Document:

Exhibit

Exhibit 10.5

PURCHASE AND SALE AGREEMENT

BY AND BETWEEN
DEVON ENERGY PRODUCTION COMPANY, L.P.
AS SELLER,
AND
PENN VIRGINIA OIL & GAS, L.P.
AS BUYER
EXECUTED ON JULY 29, 2017

TABLE OF CONTENTS
Page
		
	ARTICLE I DEFINITIONS AND INTERPRETATION
	1

		
	1.1
	Defined Terms    1

		
	1.2
	References and Rules of Construction    1

		
	ARTICLE II PURCHASE AND SALE
	2

		
	2.1
	Purchase and Sale    2

		
	2.2
	Excluded Assets and Other Matters    4

		
	2.3
	Revenues and Expenses    4

		
	ARTICLE III PURCHASE PRICE
	5

		
	3.1
	Purchase Price    5

		
	3.2
	Deposit    6

		
	3.3
	Adjustment to Purchase Price    6

		
	3.4
	Adjustment Methodology    8

		
	3.5
	Preliminary Settlement Statement    8

		
	3.6
	Final Settlement Statement    9

		
	3.7
	Disputes    10

		
	3.8
	Allocation of Purchase Price; Allocated Values    11

		
	3.9
	Allocation for Imbalances at Closing    11

		
	ARTICLE IV ACCESS / DISCLAIMERS
	11

		
	4.1
	Access    11

		
	4.2
	Confidentiality    15

		
	4.3
	Disclaimers    15

		
	ARTICLE V TITLE MATTERS; CASUALTY; TRANSFER RESTRICTIONS
	17

		
	5.1
	General Disclaimer of Title Warranties and Representations    17

		
	5.2
	Special Warranty    17

		
	5.3
	Notice of Title Defects; Defect Adjustments    18

		
	5.4
	Casualty or Condemnation Loss    24

		
	5.5
	Preferential Purchase Rights and Consents to Assign    25

		
	ARTICLE VI ENVIRONMENTAL MATTERS
	27

		
	6.1
	Environmental Defects    27

		
	6.2
	NORM, Asbestos, Wastes and Other Substances    32

i

		
	ARTICLE VII REPRESENTATIONS AND WARRANTIES OF SELLER
	32

		
	7.1
	Organization, Existence and Qualification    33

		
	7.2
	Authorization, Approval and Enforceability    33

		
	7.3
	No Conflicts    33

		
	7.4
	Consents    33

		
	7.5
	Bankruptcy    34

		
	7.6
	Litigation    34

		
	7.7
	Material Contracts    34

		
	7.8
	No Violation of Laws    35

		
	7.9
	Preferential Rights    36

		
	7.10
	Imbalances    36

		
	7.11
	Current Commitments    36

		
	7.12
	Taxes    36

		
	7.13
	Brokers’ Fees    36

		
	7.14
	Permits    36

		
	7.15
	Environmental    37

		
	7.16
	Non-Consent Operations    37

		
	7.17
	Leases; Rights-of-Way    37

		
	7.18
	Wells    38

		
	7.19
	Suspense Funds    38

		
	7.20
	Advance Payments    38

		
	7.21
	Post-Effective Time    39

		
	ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF BUYER
	39

		
	8.1
	Organization, Existence and Qualification    39

		
	8.2
	Authorization, Approval and Enforceability    39

		
	8.3
	No Conflicts    39

		
	8.4
	Consents    40

		
	8.5
	Bankruptcy    40

		
	8.6
	Litigation    40

		
	8.7
	Regulatory    40

		
	8.8
	Financing    40

		
	8.9
	Independent Evaluation    41

		
	8.10
	Brokers’ Fees    41

		
	8.11
	Accredited Investor    41

		
	ARTICLE IX CERTAIN AGREEMENTS
	42

		
	9.1
	Conduct of Business    42

		
	9.2
	Successor Operator    43

		
	9.3
	Governmental Bonds and Guarantees    44

		
	9.4
	Record Retention    44

		
	9.6
	Amendment to Schedules    45

		
	9.7
	Employees    45

ii

		
	9.8
	Suspense Funds    46

		
	9.9
	Tag-Along Rights    46

		
	9.10
	Transition Services Agreement    48

		
	9.11
	Audits and Filings    49

		
	9.12
	Buyer Financing    50

		
	ARTICLE X BUYER’S CONDITIONS TO CLOSING
	51

		
	10.1
	Representations    51

		
	10.2
	Performance    52

		
	10.3
	No Legal Proceedings    52

		
	10.4
	Title Defects, Environmental Defects and Casualty    52

		
	10.5
	Closing Deliverables    52

		
	ARTICLE XI SELLER’S CONDITIONS TO CLOSING
	53

		
	11.1
	Representations    53

		
	11.2
	Performance    53

		
	11.3
	No Legal Proceedings    53

		
	11.4
	Title Defects, Environmental Defects and Casualty    53

		
	11.5
	Closing Deliverables    53

		
	ARTICLE XII CLOSING
	53

		
	12.1
	Date of Closing    53

		
	12.2
	Place of Closing    54

		
	12.3
	Closing Obligations    54

		
	12.4
	Records    55

		
	ARTICLE XIII ASSUMPTION; INDEMNIFICATION; SURVIVAL
	55

		
	13.1
	Assumption by Buyer; Specified Obligations    55

		
	13.2
	Indemnities of Seller    57

		
	13.3
	Indemnities of Buyer    57

		
	13.4
	Limitation on Liability    58

		
	13.5
	Express Negligence    59

		
	13.6
	Exclusive Remedy    59

		
	13.7
	Indemnification Procedures    60

		
	13.8
	Survival    63

		
	13.9
	Non‐Compensatory Damages    63

		
	13.10
	Waiver of Right to Rescission    63

		
	13.11
	Insurance    64

		
	13.12
	Disclaimer of Application of Anti-Indemnity Statutes    64

iii

		
	ARTICLE XIV TERMINATION, DEFAULT AND REMEDIES
	64

		
	14.1
	Right of Termination    64

		
	14.2
	Effect of Termination    65

		
	14.3
	Return of Documentation and Confidentiality    66

		
	ARTICLE XV MISCELLANEOUS
	66

		
	15.1
	Appendices, Exhibits and Schedules    66

		
	15.2
	Expenses and Taxes    66

		
	15.3
	Assignment    68

		
	15.4
	Preparation of Agreement    68

		
	15.5
	Publicity    68

		
	15.6
	Notices    69

		
	15.7
	Further Cooperation    70

		
	15.8
	Filings, Notices and Certain Governmental Approvals    70

		
	15.9
	Entire Agreement; Non‐Reliance; Conflicts    71

		
	15.10
	Successors and Permitted Assigns    72

		
	15.11
	Parties in Interest    72

		
	15.12
	Amendment    72

		
	15.13
	Waiver; Rights Cumulative    72

		
	15.14
	Governing Law; Jurisdiction; Venue; Jury Waiver    72

		
	15.15
	Severability    73

		
	15.16
	Removal of Name    73

		
	15.17
	Counterparts    74

		
	15.18
	Like-Kind Exchange    74

		
	15.19
	Specific Performance    74

iv

LIST OF APPENDICES, EXHIBITS AND SCHEDULES
	
							
	Appendices
	 
	 

	   Appendix I
	―
	Definitions
	 
	 

	 
	 
	 
	 
	 

	Exhibits
	 
	 

	   Exhibit A
	―
	Leases
	 
	 

	   Exhibit B
	―
	Wells
	 
	 

	   Exhibit C
	―
	Other Wells
	 
	 

	   Exhibit D-1
	―
	Fee Simple Surface Estate
	 
	 

	   Exhibit D-2
	―
	Rights-of-Way
	 
	 

	   Exhibit D-3
   Exhibit E
   Exhibit F
	―
―
―
	Personal Property
Pipeline Systems
Form of Assignment and Bill of Sale
	 
	 

	   Exhibit G-1
   Exhibit G-2
	―
―
	Excluded Geophysical and Seismic Data
Excluded Fee Simple Surface Estate 
	 
	 

	   Exhibit G-3
	―
	Excluded Assets and Other Matters
	 
	 

	   Exhibit G-4
	―
	Excluded Fee Mineral Interests
	 
	 

	   Exhibit H
	―
	Title Defect Exceptions
	 
	 

	   Exhibit I
	―
	Form of License Agreement
	 
	 

	   Exhibit J
	―
	Form of Surface Deed
	 
	 

	   Exhibit K
	―
	Permitted Encumbrances
	 
	 

	   Exhibit L
	―
	Transition Services Terms
	 
	 

	   Exhibit M
	―
	Form of Escrow Agreement
	 
	 

	   Exhibit N
	―
	Eagle Ford Formations
	 
	 

	 
	 
	 
	 
	 

	Schedules
	 
	 

	   Schedule 2.1
	―
	Lands
	 
	 

	   Schedule 3.6(b)
   Schedule 5.3(i)
   Schedule 7.4
	―
―
―
	Purchase Price Examples
Dickson Allen and Robin Unit Leases
Seller Consents
	 
	 

	   Schedule 7.6
	―
	Litigation
	 
	 

	   Schedule 7.7(a)
	―
	Material Contracts
	 
	 

	   Schedule 7.7(b)
	―
	Material Contracts
	 
	 

	   Schedule 7.8
	―
	Violation of Laws
	 
	 

	   Schedule 7.9
	―
	Preferential Rights
	 
	 

	   Schedule 7.10
	―
	Imbalances
	 
	 

	   Schedule 7.11
	―
	Current Commitments
	 
	 

	   Schedule 7.12
	―
	Asset Taxes
	 
	 

	   Schedule 7.14
   Schedule 7.15
	―
―
	Permits 
Environmental
	 
	 

	   Schedule 7.17
	―
	Leases; Rights-of-Way
	 
	 

	   Schedule 7.18
	―
	Wells
	 
	 

	   Schedule 7.19
	―
	Suspense Funds
	 
	 

v

	
							
	   Schedule 9.1
	―
	Conduct of Business
	 
	 

	   Schedule 9.3(a)
	―
	Governmental Bonds
	 
	 

	   Schedule 9.3(b)
   Schedule 9.9 
	―
―      
	Guarantees
Tag-Alongs
	 
	 

vi

PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance herewith, this “Agreement”) is entered into this 29th day of July 2017 (the “Execution Date”), between DEVON ENERGY PRODUCTION COMPANY, L.P., an Oklahoma limited partnership (“Seller”), and PENN VIRGINIA OIL & GAS, L.P., a Texas limited partnership (“Buyer”).  Buyer and Seller may be referred to collectively as the “Parties” or individually as a “Party.”  
RECITALS
Seller desires to sell and assign, and Buyer desires to purchase and pay for, all of the Conveyed Interests (as defined hereinafter) effective as of the Effective Time (as defined hereinafter).
NOW, THEREFORE, for and in consideration of the mutual agreements herein contained, the benefits to be derived by each Party, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
ARTICLE I 
DEFINITIONS AND INTERPRETATION
1.1    Defined Terms.  Capitalized terms used herein shall have the meanings given such terms in Appendix I, unless the context otherwise requires.  
1.2    References and Rules of Construction.  All references in this Agreement to Exhibits, Appendices, Schedules, Articles, Sections, subsections and other subdivisions refer to the corresponding Exhibits, Appendices, Schedules, Articles, Sections, subsections and other subdivisions of or to this Agreement unless expressly provided otherwise.  Titles appearing at the beginning of any Exhibits, Appendices, Schedules, Articles, Sections, subsections and other subdivisions of this Agreement are for convenience only, do not constitute any part of this Agreement, and shall be disregarded in construing the language hereof.  The words “this Agreement,” “herein,” “hereby,” “hereunder,” and “hereof,” and words of similar import, refer to this Agreement as a whole and not to any particular Article, Section, subsection or other subdivision unless expressly so limited.  The words “this Article,” “this Section,” and “this subsection,” and words of similar import, refer only to the 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, and each accounting term partly defined herein, to the extent not defined, 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 agreement (including this Agreement) shall mean such agreement as it may be amended, supplemented or otherwise modified from time to time.  References to any date shall mean such date in Oklahoma City, Oklahoma and for purposes of calculating the period of time in which any notice or action is to be given or undertaken hereunder, such period shall be deemed to begin at 12:01 A.M. on the applicable date in Oklahoma City, Oklahoma.   Unless 

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expressly provided to the contrary, the word “or” is not exclusive.  With respect to any Conveyed Interests operated, owned, or otherwise used by an Affiliate of Seller, representations, warranties, covenants, and obligations of Seller herein will be deemed to also include, cover, and serve as references to such Affiliates.
ARTICLE II
PURCHASE AND SALE
2.1    Purchase and Sale.  Subject to the terms and conditions of this Agreement, Seller agrees to sell, and Buyer agrees to purchase and pay for, effective as of the Effective Time, all of Seller’s right, title and interest in and to the interests and properties described in Section 2.1(a) through Section 2.1(o) (without duplication) (such right, title and interest, less and except the Excluded Assets and Other Matters, collectively, the “Conveyed Interests”):
(a)    all oil and/or gas leases covering any of the Lands (including any Top Leases), including all of the oil and gas leases described on Exhibit A, together with any and all other right, title and interest of Seller in and to the leasehold estates created thereby (including all overriding royalty interests, production payments, net profits interests, carried interests, reversionary interests, and similar interests) but subject to the terms, conditions, covenants, and obligations set forth in those leases and/or matters described on Exhibit A, as applicable  (each such lease, a “Lease,” and collectively the “Leases”);
(b)    all oil and gas wells located on any of the Lands, whether producing, non-producing, plugged and abandoned, temporarily abandoned, or otherwise, including the wells described on Exhibit B (collectively, the “Wells”);
(c)     (i)(A) all oil, gas, condensate, and other hydrocarbons produced from or allocated to the Wells, Units, or the Leases (whether or not that hydrocarbon is in liquid or gaseous form) from and after the Effective Time, or any combination thereof, including hydrocarbons extracted therefrom or entrained therein, whether at the Wells or downstream, and (B) all oil, gas, condensate, and other hydrocarbons produced from or allocated to the Wells, Units, or the Leases in storage or existing in stock tanks, pipelines and/or plants (including inventory and line fill) as of the Effective Time (less any volume of Hydrocarbons sold during the Interim Period for which there is a Purchase Price adjustment pursuant to Section 3.3) (the “Hydrocarbons”), (ii) all minerals (whether in liquid or gaseous form) produced in association with the Hydrocarbons from and after the Effective Time, and (iii) all proceeds with respect to the foregoing;
(d)    all rights and interests in, under or derived from all spacing, pooling, unitization, production sharing, and communitization agreements, declarations and orders in effect with respect to any of the Lands, the Leases or the Wells, and the units created by any of those agreements, declarations or orders (the “Units”) (Seller’s right, title and interest in and to the Leases, the Units and the Wells being collectively referred to hereinafter as the “Properties” or individually as a “Property”);
(e)    all disposal, water, and observation wells located on any of the Lands (other than the Wells), whether plugged and abandoned, temporarily abandoned, or otherwise, including 

2

the wells described on Exhibit C (the “Other Wells”), and the personal property, fixtures and buildings that are on, at or under the sites at which the Other Wells are located and that were used, are being used or are to be used in connection with the operation, use and maintenance of the Other Wells; 
(f)    the fee simple surface estate in and covering each tract of land described on Exhibit D-1 and all improvements, fixtures, facilities and appurtenances located thereon or relating thereto (the “Surface Fee Interests”);  
(g)    all pipelines and gathering systems located at, on, or under any of the Lands, including all of the pipelines and gathering systems described on Exhibit E (collectively, the “Pipeline Systems”); 
(h)    subject to Preferential Purchase Rights and Required Consents, all surface leases, rights-of-way and easements, rights of ingress and egress, servitudes, permits, licenses, and surface usage rights, including those described on Exhibit D-2, to the extent appurtenant to or used primarily in connection with (i) the ownership or development of the Leases or the Units, or the installation, drilling, completion, reworking, recompletion, ownership, development, operation, use or maintenance of the Wells, the Other Wells, and/or the Pipeline Systems, or (ii) the production, treatment, storage, gathering, processing, transportation or disposal of Hydrocarbons or other produced substances from or attributable to the Wells, the Units, the Leases, or the Other Wells (the “Rights-of-Way”);
(i)    all surface and subsurface tangible personal property, fixtures and improvements, operational and non-operational, known or unknown, that are (i) located at, on or under any of the Lands at and/or after the Effective Time and (ii) used or held for use primarily in connection with the ownership or operation of the Leases, the Wells, the Other Wells or the Pipeline Systems, including (A) all SCADA and measurement equipment and well communication devices and (B) equipment, machinery, separators, storage facilities, casing, tubing, flow lines, lateral lines, associated piping, electric lines, pumps, motors, electric lines, compression equipment, platforms, pads, frac ponds and pits, rods, tanks, tap connections, fittings, valves, meters and manifolds (“Personal Property”), less and except the personal property described as “Replaced Property” on Exhibit D-3, which Seller has replaced, or will replace prior to Closing, with the personal property described as “Replacement Property” on the same schedule, the latter of which will be deemed Personal Property for purposes hereof; 
(j)    subject to Preferential Purchase Rights and Required Consents, all Applicable Contracts and all rights thereunder, including those described on Schedule 7.7;
(k)    all Imbalances relating to the Properties;
(l)    all files, records, information and data, whether written or electronically stored, to the extent primarily relating to Seller’s ownership and operation of the other Conveyed Interests and that are in Seller’s or its Affiliates’ possession, including all: (i) digital maps of shape files and scanned plats, physical records of the Pipeline Systems (including as-built maps, surveys, X-ray and hydrotest records, and welder certificates), land files and title records (including abstracts 

3

of title, title opinions and title curative documents); (ii) Applicable Contract files; (iii) correspondence; (iv) operations, environmental, production and accounting records; (v) facility and well records; and (vi) copies of records and Tax Returns for calendar years 2017 and 2016 with respect to Asset Taxes that are ad valorem Taxes (provided, however, notwithstanding anything to the contrary in this Agreement, Seller is not assigning or otherwise transferring any right, title, or interest in any such records and Tax Returns) (collectively, the “Records”); 
(m)    all rights, claims and causes of action (including claims for adjustments and refunds) to the extent attributable to (i) the other Conveyed Interests insofar as accruing from and after the Effective Time, and/or (ii) any of the Assumed Obligations; 
(n)    all accounts receivable for which the Purchase Price was adjusted pursuant to Section 3.3(a)(vii), and all claims, causes of action, and rights related thereto; and
(o)    to the extent not otherwise described above, any real or personal property or contract right that, in each case, is primarily related to and arises from or, in the case of clause (i), is necessary for, (i) the ownership, operation, use or development of the other Conveyed Interests (as owned, operated, used, or developed by Seller or its Affiliates immediately prior to the Effective Time) and/or (ii) the Assumed Obligations; provided, that, for the avoidance of doubt, the items described in the definition of “Excluded Assets and Other Matters” will be deemed excluded from any real property, personal property or contract right that would otherwise be covered by, through or under this Section 2.1(o).  
For the avoidance of doubt, the Parties agree that the term “Subject Properties,” as used in this Agreement, means the 100% interest on an 8/8ths basis in and to the Leases, the Wells, the Units, the Hydrocarbons and minerals described in Section 2.1(c), the Other Wells and the personal property, fixtures and buildings described in Section 2.1(d) or Section 2.1(f), the Surface Fee Interests, the Pipeline Systems, the Rights-of-Way and the Personal Property, of which the Conveyed Interests are the whole or a part, as applicable, less and except the Excluded Assets and Other Matters.
2.2    Excluded Assets and Other Matters.  Seller shall reserve and retain all of the Excluded Assets and Other Matters.
2.3    Revenues and Expenses.
(a)    Except as expressly provided otherwise in this Agreement (including Sections 2.3(b) and 3.3), Seller shall remain entitled to all of the rights of ownership (including the right to all production, proceeds of production, and other proceeds) and shall remain responsible (by payment, through the adjustments to the Purchase Price under this Agreement or otherwise) for all Operating Expenses, in each case attributable to the Conveyed Interests for the period of time prior to the Effective Time.  Except as expressly provided otherwise in this Agreement (including Section 3.3), and subject to the occurrence of Closing, Buyer shall be entitled to all of the rights of ownership (including the right to all production, proceeds of production, and other proceeds) attributable to the Conveyed Interests for the period of time commencing at the Effective Time, and shall be responsible for (by payment, through the adjustments to the Purchase Price under this 

4

Agreement or otherwise) all Operating Expenses attributable to the Conveyed Interests for the period of time commencing at the Effective Time (including any pre-payments made before the Effective Time for services, work or goods performed or to be performed, or delivered or to be delivered after the Effective Time).  Such amounts which are received or paid prior to Closing shall be accounted for in the Preliminary Settlement Statement or Final Settlement Statement, as applicable; provided, however, that the Preliminary Settlement Statement may contain estimated amounts of Seller made in good faith.  Such amounts which are received or paid after Closing but prior to the date of the Final Settlement Statement shall be accounted for in the Final Settlement Statement.  
(b)    Except as otherwise provided in this Section 2.3(b), after the Parties’ agreement upon the Final Settlement Statement, if, based on the Effective Time allocation described in Section 2.3(a) (except to the extent constituting part of the Assumed Obligations), (i) either Party receives monies belonging to the other Party, including proceeds of production, then such amount shall, within 30 days after the end of the calendar month in which such amounts were received, be paid over to the proper Party, (ii) either Party pays monies for Operating Expenses which are the obligation of the other Party, then such other Party shall, within 30 days after the end of the calendar month in which the applicable invoice and proof of payment of such invoice were received, reimburse the Party which paid such Operating Expenses, (iii) a Party receives an invoice of an expense or obligation (other than an invoice of an expense or obligation with respect to Asset Taxes, Income Taxes or Transfer Taxes) which is owed by the other Party, such Party receiving the invoice shall promptly forward such invoice to the Party obligated to pay the same, and (iv) an invoice or other evidence of an obligation (other than an obligation with respect to Asset Taxes, Income Taxes or Transfer Taxes) is received by a Party, which is partially an obligation of both Seller and Buyer, then the Parties shall consult with each other, and each shall promptly pay its portion of such obligation to the obligee thereof.  Subject to, and without prejudice to, Buyer’s rights and remedies under Section 13.2(c) with respect to Operating Expenses that constitute Specified Obligations, the Final Settlement Statement shall be the final accounting for any and all Operating Expenses, and there shall be no adjustment for, or obligation to pay, any Operating Expenses between the Parties following the Final Settlement Statement.  
(c)    Each of Seller and Buyer shall be permitted to offset any Operating Expenses owed by such Party to the other Party pursuant to this Section 2.3 against amounts owing by the second Party to the first Party pursuant to this Section 2.3.
ARTICLE III
PURCHASE PRICE
3.1    Purchase Price.  The purchase price for the transfer of the Conveyed Interests and the transactions contemplated hereby shall be $205,000,000 (the “Purchase Price”), as adjusted pursuant to this Agreement, payable by Buyer (less (a) the Deposit, which will be distributed at Closing as described in Section 3.2 and (b) the Defect Escrow Amount, if applicable, which will be paid into the Escrow Account pursuant to Section 3.6(c) and distributed therefrom pursuant to Section 3.6(b)) to Seller at Closing by wire transfer in immediately available funds to a bank account 

5

of Seller (the details of which shall be provided by Seller to Buyer in the Preliminary Settlement Statement).
3.2    Deposit.  No later than one Business Day following the execution of this Agreement, Buyer shall deposit by wire transfer in same day funds with the Escrow Agent the sum of $10,250,000, representing 5% of the Purchase Price (such amount, including any interest earned thereon, the “Deposit”) to be held in, and distributed from, the Escrow Account pursuant to the Escrow Agreement and this Agreement.  If Closing occurs, the Deposit shall be applied toward the Adjusted Purchase Price at Closing and the Parties shall instruct the Escrow Agent to pay the Deposit to Seller at Closing.  Otherwise the Deposit shall be handled in accordance with Section 14.2. 
3.3    Adjustment to Purchase Price.  The Purchase Price shall be adjusted as follows (without duplication), and the resulting amount shall be herein called the “Adjusted Purchase Price”:  
(a)    The Purchase Price shall be adjusted upward by the following amounts:
(i)    an amount equal to the value of all Hydrocarbons (other than Tank Bottoms) attributable to the Conveyed Interests that are, as of the Effective Time, in storage or existing in stock tanks, pipelines and/or plants (including inventory and line fill), the value to be based upon the price paid to Seller in connection with the sale of such Hydrocarbons (or if there is no sales of such Hydrocarbons, the value to be based upon the contract price for those Hydrocarbons in effect as of the Effective Time), net of amounts payable as Burdens on such production;  
(ii)    an amount equal to all Operating Expenses and all other costs and expenses paid by Seller or any of its Affiliates that are attributable to the Conveyed Interests (other than Overhead Costs, Asset Taxes, Income Taxes and Transfer Taxes) for the period of time from and after the Effective Time, whether paid before or after the Effective Time (including any pre-payments made before the Effective Time for services, work or goods performed or to be performed, or delivered or to be delivered after the Effective Time), including (A) Burdens, (B) bond and insurance premiums paid by or on behalf of Seller or any of its Affiliates with respect to the period of time commencing at the Effective Time, and (C) rentals and other lease maintenance payments; 
(iii)    the amount of all Asset Taxes allocated to Buyer in accordance with Section 15.2 but that have been paid or are payable by Seller as of the date the Final Price is determined;
(iv)    subject to Section 3.9, to the extent that Seller has underproduced any Hydrocarbons as of the Effective Time, as complete and final settlement of all Well Imbalances attributable to the Conveyed Interests, an amount equal to the product of the underproduced gaseous Hydrocarbon volumes set forth on Schedule 7.10 times $2.34/MMBtu; 
(v)    subject to Section 3.9, to the extent that Seller has over-delivered any Hydrocarbons as of the Effective Time, as complete and final settlement of all Pipeline Imbalances 

6

attributable to the Conveyed Interests, an amount equal to the product of the over-delivered gaseous Hydrocarbons volumes set forth on Schedule 7.10 times $2.34/MMBtu; 
(vi)    the Overhead Costs; 
(vii)    to the extent Seller has not received or otherwise been reimbursed prior to Closing, the aggregate amount of accounts receivable billed after the Effective Time with respect to the total amount of costs and expenses paid by Seller on behalf of or that are properly chargeable to any Third Party with respect to any Subject Property for periods of time after the Effective Time, which adjustment shall not be made at Closing but shall be made in connection with the Final Settlement Statement and taken into account in the Final Price; and 
(viii)    any other amount provided for elsewhere in this Agreement or otherwise agreed upon in writing by Seller and Buyer as an upward adjustment to the Purchase Price.
(b)    The Purchase Price shall be adjusted downward by the following amounts:
(i)    an amount equal to all proceeds actually received by Seller or its Affiliates attributable to the sale of Hydrocarbons (A) produced from or allocable to the Conveyed Interests during the period of time commencing at the Effective Time or (B) contained in storage or existing in stock tanks, pipelines and/or plants (including inventory and line fill) as of the Effective Time for which an upward Purchase Price adjustment was made pursuant to Section 3.3(a)(i), in each case, net of marketing expenses (other than Operating Expenses and other expenses taken into account pursuant to Section 3.3(a), Income Taxes, Asset Taxes and Transfer Taxes) directly incurred in earning or receiving such proceeds and that are paid by Seller (and not reimbursed to Seller by a Third Party purchaser);
(ii)    an amount equal to all Operating Expenses and all other costs and expenses paid after the Effective Time by Buyer or any of its Affiliates that are attributable to the Conveyed Interests (other than Overhead Costs, Asset Taxes, Income Taxes and Transfer Taxes) for the period prior to the Effective Time, including (A) Burdens, (B) bond and insurance premiums paid by or on behalf of Buyer or any of its Affiliates with respect to the period of time prior to the Effective Time, and (C) rentals and other lease maintenance payments;
(iii)    the amount of all Asset Taxes allocated to Seller in accordance with Section 15.2 but that have been paid or are payable by Buyer as of the date the Final Price is determined;
(iv)    any reduction to the Purchase Price pursuant to Seller’s election under Section 5.3(d)(i);
(v)    any reduction to the Purchase Price pursuant to Seller’s election under Section 6.1(c)(i);

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(vi)    the Allocated Value of the Conveyed Interests excluded from the transactions contemplated hereby pursuant to Sections 4.1(b), 5.5(a)(i), 5.5(b)(i) or 6.1(c);
(vii)    subject to Section 3.9, to the extent that Seller has overproduced any Hydrocarbons as of the Effective Time, as complete and final settlement of all Well Imbalances attributable to the Conveyed Interests, an amount equal to the product of the overproduced gaseous Hydrocarbon volumes set forth on Schedule 7.10 times $2.34/MMBtu; 
(viii)    subject to Section 3.9, to the extent that  Seller has under-delivered any Hydrocarbons as of the Effective Time, as complete and final settlement of all Pipeline Imbalances attributable to the Conveyed Interests, an amount equal to the product of the under-delivered gaseous Hydrocarbon volumes set forth on Schedule 7.10 times $2.34/MMBtu; 
(ix)    an amount equal to all proceeds from sales of Hydrocarbons relating to the Conveyed Interests and payable to owners of working interests, Burdens or other similar interests (in each case) that are held by Seller or its Affiliates in suspense as of the Closing Date (or a date after Closing when the liability to such suspense accounts are transferred from Seller to Buyer), which adjustment shall not be made at Closing but shall be made in connection with the Final Settlement Statement and taken into account in the Final Price; and
(x)    any other amount provided for elsewhere in this Agreement or otherwise agreed upon in writing by Seller and Buyer as a downward adjustment to the Purchase Price.
3.4    Adjustment Methodology.  When available, actual figures will be used for the adjustments to the Purchase Price at Closing.  To the extent actual figures are not available, estimates made by the relevant Party in good faith will be used subject to final adjustments in accordance with Section 3.6 and Section 3.7.  Seller will provide supporting documents and calculations, as applicable, for Purchase Price adjustments included in the Preliminary Settlement Statement and/or the Final Settlement Statement.  In the event the written report delivered by Buyer to Seller pursuant to Section 3.5 or a Dispute Notice, if applicable, proposes an adjustment to the Purchase Price under Section 3.3(b)(ii), Buyer will provide supporting documents (if any) for such proposed adjustment when it delivers such written report or Dispute Notice to Seller. 
3.5    Preliminary Settlement Statement.  Not less than five Business Days prior to Closing, Seller shall prepare and submit to Buyer for review a draft settlement statement (the “Preliminary Settlement Statement”) that shall set forth the Adjusted Purchase Price, reflecting each adjustment made in accordance with this Agreement as of the date of preparation of such Preliminary Settlement Statement and the calculation of the adjustments used to determine such amount (in each case, without duplication of any amounts), together with the designation of Seller’s accounts for the wire transfer of funds as set forth in Section 3.1 and Section 12.3(d).  Within three Business Days after receipt of the Preliminary Settlement Statement, Buyer will deliver to Seller a written report containing all changes, with explanation therefor, that Buyer proposes to be made to the Preliminary Settlement Statement, if any.  The Parties shall in good faith attempt to agree on the Preliminary Settlement Statement as soon as possible after Seller’s receipt of Buyer’s written report.  The Preliminary Settlement Statement, as agreed upon by the Parties, will be used to adjust 

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the Purchase Price at Closing (the Purchase Price, as adjusted at Closing and (a) less the Deposit and (b) downward adjusted by, among other things, any amounts deposited into escrow pursuant to Section 3.6(c), the “Closing Payment”); provided that if the Parties do not agree on an adjustment set forth in the Preliminary Settlement Statement prior to the Closing, the amount of such adjustment set forth in the Preliminary Settlement Statement as presented by Seller in good faith will be used to adjust the Purchase Price at Closing.
3.6    Final Settlement Statement.
(a)    On or before 120 days after the Closing, Seller shall deliver to Buyer a final settlement statement (the “Final Settlement Statement”) prepared by Seller based on actual income and expenses during the Interim Period and which (i) takes into account all final adjustments made to the Purchase Price and (ii) shows the resulting final Adjusted Purchase Price (in each case, without duplication of any amounts) (the “Final Price”).  The Final Settlement Statement shall set forth the actual proration of the amounts required by this Agreement.  As soon as practicable, and in any event within 30 days after receipt of the Final Settlement Statement, Buyer will deliver to Seller a written report containing any proposed changes to the Final Settlement Statement and an explanation of any such changes and the reasons therefor (the “Dispute Notice”).  Any changes not so specified in the Dispute Notice shall be deemed waived and Seller’s determinations with respect to all such elements of the Final Settlement Statement that are not addressed specifically in the Dispute Notice shall prevail.  If Buyer fails to timely deliver a Dispute Notice to Seller containing changes Buyer proposes to be made to the Final Settlement Statement, the Final Settlement Statement as delivered by Seller will be deemed to be correct and mutually agreed upon by the Parties, and will be final and binding on the Parties and not subject to further audit or arbitration.  
(b)    At such time that the Final Price set forth in the Final Settlement Statement is mutually agreed upon by Seller and Buyer (or deemed to be mutually agreed upon by the Parties pursuant to Section 3.6(a)), or, if the Final Settlement Statement is not mutually agreed upon (or deemed to be mutually agreed upon) by the Parties, at such time that the matters subject to any Dispute Notices, if applicable, are resolved pursuant to Section 3.7, the Final Settlement Statement and the Final Price shall be final and binding on the Parties, subject to the provisions of Section 2.3(b).  If the Final Price is more than the Buyer Amount P-A-C (such difference, the “Payable Amount”), then (i) the Defect Escrow Amount shall be released to Seller from the Escrow Account and (ii) the remaining portion of the Payable Amount owed by Buyer shall be paid by Buyer to Seller within 10 days after final determination of such owed amounts in accordance herewith.  However, in the event that the Buyer Amount P-A-C is more than the Final Price (such difference, the “Refundable Amount”), then (A) if the Refundable Amount is less than the Defect Escrow Amount, (1) an amount that is equal to the Refundable Amount shall be released to Buyer from the Escrow Account and (2) the remaining portion of the Defect Escrow Amount shall be released to Seller or (B) if the Refundable Amount is greater than the Defect Escrow Amount, (i) the Defect Escrow Amount shall be released to Buyer from the Escrow Account and (ii) the remaining portion of the Refundable Amount owed by Seller shall be paid by Seller to Buyer, in each case, within 10 days after final determination of such owed amounts in accordance herewith. For illustrative purposes only, Schedule 3.6(b) sets forth examples of calculations for the Payable Amount and the Refundable Amount.  All amounts paid by any Party pursuant to this Section 3.6 shall be delivered in United 

