Document:

9652608_10_PURCHASEANDSALEAGREEMENT

Execution Version

Exhibit 10.1

PURCHASE AND SALE AGREEMENT
DATED AS OF DECEMBER 5, 2013
BETWEEN
ABRAXAS PETROLEUM CORPORATION
AS SELLER
AND
F-250, LLC
AS BUYER

	
				
	Table of Contents

	 
	 
	 
	 

	Section 1. Purchase and Sale
	 
	1

	            
	(a)       Properties
	 
	2

	 
	(b)       Excluded Properties
	 
	3

	 
	(c)       Assumed Liabilities
	 
	 

	 
	 
	 
	 

	Section 2. Purchase Price; Deposit
	 
	4

	 
	 
	 
	 

	Section 3. Purchase Price Adjustments
	 
	4

	 
	(a)        Purchase Price Increases
	 
	4

	 
	(b)        Purchase Price Decreases
	 
	5

	 
	(c)        Collection of Receivables
	 
	6

	 
	(d)        Allocation
	 
	6

	 
	(e)        Production Taxes
	 
	6

	 
	(f)         Audit Adjustments
	 
	7

	 
	(g)        Tax Refunds
	 
	7

	 
	 
	 
	 

	Section 4. Representations and Warranties of Seller
	 
	7

	 
	(a)        Organization
	 
	7

	 
	(b)        Authority
	 
	7

	 
	(c)        Enforceability
	 
	7

	 
	(d)        No Conflicts
	 
	8

	 
	(e)        Foreign Person
	 
	8

	 
	(f)        Bankruptcy
	 
	8

	 
	(g)       Brokers
	 
	8

	 
	(h)       Taxes
	 
	8

	 
	(i)        Rentals and Royalties
	 
	8

	 
	(j)       Consents and Preferential Rights
	 
	8

	 
	(k)      Material Contracts
	 
	9

	 
	(l)       Production Contracts
	 
	10

	 
	(m)     Outstanding Capital Commitments
	 
	10

	 
	(n)      Claims and Litigation
	 
	10

	 
	(o)      Imbalances
	 
	10

	 
	(p)      Non-Consent Operations
	 
	11

	 
	(q)      Plugging and Abandonment
	 
	11

	 
	(r)       Liens
	 
	11

	 
	(s)      The Records
	 
	11

	 
	(t)       Payouts
	 
	11

i

	
				
	 
	(u)      Leases
	 
	11

	 
	(v)     Wycross Gathering System
	 
	11

	 
	(w)    Absence of Certain Events
	 
	11

	 
	(x)      Information
	 
	12

	 
	 
	 
	 

	Section 5.Representations and Warranties of Buyer
	 
	12

	 
	(a)       Organization
	 
	12

	 
	(b)       Authority
	 
	12

	 
	(c)       Enforceability
	 
	12

	 
	(d)       No Conflicts
	 
	12

	 
	(e)       Securities Law Disclosure
	 
	12

	 
	(f)        Financial Ability
	 
	13

	 
	(g)       Investment Experience
	 
	13

	 
	(h)       Physical and Environmental Defects
	 
	13

	 
	(i)        Brokers
	 
	13

	 
	 
	 
	 

	Section 6. Pre-Closing Covenants
	 
	13

	 
	(a)      Seller’s Pre-Closing Covenants
	 
	13

	 
	(b)      Buyer’s Covenants
	 
	15

	 
	 
	 
	 

	Section 7.Title and Environmental Matters
	 
	15

	 
	(a)      Access
	 
	15

	 
	(b)      Indemnity and Disclaimer
	 
	16

	 
	(c)      Defect Notice
	 
	16

	 
	(d)     Defect Remedies
	 
	17

	 
	(e)     Post-Closing Remedies
	 
	18

	 
	(f)      Exclusive Remedy
	 
	19

	 
	 
	 
	 

	Section 8. Environmental Acknowledgments
	 
	19

	 
	 
	 
	 

	Section 9. Casualty Loss
	 
	19

	 
	(a)      Risk of Loss
	 
	19

	 
	(b)      Casualty Loss
	 
	19

	 
	(c)      Casualty Remedies
	 
	20

	 
	 
	 
	 

ii

	
				
	Section 10. Preferential Rights and Consents
	 
	20

	 
	 
	 
	 

	Section 11. Conditions Precedent to the Closing
	 
	21

	 
	(a)       Buyer’s Representations and Covenants
	 
	21

	 
	(b)       Seller’s Representations and Covenants
	 
	21

	 
	(c)        Litigation
	 
	21

	 
	(d)       Defects
	 
	21

	 
	 
	 
	 

	Section 12. Closing
	 
	21

	 
	(a)       Preliminary Settlement Statement
	 
	21

	 
	(b)       Closing Deliverables
	 
	22

	 
	(c)       Certificate from Seller
	 
	22

	 
	(d)       Certificate from Buyer
	 
	22

	 
	(e)        Cancellation of Applicable Contracts
	 
	23

	 
	 
	 
	 

	Section 13. Post-Closing Adjustments
	 
	23

	 
	 
	 
	 

	Section 14. Post-Closing Covenants
	 
	23

	 
	(a)        Recording and Sales Tax
	 
	23

	 
	(b)        Records
	 
	24

	 
	(c)        Records Subject to Transfer Restrictions
	 
	24

	 
	(d)        Financial Information
	 
	24

	 
	 
	 
	 

	Section 15. Operations
	 
	24

	 
	 
	 
	 

	Section 16.Indemnities
	 
	24

	 
	(a)         Seller’s Indemnification
	 
	24

	 
	(b)         Buyer’s Indemnification
	 
	24

	 
	(c)         Monetary Damages
	 
	25

	 
	(d)         Monetary Limitation
	 
	25

	 
	(e)         Time Limitations
	 
	25

	 
	(f)         Indemnification Actions
	 
	26

	 
	(g)        Mitigation
	 
	26

	 
	(h)        Exclusive Remedy
	 
	26

iii

	
				
	 
	 
	 
	 

	Section 17. Disclaimers
	 
	27

	 
	(a)        No Warranty
	 
	27

	 
	(b)        Disclaimer
	 
	27

	 
	(c)        Not Consumers
	 
	28

	 
	(d)        Disclaimers
	 
	28

	 
	 
	 
	 

	Section 18. Termination and Notices
	 
	28

	 
	(a)        Termination
	 
	28

	 
	(b)        Buyer’s Remedy
	 
	28

	 
	 
	 
	 

	Section 19. Notices
	 
	29

	 
	(a)        Exhibits
	 
	29

	 
	(b)        Integration
	 
	30

	 
	(c)        Amendments
	 
	30

	 
	(d)        No Assignment
	 
	30

	 
	(e)        Binding Effects
	 
	30

	 
	(f)        Third Parties
	 
	30

	 
	(g)        No Merger; Survival
	 
	30

	 
	(h)        Expenses and Fees
	 
	30

	 
	(i)         Governing Law
	 
	30

	 
	(j)         Venue and Jurisdiction
	 
	31

	 
	(k)        Attorney’s Fees
	 
	31

	 
	(l)         Press Releases
	 
	31

	 
	(m)       Interpretation
	 
	31

	 
	(n)        Construction
	 
	31

	 
	(o)        Timing
	 
	32

	 
	(p)        Further Assurances
	 
	32

	 
	(q)        Counterparts
	 
	32

iv

List of Exhibits and Schedules
Exhibit A - Leases 
Exhibit B - Wells 
Exhibit C - Equipment
Exhibit D - Surface Rights
Exhibit E - Material Contracts
Exhibit F - Assignment
Exhibit G - Non-Foreign Person Affidavit
Schedule 1 - Definitions
Schedule 3(d) - Allocation of Purchase Price
Schedule 4 - Disclosure Schedule

v

PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this “Agreement”), dated as of December 5, 2013 (the “Execution Date”), but effective as of the Effective Time, is between ABRAXAS PETROLEUM CORPORATION, a Nevada corporation (“Seller”) and F-250, LLC, a Delaware limited liability company (“Buyer”).  Seller and Buyer may be referred to herein, individually, as a “Party,” and, collectively, as the “Parties.”
Recitals
A.    Seller owns certain rights and interests in and to certain oil and gas properties located in the State of Texas, as more particularly described in Section 1(a) below.
B.    Seller desires to sell and assign to Buyer, and Buyer desires to purchase and acquire from Seller, all of Seller’s right, title and interest in and to such oil and gas properties, in accordance with the terms and conditions of this Agreement.
Agreement
FOR ONE HUNDRED DOLLARS ($100.00), the mutual premises and covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
Section 1.Purchase and Sale.  
(a)    Properties.  Subject to the terms and conditions of this Agreement, Seller agrees to sell, assign and transfer to Buyer, and Buyer agrees to purchase, acquire and assume from Seller, at the Closing, but effective as of the Effective Time, all of Seller’s right, title and interest in and to the following, excluding the Excluded Properties (collectively, the “Properties”):
(i)    The oil and gas leases including all amendments thereto, whether recorded or unrecorded (the “Leases”) described in Exhibit A hereto, insofar and only insofar as the Leases cover the depths under the land (the “Land”) described in Exhibit A hereto;
(ii)    the Wells;
(iii)    the Equipment;
(iv)    the Surface Rights;
(v)    the Material Contracts, to the extent assignable;
(vi)    the Production;

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(vii)    the WyCross Gas Gathering System;
(viii)    all trade credits, accounts receivable, instruments, general intangibles and other proceeds, benefits, income or revenues attributable to any of the Properties (including from the sale of any Production) with respect to any period of time from and after the Effective Time;
(ix)    all Claims for any refunds of, and any loss or credit carryovers or similar items with respect to, any Production Taxes attributable to any period (or portion thereof) from and after the Effective Time;
(x)    to the extent assignable, all valid indemnity rights against other owners (including prior owners) of any of the Properties, but only to the extent any Damages relating to such indemnity rights arise from Assumed Liabilities; and
(xi)    the Records.
(b)    Excluded Properties.  Notwithstanding anything to the contrary, the following rights and interests (collectively, the “Excluded Properties”) are not included in the definition of the Properties, and Seller hereby expressly reserves, excepts and retains unto itself all of Seller’s right, title and interest in and to the following:
(i)    the Production attributable to the Properties prior to the Effective Time, together with all proceeds from and rights relating to the sale of such Production;
(ii)    except to the extent that Buyer has assumed a liability corresponding to any such matters hereunder, all funds, monies, proceeds, income, revenues, credits, receipts and benefits (and any security, deposits, bonds, advances or prepayments) attributable to the Properties, or the operation thereof prior to the Effective Time, or attributable to the Withdrawn Properties, before and after the Effective Time;
(iii)    all Claims for any refunds of, and any loss or credit carryovers or similar items with respect to: (A) Production Taxes for any period prior to the Effective Time; (B) Seller’s income, occupational or franchise taxes; and (C) any taxes attributable to the Withdrawn Properties;
(iv)    all Claims in favor of Seller for all periods prior to the Effective Time: (A) under any policy or agreement of insurance, indemnity, surety, guaranty or bond; or (B) except as otherwise set forth in Section 9, to any insurance or condemnation proceeds or awards arising, in each case, from acts, omissions or events, or damage to or destruction of property;
(v)    all computers, monitors, printers, plotters, peripherals and software, and all radio and telephone equipment, except to the extent any such equipment is utilized primarily in connection with the Properties;

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(vi)    all cars, trucks, tractors, trailers, rigs and other rolling stock;
(vii)    all personal property, furniture, fixtures and equipment located in Seller’s offices;
(viii)    all intellectual property, patents, copyrights, and trade secrets, names, marks and logos, and all software, studies, interpretations, compilations and reports relating to geology, geophysics and reserve characteristics of the Land, as well as any information or interpretative or proprietary data which Seller considers confidential or proprietary to Seller or which Seller cannot lawfully disclose or assign to Buyer due to Third Party restrictions that Buyer has not agreed in writing to pay or satisfy at its cost, to the extent disclosure or transfer is permitted on the payment of a fee;
(ix)    all correspondence, memoranda, agreements, documents and other communications (other than title opinions applicable to the Properties) that are protected by the attorney-client privilege or the attorney work-product privilege;
(x)    all correspondence, memoranda, agreements, documents and other communications among Seller, and Seller’s Affiliates, members, investors, banks, lending institutions, investment banks, brokers and prospective purchasers of the Properties, and their respective officers, directors, shareholders, managers, members, employees, consultants, attorneys, accountants, agents and authorized representatives, including contact lists, sales materials, confidentiality agreements, reports, bids, offers, analyses and draft agreements;
(xi)    all general corporate, legal, financial, accounting and tax records of Seller not directly related to the Properties; with the understanding that those tax records for Production Taxes directly related to the Properties, or which are necessary for Buyer’s ownership, administration or operation of the Properties are not Excluded Properties;
(xii)    the Withdrawn Properties; and
(xiii)    any contracts, including Material Contracts, which were not provided to Buyer on or before the execution of this Agreement and any contracts with Affiliates of Seller, which, in either case, are rejected, in writing, by Buyer on or before Closing.
(c)    Assumed Liabilities.  Upon and after Closing, Buyer shall, and does hereby agree to, assume, bear and perform all the duties, obligations and liabilities arising in connection with or related to the Properties, including, but not limited to: (i) all express and implied covenants, duties, obligations and liabilities under the terms of the Leases, the Surface Rights, and the Material Contracts attributable to the period from and after the Effective Time; (ii) all Property Costs and other costs which are for the account of Buyer pursuant to Section 3(a) below; (iii) all royalties, 

                                                                                                                            3

overriding royalties, production payments, net profits obligations, rentals, shut-in payments and similar burdens to which the Properties are subject accruing after the Effective Time; (iv) all Sales Taxes and Production Taxes (including applicable penalties and interest) with respect to Production attributable to the Properties on and after the Effective Time; (v) compliance with all applicable Laws and Environmental Laws pertaining to the Properties, including the procurement and maintenance of all permits required by public authorities in connection with the Properties, after the Effective Time; (vi) the condition of the Properties (“Condition of the Properties”), both surface and subsurface, on the Closing Date, including all obligations to properly plug and abandon, or re-plug and re-abandon, all wells that are located on the Properties, to restore the surface of the Lands, and to comply with, or to bring the Properties into compliance with, Environmental Laws, including conducting any remediation activities, investigations, feasibility studies, and other clean-up activities which may be required; (vii) all Title Defects (other than a breach of Seller’s special warranty of title by, through and under Seller in the Assignment); (viii) all Environmental Defects (except as otherwise provided herein); and (ix) all Casualty Losses (except as otherwise provided herein).  The liabilities assumed by Buyer pursuant to this Section 1(c) shall be referred to as the “Assumed Liabilities.” Buyer does not assume (and Assumed Liabilities shall not include): (i) any obligations or liabilities of Seller to the extent that they are attributable to or arise out of the ownership, use or operation of the Excluded Properties, or (ii) any other Claims for which Seller is required to indemnify Buyer pursuant to Section 16.
Section 2.    Purchase Price; Deposit.  The cash purchase price (the “Purchase Price”) for the Properties shall be Seventy Three Million Dollars ($73,000,000.00), subject to any applicable adjustments as described herein.  The Purchase Price shall be paid by Buyer to Seller as follows: (a) an amount equal to five percent (5%) of the Purchase Price shall be paid by Buyer to Seller by wire transfer of immediately available funds on the Execution Date as a deposit (the “Deposit”) to an account designated by Seller; and (b) the remainder of the Purchase Price, as adjusted pursuant to Section 3 below, shall be paid by Buyer at the Closing in accordance with Section 12(b) below.  If (i) all of Buyer’s conditions to Closing set forth in Section 11(b) through (d) (except for such conditions which by their terms were intended to be satisfied at the Closing) were satisfied prior to the Outside Termination Date and (ii) the transactions contemplated by this Agreement are not consummated on or before the Outside Termination Date because of: (a) the failure of Buyer to materially perform any of its obligations hereunder, or (b) the failure of any of Buyer’s representations or warranties hereunder to be true and correct in all material respects, then, in such event, Seller shall have the right to terminate this Agreement and retain the Deposit free of any claims by Buyer thereto.  If this Agreement is terminated for any reason not set forth in the preceding sentence, then Buyer shall be entitled to the return of the Deposit, free of any claims by Seller with respect thereto.  The Parties acknowledge and agree that, as of the Execution Date: (i) the anticipated damages in case of such termination were difficult to ascertain; (ii) the Parties mutually intended to liquidate the damages in advance; (iii) the amount of such liquidated damages are a reasonable 

                                                                                                                            4

estimate of the potential actual damages the breach would cause; and (iv) such liquidated damages are not so disproportionate to any possible loss as to constitute a penalty. Seller hereby irrevocably disclaims, waives and releases any and all Claims against Buyer and all of the Buyer Indemnitees arising in connection with or related to this Agreement and any of the transactions contemplated hereby upon any termination of this Agreement.
Section 3.    Purchase Price Adjustments.  The purchase and sale of the Properties shall be effective as of December 1, 2013 at 12:01 am Central Time (the “Effective Time”).  The Purchase Price shall be adjusted as of the Effective Time as follows and the resulting amount shall be referred to herein as the “Adjusted Purchase Price”:
(a)    Purchase Price Increases.  The Purchase Price shall be increased by an amount equal to the sum of the following amounts, without duplication:
(i)    Subject to Section 6(a) below, the amount of all non-reimbursed costs and expenses incurred by Seller attributable to the ownership, exploration, development and operation of the Properties after the Effective Time, including all joint interest billings, lease operating expenses, lease rentals, shut-in payments (which shall be pro-rated over the number of days that the applicable Lease is extended by such payments), drilling expenses, capital expenditures, completion expenses and other exploration or development expenditures, work-over expenses, water disposal, geological, geophysical and any other exploration or development expenditure that are associated with a Well, or pipeline development expenditures, together with the operator’s reimbursement of direct costs and applicable overhead chargeable under Applicable Operating Agreements, or other agreements consistent with the standards established by the Council of Petroleum Accountant Societies of North America (collectively, “Property Costs”).
(ii)    The amount of all prepaid non-reimbursed Property Costs paid by Seller attributable to the Properties after the Effective Time, including Production Taxes.
(iii)    The value of the Production in tanks above the pipeline sales connection or within processing plants at the Effective Time credited to the Properties, such value to be the market or, if applicable, the contract price in effect as of the Effective Time, less any applicable Production Taxes and royalties.
(iv)    If applicable, the amount Seller is under-produced as of the Effective Time multiplied by $3.50 per MMBtu (or, with respect to oil Imbalances, $100.00 per barrel), or, to the extent that the applicable Material Contracts provide for cash balancing, the actual cash balance amount determined to be due to Seller as of the Effective Time.
(v)    Any other amount agreed upon in writing by Seller and Buyer.

                                                                                                                            5

(b)    Purchase Price Decreases.  The Purchase Price shall be decreased by an amount equal to the sum of the following amounts, without duplication:
(i)    The amount of all proceeds of the Production received by Seller, net of all applicable Production Taxes and royalties actually paid by Seller that are attributable to the Production from the Properties for periods of time after the Effective Time, excluding all proceeds from the Production prior to the Effective Time, which shall be for Seller’s account.
(ii)    The amount of all non-reimbursed Property Costs paid by Buyer that are attributable to the period prior to the Effective Time.
(iii)    Any amount determined in connection with the resolution of the Title Defects.
(iv)    Any amount determined in connection with the resolution of the Environmental Defects.
(v)    Any amount determined in connection with the resolution of the Casualty Losses pursuant to Section 9(c) below.
(vi)    The Allocated Value of any Withdrawn Properties being retained by Seller.
(vii)    If applicable, the amount Seller is overproduced as of the Effective Time multiplied by $3.50 per MMBtu (or, with respect to oil Imbalances, $100.00 per barrel), or, to the extent that the applicable Material Contracts provide for cash balancing, the actual cash balance amount determined to be owed by Seller as of the Effective Time.
(viii)    Six Hundred Fifty Thousand Dollars ($650,000.00) for Seller’s remaining carry obligations under any applicable Carry Agreements (as defined below).  
(ix)    Any other amount agreed upon in writing by Seller and Buyer.
(c)    Collection of Receivables.  Seller shall have the right to collect any receivable, refund or other amounts associated with periods prior to the Effective Time.  If Buyer collects any such receivable, refund or other amounts associated with periods prior to the Effective Time and such amount has not been reflected as an adjustment to the Purchase Price pursuant to Section 3(a) or Section 3(b) above, then Buyer shall promptly remit to Seller any such amounts.  Buyer shall have the right to collect any receivable, refund or other amounts associated with the Properties for periods after the Effective Time.  If Seller collects any such receivable, refund or other amounts associated with periods after the Effective Time, and such amount has not been reflected as an adjustment to the Purchase Price pursuant to Section 3(a) or Section 3(b) above, then Seller shall promptly remit to Buyer such amounts.

