the Expiration Date of the Term or the Renewal Term, as the case may be
as set forth herein.  The Renewal Term shall be governed by the
provisions of this Lease, except that there shall be no further option to renew
and the Rent and Additional Rent during the Renewal Term shall be increased as
hereinabove provided.

    

    2.           PREPARATION OF
PREMISES.

    

    A.           LANDLORD'S
WORK

    

    Tenant is fully familiar with the state
and condition of the Premises and accordingly, Tenant agrees to accept the
Demised Premises "AS IS".  Landlord undertakes to provide no work,
installations or services, and makes no warranties or representations, express
or implied, regarding the Demised Premises or their condition including latent
defects, and Tenant acknowledges that it has relied on none.  Landlord
reserves the right at any time at its own discretions to do improvements to the
Tenants space so to  preserve the historic nature of the building,
including but not limited to plaster ceiling, wood work, leaded and stained
glass windows ETC.

    

    B.           TENANT'S
WORK

    

    Tenant agrees, at its own cost and
expense, to perform all fixturing and other work required for the operations of
its business (hereinafter called "Tenant's Work). Tenant will be responsible to
maintain the historic integrity of the interior space. Tenant will not alter in
any way the interior space without prior Landlord written approval. Landlord may
not approve any alterations that will interfere with the historic nature of the
building, including but not limited to plaster ceiling, wood work, leaded and
stained glass windows ETC....

     

    
      
        	
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    C.           PERFORMANCE OF TENANT'S
WORK

    

    Tenant shall, with due diligence,
commence Tenant's Work and install fixtures of first class quality and
workmanship in accordance with the  Landlord’s approved plans and
specifications theretofore submitted to and approved by Landlord, in accordance
with the laws, rules, regulations and orders of all governmental authorities
having jurisdiction thereof and without interference with other work being done
in the building or the Office Park and in compliance with all reasonable rules
which Landlord may make.  Tenant shall be responsible for the issuance
and all costs and expenses of all certificates and approvals relating to any
work or installations done by Tenant which may be required by any governmental
authority and for the issuance of a certificate of occupancy or other approval
of the building or by the Board of Fire Underwriters of the State where the
Building is located or the National Board of Fire Underwriters or other similar
body or bodies having jurisdiction.

    

     3.           TAXES.

    

    A.  The term "Taxes" shall mean the
aggregate of the real estate taxes assessments and other governmental charges
and levies, general and special, ordinary and extraordinary, foreseen and
unforeseen, of any kind or nature whatsoever (including without limitation
assessments for public improvements or benefits and interest on unpaid
installments thereof) which may be levied, assessed or imposed or become liens
upon or arise out of the use, occupancy or possession of the Office Park (land,
buildings, leasehold improvements betterments and other permanent improvements)
from time to time.  The term "Taxes" shall not,
however, include inheritance, estate, succession, transfer, gift, franchise,
corporation income or profit tax imposed upon Landlord; PROVIDED, HOWEVER, that
if at any time during the Term of this Lease the methods of taxation prevailing
at the commencement of the Term of this Lease shall be altered so that in
addition to or in lieu of or as a substitute for the whole or any part of the
Taxes now levied, assessed or imposed on real estate as such there shall be
levied, assessed or imposed (i) a tax on the rents received from the Office
Park; or (ii) a license fee measured by the rents receivable by Landlord from
the Office Park; or (iii) a tax or license imposed upon Landlord which is
otherwise measured by or based in whole or in part upon the Office Park or any
portion thereof, then such tax or fee shall be included in the computation of
Taxes, computed as if the amount of such tax or fee so payable were that part
due if the Office Park were the only property of Landlord subject
thereto.

    

    B.  The term "Tax Year" shall mean
the twelve (12) month period established as the real estate tax year by the
taxing authorities having jurisdiction over the Office Park.

    

    C.  The term "Tenant's Tax Charge"
shall mean an amount equal to the product obtained by multiplying the Taxes for
each Tax Year by a fraction, the numerator of which is the number of square feet
of gross leasable area in the Demised Premises and the denominator of which is
the number of square feet of gross leasable area in the Office Park open for
business as of the date the Taxes for such Tax Year are assessed.

    

    D.  Tenant shall pay its
Proportionate Share of Taxes as provided in Article
5D.

     

    
      
        	
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    E.  Landlord shall have the
right but not the obligation, if permitted by law, to make installment payments
of any assessments levied against the  building and in such event,
Tenant's share of the Taxes shall be computed upon the installments and interest
thereon paid by Landlord in each Tax Year.  Landlord shall have the
sole, absolute and unrestricted right, but not the obligation to contest the
validity or amount of any tax by appropriate proceedings, and if Landlord shall
voluntarily institute any such contest it shall have the sole, absolute and
unrestricted right to settle any negotiation, contest, proceeding or action upon
whatever terms Landlord may, it its sole discretion, determine.  In
the event Landlord receives any refund of such Taxes (and provided Tenant is not
then in default under this Lease beyond applicable cure and notice periods)
Landlord shall credit such proportion of the refund as shall be allocable to the
Tenant's Tax Charge (less costs, expenses and attorneys' fees) against the next
succeeding payments of Tenant's Tax Charge due from Tenant.

    

    G.  In the event of any
dispute under this Article, Tenant shall pay Tenant's Tax Charge in accordance
with the applicable bill or statement, and such payment shall be without
prejudice to Tenant's position.  If the dispute shall be determined in
Tenant's favor, by agreement or otherwise, Landlord shall pay to Tenant the
amount of Tenant's overpayment resulting from compliance with such bill or
statement.  Any such bill or statement shall be deemed binding and
conclusive if Tenant fails to object thereto within thirty (30) days after
receipt thereof.

    

    H.  If any land or buildings
shall be added to the Building  from time to time, Tenant shall be
responsible for its proportion under subarticle A hereof
of the taxes payable on such additional land from the time that the taxes are
first assessed and payable, and on any additional buildings from the time when
they are first assessed as completed structures.  Tenant shall not be
responsible for its proportion of taxes on such additional land unless that land
is contiguous to and improved as part of the Building.

    

    I.  Whenever the term "floor area" or "gross leasable area"
is used in this Lease, it shall be deemed to mean the approximate number of
square feet of floor space within the Demised Premises measured from the
exterior faces of the exterior walls, without deduction for any space occupied
by or used for columns, stairs, or other interior construction or equipment by
Tenant at Tenant's sole expense.  The center of the walls and the
interior demising partitions shall be used in case of party walls and walls
between spaces occupied by two or more separate tenants.

     

    
      
        	
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       4.           SECURITY
DEPOSIT.

       

    

    
      	
               
      

            	
              Tenant
      has heretofore deposited with Landlord the sum of   Four
      Thousand Four Hundred Eighteen with 87/100 Dollars
      ($4,418.87).  as security for the full and faithful performance
      by the Tenant of all the terms, coven. ants and conditions of this Lease
      upon the Tenant's part to be performed, which said sum shall be returned
      to the Tenant without interest, after the time fixed as the expiration of
      the Term herein provided that Tenant has fully and faithfully carried out
      all of said terms, covenants and conditions on Tenant's part to be
      performed, including, without limitation intended, the surrender of the
      Demised Premises to Landlord as provided for herein.  Landlord
      shall have the right to apply any part of said deposit to cure any default
      of Tenant, and if Landlord does so, Tenant shall, upon demand, deposit
      with  Landlord the amount so applied so that Landlord shall have
      the full deposit on hand at all times during the term of this
      Lease.  In the event of a sale or lease of the Office Park,
      subject to this Lease, the Landlord shall have the right to transfer the
      security to the vendee or lessee and the Landlord shall be considered
      released by the Tenant from all liability for the return of such security
      and the Tenant shall look to the new landlord solely for the return of the
      said security, and it is agreed that this shall apply to every transfer or
      assignment made of the security to a new landlord.  The security
      deposited under this Lease shall not be mortgaged, assigned or encumbered
      by the Tenant without the written consent of the Landlord, and any attempt
      to do so shall be void.

            

    

    

    In the event of the insolvency of
Tenant, or in the event of the entry of a judgment in any court against Tenant
which is not discharged within thirty (30) days after entry, or in the event a
petition is filed by or against Tenant under any chapter of the bankruptcy laws
of the state where the Office Park is located or of the United States of
America, then in such event, Landlord may require Tenant to deposit additional
security in an amount which in Landlord's sole judgment would be sufficient to
adequately assure Tenant's performance of all its obligations under the Lease.
Failure of Tenant to deposit the security required by this Article within ten
(10) days after Landlord's written demand shall constitute a material breach of
this Lease by Tenant.

    

    5.        
   A.           COMMON
AREAS.

    

    Landlord grants to Tenant and Tenant’s
agents, employees, invitees, customers, the right to use the "Common Areas" on a
non-exclusive basis with all other tenants of the Office Park. “Common Areas”
shall mean the areas of the Office Park made available by Landlord for the use
and enjoyment of all tenants of the Office Park and shall include the parking
areas, roadways, pathways, sidewalks, entrances and exits designated by Landlord
for common use in the Office Park Common Areas and subject to change at
Landlord’s sole discretion.

    

    B.          MAINTENANCE OF COMMON
AREAS.

    

    Landlord shall maintain the Common
Areas as well as portions of the Building in a  manner consistent with
its historical nature and in accordance with the quality construction consistent
with the existing Building.   In connection therewith, Landlord
shall have the right to expend, in its sole discretion, such reasonable sums as
may be required (i) to maintain and keep in good repair (including but not
limited to the making of any necessary repairs, replacements, improvements) all
portions of the Common Areas including, but not limited,
to  bathrooms, common areas, paving, roads, hydrants and sprinkler
equipment (including stand-by charges), driveways, sidewalks, secondary fire
pump facility, curbs, culverts and drainage facilities, surfacing, landscaping,
barriers, retaining walls, fences, gates, grading, directional and Building
signs, striping and marking of the parking area, sewer and water supply lines
and facilities, and other outside service and utility lines and facilities,
including electric lines, pipes, and installation of every kind serving the
buildings in the Office Park; (ii) to keep the Common Areas free from
accumulated snow, ice and refuse, and open for use and fully lighted during all
business hours; (iii) to keep the curb cuts of the Office Park, and to keep the
sidewalks and curbs, if any, adjacent to and immediately in front of the
Building, in good condition and repair, and free from accumulated snow, ice and
refuse, and to comply with all governmental requirements respecting same; (iv)
to include the Common Areas and the said curb cuts, and the sidewalks and curbs
aforesaid if any, covered by public liability insurance, protecting Landlord
against all claims for personal injury and property damage occurring thereon and
such other coverage as Landlord may determine, all commercially reasonable
limits of coverage.  The said insurance policy shall be written by
companies, which are licensed to write insurance in the jurisdiction where the
Building is located.  If such insurance shall be carried under a
blanket policy covering other locations of Landlord, the pro-rata premium cost
attributable to this Office Park shall be included in Common Area
Charges.