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States currency by wire transfer of immediately available funds to the account specified in writing by the relevant Party.  The Parties shall instruct the Escrow Agent to release the portions of the Defect Escrow Amount payable to the applicable Party (or Parties) within the 10 day period referenced above. 
(c)    At the Closing, if applicable, Buyer shall deposit into the Escrow Account an amount equal to the Defect Escrow Amount.  For purposes of this Agreement, the “Defect Escrow Amount” shall mean (i) the aggregate amount of Title Defect Amounts asserted by Buyer with respect to all uncured Title Defects that were timely and properly asserted by Buyer pursuant to Section 5.3(a) and that Seller has timely elected to cure or that the Parties have not agreed upon prior to the sixth Business Day prior to Closing, plus (ii) (A) the Remediation Amounts asserted by Buyer for all uncured Environmental Defects that were timely and properly asserted by Buyer pursuant to Section 6.1(a) and that Seller has timely elected to cure or that the Parties have not agreed upon prior to the sixth Business Day prior to Closing (including any dispute as to whether Seller has cured such asserted Environmental Defects), and (B) the Allocated Values of any Conveyed Interests for which any portion of a Phase II ESA will be completed post-Closing pursuant to Section 4.1(b)(B) (for purposes of this clause (c), “Phase II Conveyed Interests”) less (iii) the aggregate amount of Title Benefits Amounts (without duplication of any Title Benefit Amounts already used hereunder to offset Title Defect Amounts and/or Remediation Amounts) asserted by Seller with respect to all Title Benefits that were timely and properly asserted by Seller pursuant to Section 5.3(b) and that Buyer has conceded or are the subject of a Title Dispute, in each case, after application of the Individual Title Defect Threshold, the Individual Environmental Threshold, and (without duplication of the application thereof) the Aggregate Deductible and other limitations set forth in Section 5.3(i) or Section 6.1(e), as applicable.   For the avoidance of doubt, the Defect Escrow Amount shall be the amount of the Purchase Price that, at Closing, has been reduced as a result of (A) uncured Title Defects for which Seller has made a timely election to cure pursuant to Section 5.3(d), (B) Title Defects that the Parties have not agreed upon prior to the sixth Business Day prior to Closing, (C) uncured Environmental Defects for which Seller has made a timely election to cure pursuant to Section 6.1(c), (D) Environmental Defects that the Parties have not agreed upon prior to the sixth Business Day prior to Closing, and (E) Phase II Conveyed Interests, less the Title Benefit Amounts referenced in clause (iii) above.  
3.7    Disputes.
(a)    If Seller and Buyer are unable to resolve the matters addressed in a Dispute Notice (if any), the Parties agree that for a 30 day period following written notice from either Party, an officer or representative designated by each Party shall attempt to resolve such dispute.
(b)    If Seller and Buyer are unable to resolve their dispute within the period set forth in Section 3.7(a), either Party may initiate the arbitration process set forth in this Section 3.7(b) by sending a written notice to the other Party (the “Arbitration Notice”).  Each Party shall within 14 Business Days after the delivery of the Arbitration Notice, summarize its position with regard to such dispute in a written document of 20 pages or less and submit such summaries to the Dallas, Texas office of Deloitte & Touche LLP, or such other Person as the Parties may mutually select (the “Accounting Arbitrator”), together with the Dispute Notice, the Arbitration Notice, the Final 

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Settlement Statement and any other documentation such Party may desire to submit.  Within 20 Business Days after receiving the Parties’ respective submissions, the Accounting Arbitrator shall render a decision choosing either Seller’s position or Buyer’s position with respect to each matter addressed in any Dispute Notice, based on the materials submitted to the Accounting Arbitrator as described above.  Any decision rendered by the Accounting Arbitrator pursuant hereto shall be final, conclusive and binding on Seller and Buyer and will be taken into account as part of the Final Price determination pursuant to Section 3.6 and will be enforceable against the Parties in any court of competent jurisdiction.  The Accounting Arbitrator shall act as an expert for the limited purpose of determining the specific dispute submitted by either Party and may not award damages, interest or penalties to either Party with respect to any matter, except as otherwise provided in the following sentence.  The costs of the Accounting Arbitrator and the reasonable legal costs and other expenses incurred by the Parties in connection with the arbitration shall be borne pro rata between the Parties with each Party being responsible for such costs and expenses to the extent the Accounting Arbitrator has not selected such Party’s position on an aggregate dollar basis with respect to all amounts submitted for resolution by the Accounting Arbitrator.  
3.8    Allocation of Purchase Price; Allocated Values.  Solely for the purposes of determining the value of Conveyed Interests in connection with any Title Defect, Environmental Defect, Preferential Purchase Right, Required Consent, and/or breach of Special Warranty under this Agreement and the value of the Tag Interests, Buyer and Seller have allocated the Purchase Price among the Conveyed Interests as set forth on Exhibit A and Exhibit B.  The value so allocated to a particular Conveyed Interest identified on Exhibit A and Exhibit B may be referred to as “Allocated Value” for that Conveyed Interest.  Buyer and Seller agree that such allocation is reasonable and shall not take any position inconsistent therewith, including notices to holders of Preferential Purchase Rights.  Neither Party, however, makes any representations or warranties as to the accuracy of such value or allocation. 
3.9    Allocation for Imbalances at Closing.  If, prior to Closing, the Imbalances set forth in Schedule 7.10 change or, prior to the date the Final Price is determined as provided in Section 3.6 or 3.7, as applicable, either Party discovers an error in the Imbalances set forth in Schedule 7.10, then the Purchase Price shall be further adjusted pursuant to Section 3.3(a)(iv), 3.3(a)(v), 3.3(b)(vii), or 3.3(b)(viii) as applicable, and Schedule 7.10 will be deemed amended immediately prior to Closing to reflect the Imbalances for which the Purchase Price is so adjusted.
ARTICLE IV
ACCESS / DISCLAIMERS
4.1    Access.
(a)    From and after the Execution Date and until two (2) Business Days prior to  Closing (or earlier termination of this Agreement pursuant to the terms herein), but subject to the other provisions of this Section 4.1 and obtaining any required consents of Third Parties, including Third Party operators of the Subject Properties (with respect to which consents Seller shall use commercially reasonable efforts to request, but shall not be obligated to expend any monies, except as may be agreed to be paid or reimbursed by Buyer), Seller shall afford to Buyer and its authorized representatives (“Buyer’s Representatives”) reasonable access, during normal business hours, to 

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the Subject Properties, and all Records in Seller’s or its Affiliates’ possession, at such time to the extent necessary to conduct investigations and due diligence on the Conveyed Interests, including, prior to the Environmental Defect Claim Date, the title or environmental review described in Article V and Article VI.  All investigations and due diligence conducted by Buyer or any Buyer’s Representative shall be conducted at Buyer’s sole cost, risk and expense and any conclusions made from any examination done by Buyer or any Buyer’s Representative shall result from Buyer’s own independent review and judgment.
(b)    From the Execution Date until the Environmental Defect Claim Date, subject to the terms and conditions below, Buyer’s inspection right with respect to the Environmental Condition of the Subject Properties shall be limited to undertaking a Phase I Environmental Site Assessment of the Subject Properties conducted by Buyer’s employees, or a reputable environmental consulting or engineering firm approved in advance in writing by Seller (such approval not to be unreasonably withheld, conditioned, or delayed), and may include only visual inspections and record reviews relating to the Subject Properties.  In conducting such inspection, Buyer shall not operate any equipment or conduct any testing or sampling of soil, groundwater or other materials (including any invasive testing or sampling for Hazardous Substances, Hydrocarbons or NORM).  Seller or Seller’s designee shall have the right to be present during any stage of the assessment.  Buyer shall give Seller reasonable prior written notice before gaining physical access to any of the Subject Properties, and Seller or its designee shall have the right but not the obligation to accompany Buyer and Buyer’s Representatives whenever Buyer and/or Buyer’s Representatives gain physical access to any Subject Property.  Notwithstanding anything contained herein to the contrary, Buyer shall not have access to, and shall not be permitted to conduct any inspections (including any Phase I Environmental Site Assessment) with respect to, any Subject Property with respect to which Seller does not have the authority to grant access for such due diligence; provided that Seller shall reasonably request (with respect to which request Seller shall not be obligated to expend any monies, unless Buyer agrees to reimburse Seller therefor) access rights from Third Parties for Buyer to conduct such inspections (including any Phase I Environmental Site Assessment) with respect to, such Subject Property.  Buyer will use reasonable efforts to complete all such Phase I Environmental Site Assessments within 30 days of the Execution Date.  If, and only if, Buyer in good faith believes that a Phase I Environmental Site Assessment determines that Phase II sampling or other invasive investigations (“Phase II ESA”) are necessary in order for Buyer to prove the existence of an Environmental Defect or establish a defensible Remediation Amount with respect to the applicable Conveyed Interest, Buyer shall, if it desires to perform a Phase II ESA as described in such Phase I Environmental Site Assessment, (i) furnish Seller with a written description of the proposed scope of such sampling or invasive activities, including a description of the specific activities to be conducted, and a description of the approximate location and expected timing of such activities, which proposed scope shall be consistent with what was determined to be necessary in the Phase I Environmental Site Assessment (a “Phase II Request”), and, (ii) subject to the preceding sentence, obtain the prior written consent of Seller (such consent not to be unreasonably withheld, conditioned, or delayed) to undertake the sampling or invasive activities described in the Phase II Request.  In the event that (A) (1) Seller does not approve any such Phase II Request on any Subject Property operated by Seller or its Affiliates within five Business Days of Buyer’s delivery of such request or (2) with respect to any other Subject Property, Buyer, due to un-obtained consents or approvals of Third Parties with respect to accessing such Subject Property, was unable to timely perform a 

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Phase I Environmental Site Assessment or Phase II ESA, as the case may be, Buyer shall have the right, but not the obligation, to exclude any or all of the affected Conveyed Interests from the transactions contemplated hereby, and any such Conveyed Interests that are so excluded shall be deemed hereunder to be Excluded Assets and Other Matters and the Purchase Price shall be adjusted downward by the aggregate of the Allocated Values thereof or (B) Seller provides its approval of the Phase II Request, the Environmental Defect Claim Date, the Cure Period and the Dispute Date (in each case, with respect to the affected Conveyed Interests only and notwithstanding anything to the contrary herein) and all other associated dates herein will be extended for a reasonable period of time (as set forth in the Phase II Request) in order for Buyer to perform and complete its Phase II ESA, provided that (x) the Closing will still occur on the Scheduled Closing Date for the affected Conveyed Interests, (y) the Purchase Price will be reduced at Closing by an amount equal to the Allocated Value of the affected Conveyed Interests and (z) the applicable provisions herein with respect to uncured Environmental Defects and/or Disputed Environmental Matters will apply mutatis mutandis to the amounts placed in the Escrow Account pursuant to Section 3.6(c) for such Conveyed Interests; provided, however, none of the foregoing shall apply to any Subject Property that is operated by Buyer or its Affiliates or any Subject Property in which Seller solely owns an overriding royalty interest.  Buyer shall reasonably cooperate with Seller in attempting to cause any Third Party operator to provide Buyer with the requested access. If any of the proposed sampling or invasive activities interfere with the normal operations of the Subject Properties or otherwise may cause an undue risk of harm to the site, Seller may request an appropriate modification of the proposed sampling or invasive activities. Any sampling or invasive activities shall be conducted by a reputable environmental consulting or engineering firm, approved in advance by Seller (such approval not to be unreasonably withheld, conditioned, or delayed) and, once approved, such environmental consulting or engineering firm shall be deemed to be a “Buyer’s Representative.”  Buyer shall obtain all permits necessary to conduct any approved sampling or invasive activities from any applicable Governmental Authorities.    
(c)    Buyer shall coordinate its access rights, environmental property assessments and physical inspections of the Subject Properties with Seller and all Third Party operators, as applicable, to minimize any inconvenience to or interruption of the conduct of business by Seller or any such Third Party operator.  Buyer shall abide by Seller’s, and any Third Party operator’s, safety rules, regulations and operating policies (in each case, to the extent communicated to Buyer) while conducting its due diligence evaluation of the Properties, including any environmental or other inspection or assessment of the Subject Properties and, to the extent reasonably required by any Third Party operator, execute and deliver any access and bonding agreement required by any such Third Party operator, in each case before conducting Buyer’s assessment on such Subject Property in accordance with this Section 4.1.  Buyer hereby defends, indemnifies, and holds harmless each of the operators of the Subject Properties and each Seller Indemnified Party from and against any and all Liabilities arising out of, resulting from or relating to any field visit, environmental assessment or other due diligence activity conducted by Buyer or any Buyer’s Representative with respect to the Subject Properties, EVEN IF SUCH LIABILITIES ARISE OUT OF OR RESULT FROM, IN WHOLE OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF, OR THE VIOLATION OF LAW BY, ANY SELLER INDEMNIFIED PARTY, EXCEPTING ONLY LIABILITIES TO THE EXTENT ACTUALLY RESULTING FROM THE GROSS NEGLIGENCE 

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OR WILLFUL MISCONDUCT OF ANY SUCH OPERATOR OF THE SUBJECT PROPERTIES OR ANY SELLER INDEMNIFIED PARTY; provided that Buyer’s indemnity shall not include any Liabilities attributable to conditions or defects existing prior to such due diligence activities (including, for the avoidance of doubt, Liabilities arising out of, resulting from or relating to any Environmental Defects or similar environmental matters discovered as part of a due diligence activity of Buyer or Buyer’s Representatives) except and solely to the extent exacerbated, if at all, as a result of such due diligence activity of Buyer or Buyer’s Representatives. 
(d)    Buyer acknowledges that any entry into Seller’s offices or onto the Subject Properties shall be at Buyer’s sole risk, cost and expense, and, subject to the terms hereof, that none of the Seller Indemnified Parties shall be liable in any way for any injury, loss or damage arising out of such entry that may occur to Buyer or any of Buyer’s Representatives pursuant to this Agreement.  Buyer hereby fully waives and releases any and all Liabilities against all of the Seller Indemnified Parties for any injury, death, loss or damage to any of Buyer’s Representatives or their property in connection with Buyer’s due diligence activities, EVEN IF SUCH LIABILITIES ARISE OUT OF OR RESULT FROM, IN WHOLE OR IN PART, THE SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF, OR THE VIOLATION OF LAW BY, ANY SELLER INDEMNIFIED PARTY, EXCEPTING ONLY LIABILITIES ACTUALLY RESULTING FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ANY SELLER INDEMNIFIED PARTY.
(e)    Buyer agrees to promptly provide Seller, but in no event less than five days after receipt or creation thereof by Buyer or any of Buyer’s Representatives (including Buyer’s environmental consulting or engineering firm), copies of all final reports and test results prepared hereunder by Buyer and/or any of Buyer’s Representatives, which contain data collected or generated from Buyer’s and/or any of Buyer’s Representatives’ due diligence with respect to the Conveyed Interests, including all environmental and title reports.  Seller shall not be deemed by its or its representatives’ receipt of said documents or otherwise to have made any representation or warranty, express, implied or statutory, as to the condition of the Subject Properties or to the accuracy of said documents or the information contained therein.
(f)    Upon completion of Buyer’s due diligence, Buyer shall at its sole cost and expense and without any cost or expense to Seller or any of its Affiliates (i) repair all damages to any Subject Properties to the extent caused by Buyer’s and/or any of Buyer’s Representatives’ due diligence (including due diligence conducted by Buyer’s environmental consulting or engineering firm), (ii) if Buyer performed a Phase II ESA hereunder, restore the affected Subject Properties to the approximate same condition as, or better condition than, they were prior to commencement of any such Phase II ESA, and (iii) remove all equipment, tools and other property brought onto the Subject Properties in connection with such due diligence.  Any disturbance to the Subject Properties (including the leasehold associated therewith), to the extent resulting from such due diligence, will be promptly corrected by Buyer at Buyer’s sole cost and expense.
(g)    During all periods that Buyer and/or any of Buyer’s Representatives (including Buyer’s environmental consulting or engineering firm) are on the Subject Properties, Buyer shall maintain, at its sole cost and expense, policies of insurance of the types and in the 

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amounts held by Buyer immediately prior to the Execution Date.  Coverage under all insurance required to be carried by Buyer hereunder will (i) be primary insurance, (ii) list the Seller Indemnified Parties as additional insureds, (iii) waive subrogation against the Seller Indemnified Parties, and (iv) provide for 30 days’ prior written notice to Seller in the event of cancellation, expiration, or modification of the policy or reduction in coverage.  Upon request by Seller, Buyer shall provide evidence of such insurance to Seller prior to entering any of the Subject Properties. 
4.2    Confidentiality.  Buyer acknowledges that, pursuant to its right of access to the Records or the Subject Properties, Buyer and/or Buyer’s Representatives (including Buyer’s environmental consulting or engineering firm) will become privy to confidential and other information of Seller and/or Seller’s Affiliates and Buyer shall ensure that such confidential information (a) shall not be used by Buyer and Buyer’s Representatives for any purpose other than in connection with the transactions contemplated by this Agreement and (b) shall be held confidential by Buyer and Buyer’s Representatives (including Buyer’s environmental consulting or engineering firm) in accordance with the terms of the Confidentiality Agreement.  If the Closing should occur, the foregoing confidentiality restriction on Buyer and the Confidentiality Agreement, shall terminate as of the Closing Date (except as to (i) such portion of the Conveyed Interests that are not conveyed to Buyer pursuant to the provisions of this Agreement, (ii) the Excluded Assets and Other Matters, and (iii) information related to Seller, Seller’s Affiliates, or any assets other than the Subject Properties).  Further, if the Closing should occur, the terms and conditions of the Confidentiality Agreement will apply mutatis mutandis to Seller and its Affiliates (as if it, and they, were the “Recipient” thereunder) for a period equal to the initial term of the Confidentiality Agreement, it being the intent of the Parties that Seller will treat the “Confidential Information” (as defined therein) in strict confidence for such period after the Closing.  Notwithstanding anything contained herein to the contrary, this Section 4.2 shall not limit or otherwise modify the confidentiality restrictions in the License Agreement.  
4.3    Disclaimers. 
(a)    EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN ARTICLE VII OR THE SPECIAL WARRANTY SET FORTH IN THE ASSIGNMENT, (I) SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS, STATUTORY OR IMPLIED, AND (II) SELLER EXPRESSLY DISCLAIMS ALL LIABILITY AND RESPONSIBILITY FOR ANY REPRESENTATION, WARRANTY, STATEMENT OR INFORMATION MADE OR COMMUNICATED (ORALLY OR IN WRITING) TO BUYER OR ANY OF ITS AFFILIATES, EMPLOYEES, AGENTS, CONSULTANTS OR REPRESENTATIVES (INCLUDING ANY OPINION, INFORMATION, PROJECTION OR ADVICE THAT MAY HAVE BEEN PROVIDED TO BUYER BY ANY SELLER INDEMNIFIED PARTY). 
(b)    EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED OTHERWISE IN ARTICLE VII OR THE SPECIAL WARRANTY SET FORTH IN THE ASSIGNMENT, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO (i) TITLE TO ANY OF THE CONVEYED INTERESTS, (ii) THE CONTENTS, CHARACTER OR NATURE OF ANY 

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REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY ENGINEERING, GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE CONVEYED INTERESTS, (iii) THE QUANTITY, QUALITY OR RECOVERABILITY OF HYDROCARBONS IN OR FROM THE CONVEYED INTERESTS, (iv) ANY ESTIMATES OF THE VALUE OF THE CONVEYED INTERESTS OR FUTURE REVENUES TO BE GENERATED BY THE CONVEYED INTERESTS, (v) THE PRODUCTION OF OR ABILITY TO PRODUCE HYDROCARBONS FROM THE CONVEYED INTERESTS, (vi) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE CONVEYED INTERESTS, (vii) THE CONTENT, CHARACTER OR NATURE OF ANY INFORMATION MEMORANDUM, REPORTS, BROCHURES, CHARTS OR STATEMENTS PREPARED BY SELLER OR THIRD PARTIES WITH RESPECT TO THE CONVEYED INTERESTS, (viii) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE TO BUYER OR ITS AFFILIATES, OR ITS OR THEIR RESPECTIVE EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR PRESENTATION RELATING THERETO AND (ix) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT.  EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY REPRESENTED OTHERWISE IN ARTICLE VII OR THE SPECIAL WARRANTY SET FORTH IN THE ASSIGNMENT, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS, STATUTORY OR IMPLIED, AS TO THE MERCHANTABILITY, FREEDOM FROM LATENT VICES OR DEFECTS, FITNESS FOR A PARTICULAR PURPOSE OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY OF THE CONVEYED INTERESTS, RIGHTS OF A PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR RETURN OF THE PURCHASE PRICE, IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES THAT, SUBJECT TO THE INTRODUCTORY CLAUSE OF THIS SENTENCE AND WITHOUT PREJUDICE TO BUYER’S RIGHTS AND REMEDIES UNDER ARTICLE V, ARTICLE VI, SECTION 13.2(b) (WITH RESPECT TO A BREACH OF SECTION 9.1), SECTION 13.2(c) AND/OR SECTION 13.2(d), IN EACH CASE, TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN SUCH SECTIONS, BUYER SHALL BE DEEMED AT CLOSING TO BE OBTAINING THE CONVEYED INTERESTS IN THEIR PRESENT STATUS, CONDITION AND STATE OF REPAIR, “AS IS” AND “WHERE IS” WITH ALL FAULTS OR DEFECTS (KNOWN OR UNKNOWN, LATENT, DISCOVERABLE OR UNDISCOVERABLE), AND THAT BUYER, AS OF CLOSING, HAS MADE OR CAUSED TO BE MADE SUCH INSPECTIONS AS BUYER DEEMS APPROPRIATE. 
(c)     EXCEPT AS AND TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN SECTION 7.15, (i) SELLER HAS NOT AND WILL NOT MAKE ANY REPRESENTATION OR WARRANTY REGARDING ANY MATTER OR CIRCUMSTANCE RELATING TO ENVIRONMENTAL LAWS, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT OR THE PROTECTION OF HUMAN HEALTH, SAFETY, NATURAL RESOURCES OR THE ENVIRONMENT, OR ANY OTHER ENVIRONMENTAL CONDITION OF THE CONVEYED INTERESTS, (ii) NOTHING IN THIS AGREEMENT OR OTHERWISE SHALL BE CONSTRUED AS SUCH A REPRESENTATION OR WARRANTY, AND (iii) 

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WITHOUT PREJUDICE TO BUYER’S RIGHTS AND REMEDIES UNDER SECTION 13.2(a) (WITH RESPECT TO A BREACH OF SECTION 7.15), SECTION 13.2(b) (WITH RESPECT TO A BREACH OF SECTION 9.1), ARTICLE VI, AND/OR SECTION 13.2(d), IN EACH CASE, TO THE LIMITED EXTENT EXPRESSLY SET FORTH IN SUCH SECTIONS, BUYER SHALL BE DEEMED AT CLOSING TO BE TAKING THE CONVEYED INTERESTS “AS IS” AND “WHERE IS” WITH ALL FAULTS FOR PURPOSES OF THEIR ENVIRONMENTAL CONDITION AND THAT BUYER, AS OF CLOSING, HAS MADE OR CAUSED TO BE MADE SUCH ENVIRONMENTAL INSPECTIONS AS BUYER DEEMS APPROPRIATE.
(d)    SELLER AND BUYER AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 4.3 ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSE OF ANY APPLICABLE LAW.
ARTICLE V
TITLE MATTERS; CASUALTY; TRANSFER RESTRICTIONS
5.1    General Disclaimer of Title Warranties and Representations.  Except for the Special Warranty set forth in the Assignment and without limiting Buyer’s remedies for Title Defects set forth in this Article V, Seller makes no warranty or representation, express, implied, statutory or otherwise, with respect to Seller’s title to any of the Conveyed Interests, and Buyer hereby acknowledges and agrees that Buyer’s sole remedy for any defect of title, including any Title Defect, with respect to Seller’s title to any of the Conveyed Interests (a) before Closing, shall be as set forth in Section 5.3 and, if applicable, Section 14.1(e), and (b) from and after Closing, shall be (i) with respect to Title Defects for which the Title Defect Amount therefor comprises part of the Defect Escrow Amount, pursuant to Sections 3.6, 5.3(d) and 5.3(j) (along with any associated provisions in this Agreement), as applicable, in each case, however, subject to Section 5.3(i), and (ii) in all other instances, pursuant to the Special Warranty set forth in the Assignment and in compliance with, and subject to, Section 5.2 below and, if applicable, any Title Indemnity Agreement.  Notwithstanding anything to the contrary, (A) the Parties acknowledge and agree that none of Seller’s representations and warranties in Article VII will be deemed representations or warranties with respect to Seller’s title to any of the Conveyed Interests and, (B) for the avoidance of doubt, Buyer shall have the right hereunder to assert Title Defects (subject to the provisions of Section 5.3) of which Buyer’s or any of its Affiliates’ employees, title attorneys, landmen or other title examiners were aware prior to the Execution Date (including matters with respect to the partial releases referenced in Section 5.2(a)(ii), with respect to which, Seller shall promptly provide Buyer, upon Buyer’s request during the Interim Period, with copies of, or access to, any such releases in Seller’s or its Affiliates’ possession for purposes of Buyer completing its title diligence pursuant to Section 5.3).  
5.2    Special Warranty. 
(a)    Special Warranty of Title.  If Closing occurs, then the Assignment shall contain a special warranty of title whereby Seller shall, until the end of the Survival Period, warrant Defensible Title, without duplication, to the Leases set forth on Exhibit A (limited to the Eagle Ford Formation) and to the Wells set forth in Exhibit B (limited to the currently producing formation for 

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each such Well), unto Buyer against every Person whomsoever lawfully claiming or to claim the same or any part thereof by, through or under Seller, but not otherwise, subject, however, to the Permitted Encumbrances (the “Special Warranty”); provided, however, that, (i) except with respect to any liability of Seller for any claim asserted in writing by Buyer to Seller in accordance with this Section 5.2 and the Assignment before the expiration of the Survival Period for breach of the Special Warranty, the Special Warranty shall cease and terminate at the end of the Survival Period, and (ii) notwithstanding anything in this Agreement to the contrary, Seller’s release of any depths covered by a Lease pursuant to a partial release of that Lease (including any Third Party claims with respect to those depths released) shall not constitute a breach of the Special Warranty.  The Special Warranty shall be subject to the further limitations and provisions of this Section 5.2.
(b)    Recovery on Special Warranty. 
(i)    Buyer’s Assertion of Special Warranty Breaches.  Prior to the expiration of the period of time commencing as of the Closing Date and ending at 5:00 p.m. (Central Time) on the fourth anniversary thereof (the “Survival Period”), Buyer shall be entitled to furnish Seller a Title Defect Notice meeting the requirements of Section 5.3(a) setting forth any and all matters which Buyer intends to assert as a breach of the Special Warranty (collectively, the “Special Warranty Notices” and, individually, a “Special Warranty Notice”).  Seller shall have a reasonable opportunity, but not the obligation, to cure any breach of the Special Warranty asserted by Buyer pursuant to this Section 5.2(b).  Buyer shall reasonably cooperate with any attempt by Seller to cure any such breach.  For all purposes of this Agreement, Buyer shall be deemed to have waived, and Seller shall have no further liability for, any breach of the Special Warranty that Buyer fails to assert by a Special Warranty Notice given to Seller before the expiration of the Survival Period.
(ii)    Limitations on Special Warranty.  Recovery by Buyer for any breach by Seller of the Special Warranty shall be limited to an amount (without any interest accruing thereon) equal to the reduction to the Purchase Price to which Buyer would have been entitled had Buyer asserted the defect giving rise to such breach of the Special Warranty as a Title Defect prior to the Title Defect Claim Date pursuant to Section 5.3 and taking into account the last sentence of this Section 5.2(b)(ii), and in no event shall that recovery (together with any other Title Defect recoveries and Purchase Price adjustments with respect to such Conveyed Interest) exceed the Allocated Value of the affected Conveyed Interest.  The Individual Title Defect Threshold and Aggregate Deductible shall not apply to any recovery for any breach by Seller of the Special Warranty, and Buyer shall not be entitled to recover any amount for any breach of the Special Warranty to the extent that the Purchase Price is or has been reduced for the same Title Defect pursuant to Section 5.3(d)(i).
5.3    Notice of Title Defects; Defect Adjustments.  
(a)    Title Defect Notices.  Prior to the Title Defect Claim Date, Buyer must deliver claim notices to Seller meeting the requirements of this Section 5.3(a) (collectively, the “Title Defect Notices” and, individually, a “Title Defect Notice”) setting forth any matters which, in Buyer’s reasonable opinion, constitute Title Defects and which Buyer intends to assert as a Title Defect pursuant to this Section 5.3(a).  For all purposes of this Agreement and notwithstanding anything herein to the contrary, Buyer shall be deemed to have waived, and Seller shall have no liability for, 

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any Title Defect which Buyer fails to assert as a Title Defect by a properly delivered Title Defect Notice received by Seller before the Title Defect Claim Date; provided, however, that, for purposes of the Special Warranty, such waiver shall not apply to any matter that, prior to the Title Defect Claim Date, is not discovered by any of Buyer’s or any of its Affiliates’ employees, title attorneys, landmen or other title examiners while conducting Buyer’s due diligence with respect to the Conveyed Interests that in Buyer’s reasonable opinion constitutes a breach by Seller of the Special Warranty.  To be effective, each Title Defect Notice shall be in writing, and shall include (i) a description of the alleged Title Defect and the individual Well or Lease affected by the alleged Title Defect (each such Conveyed Interest, a “Title Defect Property”), (ii) the Allocated Value of the Title Defect Property, (iii) supporting documents reasonably necessary for Seller to verify the existence of the alleged Title Defect with respect to the Title Defect Property (any and all of which supporting documents may be furnished via access to a web link or ftp site (in lieu of other means of delivery)), and (iv) the amount by which Buyer reasonably believes the Allocated Value of the Title Defect Property is reduced by such alleged Title Defect and the computations upon which Buyer’s belief is based, in each case, in accordance with Section 5.3(g).  Notwithstanding anything contained in this Agreement to the contrary, and for the avoidance of doubt, any Title Defect asserted by Buyer pursuant to this Section 5.3(a) and any breach of the Special Warranty asserted by Buyer pursuant to Section 5.2(b) shall be limited to the Leases set forth on Exhibit A (as to the Eagle Ford Formation only) and the Wells set forth on Exhibit B (as to the currently producing formation for each such Well) and Buyer shall not have the right to assert Title Defects or breach of the Special Warranty with respect to any other depths or formations or any other Conveyed Interests.  To give Seller an opportunity to commence reviewing and curing Title Defects, Buyer agrees to use reasonable efforts to give Seller, on or before the end of each calendar week prior to the Title Defect Claim Date, written notice of all alleged Title Defects (as well as any claims that would be claims under the Special Warranty) discovered by Buyer during the preceding calendar week, which notice may be preliminary in nature and supplemented prior to the Title Defect Claim Date.  
(b)    Title Benefit Notices.  Seller shall have the right, but not the obligation, to deliver to Buyer on or before the Title Defect Claim Date, with respect to each Title Benefit which it discovers after the Execution Date, a notice (a “Title Benefit Notice”) including (i) a description of the alleged Title Benefit and the individual Well or Lease, or portion thereof, affected by such alleged Title Benefit (each such Conveyed Interest, a “Title Benefit Property”), and (ii) with respect to each Title Benefit Property, the amount by which Seller reasonably believes the Allocated Value of such Title Benefit Property is increased by such alleged Title Benefit, and the computations upon which Seller’s belief is based.  Seller shall be deemed to have waived any Title Benefit which Seller fails to assert as a Title Benefit by a Title Benefit Notice delivered to Buyer on or before the Title Defect Claim Date.   
(c)    Seller’s Right to Cure.  Seller shall have the right, but not the obligation, to attempt, at its sole cost, to cure any Title Defects timely and properly alleged under Section 5.3(a) at any time prior to 5:00 p.m. Central Time on the date that is 45 days after the Closing Date (the “Cure Period”), provided that Seller has notified Buyer under Section 5.3(d)(i) of its election to cure such Title Defects no later than the sixth Business Day prior to Closing.  During the period of time from Closing to the expiration of the Cure Period, Buyer agrees to afford Seller and its officers, employees and other authorized representatives reasonable access, during normal business hours, 

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to the Subject Properties and all Records in Buyer’s or any of its Affiliates’ possession in order to facilitate Seller’s attempt to cure any such Title Defects (and if Seller and/or its representatives access the Subject Properties in connection with such right to cure, the provisions herein setting forth the terms and conditions of Buyer’s (and Buyer’s Representatives’) access to the Subject Properties and the Records prior to the Closing will, notwithstanding anything to the contrary, apply mutatis mutandis to Seller and its representatives).  An election by Seller to attempt to cure a Title Defect shall be without prejudice to its rights under Section 5.3(j) and shall not constitute an admission against interest or a waiver of Seller’s right to dispute the existence, nature or value of, or cost to cure, the alleged Title Defect. 
(d)    Remedies for Title Defects.  Subject to Seller’s continuing right to dispute the existence of a Title Defect and/or the Title Defect Amount asserted with respect thereto as described in Section 5.3(j), and subject to the rights of the Parties pursuant to Section 14.1(e), in the event that any Title Defect timely and properly asserted by Buyer in accordance with Section 5.3(a) is not waived in writing by Buyer or cured on or before the sixth Business Day prior to Closing, Seller shall, at its sole option, elect to: 
(i)    subject to Section 5.3(i), assign the Title Defect Property to Buyer at Closing and reduce the Purchase Price at Closing by the Title Defect Amount determined pursuant to Section 5.3(g) (as asserted by Buyer in good faith as part of a Title Defect Notice timely and properly alleged under Section 5.3(a)), provided that Seller will have the right for the Cure Period (in accordance with Section 5.3(c)) to cure the Title Defect relating to such assigned Title Defect Property, and should Seller cure such Title Defect, then such cure will be taken into account in the Final Settlement Statement delivered pursuant to Section 3.6; or 
(ii)    subject to Section 5.3(i), with Buyer’s consent, at its sole option, indemnify Buyer against all Liability (up to the Allocated Value of the applicable Title Defect Property and subject to the Individual Title Defect Threshold and the Aggregate Deductible) resulting from such Title Defect with respect to such Title Defect Property pursuant to an indemnity agreement prepared by Seller in a form and substance reasonably acceptable to Buyer (a “Title Indemnity Agreement”); 
provided that, subject to Section 5.3(i), with respect to any Title Defect (including the Title Defect Amount with respect to such Title Defect) that the Parties have not agreed upon prior to the sixth Business Day prior to Closing, the Title Defect Property for said Title Defect will be included with the Conveyed Interests conveyed to Buyer at Closing and the Purchase Price will be reduced at Closing by the asserted Title Defect Amount (as asserted by Buyer in good faith as part of a Title Defect Notice timely and properly alleged under Section 5.3(a)) of the Title Defect Property affected by such Title Defect; and, provided, further, that the Final Price shall be adjusted to take into account the resolution of all Title Disputes after Closing (either by agreement of the Parties or as a result of the determination of the Title Arbitrator under Section 5.3(j)), any Title Defects cured by Seller during the Cure Period,  and the application of Section 5.3(i).
(e)    Remedies for Title Benefits.  With respect to each Title Benefit Property timely and properly reported under Section 5.3(b), Buyer shall notify Seller in writing on or before the date that is six Business Days prior to Closing whether Buyer (i) concedes the Title Benefit 