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(d)    Allocation.  The Purchase Price shall be allocated as set forth in Schedule 3(d) hereto.  Seller and Buyer acknowledge and agree that the values allocated among various portions of the Properties, as set forth on Schedule 3(d) hereto (with respect to each item, individually, the “Allocated Value,” and collectively, the “Allocated Values”): (i) are intended solely as a representation of relative values in relation to the overall Purchase Price for limited purposes of Section 3 (Purchase Price Adjustments), Section 7 (Title and Environmental Matters), Section 9 (Casualty Loss), and Section 10 (Preferential Rights and Consents); (ii) shall be binding on Seller and Buyer for such purposes only; and (iii) are not intended as a measure of value for any other purpose.
(e)    Production Taxes.  On or before the Closing, Seller shall deliver to Buyer copies of the relevant documents concerning assessment and collection of the Production Taxes.  All Production Taxes, deposits, prepaid utility charges and prepaid rentals and other prepaid expenses applicable to the Properties for the calendar year in which the Closing occurs shall be prorated as of the Effective Time based on the amount of hydrocarbons actually produced, purchased or sold, as applicable, before, and at or after, the Effective Time.  Notwithstanding the foregoing, real property taxes and ad valorem taxes shall be prorated among Buyer and Seller on a day-for-day basis for the 2013 calendar year before and after the Effective Time.  In each case, Buyer shall be responsible for the portion allocated to the period at and after the Effective Time and Seller shall be responsible for the portion allocated to the period before the Effective Time.  With respect to Production Taxes attributable to the Properties for 2013, the Parties agree that: (i) such allocation and adjustment to the Purchase Price for such taxes shall be final and binding upon the Parties; and (ii) Buyer shall pay the appropriate governmental authority all such taxes applicable to the Properties for 2013, subject to Seller’s obligation to reimburse Buyer for Seller’s proportionate share of such Production Taxes as set forth in the previous sentence.  Notwithstanding anything to the contrary set forth in this Agreement, for all purposes of this Agreement, Production Taxes based on or measured by production of hydrocarbons or the value thereof shall be deemed attributable to the period during which such production occurred regardless of the year when such Production Taxes are assessed or paid.  Seller shall provide written evidence to Buyer that it has paid all Production Taxes for periods prior to the Effective Time that are payable after the Effective Time including ad valorem taxes in the state of Texas.
(f)    Audit Adjustments.  Seller retains all rights to adjustments resulting from any operating agreement and other audit claims on transactions occurring prior to the Effective Time.  Any credit received by Buyer pertaining to such an audit claim on transactions occurring prior to the Effective Time shall be paid to Seller within thirty (30) days after receipt.  In like manner, Seller shall remain solely liable for, and Buyer does not assume, any obligations due to Third Parties resulting from any operating agreement and other audit claims on transactions occurring prior to the Effective Time, and if Buyer is required to pay any such audit claim, Seller will reimburse Buyer within thirty (30) days after billing for same unless such audit claim is being contested by Seller.

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(g)    Tax Refunds.  Refunds of Production Taxes paid or payable with respect to or attributable to the Properties shall be promptly paid as follows (or to the extent payable but not paid due to offset against other taxes shall be promptly paid by the Party receiving the benefit of the offset as follows): (i) to Seller if attributable to taxes with respect to any tax year or portion thereof ending on or before the Effective Time; and (ii) to Buyer if attributable to taxes with respect to any tax year or portion thereof beginning from and after the Effective Time.
Section 4.    Representations and Warranties of Seller.  For purposes of this Agreement, with respect to Seller, “Knowledge” shall mean the information actually known by the following Persons only, following a reasonable investigation, or such information of which such Person has received written notice, but does not include the knowledge or awareness of any other Person:  Geoffrey R. King, Stephen T. Wendel, William H. Wallace and Lee T. Billingsley.  Seller represents and warrants to Buyer as of the Execution Date as follows:
(a)    Organization.  Seller is a corporation, duly organized, validly existing and in good standing under the Law of the State of Nevada, and is authorized to do business in the State of Texas.
(b)    Authority.  Seller has the requisite power and authority and has taken all requisite action to authorize it to enter into this Agreement and to perform its obligations under this Agreement.  The execution, performance and delivery of this Agreement and the consummation of the transactions contemplated hereby will not violate, or be in conflict with, any provision of Seller’s governing documents or any material provisions of any agreement or instrument to which it is a party or by which it is bound.
(c)    Enforceability.  This Agreement has been duly executed and delivered on behalf of Seller and constitutes the legal, valid and binding obligation of Seller enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency and other similar Laws affecting creditors’ rights and general equitable principles.  On the Closing Date, all documents required hereunder to be executed and delivered by Seller shall be duly authorized, executed and delivered and shall constitute legal, valid and binding obligations of Seller enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency and other similar Laws affecting creditors’ rights and general equitable principles.
(d)    No Conflicts.  Except as set forth in Schedule 4(d), the execution, delivery and performance of this Agreement, and any of the other documents executed in connection with this Agreement to be performed by Seller do not and will not:
(i)    Conflict with or result in any breach of the provisions of, or constitute a default under, the organizational documents of Seller;

                                                                                                                            8

(ii)    (A) violate any restriction in any of the Material Contracts, with or without the giving of notice, or the passage of time, or both; or (B) result in the creation or imposition of any lien, encumbrance or security interest upon the Properties; and
(iii)    Constitute a violation of any applicable Law and Environmental Laws. 
(e)    Foreign Person.  Seller is not a “foreign person” within the meaning of Section 1445 of the Code.
(f)    Bankruptcy.  There are no bankruptcy, reorganization or receivership proceedings pending, or, to Seller’s Knowledge, threatened against Seller.
(g)    Brokers.  Seller has not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Buyer or any of its Affiliates shall have any responsibility whatsoever.
(h)    Taxes.  Except as set forth in Schedule 4(h), all tax returns relating to the Properties required to be filed by Seller have been timely filed with the appropriate governmental entity in all jurisdictions in which such tax returns are required to be filed, and all taxes due with respect to the Properties have been paid, except those being contested in good faith, which contests are set forth in Schedule 4(h).  Seller has not received written notice of any pending claim against it (which remains outstanding) from any applicable governmental entity for assessment of taxes with respect to the Properties.  There are no tax liabilities of Seller that could reasonably be likely to result in liability to Buyer as a transferee or successor or otherwise attach to the Properties.  The Properties are subject to the tax partnership agreements set forth in Schedule 4(h), subject to the qualifications set forth therein.
(i)    Rentals and Royalties.  All bonuses, rentals and, to Seller’s Knowledge, royalties (other than royalties held in suspense) due with respect to the Properties operated by Seller have been timely paid, and to Seller’s Knowledge, all such amounts have also been timely paid with respect to Properties operated by Third Parties.
(j)    Consents and Preferential Rights.  Except as set forth in Schedule 4(j), there are no consents required to be obtained for, and no preferential rights to purchase exercisable in connection with, the assignment of the Properties by Seller to Buyer hereunder.
(k)    Material Contracts.  Except as set forth in Exhibit A, Exhibit D, Exhibit E, and the Disclosure Schedule, there are no other material agreements or contracts burdening the Properties to which Seller is a party.  Exhibit E sets forth all Applicable Contracts of the types described below (collectively, the “Material Contracts”):

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(i)    any Applicable Contract that can reasonably be expected to result in aggregate payments by Seller of more than Twenty-Five Thousand Dollars ($25,000) during the current or any subsequent fiscal year or One Hundred Thousand Dollars ($100,000) in the aggregate over the term of such Applicable Contract (in each case, based solely on the terms thereof and without regard to any expected increase in volumes or revenues) that cannot be terminated by Seller on not greater than ninety (90) days’ notice;
(ii)    any Applicable Contract that can reasonably be expected to result in aggregate revenues to Seller of more than Twenty-Five Thousand Dollars ($25,000) during the current or any subsequent fiscal year or One Hundred Thousand Dollars ($100,000) in the aggregate over the term of such Applicable Contract (in each case, based solely on the terms thereof and without regard to any expected increase in volumes or revenues);
(iii)    any Applicable Contract that (A) is a hydrocarbon purchase and sale, gathering, transportation, processing, compression or similar Contract pursuant to which Seller received annual revenues or makes annual payments in excess of One Hundred Thousand Dollars ($100,000) and (B) is not terminable by Seller or its assignee without penalty on sixty (60) days’ or less notice;
(iv)    any Applicable Contract that is an indenture, mortgage, loan, credit or sale-leaseback, guaranty of any obligation, bonds, letters of credit or similar financial Contract other than the Bank Liens;
(v)    any Applicable Contract that constitutes a lease under which Seller is the lessor or the lessee of personal property which lease (A) cannot be terminated by Seller without penalty upon sixty (60) days’ or less notice and (B) involves an annual base rental of more than Fifty Thousand Dollars ($50,000);
(vi)    Applicable Contracts with any Affiliate of Seller;
(vii)    any Applicable Contract that is a purchase agreement for the acquisition of Leases, a farmin or farmout agreement, an exploration agreement, a participation agreement for drilling of oil and/or gas wells, and similar agreements providing for the earning of an interest; or otherwise obligates Seller or its Affiliates to sell, lease, farmout, or otherwise dispose of any interest in any of the Properties, other than conventional rights of reassignment arising in connection with Seller’s surrender or release of any of the Properties other than any Third Party preferential purchase rights;
(viii)    any Applicable Contract that constitutes a partnership (other than a tax partnership), joint venture, or non-competition agreement or contains an area of mutual interest provision or a provision having similar effect;

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(ix)    any Applicable Contract that contains a tax partnership agreement; 
(x)    any Applicable Contract that obligates Seller to “carry” (pay for more than Seller’s proportionate working interest share) any Person in any operations on a Property (each such Applicable Contract, a “Carry Agreement”); 
(xi)    any Applicable Contract that constitutes an Operating Agreement; and
(xii)    any other Applicable Contract that, to Seller’s actual knowledge, is material to the ownership, use or operation of the Properties.
Except as set forth in Schedule 4(k), Seller has not received any written notice of any Claims with respect to any continuing or uncured breach, default or violation by Seller of any of the Leases or the Material Contracts.  Seller has made available true and complete copies of all Materials Contracts to Buyer.  To Seller’s Knowledge, there exist no defaults under the Material Contracts by Seller or any other party thereto.  Schedule 4(k) details Seller’s remaining carry obligations under each Carry Agreement.
(l)    Production Contracts.  Except as set forth in Schedule 4(l), and subject to the qualifications set forth therein, Seller’s interests in the Properties are not subject to any contract for the sale of the Production attributable to periods after the Effective Time, other than contracts that may be terminated by sixty (60) days’ prior written notice.  Except as set forth in Schedule 4(l), Seller’s interests in the Properties are not subject to or burdened by any obligation under a sales, take-or-pay, gas balancing, marketing, hedging, forward sale or similar arrangement, to deliver the Production attributable to such interest in the Properties without receiving payment at the time of or subsequent to delivery, or to deliver the Production in the future for which payment has already been received (e.g., a “forward” sale contract).
(m)    Outstanding Capital Commitments.  Except as set forth in Schedule 4(m), as of the Execution Date, there are no outstanding authorities for expenditure or other commitments approved or proposed for capital expenditures that are binding on the Properties, and which Seller reasonably anticipates will require expenditures by Seller in excess of Twenty-Five Thousand Dollars ($25,000.00) per item or One Hundred Thousand Dollars ($100,000.00) in the aggregate.
(n)    Claims and Litigation.  Except as set forth in Schedule 4(n), Seller has not received any written notice of, and Seller does not have Knowledge of any facts which would support, any Claims with respect to any continuing or uncured breach, default or violation by Seller of any of the Leases, the Surface Rights, the Material Contracts or applicable Law or Environmental Laws.  Except as set forth in Schedule 4(n), there is no suit, action, hearing or other proceeding before any court or governmental authority pending, or to Seller’s Knowledge, threatened, against any of the Properties or, to the extent any such proceeding could be reasonably expected to have a Material 

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Adverse Effect, against Seller.  No condemnation or eminent domain proceedings are pending, or, to Seller’s Knowledge, threatened, by any governmental authority affecting any of the Properties.
(o)    Imbalances.  Except as set forth in Schedule 4(o), as of the Execution Date, there are no Imbalances attributable to the Properties.
(p)    Non-Consent Operations.  Except as set forth in Schedule 4(p), no operations are being conducted or have been conducted on the Properties with respect to which Seller has elected to be a non-consenting party under the applicable operating agreement or other agreement and with respect to which all of Seller’s rights have not yet reverted.
(q)    Plugging and Abandonment.  Seller has not received any written notices or demands from any Third Parties to plug and abandon any wells located on the Leases.  Except as set forth in Schedule 4(q), from the Effective Time through the Execution Date, Seller has not abandoned, and is not in the process of abandoning, any wells included in the Properties (nor has it removed, nor is it in the process of removing, any material items of personal property located upon the Leases, except those replaced by items of substantially equivalent suitability and value).  Except as set forth in Schedule 4(q), there are no wells included in the Properties that:
(i)    Seller is currently required by Law, Environmental Law or by a Material Contract to plug and abandon as of the date hereof;
(ii)    formerly produced but are currently shut in or temporarily abandoned; or
(iii)    have been plugged and abandoned but, to Seller’s Knowledge, have not been plugged in accordance with all applicable requirements of each Governmental Authority having jurisdiction over such Properties.
(r)    Liens.  Except as set forth in Schedule 4(r), Seller has not pledged any of the Properties as collateral and none of the Properties are otherwise encumbered by any recorded mortgages, security interests or other liens other than Permitted Encumbrances.
(s)    The Records.  The Records have been maintained in the ordinary course of Seller’s business, and Seller has not intentionally omitted any material information from the Records.
(t)    Payouts.  To Seller’s Knowledge, except as set forth on Schedule 4(t), none of the Properties are subject to a payout calculation, non-consent penalty or other similar arrangement, burden or benefit.
(u)    Leases.  Seller has delivered to Buyer true and complete copies of each Lease and all amendments thereto in existence on the Execution Date in compact disc or other electronic 

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format.  Seller has delivered to Buyer true and complete copies of all title opinions in its possession supporting its ownership interests in all of the Leases and all of the Wells.
(v)    WyCross Gas Gathering System.  To Seller’s Knowledge, the WyCross Gas Gathering System has been built and maintained in all material respects consistent with industry standards.
(w)    Absence of Certain Events.  Except  as contemplated by this Agreement, since the Effective Time, (a) Seller has not transferred any interest in the Leases, the Surface Rights, the Production, the WyCross Gathering System, the Wells or the Equipment, except for (i) the transfer of the Properties as contemplated by this Agreement, (ii) the sale of hydrocarbons produced from the Properties in the ordinary course of business, and (iii) sales or other transfers or obsolete, worn out or unnecessary Equipment in the ordinary course of business; and (b) there has not been any damage, destruction or loss, whether covered by insurance or not, with respect to the Properties that has had or is reasonably likely to have a Material Adverse Effect.
(x)    Information.  The information pertaining to revenue and expenses attributable to the Properties that Seller has furnished to Buyer, to Seller’s Knowledge, does not contain any untrue statement of a material fact or omit to state a material fact required to make the statements contained therein not misleading.
Section 5.    Representations and Warranties of Buyer.  For purposes of this Agreement, with respect to Buyer, “Knowledge” shall mean the information actually known by the following Persons only, following a reasonable investigation, or such information of which such Person has received written notice, but does not include the knowledge or awareness of any other Person, or imputed knowledge: J. Allen Aday and J. Jeff Voncannon.  Buyer represents and warrants to Seller as of the Execution Date as follows:
(a)    Organization.  Buyer is a limited liability company duly organized, validly existing and in good standing under the Law of the State of Delaware.
(b)    Authority.  Buyer has the requisite power and authority and has taken all requisite company action to authorize it to carry on its business as currently conducted, to enter into this Agreement and to perform its obligations under this Agreement.  The execution, performance and delivery of this Agreement and the consummation of the transactions contemplated hereby will not violate, or be in conflict with, any provision of Buyer’s governing documents or any material provisions of any agreement or instrument to which it is a party or by which it is bound.
(c)    Enforceability.  This Agreement has been duly executed and delivered on behalf of Buyer, and constitutes the legal, valid and binding obligation of Buyer enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency and other 

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similar Laws affecting creditors’ rights and general equitable principles.  At the Closing, all documents required hereunder to be executed and delivered by Buyer shall be duly authorized, executed and delivered and shall constitute legal, valid and binding obligations of Buyer enforceable in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency and other similar Laws affecting creditors’ rights and general equitable principles.
(d)    No Conflicts.  The execution, delivery and performance of this Agreement and any of the other documents executed in connection with this Agreement to be performed by Buyer do not and will not:
(i)    Conflict with or result in any breach of the provisions of, or constitute a default under, the organizational documents of Buyer; and
(ii)    Violate any restriction to which Buyer is subject, with or without the giving of notice, or the passage of time, or both.
(e)    Securities Law Disclosure.  Buyer intends to acquire the Properties for its own benefit and account, and that Buyer is not acquiring the Properties with the intent of resale or distribution such as would be subject to regulation by the Securities Law, and that, in the future, if Buyer should sell, transfer or otherwise dispose of the Properties or fractional undivided interests therein, Buyer will do so in compliance with all applicable Securities Law.
(f)    Financial Ability.  Buyer has sufficient cash, available lines of credit or other sources of available funds to enable Buyer to pay the Purchase Price to Seller at the Closing.  Buyer has such knowledge and experience in financial and business matters and in oil and gas investments of the type contemplated by this Agreement that Buyer is capable of evaluating the merits and risks of this Agreement and its investment in the Properties, and Buyer is not in need of the protection afforded investors by the Securities Law.  Buyer recognizes that this investment is speculative and involves substantial risk, and that neither Seller, nor any of Seller’s representatives, have made any guaranty upon which Buyer has relied concerning the possibility or probability of profit or loss as a result of Buyer’s acquisition of the Properties.
(g)    Investment Experience.  By reason of Buyer’s experience and knowledge in the evaluation, acquisition and operation of similar properties, Buyer has evaluated the merits and risks of the proposed investment in the Properties, and has formed opinions based solely upon Buyer’s experience and knowledge and not upon any representations or warranties by Seller, or Seller’s representatives, other than as expressly set forth in this Agreement and the special warranty set forth in the Assignment.  Buyer has conducted or will conduct its own evaluation of the Properties and, except for the express representations and warranties set forth in this Agreement and the Assignment 

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and in addition to the disclaimers set forth in Section 17 of this Agreement, Buyer is acquiring the Properties “AS IS, WHERE IS, WITH ALL FAULTS, AND WITHOUT RECOURSE.”
(h)    Physical and Environmental Defects.  Buyer has been or will be provided the opportunity to conduct an independent inspection of the Properties, the public records and Seller’s files, including for the purpose of detecting the presence of any environmentally hazardous substances or contamination, including petroleum, and the presence and concentration of NORM, and as of the Closing, Buyer shall have satisfied itself as to the Condition of the Properties.  Buyer acknowledges that, except as set forth in this Agreement and subject to the disclaimers set forth in Section 17 of this Agreement, no representations have been made by Seller regarding physical or environmental condition of the Properties, past or present.
(i)    Brokers.  Buyer has not incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Seller or any of its Affiliates shall have any responsibility whatsoever.
Section 6.    Pre-Closing Covenants.
(a)    Seller’s Pre-Closing Covenants.  Seller agrees that, from and after the Execution Date until the earlier of the Closing or the termination of this Agreement, except as expressly provided herein, or as required by the Leases, the Material Contracts, the Surface Rights, the Law or Environmental Law, as set forth in the Disclosure Schedule, or as otherwise agreed in writing by Buyer, Seller shall:
(i)    not: (A) act in any manner with respect to the Properties other than in the ordinary course of business, consistent with prior practice and in compliance with Law and Environmental Law; (B) except in the ordinary course of business consistent with past practice pursuant to a valid authorization for expenditure, expend or incur liabilities of more than Twenty Thousand Dollars ($20,000) per operation net to Seller’s interests in the Properties, unless in case of an emergency or required to perpetuate a Lease (provided, however, that, notwithstanding anything to the contrary herein, Buyer shall be deemed to have consented to all of the outstanding capital commitments set forth in Schedule 4(m); (C) dispose of, abandon, encumber or relinquish any of the Properties (other than the sale of the Production in the ordinary course of business, or relinquishments resulting from the expiration of any of the Leases which Seller does not have a right or option to renew); (D) waive, compromise or settle any Claim affecting any Property; (E) enter into, terminate, cancel or amend or modify or waive any material right or consent to any material action under any Material Contracts, Leases or Surface Rights, or enter into any new agreement that, if in existence as of the Effective Time, would be a Material Contract; (F) permit the lapse of any insurance now in force with respect to the Properties; (G) elect to be a non-consenting party under the Applicable Operating Agreement or other agreement with respect to any of the 