     

    
      
        	
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    C.          CONTROL OF COMMON
AREAS.

    

    (a)  The Common Areas shall
be subject to the exclusive control and management of Landlord, and Landlord
shall have the right to establish, modify, change, improvements and enforce
reasonable rules and regulations with respect to the Common Areas and Tenant
agrees to abide by and conform with such rules and regulations.  The
right of clients or guests to use the parking facilities shall apply only while
they are conducting business in the Building.  Tenant agrees that it
and its employees will park their automobiles only in such of the parking areas
as Landlord from time to time designates for that purpose.  Landlord
shall have the right to close any part of the Common Areas for such time as may,
in the opinion of Landlord's counsel, be necessary to prevent a dedication
thereof, or the accrual of any rights in any person or to clean and repair the
same, and to close any part of the parking area for such time as Landlord deems
necessary in order to discourage non-customer parking and to do other things in
the parking areas as Landlord in its discretion deems reasonable and necessary
for the benefit of the Office Park.  If the Common Areas are
diminished, Landlord shall not be subject to liability nor shall Tenant be
entitled to any compensation or diminution or abatement of Annual Base Rent or
Additional Rent, nor shall such diminution of the Common Areas be deemed a
constructive or actual eviction. Landlord reserves the right to rearrange the
parking facilities and other Common Areas; to change the number of buildings,
and the number, identity and type  tenancies, and the right to
construct and alter buildings and improvements in the Building from time to
time.  Notwithstanding the foregoing, Landlord shall have no right
to  construct and alter buildings and improvements in the Building in
such a way as would  unreasonably interfere with the operation of
Tenant’s business.

    

     D.        TENANT'S COMMON AREA CHARGE
AND TENANT’S TAX CHARGE.

    

    (1)  For purposes of this
Subsection D,
the following terms shall have the following meanings:

    

    (a)           Taxes:  as
defined in Article
3.

     

    
      
        	
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    (b)           Common Area Charges:
means Landlord's gross costs of operating, repairing, replacing, improvement,
and maintaining the Common Areas and facilities of the Building . Common Area
Charges shall include, but are not limited to, all costs and expenses of
operating, purchasing, easing, repairing, replacing, lighting, cleaning,
painting, striping, policing and security (including the cost of uniforms and
equipment), all employment taxes, insurance, including liability insurance for
personal injury, death and property damage, insurance against fire, extended
coverage, umbrella coverage, theft or other casualties, workers' compensation,
insurance covering personnel, fidelity bonds for personnel, insurance against
liability for claims of false arrest occurring in and about the Common Areas;
plate glass insurance for glass exclusively serving the Common Areas; removal of
snow, ice, garbage and debris; regulation of traffic; inspecting and maintenance
of machinery and
equipment used in the operation and maintenance of the Common Areas and personal
property taxes and other charges incurred in connection with such machinery and
equipment operating, repairing, replacing, cleaning and maintaining bathroom,
hallways, paving, curbs, walkways, landscaping, drainage, sewer, pipes, ducts,
conduits and similar items, and lighting facilities; planting, replanting and
replacing flowers, shrubbery and planters; security systems, security guard
service, rental of music program services and loudspeaker systems, including
furnishing electricity for same; management fees paid to the
Building  manager, managing agent and management company; clerical,
bookkeeping and accounting fees, office supplies and equipment including all
costs of office personnel, including salaries, benefits and related items
allocable solely to the operation and management of the Office Park; cost of
personnel to direct parking; promoting and advertising the Office Park,
including seasonal promotions, decorations and displays; sanitary and
exterminating; maintaining, repairing and replacing exterior walls where
necessary; except as it may otherwise be provided in this Lease, the
maintenance, replacement and/or repair of drain pipes, roof, electric, gas,
water lines, sewer mains and septic systems leading to and from the leased areas
in the Building ; costs of all Building  signs (but not those of other
tenants); engineering, architectural and other expert fees, and legal fees, in
connection with all operations of the Common Areas, including, but not limited
to, costs of defense of claims for damages not covered by liability insurance
and costs of obtaining municipal, county, state and federal approvals for any
alteration, construction or addition to the Common Areas of the Office Park;
directories and computer service costs for interior and exterior signs;
sprinkler system costs, charges and maintenance; security, costs attributed by
Landlord for providing energy to heat, ventilate and air condition the Common
Areas; services, if any, furnished by Landlord for non exclusive use of all
tenants on a non profit basis, including parcel pick up and delivery services
and shuttle bus service.

    

    (2)           Tenant
shall pay, as Additional Rent during each Lease Year (pro-rated as to each
partial Lease Year during the time that this Lease shall remain in force and
effect) Tenant’s Proportionate Share of (i) Common Area Charges and (ii) Taxes
(hereinafter, for purposes of this subarticle D, Common
Area Charges and Taxes shall be referred to, collectively, with its Base Rent as
the “Common Area
Charges”) and shall be adjusted annually.

    

    (3)           Common
Area Charges shall be paid in the following manner:

     

    
      	
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    (a)           Landlord
may reasonably estimate in advance the amounts Tenant shall owe as Common Area
Charges for any full or partial calendar year of the Term.  In such
event, Tenant shall pay such estimated amounts, on a monthly basis, starting on
the Rent Commencement Date, on or before the first (1st) day of
each calendar month, together with Tenant’s payment of Base
Rent.  Tenant shall pay initially and until further notice by Landlord
the estimated amount set forth in the Preamble section of this
Lease.  Landlord may reasonably adjust the estimated amounts from time
to time.

    

    (b)           Within
one hundred twenty (120) days after the end of each calendar year, Landlord
shall provide a statement (the “Statement”) to Tenant
showing:  (a) the amount of actual Common Area Charges for such
calendar year, with a listing of amounts for each category of Common Area
Charges, (b) any amount paid by Tenant towards Common Area Charges during such
calendar year on an estimated basis, and (c) any revised estimate of Tenant’s
obligations for Common Area Charges for the current calendar year.

    

    (c)           If
the Statement shows that Tenant’s estimated payments were less than Tenant’s
actual obligations for Common Area Charges for such year, Tenant shall pay the
difference to Landlord within ten (10) days of receipt of Landlord’s
Statement.  If the Statement shows that Tenant’s estimated payments
exceed Tenant’s actual obligations for Common Area Charges, Tenant shall receive
a credit for the difference against payments of Rent next due.  If the
Term shall have expired and no further Rent shall be due, Landlord shall refund
such difference to Tenant when Landlord sends the Statement.

    

    (d)           Unless
Tenant takes exception to any Statement by written notice to Landlord
within  thirty (30) days after Landlord provides such Statement to
Tenant, such Statement shall be considered final and binding on
Tenant.  Pending resolution of any such exceptions, Tenant shall
continue paying Tenant’s Proportionate Share of Common Area Charges in the
amounts determined by Landlord, subject to adjustment between the parties afer
any such exceptions are resolved.  Landlord shall provide Tenant
annually with a statement of Common Area Charges within three (3) months
following the year in which Common Area Charges were assessed against
Tenant.  Landlord’s statements of Common Area Charges shall be
certified by Landlord and set forth (1) the Common Area Charges for the Lease
Year in question, showing in detail the amount of each item included in Common
Area Charges, and (2) a detailed computation of any Additional Rent for such
Lease Year.  The payment of any Additional Rent by Tenant shall not
preclude it from questioning the correctness of any such statement within said
one hundred and twenty (120) day period.  Tenant, its attorneys,
accountants and agents, at its sole cost and expense, shall, during normal
business hours following prior written notice to Landlord, have the right to
examine and audit the books and records, including such other records and
accounts as may contain information related to the Common Area Charges for the
period in question and to make copies thereof, which books and records will be
available at Landlord’s office in the Office Park.  Landlord’s failure
to discharge its obligations as set forth in this paragraph shall suspend
Tenant’s obligation to make any further payments on account of Common Area
Charges until such failure ceases.  In the event such audit reveals an
overstatement of Landlord’s Common Area Charges of more than three percent (3%),
Landlord shall reimburse Tenant for reasonable out-of-pocket costs and expenses
incurred by it in conducting such audit.

     

    
      
        	
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    6.           COMPLIANCE WITH LAWS,
ORDERS.