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asserted therein, or (ii) disputes such Title Benefit, in which case such Title Benefit shall be deemed to be a Title Dispute and the provisions of Section 5.3(j) shall apply.  For the avoidance of doubt, Title Benefits Amounts shall in no event increase the Purchase Price and will only be used to offset Title Defect Amounts hereunder.    
(f)    Exclusive Remedy.  Except for Buyer’s rights under the Special Warranty and Buyer’s right to terminate this Agreement pursuant to Section 14.1(e), (i) Section 5.3(d) shall be the exclusive right and remedy of Buyer with respect to Seller’s failure to have Defensible Title with respect to any Lease or Well, or any other title matter with respect to any Subject Property, and (ii) Buyer hereby waives any and all other rights or remedies with respect thereto.   
(g)    Title Defect Amount.  The amount by which the Allocated Value of a Title Defect Property is reduced as a result of the existence of a Title Defect shall be the “Title Defect Amount” for such Title Defect Property and shall be determined in accordance with the following terms and conditions (without duplication):
(i)    if Buyer and Seller agree on the Title Defect Amount, then that amount shall be the Title Defect Amount;
(ii)    if the Title Defect with respect to such Title Defect Property is an Encumbrance that is undisputed and liquidated in amount, then the Title Defect Amount shall be the amount necessary to be paid to remove the Title Defect from such Title Defect Property;
(iii)    if the Title Defect with respect to such Title Defect Property represents a decrease of (A) Seller’s Net Revenue Interest for such Title Defect Property such that Seller’s Net Revenue Interest for such Title Defect Property is less than (B) the Net Revenue Interest set forth for such Title Defect Property on Exhibit A or Exhibit B, as applicable, then the Title Defect Amount shall be the product of the Allocated Value of such Title Defect Property multiplied by a fraction, the numerator of which is the Net Revenue Interest decrease and the denominator of which is the Net Revenue Interest set forth for such Title Defect Property on Exhibit A or Exhibit B, as applicable; 
(iv)    if the Title Defect with respect to such Title Defect Property represents an increase of (A) Seller’s Working Interest for such Title Defect Property such that Seller’s Working Interest for such Title Defect Property is in excess of (B) the Working Interest set forth for such Title Defect Property on Exhibit B by not more than 10% (on an 8/8ths basis), without any increase of Seller’s Net Revenue Interest for such Title Defect Property, then the Title Defect Amount shall be the product of the Allocated Value of such Title Defect Property multiplied by a fraction, the numerator of which is the Working Interest increase and the denominator of which is the Working Interest set forth for such Title Defect Property on Exhibit B; 
(v)    if the Title Defect with respect to such Title Defect Property represents a discrepancy where (A) the actual Net Acres for such Title Defect Property is less than (B) the Net Acres set forth on Exhibit A for such Title Defect Property, then the Title Defect Amount shall be the product obtained by multiplying such Net Acre decrease by the Allocated Value (on a per Net Acre dollar amount basis) for such Title Defect Property; 

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(vi)    if the Title Defect represents an obligation or Encumbrance upon or other defect in title to the Title Defect Property of a type not described above, then the Title Defect Amount shall be determined by taking into account the Allocated Value of the Title Defect Property, the portion of the Title Defect Property affected by the Title Defect, the legal effect of the Title Defect, the potential economic effect of the Title Defect over the life of the Title Defect Property, the values placed upon the Title Defect by Buyer and Seller and such other reasonable factors as are necessary to make a proper evaluation; provided, however, that if such Title Defect is reasonably capable of being cured, the Title Defect Amount shall not be greater than the Allocated Value of the Title Defect Property;
(vii)    the Title Defect Amount with respect to a Title Defect Property shall be determined without duplication of any costs or losses included in another Title Defect Amount hereunder; and
(viii)    notwithstanding anything to the contrary in this Article V, the aggregate Title Defect Amounts attributable to the effects of all Title Defects upon any Title Defect Property shall not exceed the Allocated Value of such Title Defect Property;
provided, however, that, notwithstanding the foregoing, if a Title Defect (other than a Title Defect affecting a Title Defect Property in which Seller only owns an overriding royalty interest) results in the Seller’s Net Revenue Interest in any Well or Lease being equal to or less than 70% (proportionately reduced based on Seller’s Working Interest therein), the Title Defect Amount with respect to such Well or Lease shall be determined in accordance with Section 5.3(g)(vi), rather than Section 5.3(g)(iii).  
(h)    Title Benefit Amount.  The Title Benefit Amount resulting from a Title Benefit shall be determined in accordance with the following methodology, terms and conditions (without duplication):
(i)    if Buyer and Seller agree on the Title Benefit Amount, then that amount shall be the Title Benefit Amount;
(ii)    if the Title Benefit with respect to a Title Benefit Property  represents an increase of (A) Seller’s Net Revenue Interest for any Title Benefit Property such that Seller’s Net Revenue Interest for such Title Benefit Property is greater than (B) the Net Revenue Interest set forth for such Title Benefit Property on Exhibit A or Exhibit B, without any increase of Seller’s Working Interest for such Title Defect Property, then the Title Benefit Amount shall be the product of the Allocated Value of such Title Benefit Property multiplied by a fraction, the numerator of which is the Net Revenue Interest increase and the denominator of which is the Net Revenue Interest set forth for such Title Benefit Property on Exhibit A or Exhibit B;
(iii)    if the Title Benefit with respect to a Title Benefit Property represents a discrepancy where (A) the actual Net Acres for such Title Defect Property is greater than (B) the Net Acres set forth on Exhibit A for such Title Benefit Property, then the Title Benefit Amount shall be the product obtained by multiplying such Net Acre increase by the Allocated Value (on a per Net Acre dollar amount basis) for such Title Benefit Property; and

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(iv)    if the Title Benefit is of a type not described above (including, for the avoidance of doubt, the circumstances where a Title Benefit affects a portion, but not the entirety of any Well or Lease), then the Title Benefit Amounts shall be determined by taking into account the Allocated Value of the Title Benefit Property, the portion of such Title Benefit Property affected by such Title Benefit, the legal effect of the Title Benefit, the potential economic effect of the Title Benefit over the life of such Title Benefit Property, the values placed upon the Title Benefit by Buyer and Seller and such other reasonable factors as are necessary to make a proper evaluation.
(i)    Title Defect Threshold and Deductible.  Notwithstanding anything herein to the contrary, except as otherwise provided in the last sentence of this Section 5.3(i), with respect to any Title Defect timely and properly asserted under Section 5.3(a), (A) in no event shall there be any adjustments to the Purchase Price or other remedies provided by Seller hereunder for any Title Defect with respect to a Title Defect Property (or Title Defects, if more than one Title Defect affects the Title Defect Property) for which the Title Defect Amount (or aggregate Title Defect Amount(s) of the Title Defects affecting the Title Defect Property, if applicable), in each case, does not exceed the lesser of (x) $40,000 and (y) 75% of the Allocated Value of the relevant Title Defect Property (such lesser amount, the “Individual Title Defect Threshold”); and (B) in no event shall there be any adjustment to the Purchase Price or other remedies provided by Seller hereunder for any Title Defect with respect to a Title Defect Property for which the Title Defect Amount (or Title Defect Amounts, if applicable) exceeds the Individual Title Defect Threshold unless (1) the amount of the sum of (I) (x) the aggregate Title Defect Amounts of all such Title Defects that exceed the Individual Title Defect Threshold (as determined in accordance with (A) above, but excluding any Title Defect Amounts attributable to Title Defects cured by Seller) less (y) the aggregate Title Benefit Amount of all Title Benefits, plus (II) the aggregate Remediation Amounts of all Environmental Defects that exceed the Individual Environmental Threshold (as determined in accordance with Section 6.1(e), but excluding any Remediation Amounts attributable to Conveyed Interests subject to Environmental Defects that are retained by Seller pursuant to Section 6.1(c) and any Environmental Defects cured by Seller), exceeds (2) the Aggregate Deductible, after which point Buyer shall be entitled to adjustments to the Purchase Price or other applicable remedies available hereunder, but only to the extent that the amount by which the aggregate amount of such Title Defect Amounts and Remediation Amounts exceeds the Aggregate Deductible.  For the avoidance of doubt, a Title Defect Property shall refer to the individual Lease or Well affected by a Title Defect and, if a Title Defect affects both a Lease and a Well (or multiple Leases or Wells), the Title Defect Amounts with respect to such Title Defects shall not be aggregated when determining whether the Individual Title Defect Threshold has been satisfied. Notwithstanding the foregoing, the Individual Title Defect Threshold and the Aggregate Deductible shall not apply to any Title Defect timely and properly asserted under Section 5.3(a) with respect to any of the Leases set forth on Schedule 5.3(i).   
(j)    Title Dispute Resolution.  Seller and Buyer shall attempt to agree on matters regarding (i) all Title Defects, Title Benefits, Title Defect Amounts and Title Benefit Amounts, and (ii) the adequacy of any curative materials provided by Seller to cure any alleged Title Defect (collectively “Title Disputes”) prior to the Dispute Date.  If Seller and Buyer are unable to agree by the Dispute Date, the Title Disputes shall be exclusively and finally resolved pursuant to this Section 5.3(j).  There shall be a single arbitrator, who shall be a title attorney with at least 10 years’ experience in oil and gas titles involving properties in the regional area in which the Conveyed 

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Interests are located, as selected by the mutual agreement of Buyer and Seller within 15 days after the Dispute Date (the “Title Arbitrator”).  If the Parties do not mutually agree upon the Title Arbitrator in accordance with this Section 5.3(j), the Dallas, Texas office of the AAA shall appoint the Title Arbitrator under such conditions as the AAA in its sole discretion deems necessary or advisable.  The place of arbitration shall be Dallas, Texas, and the arbitration shall be conducted in accordance with the AAA Rules, to the extent such rules do not conflict with the terms of this Section 5.3(j).  Each of Buyer and Seller shall submit to the Title Arbitrator, with a simultaneous copy to the other Party, its proposed resolution of the applicable Title Dispute no later than 10 Business Days after the appointment of the Title Arbitrator pursuant to this Section 5.3(j).  The proposed resolution of the applicable Title Dispute shall include the best offer of the submitting Party in a single monetary amount that such Party is willing to pay or accept (as applicable) to settle the applicable Title Dispute.  The Title Arbitrator’s determination shall be made within 20 days after the end of such 10 Business Day period after the submission of the Title Disputes and shall be final and binding upon both Parties, without right of appeal.  In making his determination, the Title Arbitrator shall make a determination of the Title Disputes submitted based solely on the single written submission of Seller and Buyer (and without any additional or supplemental submittals by any Party, except to the extent the Title Arbitrator requests additional information from either Party), shall be bound by the rules set forth in this Section 5.3 and, subject to the foregoing, may consider such other matters as, in the opinion of the Title Arbitrator, are necessary to make a proper determination.  The Title Arbitrator, however, may not award Buyer a greater Title Defect Amount than the Title Defect Amount claimed by Buyer in its applicable Title Defect Notice or a lesser Title Defect Amount than the Title Defect Amount stated by Seller in its applicable position statement delivered to the Title Arbitrator; or, in the case of Title Benefits, a greater Title Benefit Amount than that claimed by Seller in its applicable Title Benefit Notice or a lesser Title Benefit Amount that claimed by Buyer in its applicable position statement delivered to the Title Arbitrator.  The Title Arbitrator shall act as an expert for the limited purpose of determining the specific Title Disputes submitted by either Party, and may not award damages, interest or penalties to either Party with respect to any matter except as otherwise provided in the following sentence.  The costs of the Title Arbitrator (and the AAA, if applicable) and the reasonable legal costs and expenses incurred by the Parties in connection with the arbitration shall be borne pro rata between the Parties with each Party being responsible for such costs and expenses to the extent the Title Arbitrator has not selected such Party’s position on an aggregate dollar basis with respect to all amounts submitted for resolution by the Title Arbitrator.
5.4    Casualty or Condemnation Loss. 
(a)    Notwithstanding anything herein to the contrary, but without prejudice to Buyer’s rights and remedies under Section 13.2(a) (with respect to a breach of Section 7.8 or Section 7.18), Section 13.2(b) (with respect to a breach of Section 9.1), and/or Section 13.2(c) (with respect to the Specified Obligations described in clause (v) of Section 13.1(b)), in each case, to the limited extent expressly set forth in such Sections, from and after the Effective Time, if Closing occurs, Buyer shall assume all risk of loss with respect to production of Hydrocarbons through normal depletion (including watering out of any well, collapsed casing or sand infiltration of any well) and the depreciation of Conveyed Interests due to ordinary wear and tear, in each case, with respect to 

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the Conveyed Interests, and Buyer shall not assert such matters as Casualty Losses or Title Defects hereunder.   
(b)    If, after the Execution Date but prior to the Closing Date, any portion of the Conveyed Interests is damaged or destroyed by fire or other casualty or is taken in condemnation or under right of eminent domain (each, a “Casualty Loss”) (excluding any of the Conveyed Interests affected by a Casualty Loss that, prior to Closing, Seller has (y) replaced with property of an equivalent or better condition and/or (z) repaired to an equivalent or better condition, in each case, as of the Effective Time), and the Closing thereafter occurs, (i) if such Casualty Losses exceed, in the aggregate, $2,000,000, there will be a downward adjustment to the Purchase Price in the amount of such Casualty Losses or (ii) if such Casualty Losses do not exceed, in the aggregate, $2,000,000, Seller, at Closing, shall pay to Buyer all sums actually paid to Seller by Third Parties by reason of any Casualty Loss insofar as with respect to the Conveyed Interests and shall assign, transfer and set over to Buyer or subrogate Buyer to all of Seller’s or its Affiliates right, title and interest (if any) in insurance claims, unpaid awards, and other rights against Third Parties (excluding any Liabilities, other than insurance claims, of or against any Seller Indemnified Party) arising out of such Casualty Loss insofar as with respect to the Conveyed Interests; provided, however, that in the event that, at Closing, clause (i) above is applicable as a result of Casualty Losses occurring during the Interim Period, Seller shall reserve and retain (and Buyer shall assign to Seller) all right, title, and interest in and to such insurance claims, unpaid awards, other rights against Third Parties, and sums paid to Seller by Third Parties; provided, further, that, in all cases, Seller shall reserve and retain (and Buyer shall assign to Seller) all right, title, interest and claims against Third Parties for the recovery of Seller’s costs and expenses incurred prior to Closing in repairing such Casualty Loss and/or pursuing or asserting any such insurance claims or other rights against Third Parties. 
5.5    Preferential Purchase Rights and Consents to Assign. 
(a)    With respect to each Preferential Purchase Right set forth on Schedule 7.9, not later than 10 days after the Execution Date (and, with respect to each Preferential Purchase Right that is not set forth on Schedule 7.9 but is discovered by either Party after the Execution Date and before the Closing Date, not later than 10 days after the discovery thereof), Seller shall send to the holder of each such Preferential Purchase Right a notice in compliance with the contractual provisions applicable to such Preferential Purchase Right, requesting a waiver of such Preferential Purchase Right. 
(i)    If, prior to Closing, any holder of a Preferential Purchase Right notifies Seller that it intends to consummate the purchase of the Conveyed Interests to which its Preferential Purchase Right applies, then the Conveyed Interest subject to such Preferential Purchase Right shall be excluded from the Conveyed Interests to be assigned to Buyer at Closing (but only to the extent of the portion of such Conveyed Interest affected by the Preferential Purchase Right), and the Purchase Price shall be reduced by the Allocated Value of the Conveyed Interest (or portion thereof) so excluded.  Seller shall be entitled to all proceeds paid by any Person exercising a Preferential Purchase Right prior to Closing.  If, on or before 90 days following the Closing Date, such holder of such Preferential Purchase Right fails to consummate the purchase of the Conveyed Interest (or portion thereof) covered by such Preferential Purchase Right (on the same terms and 

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conditions hereof) then (A) Seller shall so notify Buyer, (B) Buyer shall purchase, on or before 5 Business Days following receipt of such notice, such Conveyed Interest (or portion thereof) that was so excluded from the Conveyed Interests to be assigned to Buyer at Closing, under the terms of this Agreement and for a price equal to the amount by which the Purchase Price was reduced at Closing with respect to such excluded Conveyed Interest (or portion thereof) (as such amount is appropriately adjusted in accordance with the other terms of this Agreement) and (C) Seller shall assign to Buyer the Conveyed Interest (or portion thereof) so excluded at Closing pursuant to an instrument in substantially the same form as the Assignment.
(ii)    All Conveyed Interests for which any applicable Preferential Purchase Right has been waived, or as to which the period to exercise the applicable Preferential Purchase Right has expired without exercise by the holder thereof, in each case, prior to Closing, shall be sold to Buyer at Closing pursuant to the provisions of this Agreement.  If, as of Closing, the time for exercising a Preferential Purchase Right has not expired and such Preferential Purchase Right has not been exercised or waived, then the Conveyed Interest subject to such Preferential Purchase Right shall be included in the Conveyed Interests to be assigned to Buyer at Closing, and Buyer shall be solely responsible for complying with the terms of such Preferential Purchase Right and shall be entitled to the proceeds, if any, associated with the exercise of such Preferential Purchase Right.
(b)    With respect to each Consent set forth on Schedule 7.4, Seller, not later than 10 days after the Execution Date (and, with respect to each Consent that is not set forth on Schedule 7.4 but is discovered by either Party after the Execution Date and before the Closing Date, not later than 10 days after the discovery thereof), shall send to the holder of each such Consent a notice in material compliance with the contractual provisions applicable to such Consent seeking such holder’s consent to the transactions contemplated hereby.
(i)    If Seller fails to obtain a Consent set forth in Schedule 7.4 (or any Consent that is not set forth in Schedule 7.4 but is discovered by either Party after the Execution Date and before the Closing Date) prior to Closing and the failure to obtain such Consent would cause (A) the assignment of the Conveyed Interests affected thereby to Buyer to be void or nullified, (B) the termination of a Lease or an Applicable Contract, or (C) the assessment of a payment, fine or monetary penalty, in each case, pursuant to the express terms of the Lease, Applicable Contract, or other instrument requiring such Consent, as the case may be (each, a “Required Consent”), then, in each case, the Conveyed Interest (or portion thereof) subject to such un‐obtained Consent and any associated Conveyed Interests shall be excluded from the Conveyed Interests to be assigned to Buyer at Closing, and the Purchase Price shall be reduced by the Allocated Value of such Conveyed Interest (or portion thereof) and such associated Conveyed Interests so excluded.  In the event that a Required Consent (with respect to a Conveyed Interest excluded pursuant to this Section 5.5(b)(i)) that was not obtained prior to Closing is obtained within 180 days following Closing, then, within 10 Business Days after such Consent is obtained (x) Buyer shall purchase the Conveyed Interest (or portion thereof) and any associated Conveyed Interests that were so excluded as a result of such previously un‐obtained Consent and pay to Seller the amount by which the Purchase Price was reduced at Closing with respect to the Conveyed Interest (or portion thereof) and any associated Conveyed Interests so excluded (as such amount is appropriately adjusted in accordance with the 

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other terms of this Agreement) and (y) Seller shall assign to Buyer the Conveyed Interest (or portion thereof) and any associated Conveyed Interests so excluded at Closing pursuant to an instrument in substantially the same form as the Assignment.   
(ii)    Notwithstanding anything in this Agreement to the contrary, but without prejudice to Buyer’s rights and remedies under Sections 13.2 and/or 14.1(d) (in each case, as to breaches of this Section 5.5(b) or Section 7.4), if Seller fails to obtain a Consent other than a Required Consent, then the Conveyed Interest (or portion thereof) subject to such un‐obtained Consent shall nevertheless be assigned by Seller to Buyer at Closing as part of the Conveyed Interests and, Buyer shall have no claim against Seller, and Seller shall have no Liability, for the failure to obtain such Consent.
(iii)    Prior to Closing, Seller and Buyer shall use their commercially reasonable efforts to obtain all Consents listed on Schedule 7.4 (and any Required Consent that is not set forth in Schedule 7.4 but is discovered by either Party after the Execution Date and before the Closing Date); provided, however, that neither Party shall be required to incur any Liability or pay any money in order to obtain any such Consent (unless Buyer elects to pay for or  reimburse Seller for any such Liability or payment of monies).  Subject to the foregoing, Buyer agrees to provide Seller with any information or documentation that may be reasonably requested by Seller and/or the Third Party holder(s) of such Consents, including evidence of financial capability and bonding, in order to facilitate the process of obtaining such Consents.  
ARTICLE VI
ENVIRONMENTAL MATTERS
6.1    Environmental Defects. 

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(a)    Assertions of Environmental Defects.  Buyer must deliver claim notices to Seller meeting the requirements of this Section 6.1(a) (collectively the “Environmental Defect Notices” and individually an “Environmental Defect Notice”) not later than the Environmental Defect Claim Date setting forth any matters which, in Buyer’s reasonable opinion, constitute Environmental Defects and which Buyer intends to assert as Environmental Defects pursuant to this Section 6.1.  Except for, and without prejudice to, Buyer’s right to indemnification pursuant to (w) Section 13.2(a) (with respect to a breach by Seller of Section 7.15), (x) Section 13.2(b) (with respect to a breach by Seller of Section 9.1), (y) Section 13.2(d)(i) and/or (z) Section 13.2(d)(ii) (in each case to the limited extent expressly set forth in such Sections), Buyer shall be deemed to have waived, and Seller shall have no liability for, any Environmental Defect which Buyer fails to assert as an Environmental Defect by a properly delivered Environmental Defect Notice received by Seller, before the Environmental Defect Claim Date, with such liabilities being “Buyer’s Environmental Liabilities.”  To be effective, each Environmental Defect Notice shall be in writing and shall include (i) a description of the matter constituting the alleged Environmental Condition (including the applicable Environmental Law violated or implicated thereby) and the Conveyed Interests affected by such alleged Environmental Condition (each, an “Environmental Defect Property”), (ii) the Allocated Value of each Environmental Defect Property (or portions thereof) affected by such alleged Environmental Condition, (iii) supporting documents reasonably necessary for Seller to verify the existence of such alleged Environmental Condition (any and all of which supporting documents may be furnished via access to a web link or ftp site (in lieu of other means of delivery)), and (iv) a calculation of the Remediation Amount (itemized in reasonable detail) that Buyer asserts is attributable to such alleged Environmental Condition with respect to each Environmental Defect Property.  Buyer’s calculation of the Remediation Amount included in the Environmental Defect Notice must describe in reasonable detail the Remediation proposed for the alleged Environmental Condition that gives rise to the asserted Environmental Defect and identify all assumptions used by Buyer in calculating the Remediation Amount, including the standards that Buyer asserts must be met to comply with Environmental Laws.  
(b)    Seller’s Right to Cure.  Seller shall have the right, but not the obligation, to cure any asserted Environmental Defect at any time prior to the expiration of the Cure Period, provided that Seller has notified Buyer under Section 6.1(c)(i) of its election to cure such Environmental Defects no later than the sixth Business Day prior to Closing.  During the period of time from Closing to the expiration of the Cure Period, Buyer agrees to afford Seller and its officers, employees, and other authorized representatives reasonable access, during normal business hours, to the Subject Properties and all Records in Buyer’s or any of its Affiliates’ possession in order to facilitate Seller’s attempt to cure any Environmental Defects, and if Seller and/or its representatives access the Subject Properties in connection with such right to cure, the provisions herein setting forth the terms and conditions of Buyer’s (and Buyer’s Representatives’) access to the Subject Properties prior to the Closing will, notwithstanding anything to the contrary, apply mutatis mutandis to Seller and its representatives.  To give Seller an opportunity to commence reviewing and curing Environmental Defects, Buyer agrees to use reasonable efforts to give Seller, on or before the end of each calendar week prior to the Environmental Defect Claim Date, written notice of all alleged Environmental Defects discovered by Buyer during the preceding calendar week, which notice may be preliminary in nature and supplemented prior to the Environmental Defect Claim Date. 

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(c)    Remedies for Environmental Defects.  Subject to Seller’s continuing right to dispute the existence of an Environmental Defect and/or the Remediation Amount asserted with respect thereto as described in Section 6.1(f), and subject to the rights of the Parties pursuant to Section 14.1(e), in the event that any Environmental Defect timely and properly asserted by Buyer in accordance with Section 6.1(a) is not waived in writing by Buyer or cured on or before the sixth Business Day prior to Closing, Seller shall, at its sole option, elect to:
(i)    subject to Section 6.1(e), assign the Environmental Defect Property to Buyer at Closing and reduce the Purchase Price at Closing by the Remediation Amount, provided that Seller will have the right until the expiration of the Cure Period (in accordance with Section 6.1(b)) to cure the Environmental Defect relating to such assigned Environmental Defect Property, and should Seller cure such Environmental Defect, then such cure will be taken into account in the Final Settlement Statement delivered pursuant to Section 3.6;
(ii)    retain the entirety of the Environmental Defect Property, in which event the Environmental Defect Property will be excluded from the Conveyed Interests at Closing and the Purchase Price shall be reduced at Closing by an amount equal to the Allocated Value of such Environmental Defect Property; or
(iii)    subject to Section 6.1(e), with Buyer’s consent, at its sole option, indemnify Buyer against all Liability resulting from such Environmental Defect with respect to the Conveyed Interests pursuant to an indemnity agreement prepared by Seller in a form and substance reasonably acceptable to Buyer (each, an “Environmental Indemnity Agreement”); 
provided that, subject to Section 6.1(e), if the Remediation Amount (as asserted by Buyer in good faith as part of an Environmental Defect Notice that is timely and properly asserted pursuant to Section 6.1(a)) for any Environmental Defect Property exceeds the greater of (1) $150,000 and  (2) the Allocated Value of the Environmental Defect Property, and such Environmental Defect is not waived in writing by Buyer or cured during the Cure Period, either Party may, at its sole option, elect to exclude the Environmental Defect Property from the Conveyed Interests by delivering a notice to the other Party, in which event Buyer shall promptly assign to Seller such Conveyed Interests, such Conveyed Interests will constitute Excluded Assets and Other Matters, and the Purchase Price shall be reduced by an amount equal to the Allocated Value of such Environmental Defect (which adjustment shall be taken into account in the Final Settlement Statement); provided, however, that any such assignment to Seller shall not take place until such time as a determination can be made under Section 6.1(e) as to whether an adjustment to the Purchase Price or other remedies provided by Seller (including the Parties’ ability to elect to exclude an Environmental Defect Property as set forth above) are available to Buyer after application of Section 6.1(e), and in the event that after application of Section 6.1(e), no Purchase Price adjustment or other remedies provided by Seller are available to Buyer, Buyer shall retain the Environmental Defect Property and it shall remain part of the Conveyed Interests, notwithstanding any election to exclude the Environmental Defect Property by either Party.  Subject to Section 6.1(e), with respect to any Environmental Defect (including the Remediation Amount with respect to such Environmental Defect) that the Parties’ have not agreed upon prior to the sixth Business Day prior to Closing, the Environmental Defect Property for said Environmental Defect will be included with the Conveyed 

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Interests conveyed to Buyer at Closing and the Purchase Price will be reduced at Closing by the asserted Remediation Amount (as asserted by Buyer in good faith as part of an Environmental Defect Notice timely and properly alleged under Section 6.1(a)) of the Environmental Defect Property affected by such Environmental Defect; and, provided, further, that the Final Price shall be adjusted to take into account the resolution of all Disputed Environmental Matters after Closing (either by agreement of the Parties or as a result of the determination of the Environmental Arbitrator under Section 6.1(f)), any Environmental Defects cured by Seller during the Cure Period, and the application of Section 6.1(e).  If, at the time at which the Final Price is finally determined, the Purchase Price is reduced by the Remediation Amount for any Environmental Defect (except for Environmental Defect Properties excluded pursuant to Section (c)(ii) or as set forth above, which will constitute Excluded Assets and Other Matters) or the Purchase Price is not reduced for any Environmental Defect as a result of the application of Section 6.1(e), Buyer shall be deemed to have assumed responsibility for all of the costs and expenses attributable to the Remediation of the Environmental Condition attributable to such Environmental Defect and for all Liabilities with respect thereto and Buyer’s obligations with respect to the foregoing shall be deemed to constitute Assumed Obligations; provided that the foregoing shall not prejudice Buyer’s rights under (A) any Environmental Indemnity Agreement and/or (B) (1) Section 13.2(a) (with respect to a breach by Seller of Section 7.15), (2) Section 13.2(b) (with respect to a breach by Seller of Section 9.1), (3) Section 13.2(d)(i) and/or (4) Section 13.2(d)(ii) (in each case to the limited extent expressly set forth in such Sections).  Notwithstanding anything in this Agreement to the contrary, in no event shall there by any Environmental Defect, and Buyer shall not be permitted to deliver an Environmental Defect Notice, with respect to (i) any Subject Property operated by Buyer or its Affiliates, or (ii) any Subject Property in which Seller owns only an overriding royalty interest, and all Liabilities with respect to the foregoing (including to the extent relating to the Conveyed Interests) shall be deemed to constitute Assumed Obligations.  
(d)    Exclusive Remedy.  Except for Buyer’s rights (i) to terminate this Agreement pursuant to Section 14.1(e) and (ii) to indemnification pursuant to (A) Section 13.2(a) (with respect to a breach by Seller of Section 7.15), (B) Section 13.2(b) (with respect to a breach by Seller of Section 9.1), (C) Section 13.2(d)(i), and/or (D) Section 13.2(d)(ii) (in each case to the limited extent expressly set forth in such Sections), the provisions set forth in Section 6.1(c) shall be the exclusive right and remedy of Buyer with respect to any Environmental Defect, Environmental Condition, or other environmental matter with respect to any Conveyed Interest. 
(e)    Environmental Threshold and Deductible.  Notwithstanding anything herein to the contrary, except as otherwise provided in the last sentence of this Section 6.1(e), with respect to any Environmental Defect timely and properly asserted under Section 6.1(a), (i) in no event shall there be any adjustment to the Purchase Price or other remedies provided by Seller for any Environmental Defect with respect to an individual Environmental Defect Property (or Environmental Defects, if more than one Environmental Defect affects the individual Environmental Defect Property) for which the Remediation Amount (or aggregate Remediation Amounts, if applicable) does not exceed $70,000 (the “Individual Environmental Threshold”); and (ii) in no event shall there be any adjustment to the Purchase Price or other remedies provided by Seller for any Environmental Defect (or Environmental Defects, if applicable) affecting an individual Environmental Defect Property for which the Remediation Amount (or aggregate Remediation 

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Amounts, if applicable) exceeds the Individual Environmental Threshold unless (A) the amount of the sum of (1) the aggregate Remediation Amounts of all such Environmental Defects that exceed the Individual Environmental Threshold (as determined in accordance with (i) above, but excluding any Remediation Amounts attributable to any Environmental Defects cured by Seller and Conveyed Interests retained by Seller pursuant to Section (c)) plus (2) (x) the aggregate Title Defect Amounts of all Title Defects that exceed the Individual Title Defect Threshold (as determined in accordance with Section 5.3(i), but excluding any Title Defect Amounts attributable to Title Defects cured by Seller)  less (y) the aggregate Title Benefit Amount of all Title Benefits, exceeds (B) the Aggregate Deductible, after which point Buyer shall be entitled to adjustments to the Purchase Price or other applicable remedies available hereunder, but only with respect to the amount by which the aggregate amount of such Remediation Amounts and Title Defect Amounts exceeds the Aggregate Deductible. For the avoidance of doubt, in the instance an identical Environmental Defect is present with respect to multiple Subject Properties, the Remediation Amounts for all such identical Environmental Defects shall not be aggregated when determining whether the Individual Environmental Threshold has been satisfied.  Notwithstanding the foregoing, the Individual Title Defect Threshold and the Aggregate Deductible shall not apply to any Title Defect timely and properly asserted under Section 5.3(a) with respect to any of the Leases set forth on Schedule 5.3(i).    
(f)    Environmental Dispute Resolution.  Seller and Buyer shall attempt to agree on (i) all Environmental Defects and Remediation Amounts prior to the Dispute Date and (ii) the adequacy of any cure by Seller of any asserted Environmental Defect prior to the Dispute Date (items (i) and (ii), collectively, the “Disputed Environmental Matters”).  If Seller and Buyer are unable to agree by the Dispute Date, the Disputed Environmental Matters shall be exclusively and finally resolved by arbitration pursuant to this Section 6.1(f).  There shall be a single arbitrator, who shall be an environmental attorney with at least 10 years’ experience in environmental matters involving oil and gas producing properties in any of the regional areas in which the affected Conveyed Interests are located, as selected by the mutual agreement of Buyer and Seller within 15 days after the Dispute Date (the “Environmental Arbitrator”).  If the Parties do not mutually agree upon the Environmental Arbitrator in accordance with this Section 6.1(f), the Dallas, Texas office of the AAA shall appoint such Environmental Arbitrator under such conditions as the AAA in its sole discretion deems necessary or advisable.  The place of arbitration shall be Dallas, Texas, and the arbitration shall be conducted in accordance with the AAA Rules, to the extent such rules do not conflict with the terms of this Section 6.1(f).  Each of Buyer and Seller shall submit to the Environmental Arbitrator, with a simultaneous copy to the other Party, a single written statement of its position on the Disputed Environmental Matters in question, together with a copy of this Agreement and any supporting material that such Party desires to furnish, not later than the 10th Business Day after appointment of the Environmental Arbitrator.  The Environmental Arbitrator’s determination shall be made within 20 days after the end of such 10 Business Day period after the submission of the Disputed Environmental Matters and shall be final and binding upon both Parties, without right of appeal.  In making his determination, the Environmental Arbitrator shall make a determination of the Disputed Environmental Matters submitted based solely on the single written submission of Seller and Buyer (and without any additional or supplemental submittals by any Party, except to the extent the Environmental Arbitrator requests additional information from either Party), shall be bound by the rules set forth in this Section 6.1 and, subject to the foregoing, may consider such other legal and industry matters as in the opinion of the Environmental Arbitrator are 