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Properties; (H) make any change to a division order, revenue deck or expense deck relating to any of the Properties that causes the Net Revenue Interest or Working Interest in any such Properties to differ from as set forth on Schedule 3(d); or (I) authorize or agree to take any of the actions prohibited by any of the foregoing clauses;
(ii)    pay or cause to be paid its proportionate share of all costs and expenses incurred in connection with the operation of the Properties;
(iii)    keep Buyer reasonably informed regarding current and proposed activities and operations relating to the Properties, with no less than daily reports to Buyer;
(iv)    maintain in force during the period from the Execution Date until Closing, all of Seller’s excess liability, workers compensation, auto liability, property and casualty, and well control insurance policies in the amounts and with the coverages currently maintained by Seller that apply to the Properties;
(v)    deliver notice to Buyer copies of all well proposals and authorizations of expenditures for all proposed activities and operations relating to the Properties sent or received by Seller relating to the Properties promptly after receipt or reasonably in advance of Seller’s sending thereof, in any case in sufficient time for Buyer to review;
(vi)    promptly deliver to Buyer copies of all written notices received by Seller of any Claims with respect to any breach, default or violation of any of the Leases, the Material Contracts, the Surface Rights or any Law or Environmental Law with respect to any Property or this Agreement;
(vii)    promptly provide Buyer notice of any change that Seller becomes aware of that would cause any of the representations or warranties herein to become untrue, such that (A) Buyer could claim the condition precedent in Section 11(b) would not be satisfied or (B) the change would otherwise have a material impact on the operation or value of the Properties;
(viii)    provide information reasonably requested by Buyer in connection with its financing of the transactions contemplated hereunder;
(ix)    use Seller’s reasonable efforts in good faith to cooperate with Buyer and, as directed by Buyer, Sanchez, in the notification of all applicable governmental regulatory authorities of the transactions contemplated hereby, and in obtaining the transfer of or issuance by each such authority of such permits, licenses and authorizations as may be necessary for Buyer to own and for Sanchez or its designee to operate the Properties following the Closing; and

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(x)    Except as required by Law, from the Execution Date until the termination of this Agreement in accordance with the terms hereof or consummation of the transactions contemplated hereby, Seller will not, and will not authorize or permit any Affiliate of the Seller, or any other Person, on its or their behalf to, directly or indirectly, (i) solicit, initiate or encourage the submission of any proposal or offer to acquire all or any significant part of the Properties (an “Acquisition Proposal”), or (ii) participate in any discussions or negotiations regarding, or furnish to any Person or group, any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to any Acquisition Proposal.
(b)    Buyer’s Covenants.  
(iv)    Prior to the Closing, to the extent not already public, Buyer shall exercise all due diligence in safeguarding and maintaining secure and confidential the Records, and all engineering, geological and geophysical data, seismic data, reports and maps the results and findings of Buyer with regard to its due diligence associated with the Properties (including with regard to due diligence associated with title and environmental matters) and other data relating to the Properties.  This undertaking of confidentiality shall not diminish or take precedence over any separate confidentiality agreement between the Parties.  If this Agreement terminates, such separate confidentiality agreement shall remain in full force and effect for the term stated therein.
(v)    Buyer agrees to use Buyer’s reasonable efforts in good faith to cooperate with Seller in the notification of all applicable governmental regulatory authorities of the transactions contemplated hereby, and in obtaining the transfer of or issuance by each such authority of such permits, licenses and authorizations as may be necessary for Buyer to own and Sanchez to operate the Properties following the Closing.
(vi)    Buyer shall comply in all respects with all Securities Laws.
Section 7.    Title and Environmental Matters.  
(a)    Access.  Buyer and Buyer’s authorized agents and representatives shall have the right to conduct a due diligence investigation, at Buyer’s sole risk, cost and expense, of the Properties (including the Records).  Seller shall provide (or use commercially reasonable efforts to cause the operator of the Properties to provide) access to the Properties (including the Records) for Buyer to conduct a due diligence investigation and an environmental assessment of the Properties during regular business hours, which shall include weekends.  Buyer agrees that Buyer and Buyer’s representatives, and their agents shall not disclose to Third Parties any information obtained in its environmental assessment unless agreed to in writing by Seller, or such disclosure is expressly required by applicable Law or Environmental Law or is compelled pursuant to legal process of any court or governmental authority; provided that, Buyer may disclose its environmental assessment 

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to its lenders so long as such lenders agree to maintain the confidentiality thereof.  If reasonably possible and to the extent allowed by Law, Buyer shall notify Seller in advance of any such disclosure prior to the Closing Date, and shall furnish Seller copies of all materials to be disclosed prior to any disclosure thereof to Third Parties.  As soon as reasonably possible after Buyer’s receipt thereof, Buyer shall deliver to Seller copies of all reports and test results from Buyer’s environmental assessment.  Buyer’s failure to deliver copies of such reports or test results shall in no way constitute a waiver of any Environmental Defect asserted on or before Buyer’s Notice Date pursuant to Section 7(c).
(b)    Indemnity and Disclaimer.  Buyer shall indemnify, defend, release and hold harmless Seller Indemnitees from and against any and all Claims and damages arising from or in connection with Buyer’s, and Buyer’s agents and representatives, due diligence investigation and environmental assessment of the Properties, including Claims for property damage, personal injury and death, EVEN THOUGH CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER ACTIVE, PASSIVE, SOLE, JOINT OR CONCURRENT) OR OTHER LEGAL FAULT OF THE SELLER INDEMNITEES, but excluding the gross negligence or willful misconduct of any of Seller Indemnitees.  Notwithstanding anything to the contrary set forth herein, Seller shall not be required to supply any document or information or take any other action that would or may reasonably be expected to constitute a waiver of the attorney-client or other legal privilege or protection, violate any Law or Environmental Law, or result in breach of or a default under any obligation owed to a Third Party; provided that, Seller shall: (i) enter into a customary joint defense agreement or similar agreement if requested by Buyer to maintain any such privilege or protection in order to disclose any such documents or information to Buyer while preserving any such privilege or protection, and (ii) take any other action reasonably requested by Buyer to permit any such otherwise impermissible disclosure to Buyer.  EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT AND IN ADDITION TO THE DISCLAIMERS SET FORTH IN SECTION 17, THE PARTIES HEREBY DISCLAIM, WAIVE AND RELEASE ANY AND ALL WARRANTIES OF ANY KIND, EXPRESS, IMPLIED, STATUTORY, AT COMMON LAW OR OTHERWISE, WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF ANY INFORMATION PROVIDED BY SELLER TO BUYER.  BUYER AGREES THAT ANY CONCLUSIONS DRAWN FROM INFORMATION PROVIDED BY SELLER TO BUYER SHALL BE THE RESULT OF BUYER’S OWN INDEPENDENT REVIEW AND JUDGMENT, AND AT BUYER’S SOLE RISK.
(c)    Defect Notice.  Buyer shall deliver to Seller written notice of all Title Defects and Environmental Defects, including Buyer’s Knowledge that Seller owns a Working Interest or Net Revenue Interest greater than such interest as shown in Schedule 3(d) (the “Defect Notice”) not later than 5:00 p.m., Central Time on December 16, 2013 (the “Buyer’s Notice Date”). The Defect Notice shall set forth in reasonable detail: (i) the Properties affected by Title Defects and/or Environmental Defects; (ii) the nature and basis of such Title Defects and/or Environmental Defects, 

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including reasonable supporting documentation; (iii) the curative action it believes is necessary to cure such Title Defect or the remediation required to comply with applicable Environmental Law; and (iv) Buyer’s good faith determination of the Title Defect Value or Remediation Value.  Except for any Title Defects that constitute a breach of Seller’s special warranty of title contained in the Assignment, any Title Defect that is not identified in the Defect Notice by the Buyer’s Notice Date shall thereafter be deemed a Permitted Encumbrance.  Buyer shall, and does hereby accept and assume such Title Defects and Permitted Encumbrances, and Buyer hereby irrevocably disclaims, waives and releases any and all Claims against Seller arising in connection with or related to such Title Defects and the Permitted Encumbrances.  Except for indemnification pursuant to Section 16(a), Buyer hereby irrevocably disclaims, waives and releases any and all Claims against Seller arising in connection with or related to Environmental Defects not set forth in the Defect Notice, regardless of when discovered or when created, and such Environmental Defects shall be, and are hereby, accepted and assumed by Buyer.
(d)    Defect Remedies.  On or before 5:00 pm, Central Time on December 18, 2013 (“Seller’s Response Date”), Seller shall deliver to Buyer written notice of Seller’s response to Buyer’s Defect Notice.  The Parties shall enter into good faith negotiations and shall attempt to agree on the existence of the Title Defects and Environmental Defects and the appropriate resolution thereof.  If the Parties cannot reach a mutually acceptable agreement on or before the Closing, with respect to Title Defects and Environmental Defects, the following remedies shall apply:
(i)    Seller shall have the right, but not the obligation, to cure any Title Defects asserted in the Defect Notice, and to remediate any Environmental Defects asserted in the Defect Notice, at Seller’s sole cost and expense, to Buyer’s reasonable satisfaction, within ninety (90) days after the Closing.
(ii)    If a Title Defect is undisputed and liquidated in amount, then the Title Defect Value shall equal the amount necessary to be paid to remove the Title Defect from the affected Properties.
(iii)    If a Title Defect represents a discrepancy between the actual Net Revenue Interest for any Properties and the Net Revenue Interest set forth in Schedule 3(d) for such Properties, and there is a Working Interest change proportionate to the change in the Net Revenue Interest resulting from the Title Defect, then the Title Defect Value for each Property shall be the product of (A) the Allocated Value for such Property set forth on Schedule 3(d) multiplied by (B) one (1) minus a fraction, the numerator of which shall equal the actual Net Revenue Interest in such Property, and the denominator of which shall equal the Net Revenue Interest for such Property set forth in Schedule 3(d).

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(iv)    If the Title Defect is of a type not described in Section 7(d)(ii) or Section 7(d)(iii), the Title Defect Value will be determined by taking into account the Allocated Value for such Properties set forth on Schedule 3(d), the portion of the Properties affected by the Title Defect, the legal effect of the Title Defect, the potential economic effect of the Title Defect over the life of the affected Properties and such other factors as are necessary to make a proper evaluation of the Title Defect Value.
(v)    Buyer shall have the right to withdraw from the purchase and sale under this Agreement the Properties (collectively, the “Buyer Withdrawn Properties”) affected by Title Defects, Environmental Defects, Casualty Events and the exercise of any preferential purchase rights hereunder (collectively the “Defects”).  Seller shall have the right to withdraw from the purchase and sale under this Agreement the Properties affected by the Defects hereunder (collectively, the “Seller Withdrawn Properties” and together with the Buyer Withdrawn Properties, the “Withdrawn Properties”).  For the purposes of the foregoing sentences, the Properties affected by Defects shall include the entire unit or Lease that includes a Well or a Future Well affected by any Defect.  At the Closing, Seller shall except and reserve the Withdrawn Properties from the Assignment, and the Purchase Price for the remaining Properties shall be reduced by the Allocated Value of the Withdrawn Properties.  Notwithstanding the foregoing, until the date that is ninety (90) days from the Closing Date, the Parties shall continue to negotiate in good faith on the cost or impact of such Defect.  If such defect or event cannot be cured within ninety (90) days after the Closing in accordance with Section 7(e), and the Parties cannot agree on the value or impact of such defect or event, then the subject Property shall remain a Withdrawn Property and shall be retained by Seller, and at such point each Party shall be deemed to have waived, disclaimed and released any and all Claims against the other Party arising in connection with or related to such Withdrawn Properties.
(vi)    The Parties hereby acknowledge and agree that: (A) the Properties are subject to certain deeds of trust, mortgages, security agreements and financing statements (the “Bank Liens”) granted by Seller in favor of Société Générale pursuant to that certain Amended and Restated Credit Agreement dated as of June 30, 2011, by and among Seller, the lenders named therein and Société Générale as Administrative Agent; (B) at the Closing, the Purchase Price shall be paid to such Third Party lenders and such lenders shall release the Bank Liens; and (C) at the Closing, the Properties shall be conveyed to Buyer free and clear of all liens (other than Permitted Encumbrances), deeds of trust, mortgages, security agreements and financing statements granted by, through or under Seller, including the Bank Liens.
(vii)    In addition to the waiver of any Title Defects or Environmental Defects as set forth Section 7(c) and as otherwise provided for in this Agreement, Buyer may irrevocably waive in writing any Title Defect or Environmental Defect, in which case the Purchase Price shall not be reduced and Seller shall have no further liability for the waived Title Defects or Environmental 

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Defects, and the Properties associated with such Title Defects or Environmental Defects shall remain properties to be transferred to Buyer at Closing.
(e)    Post-Closing Remedies.  Subject to Section 7(d)(v), Seller shall have the right, but not the obligation, to cure any Title Defects or remediate any Environmental Defects affecting any of the Withdrawn Properties, at Seller’s sole cost and expense, on or before ninety (90) days after the Closing.  Seller shall have the right, but not the obligation, to cause Buyer to purchase from Seller such cured and/or remediated Withdrawn Properties in accordance with the terms of this Agreement, by written notice delivered to Buyer on or before ninety (90) days after the Closing.  In addition, subject to Section 7(d)(v), Buyer shall have the right, but not the obligation, to cause Seller to sell to Buyer such cured and/or remediated Withdrawn Properties in accordance with the terms of this Agreement by written notice delivered to Seller on or before ninety (90) days after the Closing.  Upon receipt by Buyer of an executed and acknowledged recordable assignment (substantially in the form of Exhibit F hereto) covering such cured Withdrawn Properties, Buyer shall pay to Seller an amount equal to the Allocated Value of such cured Withdrawn Properties, less any agreed reduction.
(f)    Exclusive Remedy.  Notwithstanding anything to the contrary herein, except for any Title Defects that constitute a breach of Seller’s special warranty of title contained in the Assignment, this Section 7 and the termination right contained in Section 18 shall be Buyer’s sole and exclusive remedies against Seller for Title Defects and Environmental Defects, and Buyer irrevocably waives, releases and disclaims all Claims and remedies against Seller arising in connection with or related to Title Defects and Environmental Defects.
Section 8.    Environmental Acknowledgments.  Buyer hereby acknowledges and agrees as follows: (i) Buyer has entered into this Agreement on the basis of Buyer’s own investigation of the Condition of the Properties, including surface and subsurface conditions; (ii) Buyer acknowledges that the Land has been used to explore for, develop and produce oil and gas, and for the disposal of produced water, and that spills of crude oil, produced water, wastes, hazardous substances, and other materials may have occurred thereon; and physical changes to the Properties may have occurred as a result of such use; (iii) (a) low levels of NORM may be present at some locations, (b) NORM is a natural phenomenon associated with many oil fields in the U.S. and throughout the world, and (c) Buyer will make its own determination on this matter; and (iv) except as specifically provided elsewhere in this Agreement, upon Closing, Buyer shall, and does hereby, assume the risk that the Properties may contain wastes or contaminants and that adverse physical conditions, including the presence of wastes or contaminants, may not have been revealed by Buyer’s investigation.
Section 9.    Casualty Loss.  

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(a)    Risk of Loss.  From and after the Closing Date, Buyer shall assume all risk of loss for the Properties with respect to: (i) changes in commodities prices, credit markets, and other market factors or conditions; (ii) changes in the Land; (iii) changes in production characteristics, including production declines, depletion, watering out, collapsed casing, sand infiltration or other adverse changes; and (iv) normal wear and tear.
(b)    Casualty Loss.  Prior to the Closing, if a portion of the Properties is destroyed by fire or other casualty (excluding normal wear and tear, and changes in production characteristics), or if a portion of the Properties is taken or threatened to be taken in condemnation or under the right of eminent domain (collectively, a “Casualty Event”), Seller shall promptly deliver to Buyer written notice of such Casualty Event with reasonable detail of the nature of such Casualty Event, and Seller’s good faith proposal for the appropriate corrective action with respect thereto, including any environmental remediation required pursuant to applicable Environmental Law.  For purposes of this Section, the “Casualty Loss” shall be equal to the lesser of either the cost of such appropriate corrective action or the Allocated Value of the Properties affected by such Casualty Event; provided, however, that, notwithstanding anything to the contrary herein, any individual Casualty Loss which is less than Fifteen Thousand Dollars ($15,000.00) individually or Sixty-Five Thousand Dollars ($65,000.00) in the aggregate (the “Casualty Threshold”) shall not be deemed a Casualty Event hereunder.  Buyer hereby disclaims, waives and releases any and all Claims against Seller arising in connection with or related to any individual Casualty Loss which is less than the Casualty Threshold, and such Casualty Loss shall be accepted and assumed by Buyer.
(c)    Casualty Remedies.  Seller shall have the right, but not the obligation, to elect to remedy any Casualty Loss prior to the Closing.  If Seller remedies such Casualty Loss prior to the Closing to the reasonable satisfaction of Buyer, there shall be no adjustment to the Purchase Price.  Seller shall not voluntarily compromise, settle or adjust any amounts payable by reason of any Casualty Event without the prior written consent of Buyer, which consent shall not be unreasonably withheld.  If the Closing occurs with respect to any of the Properties affected by a Casualty Event, Seller shall assign to Buyer the proceeds of any insurance coverage or condemnation award attributable to such affected Properties in excess of Seller’s cost to remedy the Casualty Event.  Notwithstanding anything to the contrary herein, Buyer shall have the right, but not the obligation, to elect to withdraw from the purchase and sale hereunder any of the Properties affected by such Casualty Event by written notice delivered to Seller on or before the Closing.  Upon receipt of such notice, at the Closing, Seller shall except and reserve such affected Properties from the Assignment and such Properties shall be deemed to be Withdrawn Properties thereafter, and the Purchase Price for the remaining Properties shall be reduced by the Allocated Value of such Withdrawn Properties and Seller shall be entitled to and shall retain all insurance proceeds allocable to such Withdrawn Properties.  Each Party hereby waives, disclaims and releases any and all Claims against the other Party arising in connection with or related to such Withdrawn Properties.

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Section 10.    Preferential Rights and Consents.  Seller shall give all required notices with respect to all Third Party preferential purchase rights and consents to assignment within five (5) Business Days of the Execution Date.  The Parties shall use their commercially reasonable efforts in good faith to obtain waivers of preferential rights and consents to assignment; provided that, Buyer shall not be obligated to make any payments in connection therewith.  If (i) the time period for the exercise of any preferential purchase right or consent to assignment expires prior to Closing, (ii) a preferential purchase right is waived by the holder thereof, or (iii) a consent to assignment is obtained from the applicable Third Party, then Seller shall convey the Properties affected thereby to Buyer at the Closing.  In the event that any such preferential purchase right is timely exercised prior to the Closing (or, subject to the following sentence, after Closing), the applicable Properties shall cease to be a part of this transaction, and the Purchase Price shall be reduced by the Allocated Value of the applicable Properties.  If the time period for any such preferential purchase right has not expired at or prior to the Closing, then the Properties affected thereby shall constitute Withdrawn Properties until such time as the time period for the exercise of such preferential purchase right expires or such preferential purchase right is waived, upon which Seller shall promptly assign such Properties to Buyer, and Buyer shall pay Seller the Allocated Value of the applicable Properties.  For all Properties affected by consents to assignment that would impair any of the rights to be transferred to Buyer if not obtained, such Properties shall constitute Withdrawn Properties if such consents to assignment are not obtained prior to Closing (unless waived by Buyer), and the Purchase Price shall be reduced by the Allocated Value of the applicable Properties.  If such consents to assignment are obtained after Closing, then Seller shall promptly assign such Properties to Buyer, and Buyer shall pay Seller the Allocated Value of the applicable Properties.  Seller shall continue to use its reasonable efforts to obtain such consents to assignment following Closing for a period of one (1) year.  Seller shall, if requested by Buyer, enter into a back-to-back contractual arrangement whereby Buyer receives all of the economic benefits of and is responsible for all of the liabilities and burdens under any Leases and Applicable Contracts and indemnifies, defends, releases and holds harmless Seller Indemnitees from and against any and all Claims and Damages arising from or in connection with any such Leases and Applicable Contracts for which consent to assignment is not obtained prior to Closing; provided that, Seller shall not obligated to perform any such back-to-back obligations for more than one (1) year after the Closing Date.  If any such consents to assignment are obtained during the one (1) year period following Closing, then Seller shall promptly assign such Properties to Buyer, and Buyer shall pay Seller the Allocated Value of the applicable Properties.
Section 11.    Conditions Precedent to the Closing.  The obligations of the Parties to close the transactions contemplated hereby are subject to the fulfillment before or at Closing, of each of the following conditions:
(a)    Buyer’s Representations and Covenants.  Except as waived in writing by Seller, the representations and warranties by Buyer set forth in this Agreement shall be true and correct in all material respects at and as of the Closing as though made at and as of the Closing; and Buyer 

                                                                                                                            23

shall have performed and complied with, in all material respects, all covenants and agreements required to be performed and satisfied by Buyer at or prior to the Closing.
(b)    Seller’s Representations and Covenants.  Except as waived in writing by Buyer, the representations and warranties by Seller set forth in this Agreement shall be true and correct in all material respects at and as of the Closing as though made at and as of the Closing; and Seller shall have performed and complied with, in all material respects, all covenants and agreements required to be performed and satisfied by Seller at or prior to the Closing.
(c)    Litigation.  There shall be no pending suits, actions or other proceedings seeking to enjoin or restrain the consummation of the transactions contemplated by this Agreement, or seeking substantial damages in connection therewith by any Third Party.
(d)    Defects.  The aggregate amount of (i) the Title Defect Values for all of the Title Defects asserted in the Defect Notice (including all of the Properties withdrawn from the purchase and sale under this Agreement pursuant to Section 7 above), (ii) the Remediation Values for all Environmental Defects asserted by Buyer in the Defect Notice (including all of the Properties withdrawn from the purchase and sale under this Agreement pursuant to Section 7 above), (iii) the Casualty Losses pursuant to Section 9(b) above and (iv) the Allocated Values of all Withdrawn Properties pursuant to Section 10, shall collectively not exceed twenty percent (20%) of the unadjusted Purchase Price.
Section 12.    Closing.  The purchase and sale of the Properties pursuant to this Agreement shall be consummated at a closing (the “Closing”), to be held at the offices of counsel to Seller or such other place as mutually agreed, on or before December 20, 2013, unless such date is extended in accordance with the provisions hereof (the “Closing Date”) but in no event shall Closing occur after the Outside Termination Date.
(a)    Preliminary Settlement Statement.  Seller shall prepare and deliver to Buyer on or before two (2) Business Days prior to the Closing Date a statement (the “Preliminary Settlement Statement”) setting forth the proposed adjustments to the Purchase Price (the “Preliminary Amount”) provided in Section 3 above.  The Preliminary Amount will be based upon actual amounts, if known on the date thereof, or estimates based upon the best information then available.  Seller shall prepare the Preliminary Settlement Statement in accordance with this Agreement and with GAAP.  Buyer shall have the right to review the Preliminary Settlement Statement and provide written comments and objections thereto within one (1) Business Day of its receipt thereof and Seller shall reasonably consider any revisions to the Preliminary Amount proposed by Buyer with the understanding that if the Parties are unable to agree on the Preliminary Settlement Statement or the Preliminary Amount prior to Close, then Seller’s draft of the Preliminary Settlement Statement and Seller’s proposed Preliminary Amount shall be utilized at the Closing.