    

    Tenant, at its own cost and expense,
shall comply with the requirements of all laws, requirements, orders, ordinances
and regulations of all governmental authorities having jurisdiction over the
Demised Premises, now or in the future.  Tenant shall obtain all
federal, state, county, municipal and other governmental licenses, permits and
approvals now or hereafter required in connection with Tenant's occupancy of the
Demised Premises, or the termination, continuation, expansion, alteration or
change of Tenant's business operations at the Demised
Premises.  Tenant shall not use the Demised Premises in such manner as
to constitute a violation of the Permitted Use of the same, and shall not bring
or permit to be brought or kept in or on the Demised Premises, any inflammable,
combustible or explosive fluids, materials, chemicals or other substances, or
permit any cooking unless expressly authorized by this Lease, or permit any
unusual or objectionable odors to permeate from the Demised Premises or do or
permit any act upon the Demised Premises which might subject Landlord to any
liability or responsibility for injury to any person or damage to any property
by reason of any business or operation being carried on in the Demised
Premises.  Tenant acknowledges and agrees that Landlord has made no
warranty or representation as to whether the use for which Tenant is leasing the
Demised Premises is permitted, restricted, regulated, prohibited or otherwise
affected by any law, ordinance or regulation.  Tenant agrees that this
Lease is not contingent upon Tenant obtaining any such governmental licenses,
permits or approvals.  Tenant shall indemnify, defend and save
harmless Landlord from any and all fines, civil penalties, lawsuits, claims,
damages and actions of any kind, including attorneys' fees, arising out of
Tenant's failure, to obtain such required governmental licenses, permits or
approvals.  Notwithstanding the foregoing, Tenant shall make no
application to any Planning Board or Board of Adjustment for any site plan or
variance approval or any other approval or relief without first obtaining the
written consent of Landlord.  Tenant shall comply with all rules,
orders or requirements now or hereinafter enacted of the federal, state and
municipal authorities and National Board of Fire Underwriters, Fire Insurance
Rating Organization, and other similar body or bodies having jurisdiction, and
shall not do or permit or bring or keep anything in the Demised Premises which
shall increase the rate of fire insurance on the building of which the Demised
Premises are a part or on the property kept therein over that in effect at the
commencement of the Term, and should Tenant fail to do so, Tenant shall
reimburse Landlord on demand as an additional charge hereunder for the increase
on all insurance premiums thereafter payable and which shall be charged because
of such violation by Tenant.  If any action or proceeding wherein
Landlord and Tenant are parties, a schedule or makeup of rates for the building
or the Demised Premises issued by the Fire Insurance Rating Organization located
in the State where the Office Park is located or other body fixing the fire
insurance rates, shall be conclusive of the facts therein stated and of the
items and charges in the fire insurance rate then applicable to the said
premises.  Tenant shall indemnify, defend and hold the Landlord
harmless from fines, claims and losses of every kind arising out of or in
connection with spills or discharges of hazardous substances or wastes occurring
at the Demised Premises.  If the Demised Premises are located in New
Jersey, Tenant shall not use the Demised Premises in any manner as to prevent
Landlord from obtaining a "negative declaration" (or its equivalent) pursuant to
the Environmental Cleanup Responsibility Act and the Spill Compensation and
Control Act or any similar or succeeding legislation.  Tenant shall
furnish Landlord and the appropriate governmental agencies with information
required in connection with environmental laws and if a cleanup plan must be
prepared and a cleanup undertaken, Tenant shall prepare, submit and implement
same.  Tenant's liability under this Article shall survive expiration
of the Term. In the event the requirements of any governmental authority or
Landlord's compliance with any laws, statutes, regulations or ordinances
interrupts the daily opening and operation of Tenant's business, Tenant's rent
shall be abated per diem accordingly with no further obligation of
Landlord.

     

    
      
        	
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    7.           REPAIRS AND MAINTENANCE OF
THE PROPERTY.

    

    (a)  Subject to the terms and
other provisions of this Lease, Landlord agrees to make, at its sole cost and
expense all necessary repairs to the foundation, exterior walls (other than the
door fronts of the Demised Premises), utility lines to the point of connection
at the Demised Premises, load bearing walls and other structural portions of the
Demised Premises after notice from Tenant of the need therefore, unless required
by reason of the negligence of Tenant.  Notwithstanding the foregoing,
it is hereby agreed and acknowledged, that regular and customary roof
maintenance costs and amortized roof  replacement costs, if any, shall
be included in the Common Area Charges.

    

    (b)           Subject
to Paragraph 2, Tenant covenants throughout the Term hereof, at its sole cost
and expense, to keep and maintain the interior, nonstructural portions of the
Demised Premises in good working order, repair and condition.

    

    8.           ADDITIONS, ALTERATIONS,
IMPROVEMENTS.(Subject to Paragraph 2)

    

    A.           Tenant
shall not make or cause to be made any exterior or structural alterations,
additions or improvements in or to the Demised Premises without submitting to
Landlord plans and specifications therefore and obtaining Landlord's prior
written consent thereto.

    

    B.           On
the last day of the Term or on the sooner termination thereof, Tenant shall (i)
peaceably surrender the Demised Premises broom-clean and in good order,
condition and restored to their original condition as of the commencement of the
term of this Lease, except for reasonable wear and tear; and (ii) at its expense
remove from the Demised Premises the signs, moveable furniture, trade fixtures
and carpeting which were furnished and installed by and at Tenant's sole cost
and expense (“Tenant's
Property"), and any of Tenant's Property not so removed may at Landlord's
election and without limiting Landlord's right to compel removal thereof at the
sole expense of Tenant, be deemed abandoned.  Any damage to the
Demised Premises caused by Tenant in the removal of Tenant's Property shall be
repaired by and at Tenant's expense.  Tenant's obligations under this
Article shall survive the expiration of the term of this Lease.

     

    
      
        	
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    C.           The
title to all alterations, additions, improvements, repairs, decorations
(including any hard surface, bonded or adhesively affixed flooring), heating and
air-conditioning equipment and fixtures (other than Tenant's Property) which
shall have been made, furnished or installed by or at the expense of either
Landlord or Tenant in or upon the Demised Premises, shall vest in Landlord upon
the installation thereof, and the same shall remain upon and be surrendered with
the Demised Premises as a part thereof, without disturbance and without
charge.

    

    9.           INSURANCE.

    

    Tenant shall, at its own expense,
during the term hereof, maintain and deliver to Landlord public liability and
property damage and policies with respect to the Demised Premises, in which both
Landlord and Tenant shall be named as insureds, with limits of at least Two
Million Dollars ($2,000,000.00) for injury or death to any one person and Two
Million Dollars ($2,000,000.00) for any one accident, and Two Million Dollars
($2,000,000.00)  with respect to damage to property.  Such
policy or policies shall be in such form and with such insurance companies as
shall be reasonably satisfactory to Landlord with provision for at least twenty
(20) days notice to Landlord of cancellation.  At least thirty (30)
days before the expiration of any such policy Tenant shall supply Landlord with
a substitute therefor with evidence of payment of premiums
thereof.  If such premiums shall not be so paid and/or the policies
therefor shall not be so delivered, then Landlord may procure and/or pay for the
same and the amounts so paid by Landlord, shall be added to the installment of
monthly rent becoming due on the first of the next succeeding month and shall be
collected as an additional charge.  Tenant shall also be responsible
for obtaining fire insurance with standard extended coverage or "all risk"
endorsement including, without limitation intended, vandalism and malicious
mischief, equal to the replacement value of Tenant's improvements to the Demised
Premises.  The proceeds of such insurance will be held in trust only
for the repair and/or replacement of the improvements to the Demised
Premises.  Tenant  shall also carry rental value insurance
in the amount of one year's Annual Base Rent and Additional Rent.  No
deductible will be carried for any of the insurance described in this
Article.

    

    10. 
       MECHANIC'S
LIEN.

    

    A.           Tenant
shall not suffer any mechanics' or materialmen's lien to be filed against the
Demised Premises or the Office Park by reason of work, labor, services or
materials performed or furnished to Tenant or anyone holding any part of the
Demised Premises under Tenant.  If any such lien shall at any time be
filed as aforesaid, Tenant may contest the same in good faith but
notwithstanding such contest Tenant shall, within thirty (30) days after the
filing thereof, cause such lien to be released of record by payment, bond, order
of a court of competent jurisdiction, or otherwise.  In the event of
Tenant's failure to release    of record any such lien
within the aforesaid period, Landlord may remove said lien by paying the full
amount thereof or by bonding or in any other manner Landlord deems appropriate
without investigating the validity thereof and irrespective of the fact that
Tenant may contest the propriety or the amount thereof, and Tenant, upon demand,
shall pay Landlord the amount so paid out by Landlord in connection with the
discharge of said liens together with expenses incurred in connection therewith,
including reasonable attorneys' fees.  Nothing contained in this Lease
shall be construed as a consent on the part of Landlord to subject Landlord's
estate in the Demised Premises to any lien or liability under the lien laws of
the State where the Office Park is located.

     

    
      
        	
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    B.           Tenant
shall not create or suffer to be created a security interest or other lien
against any improvements, additions or other construction made by Tenant in or
to the Demised Premises or against any equipment or fixtures installed by Tenant
therein (other than Tenant's Property), and should any security interest be
created in breach of the foregoing, Landlord shall be entitled to discharge the
same by exercising the rights and remedies afforded it under the penultimate
sentence of Paragraph
A of this Article.

     

    11.         ASSIGNMENT,
SUBLETTING.

     

    Tenant shall not assign, mortgage or
encumber this Lease, or sublet, underlet, license or permit the Demised Premises
or any part thereof to be used by others, whether voluntarily or by operation of
law or otherwise, without the prior written consent of Landlord any assignment
or transfers approved shall bear a legal fees incurred by Landlord
payable  by Tenant.  The sale or transfer of all or
substantially all of the assets of Tenant or stock control, if Tenant be a
corporation, or, if Tenant be a partnership or joint venture, a sale of an
interest in such partnership or joint venture shall be deemed an assignment of
this Lease, unless (i) such sale or transfer is made to a publicly owned
corporation; (ii) it involves the sale or issuance of securities registered
under the Securities Act of 1933, as amended; (iii) it is made amongst the
existing stockholders, partners or joint venturers of Tenant; or (iv) it results
from the death of a stockholder, partner or joint venturer of
Tenant.  If this Lease is assigned or if the Demised Premises or any
part thereof be underlet or occupied by any body other than Tenant, Landlord may
collect rent from the assignee, undertenant or occupant, and apply the net
amount collected to all rent herein reserved, but no such assignment,
underletting, occupancy or collection shall be deemed a waiver of this covenant
or the acceptance of the assignee, undertenant or occupant as tenant, or a
release of any performance of the covenants on Tenant's part herein
contained.  Any consent by Landlord to an assignment or underletting
shall not in any manner be construed to relieve Tenant or any assignee or
undertenant from obtaining the consent in writing of Landlord to any further
assignment or underletting.  Tenant shall pay Landlord's reasonable
attorney fees related to same.