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necessary or helpful to make a proper determination.  The Environmental Arbitrator, however, may not award Buyer a greater Remediation Amount than the Remediation Amount claimed by Buyer in its applicable Environmental Defect Notice or a lesser Remediation Amount than the Remediation Amount claimed by Seller in its applicable position statement delivered to the Environmental Arbitrator.  The Environmental Arbitrator shall act as an expert for the limited purpose of determining specific Disputed Environmental Matters submitted by either Party and may not award damages, interest or penalties to either Party with respect to any matter, except as otherwise provided in the following sentence.  The costs of the Environmental Arbitrator (and the AAA, if applicable) and the reasonable legal costs and expenses incurred by the Parties in connection with the arbitration shall be borne pro rata between the Parties with each Party being responsible for such costs and expenses to the extent the Environmental Arbitrator has not selected such Party’s position on an aggregate dollar basis with respect to all amounts submitted for resolution by the Environmental Arbitrator.  
6.2    NORM, Asbestos, Wastes and Other Substances.  Buyer acknowledges that the Conveyed Interests have been used for exploration, development, and production of oil and gas and that there may be petroleum, produced water, wastes, or other substances or materials located in, on or under the Conveyed Interests or associated with the Conveyed Interests.  Equipment and sites included in the Conveyed Interests may contain asbestos, NORM or other Hazardous Substances.  NORM may affix or attach itself to the inside of wells, materials, and equipment as scale, or in other forms.  The wells, materials, and equipment located on the Conveyed Interests or included in the Conveyed Interests may contain asbestos, NORM and other wastes or Hazardous Substances.  NORM containing material and/or other wastes or Hazardous Substances may have come in contact with various environmental media, including water, soils or sediment.  Special procedures may be required for the assessment, remediation, removal, transportation, or disposal of any affected environmental media, wastes, asbestos, NORM and other Hazardous Substances from the Conveyed Interests.  Notwithstanding anything herein to the contrary, Buyer shall not be permitted to claim any Environmental Defect on the account of the presence of NORM or asbestos-containing materials that are non-friable, unless and only to the extent such presence of NORM or asbestos-containing materials that are non-friable constitutes an Environmental Condition.  
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to the matters specifically listed or disclosed in the Schedules and subject to Section 13.4(b)(iii), Seller represents and warrants to Buyer as follows (provided that, to the extent any such representations and warranties relate to any Subject Properties or Conveyed Interests operated by Buyer or a Third Party, such representations and warranties will be deemed qualified by Seller’s Knowledge as to the periods during which Buyer or the Third Party, as the case may be, served as operator, and further provided that (i) except for the Special Warranty, Seller makes no representations or warranties with respect to its title to any of the Conveyed Interests, none of Seller’s representations and warranties in this Article VII include, or shall be construed to include, any representations or warranties with respect to Seller’s title to any of the Conveyed Interests, and (ii) except for the representation and warranty in Section 7.15, Seller makes no representations or warranties with respect to any Environmental Laws or environmental matters, and none of Seller’s 

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representations in this Article VII (other than Section 7.15) include, or shall be construed to include, any representations or warranties with respect to Environmental Laws or other environmental matters, (iii) any matter that constitutes a Title Defect or Environmental Defect (other than an Environmental Defect that constitutes a breach of Section 7.15) (regardless whether Buyer asserts such matter as a Title Defect or Environmental Defect) shall not constitute a breach of any representation and warranty in this Article VII): 
7.1    Organization, Existence and Qualification.  Seller is a limited partnership duly formed and validly existing under the Laws of the State of Oklahoma.  Seller has all requisite power and authority to own and operate its property (including the Conveyed Interests) and to carry on its business as now conducted.  Seller is duly licensed or qualified to do business as a foreign limited partnership in all jurisdictions in which it carries on business or owns assets and such qualification is required by Law, except where the failure to be so qualified would not have a material adverse effect.
7.2    Authorization, Approval and Enforceability.  Seller has full power and authority to enter into and perform this Agreement and the Transaction Documents to which it is a party and the transactions contemplated herein and therein.  The execution, delivery, and performance by Seller of this Agreement have been duly and validly authorized and approved by all necessary limited partnership action on the part of Seller.  Assuming the due authorization, execution and delivery by the other parties to such documents, this Agreement is, and the Transaction Documents to which Seller is a party when executed and delivered by Seller will be, the valid and binding obligations of Seller and enforceable against Seller in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium, and similar Laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
7.3    No Conflicts.  The execution, delivery, and performance by Seller of this Agreement and the Transaction Documents to which it is a party and the consummation of the transactions contemplated herein and therein will not (a) conflict with or result in a breach of any provisions of the organizational documents of Seller, (b) except for Permitted Encumbrances and assuming the receipt of all Consents and the waiver of, or compliance with, all Preferential Purchase Rights applicable to the transactions contemplated hereby, result in a material default or the creation of any Encumbrance or give rise to any right of termination, cancellation, or acceleration under any of the terms, conditions, or provisions of any note, bond, mortgage, indenture, or other Applicable Contract to which Seller is a party or by which Seller or the Conveyed Interests may be bound or (c) violate in any material respect any Law applicable to Seller or any of the Conveyed Interests.
7.4    Consents.  Except (a) as set forth in Schedule 7.4, (b) for Customary Post-Closing Consents, (c) for restrictions to assignment under Applicable Contracts that are terminable without payment of any fee upon not greater than 90 days’ notice, (d) for any Preferential Purchase Rights applicable to the transactions contemplated by this Agreement that are set forth in Schedule 7.9, and (e) for any notices required after the assignment of any Conveyed Interest pursuant to the express terms of the applicable Lease, Applicable Contract, or Right-of-Way, as applicable, there are no restrictions to assignment, including requirements for consents from Third Parties to any assignment 

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(in each case), that Seller is required to obtain in connection with the transfer of the Conveyed Interests by Seller to Buyer or the consummation of the transactions contemplated by this Agreement by Seller (each, a “Consent”).
7.5    Bankruptcy.  There are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to Seller’s Knowledge, threatened in writing against Seller or any Affiliate of Seller.  Seller is not insolvent.
7.6    Litigation.  Except as set forth in Schedule 7.6, as of the Execution Date, there is no suit, litigation, or arbitration by any Third Party or before any Governmental Authority pending against Seller or, to Seller’s Knowledge, threatened against Seller, in each case, with respect to the Conveyed Interests or that would otherwise prevent or hinder the consummation of the transactions contemplated by this Agreement or Seller’s performance of its obligations hereunder; and there has been no settlement of litigation with Third Parties or order of any Governmental Authority with respect to the ownership or operation of the Conveyed Interests that would be binding on Buyer (or adversely affect the Conveyed Interests) after Closing.  For the avoidance of doubt, this Section 7.6 (i) does not include any matters with respect to Environmental Laws or other environmental matters, (ii) the sole representation and warranty with respect to Environmental Laws or other environmental matters is set forth in Section 7.15, and (iii) no other representation or warranty appearing in this Agreement shall be construed to cover Environmental Laws or environmental matters.
7.7    Material Contracts. 
(a)    Schedule 7.7(a) sets forth, as of the Execution Date, all Applicable Contracts of the type described below (such Applicable Contracts, collectively, the “Material Contracts”): 
(i)    any Applicable Contract that can reasonably be expected to result in aggregate payments by Seller (or Buyer, after Closing) of more than $75,000 during the remainder of the current or any subsequent fiscal year (based solely on the terms thereof and current volumes, without regard to any expected increase in volumes or revenues);
(ii)    any Applicable Contract that can reasonably be expected to result in aggregate revenues to Seller (or Buyer, after Closing) of more than $75,000 during the remainder of the current or any subsequent fiscal year (based solely on the terms thereof and current volumes, without regard to any expected increase in volumes or revenues);
(iii)    any Applicable Contract Hydrocarbon purchase and sale, transportation, gathering, marketing, treating, processing or similar Applicable Contract (including Applicable Contracts with acreage dedications and/or volume commitments) that is not terminable without penalty on 60 days’ or less notice;
(iv)    any Applicable Contract that is an indenture, mortgage, loan, credit lien, sale-leaseback or similar Applicable Contract affecting any of the Conveyed Interest that will not be released on or prior to the Closing;

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(v)    any Applicable Contract that constitutes a lease under which Seller is the lessor or the lessee of real or personal property which lease (A) cannot be terminated by Seller without penalty upon 60 days’ or less notice and (B) involves an annual base rental of more than $75,000; 
(vi)    any Applicable Contract with any Affiliate of Seller which will be binding on Buyer after the Closing Date; 
(vii)    any Applicable Contract that constitutes a farmout agreement, exploration agreement, participation agreement, development agreement, unit operating agreement, joint operating agreement or similar Contract; and 
(viii)    any Applicable Contract that (A) contains or constitutes an area of mutual interest agreement, (B) includes non-competition restrictions or other similar restrictions on doing business, or (C) the primary purpose of which is to indemnify another Person.
(b)    Except as set forth in Schedule 7.7(b), (i) the Material Contracts are legal, valid and binding obligations of Seller and, to Seller’s Knowledge, are the legal, valid and binding obligation of each other party thereto, (ii) there exists no material default or material breach under any Material Contract by Seller or its Affiliates or, to Seller’s Knowledge, by any other Person that is a party to such Material Contract, and no event has occurred that with notice or lapse of time or both would constitute any material default or material breach under any such Material Contract by Seller or its Affiliates or, to Seller’s Knowledge, any other Person who is a party to such Material Contract. No currently effective notices have been received by Seller or any of its Affiliates of the exercise of any premature termination, price redetermination, market-out, shut-in or curtailment of or under any Material Contract. As of the Execution Date, Seller has made available to Buyer full, true and correct copies of all Material Contracts (including all material amendments thereto).
7.8    No Violation of Laws.  Except as set forth in Schedule 7.8, as of the Execution Date, neither Seller nor its Affiliates is in material violation of any applicable Laws with respect to its ownership or operation of the Conveyed Interests and neither Seller nor its Affiliates have received any written notice from a Governmental Authority or any Third Party regarding any actual or alleged violation of any applicable Law with respect to Seller’s or its Affiliates’ ownership or operation of the Conveyed Interests except for prior instances of alleged violations that have been fully and finally resolved and for which Buyer or its Affiliates will not have any Liability.  To Seller’s Knowledge, the Conveyed Interests operated by any Third Party have been operated (during the periods of such Third-Party operatorship) in material compliance with the provisions and requirements of all applicable Laws.  For the avoidance of doubt, (i) this Section 7.8 does not include any matters with respect to Environmental Laws, environmental matters, (ii) the sole representation and warranty with respect to Environmental Laws or other environmental matters is set forth in Section 7.15, (iii) no other representation or warranty appearing in this Agreement shall be construed to cover Environmental Laws or environmental matters, (iv) the sole representation and warranty with respect to laws related to Taxes is set forth in Section 7.12, and (v) no other representation or warranty appearing in this Agreement shall be construed to cover Laws related to Taxes. 

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7.9    Preferential Rights.  Except as set forth in Schedule 7.9, there are no preferential purchase rights, rights of first refusal or other similar rights (other than the Tag Rights) that are applicable to the transfer of the Conveyed Interests in connection with the transactions contemplated hereby (each a “Preferential Purchase Right”).
7.10    Imbalances.  For Subject Properties operated by Seller (and, to Seller’s Knowledge, for Subject Properties operated by a Third Party), Schedule 7.10 sets forth all Imbalances associated with the Conveyed Interests as of the Effective Time.
7.11    Current Commitments.  Schedule 7.11 sets forth, as of the Execution Date, all authorizations for expenditures and other approved capital commitments, individually equal to or greater than $75,000 (net to Seller’s interest) (the “AFEs”), that were (or are) binding on the Conveyed Interests following the Effective Time. 
7.12    Taxes.  Except as set forth in Schedule 7.12, all material Asset Taxes that have become due and payable by Seller and its Affiliates before the Effective Time have been timely and properly paid.  Seller or its Affiliate has timely filed or caused to be timely filed all Tax Returns required to be filed by Seller or its Affiliate with respect to the Conveyed Interests due on or prior to the Closing Date and all such Tax Returns are correct and complete in all material respects.  There are no extensions or waivers of any statute of limitations with respect to any Asset Taxes or Tax liens burdening the Conveyed Interests except for liens for current Taxes not yet due and payable.  There are no administrative or judicial proceedings by any Taxing Authority pending in connection with any material Asset Tax that would adversely affect the Conveyed Interests after Closing and neither the Seller nor any Conveyed Interest has received notice of any audits currently pending with respect to Asset Taxes that would adversely affect the Conveyed Interests after Closing. None of the Conveyed Interests is subject to any Tax partnership agreement or is otherwise held in an arrangement requiring a Tax Return to be filed reflecting items of income, gain, loss or deduction as set forth under Subchapter K of Chapter 1 of Subtitle A of the Code or any similar statute.
7.13    Brokers’ Fees.  None of Seller or its Affiliates has incurred liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement for which Buyer or any Affiliate of Buyer shall have any responsibility.
7.14    Permits. With respect to the Conveyed Interests currently operated by Seller, Seller has obtained and, to Seller’s Knowledge, except as set forth in Schedule 7.14, is in compliance with all governmental permits or licenses required to be obtained to operate, and conduct operations on, the Conveyed Interests operated by Seller or its Affiliates.  Except as set forth in Schedule 7.14, (a) all such permits and licenses are in full force and effect and (b)  there are no violations of such permits or licenses that would (or could with notice or lapse of time) result in their termination or revocation.  Except for permits and licenses that are not transferable, the transactions contemplated by this Agreement will not adversely affect the validity of such permits and licenses.  For the avoidance of doubt, this Section 7.14 (i) does not include any matters with respect to Environmental Laws or other environmental matters, (ii) the sole representation and warranty with respect to environmental Laws or other Environmental matters is set forth in Section 7.15, and (iii) no other representation or warranty appearing in this Agreement shall be construed to cover Environmental Laws or environmental matters. 

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7.15    Environmental.  The representation and warranty in this Section 7.15 constitutes the only representation and warranty with respect to Environmental Laws or environmental matters and no other representation or warranty appearing in this Agreement shall be construed to cover Environmental Laws or environmental matters.  Except as set forth on Schedule 7.15: 
(a)    There are no pending proceedings, and to Seller’s Knowledge there are no threatened proceedings, relating to an alleged breach of Environmental Laws on or with respect to the Conveyed Interests, and neither Seller nor any of its Affiliates have received any written notice of any environmental claim, demand, filing or investigation relating to the Conveyed Interests or written notice of any alleged or actual violation or non-compliance with any Environmental Law or of non-compliance with the terms or conditions of any environmental permits, arising from, based upon, associated with or related to the Conveyed Interests or the ownership or operation of any thereof, except for prior instances of non-compliance that have been fully and finally resolved to the satisfaction of all Governmental Authorities with jurisdiction over such matters.
(b)    Neither Seller nor any of its Affiliates has entered into or is subject to any agreement, consent, order, decree or judgment of any Governmental Authority that is based on any violations of Environmental Laws and that relates to the current or future use of any Conveyed Interests. 
7.16    Non-Consent Operations.  Except for actions taken after the Execution Date in accordance with Section 9.1, neither Seller nor its Affiliates have elected to become a non-consenting party with respect to the Conveyed Interests set forth in Exhibit A or Exhibit B that could result in its interest in the Conveyed Interests becoming subject to a penalty or forfeiture as a result of such election not to participate in such operation or activity, except to the extent reflected in the Net Revenue Interest and Working Interest for such Conveyed Interest set forth in Exhibit A or Exhibit B, as applicable. Seller has not received any written notice of any vote (or other action) being taken (or any written notice threatening to commence such vote or other action) to remove Seller or any of its Affiliates as the operator of any of the Properties. 
7.17    Leases; Rights-of-Way. 
(a)    Neither Seller nor any of its Affiliates has received written notice of a material default or material breach under any Lease by Seller or its Affiliates or, to Seller’s Knowledge, by any other Person (other than Buyer) that is a party to such Lease.
(b)    No Lease or Material Contract contains any express provisions obligating Seller or its Affiliates to drill any wells on the Conveyed Interests (other than provisions requiring optional drilling as a condition of maintaining or earning all or a portion of a presently non-producing Lease) which obligations have not yet been fulfilled. 
(c)    Except as set forth in Schedule 7.17, no Lease is subject to any affirmative waiver of material surface rights restricting Seller’s or its Affiliates use of the surface or similar material restrictions on drilling or the location of drill sites, other than (i) restrictions arising by operation of Law or restrictions that are customarily contained in oil and gas leases in Texas and (ii) those of the Leases that (A) are included within Units that are operated by Buyer or its Affiliates, 

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(B) cover less than five Net Acres and/or (C) include requirements for consent which are not to be unreasonably withheld in connection with surface use restrictions for drilling activities or the location of drill sites.  No royalty owner has requested to perform or, to Seller’s Knowledge, is currently performing, an audit regarding the payment of any royalties under the Leases or any similar payment. 
(d)    Schedule 7.17 contains a true and complete list of the following, as of the Effective Time, (i) each Lease that is held by payment of shut-in royalties, reworking operations, any substitute for production in paying quantities or any other means other than production in paying quantities; (ii) each Lease that is not held by existing production, the primary term of which will expire within one year following the Effective Time; and (iii) any Top Lease to which Seller, its Affiliates, or its or their representatives is a lessee party. 
(e)    The Leases, Rights-of-Way and Surface Fee Interests include all material surface easements, rights-of-way, servitudes, licenses, authorizations, permits and similar surface rights from Governmental Authorities and Third Parties necessary to access, operate, and maintain the Conveyed Interests operated by Seller in substantially the same manner as operated by Seller or its Affiliates as of the Effective Time, and Seller has maintained in full force and effect, and is not in material breach or violation of, the Rights-of-Way.
7.18    Wells.  Except as set forth on Schedule 7.18, (i) the Wells and Other Wells that have been drilled and completed have been drilled and completed (or, for Wells and/or Other Wells that have been drilled to total depth but not yet completed, drilled) at legal locations and within the surface and subsurface limits permitted by all applicable Leases, Contracts and pooling or unit agreements, and in compliance with all applicable Laws; (ii) no Well is subject to penalties on allowables because of any overproduction or any other violation of Laws; and (iii) there are no Wells, Other Wells, Pipeline Systems, or Personal Property (in the last instance, limited to the Personal Property described in clause (B) of Section 2.1(i)) located on the Properties for which Seller or any of its Affiliates is currently obligated by any Laws or Contracts to Decommission or that are currently subject to exceptions to a requirement to Decommission issued by a Governmental Authority. All currently producing Wells and related Other Wells, Pipeline Systems, and material Personal Property are in an operable state of repair adequate to maintain normal operations conducted as of the date hereof in accordance with past practices of Seller, ordinary wear and tear excepted.  Schedule 7.18 contains a true and complete list of the status of the Payout Balance for the Wells as of the Effective Time for each Well.  For the avoidance of doubt, the representations and warranties in this Section 7.18 shall be qualified by Seller’s Knowledge with respect to any Subject Properties or Conveyed Interests operated by a Third Party and, notwithstanding anything in this Section 7.18 to the contrary, Seller makes no representations or warranties under this Section 7.18 with respect to Subject Properties or Conveyed Interests operated by Buyer or its Affiliates for the period of said operatorship. 
7.19    Suspense Funds.  Schedule 7.19 lists all funds held in suspense by Seller or its Affiliates as of the date set forth on Schedule 7.19 that are attributable to the Conveyed Interests. 
7.20    Advance Payments.  With respect to the Properties, (i) neither Seller nor its Affiliates are obligated by any prepayment arrangement or “take-or-pay” requirement to sell, gather, 

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deliver, process or transport any Hydrocarbons without then or thereafter receiving full payment therefor; and (ii) Seller is not obligated to pay any penalties under any agreement as a result of the delivery of quantities of Hydrocarbons under or in excess of any such agreement’s requirements.
7.21    Post-Effective Time.  From the Effective Time up to the Execution Date, to Seller’s Knowledge, there has not been any (a) event or circumstance that, individually or in the aggregate, constitutes a material adverse effect, (b) material destruction or loss to any part of the Conveyed Interests or (c) action or occurrence that would have constituted a breach of, or that would have required the notification of Buyer under, Section 9.1 (other than Section 9.1(a)(i) and, in the case of Applicable Contracts already set forth on Schedule 7.7(a), Section 9.1(b)(i) and 9.1(b)(ii))  had that Section been in effect during such time. 
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller the following:
8.1    Organization, Existence and Qualification.  Buyer is a limited partnership duly formed, validly existing and in good standing under the Laws of the State of Texas and has all requisite power and authority to own and operate its property and to carry on its business as now conducted.  Buyer is duly licensed or qualified to do business as a foreign company in all jurisdictions in which it carries on business or owns assets and such qualification is required by Law except where the failure to be so qualified would not have a material adverse effect upon the ability of Buyer to consummate the transactions contemplated by this Agreement or perform its obligations hereunder.
8.2    Authorization, Approval and Enforceability.  Buyer has full power and authority to enter into and perform this Agreement, the Transaction Documents to which it is a party and the transactions contemplated herein and therein.  The execution, delivery, and performance by Buyer of this Agreement and the Transaction Documents have been duly and validly authorized and approved by all necessary company action on the part of Buyer.  Assuming the due authorization, execution and delivery by the other parties to such documents, this Agreement is, and the Transaction Documents to which Buyer is a party, when executed and delivered by Buyer, will be the valid and binding obligations of Buyer and enforceable against Buyer in accordance with their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, moratorium, and similar Laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) other than the effects of bankruptcy, insolvency, reorganization, moratorium, and similar Laws, as well as to principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) relating to, arising from, or in connection with the bankruptcy case of Penn Virginia Corporation and its subsidiaries commenced under Case No. 16-32395 on May 12, 2016 and concluded on September 12, 2016, for which the United States Bankruptcy Court for the Eastern District of Virginia retains jurisdiction,.
8.3    No Conflicts.  The execution, delivery, and performance by Buyer of this Agreement and the Transaction Documents to which it is a party and the consummation of the transactions contemplated herein and therein will not (a) conflict with or result in a breach of any provisions of 

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the organizational or other governing documents of Buyer, (b) result in a default or the creation of any Encumbrance or give rise to any right of termination, cancellation or acceleration under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license or other agreement to which Buyer is a party or by which Buyer or any of its property may be bound or (c) violate any Law applicable to Buyer or any of its property.
8.4    Consents.  Except for Customary Post-Closing Consents (and consents under the Leases, the Applicable Contracts, or that Seller is required to obtain under this Agreement or otherwise), to Buyer’s Knowledge, there are no consents or other restrictions on assignment, including requirements for consents from any Third Party or any Governmental Authority to any assignment, in each case, that Buyer is required to obtain in connection with the consummation of the transactions contemplated by this Agreement by Buyer.
8.5    Bankruptcy.  Except for claims or matters related to the bankruptcy case of Penn Virginia Corporation and its subsidiaries commenced under Case No. 16-32395 on May 12, 2016 and concluded on September 12, 2016, for which the United States Bankruptcy Court for the Eastern District of Virginia retains jurisdiction, there are no bankruptcy, reorganization or receivership proceedings pending, being contemplated by or, to Buyer’s Knowledge, threatened in writing against Buyer or any Affiliate of Buyer.  Buyer is not insolvent.  
8.6    Litigation.  As of the Execution Date, there is no investigation, lawsuit, litigation or arbitration by any Person or before any Governmental Authority pending, or to Buyer’s Knowledge, threatened against Buyer or any of its Affiliates that would prevent or hinder the consummation of the transactions contemplated by this Agreement or Buyer’s performance of its obligations hereunder.
8.7    Regulatory.  Buyer is qualified under Law to own and assume operatorship of the Conveyed Interests in all jurisdictions where the Conveyed Interests are located, and the consummation of the transactions contemplated by this Agreement will not cause Buyer to be disqualified as such an owner or operator.  To the extent required by any Laws, Buyer currently has lease bonds, area-wide bonds or any other surety bonds as may be required by, and in accordance with, all Laws governing the ownership and operation of the Conveyed Interests and has, or will have as of the Scheduled Closing Date, filed any and all reports necessary for such ownership and/or operation with all Governmental Authorities having jurisdiction over such ownership and/or operation.  To Buyer’s Knowledge, there is no fact or condition with respect to Buyer or its obligations hereunder that may cause any Governmental Authority to withhold its unconditional approval of the transactions contemplated hereby to the extent approval by such Governmental Authority is required by Law.  
8.8    Financing.  
(a)     Buyer has committed financing as of the Execution Date in respect of Buyer’s ability to pay the Purchase Price at Closing, and, as of Closing, will have sufficient cash, available lines of credit or other sources of immediately available funds with which to pay the Purchase Price, consummate the transactions contemplated by this Agreement and perform its obligations under this Agreement and the Transaction Documents.  

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(b)    Buyer has delivered to the Seller true and complete copies of an executed commitment letter, dated July 29, 2017, from Jefferies Finance LLC, pursuant to which the lender[s] party thereto have committed, subject to the terms and conditions set forth therein, to lend the amounts set forth therein to Buyer for the purpose of funding the Purchase Price at Closing (the “Commitment Letter”).

(c)    As of the Execution Date, the Commitment Letter has not been amended or modified and the commitments contained in the Commitment Letter have not been withdrawn or rescinded in any respect. As of the Execution Date, the Commitment Letter, in the form delivered to the Seller, is in full force and effect and is a legal, valid and binding obligation of Buyer and, to the Knowledge of Buyer, the other parties thereto. There are no conditions precedent or other contingencies, side agreements or other arrangements or understandings related to the funding of the amounts set forth in the Commitment Letter or the terms thereof, other than as provided in the Commitment Letter in the forms delivered to the Seller. 

8.9    Independent Evaluation.  Buyer (a) is sophisticated in the evaluation, purchase, ownership and operation of oil and gas properties and related facilities, (b) is capable of evaluating, and hereby acknowledges that it has so evaluated, the merits and risks of the Conveyed Interests, Buyer’s acquisition, ownership, and operation thereof, and its obligations hereunder, and (c) is able to bear the economic risks associated with the Conveyed Interests, Buyer’s acquisition, ownership, and operation thereof, and its obligations hereunder.  In making its decision to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer (i) has relied or shall rely solely on its own independent investigation and evaluation of the Conveyed Interests and the advice of its own legal, Tax, economic, environmental, engineering, geological and geophysical advisors and the express provisions of this Agreement and not on any comments, statements, projections or other materials made or given by any representatives, consultants or advisors of Seller or any Affiliates of Seller, and (ii) has satisfied or will satisfy, as of the Closing, itself through its own due diligence as to the environmental and physical condition of and contractual arrangements and other matters affecting the Conveyed Interests.  
8.10    Brokers’ Fees.  None of Buyer or Buyer’s Affiliates has incurred any liability, contingent or otherwise, for brokers’ or finders’ fees relating to the transactions contemplated by this Agreement or the Transaction Documents for which Seller or any of Seller’s Affiliates has or shall have any responsibility.
8.11    Accredited Investor.  Buyer is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended, and will acquire the Conveyed Interests for its own account and not with a view to a sale, distribution, or other disposition thereof in violation of the Securities Act of 1933, as amended, and the rules and regulations thereunder, any applicable state blue sky Laws or any other applicable securities Laws.

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ARTICLE IX
CERTAIN AGREEMENTS
9.1    Conduct of Business.  Except (w) as set forth in Schedule 9.1, (x) for the operations covered by the AFEs and other capital commitments described in Schedule 7.11 and/or, (y) for actions taken in connection with emergency situations to protect life or property, or to maintain the environment, and without limiting Seller’s right to cure under Section 5.3(c) and Section 6.1(b):  
(a)    Seller shall, from and after the Execution Date until Closing:
(i)    provide any drilling, operations and/or production written or digital reports received by, or prepared for, Third Parties under Applicable Contracts (other than those already received or prepared by Buyer or its Affiliates thereunder);    
(ii)    (A) administer, maintain or cause its Affiliates to administer or maintain, as the case may be, and if Seller or one of its Affiliates is the operator thereof, operate, the Conveyed Interests in the usual and ordinary manner consistent with its and, if applicable, its Affiliates’ past practice within the one-year period immediately prior to the Execution Date and, in any event, in accordance with applicable Laws, the Leases, and the Applicable Contracts and (B) use commercially reasonable efforts to maintain the Leases (and all material permits, authorizations, and approvals of Governmental Authorities relating to the Subject Properties) in full force and effect, provided, that Seller shall have no obligation to maintain any Lease set forth on Schedule 7.17 (or, for the avoidance of doubt, any Lease which, by its terms, terminated during the period between the Effective Time and the Execution Date) if such Lease terminates pursuant to its existing terms or where a reasonably prudent operator would not maintain the same; 
(iii)    maintain the books of account and Records relating to the Conveyed Interests in the usual and ordinary manner, in accordance with its usual accounting practices, and consistent with past practices of Seller and its Affiliates with respect to the Conveyed Interests; 
(iv)    maintain insurance coverage on the Conveyed Interests in the amounts and types currently in force; and
(b)    except as expressly contemplated by this Agreement or as consented to by Buyer (which consent shall not be unreasonably delayed, withheld or conditioned), Seller shall not, from and after the Execution Date until Closing:
(i)    except in the case of any Contracts that are crude oil, condensate, and natural gas purchase and sale, gathering, transportation, and marketing arrangements entered into in the ordinary course of business, consistent with Seller’s and its Affiliates’ past practices, and terminable with 30 days’ notice, enter into an Applicable Contract that, if entered into on or prior to the Execution Date, would be required to be listed in Schedule 7.7; 
(ii)    terminate (unless such Material Contract terminates pursuant to its stated terms) or amend the terms of any Material Contract;

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(iii)    propose, approve, or undertake any operation reasonably expected to cost Seller in excess of $75,000;
(iv)    except with respect to Taxes, settle or initiate any material claim, action or proceedings with respect to any of the Subject Properties that (A) affects the period after the Effective Time or (B) would reasonably be expected to result in a material economic detriment to Buyer;
(v)    become a non-consenting party to any operation proposed by a Third Party;
(vi)    transfer, sell, mortgage, pledge, encumber or dispose of the Conveyed Interests (or permit any Affiliate to do any of the foregoing), other than (A) the transfer, sale, or disposal of Hydrocarbons in the ordinary course of business, (B) sales of equipment that is no longer necessary or desirable in the operation of the Conveyed Interests or for which replacement equipment has been, or will be on or prior to Closing, obtained, and (C) with Buyer’s consent (at its sole option), acreage trades or swaps for acreage of approximately equivalent value; 
(vii)    make, change or revoke any material Tax election relating to the Conveyed Interests, settle or compromise any material liability that would affect post-Effective Time Asset Taxes, file any amended Tax Return that would affect post-Effective Time Asset Taxes, enter into an arrangement with any Governmental Authority that would affect post-Effective Time Asset Taxes, or consent to an extension of the statute of limitations applicable to any claim or assessment that would affect post-Effective Time Asset Taxes; or 
(viii)    commit to do any of the foregoing.
(c)    Buyer acknowledges that Seller owns undivided interests in certain of the properties comprising the Subject Properties with respect to which it is not the operator, and Buyer agrees that the acts or omissions of any other working interest owner (including any operator) or any other Person who is not Seller or an Affiliate of Seller shall not constitute a breach of the provisions of this Section 9.1, and no action required by a vote of working interest owners shall constitute such a breach so long as Seller (and, as applicable, its Affiliates) has voted its interest in a manner that complies with the provisions of this Section 9.1.
9.2    Successor Operator.  Buyer acknowledges that it desires to succeed Seller (and, as applicable, its Affiliates) as operator of those Subject Properties or any portion thereof that Seller or its Affiliates currently operate.  Buyer further acknowledges and agrees that Seller does not covenant or warrant that Buyer shall become successor operator of such Subject Properties.  Seller agrees, however, that, as to the Subject Properties it or its Affiliates operate, it shall use its commercially reasonable efforts to support Buyer’s effort to become successor operator of such Subject Properties effective as of Closing (at Buyer’s sole cost and expense) and to designate, to the extent legally possible and permitted under any applicable joint operating agreement or other agreement, Buyer as successor operator of such Subject Properties effective as of the Closing.