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(b)    Closing Deliverables.  At the Closing, the following events shall occur, each event under the control of one Party being a condition precedent to the events under the control of the other Party, and each event being deemed to have occurred simultaneously with the other events:
(i)    The Parties shall execute, acknowledge and deliver the assignment, conveyance and bill of sale (the “Assignment”) of the Properties, excepting and reserving unto Seller the Excluded Properties, attached as Exhibit F hereto.
(ii)    Buyer shall deliver to Seller the Preliminary Amount, less the Deposit (and any accrued interest), in immediately available funds by wire transfer to an account or accounts designated by Seller.
(iii)    Seller shall cause Société Générale and any other persons who have Bank Liens or other liens (other than Permitted Encumbrances) on the Properties to execute releases of such liens, and Seller shall deliver to Buyer releases of all such liens burdening the Properties in form and substance reasonably satisfactory to Buyer including, without limitation, recordable mortgage releases and UCC termination statements.
(iv)    On or before the Closing, Seller will disclose to Buyer the identity of all purchasers of production from the Properties.  Seller and Buyer shall execute, acknowledge and deliver division orders, change of operator forms, transfer orders or letters in lieu thereof prepared by Buyer, subject to Seller’s reasonable approval, directing all purchasers of the Production from the Properties to make payment of proceeds attributable to such Production occurring on or after the Effective Time to Buyer or its designee.
(v)    Seller shall execute and deliver to Buyer a Non-Foreign Affidavit in the form attached hereto as Exhibit G.
(vi)    Seller shall complete, execute and deliver a Form W-9.
(c)    Certificate from Seller.  Seller shall deliver to Buyer a certificate stating that the representations and warranties of Seller contained in Section 4 are true and correct, in all material respects, as of the Closing Date and that Seller has performed, in all material aspects, all covenants and agreements to be performed by Seller hereunder at or prior to Closing.
(d)    Certificate from Buyer.  Buyer shall deliver to Seller a certificate stating that the representations of Buyer contained in Section 5 are true and correct, in all material respects, as of the Closing Date, and that Buyer has performed, in all material aspects, all covenants and agreements to be performed by Buyer hereunder at or prior to Closing.

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(e)    Cancellation of Applicable Contracts.  Seller shall cancel any Applicable Contracts with Seller Affiliates if requested by Buyer.
Section 13.    Post-Closing Adjustments.  On or before the one hundred and twentieth (120th) day after Closing, Seller shall prepare and deliver to Buyer a statement (the “Final Settlement Statement”) setting forth each adjustment to the Adjusted Purchase Price in accordance with Section 3 above.  Seller shall prepare the Final Settlement Statement in accordance with this Agreement and with GAAP.  Buyer shall be given copies of all supporting documentation utilized in connection with the preparation of the Final Settlement Statement when Seller delivers the Final Settlement Statement to Buyer.  On or before the forty-fifth (45th) day after receipt of the Final Settlement Statement, Buyer shall have the right, but not the obligation, to deliver to Seller written notice of any objections by Buyer to the Final Settlement Statement.  Buyer’s notice shall include supporting documentation.  If Buyer fails to deliver written notice of such objections within said time period, the Final Settlement Statement shall be deemed conclusively to be final and binding upon the Parties.  If Buyer delivers written objections within said time period, the Final Settlement Statement shall be deemed conclusively to be final and binding with respect to all adjustments other than those described in Buyer’s written objections.  Buyer and Seller shall use their reasonable efforts in good faith to confer and resolve any objections within fifteen (15) days after Seller’s receipt of Buyer’s notice of objections.  If Buyer and Seller resolve all objections, the adjusted Final Settlement Statement and the Adjusted Purchase Price shall be deemed conclusively to be final and binding upon the Parties.  Any adjustments not resolved within said 15-day time period shall, be resolved pursuant to this Section 12(c)3.  In such case, each Party will within ten (10) Business Days from the expiration of the 15-day time period deliver to each other and UHY unless UHY is unable or unwilling to accept such appointment, in which case, to Hein (or if Hein is unable or unwilling to accept such appointment, then an accounting firm of similar expertise, size and reputation chosen by Seller, which accounting firm has not been engaged by Seller or any of its Affiliates within the past ten (10) years), a notice setting forth in reasonable detail the amount and calculation of the adjustments to the proposed Final Settlement Statement and their proposed Adjusted Purchase Price. Within ten (10) Business Days after receiving such notices, such accounting firm shall choose the Adjusted Purchase Price from one of the notices and will in no way be empowered to choose a different value.  With respect to any adjustments in the Final Settlement Statement, the “Settlement Date” shall be the date upon which such adjustments are deemed final and binding hereunder. If the Adjusted Purchase Price is more than the Preliminary Amount, Buyer shall pay Seller the amount of such difference.  If the Adjusted Purchase Price is less than the Preliminary Amount, Seller shall pay to Buyer the amount of such difference. Any such payment by Buyer or Seller hereunder shall be paid by wire transfer in immediately available funds on or before five (5) Business Days after the Settlement Date.
Section 14.    Post-Closing Covenants.

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(a)    Recording and Sales Tax.  Buyer, at Buyer’s sole cost and expense, shall promptly record counterparts of the Assignment in the appropriate offices of the state and counties in which the lands covered by such instrument are located.  Buyer shall deliver promptly to Seller true and accurate photocopies of the Assignment with the recording information thereon on or before thirty (30) days after recordation.  Notwithstanding anything in this Agreement to the contrary, Buyer shall promptly pay all sales, use, transfer, documentary, recording, filing, stamp, registration and other similar taxes and fees (specifically excluding taxes on gross income, net income or gross receipts) incurred or imposed in connection with this Agreement and the transactions contemplated hereby (collectively, the “Sales Tax”).  Buyer shall indemnify, defend, release and hold harmless Seller Indemnities with respect to the payment of the Sales Tax after the Effective Time, including any and all interest and penalties assessed thereon.
(b)    Records.  At Closing, Seller shall deliver to Buyer, at Buyer’s address or at such other location as directed by Buyer, all originals of the Records, or where originals are not available, copies, at Seller’s sole cost and expense, of the Records.
(c)    Records Subject to Transfer Restrictions.  If applicable, Seller shall cause its Affiliates to consent to the transfer of all records and files related to the Properties.  If any records or files related to the Properties (including, by way of example only, any reprocessed seismic data) are subject to Third Party restrictions on transfer that are not waived or removed prior to Closing, Seller shall use commercially reasonable efforts to cooperate with Buyer’s efforts to obtain waivers or removals of such restrictions after Closing, and if Buyer succeeds in having such restrictions waived or removed, such records or files shall be deemed to constitute Records and Seller shall deliver such Records to Buyer within a reasonable amount of time.  Any and all costs related to Buyer’s efforts to obtain records or files subject to third party restrictions and any transfer fees for seismic data shall be paid for by Buyer.
(d)    Financial Information.  For one (1) year after Closing, Seller shall use its commercially reasonable efforts to provide information reasonably requested by Buyer in connection with its preparation of financial statements and any necessary securities filings relating to the transactions contemplated hereunder.  Notwithstanding the indemnities contained in Section 16, except for matters arising out of or relating to the gross negligence or willful misconduct of any of Seller Indemnitees, Buyer shall indemnify, defend, release and hold harmless Seller from and against any and all Claims arising from or in connection with the information provided pursuant to this Section 14(d).
Section 15.    Operations.  [Intentionally Deleted]

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Section 16.    Indemnities.
(a)    Seller’s Indemnification.  Seller hereby agrees to indemnify, defend, release and hold harmless Buyer, and Buyer’s Affiliates, investment bankers, brokers, accountants, attorneys, successors and assigns, and their respective officers, directors, shareholders, managers, members, partners, employees, agents and representatives (collectively “Buyer Indemnitees”), from and against any and all Damages arising in connection with or related to: (i) the Excluded Properties; (ii) all Property Costs, royalties, overriding royalties, production payments, net profits obligations, delay rentals, shut-in payments and similar burdens to which the Properties were subject accruing before the Effective Time, to the extent not utilized to reduce the Purchase Price in accordance with Section 3(b); (iii)  the breach of any of Seller’s representations, and warranties hereunder; and (iv) the breach of any of Seller’s covenants or agreements hereunder; provided, however, that Buyer’s sole and exclusive remedy for Title Defects (except for Title Defects that constitute a breach of Seller’s special warranty of title contained in the Assignment) and Environmental Defects shall be pursuant to Section 7(f) of this Agreement.
(b)    Buyer’s Indemnification.  Buyer hereby agrees to indemnify, defend, release and hold harmless Seller, Seller’s Affiliates, investment bankers, brokers, accountants and attorneys, successors and assigns, and their respective officers, directors, shareholders, managers, members, partners, employees, agents and representatives (collectively, “Seller Indemnitees”), from and against any and all Damages arising in connection with or related to: (i) the Assumed Liabilities; and (ii) a breach of any of Buyer’s representations and warranties, covenants or agreements hereunder.
(c)    Monetary Damages.  Seller and Buyer acknowledge and agree that the payment of money, as limited by the terms of this Agreement, shall be adequate compensation for any and all Claims of breach of any representation, warranty or covenant contained herein or for any other Claims arising in connection with or with respect to the transactions contemplated by this Agreement.  As the payment of money shall be adequate compensation, Buyer and Seller hereby waive, disclaim and release any and all rights to rescind this Agreement or any of the transactions contemplated hereby after the Closing.
(d)    Monetary Limitation.  Seller shall not be obligated to indemnify Buyer for any Damages pursuant to Section 16(a)(iii) except to the extent that the aggregate of all such Damages exceeds the Deductible.  The Parties acknowledge and agree that it is the intent of the Parties that this amount shall be a deductible and not a threshold, and Seller’s indemnity pursuant to Section 16(a)(iii) above shall cover and include that portion of the Damages in excess of such deductible only.  Notwithstanding anything to the contrary, Buyer’s right to indemnification from Seller pursuant to Section 16(a)(iii) shall be limited to and shall not exceed thirty percent (30%) of the unadjusted Purchase Price. Notwithstanding anything otherwise provided in this Agreement, the 

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monetary limitations in this Section 16(d) shall not apply to any Claims by Buyer arising from Seller’s breach of any Fundamental Representations or Seller’s intentional fraud pursuant to applicable Law.  Notwithstanding any other provision hereof, in no event shall any Party be entitled to duplicate compensation with respect to any Claim, Title Defect, Environmental Defect, Damages or breach of representation, warranty or covenant asserted under any provision of this Agreement, even though such Claim, Title Defect, Environmental Defect, Damages or breach may be addressed by more than one provision of this Agreement.  Further, notwithstanding anything to the contrary, Buyer shall not have any right of indemnification by Seller, and Seller shall not have any obligation of indemnification of Buyer for the Permitted Encumbrances, Title Defects or Environmental Defects.
(e)    Time Limitation.  Seller’s indemnities contained in Section 16(a)(iii) shall terminate on the Post-Closing Date except that Seller’s indemnities related to breaches of Fundamental Representations shall survive until the expiration of any applicable statute of limitations.  Notwithstanding anything to the contrary, for any Claims asserted in good faith by Buyer for indemnification by Seller for which Buyer has delivered written notice on or before the termination date noted above, the indemnification obligations under this Section 16 shall remain in full force and effect until the final resolution of such Claims.  Except as otherwise provided in the first sentence hereof, the Parties indemnity obligations hereunder shall survive until the expiration of any applicable statute of limitations.
(f)    Indemnification Actions.  All Claims for indemnification under this Section 16 shall be asserted and resolved as follows:
(i)    For purposes of this Section 16, the term “Indemnifying Party” when used in connection with particular Damages shall mean the Party having an obligation to indemnify the other Party with respect to such Damages pursuant to this Section 16, and the term “Indemnified Party” when used in connection with particular Damages shall mean the Party having the right to be indemnified with respect to such Damages by the other Party pursuant to this Section 16.
(ii)    To make a claim for indemnification under this Section 16, an Indemnified Party shall notify the Indemnifying Party of its claim under this Section 16, including the basis under this Agreement for its claim (the “Claim Notice”).  In the event that the claim for indemnification is based upon a Third Party Claim, the Indemnified Party shall provide its Claim Notice promptly after the Indemnified Party has actual knowledge of the Third Party Claim and shall enclose a copy of all papers (if any) served with respect to the Third Party Claim.
(iii)    If the Indemnifying Party does not admit its liability or admits its liability but fails to diligently prosecute or settle the Third Party Claim, then the Indemnified Party shall have the right to defend against the Third Party Claim at the sole cost and expense of the Indemnifying 

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Party, with counsel of the Indemnified Party’s choosing, subject to the right of the Indemnifying Party to admit its liability and assume the defense of the Third Party Claim at any time prior to settlement or final determination thereof.
(iv)    In the case of a claim for indemnification not based upon a Third Party Claim, the Indemnifying Party shall have thirty (30) days from its receipt of the Claim Notice to (A) cure the Damages complained of, (B) admit its liability for such Damages or (C) dispute the claim for such Damages.  If the Indemnifying Party does not notify the Indemnified Party within such thirty (30) day period that it has cured the Damages or that it disputes the claim for such Damages, the amount of such Damages shall conclusively be deemed a liability of the Indemnifying Party.
(g)    Mitigation.  A Party entitled to indemnification hereunder, or in connection with the transactions contemplated by this Agreement, shall use such Party’s reasonable efforts in good faith to mitigate all Claims promptly upon such Party’s Knowledge of any event or circumstance which may reasonably be expected to give rise to any Claims indemnifiable or recoverable hereunder or in connection herewith.
(h)    Exclusive Remedy.  If the Closing occurs, the sole and exclusive remedy of Buyer and Seller with respect to this Agreement, and the transactions contemplated hereby, shall be pursuant to the indemnification provisions of this Section 16 only.  Any and all Claims for the breach of any representation, warranty, agreement or covenant contained herein, or for any other Claims arising in connection with or with respect to the transactions contemplated by this Agreement, shall be subject to the provisions set forth in this Section 16.  Except for the rights and remedies expressly stated in this Agreement (including the indemnification provisions of this Section 16), if the Closing occurs, each Party shall be deemed to have irrevocably disclaimed, waived and released any and all rights and remedies, at law or in equity, against the other Party for any Claims arising in connection with or related to this Agreement, and the transactions contemplated hereby, including any right of contribution under any and all applicable Law and Environmental Law.
Section 17.    Disclaimers.
(a)    No Warranty.  EXCEPT FOR SELLER’S EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED IN SECTION 4 ABOVE, AND SELLER’S SPECIAL WARRANTY OF TITLE IN THE ASSIGNMENT, THE PROPERTIES ARE BEING CONVEYED BY SELLER TO BUYER WITHOUT WARRANTY OF ANY KIND, EXPRESS, IMPLIED, STATUTORY, AT COMMON LAW OR OTHERWISE, AND THE PARTIES HEREBY EXPRESSLY DISCLAIM, WAIVE AND RELEASE ANY WARRANTY OF MERCHANTABILITY, CONDITION, SAFETY OR FITNESS FOR A PARTICULAR PURPOSE, AND BUYER ACCEPTS THE PROPERTIES “AS IS, WHERE IS, WITH ALL FAULTS, WITHOUT RECOURSE.” EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR 

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THE ASSIGNMENT, ALL DESCRIPTIONS OF THE PROPERTIES HERETOFORE OR HEREAFTER FURNISHED TO BUYER BY SELLER INDEMNITEES HAVE BEEN AND SHALL BE FURNISHED SOLELY FOR BUYER’S CONVENIENCE, AND HAVE NOT CONSTITUTED AND SHALL NOT CONSTITUTE A REPRESENTATION OR WARRANTY OF ANY KIND BY SELLER INDEMNITEES.  SELLER INDEMNITEES SHALL HAVE NO LIABILITY TO BUYER FOR ANY CLAIMS CAUSED OR ALLEGED TO BE CAUSED DIRECTLY, INDIRECTLY, INCIDENTALLY OR CONSEQUENTIALLY, BY SUCH DESCRIPTIONS OF THE PROPERTIES, BY ANY INADEQUACY THEREOF OR THEREWITH, ARISING IN STRICT LIABILITY OR OTHERWISE, OR IN ANY WAY ARISING OUT OF BUYER’S PURCHASE THEREOF.  THE PARTIES HEREBY ACKNOWLEDGE AND AGREE THAT, TO THE EXTENT REQUIRED BY LAW AND ENVIRONMENTAL LAW, THE DISCLAIMERS CONTAINED IN THIS AGREEMENT ARE “CONSPICUOUS” FOR THE PURPOSES OF SUCH LAW AND ENVIRONMENTAL LAW.
(b)    Disclaimer.  EACH PARTY HEREBY EXPRESSLY DISCLAIMS, WAIVES AND RELEASES ANY AND ALL WARRANTIES, EXPRESS, IMPLIED, STATUTORY, AT COMMON LAW OR OTHERWISE, RELATING TO THE ACCURACY OF ANY OF THE INFORMATION FURNISHED WITH RESPECT TO THE EXISTENCE OR EXTENT OF RESERVES, THE VALUE OF THE PROPERTIES BASED THEREON, OR THE CONDITION OR STATE OF REPAIR OF THE PROPERTIES.  THIS DISCLAIMER EXTENDS TO ANY REPRESENTATION OR WARRANTY AS TO THE PRICES BUYER AND/OR SELLER ARE OR WILL BE ENTITLED TO RECEIVE FROM THE PRODUCTION FROM THE PROPERTIES, IT BEING ACKNOWLEDGED AND AGREED THAT ALL RESERVE, PRICE AND VALUE ESTIMATES UPON WHICH BUYER HAS RELIED OR IS RELYING HAVE BEEN DERIVED BY THE INDIVIDUAL EVALUATION OF BUYER.  ALSO, BUYER ACKNOWLEDGES AND AGREES THAT RESERVE REPORTS ARE ESTIMATES ONLY OF PROJECTED FUTURE OIL AND/OR GAS VOLUMES, FUTURE FINDING COSTS AND FUTURE OIL AND/OR GAS SALES PRICES, ALL OF WHICH FACTORS ARE INHERENTLY IMPOSSIBLE TO PREDICT ACCURATELY EVEN WITH ALL AVAILABLE DATA AND INFORMATION.
(c)    Not Consumers.  SELLER AND BUYER HEREBY ACKNOWLEDGE AND AGREE THAT THEY ARE NOT “CONSUMERS” WITHIN THE MEANING OF ANY DECEPTIVE TRADE PRACTICES OR CONSUMER PROTECTION ACT, OR ANY APPLICABLE LAW AND ENVIRONMENTAL LAW.  BUYER HEREBY EXPRESSLY DISCLAIMS, WAIVES AND RELEASES ALL OF BUYER’S RIGHTS AND REMEDIES UNDER ALL APPLICABLE LAW AND ENVIRONMENTAL LAW WHICH MAY AFFORD CONSUMERS SPECIAL RIGHTS AND PROTECTIONS.  AFTER CONSULTATION WITH AN ATTORNEY OF BUYER’S OWN SELECTION, BUYER VOLUNTARILY CONSENTS TO THIS WAIVER AND RELEASE.  TO EVIDENCE BUYER’S ABILITY TO GRANT SUCH WAIVER, BUYER HEREBY REPRESENTS AND WARRANTS TO SELLER THAT: (i) BUYER 