     

    12.         LANDLORD'S
RIGHTS.

     

    Landlord shall have the right in a
reasonable manner to enter upon the Demised Premises at all reasonable hours and
upon not less than four (4) hours prior notice to Tenant (except in case of an
emergency where no notice is necessary) for the following purposes: to inspect,
maintain, repair or protect the Demised Premises, utilities and services , to
effect compliance with any law, order or regulation of any governmental
authority having jurisdiction; to exhibit same to prospective purchasers,
lenders or tenants; to make or supervise repairs, additions or alterations to
the same or the building of which the Demised Premises are a part, and to take
all materials thereon that may be required therefore; to erect, use and maintain
pipes and conduits in and through the Demised Premises; and to alter, decorate
or otherwise prepare the Demised Premises for re-occupancy at any time after
Tenant has vacated the same or shall have removed substantially all of its
property there from.  None of the foregoing shall constitute an actual
or constructive eviction of Tenant or a deprivation of its rights, nor subject
Landlord to any liability or impose upon Landlord any obligation, responsibility
or liability whatsoever, for the care, supervision or repair of the building of
which the Demised Premises are a part, or any part thereof, other than as herein
specifically provided, or entitle Tenant to any compensation or diminution or
abatement of the rent reserved.  If Tenant refuses or neglects to make
such repairs as it is required to make and complete the same with reasonable
dispatch, Landlord may make or cause such repairs to be made at Tenant's cost
and expense, and the amount so paid by Landlord shall be added to the
installment of monthly Rent becoming due on the first of the next succeeding
month and shall be then payable as an additional charge.  Landlord
shall not be responsible to Tenant for any loss or damage that may accrue to its
merchandise or other property by reason of any work done by Landlord in or about
the Demised Premises.  Landlord shall have the right at its sole
discretion at any time to subdivide the existing land and either dispose such
divided land as its see fits and/or be entitle without interference or dispute
by the Tenant developed the existing develop or expand the existing building
and/or property as it sole desires.

     

    
      	
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    13.         TENANT’S
REPRESENTATION

    

    Tenant
represents and warrants that they fully understand that the Landlord intends to
subdivide the existing land and either dispose such divided land as its see fits
and/or to developed the existing or subdivided property and/or to expand the
existing building and or property as it sole desires, including but not limited
to, additional office building, residential condominium, townhouses, residential
housing. Tenant agrees not to interfere, dispute, litigate against the Landlord
and/or Landlord’s successors and/or assignees with regards to Landlord’s rights
under Paragraphs 12 and 13.

     

    14.         SIGNS.

     

    Tenant shall not maintain or display
any signs, lettering or lights on the exterior of the Demised Premises or in the
interior of the Demised Premises or any show window thereof, which is visible
from the exterior thereof unless approved by Landlord in writing.

     

    15.         SUBORDINATION.

     

    This Lease shall at Landlord's option
or at the option of the holder of any mortgage, trust deed or lessor under a
ground lease be subject and subordinate to all ground or underlying leases and
to all mortgages or deeds of trust now or hereafter affecting such leases, and
to all mortgages or deeds of trust which may now or hereafter affect the Office
Park, or any portion thereof, whether such mortgages or deeds of trust cover
only the Office Park or be a blanket mortgage or deed of trust covering other
premises in addition to the Office Park, and to any renewals, modifications,
consolidations, replacements or extensions thereof, provided that the holder of
any mortgage, trust deed or lessor under a ground lease, as the case may be,
shall and does agree to (a) recognize this Lease so that Tenant’s rights are not
diminished by reason of such subordination and (b) not  disturb the
tenancy of Tenant.  This clause shall be self-operative and no further
instrument of subordination shall be required by any mortgagee or
trustee.  Tenant shall execute promptly any instrument which Landlord
may request in confirmation of such subordination.  Landlord agrees to
use commercially reasonable efforts to obtain a Subdordination, Non-Disturbance
and Attornment Agreement (“SNDA”) from its
current lender(s), if any, in form reasonably satisfactory to Tenant, from any
future lender within forty-five (45) days after Landlord closes on the financing
from such lender.

     

    
      	
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    16.         UTILITIES.

     

    As part of CAM, Tenant shall pay for
all water charges, electrical, gas charges, sewer charges or sewer tax based on
the Tenants Proportionate Share of Square feet as shown in PREAMBLE
(5).   and like utilities used or consumed in or upon the Demised
Premises, including the operation of the heating, air-conditioning and sprinkler
systems for the Demised Premises.  Tenant shall also pay any and all
deposits required by any utility. Landlord reserves the right to interrupt the
supply of water, gas, electric and also sewer service and any other similar
utilities for the Demised Premises when required by reason of accident or of
repairs, alterations or improvements, until such repairs, alterations or
improvements shall have been completed.    Landlord shall
not be liable in damages or otherwise for any failure to furnish or interruption
of the services of water, gas, electricity or sewer.

     

    17.         RULES,
REGULATIONS.

    

    A.           Tenant
agrees that at all times during the term of this Lease it shall comply with all
rules and regulations specified in Exhibit E annexed
hereto together with all reasonable amendments, modifications, deletions and
other reasonable rules and regulations for the use and occupancy of the Office
Park as Landlord may from time to time promulgate.

     

    B.           REFUSE
ADMISSION.

     

    Landlord reserves the right to refuse
admission to the Office Park and the Demised Premises, outside of ordinary
business hours, to any person not known to any watchman in charge or properly
identified, to eject any person from the Office Park whose conduct may tend to
be harmful to the safety and interests of the tenants and the property herein;
to close any part of the Office Park during any riot or other commotion where
person or property may be imperiled.

     

    18.         LANDLORD NOT
LIABLE.

     

    Landlord and its agents shall not be
liable for any loss or damage to property for any reason whatsoever entrusted to
their employees or agents, nor for loss of property by theft. Landlord and its
agents shall not be liable for any injury or damage to persons or property
resulting from falling plaster, or from steam, gas, water or snow which may leak
from any part of the building including, but not limited to, the roof or from
the pipes or appliances therein, or from the part of sub-surface or from
dampness, or from any other cause.

     

    19.         EMINENT
DOMAIN.

     

    A.           If
the whole of the Demised Premises shall be taken under the power of eminent
domain, then this Lease shall be terminated as of the day possession shall be so
taken.

     

    
      	
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    B.           If
more than twenty-five (25%) percent of the floor area of the Demised Premises,
or if more than fifty (50%) percent of the common parking area, or if more than
fifty (50%) percent of all of the ground level floor area of the buildings in
the Office Park shall be taken under power of eminent domain, either Landlord or
Tenant may terminate this Lease by written notice given within thirty (30) days
after the date of surrendering possession to the public authority pursuant to
such taking, and if neither Landlord nor Tenant elects to terminate this Lease,
Landlord shall restore and adapt the remaining Demised Premises, and the Annual
Base Rent shall be reduced as described in Paragraph C of this
Article.

     

    C.           If
twenty five (25%) percent or less of the floor area of the Demised Premises, or
fifty (50%) percent or less of the common parking area, or fifty (50%) percent
or less of all of the ground level floor area of the buildings in the Office
Park shall be taken under the power of eminent domain, this Lease shall not
terminate, but shall continue in full force and effect, except that the Annual
Base Rent shall be reduced in the same proportion that the floor area of the
Demised Premises so taken bears to the total floor area demised to Tenant at the
time of such taking, and Landlord shall, at its own cost and expense, make all
necessary restorations to the building in which the Demised Premises are located
so as to constitute the portion of the building not taken a complete
architectural unit, but such work shall not exceed the scope of the work to be
done by Landlord in originally constructing said building.

     

    D.          All
damages awarded for any taking under the power of eminent domain, whether for
the whole or a part of the Demised Premises, shall belong to and be the sole
property of Landlord, whether such damages shall be awarded as compensation for
diminution in value to the leasehold or to the fee of the premises; provided,
however, that Landlord shall not be entitled to any award made to Tenant for
loss of or damage to Tenant's trade fixtures.

     

    E.           If
this Lease is terminated as provided in this Article, Tenant shall pay all
Annual Base Rent and additional charges and perform all other covenants up to
the day that possession is so taken by public authority and Landlord shall make
a proportionate refund of any Annual Base Rent or additional charges paid by
Tenant in advance.

    

    F.   The
above Paragraph 19 does not apply to any subdivision or new construction on the
site, including but not limited to the construction of townhouses, condominiums,
office buildings, subdivision, or any other improvements to the
land.

     

    
      	
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    20.         DAMAGE,
DESTRUCTION.

    If the Demised Premises or the building
where the Demised Premises are located should be damaged or destroyed during the
term by fire or other insured casualty without the fault of Tenant, Landlord
shall, subject to the time that elapses due to adjustment of fire insurance,
repair and/or restore the same to substantially the condition it was in
immediately prior to such damage or destruction, except as in this Article
provided.  Landlord's obligation under this Article shall in no
event exceed the scope of the work required to be done by Landlord in the
original construction of the building.  Landlord shall not be required
to, but Landlord shall with due dispatch, replace or restore forthwith any trade
fixtures, signs or other installations theretofore installed by
tenant.   All Rent and Additional Rent payable under this
Lease,  shall be equitably abated.  Such abatement shall
continue for the period commencing with such damage or destruction and ending
with the completion by the Landlord of such work of repair and/or reconstruction
as Landlord is obligated to do.  If, however, the Demised Premises or
the building containing it or the other buildings in the Office Park should be
damaged or destroyed by any cause so that the Landlord shall decide to demolish
or to completely rebuild the Demised Premises or the building containing it or
the other damaged buildings in the Office Park, Landlord may, within sixty (60)
days after such damage or destruction give Tenant written notice of such
decision and thereupon this Lease shall be deemed to have terminated as of the
date of the damage or destruction and Tenant shall immediately quit and
surrender the Demised Premises to Landlord.  If damage to the Demised
Premises exceeds 30% thereof during the last two years, either Landlord or
Tenant may cancel this Lease.

     

    21.         DEFAULT

     

    A. 
        BANKRUPTCY BEFORE COMMENCEMENT
DATE. If at any time prior to the Commencement Date a petition in bankruptcy or
insolvency or for reorganization or arranged or for the appointment of a
receiver or trustee of all or a part of Tenant's property is filed in any court
by Tenant, or if filed against Tenant, same is not vacated within thirty (30)
days thereafter, or if Tenant makes an assignment for the benefit of creditors
or enters into an arrangement with its creditors or otherwise seeks relief under
or is the debtor-party to any insolvency proceedings under any federal or state
bankruptcy or insolvency statute, then, and in any such event, this Lease, at
the option of Landlord, exercised within a reasonable time after the happening
of any one or more of such events, may be terminated and cancelled and neither
Tenant nor any person claiming through Tenant shall be entitled to possession of
the Demised Premises and Landlord may retain as liquidated damages any rent,
security or monies previously received from Tenant or others on behalf of Tenant
under this Lease, in addition to the rights and remedies hereinafter set forth
in this Article.