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9.3    Governmental Bonds and Guarantees. 
(a)    Buyer acknowledges that none of the bonds, letters of credit and guarantees, if any, posted by Seller or its Affiliates with any Governmental Authority and/or relating to the Conveyed Interests, including those set forth in Schedule 9.3(a) (the “Governmental Bonds”), are transferable to Buyer.  On or before the Closing Date, Buyer shall obtain, or cause to be obtained in the name of Buyer, replacements for the Governmental Bonds set forth in Schedule 9.3(a) to the extent such replacements are necessary (i) for Buyer’s ownership of the Conveyed Interests, and (ii) to permit the cancellation of the Governmental Bonds posted by Seller and/or any Affiliate of Seller with respect to the Conveyed Interests.  In addition, at or prior to Closing, Buyer shall deliver to Seller evidence of the posting of bonds or other security with all applicable Governmental Authorities meeting the requirements of such Governmental Authorities to own and, if applicable, operate the Conveyed Interests.
(b)    Buyer shall cooperate with Seller in order to cause Seller and its Affiliates to be released, as of the Closing Date, from all guarantees, performance bonds, letters of credit, escrow accounts and other forms of financial assurance previously put in place by Seller with Third Parties that are not Governmental Authorities in connection with its ownership and operation of the Conveyed Interests, in each case, that are set forth in Schedule 9.3(b) (the “Guarantees”).  Without limiting the foregoing, if required by a counterparty to any Guarantee, Buyer shall, and, if applicable, shall cause its Affiliates to, provide, effective as of the Closing Date or such later date as may be reasonably required by such counterparty, substitute guarantee or similar arrangements for all periods of time following Closing and covered by the Guarantees, which guarantee or similar arrangements shall (i) constitute a type of security, and (ii) be provided by a party whose creditworthiness is, in each case, equivalent to or better than that required by the counterparty to such Guarantee.
(c)    In the event that any counterparty to any such Guarantee does not release Seller or any of its Affiliates or in the event that any Governmental Authority does not permit the cancellation of any Governmental Bond (to the extent set forth in Schedule 9.3(a)) posted by Seller and/or any Affiliate of Seller with respect to the Conveyed Interests, then, from and after Closing, Buyer shall indemnify Seller or any Affiliate of Seller, as applicable, against all amounts incurred by Seller or any Affiliate of Seller, as applicable, under such Guarantee or such Governmental Bond (and all costs incurred in connection with such Guarantee or such Governmental Bond) if applicable to the Conveyed Interests acquired by Buyer.  Notwithstanding anything to the contrary contained in this Agreement, any cash placed in escrow by Seller or any Affiliate of Seller pursuant to the Guarantees must be returned to Seller as soon as practicable and shall be deemed an Excluded Asset and Other Matter for all purposes hereunder.
9.4    Record Retention.  Buyer shall and shall cause its successors and assigns to, for a period of two years (or such longer period as required by applicable Law) following Closing, (a) retain the Records, (b) upon reasonable advance notice, provide Seller, its Affiliates and its and their respective officers, employees and representatives with reasonable access to the Records during normal business hours for review and copying at Seller’s expense, and (c) provide Seller, its Affiliates and its and their respective officers, employees and representatives with access, during 

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normal business hours, to materials in Buyer’s or its Affiliates’ possession that have been received from Third Parties after Closing relating to any indemnity claim made under Section 13.2 for review and copying at Seller’s expense, provided that (i) Buyer will not be required to disclose any materials subject to the attorney-client privilege, the attorney work-product doctrine, confidentiality restrictions, or any other applicable immunity from disclosure, (ii) Buyer’s provision to Seller, its Affiliates and their respective representatives of access to materials under this Section 9.4 shall not constitute an admission that any such materials are relevant to any given indemnity claim, (iii) (A) Buyer’s inadvertent provision to Seller, its Affiliates and their respective representatives of access to confidential materials and/or materials subject to the attorney-client privilege or attorney work-product doctrine shall not constitute a waiver of the applicable privilege or protection and (B) upon discovery of the inadvertent disclosure, Buyer shall retain the right to assert all applicable privileges and protections and Seller, its Affiliates and their respective representatives shall be prohibited from using the inadvertently disclosed documents for any purpose, and (iv) all Records and materials provided under this Section 9.4 shall be treated by Seller, its Affiliates and their respective representatives as confidential and shall not be disclosed or provided to any Third-Party without the express written consent of Buyer.  At the end of such two-year period, Buyer shall provide Seller a reasonable opportunity to copy any or all of such Records at Seller’s expense.
9.5    Knowledge of Breach.  Buyer will notify Seller, and Seller will notify Buyer, promptly and in reasonable detail promptly after such Party or any Affiliate of such Party, obtains Knowledge that any representation, warranty, covenant, or other agreement of the other Party contained in this Agreement is, becomes, or will be untrue, or has been or may be breached, as applicable, in any material respect on or before the Closing Date.  Notwithstanding the foregoing, (a) a Party’s breach of this Section 9.5 will under no circumstances be deemed a material breach of this Agreement by such Party or constitute a failure of any condition in Article X or Article XI and (b) this Section 9.5 shall not be deemed or constitute a waiver by a Party of (or give rise to any defense on the part of the other Party to) any rights or remedies of such Party contained in this Agreement in respect of any breach hereof by the other Party.  No breach by a Party of any representation, warranty, covenant, agreement or condition of this Agreement shall be deemed to be a breach of this Agreement for any purpose under this Agreement if the other Party had Knowledge of such breach prior to the Execution Date.  
9.6    Amendment to Schedules.  Buyer agrees that, with respect to the representations and warranties of Seller contained in this Agreement, Seller shall have the continuing right until Closing to add, supplement or amend the Schedules to its representations and warranties with respect to any matter hereafter occurring which, if existing on the Execution Date or thereafter, would have been required to be set forth or described in such Schedules.  For all purposes of this Agreement, including for purposes of determining whether the conditions set forth in Article X have been fulfilled and whether Seller has breached its representations and warranties in Article VII, the Schedules to Seller’s representations and warranties contained in this Agreement shall be deemed to include only that information contained therein on the Execution Date and shall be deemed to exclude all information contained in any addition, supplement or amendment thereto. 
9.7    Employees.  From and after the Execution Date until the date that is 12 calendar months after the earlier to occur of (i) the Closing Date and (ii) the termination of this Agreement 

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pursuant to Section 14.1, each Party will not, and will cause its Affiliates not to, directly or indirectly, solicit (and will not cause any Third Party to solicit on its behalf) for employment (including by contracting through an independent contractor, consultant, or other Third Party) or employ (including as a consultant) any officer, employee, or field personnel of or under contract to the other Party or any Affiliate of the other Party without obtaining the prior written consent of Seller, if the first Party came into contact with such officer, employee or field personnel in connection with the transactions contemplated by this Agreement (any such officers, employees or field personnel, a “Subject Employee”); provided that the foregoing shall not prohibit any Party or its Affiliates from (A) hiring a Subject Employee who responds to a general solicitation to the public of general advertising or similar methods of solicitation by search firms not specifically directed at Subject Employees or (B) soliciting, recruiting or hiring any Subject Employee who has ceased to be employed or retained by the other Party or any of its Affiliates for at least six months.  
9.8    Suspense Funds.  Notwithstanding anything to the contrary herein, but without prejudice to Buyer’s rights under Article XIII, Buyer shall, from and after the termination or expiration of the Transition Services Agreement (or, if the Transition Services Agreement is not executed at Closing, 60 days after the Closing Date (the “Suspense Transfer Date”)) assume and fulfill, perform, pay and discharge (or cause to be fulfilled, performed, paid and discharged) all obligations and Liabilities arising from, based upon, related to or associated with the payment of all proceeds from sales of Hydrocarbons relating to the Conveyed Interests and payable to owners of working interests, royalties, overriding royalties and other similar interests or Burdens (in each case) that are held by Seller in suspense.  Such payments held in suspense (a) will not be included in the calculation of the adjustments to the Purchase Price for the Preliminary Settlement Statement and (b) shall be included in the calculation of the adjustments to the Purchase Price for the Final Settlement Statement in accordance with Section 3.3(b)(ix).  From the Suspense Transfer Date until the first anniversary thereof, Seller may transfer additional suspense obligation discovered and/or identified following the Suspense Transfer Date, together with any suspense funds related thereto, to Buyer up to two times, and Seller shall have no further right or obligation to transfer suspense obligations and/or funds unless otherwise agreed by the Parties. 
9.9    Tag-Along Rights.  Buyer acknowledges that certain of the Conveyed Interests are subject to the rights of the Third Parties identified in Schedule 9.9 (the “Tag Parties”) to include certain of their respective interests in the Subject Properties (such interests, as set forth on Schedule 9.9, the “Tag Interests”) as part of the transactions contemplated hereunder (the “Tag Rights”). Accordingly, no later than 10 days after the Execution Date, Seller shall send to each Tag Party a notice of, and opportunity to participate as a seller in the transactions contemplated by this Agreement in accordance with the contractual provisions governing the Tag Rights and for the applicable allocated values set forth on Schedule 9.9 for the respective Tag Interests.  If a Tag Party notifies Seller in writing prior to Closing, and, in any event, before the expiration of its Tag Rights, that it is exercising its Tag Right with respect to its Tag Interests, this Agreement shall be amended to include that Tag Party as a seller hereto (each, a “Tag Seller Party,” and, together with Seller, the “Seller Parties”) with respect to those Tag Interests prior to Closing (which Tag Interests shall, upon such execution and delivery of such amendment, become part of the “Conveyed Interests”), on the following terms and conditions: 

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(a)    By its execution of this Agreement and for a period beginning on the date of such execution and ending 180 days after Closing, each Tag Seller Party irrevocably authorizes Seller to act on that Tag Seller Party’s behalf until 180 days after the Closing with respect to the following matters pertaining to this Agreement: (i) delivering and receiving all notices, statements, reports, and other information given by or addressed to one or more of the Seller Parties hereunder, (ii) making, on a joint basis, all elections that any Seller Party is entitled to make hereunder, and (iii) negotiating, compromising, and resolving any matters related to this Agreement, including Title Defects, Environmental Defects, Casualty Losses, Preferential Purchase Rights, Consents, the Preliminary Settlement Statement, and the Final Settlement Statement, and Seller hereby agrees to perform those matters, subject to the provisions of this Section 9.9 (collectively, the “Representative Services”); provided, however, that notwithstanding the foregoing, the Representative Services shall not include, and Seller shall not serve as a Tag Seller Party’s representative, or have any obligation to the Tag Seller Parties, with respect to (A) receiving or disbursing any amounts due to a Tag Seller Party under this Agreement, (B) any claims asserted by Buyer against a Tag Seller Party under Section 13.2, (C) any claims asserted by a Tag Seller Party against Buyer under Section 13.3, (D) any other indemnity matters, (E) the negotiation, compromise, or resolution of any matters related to any Claim Notices or other indemnity matters, or (F) any administrative functions or other actions (such as giving and receiving notices) related to any Claim Notices or other indemnity matters.  
(b)    Seller shall have no Liability to the Tag Seller Parties for, and each Tag Seller Party HEREBY RELEASES Seller from and against, all Liabilities relating to, arising out of, or resulting in any way from Seller’s performance and discharge, or failure to perform and discharge, the Representative Services, including any action or decision taken or made by Seller under, pursuant to, or in connection with this Agreement, the transactions contemplated hereby, or any related agreements in its role as the Tag Seller Parties’ representative, HOWSOEVER ARISING AND WHETHER OR NOT SUCH CLAIMS ARISE OUT OF THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE), STRICT LIABILITY, OR OTHER FAULT OR BREACH OF LEGAL DUTY OF ANY OF THE SELLER INDEMNIFIED PARTIES, except for any such Liabilities that may result from (and only to the extent it results from) Seller’s gross negligence or willful misconduct.  EACH TAG SELLER PARTY ACKNOWLEDGES AND AGREES THAT SELLER IS NOT ACTING IN ANY FIDUCIARY CAPACITY WHATSOEVER FOR OR ON BEHALF OF THAT TAG SELLER PARTY WITH RESPECT TO THIS AGREEMENT OR OTHERWISE, AND THAT SELLER’S AGREEMENT TO PERFORM THE MATTERS PROVIDED FOR IN THIS SECTION 9.9 FOR THE TAG SELLER PARTIES IS MADE AS AN ACCOMMODATION ONLY. 
(c)    Each Tag Seller Party, by the execution of this Agreement, expressly acknowledges and agrees that Buyer shall be entitled to rely on any and all actions and decisions taken or made by Seller under or pursuant to this Agreement that are within the scope of Seller’s authority under Section 9.9(a) without any liability to, or obligation to inquire of, such Tag Seller Party.  Any notice or communication given or received by, and any decision, action, failure to act within a designated period of time by, or instruction of, Seller that is within the scope of Seller’s authority under Section 9.9(a) shall constitute a notice or communication to or by all Seller Parties and shall be final, binding, and conclusive upon each Tag Seller Party.  SELLER WILL INDEMNIFY AND HOLD HARMLESS, AND EACH TAG SELLER PARTY RELEASES, EACH BUYER 

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INDEMNIFIED PARTY FROM AND AGAINST ANY AND ALL LIABILITIES IN FAVOR OF ANY SELLER INDEMNIFIED PARTY ARISING OUT OF, OR RESULTING IN ANY WAY FROM, THE PERFORMANCE AND DISCHARGE, OR THE FAILURE TO PERFORM OR DISCHARGE, BY SELLER OF THE REPRESENTATIVE SERVICES.  
(d)    If any Seller Party has not satisfied the conditions to Closing set forth in Article X (as such conditions relate to such Seller Party), Buyer will have the right, if so desired, to not close the transactions contemplated hereunder as to such Seller Party and to close the transactions contemplated hereunder as to the other Seller Parties; provided, that, (i) notwithstanding the foregoing, if the conditions to Closing set forth in Article X are satisfied as they relate to Seller, but have not been satisfied as to a Tag Seller Party, Buyer will still be required to close the transactions contemplated hereunder (subject to the other terms and conditions hereof) as to the Conveyed Interests of Seller and (ii) if the conditions to Closing set forth in Article X are not satisfied as they relate to Seller, but have been satisfied as to any or all of the Tag Seller Parties, Buyer will not be required to close any of the transactions contemplated hereunder (subject to the other terms and conditions hereof).
(e)    All thresholds, deductibles, caps, and similar limitations herein shall be reduced, and apply separately, for each Tag Seller Party, on a pro rata basis determined by dividing the relevant Tag Interest by the relevant Conveyed Interests.  Further, the benefit or burden of any adjustment to the Purchase Price, to the extent applicable to two or more of the Seller Parties, shall be allocated among those Seller Parties on the same pro rata basis referenced in the preceding sentence.  
(f)    Notwithstanding anything in this Agreement to the contrary, the Liabilities of the Seller Parties under this Agreement shall be shared severally, and not jointly, by each Seller Party.
The Parties’ failure to agree on the above-mentioned amendment will not constitute a failure of any condition in Article X and Article XI.
9.10    Transition Services Agreement.  Between the Execution Date and the Closing Date, the Parties will use commercially reasonably efforts to negotiate a form of transition services agreement (the “Transition Services Agreement”) to be executed at Closing by the Parties, establishing the terms under which Seller would provide certain transition services (at a minimum, operations, accounting, information technology and marketing services) in respect of the Conveyed Interests for a limited period of time following the Closing.   If the Parties do not reach an agreement regarding such a Transition Services Agreement, the Closing shall nonetheless occur (subject to the other terms of this Agreement) and, thereafter, for a period of 60 days following the Closing, Seller shall provide transition services pursuant to (and subject to the limitations set forth in) the term sheet set forth on Exhibit L in substantially the same manner as Seller or its Affiliates performed such services during the one-year period immediately prior to the Execution Date and Buyer agrees to be bound by the release and indemnification terms set forth therein with respect to such transition services.   

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9.11    Audits and Filings. 
(a)    Seller acknowledges that Buyer and its Affiliates may be required to include statements of revenues and direct operating expenses and other financial information relating to the Conveyed Interests for one or more years or interim periods ending on or prior to the Closing (collectively, the “Financial Statements”), and that such Financial Statements may be required to be audited or reviewed in accordance with GAAP and may need to comply with the requirements of the SEC for inclusion or incorporation by reference into one or more registration statements, reports or other documents (collectively, “SEC Documents”) required to be filed by Buyer or its Affiliates under the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules set forth in Regulation S-X, or other rules promulgated thereunder or in an offering memorandum relating to a private placement of securities exempt from registration under the Securities Act (“Offering Document”).  From and after the Execution Date, Seller shall, shall cause its Affiliates to, and shall use commercially reasonable efforts to cause its accountants and counsel to, cooperate with Buyer, its Affiliates and their respective agents, advisors and representatives in preparing and obtaining the Financial Statements to the extent that Seller or such other persons has such information available or can obtain such information using commercially reasonable efforts.  Further, from and after the Execution Date and following reasonable advance notice from Buyer to Seller, Seller shall, shall cause its Affiliates to, and shall use commercially reasonable efforts to cause its accountants and counsel to, make available during normal business hours to Buyer and its Affiliates and their agents, advisors and representatives reasonable access to any and all books, records, information and documents that are attributable to the Conveyed Interests in any of Seller’s or any of its Affiliates’ possession or control if reasonably required by Buyer or its Affiliates in connection with the creation and audit or review of the Financial Statements.  Buyer shall be responsible for, and obligated to promptly reimburse Seller for (in any event, not less than within ten (10) Business Days after receipt of demand in writing therefor), any and all reasonable costs and expenses (including third person or internal resources and personnel) incurred by Seller or its Affiliates to the extent associated with preparing and obtaining the Financial Statements solely pursuant to this Section 9.11 and otherwise complying with the provisions of this Section 9.11. 
(b)    To the extent requested by Buyer, Seller shall use its commercially reasonable efforts to obtain representation letters and similar documents (in each case, in form and substance customary for representation letters provided to external audit firms by management of a company whose financial statements are the subject of an audit or review used in filings of acquired company financial statements under the Exchange Act) from applicable personnel of Seller and its Affiliates as may be required in connection with the preparation and audit or review of the Financial Statements or delivery of a “comfort letter” for a securities offering by Buyer or its Affiliates and solely to the extent related to the Conveyed Interests.  To the extent requested by Buyer, Seller shall use its commercially reasonable efforts to provide and request that each independent audit firm that audits or reviews the Financial Statements provide consents necessary for the inclusion or incorporation by reference of the Financial Statements in any SEC Document or any Offering Document in which the Financial Statements are required to be included or incorporated.

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(c)    Subject and without prejudice to Buyer’s rights hereunder with respect to Seller’s representation and warranties in Article VII (to the limited extent expressly set forth therein), all of the information provided by Seller or its Affiliates pursuant to this Section 9.11 is given without any representation or warranty, express or implied, and no Seller Indemnified Party shall have any liability or responsibility with respect thereto.  Without prejudice to Buyer’s rights and remedies under Article XIII and, if applicable, Section 14.1(d) (and except for and excluding any of the following to the extent arising from the gross negligence or willful misconduct of any Seller Indemnified Party), Buyer, for itself and for each member of the Buyer Indemnified Parties, hereby releases, defends, indemnifies, remises and forever discharges each member of the Seller Indemnified Parties from any and all suits, legal or administrative proceedings, claims, demands, damages, losses, costs, Liabilities, interest or causes of action whatsoever, at law or in equity, known or unknown, suffered or incurred by any Seller Indemnified Party based on, relating to or arising out of the information provided by Seller or its Affiliates pursuant to this Section 9.11. 
(d)    For a period of three years following the Closing Date, Seller shall, and shall cause its respective Affiliates to, retain all books, records, information and documents in their or their Affiliates’ possession that are necessary to prepare and audit the Financial Statements, except to the extent originals or copies thereof are transferred to Buyer in connection with Closing. 
9.12    Buyer Financing.  
(a)    None of the Financing Sources will have any liability to any Seller Indemnified Party relating to or arising out of this Agreement, the Financing or otherwise in connection with the transactions contemplated by this Agreement, whether at law or in equity, in contract, in tort, or otherwise, and none of the Seller Indemnified Parties will have any rights or claims (and will not bring or support any claims) against any of the Financing Sources hereunder or thereunder in connection with the transactions contemplated, whether at law or in equity, in contract, in tort, or otherwise.  Each Party agrees that (i) it will not, and will not permit its controlled Affiliates to, bring or support any action, claim, cause of action or similar claims or assertions of any kind or description, whether at law or in equity, whether in contract or in tort or otherwise, against the Financing Sources in any way relating to this Agreement or any of the transactions contemplated by this Agreement, including with respect to any dispute arising out of or relating in any way to the Financing or the performance thereof, in any forum other the United States District Court for the Southern District of New York or any court of the State of New York sitting in the Borough of Manhattan in the City of New York and (ii) any such action, claim, cause of action or similar claims or assertions will be instituted exclusively in the courts of the United States District Court for the Southern District of New York or any court of the State of New York sitting in the Borough of Manhattan in the City of New York and each Party hereby irrevocably consents to the exclusive jurisdiction and venue in connection with any such action, claim, cause of action or similar claims or assertions.  EACH OF THE PARTIES HEREBY VOLUNTARILY AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY LITIGATION, ACTION OR OTHER PROCEEDING BROUGHT IN CONNECTION WITH ANY ACTION, CLAIM, CAUSE OF ACTION OR SIMILAR CLAIMS OR ASSERTIONS OF ANY KIND OR DESCRIPTION REFERRED TO IN THIS SECTION 9.12(a).  EACH OF THE PARTIES AGREES THAT, SECTION 15.14 NOTWITHSTANDING, THIS SECTION 9.12(A) SHALL BE INTERPRETED, AND ANY 

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ACTION RELATING TO THIS PROVISION, SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 
(b)    Prior to the Closing, Seller shall, and shall cause its Affiliates to, use their respective commercially reasonable efforts to provide or cause to be provided, to Buyer, in each case, at Buyer’s sole expense, all cooperation reasonably requested by Buyer that is necessary or customary in connection with any Financing contemplated by Buyer for purposes of the transactions contemplated by this Agreement.  None of Seller or its Affiliates shall be required to take any action pursuant to this Section 9.12(b) that would subject it to any Liability or to bear any cost or expense or to pay any commitment or other fee.  BUYER SHALL INDEMNIFY AND HOLD HARMLESS THE SELLER INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LIABILITIES SUFFERED OR INCURRED BY THEM IN CONNECTION WITH THE ARRANGEMENT OF SUCH FINANCING (INCLUDING ANY ACTION TAKEN AT BUYER’S REQUEST PURSUANT TO THIS SECTION 9.12(b)) AND ANY INFORMATION UTILIZED IN CONNECTION THEREWITH, EXCEPT TO THE EXTENT CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE SELLER INDEMNIFIED PARTIES.  Buyer shall be responsible for, and shall promptly reimburse Seller upon written request by Seller for, any and all reasonable costs and expenses incurred by Seller or its Affiliates in connection with the Financing or the cooperation provided at Buyer’s request pursuant to this Section 9.12(b).
 
ARTICLE X
BUYER’S CONDITIONS TO CLOSING
The obligations of Buyer to consummate the transactions provided for herein are subject, at the option of Buyer, to the fulfillment by Seller or waiver by Buyer, on or prior to Closing, of each of the following conditions precedent:
10.1    Representations.  The representations and warranties of Seller set forth in Article VII shall be true and correct (without regard to materiality or material adverse effect qualifiers) on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made or given on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date), except for those breaches, if any, of such representations and warranties that in the aggregate would not reasonably be expected to result in a total or combined (a) reduction of the value of the Conveyed Interests by, and (b) out-of-pocket payment made by Buyer of, more than $20,000,000 (provided that, (i) with respect to breaches by Seller of any Specified Representation, special, indirect, consequential, punitive, exemplary, remote or speculative damages or damages for lost profits of any kind shall not be included in making any determination of amounts under clause (a) and/or (b) above and (ii) with respect to all other Seller breaches of representations and warranties, with respect to each Conveyed Interest affected thereby, such amounts under clause (a) and/or (b) above will not exceed the Allocated Value thereof); provided, however, that for the avoidance of doubt, any matter that constitutes a Title Defect or Environmental Defect (other than an Environmental Defect that constitutes a breach of Section 7.15) hereunder (regardless whether Buyer asserts such matter as a Title Defect or Environmental Defect) shall be addressed exclusively under Article V, Article 

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VI, and, if applicable Section 14.1(e), and not be considered in determining whether this Section 10.1 is fulfilled. 
10.2    Performance.  Seller shall have performed or complied in all material respects with all obligations, agreements, and covenants contained in this Agreement as to which performance or compliance by Seller is required prior to or at the Closing Date.
10.3    No Legal Proceedings.  No material suit, action, litigation or other proceeding instituted by any Third Party shall be pending before any Governmental Authority seeking to restrain, prohibit, enjoin, or declare illegal, or seeking substantial damages in connection with, the transactions contemplated by this Agreement.
10.4    Title Defects, Environmental Defects and Casualty.  In each case subject to the Individual Title Defect Threshold, the Individual Environmental Threshold and the Aggregate Deductible, as applicable, the sum of (a) all Title Defect Amounts asserted by Buyer in good faith, plus (b) all Remediation Amounts for Environmental Defect Properties asserted by Buyer in good faith, plus (c) the amount of all Casualty Losses, shall be less than 25% of the Purchase Price. 
10.5    Closing Deliverables.  Seller shall have delivered (or be ready, willing and able to deliver at Closing) to Buyer the documents and other items required to be delivered by Seller under Section 12.3.

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ARTICLE XI
SELLER’S CONDITIONS TO CLOSING
The obligations of Seller to consummate the transactions provided for herein are subject, at the option of Seller, to the fulfillment by Buyer or waiver by Seller, on or prior to Closing, of each of the following conditions precedent:
11.1    Representations.  The representations and warranties of Buyer set forth in Article VIII (a) that are qualified by materiality qualifiers shall be true and correct in all respects (such qualifiers in their terms shall be applicable for purposes of this Section 11.1) and (b) that are not qualified by materiality qualifiers shall be true and correct in all material respects, in each case, on and as of the Closing Date, with the same force and effect as though such representations and warranties had been made or given on and as of the Closing Date (other than representations and warranties that refer to a specified date, which need only be true and correct on and as of such specified date). For the avoidance of doubt, any breach of the representation and warranty in Section 8.8 shall be deemed a material breach by Buyer. 
11.2    Performance.  Buyer shall have performed or complied in all material respects with all obligations, agreements, and covenants contained in this Agreement as to which performance or compliance by Buyer is required prior to or at the Closing Date.
11.3    No Legal Proceedings.  No material suit, action, litigation or other proceeding instituted by any Third Party shall be pending before any Governmental Authority seeking to restrain, prohibit, or declare illegal, or seeking substantial damages in connection with, the transactions contemplated by this Agreement.
11.4    Title Defects, Environmental Defects and Casualty.  In each case subject to the Individual Title Defect Threshold, the Individual Environmental Threshold and the Aggregate Deductible, as applicable, the sum of (a) all Title Defect Amounts asserted by Buyer in good faith, plus (b) all Remediation Amounts for Environmental Defect Properties asserted by Buyer in good faith, plus (c) the amount of all Casualty Losses, shall be less than 25% of the Purchase Price. 
11.5    Closing Deliverables.  Buyer shall have delivered (or be ready, willing and able to deliver at Closing) to Seller the documents and other items required to be delivered by Buyer under Section 12.3
ARTICLE XII
CLOSING
12.1    Date of Closing.  Subject to the conditions stated in this Agreement, the sale by Seller and the purchase by Buyer of the Conveyed Interests pursuant to this Agreement (the “Closing”) shall occur on September 29, 2017 or such other date as Buyer and Seller may agree upon in writing (the “Scheduled Closing Date”).  The date on which the Closing actually occurs shall be the “Closing Date”; provided, that, if the Closing occurs on September 29, 2017, the Closing Date (and the Closing) will be deemed to occur at 11:59 p.m., Central Time, on September 30, 2017.

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12.2    Place of Closing.  Closing shall be held at the offices of Seller at 333 W. Sheridan Ave, Oklahoma City, OK 73102‐5010, or such other location as Buyer and Seller may agree upon in writing.
12.3    Closing Obligations.  At Closing, the following documents shall be delivered and the following events shall occur, the execution of each document and the occurrence of each event being a condition precedent to the others and each being deemed to have occurred simultaneously with the others:
(a)    Seller and Buyer shall execute, acknowledge, and deliver the Assignment, in sufficient counterparts to facilitate recording in the applicable counties where the Conveyed Interests are located, covering all of the Conveyed Interests;
(b)    Seller and Buyer shall execute and deliver assignments, on appropriate forms, of federal Leases, state Leases and Indian Leases comprising portions of the Conveyed Interests, if any, in sufficient counterparts to facilitate filing with the applicable Governmental Authority; 
(c)    Seller and Buyer shall execute and deliver the Preliminary Settlement Statement;
(d)    Buyer shall deliver to Seller, to the account designated in the Preliminary Settlement Statement, by direct bank or wire transfer in same day funds, the Closing Payment;
(e)    Buyer shall deliver, by direct bank or wire transfer in same day funds, to the Escrow Agent the Defect Escrow Amount pursuant to Section 3.6(c); 
(f)    Buyer and Seller shall execute and deliver to the Escrow Agent a joint instruction letter instructing the Escrow Agent to distribute the Deposit at Closing to the account of Seller designated in the Preliminary Settlement Statement;
(g)    Seller (or Seller shall cause Devon Gas Services, L.P.) and Buyer shall execute, acknowledge and deliver the Surface Deed, in sufficient counterparts to facilitate recording in the applicable counties;
(h)    subject to Section 9.10, Seller and Buyer shall execute and deliver the Transition Services Agreement; 
(i)    Seller shall execute and deliver, on forms supplied by Buyer and reasonably acceptable to Seller, transfer orders or letters in lieu thereof directing all purchasers of production to make payment to Buyer of proceeds attributable to production from the Conveyed Interests from and after the Effective Time, for delivery by Buyer to the purchasers of production;
(j)    Seller shall deliver an executed certificate of non‐foreign status that meets the requirements set forth in Treasury Regulation § 1.1445‐2(b)(2);

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(k)    to the extent required under any Law or Governmental Authority, Seller and Buyer shall deliver federal and state change of operator forms designating Buyer as the operator of the Subject Properties currently operated by Seller;
(l)    an authorized officer of Seller shall execute and deliver a certificate, dated as of Closing Date, certifying that the conditions set forth in Section 10.1 and Section 10.2 have been fulfilled and, if applicable, any exceptions to such conditions that have been waived by Buyer;
(m)    an authorized officer of Buyer shall execute and deliver a certificate, dated as of Closing, certifying that the conditions set forth in Section 11.1 and Section 11.2 have been fulfilled and, if applicable, any exceptions to such conditions that have been waived by Seller;
(n)    Buyer shall deliver any instruments and documents required by Section 9.3;
(o)    Seller shall deliver a recordable release in a form reasonably acceptable to Buyer of any trust, mortgages, financing statements, fixture filings and security agreements, in each case, securing indebtedness for borrowed money made by Seller or its Affiliates affecting the Conveyed Interests; 
(p)    Seller and Buyer shall execute and deliver the License Agreement; and 
(q)    Seller and Buyer shall execute and deliver any other agreements, instruments and documents that are required by other terms of this Agreement to be executed and/or delivered at Closing or reasonably necessary to effectuate the transactions contemplated by this Agreement.
12.4    Records.  In addition to the obligations set forth under Section 12.3 above, but notwithstanding anything herein to the contrary, no later than 10 Business Days following the Closing Date, Seller shall deliver to Buyer (at its corporate office) the Records in their current form and format as maintained by Seller as of the Effective Time; provided that Seller may retain written or electronic copies of the Records; provided, further, that Seller shall not be required to conduct processing or conversion with respect to the delivery of the Records pursuant to this Section 12.4. 
 
ARTICLE XIII
ASSUMPTION; INDEMNIFICATION; SURVIVAL
13.1    Assumption by Buyer; Specified Obligations. 
(a)    Without limiting Buyer’s rights to indemnity under this Article XIII and, if applicable, Buyer’s rights under any Title Indemnity Agreement or Environmental Indemnity Agreement, from and after Closing, Buyer assumes and hereby agrees to fulfill, perform, pay and discharge (or cause to be fulfilled, performed, paid and discharged) all obligations and Liabilities, known or unknown, arising from, based upon, related to or associated with (x) the Conveyed Interests (including the use or ownership thereof), or (y) to the extent Buyer succeeds Seller as operator, operation of the Subject Properties, in each case, regardless of whether such obligations or Liabilities arose prior to, at or after the Effective Time, including obligations to %3) furnish makeup gas and/or settle Imbalances according to the terms of applicable gas sales, processing, gathering or 

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transportation Contracts, %3) pay royalties, overriding royalties, other Burdens, and other interest owners’ (including working interests owners and mineral interest owners) revenues or proceeds attributable to sales of Hydrocarbons, including those funds held in suspense (including the amount paid by Seller to Buyer pursuant to Section 9.8 or by which the Purchase Price is adjusted pursuant to Section 3.3(b)(ix)), (iii) pay the applicable Governmental Authority any amounts subject to escheat obligations pursuant to applicable Law, (iv) Decommission the Conveyed Interests (the “Decommissioning Obligations”), including those Wells and/or Other Wells that are required by Law, any Governmental Authority, or agreements to be plugged and abandoned as of the Effective Time, (v) subject to Article VI, clean up, restore and/or Remediate the premises covered by or related to the Conveyed Interests in accordance with applicable Leases, Rights-of-Way, Contracts and Laws, (vi) perform all obligations applicable to or imposed on the lessee, owner, or operator under the Leases and the Applicable Contracts, or as required by any Law, (vii) subject to Article VI, all Environmental Conditions, Environmental Defects and Buyer’s Environmental Liabilities, (viii) collect any accounts receivable transferred hereunder to Buyer for post-Effective Time periods and (ix) perform all obligations under the Applicable Contracts (all of said obligations and Liabilities, subject to the exclusion below, herein being referred to as the “Assumed Obligations”); provided that Buyer does not assume any obligations or Liabilities of Seller to the extent that they are Specified Obligations for which Seller is obligated to indemnify Buyer under Section 13.2(c), as may be limited by Sections 13.4 and 13.8, or attributable to or that arise out of the Excluded Assets and Other Matters. 
(b)    Upon Closing, with respect to specific claims for the following for which a valid Claim Notice is given within the applicable survival period as set forth in Section 13.8, Seller shall retain and hereby agrees to fulfill, perform, pay and discharge (or cause to be fulfilled, performed, paid and discharged) all obligations and Liabilities, known or unknown, arising from, based upon, related to or associated with (i) Seller’s failure to properly, timely or legally pay, in accordance with the terms of any Lease, Applicable Contract, or applicable Laws, Burdens with respect to the Conveyed Interests (or with respect to the Subject Properties operated by Seller, revenues of other working interest owners in the Subject Properties) due (or payable) by Seller and attributable to Seller’s ownership or operation of the Conveyed Interests prior to the Closing Date (other than amounts held in suspense attributable to the amount paid by Seller to Buyer pursuant to Section 9.8 or for which the Purchase Price is adjusted pursuant to Section 3.3(b)(ix) or Burdens paid by any Third Party operator); (ii) subject to Section 4.1, personal injury, death or Third Party surface property damage claims (other than Third Party property damage claims or Liabilities related to or arising from an Environmental Condition, Environmental Defect or other environmental matter) attributable to the ownership or operation of the Subject Properties (net to Seller’s interest) prior to the Effective Time; (iii) Taxes for which Seller is responsible pursuant to Section 15.2 (taking into account, and without duplication of, (A) such Asset Taxes effectively borne by Seller as a result of the adjustments to the Purchase Price made pursuant to Section 3.3 and (B) payments made from one Party to the other in respect of Assets Taxes pursuant to Section 15.2(c)); (iv) waste transportation or disposal by Seller off the premises of the Subject Properties in connection with Seller’s operation of the Subject Properties (net to Seller’s interest) occurring prior to the Closing Date; (v) the gross negligence or willful misconduct of Seller or its Affiliates under an Applicable Contract with respect to its or their operation of the Subject Properties (net to Seller’s interest) prior to the Closing Date, but excluding all Liabilities related to or arising from Environmental Conditions, 

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Environmental Defects or other environmental matters; (vi) Operating Expenses attributable to periods prior to the Effective Time (excluding, for the avoidance of doubt, all Operating Expenses that are Liabilities related to or arising from an Environmental Condition, Environmental Defect or other environmental matter); (vii) the matters disclosed on Schedule 7.6; or (viii) written claims by Third Parties for any penalty or liquidated damages amount owing under the express terms of a Lease as a result of Seller’s failure, after the primary term of such Lease, to file of record in the applicable county a partial release of such Lease with respect to certain depths covered by such Lease when executed within the time period specified in such Lease (all of said Liabilities herein being referred to as the “Specified Obligations”).
13.2    Indemnities of Seller.  Effective as of Closing, subject to the limitations set forth in Section 13.4 and Section 13.8, Seller shall be responsible for, shall pay on a current basis, and hereby defends, indemnifies, holds harmless and forever releases Buyer and its Affiliates, and all of its and their respective stockholders, partners, members, directors, officers, managers, employees, attorneys, consultants, agents and representatives (collectively, the “Buyer Indemnified Parties”) from and against any and all Liabilities, whether or not relating to Third Party Claims or incurred in the investigation or defense of any of the same or in asserting, preserving or enforcing any of their respective rights hereunder, arising from, based upon, related to or associated with:
(a)    any breach by Seller of its representations or warranties contained in Article VII or the certificate delivered by Seller pursuant to Section 12.3(l);
(b)    any breach by Seller of its covenants and agreements (including covenants to be performed after Closing pursuant to the express terms hereof) under this Agreement or the certificate delivered by Seller pursuant to Section 12.3(l); 
(c)    the Specified Obligations; or
(d)    (i) the Excluded Assets and Other Matters described in clause (z) of the definition thereof to the extent such Conveyed Interests were conveyed hereunder to Buyer at Closing, but subsequently became Excluded Assets and Other Matters pursuant to Section 6.1(c), including any Liabilities with respect to the period of Buyer’s ownership thereof, and (ii) any Liability resulting from Seller’s actual violation of an Environmental Law with respect to any Conveyed Interest in connection with the letter identified on Schedule 7.15 and the investigation by the United States Environmental Protection Agency in connection therewith.
13.3    Indemnities of Buyer.  Effective as of Closing, subject to the limitations set forth in Section 13.8, Buyer shall be responsible for, shall pay on a current basis, and hereby defends, indemnifies, holds harmless and forever releases Seller and its Affiliates, and all of their respective stockholders, partners, members, directors, officers, managers, employees, attorneys, consultants, agents and representatives (collectively, the “Seller Indemnified Parties”) from and against any and all Liabilities, whether or not relating to Third Party Claims or incurred in the investigation or defense of any of the same or in asserting, preserving or enforcing any of their respective rights hereunder arising from, based upon, related to or associated with:

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(a)    any breach by Buyer of its representations or warranties contained in Article VIII or the certificate delivered by Buyer pursuant to Section 12.3(m);
(b)    any breach by Buyer of its covenants and agreements (including covenants to performed after Closing pursuant to the express terms hereof) under this Agreement or the certificate delivered by Buyer pursuant to Section 12.3(m); or
(c)    the Assumed Obligations; 
provided that Buyer’s indemnification obligations do not include the matters for which Seller is required to indemnify Buyer pursuant to Section 13.2.  
13.4    Limitation on Liability. 
(a)    Seller shall not have any liability for any indemnification under Section 13.2(a) (i) for any individual Liability unless the amount with respect to such Liability exceeds $50,000, and (ii) until and unless the aggregate amount of all Liabilities exceeding the threshold described in clause (i) above and for which Claim Notices are delivered by Buyer exceeds the Indemnity Deductible, and then only to the extent such Liabilities exceed the Indemnity Deductible; provided that any breach of a Specified Representation shall not be limited by this Section 13.4(a). 
(b)    Notwithstanding anything in this Agreement to the contrary: 
(i)    Seller shall not be required to indemnify Buyer (A) under Section 13.2(a) (other than in respect of breaches of a Specified Representation, to which this clause (A) will not apply), for aggregate Liabilities in excess of an amount equal to 20% of the Purchase Price and (B) under this Agreement, for aggregate Liabilities in excess of an amount equal to 100% of the Purchase Price.
(ii)    For purposes of determining the amount of any Liabilities that are the subject matter of a claim for indemnification under Section 13.2(a), each representation and warranty herein that is qualified by materiality or a specified dollar amount will be read without regard and without giving effect to such qualifier.  
(iii)    In no event shall Seller be responsible or liable for any breach of a representation, warranty, or covenant contained in this Agreement or any Transaction Document, to the extent such breach resulted from Buyer’s or any of its Affiliates’ ownership or operation of any of the Subject Properties, and all Liabilities relating to such matters (including to the extent relating to the Conveyed Interests) shall be deemed Assumed Obligations. 
(iv)      No event occurring prior to, or any condition in existence as of, the Execution Date that constitutes an Environmental Defect, Environmental Condition, or other environmental matter, or any failure by Seller to act with respect to that Environmental Defect, Environmental Condition, or other environmental matter, shall constitute a breach of Section 9.1.  