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IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION; (ii) BUYER IS REPRESENTED BY LEGAL COUNSEL IN ENTERING INTO THIS AGREEMENT; AND (iii) SUCH LEGAL COUNSEL WAS NOT, DIRECTLY OR INDIRECTLY, IDENTIFIED, SUGGESTED OR SELECTED BY SELLER OR ANY AGENT OF SELLER.
(d)    Disclaimers.  NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, NEITHER PARTY SHALL BE ENTITLED TO CLAIM OR RECOVER FROM THE OTHER PARTY, AND EACH PARTY HEREBY DISCLAIMS, RELEASES AND WAIVES ANY CLAIMS, AGAINST THE OTHER PARTY FOR ANY CONSEQUENTIAL, PUNITIVE, EXEMPLARY, SPECIAL OR INDIRECT DAMAGES (INCLUDING, WITHOUT LIMITATION, LOST SALES, USE, INCOME, PROFIT, REVENUE, PRODUCTION, RESERVES OR OPPORTUNITY), EXCEPT WITH RESPECT TO INDEMNIFICATION OF THIRD PARTY CLAIMS IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT.  THE FOREGOING DISCLAIMERS, RELEASES AND WAIVERS SHALL APPLY TO THE SELLER INDEMNITEES AND BUYER INDEMNITEES IN CONNECTION WITH ANY CLAIM FOR INDEMNIFICATION HEREUNDER OR OTHERWISE.
Section 18.    Termination and Notices.
(a)    Termination.  This Agreement, and the transactions contemplated hereby, may be terminated: (i) by mutual written consent of Seller and Buyer; (ii) by Seller if the conditions set forth in Section 11(a) above have not been satisfied by Buyer or waived in writing by Seller on or before the Outside Termination Date (as defined below); (iii) by Buyer if the conditions set forth in Section 11(b) above have not been satisfied by Seller or waived in writing by Buyer on or before the Outside Termination Date; (iv) by either Buyer or Seller if the conditions set forth in Section 11(c) or Section 11(d) have not been satisfied or waived in writing by the Parties on or before the Outside Termination Date; or (v) by either Seller or Buyer, if the Closing shall not have occurred on or before January 15, 2014 (the “Outside Termination Date”).
(b)    Buyer’s Remedy.  In the event of a material breach of any provision of this Agreement by Seller that is not cured within five (5) days of its receipt of written notice thereof from Buyer, in the absence of a material breach of any provision of this Agreement by Buyer, Buyer’s exclusive remedies shall be to either terminate this Agreement by written notice delivered to Seller and receive a return of the Deposit or to demand specific performance. Buyer hereby irrevocably disclaims, waives and releases any and all Claims against Seller and all of the Seller Indemnitees arising in connection with or related to this Agreement and any of the transactions contemplated hereby upon any such termination of this Agreement and in seeking specific performance Buyer shall be deemed to have irrevocably waived any such breach.

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Section 19.    Notices.  All notices and communications required or permitted under this Agreement shall be in writing addressed as set forth below, and any notice or communication hereunder shall be deemed to have been duly delivered upon the earliest of: (a) actual receipt by the Party to be notified; (b) three (3) days after deposit with the United States Postal Service, certified mail, postage prepaid, return receipt requested; (c) if by facsimile or electronic transmission, upon confirmation by the recipient of receipt; or (d) by Federal Express overnight delivery (or other reputable overnight delivery service), one (1) Business Day after deposited with such service.  All such notices shall be addressed as follows:
	
		
	If to Seller:
	With a copy to (which shall not constitute notice):

	 
	 

	Abraxas Petroleum Corporation
	Jackson Walker L.L.P.

	18803 Meisner Drive
	112 E. Pecan, Suite 2400

	San Antonio, Texas 78258
	San Antonio, Texas 78205

	Attention: Mr. Robert L.G. Watson
	Attention: Steven R. Jacobs

	Telephone: (210) 757-9850
	Telephone: (210) 978-7700

	Fax: (210) 490-8816
	Fax: (210) 978-7790

	Email: rwatson@abraxaspetroleum.com
	Email: sjacobs@jw.com

	 
	 

	
		
	If to Buyer:
	With a copy to (which shall not constitute notice):

	 
	 

	F-250, LLC
c/o Redman Management Company
10375 Richmond, Suite 444
Houston, Texas 77042
Attn:  Mr. Jeff Voncannon
Telephone:  (713) 782-2870
	Gardere Wynne Sewell LLP
1000 Louisiana, Suite 3400 
Houston, TX  77002-5011
Attention: Jerry DeVault
Telephone: (713) 276-5835
Email: jdevault@gardere.com

	Email: jvoncannon@redmanresources.com
	

Any Party may, upon written notice to the other Parties, change the address and person to whom such communications are thereafter to be directed.
Section 20.    Miscellaneous.
(a)    Exhibits.  All exhibits and schedules attached to this Agreement are hereby incorporated by reference herein and made a part hereof for all purposes as if set forth in their entirety herein.  The schedule numbers used in this Agreement refer to the corresponding sections of the Agreement to which such schedule relates; provided, however, to the extent that a matter is disclosed in a schedule is relevant and reasonably apparent on its face to apply to the disclosure 

                                                                                                                            33

required by any other section of this Agreement, such matter shall be deemed to be disclosed in such other section of this Agreement, whether or not an explicit cross reference appears.
(b)    Integration.  This Agreement, and the exhibits and schedules hereto, including the definitions in Schedule 1, constitute the entire agreement between the Parties with respect to the subject matter hereof, and supersede and replace all prior negotiations, discussions, representations, understandings and agreements, whether oral or written, relating to such subject matter.
(c)    Amendments.  This Agreement may not be altered or amended, nor any rights hereunder waived, except by a written document signed by the Party to be charged with such amendment or waiver.
(d)    No Assignment.  A Party shall not assign, or contract to assign, any of its rights, interests, obligations or duties under this Agreement without the prior written consent of the other Party, which consent shall not be unreasonably withheld, conditioned or delayed.  Such other Party shall consent to a proposed assignment hereunder to the extent that the proposed assignee has the financial and technical ability to perform the obligations of assignor under this Agreement, and such assignment is in compliance with the terms and conditions of this Agreement.  Any attempted assignment in breach of this provision shall be null and void.  Any assignment hereunder shall be subject to all of the terms and conditions of this Agreement, and the proposed assignee shall agree to assume, bear and perform all of the obligations of the assignor hereunder.  Notwithstanding the foregoing, Buyer may assign this Agreement to an Affiliate without Seller’s consent; provided Buyer shall remain liable to Seller for all of Buyer’s duties, obligations and liabilities hereunder.
(e)    Binding Effect.  Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the Parties, and their respective successors and assigns.
(f)    Third Parties.  Except for indemnified persons or entities described in Section 16 above, this Agreement shall not confer any rights, benefits or remedies to any person or entity not a Party hereto.  The preceding sentence notwithstanding, any claim for indemnity or defense under this Agreement may only be brought by and administered by a Party to this Agreement.
(g)    No Merger; Survival.  None of the provisions of this Agreement shall be deemed to have merged with any assignment or other instrument hereafter executed.  Except for Seller’s Fundamental Representations, which shall survive until the expiration of any applicable statute of limitations, the representations and warranties made by Seller in Section 4 above and by Buyer in Section 5 above shall survive the Closing until the Post-Closing Date, shall expire automatically upon the Post-Closing Date, and no Claims for breach thereof shall be made after the Post-Closing Date.

                                                                                                                            34

(h)    Expenses and Fees.  Except as expressly stated herein to the contrary, each Party shall pay its own fees and expenses incident to the negotiation and preparation of this Agreement and consummation of the transactions contemplated hereby, including broker or investment banker fees.
(i)    Governing Law.  This Agreement and the transactions contemplated hereby shall be governed by and construed in accordance with the Law of the State of Texas, without regard to any conflicts of laws principles that would cause the application of Law from another jurisdiction.
(j)    Venue and Jurisdiction.  Each Party consents to personal jurisdiction in any legal action, suit or proceeding with respect to this Agreement in any court, federal or state, within Travis County, Texas, having subject matter jurisdiction and with respect to any such claim, each Party irrevocably waives, to the fullest extent permitted by law, any Claim, or any objection that it may now or hereafter have, that venue or jurisdiction is not proper with respect to any such legal action, suit or proceeding brought in such court in Travis County, Texas, including any claim that such legal action, suit or proceeding brought in such court has been brought in an inconvenient forum and any Claim that such Party is not subject to personal jurisdiction or service of process in such Travis County, Texas forum.
(k)    Attorney’s Fees.  In the event of any disputes related to this Agreement, the prevailing Party shall recover its court costs, out-of-pocket costs, expert witness fees and reasonable attorneys’ fees from the opposing Party.
(l)    Press Releases.  No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement prior to the Closing without the prior written approval of the other Parties, which shall not be unreasonably condition, delayed or withheld.  Notwithstanding the foregoing, any Party may make any public disclosure that such Party believes in good faith is required by Law or any listing or trading agreement concerning its or its Affiliates’ publicly-traded securities (in which case such Party shall use all reasonable efforts to advise the other Parties, and allow the other Parties an opportunity to comment on the proposed disclosure, prior to making the disclosure).
(m)    Interpretation.  For purposes of interpreting the provisions of this Agreement, the Parties acknowledge and agree that: (i) this Agreement is the result of negotiations between Buyer and Seller, and their respective counsel; (ii) Buyer and Seller are deemed to have equal bargaining power and position; (iii) the Parties are deemed to have drafted this Agreement jointly; and (iv) the rule of construction that ambiguities are to be resolved against the drafting party shall not be employed in the interpretation or construction of this Agreement.
(n)    Construction.  The headings of the articles and sections of this Agreement and any listing of its contents shall not limit or otherwise affect any of the terms or provisions of this 

                                                                                                                            35

Agreement.  All references in this Agreement to Exhibits, Schedules, Appendices, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Schedules, Appendices, Articles, Sections, subsections and other subdivisions of or to this Agreement unless expressly provided otherwise.  The words “this Agreement,” “herein,” “hereby,” “hereunder” and “hereof,” and words of similar import, refer to this Agreement as a whole and not to any particular Article, Section, subsection or other subdivision unless expressly so limited.  The words “this Article,” “this Section,” and “this subsection,” and words of similar import, refer only to Article, Section or subsection hereof in which such words occur.  The word “including” (in its various forms) means including without limitation.  All references to “$” or “dollars” shall be deemed references to United States dollars.  Each accounting term not defined herein will have the meaning given to it under GAAP.  Pronouns in masculine, feminine or neuter genders shall be construed to state and include any other gender, and words, terms and titles (including terms defined herein) in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.  References to any law or agreement shall mean such law or agreement as it may be amended from time to time.
(o)    Timing.  The Parties hereby acknowledge and agree that time is of the essence of this Agreement.
(p)    Further Assurances.  Seller and Buyer shall execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such instruments and take such other action as may be reasonably necessary or advisable to consummate the transactions contemplated by this Agreement.
(q)    Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute one and the same Agreement.  In the event that this Agreement is delivered by facsimile transmission or by e-mail delivery of a “.pdf” file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” file were an original thereof. 

[Signature Page Follows]

                                                                                                                            36

                                                                                                                            37

EXECUTED on the Execution Date, to be effective for all purposes as of the Effective Time.
	
						
	SELLER:
	 
	BUYER:

	 
	 
	 

	ABRAXAS PETROLEUM 
CORPORATION
	 
	F-250, LLC

	 
	 
	 
	            By: Redman Management Company, LLC
            Its:  Manager

	 
	 
	 
	 
	

	By:
	_____________________________
	 
	By:
	_____________________________

	Name:
	Geoffrey R. King
	 
	Name:
	J. Jeffrey Voncannon

	Title:
	Vice President and Chief Financial Officer
	 
	Title:
	Manager

	 

	 

	 

	 
	 

	 
	 

	 
	 

	 
	 

	 
	 

PURCHASE AND SALE AGREEMENT                                                                                                   SIGNATURE PAGE                                                                                                      

Schedule 1
Definitions
“Adjusted Purchase Price” has the meaning set forth in Section 3.
“Affiliate” means any individual, group, partnership, corporation, trust or other entity which (a) controls either directly or indirectly a Person, or (b) is controlled directly or indirectly by such Person, or (c) is directly or indirectly controlled by an individual, group, partnership, corporation, trust or other entity which directly or indirectly controls such Person, for which purpose “control” means the right to exercise more than fifty percent (50%) of the voting rights in the appointment of the directors or similar representation of an individual, group, partnership, corporation, trust or other entity.
“Agreement” has the meaning set forth in the preamble.
“Allocated Value” and “Allocated Values” have the meanings set forth in Section 3(d).
“Applicable Contracts” means all Contracts to which Seller is a party that primarily relate to the Properties and that will be binding on the Properties or Buyer after Closing, including, without limitation; farmin and farmout agreements; bottomhole agreements; crude oil, condensate and natural gas purchase and sale agreements; gathering, transportation and marketing agreements; hydrocarbon storage agreements; acreage contribution agreements; operating agreements (including, for the avoidance of doubt, Applicable Operating Agreements); balancing agreements; pooling declarations or agreements; unitization agreements; processing agreements; and crossing agreements and other similar contracts and agreements; but excluding the Leases, including any amendments thereto, whether recorded or unrecorded, and any master service agreements or other agreements held by Seller solely in its capacity as Operator of the Properties.
 “Applicable Operating Agreements” means, collectively, the joint operating agreements applicable to the Properties, and “Applicable Operating Agreement” means any of them.
“Assignment” has the meaning set forth in Section 12(b)(i).
“Assumed Liabilities” has the meaning set forth in Section 1(c).
“Bank Liens” has the meaning set forth in Section 7(d)(vi).
“Business Day” means each calendar day except Saturdays, Sundays and federal holidays.
“Buyer” has the meaning set forth in the preamble.
“Buyer Indemnitees” has the meaning set forth in Section 16(a).
“Buyer’s Notice Date” has the meaning set forth in Section 7(c).
“Buyer Withdrawn Properties” has the meaning set forth in Section 7(d)(v).

“Casualty Event” has the meaning set forth in Section 9(b).
“Casualty Loss” has the meaning set forth in Section 9(b).
“Casualty Threshold” has the meaning set forth in Section 9(b).
“Claim Notice” has the meaning set forth in Section 16(f)(ii).
“Claims” shall mean any and all claims, demands, complaints, causes of action, suits, actions and appeals.
“Closing” has the meaning set forth in Section 12.
“Closing Date” has the meaning set forth in Section 12.
“Code” means the Internal Revenue Code of 1986, as amended.
“Condition of the Properties” has the meaning set forth in Section 1(c).
“Damages” shall mean the amount of any actual liability, loss, cost, expense, recovery, liability, award, settlement, penalty, fine or judgment incurred or suffered by any Indemnified Party arising out of or resulting from the indemnified matter, 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 Buyer and Seller shall not be entitled to indemnification under this Agreement for, and “Damages” shall not include, loss of profits or other consequential damages suffered by the Indemnified Party, or any special or punitive damages (other than indirect, consequential, special or punitive damages suffered by Third Parties and actually paid by an Indemnified Party pursuant to a Third Party Claim).
“Deductible” means one percent (1.0%) of the unadjusted Purchase Price.  Any adjustment to the Purchase Price for Title Defects and Environmental Defects that individually exceed the Defect Threshold shall include only that portion of the sum of (a) Title Defects and (b) Environmental Defects which collectively exceeds the Deductible.
“Defect” has the meaning set forth in Section 7(d)(v).
“Defect Notice” has the meaning set forth in Section 7(c).
“Defect Threshold” means Twenty Thousand Dollars ($20,000.00).  Each Title Defect with a Title Defect Value, and each Environmental Defect with a Remediation Value, respectively, of less than the Defect Threshold shall be considered a Permitted Encumbrance, and Buyer shall assume sole and exclusive responsibility for all such Title Defects and Environmental Defects.
“Deposit” has the meaning set forth in Section 2.
“Disclosure Schedule” means the schedules referred to in Schedule 4.

“Effective Time” has the meaning set forth in Section 3.
“Environmental Defect” means any contamination or condition resulting from any discharge, release, disposal, production, storage, treatment, or any other activities in, on, under or from the Land, or the migration or transportation from other lands to the Land, or from the Land to other lands, of any wastes, pollutants, contaminants, hazardous materials or other materials or substances which is in violation of Environmental Law and is not otherwise authorized by permit or Environmental Law and for which remedial, investigative or corrective action is required.
“Environmental Law” means any and all applicable laws, statutes, regulations, orders, judgments, writs, injunctions or decrees of any applicable governmental entity relating to safety, the protection of human health, or the protection of the environment, including the Occupational Safety and Health Act, as amended; the Clean Air Act, as amended; the Comprehensive Environmental Response, as amended; Compensation and Liability Act of 1980, as amended; the Federal Water Pollution Control Act, as amended; the Safe Drinking Water Act, as amended; the Toxic Substance Control Act, as amended; the Hazardous and Solid Waste Amendments Act of 1984, as amended; the Superfund Amendments and Reauthorization Act of 1986, as amended; the Hazardous Materials Transportation Act, as amended; the Clean Water Act, as amended; the National Environmental Policy Act, as amended; the Endangered Species Act, as amended; the Fish and Wildlife Coordination Act, as amended; the National Historic Preservation Act, as amended; and the Oil Pollution Act of 1990, as amended, as well as any federal, state and local laws, statutes, regulations, orders, judgments, writs, injunctions or decrees of any applicable governmental entity governing the same, similar or related matters.
“Equipment” means the equipment, machinery, tools, tangible personal property, facilities, improvements, structures and fixtures located on the Land, or directly used in connection with the Leases or the Wells, for the production, gathering, treatment, compression, transportation, processing, sale or disposal of hydrocarbons or water produced from the Wells, including all wells, well-bores, casing, tubing, wellheads, gauges, valves, rods, tanks, pumps, pads, pits, cellars, sumps, separators, treaters, compressors, pipelines and other improvements described in Exhibit C hereto.
“Excluded Properties” has the meaning set forth in Section 1(b).
“Final Settlement Statement” has the meaning set forth in Section 12(c).
“Fundamental Representations” means the representations and warranties set forth in Sections 4(a)– 4(c), 4(d)(i), 4(g), 4(h) and 4(n).
“Future Wells” means the future well locations described on the Plat attached to Schedule 3(d), subject to the limitations set forth therein, and to any restrictions on the future well locations, as provided for in the Leases, the Surface Agreements, the Applicable Contracts, Environmental Law, and the Law.
“GAAP” means generally accepted accounting principles customarily applied in the oil and gas industry as interpreted as of the Execution Date.