     

    B.           BANKRUPTCY
AFTER COMMENCEMENT DATE. If at the date fixed as the Commencement Date or if at
any time during the Term of this Lease or any renewals or extensions thereof a
petition in bankruptcy or insolvency or for reorganization or arrangement or for
the appointment of a receiver or trustee of all or a part of Tenant's property
is filed in any court by Tenant, or if filed against Tenant, same is not vacated
within thirty (30) days thereafter, or if Tenant makes an assignment for the
benefit of creditors or enters into an arrangement with its creditors or
otherwise seeks relief under or is the debtor-party to any insolvency
proceedings under any federal or state bankruptcy or insolvency statute, then,
and in any of such events, this Lease, at the option of Landlord, exercised
within a reasonable time after notice of the happening of any one or more of
such events, may be terminated and cancelled, in which event neither Tenant nor
any person claiming through or under Tenant by virtue of any statute or of any
order of any court shall be entitled to possession or to remain in possession of
the Demised Premises, but shall forthwith quit and surrender the Demised
Premises, and Landlord, in addition to the other rights and remedies Landlord
has by virtue of any other provision herein or elsewhere in this Lease contained
or by virtue of any statute or rule of law may retain as liquidated damages any
Annual Base Rent, Security Deposit, Additional Rent other monies received or
recoverable by Landlord from Tenant or others in behalf of Tenant.

     

    
      	
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    C.           It
is stipulated and agreed that in the event of the termination of this Lease
pursuant to Paragraph
21A or B
above or 22A or
B below
Landlord shall, in addition to all other remedies and damages available to
Landlord,  be entitled to recover from Tenant as and for  an
amount equal to the difference between (i) the Annual Base Rent and additional
charges reserved hereunder for the unexpired portion of the Term demised; and
(ii) the rental value of the Demised Premises at the time of termination for the
unexpired term or portion thereof, both discounted at the rate of four (4%)
percent per annum to present worth.  Nothing herein contained shall
limit or prejudice the right of Landlord to prove for and obtain as liquidated
damages by reason of such termination, an amount equal to the maximum allowed by
any statute or rules of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved, whether or not such amount
be greater, equal to, or less than the amount of the difference referred to
above.  In determining rental value of the Demised Premises, the rent
realized by any reletting, if such reletting be accomplished by Landlord within
a reasonable time after termination of this Lease, shall be deemed prima facie
to be the rental value.

     

    22.         A.           ADDITIONAL
LANDLORD REMEDIES

    

    If Tenant (i) defaults in the payment
of Annual Base Rent, Additional Rent or any additional charges due under this
Lease and such default continues for a period of five (5) days after Landlord
shall have given notice to Tenant thereof; or (ii) if Tenant defaults in the
observance or performance of any other term, covenant or condition of this Lease
on Tenant’s part to be observed or performed and Tenant fails to remedy such
default within  thirty (30) days after notice by Landlord to Tenant
specifying such default; or, if such default is of such a nature that it cannot
be completely remedied within said thirty (30) day period and  Tenant
fails to commence in good faith to remedy such default within  such
thirty (30) day period or fails thereafter to diligently prosecute to completion
all steps necessary to remedy such default which remedy in all events will be
completed within  thirty (30) days after notice by Landlord to Tenant
of such default; provided, however, if any governmental authority or mortgagee
requires that such default be remedied in less than  thirty (30) days,
then Tenant’s time to remedy such default shall be shortened so that such
default must be remedied at least five (5) business days before the last date of
the period of time to remedy such default; provided by such governmental
authority or mortgagee; or (iii) if Tenant permits the Demised Premises to
become deserted, abandoned or vacated, or fails to remain open for business for
a period of ten (10) consecutive business days within a  fifteen (15)
day period; or (iv) permits this Lease to be transferred to or devolve upon any
person or corporation other than Tenant, except as may be specifically permitted
by this Lease, then and in any of such events Landlord, or its agents may give
Tenant a written notice specifying a day not less than five (5) days thereafter
whereupon the Term shall end; and on the day specified the Term of this Lease
shall expire as if that day were the day herein fixed for the expiration of the
Term,  Tenant shall then quit and surrender the Demised Premises to
Landlord and all amounts of Rent and Additional Rent due to Landlord through the
expiration of the Term or any renewal/option terms exercised by
Tenant  of this Lease shall be immediately accelerated, due and
payable by Tenant to Landlord and Tenant shall remain liable in all respects
hereunder.  Tenant waives trial by jury in any action or proceeding by
the Landlord to enforce Landlord's rights hereunder.  Tenant further
waives any and all statutory rights or redemption following termination of this
Lease or dispossess of Tenant.

     

    
      	
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    B.           ABANDONMENT.

     

    If Tenant shall abandon the Demised
Premises or if the Term of this Lease shall expire as hereinbefore provided, or
if Tenant fails to take possession of the Demised Premises within ten (10) days
after the Commencement Date, Landlord may re-enter the Demised Premises and
remove Tenant or its legal representatives or other occupant by summary
proceedings or otherwise and Tenant hereby waives the service of notice of
intention to re-enter or to institute legal proceedings to that
end.

     

    C.           RE-ENTRY.

    

    In case of any such re-entry,
expiration and/or dispossess by summary proceedings or otherwise, the Annual
Base Rent shall become due thereupon and be paid up to the time of such
re-entry, dispossess and/or expiration, together with such expenses as Landlord
may incur for brokerage, attorneys fees, and/or putting the Demised Premises in
good order, or for preparing the same for re-rental.  Landlord may
relet the Demised Premises or any part or parts thereof, either in the name of
Landlord or otherwise, for a term or terms which may at Landlord's option be
less than or exceed the period which may otherwise have constituted the balance
of the term of this Lease and may grant reasonable concessions, or free rent;
and Tenant or the legal representatives of Tenant shall also pay Landlord as
liquidated damages for the failure of Tenant to observe and perform said
Tenant's covenants herein contained, any deficiency between (i) all Annual Base
Rent and additional charges hereby reserved and/or covenanted to be paid; and
(ii) the net amount, if any, of the rents collected on account of the Lease of
the Demised Premises for each month of the period which would otherwise have
constituted the balance of the term of this Lease.  In computing such
liquidated damages, there shall be added to the said deficiency such expenses as
Landlord may incur in connection with reletting, such as for brokerage,
attorneys' fees, advertising, for keeping the Demised Premises in good order,
and for preparing the same for reletting.  Any such liquidated damages
shall be paid in monthly installments by Tenant on the rent days specified in
this Lease and any suit brought to collect the amount of the deficiency for any
month shall not prejudice in any way the rights of Landlord to collect the
deficiency for any subsequent month by a similar
proceeding.  Landlord, in its discretion, may make such alterations,
divisions, repairs, replacements, and/or decorations in the Demised Premises as
may be necessary for the purpose of reletting the Demised Premises, and the
making of such alterations and/or decorations shall not operate or be construed
to release Tenant from liability hereunder as aforesaid.  Landlord
shall not be liable for failure to relet the Demised Premises.  The
words "re-enter" or "re-entry" as used in this Lease shall not be restricted to
their technical legal meaning.

     

    
      	
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    D.           INJUNCTIVE
RELIEF.

    In the event of a breach or threatened
breach or anticipatory breach by Tenant of any of the covenants or provisions of
this Lease, Landlord shall have the right of injunction and the right to invoke
any remedy allowed at law or in equity as if re-entry, summary proceedings and
other remedies were not herein provided for.  Mention in this Lease of
any particular remedy shall not preclude Landlord from any other remedy, in law
or in equity.  Tenant hereby expressly waives any and all rights of
redemption granted by or under any present or future laws in the event of
Tenant's being evicted or dispossessed, or in the event of Landlord's obtaining
possession of the Demised Premises by reason of Tenant's violation of the
provisions of this Lease.  Landlord's remedies hereunder are in
addition to any remedy provided by law.

     

    E.          CURE
DEFAULTS.

     

    If Tenant shall default in the
performance of any provision, covenant or condition on its part to be performed
under this Lease beyond the applicable notice and cure periods, Landlord may, at
its option, perform the same for the account and at the expense of
Tenant.  If Landlord at any time shall be compelled to pay or elects
to pay any sum of money or do any act which requires the payment of any sum of
money by reason of the failure of the Tenant to comply with any provision of
this Lease, or if Landlord incurs any expense in prosecuting or defending any
action or proceeding by reason of any default of Tenant under this Lease, the
sums so paid by Landlord with legal interest, reasonable attorney's fees, costs
and damages shall be due from and be paid by Tenant to Landlord on demand as an
additional charge hereunder shall constitute Additional Rent.

     

    23.         Attornment.
Notwithstanding anything to the contrary contained in this Lease, this Lease is
subject and subordinate to Landlord's mortgage loan ("Mortgage"), Tenant
will recognize as its landlord, lessor or licensor, as applicable, and attorn to
any person succeeding to the interest of Landlord-Mortgagor under this Lease
upon any foreclosures of such Mortgage or deed in lieu of foreclosure; and upon
request of said successor-in-interest, Tenant shall execute and deliver an
instrument or instruments confirming its attornment as provided for in this
Section; provided, however, that neither Mortgagee nor any successor-in-interest
shall be bound by any payment of rent for more than one (1) month in advance, or
any amendment or modification of said Lease made without the express prior
written consent of Mortgagee or said successor-in-interest.

    

    24.         NOTICES.

     

    All notices by either party to the
other provided for in this Lease shall be in writing and shall be sent by
Certified or Registered Mail, return receipt requested, or Express Mail, Federal
Express or other similar form of delivery where proof of delivery is available
addressed to Tenant at Tenant's address, and addressed to Landlord at Landlord's
address, or to such other address as may be designated by either party to the
other by like notice, and the date on which such notice is deposited in the
United States Mail, postage prepaid, shall be the date of the giving of such
notice.  Any bill, statement or communication, other than notices
provided for in this Lease, which Landlord may give to Tenant, shall be
sufficiently given if delivered to Tenant personally or left at the Demised
Premises with a person of suitable discretion or sent by mail addressed to
Tenant at the Demised Premises or the last known address of Tenant, and the date
of such service or deposit in the mail shall be deemed the date of the rendition
of any such bill, statement or communication.

     

    
      	
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    25.         EXCAVATIONS.