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13.5    Express Negligence.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, THE DEFENSE, INDEMNIFICATION, HOLD HARMLESS, RELEASE, ASSUMED OBLIGATIONS AND LIMITATION OF LIABILITY PROVISIONS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE WHETHER OR NOT THE LIABILITIES, LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE OR RESULTED SOLELY OR IN PART FROM THE GROSS, SOLE, ACTIVE, PASSIVE, CONCURRENT OR COMPARATIVE NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OR VIOLATION OF LAW OF OR BY ANY INDEMNIFIED PARTY.  BUYER AND SELLER ACKNOWLEDGE THAT THIS STATEMENT COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS “CONSPICUOUS.”
13.6    Exclusive Remedy.  Notwithstanding anything to the contrary contained in this Agreement, from and after Closing, Sections 4.1(c), 5.2(b), 9.3, 13.2 and 13.3, the Special Warranty set forth in the Assignment, the Transition Services Agreement (if applicable), the covenants that are to be performed after Closing by the express terms thereof, the Transaction Documents, and any Title Indemnity Agreement or Environmental Indemnity Agreement entered into by the Parties contain the Parties’ exclusive remedies against each other with respect to the transactions contemplated hereby, including breaches of the representations, warranties, covenants and agreements of the Parties contained in this Agreement, the Assignment, or in any document or certificate delivered pursuant to this Agreement.  Except as specified in Section 13.2 or 13.3, any Title Indemnity Agreement or Environmental Indemnity Agreement entered into by the Parties, the Transaction Documents, and the Special Warranty in the Assignment, effective as of Closing, Buyer, on its own behalf and on behalf of the Buyer Indemnified Parties, and Seller, on its own behalf and on behalf of the Seller Indemnified Parties, hereby releases, remises and forever discharges (for purposes of this Section 13.6, the “releasing Party Group”) the other Party and its Affiliates and all of such Persons’ equity holders, partners, members, directors, officers, employees, agents, advisors, and representatives (for purposes of this Section 13.6, the “released Party Group”) from any and all suits, legal or administrative proceedings, claims, demands, damages, losses, costs, Liabilities, interest or causes of action whatsoever, at law or in equity, known or unknown, which the releasing Party Group might now or subsequently have against the released Party Group, based on, relating to or arising out of this Agreement, the transactions contemplated by this Agreement, the ownership, use or operation of any of the Conveyed Interests or the Subject Properties prior to Closing or the condition, quality, status or nature of any of the Conveyed Interests or the Subject Properties prior to Closing, including rights to contribution under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, and any similar Environmental Law, breaches of statutory or implied warranties, nuisance or other tort actions, rights to punitive damages, common law rights of contribution and rights under insurance maintained by a Party or any of its Affiliates (except as provided in Section 5.4 or insurance of Seller or its Affiliates which was chargeable as an Operating Expense after the Effective Time).  NOTWITHSTANDING THE FOREGOING, THE RIGHTS EXISTING IMMEDIATELY PRIOR TO THE EXECUTION DATE (WHETHER EXISTING BY OPERATION OF LAW, CONTRACT OR OTHERWISE), OF EACH PARTY AS A NON-OPERATOR IN ANY SUBJECT PROPERTIES OPERATED BY THE OTHER PARTY, OR AS ANY OPERATOR OF ANY SUBJECT PROPERTIES IN WHICH THE OTHER PARTY IS A NON-OPERATOR, SHALL NOT BE PREJUDICED OR OTHERWISE AFFECTED BY THE PROVISIONS OF THIS AGREEMENT (OTHER THAN (a) TITLE DEFECTS OR OTHER 

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TITLE MATTERS, WHICH FOLLOWING CLOSING SHALL BE EXCLUSIVELY ADDRESSED AS SET FORTH IN SECTION 5.1 AND (b) ENVIRONMENTAL DEFECTS, ENVIRONMENTAL CONDITIONS, OR OTHER ENVIRONMENTAL MATTERS, WHICH FOLLOWING CLOSING SHALL BE EXCLUSIVELY ADDRESSED HEREIN IN ARTICLE VI, AND, AS APPLICABLE, SECTIONS 13.2(a) (WITH RESPECT TO A BREACH OF SECTION 7.15), 13.2(b) (WITH RESPECT TO A BREACH OF SECTION 9.1), 13.2(d) AND 13.3).  
13.7    Indemnification Procedures.  All claims for indemnification hereunder, including Sections 4.1(c), 5.3(c), 9.3, 9.9, 9.10 (if a Transition Services Agreement is not executed at Closing), 13.2 and 13.3 (for purposes of this Section 13.7, the “indemnification provisions”) shall be asserted and resolved as follows: 
(a)    For purposes of the indemnification provisions, the term “Indemnifying Party” when used in connection with particular Liabilities shall mean the Party or Parties having an obligation to indemnify another Party and/or other Person(s) with respect to such Liabilities pursuant to the indemnification provisions, and the term “Indemnified Party” when used in connection with particular Liabilities shall mean the Party and/or other Person(s) having the right to be indemnified with respect to such Liabilities by the Indemnifying Party pursuant to the indemnification provisions.
(b)    To make a claim for indemnification under the indemnification provisions, an Indemnified Party shall notify the Indemnifying Party in writing of its claim under this Section 13.7, including the specific details of and specific basis under this Agreement for its claim as then known by the Indemnified Party  (the “Claim Notice”).  In the event that the claim for indemnification is based upon a claim by a Third Party against the Indemnified Party (a “Third Party Claim”), the Indemnified Party shall provide its Claim Notice promptly after the Indemnified Party has actual knowledge of the Third Party Claim and shall enclose a copy of all papers (if any) served with respect to the Third Party Claim; provided that the failure of any Indemnified Party to give notice of a Third Party Claim as provided in this Section 13.7(b) shall not relieve the Indemnifying Party of its obligations under the indemnification provisions (as applicable) except to the extent such failure results in insufficient time being available to permit the Indemnifying Party to effectively defend against the Third Party Claim or otherwise materially prejudices the Indemnifying Party’s ability to defend against the Third Party Claim.  In the event that the claim for indemnification is based upon an inaccuracy or breach of a representation, warranty, covenant or agreement, the Claim Notice shall specify the representation, warranty, covenant or agreement that was inaccurate or breached.
(c)    In the case of a claim for indemnification based upon a Third Party Claim, the Indemnifying Party shall have 30 days from its receipt of the Claim Notice to notify the Indemnified Party whether it admits or denies its obligation to defend and indemnify the Indemnified Party against such Third Party Claim at the sole cost and expense of the Indemnifying Party.  The Indemnified Party is authorized, prior to and during such 30‐day period, at the expense of the Indemnifying Party, to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests or those of the Indemnifying Party and that is not prejudicial to the Indemnifying Party.

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(d)    If the Indemnifying Party admits its obligation to defend and indemnify the Indemnified Party against a Third Party Claim, it shall have the right and obligation to diligently defend and indemnify, at its sole cost and expense, the Indemnified Party against such Third Party Claim.  The Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement thereof.  If requested by the Indemnifying Party, the Indemnified Party agrees to cooperate in contesting any Third Party Claim which the Indemnifying Party elects to contest.  The Indemnified Party may participate in, but not control, with its own counsel and at its own expense, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this Section 13.7(d).  An Indemnifying Party shall not, without the written consent of the Indemnified Party, (i) settle any Third Party Claim or consent to the entry of any judgment with respect thereto which does not include a full and unconditional written release of the Indemnified Party from all Liability in respect of such Third Party Claim without any admission or finding of fault or liability on the part of the Indemnified Party or (ii) settle any Third Party Claim or consent to the entry of any judgment with respect thereto in any manner that may materially and adversely affect the Indemnified Party (other than as a result of money damages fully paid by the Indemnifying Party).
(e)    If the Indemnifying Party does not admit its obligation or admits its obligation to defend and indemnify the Indemnified Party against a Third Party Claim, but fails to diligently prosecute, indemnify against or settle such Third Party Claim, then the Indemnified Party shall have the right to defend against the Third Party Claim at the sole cost and expense of the Indemnifying Party, with counsel of the Indemnified Party’s choosing. The Indemnifying Party may participate in, but not control, with its own counsel and at its own expense, any defense or settlement of any Third Party Claim controlled by the Indemnified Party pursuant to this Section 13.7(e). If the Indemnifying Party has not yet admitted its obligation to defend and indemnify the Indemnified Party against a Third Party Claim, the Indemnified Party shall send written notice to the Indemnifying Party of any proposed settlement and the Indemnifying Party shall have the option for 10 days following receipt of such notice to %3) admit in writing its obligation to indemnify the Indemnified Party from and against the liability and consent to such settlement, %3) if liability is so admitted, reject, in its reasonable judgment, the proposed settlement, or %3) deny liability.  Any failure by the Indemnifying Party to respond to such notice shall be deemed to be an election under subsection (iii) above.
(f)    In the case of a claim for indemnification not based upon a Third Party Claim, the Indemnifying Party shall have 30 days from its receipt of the Claim Notice to (i) cure the Liabilities complained of, (ii) admit its liability for such Liability or (iii) dispute the claim for such Liabilities.  If the Indemnifying Party does not notify the Indemnified Party within such 30‐day period that it has cured the Liabilities or that it disputes the claim for such Liabilities, the Indemnifying Party shall be deemed to dispute the claim for such Liabilities.
(g)    The indemnification provisions in this Section 13.7 will apply mutatis mutandis to any indemnity obligations hereunder of the Parties that are not referenced in Section 13.7(a).

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13.8    Survival. 
(a)    Except for the Specified Representations, (i) the representations and warranties of Seller in Article VII, (ii) the covenants and agreements of the Parties in Section 9.1 and Section 12.4, and (iii) any other covenants and agreements of the Parties that are to be performed on or before the Closing shall survive the Closing and in each case terminate on the date that is 12 calendar months following the Closing Date.  The Specified Representations and the covenants set forth in Section 15.2 shall survive Closing until the expiration of 30 days after the applicable statute of limitations.  The Special Warranty shall terminate as of the expiration of the Survival Period.  Subject to the foregoing and as set forth in Section 13.8(b), the remainder of this Agreement shall survive Closing without time limit.  Representations, warranties, covenants and agreements shall be of no further force or effect after the date of their expiration, provided that there shall be no termination of any bona fide claim asserted pursuant to this Agreement with respect to such a representation, warranty, covenant or agreement prior to its expiration date.
(b)    The indemnities in Sections 13.2(a), 13.2(b), 13.3(a) and 13.3(b) shall terminate as of the expiration date of each respective representation, warranty, covenant or agreement that is subject to indemnification.  Seller’s indemnities set forth in Section 13.2(c) (i) with respect to Operating Expenses that constitute Specified Obligations under subsection (vi) of the Specified Obligations, shall terminate 24 calendar months after Closing and (ii) with respect to all other Specified Obligations, shall terminate on the earlier of the (A) the expiration of the applicable statute of limitations and (B) 48 calendar months after Closing. Seller’s indemnity set forth in Section 13.2(d)(ii) shall terminate on the earlier of the (1) the expiration of the applicable statute of limitations and (2) 48 calendar months after Closing.  Buyer’s indemnity set forth in Sections 4.1(c), 9.3, 9.10 (if the Transition Services Agreement is not executed at Closing), and 13.3(c), and Seller’s indemnity set forth in Section 13.2(d)(i), shall survive the Closing without time limit.  Notwithstanding the foregoing, there shall be no termination of any bona fide claim asserted pursuant to the indemnities in Sections 13.2(a) through 13.2(c), Section 13.2(d)(ii) or Sections 13.3(a) through 13.3(b) prior to the date of termination for such indemnity.  
13.9    Non‐Compensatory Damages.  None of the Buyer Indemnified Parties nor Seller Indemnified Parties shall be entitled to recover from Seller or Buyer, or their respective Affiliates, any special, indirect, consequential, punitive, exemplary, remote or speculative damages or damages for lost profits of any kind arising under or in connection with this Agreement or the transactions contemplated hereby, except to the extent any such Party suffers such damages to a Third Party, which damages (including costs of defense and reasonable attorneys’ fees incurred in connection with defending against such damages) shall not be excluded by this provision as to recovery hereunder.  Subject to the preceding sentence, Buyer, on behalf of each of the Buyer Indemnified Parties, and Seller, on behalf of each of the Seller Indemnified Parties, waive any right to recover special, indirect, consequential, punitive, exemplary, remote or speculative, or damages for lost profits of any kind, arising in connection with or with respect to this Agreement or the transactions contemplated hereby.
13.10    Waiver of Right to Rescission.  Seller and Buyer acknowledge that, following Closing, the payment of money or specific performance (with respect the performance of covenants 

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or agreements herein following Closing), in each case, as may be limited by the terms of this Agreement, shall be adequate compensation for breach of any representation, warranty, covenant or agreement contained herein or for any other claim arising in connection with or with respect to the transactions contemplated by this Agreement.  As the payment of money or specific performance (with respect the performance of covenants or agreements herein following Closing) shall be adequate compensation, following Closing, Buyer and Seller waive any right to rescind this Agreement or any of the transactions contemplated hereby.
13.11    Insurance.  The amount of any Liabilities for which any of the Seller Indemnified Parties or the Buyer Indemnified Parties, as the case may be, is entitled to indemnification under this Agreement or in connection with or with respect to the transactions contemplated by this Agreement (for purposes of this Section 13.11, the “indemnified party”) shall be reduced by any corresponding insurance proceeds from insurance policies carried by the indemnified party that are realized by the indemnified party. 
13.12    Disclaimer of Application of Anti-Indemnity Statutes.  THE PARTIES ACKNOWLEDGE AND AGREE THAT THE PROVISIONS OF ANY ANTI-INDEMNITY STATUTE RELATING TO OILFIELD SERVICES AND ASSOCIATED ACTIVITIES SHALL NOT BE APPLICABLE TO THIS AGREEMENT AND/OR THE TRANSACTIONS CONTEMPLATED HEREBY.

ARTICLE XIV
TERMINATION, DEFAULT AND REMEDIES
14.1    Right of Termination.  This Agreement and the transactions contemplated herein may be terminated at any time prior to Closing by delivery of written notice to the other Party:
(a)    by the mutual prior written consent of Seller and Buyer;
(b)    by either Seller or Buyer if Closing has not occurred on or before December 31, 2017 (or such later date as agreed to in writing by Seller and Buyer);
(c)    by Seller, at Seller’s option, if any of the conditions set forth in Article XI have not been (or cannot be) satisfied on or before the Scheduled Closing Date and, following written notice thereof from Seller to Buyer specifying the reason such condition is (or will be) unsatisfied (including any breach by Buyer of this Agreement), such condition remains unsatisfied for a period of 10 Business Days after Buyer’s receipt of written notice thereof from Seller;
(d)    by Buyer, at Buyer’s option, if any of the conditions set forth in Article X have not been (or cannot be) satisfied on or before the Scheduled Closing Date and, following written notice thereof from Buyer to Seller specifying the reason such condition is (or will be) unsatisfied (including any breach by Seller of this Agreement), such condition remains unsatisfied for a period of 10 Business Days after Seller’s receipt of written notice thereof from Buyer; 

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(e)    by Buyer if the condition set forth in Section 10.4 is not satisfied on or before the Scheduled Closing Date or by Seller if the condition set forth in Section 11.4 is not satisfied on the Scheduled Closing Date; or
(f)    by Seller if Buyer fails to pay the Deposit in accordance with Section 3.2; 
provided, however, that (i) neither Party shall be entitled to terminate this Agreement pursuant to Sections 14.1(b) through 14.1(e) above if such Party or its Affiliates are, at such time, in material breach of any provision of this Agreement and, (ii) notwithstanding anything to the contrary, the Parties’ failure to agree on the amendment referenced in Section 9.9 and/or the Transition Services Agreement during the Interim Period pursuant to Section 9.10 will not be deemed a material breach of this Agreement or constitute a failure of any condition in Article X or Article XI.  For the avoidance of doubt, any breach of Section 8.8 shall be deemed a material breach of this Agreement by Buyer.
14.2    Effect of Termination. 
(a)    If the obligation to close the transactions contemplated by this Agreement is terminated pursuant to any provision of Section 14.1 hereof, then, except for the provisions of Article I, Sections 4.1(c) through 4.1(g), 4.2, 4.3, 5.3(c) (as to the indemnity therein), 6.1(b) (as to the indemnity therein), 9.7, 9.9(b), 9.9(c), 9.11(c), 9.12(a), 13.9, this Section 14.2, Section 14.3, Article XV (other than Sections 15.2(b) through (e), 15.7, 15.8, 15.16, and 15.18) and such of the defined terms in Appendix I to give context to the surviving provisions, this Agreement shall forthwith become void and the Parties shall have no liability or obligation hereunder.  
(b)    If Seller has the right to terminate this Agreement pursuant to Section 14.1(c) because a condition set forth in Sections 11.1, 11.2 or 11.5 has not been satisfied, (A) all of the conditions in Article X (excluding conditions that, by their terms, cannot be satisfied until the Closing) have been satisfied (or waived by Buyer) (unless the failure to satisfy such condition arises from the action or inaction by Buyer or any Buyer Indemnified Party), and (B) Seller is ready, willing and able to perform its obligations under Section 12.3, then, in such event, Seller shall have the right to, at its option, (1) as Seller’s sole and exclusive remedy, terminate this Agreement pursuant to Section 14.1(c) and receive the Deposit from the Escrow Agent as liquidated damages, and not as a penalty, for such termination, free and clear of any claims thereon by Buyer, or (2) in lieu of terminating this Agreement, seek all remedies available at law or in equity, including specific performance by Buyer.  The provision for payment of the Deposit as liquidated damages in this Section 14.2 has been included because, in the event of a termination of this Agreement permitting Seller to receive the Deposit, the actual damages to be incurred by Seller can reasonably be expected to approximate the amount of liquidated damages called for herein and because the actual amount of such damages would be difficult if not impossible to measure accurately.  
(c)    If Buyer has the right to terminate this Agreement pursuant to Section 14.1(d) because a condition set forth in Sections 10.1, 10.2 or 10.5 has not been satisfied, (A) all of the conditions in Article XI (excluding conditions that, by their terms, cannot be satisfied until the Closing) have been satisfied (or waived by Seller) (unless the failure to satisfy such condition arises from the action or inaction by Seller or any Seller Indemnified Party), and (B) Buyer is ready, willing and able to perform its obligations under Section 12.3, then, in such event, Buyer shall have the 

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right to, at its option, (1) terminate this Agreement, receive the Deposit from the Escrow Agent, and seek actual damages (incurred by Buyer) against Seller as a result of Seller’s breach of its covenants, agreements, representations or warranties (as the case may be) hereunder or (2) in lieu of terminating this Agreement, seek all remedies available at law or in equity, including specific performance. 
(d)    If this Agreement is terminated pursuant to Section 14.1 for any reason (other than as set forth in Section 14.2(b), Section 14.2(c) or the following proviso), neither Buyer nor Seller shall have any liability or obligation to the other Party in connection with the termination of this Agreement, and the Parties shall instruct the Escrow Agent to return the Deposit to Buyer (free and clear of any claims thereon by Seller) within five Business Days of the termination date; provided, however, that if this Agreement is terminated by Seller pursuant to Section 14.1(f), Seller shall have the right to seek actual damages (incurred by Seller) against Buyer as a result of Buyer’s breach of Section 3.2.  If a Party is otherwise entitled to the Deposit under this Section 14.2, the Parties shall instruct the Escrow Agent to release the Deposit to the applicable Party within five Business Days of the termination date.
14.3    Return of Documentation and Confidentiality.  Upon termination of this Agreement, Buyer shall destroy or return to Seller all title, engineering, geological and geophysical data, environmental assessments and/or reports, maps and other information furnished by or on behalf of Seller to Buyer or prepared by or on behalf of Buyer in connection with its due diligence investigation of the Conveyed Interests, in each case, in accordance with the Confidentiality Agreement and, if Buyer elects to destroy any such information, an officer of Buyer shall certify the destruction of such information to Seller in writing.
ARTICLE XV
MISCELLANEOUS
15.1    Appendices, Exhibits and Schedules.  All of the Appendices, Exhibits and Schedules referred to in this Agreement are hereby incorporated into this Agreement by reference and constitute a part of this Agreement.  Each Party to this Agreement and its counsel have received a complete set of Appendices, Exhibits and Schedules prior to and as of the execution of this Agreement.
15.2    Expenses and Taxes. 
(a)    Except as otherwise specifically provided herein, all fees, costs and expenses incurred by the Parties in negotiating this Agreement or in consummating the transactions contemplated by this Agreement shall be paid by the Party incurring the same, including legal and accounting fees, costs and expenses.
(b)    Seller shall be allocated and bear all Asset Taxes for any period or portion thereof ending prior to the Effective Time, and Buyer shall be allocated and bear all Asset Taxes for any period or portion thereof that begins at or after the Effective Time.

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(c)    For purposes of Section 15.2(b), (i) Asset Taxes that are attributable to the severance or production of Hydrocarbons shall be allocated to the period in which the severance or production giving rise to such Asset Taxes occurred, (ii) Asset Taxes that are based upon or related to income or receipts or imposed on a transactional basis (other than such Asset Taxes described in clause (i) or (iii)), shall be allocated to the period in which the transaction giving rise to such Asset Taxes occurred, and (iii) Asset Taxes that are ad valorem, property or other Asset Taxes imposed on a periodic basis pertaining to a Straddle Period shall be allocated between the portion of such Straddle Period ending immediately prior to the Effective Time and the portion of such Straddle Period beginning at the Effective Time by prorating each such Asset Tax based on the number of days in the applicable Straddle Period that occur before the date on which the Effective Time occurs, on the one hand, and the number of days in such Straddle Period that occur on or after the date on which the Effective Time occurs, on the other hand.  For purposes of clause (iii) of the preceding sentence, the period for such Asset Taxes shall being on the date on which ownership of the applicable Conveyed Interests gives rise to liability for the particular Asset Tax and shall end on the day before the next such date.  To the extent the actual amount of an Asset Tax is not known at the time an adjustment is to be made with respect to such Asset Tax pursuant to Section 3.3, the Parties shall utilize the most recent information available in estimating the amount of such Asset Tax for purposes of such adjustment.  To the extent the actual amount of an Asset Tax is ultimately determined to be different than the amount (if any) that was taken into account in the Final Settlement Statement as finally determined pursuant to Section 3.6, Seller shall indemnify and hold harmless Buyer for any excess of actual amount of an Asset Tax over such estimate, and Buyer shall indemnify and hold harmless Seller for any excess of such estimate over the actual amount of Asset Tax, in each case taking into account the amount of such Asset Tax that is allocable to such Party under Section 15.2(b) and this Section 15.2(c).  Subject to the Transition Services Agreement (if applicable), Buyer shall be responsible for the preparation and timely filing of any Tax Returns with respect to Asset Taxes for Tax periods beginning at or after the Effective Time that are required to be filed on or after the Closing Date, and the payment to the applicable Taxing Authority of all Asset Taxes for such Tax periods that become due and payable on or after the Closing Date, and Buyer shall indemnify and hold Seller harmless for any failure to file such Tax Returns and to make such payments subject to Buyer’s right of reimbursement for any Asset Taxes for which Seller is responsible pursuant to Section 15.2(b) and this Section 15.2(c).  Notwithstanding the foregoing regarding filing and payment, Seller shall be responsible for the preparation and timely filing of any Tax Return and the payment to the applicable Taxing Authority of any ad valorem or property taxes on Seller operated Subject Properties which are due and payable within the calendar year 2017, with the prior written consent of Buyer (not to be unreasonably withheld, conditioned or delayed) and subject to each Party’s right of reimbursement for any such taxes for which Seller is responsible pursuant to this Agreement; provided, however, that Buyer will be deemed to have given prior written consent in any case where the actual ad valorem or property taxes which are due and payable are not materially different from those provided in the Preliminary Settlement Statement, as agreed on by the Parties pursuant to Section 3.5. 
(d)    All required documentary, filing and recording fees and expenses in connection with the filing and recording of the assignments, conveyances or other instruments required to convey title to the Conveyed Interests to Buyer shall be borne by Buyer.  Any and all sales, use, transfer, stamp, documentary, registration or similar Taxes incurred or imposed with 

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respect to the transactions described in this Agreement (collectively, “Transfer Taxes”) shall be borne by Buyer; provided that Seller shall pay or cause to be paid to the applicable Governmental Authorities any Transfer Taxes that it is required by Law to collect and remit.  Buyer shall indemnify and hold Seller harmless from and against such Transfer Taxes within 30 days of Seller’s written demand therefor.  If Seller (not Buyer) is required by applicable Law to appeal or protest the assessment of Transfer Taxes, the appeal or protest of such proposed assessment shall be treated as an item for which Seller is entitled to indemnification and if Buyer provides a written request and instructs Seller to do so, Seller shall prosecute the protest or appeal; in such event Buyer shall pay all out-of-pocket expenses of Seller (including attorneys’ fees) incurred by Seller in connection with such appeal or protest.  Seller and Buyer shall reasonably cooperate in good faith to minimize, to the extent permissible under applicable Law, the amount of any such Transfer Taxes.
(e)    The Parties shall cooperate fully, as and to the extent reasonably requested by the other Party, in connection with the filing of Tax Returns and any audit, litigation, or other proceeding with respect to Taxes relating to the Conveyed Interests. Such cooperation shall include the retention and (upon another Party’s request) the provision of records and information that are relevant to any such Tax Return or audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided under this Agreement.  The Parties agree to retain all books and records with respect to Tax matters pertinent to the Conveyed Interests relating to any Tax period beginning before the Closing Date until the later of (i) seven years or (ii) sixty days following the expiration of the statute of limitations of the respective Tax periods and to abide by all record retention agreements entered into with any Governmental Authority.
15.3    Assignment.  Subject to the provisions of Section 15.18, this Agreement may not be assigned by either Party without the prior written consent of the other Party.  In the event a Party consents to any such assignment, such assignment shall not relieve the assigning Party of any obligations and responsibilities hereunder, including obligations and responsibilities arising following such assignment.  Any assignment or other transfer by Buyer or its successors and assigns of any of the Conveyed Interests shall not relieve Buyer or its successors or assigns of any of their obligations (including indemnity obligations) hereunder, as to the Conveyed Interests so assigned or transferred.
15.4    Preparation of Agreement.  Both Seller and Buyer and their respective counsel participated in the preparation of this Agreement.  In the event of any ambiguity in this Agreement, no presumption shall arise based on the identity of the draftsman of this Agreement.
15.5    Publicity.  Seller and Buyer shall promptly consult with each other with regard to all press releases or other public or private announcements issued or made at or prior to Closing concerning this Agreement or the transactions contemplated herein, and, except as may be required by applicable Laws or the applicable rules and regulations of any Governmental Authority or stock exchange or as described in the remaining provisions of this Section 15.5, neither Buyer nor Seller shall issue any such press release or other public or private announcement without the prior written consent of the other Party (which shall not be unreasonably withheld, conditioned, or delayed).  The Parties shall be obligated to hold all specific terms and provisions of this Agreement strictly 

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confidential until the expiration of two years after the Closing under this Agreement; provided, however, that the foregoing shall not (a) restrict disclosures by Buyer or Seller that are required by applicable securities or other Laws or regulations or the applicable rules of any stock exchange having jurisdiction over the disclosing Party or its Affiliates; provided that such disclosures shall be made only to the extent required thereunder, (b) prevent Buyer or Seller from recording the Assignment, any Surface Deed and any federal or state assignments delivered at Closing or from complying with any disclosure requirements of Governmental Authorities that are applicable to the transfer of the Conveyed Interests from Seller to Buyer, (c) prevent Buyer or Seller from making any disclosure of information relating to this Agreement if made in a manner, under conditions and to Persons that would be permitted under the Confidentiality Agreement so long as such Person continues to hold such information confidential on the same terms as set forth in this Section 15.5, and (d) prevent Seller from making disclosures in connection with complying with Preferential Purchase Rights and other transfer restrictions applicable to the transactions contemplated hereby.
15.6    Notices.  All notices and communications required or permitted to be given hereunder shall be given in writing and shall be delivered personally, or sent by bonded overnight courier, or mailed by U.S. Express Mail, Federal Express or United Parcel Service Express Delivery or by certified or registered United States Mail with all postage fully prepaid, or sent by electronic mail (“email”) transmission (provided that (a) the acknowledgement of the receipt of such email is received, excluding automatic receipts, and (b) each Party will act in good faith in respect of promptly acknowledging notices delivered by email to it hereunder) addressed to the appropriate Party at the address for such Party shown below or at such other address as such Party shall have theretofore designated by written notice delivered to the Party giving such notice: 
If to Seller: 
 
Devon Energy Production Company, L.P. 
333 W. Sheridan Ave 
Oklahoma City, OK 73102‐5010 
Attention:  Emily McGinley, Acquisitions & Divestiture Professional   
Email:  Emily.McGinley@dvn.com 
With a copy to: 
 
Devon Energy Production Company, L.P. 
333 W. Sheridan Ave 
Oklahoma City, OK 73102‐5010 
Attention:  Rachel Evans, Counsel 
Email:  Rachel.Evans@dvn.com 
If to Buyer: 
 
Penn Virginia Oil & Gas, L.P. 
14701 St. Mary’s Lane 
Suite 275
Houston, Texas 77079

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Attention:  John A. Brooks, Chief Executive Officer 
Email: john.brooks@pennvirginia.com            

With a copy to: 
 
Penn Virginia Oil & Gas, L.P. 
14701 St. Mary’s Lane 
Suite 275
Houston, Texas 77079
Attention:  Katie Ryan, Vice President, Chief Legal Counsel & Corporate   
                  Secretary
Email: katie.ryan@pennvirginia.com

With a copy to (which will not constitute notice): 

Gibson, Dunn & Crutcher LLP 
1221 McKinney 
Houston, Texas 77010 
Attention: Justin T. Stolte
Email: JStolte@gibsondunn.com
Any notice given in accordance herewith shall be deemed to have been given when delivered to the addressee in person, or by courier, or transmitted by email transmission during normal business hours on a Business Day (or if delivered or transmitted after 5:00 p.m. Central Time on a Business Day or on a day other than a Business Day, then on the next Business Day), or upon actual receipt by the addressee during normal business hours on a Business Day after such notice has either been delivered to an overnight courier or deposited in the United States Mail or with Federal Express or United Parcel Service, as the case may be (or if delivered after 5:00 p.m. Central Time on a Business Day or on a day other than a Business Day, then on the next Business Day).  Either Party may change their contact information for notice by giving written notice to the other Party in the manner provided in this Section 15.6.  If the date specified in this Agreement for giving any notice or taking any action is not a Business Day (or if the period during which any notice is required to be given or any action taken expires on a date which is not a Business Day), then the date for giving such notice or taking such action (and the expiration date of such period during which notice is required to be given or action taken) shall be the next day which is a Business Day.
15.7    Further Cooperation.  Until the fourth anniversary of Closing, Buyer and Seller shall execute and deliver, or shall cause to be executed and delivered from time to time, such further instruments of conveyance and transfer, and shall take such other actions as either Party may reasonably request, to convey and deliver the Conveyed Interests to Buyer, to perfect Buyer’s title thereto, and to accomplish the orderly transfer of the Conveyed Interests to Buyer in the manner contemplated by this Agreement.
15.8    Filings, Notices and Certain Governmental Approvals.  Promptly after Closing, Buyer shall, at is sole expense, (a) record all assignments (including the Assignment) and Surface Deeds executed at Closing in the records of the applicable Governmental Authority (including any 

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federal or state agencies, if applicable), (b)  send notices of the assignment of the Conveyed Interests to the operators of the Subject Properties that are not operated by Seller, and to the lessors under the Leases if required by the express terms of a Lease, (c) actively pursue the unconditional approval of all applicable Governmental Authorities of the assignment of the Conveyed Interests to Buyer, (d) file and actively pursue approvals from the applicable Governmental Authority of all federal and state change of operator forms set forth in Section 12.3(k), and (e) actively pursue all other consents and approvals that may be required in connection with the assignment of the Conveyed Interests to Buyer and the assumption of the Liabilities assumed by Buyer hereunder, in each case, that shall not have been obtained prior to Closing.  Buyer obligates itself to take any and all action reasonably required by any Governmental Authority in order to obtain such unconditional approval, including the posting of any and all bonds or other security that may be required in excess of its existing lease, pipeline or area-wide bond.
15.9    Entire Agreement; Non‐Reliance; Conflicts.  THIS AGREEMENT, THE APPENDICES, EXHIBITS AND SCHEDULES HERETO, THE TRANSACTION DOCUMENTS AND THE CONFIDENTIALITY AGREEMENT COLLECTIVELY CONSTITUTE THE ENTIRE AGREEMENT BETWEEN THE PARTIES PERTAINING TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ALL PRIOR AGREEMENTS, UNDERSTANDINGS, NEGOTIATIONS, AND DISCUSSIONS, WHETHER ORAL OR WRITTEN, OF THE PARTIES PERTAINING TO THE SUBJECT MATTER OF THIS AGREEMENT.  THERE ARE NO WARRANTIES, REPRESENTATIONS, OR OTHER AGREEMENTS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT OR THE TRANSACTION DOCUMENTS, AND NEITHER PARTY SHALL BE BOUND BY OR LIABLE FOR ANY ALLEGED REPRESENTATION, PROMISE, INDUCEMENT, OR STATEMENTS OF INTENTION NOT SO SET FORTH.  EACH PARTY ACKNOWLEDGES THAT, IN ENTERING INTO THIS AGREEMENT, IT HAS RELIED SOLELY ON THE PROMISES, AGREEMENTS, STATEMENTS OR REPRESENTATIONS THAT ARE EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE TRANSACTION DOCUMENTS AND THAT NEITHER PARTY HAD ANY DUTY TO MAKE ANY PROMISES, AGREEMENTS, STATEMENTS OR REPRESENTATIONS THAT ARE NOT EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN THE TRANSACTION DOCUMENTS.  EACH PARTY ALSO ACKNOWLEDGES THAT, IN ENTERING THIS AGREEMENT, IT HAS NOT RELIED ON ANY PROMISES, AGREEMENTS, STATEMENTS OR REPRESENTATIONS THAT ARE NOT EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN THE TRANSACTION DOCUMENTS.  IN THE EVENT OF A CONFLICT BETWEEN: (a) THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE TERMS AND PROVISIONS OF ANY SCHEDULE OR EXHIBIT HERETO; OR (b) THE TERMS AND PROVISIONS OF THIS AGREEMENT AND THE TERMS AND PROVISIONS OF ANY TRANSACTION DOCUMENT, THE TERMS AND PROVISIONS OF THIS AGREEMENT SHALL GOVERN AND CONTROL; PROVIDED, HOWEVER, THAT THE INCLUSION IN ANY OF THE SCHEDULES OR EXHIBITS HERETO OR ANY TRANSACTION DOCUMENT OF TERMS AND PROVISIONS NOT ADDRESSED IN THIS AGREEMENT SHALL NOT BE DEEMED A CONFLICT, AND ALL SUCH ADDITIONAL PROVISIONS SHALL BE GIVEN FULL FORCE AND EFFECT, SUBJECT TO THE PROVISIONS OF THIS SECTION 15.9.  