“Hein” means Hein & Associates (http://www.heincpa.com).  
“Imbalances” means over-production or under-production or over-delivery or under-delivery with respect to Production from or attributable to the Properties, regardless of whether the same arise at the wellhead, pipeline, gathering system, transportation system, processing plant or any other location.
“Indemnified Party” has the meaning set forth in Section 16(f)(i).
“Indemnifying Party” has the meaning set forth in Section 16(f)(i).
“Knowledge” has the meaning set forth in Section 4 and Section 5.
“Land” has the meaning set forth in Section 1(a)(i).
“Law” means any and all applicable laws, statutes, rules, regulations, orders, judgments, writs, injunctions or decrees of any applicable governmental entity other than Environmental Law.
“Leases” has the meaning set forth in Section 1(a)(i).
“Material Adverse Effect” means the result of a circumstance affecting the Properties that, taken as a whole and whether or not arising from transactions in the ordinary course of business, results in a material diminution of the value, net of any positive effect, of the Properties, provided, however, that no material adverse effect caused by changes in the prices of hydrocarbons,  the cost or availability of goods or services; the oil and gas industry generally; governmental orders, regulations, ordinances, or laws; the U.S. or world economies; or similar matters shall be considered.
 “Material Contracts” has the meaning set forth Section 4(k). 
“Net Revenue Interest” means, with respect to a Well or a Future Well, Seller’s interest in oil, gas and other minerals produced, saved and sold from the Well or Future Well, as set forth in Schedule 3(d), after giving effect to all landowners’ royalties, overriding royalties, production payments, carried interests, net profits interests, reversionary interests and other burdens upon, measured by or payable out of production therefrom.
“NORM” means Naturally Occurring Radioactive Material.
“Outside Termination Date” has the meaning set forth in Section 18(a).
“Party” and “Parties” have the meanings set forth in the preamble.
“Permitted Encumbrances” means any of the following:
(a)    The terms and conditions of this Agreement, the Leases, the Material Contracts, and the Surface Rights and all matters disclosed in the Disclosure Schedule, but only to the extent the same do not operate to: (A) reduce the interest of Seller with respect to all oil and gas produced from the Wells to less than the Net Revenue Interest for such 

Wells set forth in Schedule 3(d); or (B) increase the Working Interest of Seller in any of the Wells to greater than the Working Interest set forth in Schedule 3(d) (unless Seller’s Net Revenue Interest therein is increased in the same proportion);
(b)    The terms and conditions of this Agreement, the Leases, the Material Contracts, the Surface Rights, the Law, Environmental Law, and all matters disclosed in Schedule 4(k) relating to the rights of owners and lessees of coal in the Properties, to the extent the same operate to: (A) reduce the interest of Seller with respect to all oil and gas produced from the Future Wells to less than the Net Revenue Interest for such Future Wells set forth in Schedule 3(d); or (B) increase the Working Interest of Seller in any of the Future Wells to greater than the Working Interest set forth in Schedule 3(d);
(c)     Royalties and overriding royalties burdening the Wells and Future Wells, but only to the extent the same do not operate to: (A) reduce the interest of Seller with respect to all oil and gas produced from such Wells and Future Wells to less than the Net Revenue Interest for such Wells and Future Wells set forth in Schedule 3(d); or (B) increase the Working Interest of Seller in such Wells and Future Wells to greater than the Working Interest set forth in Schedule 3(d) (unless Seller’s Net Revenue Interest therein is increased in the same proportion);
(d)    All rights to consent by, required notices to, filings with, or other actions by governmental entities in connection with the sale or conveyance of oil and gas leases or interests therein if such are routinely obtained subsequent to the sale or conveyance;
(e)    Third Party consents to assignment that have been obtained, or will be obtained prior to Closing, from the appropriate Persons and preferential purchase rights to purchase identified on the Disclosure Schedule;
(f)    Easements, rights-of-way, servitudes, permits, surface leases and other rights in respect of surface operations or any restrictions on access thereto which do not have a material adverse effect on the oil and gas operations to be conducted on any of the Properties;
(g)    Conventional rights of reassignment prior to release or surrender requiring notice to the holders of the rights;
(h)    All rights reserved to or vested in any governmental authority to control or regulate any of the Properties in accordance with applicable Law;
(i)    Division orders terminable without penalty upon no more than sixty (60) days’ prior written notice;

(j)    Liens arising under operating agreements, unitization and pooling agreements and sales contracts securing amounts not yet due, or, if due, being contested in good faith in the ordinary course of business;
(k)    Materialman’s, mechanic’s, repairman’s, contractor’s, operator’s, tax, and other similar liens or charges arising in the ordinary course of business for obligations that are not delinquent or that will be paid and discharged in the ordinary course of business, or if delinquent, that are being contested in good faith in the ordinary course of business;
(l)    Any real property taxes not yet due and payable;
(m)    The lack of a release of any prior expired oil and gas lease covering any portion of the Lands, if the Records contain an affidavit of non-production;
(n)    Mortgages, deeds of trust, security agreements and financing statements burdening the lessor’s interest covered by any of the Leases to the extent the same are subordinated to the Leases;
(o)    Defects or irregularities of title as to which the relevant statute of limitation or prescription would conclusively bar any attack or claim against Seller’s title;
(p)    Defects in the chain of title arising from the failure to recite marital status, omissions of successors or heirs, or the lack of probate proceedings and defects arising out of lack of corporate or other entity authorization, unless Buyer provides evidence that the defect results in another person’s superior, actual and valid claim of title to the affected Properties; 
(q)    Any question as to the legitimacy of a survey or the lack of a survey;
(r)    Any change in Working Interest or Net Revenue Interest based on a change in drilling and spacing units, tract allocation or other changes in pool or unit participation occurring after the Execution Date, but only to the extent the same do not operate to: (A) reduce the interest of Seller with respect to all oil and gas produced from a Well or Future Well to less than the Net Revenue Interest for such Wells and Future Wells set forth in Schedule 3(d); or (B) increase the Working Interest of Seller in any of the Wells and Future Wells to greater than the Working Interest set forth in Schedule 3(d) (unless Seller’s Net Revenue Interest therein is increased in the same proportion); and
(s)    The necessity of obtaining the joinder or consent of other working interest owners or lessors in the Leases or of any owners of the Land as may be required for the drilling of any of the Future Wells;

(t)    The right of other working interest owners in the Leases to propose the drilling of wells that may conflict with or preclude the possibility of drilling a Future Well; and
(u)    Any Title Defects Buyer may have expressly waived in writing or which are deemed to have become Permitted Encumbrances under Section 7.
“Person” means an individual, a corporation, an association, a partnership, a limited partnership, a limited liability company, a joint-stock company, a trust, any unincorporated organization or a government or a political subdivision thereof.
“Plat” means the unscaled map attached to Schedule 3(d) which provides a rough approximation of the location, length, and approximation of Future Wells. 
“Post-Closing Date” shall mean the date that is one year after the Closing Date.
“Preliminary Amount” has the meaning set forth in Section 12(a).
“Preliminary Settlement Statement” has the meaning set forth in Section 12(a).
“Production” means the oil, gas, condensate and other hydrocarbon production produced from the Land covered by the Leases, or attributable thereto, or to lands pooled or unitized therewith, from and after the Effective Time.
“Production Taxes” means the ad valorem, severance, production, property or similar taxes and assessments attributable to the Properties (specifically excluding Seller’s federal income taxes and state income and franchise taxes).
“Properties” has the meaning set forth in Section 1(a).
“Property Costs” has the meaning set forth in Section 3(a)(i).
“Purchase Price” has the meaning set forth in Section 2.
“Records” means Seller’s files and records related to the Leases, the Land, the Wells and Future Wells, the Equipment, the Production, the Surface Rights and the Material Contracts, including: (A) title abstracts, title opinions, leases, assignments, contracts, rights of way, surveys, maps, plats and related correspondence; (B) well files, logs, and operations, engineering and maintenance records; (C) joint interest billing, lease operating expense, division of interest and accounting records; (D) the Production Taxes and all files and records related thereto; and (E) all seismic, engineering, geological and geophysical data, information, and technical evaluations, but only to the extent not subject to Third Party contractual restrictions on disclosure or transfer that have not been waived or consented to following Seller’s written request therefor or that Buyer has not agreed in writing to pay or satisfy at its cost, to the extent disclosure or transfer is permitted on the payment of a fee, and only to the extent related to the Properties; but, in all cases, specifically excluding the records and files related to the Excluded Properties described in Section 1(b)(viii).

“Remediation Value” means, with respect to an individual Environmental Defect, the reasonable cost to remediate such Environmental Defect as determined in accordance herewith.  In no event shall the Remediation Value for any of the Properties exceed the lesser of the Allocated Value set forth in Schedule 3(d), or the reasonable cost to remediate such Environmental Defect, if the cost to cure is reasonably determinable.
“Sales Tax” has the meaning set forth in Section 14(a).
“Sanchez” means Sanchez Energy Corporation. 
“Securities Law” means all applicable federal and state securities Laws, including the Securities Act of 1933, as amended.
“Seller” has the meaning set forth in the preamble.
“Seller Indemnitees” has the meaning set forth in Section 16(b).
“Seller’s Response Date” has the meaning set forth in Section 7(d).
“Seller Withdrawn Properties” has the meaning set forth in Section 7(d)(v).
“Surface Rights” means the easements, rights-of-way, permits, leases, licenses, servitudes, access agreements, surface use agreements or other similar interests with respect to ingress, egress, access to the Lands, or the Wells, including those described in Exhibit D hereto.
“Third Party” means any Person other than one of the Parties or an Affiliate of a Party.
“Third Party Claim” shall mean a Claim against one of the Parties by a Third Party.
“Title Defect” means, with respect to Seller’s interest in any of the Properties, on a property by property basis, any lien, charge, encumbrance or defect of title, excluding the Permitted Encumbrances, that: (A) increases the Working Interest of Seller in any of the Properties to greater than the Working Interest set forth on Schedule 3(d) (unless Seller’s Net Revenue Interest therein is increased in the same proportion); (B) diminishes the Net Revenue Interest of Seller in any of the Properties to less than the Net Revenue Interest as set forth on Schedule 3(d); (C) results in a pledge, security interest or lien upon a Lease or any of the Properties; or (D) has an adverse effect on the ownership or operation of a Lease or any of the Properties.  
“Title Defect Value” means, with respect to an individual Title Defect, the amount by which the Allocated Value of the affected Properties is reduced as a result of such Title Defect as determined in accordance herewith.  In no event shall the Title Defect Value for a particular Property exceed the lesser of the Allocated Value set forth in Schedule 3(d) hereto, or the reasonable cost to cure the Title Defect, if the cost to cure is reasonably determinable.
“UHY” means UHY LLP (http://uhy-us.com).
“Wells” means the oil and gas wells described in Exhibit B hereto.

“Withdrawn Properties” has the meaning set forth in Section 7(d)(v).
“Working Interest” means, with respect to an individual Well or a Future Well, Seller’s ownership interest in and to the Well or Future Well set forth in Schedule 3(d), insofar as such interest is burdened by the obligation to bear and pay costs, without regard to any landowners’ royalties, overriding royalties, production payments or similar burdens on production.
“WyCross Gas Gathering System” means the Surface Rights and Equipment listed in the Exhibits under the heading “WyCross Gas Gathering System.”forms8_exh101-12413.htm

Exhibit 10.1

  

  

  

APPENDIX B

 

ROMA FINANCIAL CORPORATION

2008 EQUITY INCENTIVE PLAN

 

	
1.

	
PURPOSE OF PLAN.

 

The purpose of this 2008 Equity Incentive Plan is to provide incentives and rewards to selected officers, employees and directors that contribute to the success and growth of Roma Financial Corporation, and its Affiliates, and to assist these entities in attracting and retaining selected officers, employees and directors with necessary experience and ability required to aid the Company in increasing the long-term value of the Company for the benefit of its shareholders.

 

	
2.

	
DEFINITIONS.

 

“Affiliate” means any “parent corporation” or “subsidiary corporation” of the Company, as such terms are defined in Sections 424(e) and 424(f) of the Code.

 

“Award” means Restricted Stock Awards and/or Stock Options, as set forth in Section 6 of the Plan.

 

“Bank” means Roma Bank, and any successors thereto.

 

“Beneficiary” means the person or persons designated by the Participant to receive any benefits payable under the Plan in the event of such Participant’s death.  Such person or persons shall be designated in writing by the Participant and addressed to the Company or the Committee on forms provided for this purpose by the Committee, and delivered to the Company or the Committee.  Such Beneficiary designation may be changed from time to time by similar written notice to the Committee.  A Participant’s last will and testament or any codicil thereto shall not constitute written designation of a Beneficiary.  In the absence of such written designation, the Beneficiary shall be the Participant’s surviving spouse, if any, or if none, the Participant’s estate.

 

“Board of Directors” means the board of directors of the Company.

 

“Cause” means the personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profits, intentional failure to perform stated duties, willful violation of a material provision of any law, rule or regulation (other than traffic violations and similar offense), or a material violation of a final cease-and-desist order or any other action which results in a substantial financial loss to the Company or its Affiliates.

 

“Change in Control” shall mean: (i) the sale of all, or a material portion, of the assets of the Company or its Affiliates; (ii) the merger or recapitalization of the Company whereby the Company is not the surviving entity; (iii) a change in control of the Company, as otherwise defined or determined by the Office of Thrift Supervision or regulations promulgated by it; or (iv) the acquisition, directly or indirectly, of the beneficial ownership (within the meaning of that term as it is used in Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) of twenty-five percent (25%) or more of the outstanding voting securities of the Company by any person, trust, entity or group.  This limitation shall not apply to the purchase of shares by underwriters in connection with a public offering of Company stock, or the purchase of shares of up to 25% of any class of securities of the Company by a tax-qualified employee stock benefit plan which is exempt from the approval requirements, set forth under 12 C.F.R. Section 574.3(c)(1)(vii) as now in effect or as may hereafter be amended.  The term “person” refers to an individual or a corporation, partnership, trust, association, joint venture, pool, syndicate, sole proprietorship, unincorporated organization or any other form of entity not specifically listed herein.  A Change in Control shall not include a transaction whereby the MHC shall merge into the Company or the Bank and a new Parent of the Company or the Bank is formed.

 

B-1

  

  

  

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Committee” means the Board of Directors of the Company or the administrative committee designated, pursuant to Section 3 of the Plan, to administer the Plan.

 

“Common Stock” or “Shares” means shares of common stock of the Company.

 

“Company” means Roma Financial Corporation, and any successor entity or any future parent corporation of the Bank.

 

“Director” means a person serving as a member of the Board of Directors of the Company from time to time.

 

“Director Emeritus” means a person serving as a director emeritus, advisory director, consulting director or other similar position as may be appointed by the Board of Directors of the Company or the Bank from time to time.

 

“Disability” means (a) with respect to Incentive Stock Options, the “permanent and total disability” of the Employee as such term is defined at Section 22(e)(3) of the Code; and (b) with respect to other Awards, a condition of incapacity of a Participant which renders that person unable to engage in the performance of his or her duties by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.

 

“Effective Date” shall mean the date of stockholder approval of the Plan by the stockholders of the Company.

 

“Eligible Participant” means an Employee or Outside Director who may receive an Award under the Plan.

 

“Employee” means any person employed by the Company or an Affiliate.  Directors who are also employed by the Company or an Affiliate shall be considered Employees under the Plan.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Exercise Price” means the price at which an individual may purchase a share of Common Stock pursuant to an Option.

 

B-2

  

  

  

“Fair Market Value” means a) for a security traded on a national securities exchange, including the Nasdaq Global market, the last reported sales price reported on such date or, if the Common Stock was not traded on such date, on the immediately preceding day on which the Common Stock was traded thereon or the last previous date on which a sale is reported; b) if the Shares are not traded on a national securities exchange, but are traded on the over-the-counter market, if sales prices are not regularly reported for the Shares for the trading day referred to in clause (a), and if bid and asked prices for the Shares are regularly reported, the mean between the bid and the asked price for the Shares at the close of trading in the over-the counter market on the applicable date, or if the applicable date is not a trading day, on the trading day immediately preceding the applicable date; and (c) in the absence of such markets for the Shares, the Fair Market Value shall be determined in good faith by the Committee.

 

“Incentive Stock Option” means a Stock Option granted under the Plan, that is intended to meet the requirements of Section 422 of the Code.

 

“MHC” means Roma Financial Corporation, MHC, the mutual holding company of the Bank.

 

“Non-Statutory Stock Option” means a Stock Option granted to an individual under the Plan that is not intended to be and is not identified as an Incentive Stock Option, or an Option granted under the Plan that is intended to be and is identified as an Incentive Stock Option, but that does not meet the requirements of Section 422 of the Code.

 

“Option” or “Stock Option” means an Incentive Stock Option or a Non-Statutory Stock Option, as applicable.

 

“Outside Director” means a member of the Board of Directors of the Company who is not also an Employee.

 

“Parent” means any present or future corporation which would be a “parent corporation” of the Bank or the Company as defined in Sections 424(e) and (g) of the Code.

 

“Participant” means an individual who is granted an Award pursuant to the terms of the Plan; provide, however, upon the death of a Participant, the term “Participant” shall also refer to a Beneficiary designated in accordance with the Plan.

 

“Plan” means this Roma Financial Corporation 2008 Equity Incentive Plan.

 

“Restricted Stock Award” means an Award of shares of restricted stock granted to a Participant pursuant to Section 6.1(b) of the Plan.

 

“Trust” shall mean any grantor trust established by the Company for purposes of administration of the Plan.

 

“Trustee” or “Trustee Committee” means that person(s) or entity appointed by the Committee to hold legal title to the Plan assets under any Trust for the purposes set forth herein.

 

B-3

  

  

  

	
3.

	
ADMINISTRATION.

 

	
  

	
(a)

	
Committee.  The Committee shall administer the Plan.  The Committee shall consist of two or more disinterested directors of the Company, who shall be appointed by the Board of Directors.  A member of the Board of Directors shall be deemed to be disinterested only if he or she satisfies: (i) such requirements as the Securities and Exchange Commission may establish for non-employee directors administering plans intended to qualify for exemption under Rule 16b-3 (or its successor) of the Exchange Act and (ii) and to the extent deemed appropriate by the Board of Directors, such requirements as the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption under Section 162(m)(4)(C) of the Code; provided, however, a failure to comply with the requirements of subparagraphs (i) and (ii) shall not disqualify any actions taken by the Committee.  A majority of the entire Committee shall constitute a quorum and the action of a majority of the members present at any meeting at which a quorum is present shall be deemed the action of the Committee.  In no event may the Committee revoke outstanding Awards without the consent of the Participant.  All decisions, determinations and interpretations of the Committee shall be final and conclusive on all persons affected thereby.

 

	
  

	
(b)

	
Authority of Committee.  Subject to paragraph (a) of this Section 3, the Committee shall:

 

	
  

	
(i)

	
select the individuals who are to receive grants of Awards under the Plan;

 

	
  

	
(ii

	
determine the type, number, vesting requirements, acceleration of vesting and other features and conditions of Awards made under the Plan;

 

	
  

	
(iii)

	
establish the terms, conditions and criteria related to performance-based compensation in accordance with Section 162(m) of the Code, if applicable, and the certification of attainment of such performance-based criteria;

 

	
  

	
(iv)

	
interpret the Plan and Award Agreements (as defined below); and

 

	
  

	
(v)

	
make all other decisions and determinations that may be required or as the Committee deems necessary or advisable related to the operation of the Plan.

 

	
  

	
(c)

	
Awards.  Each Award granted under the Plan shall be evidenced by a written agreement (i.e., an “Award Agreement”).  Each Award Agreement shall constitute a binding contract between the Company or an Affiliate and the Participant, and every Participant, upon acceptance of an Award Agreement, shall be bound by the terms and restrictions of the Plan and the Award Agreement.  The terms of each Award Agreement shall be set in accordance with the Plan, but each Award Agreement may also include any additional provisions and restrictions determined by the Committee.  In particular, and at a minimum, the Committee shall set forth in each Award Agreement:

 

	
  

	
(i)

	
the type of Award granted;

 

B-4

  

  

  

	
  

	
(ii)

	
the Exercise Price for any Option;

 

	
  

	
(iii)

	
the number of shares or rights subject to the Award;

 

	
  

	
(iv)

	
the expiration date of the Award;

 

	
  

	
(v)

	
the manner, time and rate (cumulative or otherwise) of exercise or vesting of the Award; and

 

	
  

	
(vi)

	
the restrictions, if any, placed on the Award, or upon shares which may be issued upon the exercise or vesting of the Award.

 

The Chairman of the Committee and/or the President of the Company are hereby authorized to execute Award Agreements on behalf of the Company or an Affiliate and to cause them to be delivered to the Participants granted Awards under the Plan.

 

	
  

	
(d)

	
Six-Month Holding Period.  Subject to vesting requirements, if applicable, except in the event of death or Disability of the Participant or a Change in Control of the Company, a minimum of six months must elapse between the date of the grant of an Option and the date of the sale of the Common Stock received through the exercise of such Option.

 

	
4.

	
ELIGIBILITY.

 

Subject to the terms of the Plan, Employees and Outside Directors, as the Committee shall determine from time to time, shall be eligible to receive Awards in accordance with the Plan.

 

	
5.

	
SHARES OF COMMON STOCK SUBJECT TO THE PLAN; SHARE LIMITS.

 

5.1           Shares Available.  Subject to the provisions of Section 7, the Common Stock that may be delivered under this Plan shall be shares of the Company’s authorized but unissued Common Stock, shares of Common Stock purchased in the open-market by the Company or any Trust established for purposes of administration of the Plan and any shares of Common Stock held as treasury shares.

 

5.2           Share Limits.  The maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under this Plan (the “Share Limit”) equals 1,810,073 shares.  The following limits also apply with respect to Awards granted under this Plan:

 

	
  

	
(a)

	
The maximum number of shares of Common Stock that may be delivered pursuant to the exercise of Stock Options granted under this Plan is 1,292,909 shares.

 

	
  

	
(b)

	
The maximum number of shares of Common Stock that may be delivered pursuant to Restricted Stock Awards granted under this Plan is 517,164 shares.

 

5.3           Awards Settled in Cash, Reissue of Awards and Shares.  To the extent that an Award is settled in cash or a form other than shares of Common Stock, or if shares of Common Stock are withheld from an Award for tax purposes, then the shares that would have been delivered had there been no such cash or other settlement shall be counted against the shares available for issuance under this Plan.  Shares that are subject to or underlie Awards which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under this Plan shall again be available for subsequent Awards under this Plan.

 

B-5

  

  

  

5.4           Reservation of Shares; No Fractional Shares; Minimum Issue.  The Company shall at all times reserve a number of shares of Common Stock sufficient to cover the Company’s obligations and contingent obligations to deliver shares with respect to Awards then outstanding under this Plan.  No fractional shares shall be delivered under this Plan.  The Committee may pay cash in lieu of any fractional shares in settlements of Awards under this Plan.  No fewer than 100 shares may be purchased on exercise of any Stock Option unless the total number purchased or exercised is the total number at the time available for purchase or exercise by the Participant.