     

    If an excavation or other construction
shall be undertaken upon land  adjacent, under, or
about  the Demised Premises, Tenant shall afford to the person
performing such work, permission to enter upon the Demised Premises for the
purpose of doing such work as such party deems necessary to preserve the wall,
or the building of which the Demised Premises form a part, from injury or damage
and to support the same by proper foundations without the same constituting an
eviction of Tenant, in whole or part, and without any claim for damages or
indemnity against Landlord, or diminution or abatement of Annual Base
Rent.  The person performing such work shall use reasonable efforts to
minimize interference with, or interruption of, Tenant's business operations,
and shall repair any damage caused to the Demised Premises as a result of such
work.

     

    26.         COVENANT OF QUIET
ENJOYMENT.

     

    Landlord agrees that Tenant, upon
paying the Annual Base Rent and all additional charges to be paid hereunder and
upon performing all the covenants and conditions on Tenant's part to be observed
and performed, shall and may peaceably and quietly have, hold and enjoy the
Demised Premises for the Term aforesaid, subject, nevertheless, to the other
provision of this Lease; except for events related
to Landlord's compliance with statutes, rules, regulations and
ordinances.

     

    27.         TENANT'S
TAXES.

     

    Tenant shall make timely payment of all
ad valorem or other taxes and assessments levied upon Tenant's stock of
merchandise, fixtures, furnishings, furniture, equipment, supplies and other
property located on or used in connection with the Demised Premises and of all
privilege and business licenses, fees, taxes and similar charges.

     

    28.         NAME OF OFFICE
PARK.

     

    Landlord shall have and retain all
property rights in and rights to the use of the name or designation of the
Office Park and Tenant agrees that Landlord shall have the absolute right to
change the name or designation of the Office Park at any time or from time to
time during the Term of this Lease.  Tenant shall not have any
property right or interest in any name or distinctive designation which may
become associated with Tenant's business to be conducted at the Demised Premises
or the Office Park if such name or designation shall contain any reference to
the name or designation of the Office Park and Tenant agrees to use the name or
designation of the Office Park only with the consent of Landlord.

     

    29.         DEFINITION OF
LANDLORD.

     

    The term "Landlord" as used in
this Lease shall mean the owner or lessee for the time being of the property
containing the Demised Premises, and if such property or Lease be sold or
transferred, the seller or assignor shall be entirely relieved of all covenants
and obligations under this Lease and it shall be deemed without further
agreement between the parties hereto and their successors, that the purchaser on
such sale or the lessee or assigned has assumed and agreed to carry out
covenants and obligations of Landlord hereunder.

     

    
      	
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    30.         FORCE
MAJEURE.

     

    The period of time during which
Landlord is prevented or delayed in the performance of the making of any
improvements or repairs or fulfilling any obligation required under this Lease
due to delays caused by fire, catastrophe, strikes, or labor trouble, civil
commotion, weather, labor delays, acts of God or the public enemy, govern mental
prohibitions or regulations, or inability or difficulty to obtain material, or
other causes beyond Landlord's control, shall be added to Landlord's time for
performance thereof, and Landlord shall have no liability by reason
thereof.

     

    31.         CERTIFICATION.

     

    Within ten (10) days after request
therefor by Landlord, Tenant agrees to deliver in recordable form a
certification to any proposed mortgagee, trustee or purchaser, certifying that
this Lease is (i) in full force and effect, (ii) it has not been assigned and is
unmodified, (iii) or if modified that it is in full force and effect setting
forth the modifications, (iv) that there are no defenses or offsets thereto, or
stating those claimed by Tenant, (v) the dates to which Annual Base Rent other
charges have been paid, (vi) the commencement and termination dates and (vii)
the amount of security deposited.  It is intended that any such
statement delivered pursuant to this Article may be relied upon by a prospective
purchaser of Landlord's interest or mortgagee of Landlord's interest or assignee
of any mortgage of Landlord's interest.  Failure of tenant to comply
with the provisions of this Article 30 shall be
deemed a default by Tenant under this Lease and such Failure shall also
constitute an acknowledgment by Tenant which may be relied upon by Landlord, any
person holding or proposing to hold or acquire an interest in the Office Park,
that this Lease is in full force and effect, that Landlord is not in default
under this Lease and that there are no set-offs or defenses against the Landlord
under this Lease.  Such failure by Tenant to deliver timely fee
statement required under this Article shall
constitute as to any person entitled to rely upon such statement, a waiver of
any defaults which existed prior to the date of such notice.

     

    32.         SURRENDER,
WAIVER.

     

    No agreement to accept a surrender of
the Demised Premises shall be valid unless in writing signed by
Landlord.  The delivery of keys to any employee of Landlord or of
Landlord's agents shall not operate as a termination of the Lease or a surrender
of the Demised Premises.  The failure of Landlord to seek regress for
violation of, or to insist upon the strict performance of, any covenant or
condition of this Lease, or of any rule or regulation, shall not prevent a
subsequent act, which would have originally constituted a violation, from having
all the force and effect of an original violation.  The receipt by
Landlord of Annual Base Rent or additional charges due hereunder, if any, with
knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach.  No provision of this Lease shall be deemed to
have been waived by Landlord, unless such waiver be in writing signed by
Landlord.  No payment by Tenant or receipt by Landlord of a lesser
amount than the Annual Base Rent or additional charges due hereunder, if any,
herein stipulated shall be deemed to be other than on account of the earliest
stipulated Annual Base Rent or additional charge hereunder, nor shall any
endorsement or statement on any check nor any letter accompanying any check or
payment as Annual Base Rent be deemed an accord and satisfaction, and Landlord
may accept such check or payment without prejudice to Landlord's right to
recover the balance of such Annual Base Rent or additional charge hereunder or
pursue any other remedy in this Lease provided.  This Lease contains
the entire agreement between the parties, and any agreement hereafter made shall
be ineffective to change, modify, or discharge it in whole or in part, unless
such agreement is in writing and signed by the party against whom enforcement of
the change, modification or discharge is sought.

     

    
      	
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    33.         EXCULPATION.

     

    Notwithstanding anything to the
contrary set forth in this Lease, it is specifically understood and agreed by
Tenant that there shall be absolutely no personal liability on the part of
Landlord or on the part of the partners of Landlord with respect to any of the
terms, covenants and conditions of this Lease, and Tenant shall look solely to
the equity, if any, of Landlord in the Office Park for the satisfaction of each
and every remedy of Tenant in the event of any breach by Landlord of any of the
terms, covenants and conditions of this Lease to be performed by Landlord, such
exculpation of personal liability to be absolute and without any exception
whatsoever.

     

    34.         EXECUTION BY
LANDLORD.

     

    The submission of this Lease to Tenant
is transmitted for examination only and shall not be construed to vest in Tenant
an offer to Lease, or reservation of, the Demised Premises.  This
Lease shall become effective only upon full (100%) execution and unconditional
delivery by Landlord and Tenant.

     

    35.         WAIVER OF
SUBROGATION.

     

    Landlord and Tenant hereby releases the
other from any and all liability or responsibility (to the other or anyone
claiming through or under them by way of subrogation or otherwise) under fire
and extended coverage or supplementary contract casualties, if such fire or
other casualty shall have been caused by the fault or negligence of the other
party, or anyone for whom such party may be responsible; provided, however, that
this release shall be applicable and in force and effect only with respect to
loss or damage occurring during such time as the releasor's policies shall
contain a clause or endorsement to the effect that any such release shall not
adversely affect or impair said policies or prejudice the rights of the releasor
to recover thereunder.  Landlord and Tenant agree that its respective
policies will include such a clause or endorsement so long as the same shall be
obtainable without extra cost, or if such cost shall be charged therefore so
long as the other party pays such extra cost.  If extra cost shall be
chargeable therefor, each party shall notify the other party thereof and of the
amount of the extra cost, and the other party shall be obligated to pay the
extra cost unless, within ten (10) days after such notice, it elects not to be
obligated to do so by written notice to the original party.  If such
clause or endorsement is not available, or if either party should not desire the
coverage at extra cost to it, then the provisions of this Article shall not
apply to the policy or policies in question.

     

    
      	
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    36.         BROKER.

     

    Tenant and Landlord each represent that
no broker or real estate agent brought about this Lease and that it has not had
any dealings with any broker or real estate agent in connection with the
bringing about of this Lease.  Tenant and Landlord agree to indemnify
and save each other harmless from and against any and all claims and all costs,
expenses and liabilities incurred in connection therewith, including but not
limited to reasonable attorney’s fees and court costs, by any such broker, agent
or other person claiming a commission or other form of compensation by virtue of
having dealt with Tenant or Landlord with respect to this Lease.

     

    37.         RECORDATION.

     

    Tenant covenants not to place this
Lease or any memorandum thereof on record without the prior written consent of
Landlord.  At the request of Landlord, Tenant will execute a
memorandum of lease for recording purposes containing references to such
provisions of this Lease as Landlord, in its sole discretion, shall deem
necessary.

     

    38.         JOINT
VENTURE.

     

    The parties hereto state that they have
not created and do not intend to create by this Lease a joint venture or
partnership relating between them, it being understood and agreed that the
provisions of this Lease with regard to the payment by Tenant and the acceptance
by Landlord of a sum equal to a percentage of gross sales is a reservation of
rent.

     

    39.         ADDITIONAL
CHARGES.

     

    Whenever in this Lease Tenant is
required to pay an "additional charge" or other monies to Landlord, the same
shall be deemed to be "Additional Rent", and Landlord shall have all remedies
for the collection thereof that it may have for the nonpayment of Annual Base
Rent hereunder.  TENANT SHALL PAY THE FIRST MONTH'S RENT DUE HEREUNDER
ON THE EXECUTION OF THIS LEASE.

     

    40.         INTERPRETATION.

     

    The laws of the State of New Jersey
where the Office Park is located shall govern the validity, performance and
enforcement of this Lease.  The invalidity or unenforceability of any
provision hereof shall not affect or impair any other provision.

     

    41.         NO
REPRESENTATIONS.

     

    All negotiations, considerations,
representations, and understandings between the parties are incorporated in this
Lease and Tenant acknowledges and agrees that Landlord, its agents and
representatives, have made no representations, warranties or promises with
respect to the Office Park or the Demised Premises except as may be expressly
set forth herein.

     

    
      	
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    42.         SINGULAR, PLURAL,
COUNTERPARTS.