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15.10     Successors and Permitted Assigns.  The terms and provisions of this Agreement shall be binding upon and inure to the benefit of Buyer and Seller and their respective successors and permitted assigns.
15.11    Parties in Interest.  Notwithstanding anything contained in this Agreement to the contrary, nothing in this Agreement, expressed or implied, is intended to confer on any Person other than the Parties or their respective successors and permitted assigns, or the Parties’ respective related Indemnified Parties (which, for purposes of Section 9.12(a), will be deemed to include Financing Sources as to Buyer) hereunder, any rights, remedies, obligations or Liabilities under or by reason of this Agreement; provided that only a Party and its successors and permitted assigns will have the right to enforce the provisions of this Agreement on its own behalf or on behalf of any of its related Indemnified Parties (subject to the immediately preceding parenthetical) but shall not be obligated to do so. 
15.12    Amendment.  This Agreement may be amended, restated, supplemented or otherwise modified only by an instrument in writing executed by both Parties and expressly identified as an amendment, restatement, supplement or modification; provided, however, Section 9.12(a) may not be amended in any manner adverse to the interests of the Financing Sources without the written consent of the Financing Sources affected thereby (it being understood that the consent of any Person described in clause (b) of the definition of “Financing Sources” shall not be required).
15.13    Waiver; Rights Cumulative.  Any of the terms, covenants, representations, warranties, or conditions hereof may be waived only by a written instrument executed by or on behalf of the Party waiving compliance.  No course of dealing on the part of either Party, or their respective officers, employees, agents, or representatives, and no failure by a Party to exercise any of its rights under this Agreement, shall, in any such case, operate as a waiver thereof or affect in any way the right of such Party at a later time to enforce the performance of such provision.  No waiver by either Party of any condition, or any breach of any term, covenant, representation, or warranty contained in this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such condition or breach or a waiver of any other condition or of any breach of any other term, covenant, representation, or warranty.  Except as set expressly forth herein, the rights of the Parties under this Agreement shall be cumulative and the exercise or partial exercise of any such right shall not preclude the exercise of any other right.
15.14    Governing Law; Jurisdiction; Venue; Jury Waiver.  EXCEPT AS OTHERWISE PROVIDED IN SECTION 9.12(a), THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE RIGHTS, DUTIES AND THE LEGAL RELATIONS AMONG THE PARTIES HERETO AND THERETO SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT REFER CONSTRUCTION OF SUCH PROVISIONS TO THE LAWS OF ANOTHER JURISDICTION.  BOTH PARTIES HERETO CONSENT TO THE EXERCISE OF JURISDICTION IN PERSONAM BY THE FEDERAL COURTS OF THE UNITED STATES LOCATED IN DALLAS COUNTY, TEXAS OR, IF THE REQUIREMENTS FOR FEDERAL JURISDICTION ARE NOT MET, THE 

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STATE COURTS LOCATED IN DALLAS COUNTY, TEXAS FOR ANY ACTION ARISING OUT OF THIS AGREEMENT, THE TRANSACTION DOCUMENTS, OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.  ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO, ARISING DIRECTLY OR INDIRECTLY IN CONNECTION WITH, OUT OF, RELATED TO, OR FROM THIS AGREEMENT, THE TRANSACTION DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY SHALL BE EXCLUSIVELY LITIGATED IN SUCH COURTS DESCRIBED ABOVE HAVING SITES IN DALLAS COUNTY, TEXAS AND EACH PARTY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS SOLELY IN RESPECT OF ANY PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT.  EACH PARTY HERETO VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TRANSACTION DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY.  THE PARTIES FURTHER AGREE, TO THE EXTENT PERMITTED BY LAW, THAT A FINAL AND NONAPPEALABLE JUDGMENT AGAINST A PARTY IN ANY ACTION OR PROCEEDING CONTEMPLATED ABOVE SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN ANY OTHER JURISDICTION WITHIN OR OUTSIDE THE UNITED STATES BY SUIT ON THE JUDGMENT, A CERTIFIED OR EXEMPLIFIED COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND AMOUNT OF SUCH JUDGMENT.  TO THE EXTENT THAT EITHER PARTY OR ANY OF ITS AFFILIATES HAS ACQUIRED, OR HEREAFTER MAY ACQUIRE, ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH PARTY (ON ITS OWN BEHALF AND ON BEHALF OF ITS AFFILIATES) HEREBY IRREVOCABLY (i) WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS WITH RESPECT TO THIS AGREEMENT AND (ii) SUBMITS TO THE PERSONAL JURISDICTION OF ANY COURT DESCRIBED IN THIS SECTION 15.14.
15.15    Severability.  If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any adverse manner to either Party.  Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.
15.16    Removal of Name.  As promptly as practicable, but in any case within 60 days after the Closing Date, Buyer shall eliminate the names “Devon Energy Production Company, L.P.,” “Devon” and any variants thereof from the Subject Properties and, except with respect to such grace period for eliminating existing usage, shall have no right to use any logos, trademarks or trade names belonging to Seller or any of its Affiliates.

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15.17    Counterparts.  This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all of such counterparts shall constitute for all purposes one agreement.  Any signature hereto delivered by a Party by facsimile or other electronic transmission (including scanned documents delivered by email) shall be deemed an original signature hereto, and execution and delivery by such means shall be binding upon all Parties.
15.18    Like-Kind Exchange.  Buyer and Seller agree that either or both of Seller and Buyer may elect to treat the acquisition or sale of the Conveyed Interests as an exchange of like-kind property under Section 1031 of the Code (an “Exchange”), provided that the Closing shall not be delayed by reason of the Exchange.  Each Party agrees to use reasonable efforts to cooperate with the other Party in the completion of such an Exchange including an Exchange subject to the procedures outlined in Treasury Regulation § 1.1031(k)‐1 and/or Internal Revenue Service Revenue Procedure 2000‐37.  Each of Seller and Buyer shall have the right at any time prior to Closing to assign all or a part of its rights under this Agreement to a qualified intermediary (as that term is defined in Treasury Regulation § 1.1031(k)‐1(g)(4)(iii)) or an exchange accommodation titleholder (as that term is defined in Internal Revenue Service Revenue Procedure 2000‐37) to effect an Exchange.  In connection with any such Exchange, any exchange accommodation titleholder shall have taken all steps necessary to own the Conveyed Interests under applicable Law.  Each Party acknowledges and agrees that neither an assignment of a Party’s rights under this Agreement nor any other actions taken by a Party or any other Person in connection with the Exchange shall release either Party from, or modify, any of its liabilities and obligations (including indemnity obligations to the other Party) under this Agreement, and neither Party makes any representations as to any particular Tax treatment that may be afforded to any other Party by reason of such assignment or any other actions taken in connection with the Exchange.  Either Party electing to treat the acquisition or sale of the Conveyed Interests as an Exchange shall be obligated to pay all additional costs incurred hereunder as a result of the Exchange, and in consideration for the cooperation of the other Party, the Party electing Exchange treatment shall agree to pay all costs associated with the Exchange and to indemnify and hold the other Party, its Affiliates, and their respective former, current and future partners, members, shareholders, owners, officers, directors, managers, employees, agents and representatives harmless from and against any and all liabilities and Taxes arising out of, based upon, attributable to or resulting from the Exchange or transactions or actions taken in connection with the Exchange that would not have been incurred by the other Party but for the electing Party’s Exchange election.
15.19    Specific Performance.  The Parties agree that if any of the provisions of this Agreement are not performed by a Party in accordance with their specific terms, the other Party shall be entitled to specific performance of the terms hereof, in addition to any other remedy available at law or in equity; provided, that, for the avoidance of doubt, if this Agreement is terminated pursuant to Article XIV, a Party may not thereafter seek or otherwise attempt to enforce specific performance of the closing of the transactions contemplated hereby.
[Remainder of page intentionally left blank. Signature page follows.]

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IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement on the date first above written.
Seller:
DEVON ENERGY PRODUCTION COMPANY, L.P.
By:    /s/ Jeffrey L. Ritenour    
Name:     Jefferey L. Ritenour    
Title:          Executive Vice President    
Buyer:
PENN VIRGINIA OIL & GAS, L.P.
By: Penn Virginia Oil & Gas GP LLC
By:    /s/ John A. Brooks    
Name:     John A. Brooks    
Title:          Chief Executive Officer    

[SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT]
S-1

APPENDIX I 
Definitions
Capitalized terms used in this Agreement shall have the meanings set forth in this Appendix I unless the context requires otherwise.
“AAA” means the American Arbitration Association.
“AAA Rules” means the Commercial Arbitration Rules of the AAA.
“Accounting Arbitrator” has the meaning set forth in Section 3.7(b).
“Adjusted Purchase Price” has the meaning set forth in Section 3.3.
“AFEs” has the meaning set forth in Section 7.11.
“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, another Person.  The term “control” and its derivatives with respect to any Person mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
“Aggregate Deductible” means 1.5% of the Purchase Price.
“Agreement” has the meaning set forth in the first paragraph herein.
“Allocated Value” has the meaning set forth in Section 3.8.
“Applicable Contracts” means all Contracts (a) to which Seller is a party to the extent relating to any of the Conveyed Interests or to which any Conveyed Interest is bound and/or (b) that will be binding on Buyer or the Conveyed Interests after the Closing, including:  communitization agreements; net profits agreements; production payment agreements; area of mutual interest agreements; joint venture agreements; confidentiality agreements; farmin and farmout agreements; bottom hole agreements; crude oil, condensate, and natural gas purchase and sale, gathering, transportation, and marketing agreements; hydrocarbon storage agreements; acreage contribution agreements; operating agreements; balancing agreements; pooling declarations or agreements; unitization agreements; processing agreements; saltwater disposal agreements; facilities or equipment leases; and other similar contracts and agreements, but exclusive of (i) any Contracts to the extent relating to the Excluded Assets and Other Matters, (ii) any master service agreements and similar Contracts, (iii) the Leases and the other contracts, agreements and instruments relating to the title of the properties and interests described in Sections 2.1(a)-(b), 2.1(e)-(f), and 2.1(h) and the surface use and water use contracts and agreements set forth on Exhibit D-2.
“Arbitration Notice” has the meaning set forth in Section 3.7(b).

APPENDIX I
PAGE 1

“Asset Taxes” means ad valorem, property, excise, severance, production, sales, use, or similar Taxes (excluding, for the avoidance of doubt, any Income Taxes and Transfer Taxes) based upon or measured by the ownership or operation of the Conveyed Interests or the production of Hydrocarbons therefrom or the receipt of proceeds therefrom.
“Assignment” means the Assignment and Bill of Sale from Seller to Buyer, pertaining to the Conveyed Interests, substantially in the form attached to this Agreement as Exhibit F.
“Assumed Obligations” has the meaning set forth in Section 13.1(a).
“Burden” means any and all royalties (including lessor’s royalty), overriding royalties, production payments, net profits interests and other similar burdens measured by or payable out of production (excluding, for the avoidance of doubt, any Taxes).
“Business Day” means any day (other than Saturday or Sunday) on which commercial banks in Oklahoma City, Oklahoma are generally open for business.
“Buyer” has the meaning set forth in the first paragraph herein.
“Buyer Amount P-A-C” means the sum of the following amounts paid by Buyer (or on Buyer’s behalf) at Closing: (a) the Closing Payment paid to Seller at Closing pursuant to Section 12.3(d); (b) the Defect Escrow Amount deposited into the Escrow Account pursuant to Section 12.3(e); and (c) Deposit distributed to Seller pursuant to Section 12.3(f).  For the avoidance of doubt, the sum of the Closing Payment and the Deposit shall equal the Adjusted Purchase Price determined as of Closing pursuant to Section 3.5. 
“Buyer Indemnified Parties” has the meaning set forth in Section 13.2.
“Buyer’s Environmental Liabilities” has the meaning set forth in Section 6.1(a).
“Buyer’s Representatives” has the meaning set forth in Section 4.1(a).
“Casualty Loss” has the meaning set forth in Section 5.4(b).
“Claim Notice” has the meaning set forth in Section 13.7(b).
“Closing” has the meaning set forth in Section 12.1.
“Closing Date” has the meaning set forth in Section 12.1.
“Closing Payment” has the meaning set forth in Section 3.5.
“Code” means the Internal Revenue Code of 1986, as amended, and any successor statute.
“Commitment Letter” has the meaning set forth in Section 8.8.
“Confidentiality Agreement” means that certain Confidentiality Agreement, dated as of May 23, 2017, by and between Seller and Buyer. 

APPENDIX I
PAGE 2

“Consent” has the meaning set forth in Section 7.4.
“Contract” means any written or oral contract, agreement or any other legally binding arrangement, but excluding, however, any Lease, Rights-of-Way, any other easement, right-of-way, permit or other instrument creating or evidencing an interest in the Conveyed Interests or any real or immovable property related to or used in connection with the operations of any Conveyed Interests.
“Conveyed Interests” has the meaning set forth in Section 2.1.
 “Cure Period” has the meaning set forth in Section 5.3(c).
“Customary Post-Closing Consents” means the consents and approvals from Governmental Authorities for the assignment of the Conveyed Interests to Buyer that are customarily obtained after the assignment of properties similar to the Conveyed Interests.
“Decommission” and “Decommissioning” means all dismantling and decommissioning activities and obligations as are required by Law, any Governmental Authority or agreements including all well plugging, replugging and abandonment, facility dismantlement and removal, pipeline and flowline removal, dismantlement and removal of all other property of any kind related to or associated with operations or activities and associated site clearance, site restoration and site remediation.
“Decommissioning Obligations” has the meaning set forth in Section 13.1(a).
“Defect Escrow Amount” has the meaning set forth in Section 3.6(c)
“Defensible Title” means, subject to Permitted Encumbrances, title of Seller with respect to any Lease set forth on Exhibit A, solely with respect to the Eagle Ford Formation, and any Well set forth in Exhibit B, solely with respect to the currently producing formation for such Well, that, as of the Effective Time and immediately prior to the Title Defect Claim Date and the Closing Date, has the applicable attributes set forth in clauses (a) through (e) below, each of which is (I) fairly deducible of record or (II) evidenced by documentation which, although not constituting perfect, merchantable or marketable title, clearly establishes: 
(a)    with respect to each Lease identified on Exhibit A, entitles Seller to receive throughout its duration not less than the Net Revenue Interest set forth on Exhibit A for that Lease as to the Eagle Ford Formation; 
(b)    with respect to each Lease identified on Exhibit A, entitles Seller throughout its duration to the Net Acres set forth on Exhibit A for the Eagle Ford Formation;
(c)    with respect to each Well identified on Exhibit B, entitles Seller to, during the productive life of that Well, receive not less than the Net Revenue Interest set forth on Exhibit B for that Well as to the currently producing formation; and

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(d)    with respect to each Well identified on Exhibit B, obligates Seller to, during the productive life of that Well, bear not more than the Working Interest set forth on Exhibit B for that Well as to the currently producing formation, except for any increase to that Working Interest that is accompanied by at least a proportionate increase in Seller’s Net Revenue Interest; and
(e)    is free and clear of all Encumbrances, except for the Permitted Encumbrances.
“Deposit” has the meaning set forth in Section 3.2.
“Dispute Date” means on or before 5:00 p.m. (Central Time) on the date that is 10 days after the expiration of the Cure Period.
“Dispute Notice” has the meaning set forth in Section 3.6(a).
“Disputed Environmental Matters” has the meaning set forth in Section 6.1(f).
“Eagle Ford Formation” has the meaning set forth in Exhibit N.
“Effective Time” means 12:01 A.M. (Central Time) on March 1, 2017.
“email” has the meaning set forth in Section 15.6.
“Encumbrance” means any lien, mortgage, security interest, pledge, charge or similar encumbrance.
“Environmental Arbitrator” has the meaning set forth in Section 6.1(f).
“Environmental Condition” means (a) a condition existing on the Execution Date with respect to the air, soil, subsurface, surface waters, ground waters and/or sediments that causes a Subject Property (or Seller with respect to a Subject Property) not to be in compliance with any Environmental Law, or (b) the existence as of the Execution Date with respect to the any of the Subject Properties or the operation thereof of any environmental pollution, contamination or degradation where either remedial or corrective action is presently required (or if known, would be presently required) under Environmental Laws. 
“Environmental Defect” means an Environmental Condition with respect to a Conveyed Interest.
“Environmental Defect Claim Date” means 5:00 p.m. (Central Time) on the date that is 45 days after the Execution Date.
“Environmental Defect Notice” and “Environmental Defect Notices” have the meaning set forth in Section 6.1(a).
“Environmental Defect Property” has the meaning set forth in Section 6.1(a).
“Environmental Indemnity Agreement” has the meaning set forth in Section 6.1(c)(iii).

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“Environmental Laws” means all Laws in effect as of the Execution Date, including common law, relating to the protection of human health, natural resources or the environment, including those Laws relating to the storage, handling, and use of Hazardous Substances and those Laws relating to the generation, processing, treatment, storage, transportation, disposal or other management thereof.  The term “Environmental Laws” does not include good or desirable operating practices or standards that may be employed or adopted by other oil and gas well operators or recommended by a Governmental Authority, or the Occupational Safety and Health Act of 1970, 29 U.S.C. § 651 et seq., as amended, or any other Law governing worker safety or workplace concerns. 
“Escrow Account” means the account established pursuant to the Escrow Agreement.
“Escrow Agent” means Wells Fargo Bank, N.A.
“Escrow Agreement” means that certain Escrow Agreement dated as of July 31, 2017 by and among the Parties and the Escrow Agent, substantially in the form attached hereto as Exhibit M.
“Exchange” has the meaning set forth in Section 15.18.
“Exchange Act” has the meaning set forth in Section 9.11(a). 
“Excluded Assets and Other Matters” means (a) all of Seller’s corporate minute books, financial, budget, Tax records and other business records that relate to Seller’s business generally (including the ownership and operation of the Conveyed Interests prior to the Effective Time); (b) to the extent that they do not relate to the Assumed Obligations for which Buyer is obligated to provide indemnification hereunder, all trade credits, all accounts, all receivables of Seller and all other proceeds, income or revenues of Seller attributable to the Conveyed Interests and attributable to any period of time prior to the Effective Time; (c) to the extent that they do not relate to the Assumed Obligations for which Buyer is obligated to provide indemnification hereunder, and except for those described in Section 2.1(m), any and all claims and causes of action of Seller that are attributable to periods of time prior to the Effective Time (including claims for adjustments or refunds); provided, however, that no such claim may be settled, compromised, or otherwise resolved in a manner that results in an obligation borne by Buyer or the Conveyed Interests on and after the Effective Time without the prior written consent of Buyer; (d) subject to Section 5.4 and to the extent that they do not relate to the Assumed Obligations for which Buyer is obligated to provide indemnification hereunder, all rights and interests of Seller (i) under any policy or agreement of insurance or indemnity, (ii) under any bond, or (iii) to any insurance or condemnation proceeds or awards arising, in each case, from acts, omissions or events or damage to or destruction of property prior to the Effective Time; (e) except to the extent such Hydrocarbons are described in Section 2.1(c)(i)(B), Seller’s rights with respect to all Hydrocarbons produced and sold from the Conveyed Interests with respect to all periods of time prior to the Effective Time; (f) all claims of Seller or any of its Affiliates for refunds of, rights to receive funds from any Governmental Authority, or loss carry forwards or credits with respect to (i) Asset Taxes attributable to any period (or portion thereof) prior to the Effective Time, (ii) Income Taxes, or (iii) any Taxes attributable to the Excluded Assets and Other Matters; (g) all servers and all intangible information technology assets, including (i) 

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computer, server, proprietary and Seller and its Affiliates’ specific software and (ii) any other intangible information technology assets; (h) to the extent that they do not relate to the Assumed Obligations for which Buyer is providing indemnification hereunder, all rights, benefits and releases of Seller or its Affiliates under or with respect to any Contract that are attributable to periods of time prior to the Effective Time; (i) all of Seller’s proprietary computer software, patents, trade secrets, copyrights, names, trademarks, logos and other intellectual property; (j) all documents and instruments of Seller that may be protected by an attorney-client privilege or any attorney work product doctrine (other than title opinions); (k) all data relating to the Conveyed Interests that cannot be disclosed to Buyer as a result of confidentiality arrangements under agreements with Third Parties (provided that Seller will use commercially reasonably efforts (but at no third-party cost to Seller, unless Buyer agrees to reimburse Seller therefor) to obtain consent to transfer such data and, if such consent is granted, such items will be part of the “Conveyed Interests”); (l) all audit rights of Seller arising under any of the Applicable Contracts or otherwise with respect to any period prior to the Effective Time or to any of the Excluded Assets and Other Matters, except for any Imbalances assumed by Buyer and except to the extent relating to Assumed Obligations for which Buyer is obligated to provide indemnification hereunder; (m) all geophysical and other seismic and related technical data and information relating to the Conveyed Interests to the extent not transferable (provided that, if not transferable, Seller will use commercially reasonably efforts (but at no Third-Party cost to Seller, unless Buyer reimburses Seller therefor), except for the data and information set forth on Exhibit G-1, for which such commercially reasonably efforts will not be required) to obtain consent to said transfer and, if such consent is granted, such items will be part of the “Conveyed Interests”), other than the rights granted pursuant to the License Agreement; (n) documents prepared or received by Seller or its Affiliates with respect to (i) lists of prospective purchasers for such transactions compiled by Seller, (ii) bids submitted by other prospective purchasers of the Conveyed Interests, (iii) analyses by Seller or its Affiliates of any bids submitted by any prospective purchaser, (iv) correspondence between or among Seller, its representatives, and any prospective purchaser other than Buyer, and (v) correspondence between Seller or any of its representatives with respect to any of the bids, the prospective purchasers or the transactions contemplated by this Agreement; (o) any offices, office leases and any personal property located in or on such offices or office leases; (p) any fee simple surface estate in and covering any tract of land described on Exhibit G-2; (q) any leases, Contracts, rights and other assets specifically listed on Exhibit G-3; (r) any Hedge Contracts of Seller or that would otherwise be binding on the Conveyed Interests on the Effective Time; (s) any indenture, mortgage, loan, financial guaranty of any obligation, bond, letters of credit, credit or sale-leaseback or similar debt instruments to which Seller or any of its Affiliates is a party or by which the Seller or any of the Conveyed Interests are bound; (t) any fee mineral interests described on Exhibit G-4, and any right to production revenues associated therewith; (u) the monies held by Seller for which the Purchase Price was adjusted pursuant to Section 3.3(b)(ix); (v) all personnel files and records of Seller; (w) all data contained on back‐up tapes or disaster recovery tapes; (x) all vehicles and trailers; (y) all information technology equipment and devices that are not Personal Property or otherwise described in the definition of “Conveyed Interests,” including desktop computers, laptop computers, networking equipment and any associated peripherals and other computer hardware, all radio and telephone equipment, smartphones, tablets and other mobility devices, and any other information technology hardware; (z) any portion of the Conveyed Interests that is excluded from the transactions contemplated hereby pursuant to Sections 4.1(b), 5.5(a)(i), 5.5(b)(i), or 6.1(c), and (aa) the Tax Settlement. 

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“Execution Date” has the meaning set forth in the first paragraph herein.
“Final Price” has the meaning set forth in Section 3.6(a).
“Final Settlement Statement” has the meaning set forth in Section 3.6(a).
“Financial Statements” has the meaning set forth in Section 9.11(a).
“Financing” means any direct or indirect debt or equity financing, investment, contribution, issuance or placement from or with any Third Party incurred or intended to be incurred by Buyer or its Affiliates in connection with the financing of any amounts payable hereunder at the Closing.  
“Financing Sources” means (a) any and all Persons who have provided, do provide, have committed to provide or arrange, the Financing, including any Persons that are named in any debt commitment letters, joinder agreements, indentures, credit agreements, contribution agreements, equity purchase agreements or similar agreements entered into in connection therewith or relating thereto and (b) together with such Persons’ Affiliates, officers, directors, employees and representatives and their successors and assigns.  For the avoidance of doubt, in no event shall this definition of Financing Sources include Buyer, its Affiliates, or their respective partners, members, stockholders, agents, officers, managers, directors or employees.
“GAAP” means generally accepted accounting principles in the United States as interpreted as of the Execution Date.
“Governmental Authority” means any federal, state, local, municipal, tribal or other government; any governmental, regulatory or administrative agency, commission, body or other authority exercising or entitled to exercise any administrative, executive, judicial, legislative, regulatory or Taxing Authority or power; and any court or governmental tribunal, including any tribal authority having or asserting jurisdiction.
“Governmental Bonds” has the meaning set forth in Section 9.3(a).
“Guarantees” has the meaning set forth in Section 9.3(b).
“Hazardous Substances” means any pollutants, contaminants, toxins or hazardous or extremely hazardous substances, materials, wastes, constituents, compounds, or chemicals that are regulated by, or may form the basis of liability under, any Environmental Laws, including NORM and other substances referenced in Section 6.2.
“Hedge Contract” means any Contract applying to the Conveyed Interests and/or to which Seller or any of its Affiliates is a party with respect to any swap, forward, future or derivative transaction or option or similar agreement, whether exchange traded, “over-the-counter” or otherwise, involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions. 
“Hydrocarbons” has the meaning set forth in Section 2.1(c).