 

	
6.

	
AWARDS.

 

6.1           Except as otherwise detailed herein, the Committee shall determine the type or types of Award(s) to be made to each Eligible Participant or Outside Director.  Awards may be granted singularly, in combination or in tandem.  Awards also may be made in combination or in tandem with, in replacement of, as alternatives to, or as the payment form for grants or rights under any other employee or compensation plan of the Company.  The types of Awards that may be granted under this Plan are Stock Options and Restricted Stock Awards, as follows:

 

(a)           Stock Options.

 

The Committee may, subject to the limitations of this Plan and the availability of shares of Common Stock reserved but not previously awarded under the Plan, grant Stock Options to Employees and Outside Directors, subject to terms and conditions as it may determine, to the extent that such terms and conditions are consistent with the following provisions:

 

	
(i)  

	
Exercise Price.  The Exercise Price of Stock Options shall not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock on the date of grant.

 

	
(ii)  

	
Terms of Options.  In no event may an individual exercise an Option, in whole or in part, more than ten (10) years from the date of grant.

 

	
(iii)  

	
Non-Transferability.  Unless otherwise determined by the Committee, an individual may not transfer, assign, hypothecate, or dispose of an Option in any manner, other than by will or the laws of intestate succession.  The Committee may, however, in its sole discretion, permit the transfer or assignment of a Non-Statutory Stock Option, if it determines that the transfer or assignment is for valid estate planning purposes and is permitted under the Code and Rule 16b-3 of the Exchange Act.  For purposes of this Section 6.1(a), a transfer for valid estate planning purposes includes, but is not limited to, transfers:

 

B-6

  

  

  

	
  

	
(1)

	
to a revocable inter vivos trust, as to which an individual is both settlor and trustee;

 

	
  

	
(2)

	
for no consideration to: (a) any member of the individual’s Immediate Family; (b) a trust solely for the benefit of members of the individual’s Immediate Family; (c) any partnership whose only partners are members of the individual’s Immediate Family; or (d) any limited liability corporation or other corporate entity whose only members or equity owners are members of the individual’s Immediate Family.

 

For purposes of this Section 6.1, “Immediate Family” includes, but is not necessarily limited to, a Participant’s parents, grandparents, spouse, children, grandchildren, siblings (including half brothers and sisters), and individuals who are family members by adoption.  Nothing contained in this Section 6.1 shall be construed to require the Committee to give its approval to any transfer or assignment of any Non-Statutory Stock Option or portion thereof, and approval to transfer or assign any Non-Statutory Stock Option or portion thereof does not mean that such approval will be given with respect to any other Non-Statutory Stock Option or portion thereof.  The transferee or assignee of any Non-Statutory Stock Option shall be subject to all of the terms and conditions applicable to such Non-Statutory Stock Option immediately prior to the transfer or assignment and shall be subject to any other conditions prescribed by the Committee with respect to such Non-Statutory Stock Option.

 

	
(iv)  

	
Special Rules for Incentive Stock Options.  Notwithstanding the foregoing provisions, the following rules shall further apply to grants of Incentive Stock Options:

 

	
  

	
(1)

	
If an Employee owns or is treated as owning, for purposes of Section 422 of the Code, Common Stock representing more than ten percent (10%) of the total combined voting securities of the Company at the time the Committee grants the Incentive Stock Option (a “10% Owner”), the Exercise Price shall not be less than one hundred and ten percent (110%) of the Fair Market Value of the Common Stock on the date of grant.

 

	
  

	
(2)

	
An Incentive Stock Option granted to a 10% Owner shall not be exercisable more than five (5) years from the date of grant.

 

	
  

	
(3)

	
To the extent the aggregate Fair Market Value of shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an Employee during any calendar year, under the Plan or any other stock option plan of the Company, exceeds $100,000, or such higher value as may be permitted under Section 422 of the Code, Incentive Stock Options in excess of the $100,000 limit shall be treated as Non-Statutory Stock Options.  Fair Market Value shall be determined as of the date of grant for each Incentive Stock Option.

 

B-7

  

  

  

	
  

	
(4)

	
Each Award Agreement for an Incentive Stock Option shall require the individual to notify the Committee within ten (10) days of any disposition of shares of Common Stock under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions).

 

	
  

	
(5)

	
Incentive Stock Options may only be awarded to an Employee of the Company or its Affiliates.

 

	
(v)  

	
Option Awards to Outside Directors.  Subject to the limitations of Section 6.4(a), the Committee may award Non-Statutory Stock Options to purchase shares of Common Stock to each Outside Director of the Company at an Exercise Price equal to the Fair Market Value of the Common Stock on such date of grant.  The Options will be first exercisable at the rate of 20% on the one year anniversary of the date of grant of such Award and 20% annually thereafter during periods of continuing service as a Director or Director Emeritus.  Upon the death or Disability of the Director or Director Emeritus, such Option shall be deemed immediately 100% exercisable.  Such Options shall continue to be exercisable for a period of ten years following the date of grant without regard to the continued services of such Director as a Director or Director Emeritus.  In the event of the Director’s death, such Options may be exercised by the Beneficiary or the personal representative of his estate or person or persons to whom his rights under such Option shall have passed by will or by the laws of descent and distribution.  Options may be granted to newly appointed or elected Outside Directors within the sole discretion of the Committee.  The Exercise Price per share of such Options granted shall be equal to the Fair Market Value of the Common Stock at the time such Options are granted.  All outstanding Awards shall become immediately exercisable in the event of a Change in Control of the Bank or the Company.  Unless otherwise inapplicable, or inconsistent with the provisions of this paragraph, the Options to be granted to Outside Directors hereunder shall be subject to all other provisions of this Plan.

 

(b)           Restricted Stock Awards.

 

The Committee may make grants of Restricted Stock Awards, which shall consist of the grant of some number of shares of Common Stock to an individual upon such terms and conditions as it may determine, to the extent such terms and conditions are consistent with the following provisions:

 

	
  

	
(i)

	
Grants of Stock.  Restricted Stock Awards may only be granted in whole shares of Common Stock.

 

B-8

  

  

  

	
  

	
(ii)

	
Non-Transferability.  Except to the extent permitted by the Code, the rules promulgated under Section 16(b) of the Exchange Act or any successor statutes or rules:

 

	
  

	
(1)

	
The recipient of a Restricted Stock Award grant shall not sell, transfer, assign, pledge, or otherwise encumber shares subject to the grant until full vesting of such shares has occurred.  For purposes of this Section 6.1, the separation of beneficial ownership and legal title through the use of any “swap” transaction is deemed to be a prohibited encumbrance.

 

	
  

	
(2)

	
Unless otherwise determined by the Committee, and except in the event of the Participant’s death or pursuant to a qualified domestic relations order, a Restricted Stock Award grant is not transferable and may be earned only by the individual to whom it is granted during his or her lifetime.  Upon the death of a Participant, a Restricted Stock Award shall be transferred to the Beneficiary.  The designation of a Beneficiary shall not constitute a transfer.

 

	
  

	
(3)

	
If the recipient of a Restricted Stock Award is subject to the provisions of Section 16 of the Exchange Act, shares of Common Stock subject to the grant may not, without the written consent of the Committee (which consent may be given in the Award Agreement), be sold or otherwise disposed of within six (6) months following the date of grant.

 

	
  

	
(iii)

	
Issuance of Certificates.  The Committee shall take such action as is reasonably necessary for the prompt issuance of shares of Common Stock to be issued pursuant to a Restricted Stock Award prior to the time that such Award shall be deemed earned and non-forfeitable, with such stock certificate evidencing such shares registered in the name of the Participant to whom the Restricted Stock Award was granted; provided, however, that the Company may not cause a stock certificate to be issued unless it has received a stock power duly endorsed in blank with respect to such shares.  Further, each such stock certificate shall bear the following legend:

 

THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE RESTRICTIONS, TERMS AND CONDITIONS (INCLUDING FORFEITURE PROVISIONS AND RESTRICTIONS AGAINST TRANSFER) CONTAINED IN THE ROMA FINANCIAL CORPORATION 2008 EQUITY INCENTIVE PLAN AND THE RELATED AWARD AGREEMENT ENTERED INTO BETWEEN THE REGISTERED OWNER OF SUCH SHARES AND THE ROMA FINANCIAL CORPORATION THE PLAN AND AWARD AGREEMENT IS ON FILE IN THE OFFICE OF THE CORPORATE SECRETARY OF ROMA FINANCIAL CORPORATION.

 

This legend shall not be removed until the individual becomes vested in such Restricted Stock Award pursuant to the terms of the Plan and respective Award Agreement.  Each certificate issued pursuant to this Section 6.1(b) shall be held by the Company or its Affiliates, unless the Committee determines otherwise.

 

B-9

  

  

  

	
  

	
(iv)

	
Treatment of Dividends.  Participants are entitled to all dividends and other distributions declared and paid on all shares of Common Stock subject to a Restricted Stock Award from and after the date of grant of such Restricted Stock Award.  Such dividends and other distributions shall be distributed to the holder of such Restricted Stock Award within 30 days of the payment date applicable to such distributions declared and paid with respect to the Common Stock; provided that in the event of the forfeiture of such Restricted Stock Award, all future dividend rights shall cease.

 

	
  

	
(v)

	
Voting Rights Associated with of Restricted Stock Awards.  Voting rights associated with any Restricted Stock Award shall not be exercised by the Participant until certificates of Common Stock representing such Award have been issued to such Participant and the Restricted Stock Award shall be deemed earned and non-forfeitable.  Any shares of Common Stock held by the Trust prior to such time shall be voted by the Trustee of such Trust as directed by the Committee; Any shares of Common Stock held by Company prior to such time shall be voted by the Committee in accordance with the stock power held by the Company applicable to such Awards.

 

	
  

	
(vi)

	
Restricted Stock Awards to Outside Directors.  Notwithstanding anything herein to the contrary, the Committee may grant a Restricted Stock Award consisting of shares of Common Stock to each Outside Director of the Company.  Such Award shall be earned and non-forfeitable at the rate of one-fifth as of the one-year anniversary of such date of grant and an additional one-fifth following each of the next four successive years during such periods of service as a Director or Director Emeritus.  Such Award shall be immediately 100% earned and non-forfeitable in the event of the death or Disability of such Director.  Such Award shall be immediately 100% earned and non-forfeitable upon a Change in Control of the Company or the Bank.  Restricted Stock Awards may be granted to newly elected or appointed Outside Directors within the discretion of the Committee, provided that total Restricted Stock Awards granted to Outside Directors shall not exceed the limitations set forth at Section 6.4(b) herein.

 

B-10

  

  

  

(c)           Performance-Based Compensation.

 

Any Restricted Stock Award under the Plan which is intended to be “performance-based compensation” within the meaning of Code Section 162(m) shall be conditioned on the achievement of one or more objective performance measures, to the extent required by Section 162(m) of the Code, as may be determined by the Committee.  The grant of any Restricted Stock Award subject to such performance measures and the establishment of performance measures that are intended to be performance-based compensation shall be made during the period required under Section 162(m) of the Code.

 

	
(i)  

	
Performance Measures.  Such performance measures may be based on any one or more of the following: earnings (e.g., earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization; or earnings per share); financial return ratios (e.g., return on investment, return on invested capital, return on equity or return on assets); capital; increase in revenue, operating or net cash flows; cash flow return on investment; total stockholder return; market share; net operating income, operating income or net income; debt load reduction; expense management; economic value added; stock price; assets, asset quality level, charge offs, loan reserves, non-performing assets, loans, deposits, growth of loans, deposits or assets; liquidity; interest sensitivity gap levels; regulatory compliance or safety and soundness; improvement of financial rating; achievement of balance sheet or income statement objectives and strategic business objectives, consisting of one or more objectives, such as meeting specific cost, revenue or other targets, business expansion goals and goals relating to acquisitions or divestitures.  Performance measures may be based on the performance of the Company as a whole or of any one or more subsidiaries or business units of the Company or an Affiliate and may be measured relative to a peer group, an index or a business plan.  In establishing any performance measures, the Committee may provide for the exclusion of the effects of the following items, to the extent identified in the audited financial statements of the Company, including footnotes, or in the Management’s Discussion and Analysis section of the Company’s annual report: (i) extraordinary, unusual, and/or nonrecurring items of gain or loss; (ii) gains or losses on the disposition of a business; (iii) changes in tax or accounting principles, regulations or laws; or (iv) mergers or acquisitions.  To the extent not specifically excluded, such effects shall be included in any applicable performance measure.

 

	
(ii)  

	
Partial Achievement.  The terms of any award may provide that partial achievement of the performance measures may result in a payment or vesting based upon the degree of achievement.  In addition, partial achievement of performance measures shall apply toward a Participant’s individual limitations as set forth in Section 6.4(b).

 

B-11

  

  

  

	
(iii)  

	
Adjustments.  Pursuant to this Section 6.1(c), in certain circumstances the Committee may adjust performance measures; provided, however, no adjustment may be made with respect to an award that is intended to be performance-based compensation, except to the extent the Committee exercises such negative discretion to reduce awards as is permitted under applicable law for purposes of an exception under Code Section 162(m)  If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company or the manner in which the Company or its Affiliates conducts its business or other events or circumstances render current performance measures to be unsuitable, the Committee may modify such performance measures, in whole or in part, as the Committee deems appropriate.  If a Participant is promoted, demoted or transferred to a different business unit during a performance period, the Committee may determine that the selected performance measures or applicable performance period are no longer appropriate, in which case, the Committee, in its sole discretion, may: (i) adjust, change or eliminate the performance measures or change the applicable performance period; or (ii) cause to be made a cash payment to the Participant in an amount determined by the Committee.

 

	
(iv)  

	
Other Restrictions.  Any Award that shall be contingent upon the attainment of performance-based compensation criteria established in accordance with this Section 6.1(c) shall be evidenced by a written agreement setting forth the performance criteria established, the maximum amounts to be earned or payable and such other terms and conditions applicable to such Award.  Such Awards shall be granted and administered to comply with the requirements of Section 162(m) of the Code.  Any such Award shall be made not later than 90 days after the start of the period for which the Award performance criteria relates and shall be made prior to the completion of 25% of such period.  All determinations regarding the achievement of any performance criteria will be made by the Committee.  No such Award or portion thereof that is subject to the attainment or satisfaction of a condition based upon performance criteria shall be distributed or considered to be earned or vested until the Committee certifies in writing that the conditions or performance criteria to which the distribution, earning or vesting of such Award is subject have been achieved.  Notwithstanding anything herein at Sections 6.1(b)(iv) or (v) to the contrary, a Participant receiving an Award conditioned upon the attainment of performance criteria in accordance with Section 6.1(c) herein, shall have no rights as a shareholder until the certification of attainment of the performance criteria has been satisfied and the Common Stock is issued pursuant to such Award.

 

B-12

  

  

  

6.2           Award Payouts.  Awards may be paid out in the form of cash, Common Stock, or combinations thereof as the Committee shall determine in its sole discretion, and with such restrictions as it may impose.

 

6.3           Consideration for Stock Options.  The Exercise Price for any Stock Option granted under this Plan may be paid by means of any lawful consideration as determined by the Committee, including, without limitation, one or a combination of the following methods:

 

(a)           cash, check payable to the order of the Company, or electronic funds transfer;

 

(b)           the delivery of previously owned shares of Common Stock; or

 

(c)           subject to such procedures as the Committee may adopt, pursuant to a “cashless exercise” with a third party who provides financing for the purposes of (or who otherwise facilitates) the purchase or exercise of such Stock Option.

 

In no event shall any shares newly-issued by the Company be issued for less than the minimum lawful consideration for such shares or for consideration other than consideration permitted by applicable state law.  In the event that the Committee allows a Participant to exercise an Option by delivering shares of Common Stock previously owned by such Participant, any such shares delivered which were initially acquired by the Participant from the Company (upon exercise of a stock option or otherwise) must have been owned by the Participant for at least six months prior to such date of delivery.  Shares of Common Stock used to satisfy the Exercise Price of an Option shall be valued at their Fair Market Value on the date of exercise.  The Company will not be obligated to deliver any shares unless and until it receives full payment of the Exercise Price and any related withholding obligations under Section 9.5 have been satisfied, or until any other conditions applicable to exercise or purchase have been satisfied.  No Shares of Common Stock shall be issued until full payment has been received by the Company, and no Participant shall have any of the rights of a stockholder of the Company until shares of Common Stock are issued upon the exercise of such Stock Options.  Unless expressly provided otherwise in the applicable Award Agreement, the Committee may at any time within its sole discretion eliminate or limit a Participant’s ability to pay the purchase or Exercise Price of any Award by any method other than a cash payment to the Company.

 

6.4           Limitations on Awards.

 

(a)           Stock Option Award Limitations.  During the ten year period following the Effective Date (and in no single calendar year), Shares subject to Options granted to Outside Directors in the aggregate under this Plan shall not exceed more than 30% of the total number of Shares authorized for delivery under this Plan with respect to Stock Options or exceed more than 4% of such Shares to any individual Outside Director pursuant to Section 5.2(a) herein.  During the ten year period following the Effective Date (and in no single calendar year), the aggregate number of Shares subject to Options granted to any single Employee shall not exceed more than 20% of the total number of Shares authorized for delivery under the Plan pursuant to Section 5.2(a) herein.

 

(b)           Restricted Stock Award Limitations.  During the ten year period following the Effective Date (and in no single calendar year), Shares subject to Restricted Stock Awards granted to Outside Directors in the aggregate under this Plan shall not exceed more than 30% of the total number of Shares authorized for delivery under this Plan with respect to Restricted Stock Awards or exceed more than 4% to any individual Outside Director pursuant to Section 5.2(b) herein.  During the ten year period following the Effective Date (and in no single calendar year), the aggregate number of Shares subject to Restricted Stock Awards granted to any single Employee shall not exceed more than 20% of the total number of Shares authorized for delivery under the Plan pursuant to Section 5.2(b) herein.  The maximum number of Shares subject to a Restricted Stock Award that may be granted in any one calendar year to any participant that shall be deemed “performance-based compensation” in accordance with Section 6.1(c), herein, and in conformity with the requirements of Section 162(m) of the Code, and that may be earned and non-forfeitable in a single installment upon attainment of such performance criteria shall be 25,000 Shares.

 

B-13

  

  

  

(c)           Vesting of Awards.  Except as otherwise provided by the terms of the Plan or by action of the Committee at the time of the grant of an Award, Stock Options will be first exercisable and Restricted Stock Awards will be earned and nonforfeitable at the rate of 20% of such Award on the one year anniversary of the date of grant and 20% annually thereafter during such periods of service as an Employee, Director or Director Emeritus.  Except for Awards that will be "performance based compensation" in accordance with Section 6.1(c), Awards will not be earned and non-forfeitable more quickly than at the rate of one third on the one year anniversary of the grant of such award and one-third annually thereafter, except in the event of the death or Disability of the Participant or a Change in Control transaction occurring after the date of grant of such Award.  Notwithstanding the foregoing, Awards under the Plan may be made conditioned upon achievement of performance-based criteria and not with respect to a period of service requirement in accordance with Section 6.1(c) herein and the requirements of Section 162(m) of the Code.

 

	
7.

	
EFFECT OF TERMINATION OF SERVICE ON AWARDS.

 

7.1           General.  The Committee shall establish the effect of a termination of employment or service on the continuation of rights and benefits available under an Award, and, in so doing, may make distinctions based upon, inter alia, the recipient of such Award, the cause of termination and the type of the Award.  Notwithstanding the foregoing, the terms of Awards shall be consistent with the following, as applicable:

 

(a)           Termination of Employment.  In the event that any Participant’s employment with the Company shall terminate for any reason, other than Disability or death, all of any such Participant’s Incentive Stock Options, and all of any such Participant’s rights to purchase or receive shares of Common Stock pursuant thereto, shall automatically terminate on (A) the earlier of (i) or (ii): (i) the respective expiration dates of any such Incentive Stock Options, or (ii) the expiration of not more than three (3) months after the date of such termination of employment; or (B) at such later date as is determined by the Committee at the time of the grant of such Award based upon the Participant’s continuing status as a Director or Director Emeritus of the Bank or the Company, but only if, and to the extent that, the Participant was entitled to exercise any such Incentive Stock Options at the date of such termination of employment, and further that such Award shall thereafter be deemed a Non-Statutory Stock Option.

 

(b)           Disability.  In the event that any Participant’s employment with the Company shall terminate as the result of the Disability of such Participant, such Participant may exercise any Incentive Stock Options granted to the Participant pursuant to the Plan at any time prior to the earlier of (i) the respective expiration dates of any such Incentive Stock Options or (ii) the date which is one (1) year after the date of such termination of employment, but only if, and to the extent that, the Participant was entitled to exercise any such Incentive Stock Options at the date of such termination of employment.