     

    Whenever a neutral singular pronoun
refers to Tenant, same shall be deemed to refer to Tenant if Tenant be an
individual, a corporation, a partnership or two or more individuals or
corporations.  This Lease may be executed in multiple counter-parts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.

    

    43.         BINDING.

     

    The provisions of this Lease shall be
binding on and inure to the benefit of the parties hereto, their legal
representatives, successors and permitted assigns.  If any provision
of this Lease proves to be illegal, invalid or unenforceable, the remainder of
this Lease will not be affected by such finding and in lieu of each provision of
this Lease that is illegal, invalid or unenforceable, a provision will be added
as part of this Lease as similar in terms to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and
enforceable.

     

    44.         HOLDING
OVER.

     

    In the event that Tenant shall remain
in occupancy of the Demised Premises for any period beyond the expiration of the
term of this Lease or any renewals or extensions thereof, such occupancy shall
be deemed to be a month-to-month tenancy at twice (2 times) the Annual Base Rent
for the last lease year of the Term, subject to all the other provisions of this
Lease prevailing prior to such expiration including additional rent, and the
acceptance of Annual Base Rent or Additional Rent by Landlord shall not be
deemed to create a new or additional tenancy other than aforesaid.

     

    45.         CAPTIONS AND
INTERPRETATION.

     

    The captions, section numbers, article
numbers and index appearing in this Lease in no way define, limit, construe or
describe the scope or intent of such sections or articles of this
Lease.  The language in all parts of this Lease shall in all cases be
construed as a whole according to its fair meaning, and not strictly for nor
against either Landlord or Tenant, and should a court be called upon to
interpret any provision hereof, no weight shall be given to, nor shall any
construction or interpretation be influenced by, any presumption of preparation
of a Lease by Landlord or by Tenant.

     

    46.         INDEMNIFICATION.

    Tenant shall indemnify and save
harmless Landlord and its agents from (a) any and all claims (i) arising from
(x) the conduct or management by Tenant, its subtenants, licensees, its or their
employees, agents, business therein, or (y) any work or thing whatsoever done,
or any condition created (other than by Landlord for Landlord's account) in or
about the Demised Premises during the Term of this Lease or during the period of
time, if any, prior to the Commencement Date that Tenant may have been given
access to the Demised Premises, or (ii) arising from any negligent or otherwise
wrongful act or omission of Tenant or any of its subtenants or licensees or its
or their employees, agents, contractors or invitees, and (b) all costs, expenses
and liabilities incurred in or in connection with each such claim, action or
proceeding brought thereon.  In case any action or proceeding be
brought against Landlord by reason of any such claim, Tenant, upon notice from
Landlord, shall resist and defend such action or proceeding.

     

    
      	
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    47.           LATE
CHARGE.

    

    Notwithstanding anything to the
contrary herein contained, in order to cover the extra expense involved in
handling delinquent payments, Tenant, at Landlord's option, shall pay a "late
charge" of ten (10%) percent when any payment of Annual Base Rent or additional
rent hereunder is paid more than ten (10) days after the due date thereon
("Delinquency"). It is
understood and agreed that this charge is for additional expense incurred by
Landlord and shall not be considered interest.

    

    Tenant acknowledges that Landlord has
the right and privilege to require that the Annual Base Rent due under this
Lease be paid in advance on an annual basis; however, for the convenience of the
Tenant, provided no Delinquencies occur, Landlord is willing to permit Tenant to
pay the Annual Base Rent in monthly installments as set forth
herein.  If three (3) Delinquencies occur during any twelve (12) month
period, then, at Landlord's option, from time to time, Landlord may demand that
Tenant pay to Landlord one (1) Year's Annual Base Rent at the then current rate
or amount ("Delinquency
Payment").  The Delinquency Payment shall be applied towards
the next twelve (12) installments of Annual Base Rent next coming due
hereunder.  The Delinquency payment shall bear no interest and if
legally permissible, Landlord shall be entitled to commingle the Delinquency
Payment with Landlord's other funds.  If Tenant shall fail to pay the
Delinquency Payment within fifteen (15) days after demand is made therefor, such
failure shall constitute a default pursuant to this Lease.

    

    48.           ILLEGAL AND PORNOGRAPHIC
USES PROHIBITED.

    

    Tenant shall not use the Demised
Premises for any illegal trade or other business or any other illegal
purpose.

    

    Tenant further agrees that the value of
the Demised Premises and the reputation of the Landlord will be seriously
injured if the Demised Premises are used for any obscene or pornographic
purposes or any sort of commercial sex establishment. Tenant agrees that Tenant
will not bring or permit any obscene or pornographic material on the Demised
Premises, and shall not permit or conduct any obscene, nude, or semi-nude live
performances on the Demised Premises, nor permit use of the Demised Premises for
nude modeling, rap sessions, or as a so-called rubber goods shop, or as a
so-called "massage parlor".  Tenant agrees further that Tenant will
not permit any of these uses by any sub-tenant or assignee of the Demised
Premises.  This paragraph shall directly bind any successors in
interest to the Tenant.  Tenant agrees that if at any time Tenant
violates any of the provisions of this Article such violation shall be deemed a
breach of a substantial obligation of the terms of this Lease and shall be
deemed objectionable conduct and a default under this
Lease.  Pornographic material is defined for purpose of this Article
as any written or pictorial matter with prurient appeal or any objects or
instruments that are primarily concerned with lewd or prurient sexual
activity.

     

    
      	
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    49.           CORPORATE/PARTNERSHIP
AUTHORITY.

    

    A.           If
Tenant is a corporation, Tenant represents and warrants that this Lease and the
undersigned's execution of this Lease has been duly authorized and approved by
the corporation's Board of Directors.  The undersigned officers and
representatives of the corporation executing this Lease on behalf of the
corporation represent and warrant that they are officers of the corporation with
authority to execute this Lease on behalf of the corporation, and within fifteen
(15) days of execution hereof, Lessee will provide Landlord with a corporate
resolution confirming the aforesaid.

    

    B.           If
Tenant is a partnership, then Tenant shall deliver to Landlord, at the time of
execution of this Lease, a duly executed Consent of Partners confirming the
authority of the General Partner(s) to execute this Lease, together with a
certified copy of the fixed Certificate of Partnership.

    

    C.           Notwithstanding
the provisions of this Article 48 or other
provisions of this Lease to the contrary, Landlord's execution of this Lease and
obligations hereunder are subject to Tenant's performance of its obligations
under this Lease being personally guaranteed by Shu- Chen Tsai as more
particularly set forth in the Limited Personal Guarantee attached hereto as
Exhibit
D.

    

    50.           CONSENTS.

    

    Whenever Tenant requests Landlord to
take any action or give any consent, whether or not required or permitted under
this Lease, Tenant will reimburse Landlord for all of Landlord's reasonable
costs incurred in reviewing the proposed action or consent, including, without
limitation, attorneys', engineers', architects', accountants and other
professional fees, as Additional Rent, within ten (10) days after Landlord's
delivery to Tenant of a  statement of such costs.  Tenant
will be obligated to make such reimbursement without regard to whether Landlord
consents to any such proposed action.  The fees specified in this
Article 49 are
in addition to any other fees mentioned in this Lease, and shall not be combined
with any specific fees set forth elsewhere in this Lease.

    

    
      51.                
ENVIRONMENTAL
LAWS:

    

    

    The
parties acknowledge that there are certain Federal, state and local laws,
regulations and guidelines now in effect, and that additional laws, regulations
and guidelines now in effect, and that additional laws, regulations and
guidelines may hereafter be enacted, relating to or affecting the demised
premises, and the larger parcel of land of which the demised premises may be a
part, concerning the impact on the environment of construction, land use, the
maintenance and operation of structures and the conduct of
business.  Tenant will not cause, or permit to be caused, any act or
practice, by negligence, omission, or otherwise, that would adversely affect the
environment or do anything or permit anything to be done that would violate any
of said laws, regulations or guidelines.  Any violation of this
covenant shall be an event of default.  Tenant shall have no claim
against Landlord by reason of any changes Landlord may make in the demised
premises pursuant to said laws, regulations and guidelines.

     

    
      	
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    52.           LIMITATION
OF LANDLORD LIABILITY.

    

    EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED HEREIN, IN NO EVENT SHALL LANDLORD, ITS MEMBERS,
AFFILIATES, AGENTS, OFFICERS, OR DIRECTORS BE LIABLE FOR INDIRECT, INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES, LOST DATA, LOST PROFITS, LSOT CUSTOMERS OR
ATTORNEYS FEES, EVEN IF ADVISED OF THE POSSIBILITY THEREOF, ARISING OUT OF OR
RELATED TO THIS LEASE OR THE PERFORMANCE OR BREACH HEREOF.

    

    IN WITNESS WHEREOF, the
parties have hereunto set their hands and seals (or in the case of a
corporation, have had their proper corporate officers execute this Lease and
affix their corporate seals hereto) as of the date of this Lease.

    

    
      
        
          
            
              
                
                  
                    
                      	
                              WITNESS:

                            	 
      	
                              LANDLORD:

                            
	 
      	 
      	 
      	 
      
	 
      	 
      	
                              NYC
      Skyline Realty, LLC

                            
	
                                  

                            	 
      	 
      	 
      
	 
      	 
      	
                              By:

                            	
                                   

                            
	 
      	 
      	 
      	
                              Name:
      Thomas Maoli

                            
	 
      	 
      	 
      	
                              Title:
      Member

                            
	 
      	 
      	 
      	
                              Date

                            
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	
                              WITNESS:

                            	 
      	
                              TENANT:

                            	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                              _____________________________________________,

                              LLC

                            
	 
      	 
      	 
      	 
      
	 	 	 	 
	 
      	 
      	
                              By:

                            	
                                   

                            
	 
      	 
      	 
      	
                              Name:

                            
	 
      	 
      	 
      	
                              Date_______________

                            

                    

                  

                

              

            

          

        

      

    

     

    
      	
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    EXHIBIT
A

    

    SITE PLAN (OFFICE
PARK)

    

    ATTACHED
TO AND FORMING A PART OF

    V-FEE
REALTY INVESTMENT, LLC  LEASE

    

    Please
provide

     

    
      	
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    EXHIBIT
B

    

    LEASE PLAN (DEMISED
PREMISES)

    

    ATTACHED
TO AND FORMING A PART OF

      V-FEE
REALTY INVESTMENT, LLC   LEASE

    

    Please
provide

     

    
      	
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    EXHIBIT
C

    

    RULES AND
REGULATIONS

    

    Tenant
agrees that at all times during the Term of this Lease it shall:

    

    
      	
              1.