 

(c)           Death.  In the event of the death of a Participant, any Incentive Stock Options granted to such Participant may be exercised by the Participant's Beneficiary or the person or persons to whom the Participant’s rights under any such Incentive Stock Options pass by will or by the laws of descent and distribution (including the Participant’s estate during the period of administration) at any time prior to the earlier of (i) the respective expiration dates of any such Incentive Stock Options or (ii) the date which is two (2) years after the date of death of such Participant, but only if, and to the extent that, the Participant was entitled to exercise any such Incentive Stock Options at the date of death.  For purposes of this Section 7.1(c), any Incentive Stock Option held by an Participant shall be considered exercisable at the date of his death if the only unsatisfied condition precedent to the exercisability of such Incentive Stock Option at the date of death is the passage of a specified period of time.  At the discretion of the Committee, upon exercise of such Options, the Beneficiary may receive Shares or cash or a combination thereof.  If cash shall be paid in lieu of shares of Common Stock, such cash shall be equal to the difference between the Fair Market Value of such Shares and the exercise price of such Options on the exercise date.

 

7.2           Events Not Deemed Terminations of Employment or Service.  Unless Company policy or the Committee provides otherwise, the employment relationship shall not be considered terminated in the case of (a) sick leave, (b) military leave, or (c) any other leave of absence authorized by the Company or the Committee; provided that, unless reemployment upon the expiration of such leave is guaranteed by contract or law, such leave is for a period of not more than 90 days.  In the case of any Employee on an approved leave of absence, continued vesting of the Award while on leave may be suspended until the Employee returns to service, unless the Committee otherwise provides or applicable law otherwise requires.  In no event shall an Award be exercised after the expiration of the term set forth in the Award Agreement.

 

7.3           Effect of Change of Affiliate Status.  For purposes of this Plan and any Award, if an entity ceases to be an Affiliate of the Company, a termination of employment or service shall be deemed to have occurred with respect to each individual who does not continue as an Employee or Outside Director with another entity within the Company after giving effect to the Affiliate’s change in status.

 

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8.

	
ADJUSTMENTS IN CAPITAL STRUCTURE; ACCELERATION UPON A CHANGE IN CONTROL.

 

8.1           Adjustments in Capital Structure.  Upon any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split (“stock split”); any merger, combination, consolidation, or other reorganization; any spin-off, split-up, or similar extraordinary dividend distribution with respect to the Common Stock (whether in the form of securities or property); any exchange of Common Stock or other securities of the Company, or any similar, unusual or extraordinary corporate transaction affecting the Common Stock; or a sale of all or substantially all the business or assets of the Company in its entirety; then the Committee shall proportionately adjust the Plan and the Awards thereunder in such manner, to such extent and at such times, as is necessary to preserve the benefits or potential benefits of such Awards, including:

 

(a)           proportionately adjust any or all of: (1) the number and type of shares of Common Stock (or other securities) that thereafter may be made the subject of Awards (including the specific Share Limits, maximums and numbers of shares set forth elsewhere in this Plan); (2) the number, amount and type of shares of Common Stock (or other securities or property) subject to any or all outstanding Awards; (3) the grant, purchase, or Exercise Price of any or all outstanding Awards; (4) the securities, cash or other property deliverable upon exercise or payment of any outstanding Awards; or (5) the performance standards applicable to any outstanding Awards; or

 

(b)           make provision for a cash payment or for the assumption, substitution or exchange of any or all outstanding Awards, based upon the distribution or consideration payable to holders of the Common Stock.

 

8.2           The Committee may adopt such valuation methodologies for outstanding Awards as it deems reasonable in the event of a cash or property settlement and, in the case of Options, may base such settlement solely upon the excess, if any, of the per share amount payable upon or in respect of such event over the Exercise Price or base price of the Award.  With respect to any Award of an Incentive Stock Option, the Committee may make an adjustment that causes the Option to cease to qualify as an Incentive Stock Option without the consent of the affected Participant.

 

8.3           Upon any of the events set forth in Section 8.1, the Committee may take such action prior to such event to the extent that the Committee deems the action necessary to permit the Participant to realize the benefits intended to be conveyed with respect to the Awards in the same manner as is or will be available to stockholders of the Company generally.  In the case of any stock dividend, stock split or reverse stock split, if no action is taken by the Committee, the proportionate adjustments contemplated by Section 8.1(a) above shall nevertheless be made.

 

8.4           Automatic Acceleration of Awards.  Unless otherwise determined by the Committee, upon the death or Disability of an Award recipient or upon a Change in Control of the Company or the Bank, each Stock Option then outstanding shall become fully vested and exercisable and remain exercisable for its remaining term and all Restricted Stock Awards then outstanding shall be fully vested, be deemed earned and non-forfeitable and be free of restrictions.  Unless otherwise determined by the Committee, any such adjustment to an Award intended to qualify as “performance-based compensation” shall conform to the requirements of Section 162(m) of the Code and the regulations thereunder then in effect.

 

8.5           Acceleration of Vesting.  The Committee shall at all times have the power to accelerate the exercise date of Options and the date that Restricted Stock Awards shall be earned and non-forfeitable with respect to previously granted Awards; provided that such action is not contrary to regulations of the Office of Thrift Supervision or other appropriate banking regulatory agency then in effect.

 

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9.

	
MISCELLANEOUS PROVISIONS.

 

9.1           Compliance with Laws.  This Plan, the granting and vesting of Awards under this Plan, the offer, issuance and delivery of shares of Common Stock, the acceptance of payment of money under this Plan or under Awards are subject to compliance with all applicable federal and state laws, rules and regulations (including, but not limited to, state and federal securities laws) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith.  The person acquiring any securities under this Plan will, if requested by the Company, provide such assurances and representations to the Company as may be deemed necessary or desirable to assure compliance with all applicable legal and accounting requirements.

 

9.2           Claims.  No person shall have any claim or rights to an Award (or additional Awards, as the case may be) under this Plan, subject to any express contractual rights to the contrary (set forth in a document other than this Plan).

 

9.3           No Employment/Service Contract.  Nothing contained in this Plan (or in any other documents under this Plan or in any Award Agreement) shall confer upon any Participant any right to continue in the employ or other service of the Company, constitute any contract or agreement of employment or other service or affect an Employee’s status as an employee-at-will, nor interfere in any way with the right of the Company to change a Participant’s compensation or other benefits, or terminate his or her employment or other service, with or without cause.  Nothing in this Section 9.3, however, is intended to adversely affect any express independent right of such Participant under a separate employment or service contract other than an Award Agreement.

 

9.4           Plan Not Funded.  Awards payable under this Plan shall be payable in shares of Common Stock or from the general assets of the Company.  No Participant, beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of Common Stock, except as expressly provided otherwise) of the Company by reason of any Award hereunder.  Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company and any Participant, Beneficiary or other person.  Notwithstanding the foregoing, the Company may establish a Trust in accordance with Section 10 with respect to Awards made in accordance with Section 6.1(b) herein.  To the extent that a Participant, Beneficiary or other person acquires a right to receive payment pursuant to any Award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company.

 

9.5           Tax Matters; Tax Withholding.

 

(a)           Tax Withholding.  Upon any exercise, vesting, or payment of any Award, the Company shall have the right, within its sole discretion, to:

 

	
  

	
(i)

	
require the Participant (or the Participant’s personal representative or Beneficiary, as the case may be) to pay or provide for payment of at least the minimum amount of any taxes which the Company may be required to withhold with respect to such Award or payment; or

 

	
  

	
(ii)

	
deduct from any amount otherwise payable in cash to the Participant (or the Participant’s personal representative or Beneficiary, as the case may be) the minimum amount of any taxes which the Company may be required to withhold with respect to such cash payment, or

 

	
  

	
(iii)

	
in any case where tax withholding is required in connection with the delivery of shares of Common Stock under this Plan, the Committee may, in its sole discretion, pursuant to such rules and subject to such conditions as the Committee may establish, reduce the number of shares to be delivered to the Participant by the appropriate number of shares, valued in a consistent manner at their Fair Market Value as necessary to satisfy the minimum applicable withholding obligation.  In no event shall the shares withheld exceed the minimum whole number of shares required for tax withholding under applicable law.

 

(b)           Required Notification of Section 83(b) Election.  In the event a Participant makes an election under Section 83(b) of the Code in connection with an Award, the Participant shall notify the Company of such election within ten days of filing notice of the election with the Internal Revenue Service or other governmental authority, in addition to any filing and notification required pursuant to regulations issued under Section 83(b) of the Code or other applicable provision.

 

(c)           Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code.  If any Participant shall make any disposition of shares of Stock delivered pursuant to the exercise of Incentive Stock Options under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten days thereof.

 

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9.6           Effective Date, Termination and Suspension, Amendments.

 

(a)           Effective Date and Termination.  This Plan is effective upon the later of approval of the Plan by the Board of Directors of the Company or the vote of approval by the stockholders of the Company (“Approval Date”).  Unless earlier terminated by the Board, this Plan shall terminate at the close of business on the day before the tenth anniversary of the Approval Date.  After the termination of this Plan either upon such stated expiration date or its earlier termination by the Board, no additional Awards may be granted under this Plan, but previously granted Awards (and the authority of the Committee with respect thereto, including the authority to amend such Awards) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of this Plan.

 

(b)           Board Authorization.  Subject to applicable laws and regulations, the Board of Directors may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part; provided, however, that no such amendment may have the effect of repricing the Exercise Price of Options.  No Awards may be granted during any period that the Board of Directors suspends this Plan.

 

(c)           Stockholder Approval.  The Plan must be approved by a majority of votes cast by stockholders of the Company (including votes cast by Roma Financial Corporation, MHC under Nasdaq rules), by a majority of the total votes of the Company eligible to be cast (including votes eligible to be cast by Roma Financial Corporation, MHC) and by a majority of votes cast by stockholders of the Company (excluding shares voted by Roma Financial Corporation, MHC) or such other approval vote as may be required by the Office of Thrift Supervision.

 

(d)           Limitations on Amendments to Plan and Awards.  No amendment, suspension or termination of this Plan or change affecting any outstanding Award shall, without the written consent of the Participant, affect in any manner materially adverse to the Participant any rights or benefits of the Participant or obligations of the Company under any Award granted under this Plan prior to the effective date of such change.  Changes, settlements and other actions contemplated by Section 8 shall not be deemed to constitute changes or amendments for purposes of this Section 9.6.  Notwithstanding any provision in this Plan or any Award Agreement to the contrary, the Committee may amend the Plan or an Award Agreement, to take affect retroactively or otherwise, as deemed necessary or advisable for the purpose of (i) conforming the Plan or the Award Agreement to any present or future law relating to plans of this or similar nature (including, but not limited to, Section 409A of the Code), or (ii) avoiding an accounting treatment resulting from an accounting pronouncement or interpretation thereof issued by the Securities Exchange Commission or Financial Accounting Standards Board subsequent to the adoption of the Plan or the making of the Award affected thereby, which in the sole discretion of the Committee, may materially and adversely affect the financial condition or results of operations of the Company.  By accepting an Award under this Plan, each Participant agrees and consents to any amendment made pursuant to this Section 9.6 or Section 9.11, herein, with respect to any Award granted under this Plan without further consideration, consent or action.

 

9.7           Governing Law; Compliance with Regulations; Construction; Severability.

 

(a)           Construction.  This Plan, the Awards, all documents evidencing Awards and all other related documents shall be governed by, and construed in accordance with, the laws of the United States and the laws of the State of New Jersey to the extent not preempted by Federal law.

 

(b)           Compliance with Regulations.  This Plan will comply with the requirements set forth in 12 C.F.R. Section 563b.500.  Notwithstanding any other provision in this Plan, no shares of Common Stock shall be issued with respect to any Award to the extent that such issuance would cause the MHC to fail to qualify as a mutual holding company of the Bank under applicable federal laws or regulations.

 

(c)           Severability.  If a court of competent jurisdiction holds any provision invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.

 

(d)           Section 16 of Exchange Act.  It is the intent of the Company that the Awards and transactions permitted by Awards be interpreted in a manner that, in the case of Participants who are or may be subject to Section 16 of the Exchange Act, qualify, to the maximum extent compatible with the express terms of the Award, for exemption from matching liability under Rule 16b-3 promulgated under the Exchange Act.  Notwithstanding the foregoing, the Company shall have no liability to any Participant for Section 16 consequences of Awards or events affecting Awards if an Award or event does not so qualify.

 

(e)           Compliance with Law.  Shares of Common Stock shall not be issued with respect to any Award granted under the Plan unless the issuance and delivery of such shares shall comply with all relevant provisions of applicable law, including, without limitation, the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, any applicable state securities laws and the requirements of any stock exchange upon which the shares may then be listed.

 

(f)           Necessary Approvals.  The inability of the Company to obtain any necessary authorizations, approvals or letters of non-objection from any regulatory body or authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any shares of Common Stock issuable hereunder shall relieve the Company of any liability with respect to the non-issuance or sale of such shares.

 

B-17

  

  

  

(g)           Representations and Warranties of Participants.  As a condition to the exercise of any Option or the delivery of shares in accordance with an Award, the Company may require the person exercising the Option or receiving delivery of the shares to make such representations and warranties as may be necessary to assure the availability of an exemption from the registration requirements of federal or state securities law.

 

(h)           Termination for Cause.  Notwithstanding anything herein to the contrary, upon the termination of employment or service of a Participant by the Company or an Affiliate for “cause” as defined at 12 C.F.R. Section 563.39(b)(1) as determined by the Board of Directors or the Committee, all Awards held by such Participant which have not yet been delivered shall be forfeited by such Participant as of the date of such termination of employment or service.

 

(i)           Cash Payment in Lieu of Delivery of Shares.  Upon the exercise of an Option, the Committee, in its sole and absolute discretion, may make a cash payment to the Participant, in whole or in part, in lieu of the delivery of shares of Common Stock.  Such cash payment to be paid in lieu of delivery of Common Stock shall be equal to the difference between the Fair Market Value of the Common Stock on the date of the Option exercise and the exercise price per share of the Option.  Such cash payment shall be in exchange for the cancellation of such Option.  Such cash payment shall not be made in the event that such transaction would result in liability to the Participant or the Company under Section 16(b) of the Exchange Act and regulations promulgated thereunder, or subject the Participant to additional tax liabilities related to such cash payments pursuant to Section 409A of the Code.

 

(j)           Certain Regulatory Matters.  In the event that the Bank shall be deemed critically undercapitalized (as defined at 12 C.F.R. Section 565.4), is subject to enforcement action by the Office of Thrift Supervision, or receives a capital directive under 12 C.F.R. Section 565.7, then all Options awarded to executive officers or Directors of the Company or its Affiliates must exercise such Options or forfeit such Options.

 

(k)           Forfeiture of Awards in Certain Circumstances.  In addition to any forfeiture or reimbursement conditions the Committee may impose upon an Award, a Participant may be required to forfeit an Award, or reimburse the Company for the value of a prior Award, by virtue of the requirement of Section 304 of the Sarbanes-Oxley Act of 2002 (or by virtue of any other applicable statutory or regulatory requirement), but only to the extent that such forfeiture or reimbursement is required by such statutory or regulatory provision.  Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash consideration, the Participant shall be repaid the amount of such cash consideration.

 

9.8           Captions.  Captions and headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof.

 

9.9           Non-Exclusivity of Plan.  Nothing in this Plan shall limit or be deemed to limit the authority of the Board of Directors or the Committee to grant Awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or authority.

 

9.10           Limitation on Liability.  No Director, member of the Committee or the Trustee shall be liable for any determination made in good faith with respect to the Plan, the Trust or any Awards granted.  If a Director, member of the Committee or the Trustee is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by any reason of anything done or not done by him in such capacity under or with respect to the Plan, the Company shall indemnify such person against expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in the best interests of the Company and its Affiliates and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

 

9.11           Section 409A Compliance.  To the extent that any Award is determined to constitute "nonqualified deferred compensation" within the meaning of Section 409A of the Code (a "409A Award"), the Award shall be subject to such additional rules and requirements as specified by the Committee from time to time in order to comply with Section 409A of the Code.  In this regard, if any amount under a 409A Award is payable upon a "separation from service" (within the meaning of Section 409A of the Code) to a Participant who is then considered a "specified employee" (within the meaning of Section 409A of the Code), then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the Participant's separation from service, or (ii) the Participant's death, but only to the extent such delay is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A of the Code.  Further, the settlement of any such Award may not be accelerated except to the extent permitted by Section 409A of the Code.  To the extent that an Award is deemed to constitute a 409A Award, and the settlement of, or distribution of benefits thereunder of, such Award is to be triggered solely by a Change in Control, then with respect to such Award, a Change in Control shall be defined as required in conformity with the limitations under Section 409A of the Code, as in effect at the time of such Change in Control transaction.

 

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10.

	
TRUST.

 

10.1           Activities of Trustee.  The Trustee(s) shall receive, hold, administer, invest and make distributions and disbursements from the Trust in accordance with the provisions of the Plan and the applicable directions, rules, regulations, procedures and policies established by the Committee pursuant to the Plan.

 

10.2           Management of Trust.  It is the intention of this Plan that the Trustee shall have complete authority and discretion with respect to the management, control and investment of the Trust, and that the Trustee shall invest all assets of the Trust, except those attributable to cash dividends paid with respect to unearned and unawarded Restricted Stock Awards, in Common Stock to the fullest extent practicable, except to the extent that the Trustee determines that the holding of monies in cash or cash equivalents is necessary to meet the obligations of the Trust.  In performing their duties, the Trustees shall have the power to do all things and execute such instruments as may be deemed necessary or proper, including the following powers:

 

(a)           To invest up to one hundred percent (100%) of all Trust assets in the Common Stock without regard to any law now or hereafter in force limiting investments for Trustees or other fiduciaries.  The investment authorized herein may constitute the only investment of the Trust, and in making such investment, the Trustee is authorized to purchase Common Stock from the Parent or from any other source, and such Common Stock so purchased may be outstanding, newly issued, or treasury shares.

 

(b)           To invest any Trust assets not otherwise invested in accordance with (a) above in such deposit accounts, and certificates of deposit (including those issued by the Bank), obligations of the United States government or its agencies or such other investments as shall be considered the equivalent of cash.

 

(c)           To sell, exchange or otherwise dispose of any property at any time held or acquired by the Trust.

 

(d)           To cause stocks, bonds or other securities to be registered in the name of a nominee, without the addition of words indicating that such security is an asset of the Trust (but accurate records shall be maintained showing that such security is an asset of the Trust).

 

(e)           To hold cash without interest in such amounts as may be in the opinion of the Trustee reasonable for the proper operation of the Plan and Trust.

 

(f)           To employ brokers, agents, custodians, consultants and accountants.

 

(g)           To hire counsel to render advice with respect to their rights, duties and obligations hereunder, and such other legal services or representation as they may deem desirable.

 

(h)           To hold funds and securities representing the amounts to be distributed to a Participant or his Beneficiary as a consequence of a dispute as to the disposition thereof, whether in a segregated account or held in common with other assets.

 

(i)           As may be directed by the Committee or the Board from time to time, the Trustee shall pay to the Company any earnings of the Trust attributable to unawarded or forfeited Restricted Stock Awards.

 

Notwithstanding anything herein contained to the contrary, the Trustee shall not be required to make any inventory, appraisal or settlement or report to any court, or to secure any order of a court for the exercise of any power herein contained, or to maintain bond.

 

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10.3           Records and Accounts.  The Trustee shall maintain accurate and detailed records and accounts of all transactions of the Trust, which shall be available at all reasonable times for inspection by any legally entitled person or entity to the extent required by applicable law, or any other person determined by the Committee.

 

10.4           Earnings.  All earnings, gains and losses with respect to Trust assets shall be allocated in accordance with a reasonable procedure adopted by the Committee, to bookkeeping accounts for Participants or to the general account of the Trust, depending on the nature and allocation of the assets generating such earnings, gains and losses.  In particular, any earnings on cash dividends received with respect to Restricted Stock Awards shall be allocated to accounts for Participants, except to the extent that such cash dividends are distributed to Participants, if such shares are the subject of outstanding Restricted Stock Awards, or, otherwise held by the Trust or returned to the Company.

 

10.5           Expenses.  All costs and expenses incurred in the operation and administration of this Plan, including those incurred by the Trustee, shall be paid by the Company or, if not so paid, then paid from the cash assets of the Trust.

 

10.6           Indemnification.  Subject to the requirements and limitations of applicable laws and regulations, the Company shall indemnify, defend and hold the Trustee harmless against all claims, expenses and liabilities arising out of or related to the exercise of the Trustee’s powers and the discharge of their duties hereunder, unless the same shall be due to their gross negligence or willful misconduct.

 

10.7           Term of Trust.  The Trust, if established, shall remain in effect until the earlier of (i) termination by the Committee, (ii) the distribution of all assets of the Trust, or (iii) 21 years from the Effective Date.  Termination of the Trust shall not effect any Restricted Stock Award previously granted, and such Restricted Stock Award shall remain valid and in effect until they have been earned and paid, or by their terms expire or are forfeited.

 

10.8           Tax Status of Trust.  It is intended that the Trust established hereby shall be treated as a grantor trust of the Company under the provisions of Section 671 et seq. of the Code.

 

B-20

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