            	
              Furnish
      to Landlord in writing the license numbers of the vehicles of Tenant and
      its employees.

            

    

    

    
      	
              2.

            	
              Load
      and unload its merchandise, equipment and supplies, and remove its rubbish
      only by way of the service road and service doors designated for Tenant's
      use. All garbage, refuse and rubbish shall be kept in such containers as
      are specified by Landlord and shall be placed outside of the Demised
      Premises prepared for collection, in the manner and at the times and
      places specified by Landlord and shall be removed at Tenant's expense by a
      contractor approved by Landlord, which approval shall not be unreasonably
      withheld or conditioned.  Tenant shall hire locking refuse
      containers from waste contractors at Landlord’s
  request.

            

    

    

    
      	
              3.

            	
              Not
      permit any act or practice which may tend to injure the Building or its
      equipment or be a nuisance to other
tenants

            

    

    

    
      	
              4.

            	
              Not
      install radio or television or other similar device without, in each
      instance, Landlord's prior consent in writing, which consent shall not be
      unreasonably withheld or conditioned.  No aerial or other device
      for receiving radio or television programs shall be erected on the roof or
      exterior walls of the Demised Premises, or within the Office Park,
      without, in each instance, the written consent of Landlord, which consent
      shall not be unreasonably withheld or conditioned.  Any aerial
      or other device so installed without such written consent shall be subject
      to removal without notice at any time. Notwithstanding anything herein to
      the contrary, Tenant shall have the right to install the necessary cable
      or phone lines in order to provide cable or DSL high speed access at the
      Demises Premises at Tenant's sole
cost.

            

    

    

    
      	
              5.

            	
              Not
      use nor permit the use of the plumbing facilities for any other purpose
      than that for which they are
constructed.

            

    

    

    
      	
              6.

            	
              Not
      use nor permit the use of any portion of the Demised Premises as sleeping
      or living quarters or for the keeping of any live animals, fish or
      birds.

            

    

     

    
      	
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      32 of 35

            	 
      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
D

    

    PERSONAL
GUARANTEE

    

     IN CONSIDERATION of One
($1.00) Dollar and other good and valuable consideration to the undersigned in
hand paid, receipt whereof is hereby acknowledged, and in further consideration
for and as an inducement to Landlord to enter into the within Lease
simultaneously herewith with Tenant, covering the Demised Premises as more fully
described in said Lease, the undersigned ("Guarantor") does
hereby unconditionally guarantee to Landlord and its successors in interest that
Tenant will (a install a full stock of merchandise and fixtures in the Demised
Premises and otherwise , (b) open the Demised Premises for business and operate
its business during normal business hours and in compliance with the Rules and
Regulations specified in Exhibit C of this
Lease (c) commence the payment of rental as required in Article 1C of this
Lease, and (d) pay to Landlord any security moneys remaining unpaid as of the
date hereof, without requiring any notice of non-payment, non-performance or
non-observance, or proof, or notice, or demand, whereby to charge the Guarantor,
all of which the Guarantor hereby expressly waives and expressly agrees that the
validity of this agreement and the obligations of the Guarantor hereunder shall
in no wise be terminated, affected or impaired by reason of the assertion by
Landlord against Tenant of any of the rights or remedies reserved to Landlord
pursuant to the provisions of the said lease.

    

    The Guarantor hereby waives exhausting
of recourse against the Tenant and agrees that any action brought for the
enforcement of rights under said lease or under this Guarantee may, in
Landlord's discretion, be brought against the Guarantor and/or the Tenant
jointly or severally.  The Guarantor hereby agrees that the failure of
the Landlord to require strict performance of any of the terms of said lease, or
any extension of time, concession, indulgence, or waiver of performance granted
by the Landlord shall not release the Guarantor from liability under this
Guarantee.

    

    The Guarantor hereby agrees that any
subsequent change, modification and/or amendment to said lease in any of its
terms, covenants or conditions, or in the rental payable
thereunder,  and/or any sublettings of all or any part of the
premises, may be agreed or consented to by the Landlord or any successors in
interest, without notice to or consent of the Guarantor and without in any
manner releasing or relieving the Guarantor from its present or future liability
under said lease or this Guarantee.

     

    THIS
GUARANTEE SHALL CONSTITUTE A PERSONAL GUARANTEE. GUARANTOR SHALL REMAIN
RESPONSIBLE FOR THE PAYMENT OF ALL ANNUAL   AND ADDITIONAL RENT
FOR THE TERM AND ANY RENEWAL TERM OF THIS LEASE FOLLOWING AN EVENT OF DEFAULT
UNDER THIS LEASE.  NOTWITHSTANDING ANY OTHER PROVISION IN THIS
GUARANTEE, THIS PERSONAL GUARANTEE SHALL TERMINATE UPON ASSIGNMENT OF LEASE
APPROVED BY LANDLORD. LANDLORD RETAINS THE RIGHT TO DENY ANY ASSIGMENT OF LEASE
THAT DOES NOT INCLUDE A PERSONAL GUARANTEE SIGN BY ASSIGNEE.

     

    
      	
              Boomerange
      Lease 4.13.09

            	
              Page
      33 of 35

            	 
      

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    This Guarantee shall be binding upon
the undersigned and its heirs, administrators, executors and
assigns.  If there is more than one signatory to this Guarantee, the
singular shall be deemed to be the plural and the obligations thereof shall be
joint and several.

    

     IN WITNESS WHEREOF, the
undersigned has caused these presents to be duly executed as of this
date

    

    
      
        	
                WITNESS:

              	 
      	 
      
	 
      	 
      	
                Guarantor

              
	 
      	 
      	 
      
	 
      	 
      	 
      
	
                ________________________

              	 
      	
                By:
      __________________________

              
	 
      	
                  

              	
                _____________
      , Personally

              

      

       

      
        	
                Boomerange
      Lease 4.13.09

              	
                Page
      34 of 35

              	 
      

      

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    PERSONAL
GUARANTEE

    

    I,  ______________as
shown on his /her Driver's License attached to this Lease, hereby personally
guarantees Tenant's performance of its obligations during the remaining Term of
this Lease following an Event of Default under the Lease, all as more
particularly set forth in the Limited Personal Guarantee attached hereto as
Exhibit
D.

    

    
      
        
          
            	 
      	
                    GUARANTOR

                  
	 
      	 
      	 	 
      
	 
      	
                    By:

                  	 	
                    ,
      Personally

                  
	
                    Name:

                  	 
      	 	 
      

          

        

      

    

     

    
      	
              Boomerange
      Lease 4.13.09

            	
              Page 35
      of 35

            	 
      

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

    
      AMENDMENT
TO LEASE OF January 1, 2009

      BETWEEN  BOOMERANGE
LLC. And, NYC SKYLINE REALTY LLC

       

      Amendment
to Lease of January 1, 2009 dated this ____day of  April, 2009
(“Effective Date”), by and between Boomerang Systems, Inc. ("Tenant"), and NYC
Skyline  Realty LLC ("Landlord").

       

      RECITALS

      

      A.           WHEREAS,
LANDLORD and TENANT entered into a certain Lease dated January 1, 2009 annexed
hereto and incorporated herein by reference  (the "Lease");
and

      

      B.           WHEREAS,
LANDLORD and TENANT desire to amend the Lease pursuant to the terms of this
Amendment as set forth below.

       

      NOW THEREFORE, in consideration of the
mutual promises, covenants, terms and conditions contained herein the parties
hereto agree as follows (the "Amendment"):

      

      
        	
                 
      

              	
                1.

              	
                Defined
      Terms.  Capitalized terms used but not otherwise defined
      herein shall have the meanings ascribed to them in the
    Lease.

              

      

      

      
        	
                 
      

              	
                2.

              	
                Amendments.  The
      parties hereby acknowledge, ratify and mutually agree to amend
      the  Terms and Rent pursuant to
      the  following:

              

      

       

      GENERAL TERMS AND CONDITIONS
1.A. to be
change to:

      

        1.          A.           TERM AND COMMENCEMENT
DATE.

       

      This Lease shall remain in full force
and effect from the date first written above (the “Commencement Date”)
and expiring  on the later of (i)December 31, 2013 or (ii) Five years
from the Commencement Date,   (the “Expiration Date”),
unless otherwise extended or terminated in accordance with the terms
hereof.   Landlord grants Tenants the right to terminate this
Lease  the thirty sixth month  the Commencement Date. Tenant
will notify Landlord Nine months prior to Lease termination request by means of
a Certified Letter or overnight delivery. After Thirty Six months from the
Effective Date above, Landlord grants the Tenant the right to terminate Lease.
Tenant must notify Landlord of its intention to terminate the Lease eight (8)
months in advance, by certified letter or overnight delivery.

       

      
        Amendment
to Lease between Boomerange and NYC Skyline 3.2.09

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      3.     Ratification.  The
parties' Lease, as amended, by and together with this Amendment represents the
entire agreement of the parties hereto.  All terms and conditions of
the Lease, as amended, not expressly amended or modified herein shall continue
to be in full force and effect and are hereby ratified and
confirmed.

      

      4.     Reference to the
Lease.  From and after the date hereof each reference in the
Lease to “Lease”, “hereof”, “hereunder” or words of like import, and all
references to the Lease in any and all leases, instruments, documents, notes,
certificates and other writings of every kind and nature shall be deemed to mean
the Lease as amended.

      

      IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to be executed by their respective authorized
representatives to be effective as of the day and year first written
above.

      

      
        
          
            
              	
                      NYC
      Skyline Realty, LLC

                    	 
      	 
      	
                      Boomerang
      Systems, Inc.

                    
	 
      	 
      	 
      	 
      	 
      
	
                      By:

                    	 
      	 
      	
                      By:

                    	
                       

                    
	 
      	
                      Thomas
      Maoli, Member

                    	 
      	 
      	 
      
	 
      	 
      	 
      	
                      (Print)

                    	
                       

                    
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	
                      (Title)

                    	
                       

                    

            

          

        

      

      

      Amendment
to Lease between Boomerange and NYC Skyline 3.2.09

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