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“Imbalances” means all Well Imbalances and Pipeline Imbalances.
“Income Taxes” means any income, franchise and similar Taxes.
“Indemnified Party” has the meaning set forth in Section 13.7(a).
 “Indemnifying Party” has the meaning set forth in Section 13.7(a).
“Indemnity Deductible” means 1.5% of the Purchase Price.
“Individual Environmental Threshold” has the meaning set forth in Section 6.1(e).
“Individual Title Defect Threshold” has the meaning set forth in Section 5.3(i).
“Interim Period” means that period of time commencing at the Effective Time and ending at 11:59 p.m. (Central Time) on the Closing Date.
“Knowledge” means: (a) with respect to Seller, the actual knowledge (without investigation) of the following Persons: Scott Lackey, Kevin Lafferty, Catherine Lebsack, Emily McGinley, Scott Prather, James E. Toups, Jr., Darren Smith, and Jack Richards; and (b) with respect to Buyer, the actual knowledge (without investigation) of the following Persons: John A. Brooks and Steven A. Hartman.  
“Lands” means the lands described and/or depicted on Schedule 2.1. 
“Law” means any applicable statute, law, rule, regulation, ordinance, order, code, ruling, writ, injunction, decree or other official act of or by any Governmental Authority.
“Lease(s)” has the meaning set forth in Section 2.1(a).
“Liabilities” means any and all claims, obligations, causes of action, payments, charges, judgments, assessments, liabilities, losses, damages, penalties, fines, costs and expenses, including (a) liabilities, costs, losses and damages for personal injury, death, property damage, environmental damage, or Remediation, (b) any action, proceeding, order or suit by a Governmental Authority with respect to any of the foregoing and (c) any attorneys’ fees, legal or other expenses incurred in connection with any of the foregoing.
“License Agreement” means that certain seismic license agreement, substantially in the form attached hereto as Exhibit I.
“Material Contracts” has the meaning set forth in Section 7.7(a).
“Net Acre” means, as computed separately with respect to each Lease identified on Exhibit A (a) the number of gross acres in the lands covered by that Lease, multiplied by (b) the undivided fee simple mineral interest (expressed as a percentage) in the lands covered by that Lease (as determined by aggregating the fee simple mineral interests owned by each lessor of that Lease in the lands), multiplied by (c) Seller’s undivided Working Interest in that Lease; provided that if the 

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items in (b) and/or (c) vary as to different tracts of lands covered by that Lease, a separate calculation shall be done for each such tract; provided, further, that if multiple tracts of a Lease are separately identified on Exhibit A, a separate calculation shall be done for each such tract.  For example, if a Lease in which Seller owns an undivided fifty percent (50%) working interest covers a 20‐acre tract in which the lessors of such Lease own an undivided one‐half (1/2) fee mineral interest and a separate and distinct 40‐acre tract in which the lessors of such Lease own an undivided one fourth (1/4) fee mineral interest, then the Lease would cover ten (10) Net Acres (i.e., (20 × 0.5 × 0.5) + (40 × 0.25 × 0.5) = 10).
“Net Revenue Interest” means, with respect to any (a) Lease identified on Exhibit A (limited, however, to the Eagle Ford Formation) or (b) Well identified on Exhibit B (limited, however, to the currently producing formation), the interest (expressed as a percentage or decimal) in and to all Hydrocarbons produced, saved and sold from or allocated to that Lease or Well after giving effect to all Burdens.
“NORM” means naturally occurring radioactive material.
“Offering Document” has the meaning set forth in Section 9.11(a).
“Operating Expenses” means all operating expenses (including costs of insurance and any bonds, but excluding any costs of Guarantees) and all capital expenditures to the extent incurred in the ownership and operation of the Conveyed Interests and any overhead costs charged by Third Party operators to the extent relating to the Conveyed Interests, but excluding Liabilities attributable to (a) personal injury or death, property damage, or violation of any Law, (b) Decommissioning Obligations, (c) curing any Title Defect or Remediation of any environmental matters, including obligations to remediate any contamination of water or Personal Property under applicable Environmental Laws, (d) obligations with respect to Imbalances, (e) obligations to pay working interests, royalties, overriding royalties or other interest owners revenues or proceeds attributable to sales of Hydrocarbons relating to the Conveyed Interests, including those held in suspense, and (f) Income Taxes, Asset Taxes and Transfer Taxes. 
“Other Wells” has the meaning set forth in Section 2.1(e).
“Overhead Costs” means an amount equal to the sum of $35,000, multiplied by the number of months during the Interim Period (prorated for partial months). 
“Party” and “Parties” have the meaning set forth in the first paragraph herein.
“Payable Amount” has the meaning set forth in Section 3.6(b). 
“Payout Balance” means the status, as of the date of the calculation, of the recovery by Seller or a Third Party of a cost amount specified in the contract relating to a Well out of the revenue from such Well where the Net Revenue Interest of Seller therein will be reduced or Seller’s Working Interest therein will be increased when such amount has been recovered. 
“Permitted Encumbrances” means: 

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(a)    the terms and conditions of all Leases and all Burdens if the net cumulative effect of such Leases and Burdens (i) does not operate to reduce the Net Revenue Interest of Seller with respect to any Lease identified on Exhibit A or Well identified on Exhibit B to an amount less than the Net Revenue Interest set forth for that Lease on Exhibit A or that Well on Exhibit B, (ii) does not obligate Seller to bear a Working Interest with respect to any Well identified on Exhibit B, in an amount greater than the Working Interest set forth on Exhibit B, for that Well (unless the Net Revenue Interest for that Well is greater than the Net Revenue Interest set forth on Exhibit B in the same or greater proportion as any increase in such Working Interest), and (iii) does not operate to reduce (or increase, as a result of an increased Working Interest unless the Net Revenue Interest for that Lease is greater than the Net Revenue Interest set forth on Exhibit A in the same or greater proportion to the increase in such Working Interest) the Net Acres of Seller with respect to any Lease identified on Exhibit A to an amount less (or greater, as set forth in the preceding parenthetical) than the Net Acres set forth for that Lease on Exhibit A for the Eagle Ford Formation; 
(b)    preferential rights to purchase and required consents to assignment and similar agreements, in each case, applicable to and triggered by this or any future transaction; 
(c)    liens for Taxes not yet due or delinquent or, if delinquent, that are being contested in good faith and disclosed on Exhibit K;
(d)    Customary Post-Closing Consents;
(e)    conventional rights of reassignment (excepting circumstances where such rights have already been triggered); 
(f)    all Laws, and all rights reserved to or vested in any Governmental Authority (i) to control or regulate any Conveyed Interest in any manner; (ii) by the terms of any right, power, franchise, grant, license or permit, or by any provision of Law, to terminate such right, power, franchise, grant, license or permit or to purchase, condemn, expropriate or recapture or to designate a purchaser of any of the Conveyed Interests; or (iii) to enforce any obligations or duties affecting the Conveyed Interests to any Governmental Authority with respect to any right, power, franchise, grant, license or permit that, in each case, individually or in the aggregate (A) do not materially impair the ownership, use, or operation of the Conveyed Interests in a disproportionate manner vis-à-vis properties similar to the Conveyed Interests in the region in which the Subject Properties are located, (B) do not reduce the Net Revenue Interest of Seller with respect to any Lease identified on Exhibit A or Well identified on Exhibit B to an amount less than the Net Revenue Interest for that Lease on Exhibit A or that Well set forth on Exhibit B, (C) do not obligate Seller to bear a Working Interest with respect to any Well identified on Exhibit B, in any amount greater than the Working Interest set forth on Exhibit B for that Well (unless the Net Revenue Interest for that Well is greater than the Net Revenue Interest set forth on Exhibit B in the same or greater proportion as any increase in such Working Interest) and (iv) do not reduce (or increase, as a result of an increased Working Interest unless the Net Revenue Interest for that Lease is greater than the Net Revenue Interest set forth on Exhibit A in the same or greater proportion to the increase in such Working Interest) the Net Acres of Seller with respect to any Lease  identified on Exhibit A to an amount less (or greater, as set forth in the preceding parenthetical) than the Net Acres set forth for that Lease on Exhibit A for the Eagle Ford Formation; 

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(g)    rights of a common owner (other than Buyer) of any interest in rights-of-way, permits or easements held by Seller and such common owner (other than Buyer) as tenants in common or through common ownership; provided, however, the same do not, individually or in the aggregate, materially interfere with the operation or use of any of the Conveyed Interests;
(h)    easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way, surface leases, and other rights in the Conveyed Interests for the purpose of operations, facilities, roads, alleys, highways, railways, pipelines, transmission lines, transportation lines or distribution lines, which, in each case, do not materially impair the ownership, operation or use of the Conveyed Interests as currently owned, operated, and used;
(i)    easements, conditions, covenants, restrictions, servitudes, permits, rights-of-way, surface leases, and other rights in the Conveyed Interests for the purpose of power lines, telephone lines, removal of timber, grazing, logging operations, canals, ditches, reservoirs and other like purposes, or for the joint or common use of real estate, rights-of-way, facilities and equipment, which, in each case, (i) do not materially impair the ownership, operation or use of the Conveyed Interests, (ii) for which Buyer had Knowledge as of the Execution Date, or (iii) cover lands or are located in Units that are operated by Buyer or its Affiliates;  
(j)    vendors, carriers, warehousemen’s, repairmen’s, mechanics’, workmen’s, materialmen’s, construction or other like liens arising by operation of Law in the ordinary course of business or incident to the construction or improvement of any property in respect of obligations which are not yet due or, to the extent disclosed on Exhibit K, which are being contested in good faith by appropriate proceedings by or on behalf of Seller, including those liens set forth on Exhibit K;
(k)    liens created under the Conveyed Interests or operating agreements or by operation of Law in respect of obligations that are not yet due or, to the extent disclosed on Exhibit K, that are being contested in good faith by appropriate proceedings by or on behalf of Seller;
(l)    any Encumbrance affecting the Conveyed Interests that is discharged by Seller at or prior to Closing;
(m)    any matters set forth in Schedule 7.6;
(n)    mortgage liens burdening a lessor’s interest in the Conveyed Interests in respect of mortgages that (i)  post-date the creation of the applicable Lease or (ii) pre-date the creation of the applicable Lease and (A) is not in foreclosure proceedings of which Seller has received service or written notice or, to Seller’s Knowledge, is not in default, or (B) has been subordinated to the applicable Lease; 
(o)    the terms and conditions of all Applicable Contracts if the net cumulative effect of such Applicable Contracts (i) does not reduce the Net Revenue Interest of Seller with respect to any Lease identified on Exhibit A or Well identified on Exhibit B to an amount less than the Net Revenue Interest set forth for that Lease on Exhibit A or that Well on Exhibit B, (ii) does not obligate Seller to bear a Working Interest with respect to any Well identified on Exhibit B in any amount greater than the Working Interest set forth on Exhibit B for that Well (unless the Net 

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Revenue Interest for that Well is greater than the Net Revenue Interest set forth on Exhibit B in the same or greater proportion as any increase in such Working Interest), and (iii) does not operate to reduce (or increase, as a result of an increased Working Interest unless the Net Revenue Interest for that Lease is greater than the Net Revenue Interest set forth on Exhibit A in the same or greater proportion to the increase in such Working Interest) the Net Acres of Seller with respect to any Lease  identified on Exhibit A to an amount less (or greater, as set forth in the preceding parenthetical) than the Net Acres set forth for that Lease on Exhibit A for the Eagle Ford Formation; and
(p)    all other Encumbrances, defects and irregularities in title affecting the Conveyed Interests that are of a nature customarily accepted by prudent purchasers of oil and gas properties and that individually or in the aggregate (i) do not do not materially impair the ownership, operation or use of the Conveyed Interests, (ii) do not reduce the Net Revenue Interest of Seller with respect to any Lease identified on Exhibit A or Well identified on Exhibit B to an amount less than the Net Revenue Interest for that Lease set forth on Exhibit A or that Well set forth on Exhibit B, (iii) do not obligate Seller to bear a Working Interest with respect to any Well identified on Exhibit B, in any amount greater than the Working Interest set forth on Exhibit B for that Well (unless the Net Revenue Interest for that Well is greater than the Net Revenue Interest set forth on Exhibit B in the same or greater proportion as any increase in such Working Interest); and (iv) does not operate to reduce (or increase, as a result of an increased Working Interest unless the Net Revenue Interest for that Lease is greater than the Net Revenue Interest set forth on Exhibit A in the same or greater proportion to the increase in such Working Interest) the Net Acres of Seller with respect to any Lease  identified on Exhibit A to an amount less (or greater, as set forth in the preceding parenthetical) than the Net Acres set forth for that Lease on Exhibit A for the Eagle Ford Formation. 
“Person” means any individual, firm, corporation, company, partnership (general and limited), limited liability company, joint venture, association, trust, estate, unincorporated organization, Governmental Authority or any other entity.
“Personal Property” has the meaning set forth in Section 2.1(i).
“Phase I Environmental Site Assessment” means an environmental site assessment performed pursuant to ASTM Standard E1527, or any similar environmental assessment that does not involve any invasive, sampling or testing activities (other than NORM surveys using a “Geiger Counter,” which, notwithstanding anything to the contrary, will be permitted as part of a Phase I Environmental Site Assessment).
“Phase II ESA” has the meaning set forth in Section 4.1(b).
“Phase II Request” has the meaning set forth in Section 4.1(b).
“Pipeline Imbalance” means any marketing imbalance between the quantity of Hydrocarbons attributable to the Conveyed Interests required to be delivered by Seller under any Contract relating to the purchase and sale, gathering, transportation, storage, processing (including any production handling and processing at a separation facility) or marketing of Hydrocarbons and the quantity of Hydrocarbons attributable to the Conveyed interests actually delivered by Seller pursuant to the relevant Contract, together with any appurtenant rights and obligations concerning 

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production balancing at the delivery point into the relevant sale, gathering, transportation, storage or processing facility.  
“Pipeline Systems” has the meaning set forth in Section 2.1(g).
“Preferential Purchase Right” has the meaning set forth in Section 7.9.
“Preliminary Settlement Statement” has the meaning set forth in Section 3.5.
“Property” or “Properties” has the meaning set forth in Section 2.1(d).
“Purchase Price” has the meaning set forth in Section 3.1.
“Records” has the meaning set forth in Section 2.1(l).
“Refundable Amount” has the meaning set forth in Section 3.6(b).
“Release” means any depositing, spilling, leaking, pumping, pouring, placing, emitting, discarding, abandoning, emptying, discharging, injecting, escaping, leaching, dumping or disposing of any Hazardous Substances into the environment.
“Remediation” means, with respect to an Environmental Condition, the implementation and completion of any remedial, removal, response, construction, closure, disposal or other corrective actions, including monitoring, to the extent but only to the extent required under Environmental Laws to correct or remove such Environmental Condition.
“Remediation Amount” means, with respect to an Environmental Condition, the cost (net to Seller’s interest prior to the consummation of the transactions contemplated by this Agreement) of the most cost-effective Remediation of such Environmental Condition allowed under Environmental Laws that allows the use of the affected Conveyed Interest for Hydrocarbon production. 
“Required Consent” has the meaning set forth in Section 5.5(b)(i).
“Representative Services” has the meaning set forth in Section 9.9.
“Rights-of-Way” has the meaning set forth in Section 2.1(h).
“Scheduled Closing Date” has the meaning set forth in Section 12.1.
“SEC” has the meaning set forth in Section 9.11(a).
“SEC Documents” has the meaning set forth in Section 9.11(a)
“Securities Act” has the meaning set forth in Section 9.11(a).
“Seller” has the meaning set forth in the first paragraph herein.

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“Seller Indemnified Parties” has the meaning set forth in Section 13.3.
“Seller Parties” has the meaning set forth in Section 9.9.  
“Special Warranty” has the meaning set forth in Section 5.2(a).
“Special Warranty Notice” and “Special Warranty Notices” have the meaning set forth in Section 5.2(b)(i).
“Specified Obligations” has the meaning set forth in Section 13.1(b).
“Specified Representations” means the representations and warranties in Sections 7.1, 7.2, 7.3 (other than clause (b) with respect to Applicable Contracts), 7.5, 7.12 and 7.13.
“Straddle Period” means any Tax period beginning before and ending on or after the date on which the Effective Time occurs.
“Subject Employee” has the meaning set forth in Section 9.7.
“Subject Properties” has the meaning set forth in Section 2.1.
“Surface Deed” means the surface deed pertaining to the applicable Surface Fee Interests, substantially in the form attached to this Agreement as Exhibit J.
“Surface Fee Interests” has the meaning set forth in Section 2.1(f).
“Survival Period” has the meaning set forth in Section 5.2(b)(i).
“Suspense Transfer Date” has the meaning set forth in Section 9.8.
“Tag Interests” has the meaning set forth in Section 9.9.  
“Tag Parties” has the meaning set forth in Section 9.9.  
“Tag Rights” has the meaning set forth in Section 9.9.  
“Tag Seller Party” has the meaning set forth in Section 9.9.  
“Tank Bottoms” means a mixture of Hydrocarbons, water and other substances that is concentrated at the bottom of storage facilities included in the Conveyed Interests that is not merchantable (including basic sediment and water or “BS&W”).
“Taxes” means any taxes, assessments and other governmental charges imposed by any Governmental Authority, including income, profits, gross receipts, employment, stamp, occupation, premium, alternative or add‐on minimum, ad valorem, real property, personal property, transfer, real property transfer, value added, sales, use, customs, duties, capital stock, franchise, excise, withholding, social security (or similar), unemployment, disability, payroll, windfall profit, severance, production, estimated or other tax, including any interest, penalty or addition thereto. 

APPENDIX I
PAGE 14

“Taxing Authority” means, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision, including any governmental or quasi-governmental entity or agency that imposes, or is charged with collecting, social security or similar charges or premiums.
“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof, filed with or submitted to, or required to be filed with or submitted to, any Governmental Authority.
“Tax Settlement” means that Agreement of Appraised Value between Devon Energy Production Company, L.P. and the DeWitt County Appraisal District dated April 25, 2017.

“Third Party” means any Person other than a Party or an Affiliate of a Party.
“Third Party Claim” has the meaning set forth in Section 13.7(b).
“Title Arbitrator” has the meaning set forth in Section 5.3(j).
“Title Benefit” means (a) with respect to each Well identified on Exhibit B, any right, circumstance or condition that operates (i) to increase the Net Revenue Interest of Seller with respect to the currently producing formation for such Well (during its productive life) above that shown for such Well on Exhibit B, to the extent the same does not cause an increase in Seller’s Working Interest therein above that shown on Exhibit B, or (ii) to decrease the Working Interest of Seller with respect to the currently producing formation for such Well (during its productive life) below that shown for such Well on Exhibit B, to the extent the same does not cause a decrease in Seller’s Net Revenue Interest therein below that shown on Exhibit B; and (b) without duplication, with respect to each Lease set forth on Exhibit A, any right, circumstance, or condition that operates to (i) increase the Net Revenue Interest of Seller (with respect to the Eagle Ford Formation, throughout such Lease’s duration) above that shown for such Lease on Exhibit A to the extent the same does not cause a greater than proportionate increase in Seller’s Working Interest therein above that shown on Exhibit A, or (ii) increase the Net Acres of Seller in any Lease (A) as a result of an increase in gross acres or mineral interest covered thereby (with respect to the Eagle Ford Formation, throughout such Lease’s duration)  above that shown for such Lease in Exhibit A and (B) as a result of an increase in Working Interest covered thereby (with respect to the Eagle Ford Formation, throughout such Lease’s duration) above that shown for such Lease in Exhibit A that is accompanied by at least a proportionate increase in Seller’s Net Revenue Interest therein.
“Title Benefit Amount” means an amount equal to the increase in the Allocated Value for each Title Benefit Property, as determined pursuant to Section 5.3(h) and/or Section 5.3(j). 
“Title Benefit Notice” has the meaning set forth in Section 5.3(b).
“Title Benefit Property” has the meaning set forth in Section 5.3(b).

APPENDIX I
PAGE 15

“Title Defect” means, (i) with respect to each Well set forth on Exhibit B, any Encumbrance, defect, or other matter that causes Seller not to have Defensible Title in and to such Well solely with respect to the currently producing formation for such Well, and (ii) without duplication, with respect to each Lease set forth on Exhibit A, any Encumbrance, defect, or other matter that causes Seller not to have Defensible Title in and to such Leases solely with respect to the Eagle Ford Formation; provided that, in each case, the following shall not be considered Title Defects:
(a)    defects arising out of the lack of corporate or other entity authorization unless Buyer provides affirmative evidence that such corporate or other entity action was not authorized and results in another Person’s actual and superior claim of title to the relevant Conveyed Interest;
(b)    defects based on a gap in Seller’s chain of title in the federal, state, or county records or other records of a Governmental Authority as to the Conveyed Interests in the Leases, unless Buyer affirmatively shows such gap to exist in such records by an abstract of title, title opinion or landman’s title chain, which documents (if any) shall be included in a Title Defect Notice;
(c)    defects based upon the failure to record any federal or state Leases or any assignments of interests in such Leases in any applicable county records, provided such Leases or assignments (i) were properly filed in the applicable Governmental Authority’s office or are otherwise reflected in the records of the applicable Governmental Authority’s office and (ii) are not required by the applicable Governmental Authority lessor to be recorded in the real property or other county records of the county in which the applicable Conveyed Interest is located;
(d)    defects based on the failure to recite marital status in a document or omission of successors or heirship or estate proceedings, unless Buyer provides affirmative evidence that such failure or omission could reasonably result in another Person’s superior claim of title;
(e)    defects that have been cured by applicable Laws of limitations or prescription;
(f)    any Encumbrance or loss of title resulting from Seller’s conduct of business in accordance with Section 9.1 of this Agreement;
(g)    defects based upon the exercise of any Preferential Purchase Rights or failure to obtain any Consents in connection with the transaction contemplated hereby;
(h)    defects arising from any change in applicable Law after the Execution Date, including changes that would raise the minimum landowner royalty;
(i)    defects arising from any prior oil and gas lease relating to the lands covered by a Lease not being surrendered of record, unless Buyer provides affirmative evidence that such prior oil and gas lease is still in effect and results in another Person’s actual and superior claim of title to the Conveyed Interests in the relevant Lease or Well;
(j)    defects that affect only which Person has the right to receive royalty payments rather than the amount or the proper payment of such royalty payment;

APPENDIX I
PAGE 16

(k)    defects based solely on (i) lack of information in Seller’s files, if such information is otherwise available to Buyer or is matter of public record or (ii) Tax assessment, Tax payment or similar records (or the absence of such activities or records), unless Buyer provides affirmative evidence of a Tax lien against Seller recorded in the county records of the relevant county; 
(l)    defects or irregularities that would customarily be waived by a reasonable owner or operator of oil and gas properties;
(m)    defects arising out of lack of survey, unless a survey is expressly required by applicable Laws;
(n)    defects or irregularities resulting from liens, production payments, or mortgages that have expired by their own terms or the enforcement of which are barred by applicable statutes of limitation; 
(o)    the expiration of any Lease set forth on Schedule 7.17 pursuant to the express terms thereof and not a result of a breach by Seller of its obligations under this Agreement;
(p)    such Title Defects that Buyer has expressly waived;
(q)    decreases in the Net Revenue Interest of Seller with respect to any Lease identified on Exhibit A or Well  identified on Exhibit B  in connection with those operations in which Seller or its successors or assigns may from and after the Execution Date elect to be a non‐consenting co‐owner provided that Seller has obtained Buyer’s prior written consent to such election;
(r)    decreases in the Net Revenue Interest of Seller with respect to any Lease identified on Exhibit A or Well identified on Exhibit B resulting from the establishment or amendment from and after the Execution Date of drilling and spacing units, pooling orders or pooled units, unitization agreements, communitization agreements, or other units provided that Seller has obtained Buyer’s prior written consent thereto;
(s)    increases in the Working Interest of Seller with respect to any Well identified on Exhibit B, resulting from contribution requirements with respect to defaulting co‐owners under applicable operating agreements;
(t)    with respect to any interest in the Conveyed Interests acquired through compulsory pooling, failure of the records of any Governmental Authority to reflect Seller as the owner of any Conveyed Interests, unless Buyer provides affirmative evidence of a superior claim of title by a Third Party as a result of such failure; 
(u)    defects or irregularities that are cured or for which there is a rebuttable presumption that such defects or irregularities have been cured, in each case, pursuant to the applicable title examination standards or applicable Law, unless Buyer provides affirmative evidence of a superior claim of title by a Third Party as a result of such defect or irregularity; and
(v)    any matter described in Exhibit H.

APPENDIX I
PAGE 17

“Title Defect Amount” has the meaning set forth in Section 5.3(g).
“Title Defect Claim Date” means 5:00 p.m. (Central Time) on the date that is 45 days after the Execution Date. 
“Title Defect Notice” and “Title Defect Notices” have the meaning set forth in Section 5.3(a).
“Title Defect Property” has the meaning set forth in Section 5.3(a).
“Title Disputes” has the meaning set forth in Section 5.3(j).
“Title Indemnity Agreement” has the meaning set forth in Section 5.3(d)(ii).
“Top Leases” means any oil and gas lease, oil, gas and mineral lease or other leasehold, covering any lands already covered by another Lease or Unit, that is not currently effective but that will come into effect at the time at which such Lease or Unit expires or is terminated.
“Transaction Documents” means those documents executed pursuant to or in connection with this Agreement.
“Transfer Taxes” has the meaning set forth in Section 15.2(d).
 “Transition Services Agreement” has the meaning set forth in Section 9.10.
“Treasury Regulations” means the regulations promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Code.  All references herein to sections of the Treasury Regulations shall include any corresponding provision or provisions of succeeding, similar, substitute, proposed or final Treasury Regulations.
“Units” has the meaning set forth in Section 2.1(d).
“Well Imbalance” means any imbalance at the wellhead between the amount of Hydrocarbons produced from a Well and allocated to the interests of Seller therein and the shares of production from the relevant Well to which Seller was entitled, together with any appurtenant rights and obligations concerning future in kind and/or cash balancing at the wellhead.
“Wells” has the meaning set forth in Section 2.1(b).
“Working Interest” means, with respect to any Lease identified on Exhibit A (limited, however, to the Eagle Ford Formation) or Well identified on Exhibit B (limited, however, with respect to each Well to the currently producing formation), the interest (expressed as a percentage or a decimal) that is burdened with the obligation to bear and pay costs and expenses of maintenance, development and operations for that Lease or Well, but without regard to the effect of any Burdens.

APPENDIX I
PAGE 18

DISCLOSURE SCHEDULES
Inclusion of a matter on a Schedule to this Agreement in relation to a representation or warranty which addresses matters having a material adverse effect shall not be deemed an indication that such matter does or does not, or may or may not, have a material adverse effect.  Likewise, the inclusion of a matter on a Schedule to this Agreement in relation to a representation or warranty shall not be deemed an indication that such matter necessarily would or would not, or may or may not, breach such representation or warranty absent its inclusion on such Schedule.  Matters reflected in the Schedules to this Agreement, including specifications of the Conveyed Interests, are not necessarily limited to matters required by this Agreement to be reflected in the Schedules.  Such additional matters are set forth for information purposes only, do not necessarily include other matters of a similar nature, and shall not expand the scope of the representations and warranties set forth in this Agreement.
Any fact or item which is clearly and conspicuously disclosed on any Schedule to this Agreement in such a way as to make its relevance or applicability to information called for by another Schedule or other Schedules to this Agreement reasonably apparent shall be deemed to be disclosed on such other Schedule or Schedules, as the case may be, notwithstanding the omission of a reference or cross-reference thereto.
Each of the Schedules to this Agreement is qualified in its entirety by reference to the specific provisions of this Agreement to which each such Schedules applies, and is not intended to constitute, and shall not be construed as constituting, representations or warranties of Seller, except as and to the extent provided in this Agreement.

DISCLOSURE SCHEDULESExhibit

EXHIBIT 10.1

PURCHASE AND SALE AGREEMENT

BETWEEN

EACH PARTY LISTED AS A “SELLER” ON SCHEDULE I

AS SELLER

EACH PARTY LISTED AS AN “EXISTING OPERATOR” ON SCHEDULE I

AS EXISTING OPERATOR

AND

EACH PARTY LISTED AS A “PURCHASER” ON SCHEDULE I

AS PURCHASER

TABLE OF CONTENTS
	
					
	ARTICLE I DEFINED TERMS
	1
	

	 
	 
	 
	 

	ARTICLE II PURCHASE AND SALE & PURCHASE PRICE
	1
	

	 
	 
	 
	 

	 
	2.1
	Purchase and Sale
	1
	

	 
	 
	 
	 

	 
	2.2
	Purchase Price
	2
	

	 
	 
	 
	 

	 
	2.3
	Escrow Provisions
	3
	

	 
	 
	 
	 

	ARTICLE III PURCHASER DILIGENCE/PROPERTY CONTRACTS
	4
	

	 
	 
	 
	 

	 
	3.1
	Seller Deliveries
	4
	

	 
	 
	 

	ARTICLE IV DUE DILIGENCE; TITLE
	5
	

	 
	 
	 
	 

	 
	4.1
	Inspection of the Property
	5
	

	 
	 
	 
	 

	 
	4.2
	Title Documents
	7
	

	 
	 
	 
	 

	 
	4.3
	Permitted Exceptions
	7
	

	 
	 
	 
	 

	 
	4.4
	Existing Security Documents/Monetary Liens
	8
	

	 
	 
	 
	 

	 
	4.5
	Title Review and Objection; Subsequently Disclosed Exceptions
	8
	

	 
	 
	 
	 

	 
	4.6
	Occupancy Rates
	9
	

	 
	 
	 
	 

	ARTICLE V CLOSING
	10
	

	 
	 
	 
	 

	 
	5.1
	Closing Date
	10
	

	 
	 
	 
	 

	 
	5.2
	Seller and Existing Operator Closing Deliveries
	10
	

	 
	 
	 
	 

	 
	5.3
	Purchaser Closing Deliveries
	12
	

	 
	 
	 
	 

	 
	5.4
	Originals; Document Delivery
	13
	

	 
	 
	 
	 

	 
	5.5
	Closing Prorations and Adjustments
	13
	

	 
	 
	 
	 

	 
	5.6
	Post-Closing Adjustments
	17
	

	 
	 
	 
	 

	ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER
	18
	

	
					
	 
	6.1
	Seller’s Representations
	18
	

	 
	 
	 
	 

	 
	6.2
	Representations and Warranties of Purchaser
	30
	

	 
	 
	 
	 

	ARTICLE VII ADDITIONAL COVENANTS/AGREEMENTS OF SELLER AND PURCHASER
	32
	

	 
	 
	 
	 

	 
	7.1
	Interim Operations
	32
	

	 
	 
	 
	 

	 
	7.2
	Healthcare Approvals
	32
	

	 
	 
	 
	 

	 
	7.3
	Other Consents and Satisfaction of Conditions
	33
	

	 
	 
	 
	 

	 
	7.4
	Taxes.
	33
	

	 
	 
	 
	 

	 
	7.5
	MSA.
	34
	

	 
	 
	 
	 

	 
	7.6
	No Shop.
	34
	

	 
	 
	 
	 

	 
	7.7
	No Disposition of Property.
	34
	

	 
	 
	 
	 

	 
	7.8
	Financial Information.
	34
	

	 
	 
	 
	 

	 
	7.9
	Reserved.
	34
	

	 
	 
	 
	 

	 
	7.10
	Reserved.
	34
	

	 
	 
	 
	 

	 
	7.11
	Resident Records.
	34
	

	 
	 
	 
	 

	 
	7.12
	Recoupment Claims.
	35
	

	 
	 
	 
	 

	 
	7.13
	Surveys; Resolution of Audit Deficiencies; Cooperation.
	35
	

	 
	 
	 
	 

	 
	7.14
	Medicaid Provider Agreements.
	35
	

	 
	 
	 
	 

	 
	7.15
	Residents Rents; Accounts Receivable.
	36
	

	 
	 
	 
	 

	 
	7.16
	Reserved.
	37
	

	 
	 
	 
	 

	 
	7.17
	Reserved.
	37
	

	 
	 
	 
	 

	 
	7.18
	Pre-Closing Access.
	38
	

	 
	 
	 
	 

	 
	7.19
	Reserved.
	38
	

	 
	 
	 
	 

	 
	7.20
	Approvals and Consents.
	38
	

	 
	 
	 
	 

	 
	7.21
	Reserved.
	38
	

ii

	
					
	 
	7.22
	Information Systems, Records in Electronic Form, Software and Data
	38
	

	 
	 
	 
	 

	 
	7.23
	Changes in Representations and Warranties.
	38
	

	 
	 
	 
	 

	 
	7.24
	Further Documentation.
	39
	

	 
	 
	 
	 

	 
	7.25
	Operations Transfer.
	39
	

	 
	 
	 
	 

	ARTICLE VIII CONDITIONS PRECEDENT TO CLOSING
	39
	

	 
	 
	 
	 

	 
	8.1
	Purchaser’s Conditions to Closing
	39
	

	 
	 
	 
	 

	 
	8.2
	Seller’s Conditions to Closing
	41
	

	 
	 
	 

	ARTICLE IX INDEMNIFICATION & SURVIVAL PROVISIONS
	42
	

	 
	 
	 
	 

	 
	9.1
	Effective Date; Survival
	42
	

	 
	 
	 
	 

	 
	9.2
	Indemnification by Seller
	43
	

	 
	 
	 
	 

	 
	9.3
	Indemnification by Purchaser
	43
	

	 
	 
	 
	 

	 
	9.4
	Limitations on Indemnification
	44
	

	 
	 
	 
	 

	 
	9.5
	Indemnification Procedures
	44
	

	 
	 
	 
	 

	 
	9.6
	Tax Treatment
	47
	

	 
	 
	 
	 

	 
	9.7
	Exclusive Remedy
	47
	

	 
	 
	 
	 

	 
	9.8
	Manner of Payment
	48
	

	 
	 
	 
	 

	 
	9.9
	Brokerage
	48
	

	 
	 
	 
	 

	ARTICLE X DEFAULT AND REMEDIES
	48
	

	 
	 
	 
	 

	 
	10.1
	Purchaser Default
	48
	

	 
	 
	 
	 

	 
	10.2
	Seller Default
	49
	

	 
	 
	 
	 

	 
	10.4
	Post-Closing Default
	50
	

	 
	 
	 
	 

	ARTICLE XI CASUALTY; EMINENT DOMAIN
	50
	

	 
	 
	 
	 

	 
	11.1
	Damage
	50
	

	 
	 
	 
	 

	 
	11.2
	Closing
	51
	

	 
	 
	 
	 

	 
	11.3
	Repairs
	51
	

iii

	
					
	 
	11.4
	Eminent Domain
	51
	

	 
	 
	 
	 

	ARTICLE XII MISCELLANEOUS
	52
	

	 
	 
	 
	 

	 
	12.1
	Binding Effect of Agreement
	52
	

	 
	 
	 
	 

	 
	12.2
	Exhibits; Schedules; Annexes
	52
	

	 
	 
	 
	 

	 
	12.3
	Assignability
	52
	

	 
	 
	 
	 

	 
	12.4
	Captions
	52
	

	 
	 
	 
	 

	 
	12.5
	Number and Gender of Words
	52
	

	 
	 
	 
	 

	 
	12.6
	Notices
	52
	

	 
	 
	 
	 

	 
	12.7
	Governing Law and Venue
	54
	

	 
	 
	 
	 

	 
	12.8
	Entire Agreement
	54
	

	 
	 
	 
	 

	 
	12.9
	Amendments
	54
	

	 
	 
	 
	 

	 
	12.10
	Severability
	54
	

	 
	 
	 
	 

	 
	12.11
	Multiple Counterparts/Facsimile Signatures
	54
	

	 
	 
	 
	 

	 
	12.12
	Construction
	55
	

	 
	 
	 
	 

	 
	12.13
	Confidentiality/Press Releases
	55
	

	 
	 
	 
	 

	 
	12.14
	Time of the Essence
	56
	

	 
	 
	 
	 

	 
	12.15
	Waiver
	56
	

	 
	 
	 
	 

	 
	12.16
	Time Periods
	56
	

	 
	 
	 
	 

	 
	12.17
	No Personal Liability of Officers, Trustees or Directors
	56
	

	 
	 
	 
	 

	 
	12.18
	No Recording
	56
	

	 
	 
	 
	 

	 
	12.19
	Relationship of Parties
	56
	

	 
	 
	 
	 

	 
	12.20
	Reserved
	56
	

	 
	 
	 
	 

	 
	12.21
	Multiple Parties
	56
	

	 
	 
	 
	 

	 
	12.22
	WAIVER OF JURY TRIAL
	57
	

	 
	 
	 
	 

	 
	12.23
	Appointment of Seller’ Agent
	57
	

iv

	
					
	 
	12.24
	Attorneys’ Fees
	58
	

	 
	 
	 
	 

	 
	12.3
	Reserved
	58
	

	 
	 
	 
	 

	 
	12.3
	Bulk Transfer Tax Clearance
	58
	

	 
	 
	 
	 

	 
	12.3
	Audit  58
	 

v

EXHIBITS AND SCHEDULES

EXHIBITS
	
		
	Exhibit A
	Legal Description

	Exhibit B
	Form of Indemnity Escrow Agreement

	Exhibit C
	Reserved

	Exhibit D
	Form of Bill of Sale

	Exhibit E
	Form of General Assignment and Assumption

	Exhibit F
	Form of Assignment and Assumption of Resident Agreements

	Exhibit G
	Form of Certification of Non-Foreign Status

	Exhibit H
	Reserved

	Exhibit I
	Form of Guaranty

	Exhibit J
	Form of Resident Notification

	Exhibit K
	Form of Access Agreement

	Exhibit L
	Property Contracts List

	Exhibit M
	Bring-Down Certificate

	Exhibit N
	Assigned Contracts

	Exhibit O
	Third-Party Reports

	Exhibit P
	Management Agreements

	Exhibit Q
	Other Seller Deliveries

	Exhibit R
	Non-Compete Agreement

SCHEDULES
	
		
	Schedule I
	Seller; Purchaser; Facility Names and Addresses

	Schedule II
	Separate Facilities

	Schedule 5.6
	Current Assessed Values

	Schedule 6.1.3
	Condemnation; Proceedings

	Schedule 6.1.7(b)
	Notices of Violations

	Schedule 6.1.8(b)
	Leased Personal Property

	Schedule 6.1.8(k)
	Commercial Leases

	Schedule 6.1.11
	Required Consents

	Schedule 6.1.12(a)
	Permits and Operating Licenses

	Schedule 6.1.12(b)
	Third Party Payor Programs

	Schedule 6.1.12(d)
	Deficiencies or Violations

	Schedule 6.1.12(g)
	Corporate Integrity Agreements

	Schedule 6.1.14
	Property Statements

	Schedule 6.1.15(a)
	Regulated Quantities of Hazardous Substances

	Schedule 6.1.15(b)
	Litigation Regarding Hazardous Substances

	Schedule 6.1.15(c)
	Notices Regarding Hazardous Substances

	Schedule 6.1.15(d)
	Noncompliance with Environmental Laws

	Schedule 6.1.15(e)
	Discharge of Hazardous Substances

	Schedule 6.1.15(f)
	Environmental Reports

	Schedule 6.1.15(h)
	Underground Storage Tanks

	Schedule 6.1.24
	Licensed Beds

vi

	
		
	Schedule 6.1.25
	Intellectual Property

	Schedule 6.1.29
	List of Insurance Policies

	Schedule 12.13-A
	Form of Representations Letter

	Schedule 12.27-B
	Form of Audit Letter

	Attachment 1.1
	Healthcare Approvals

ANNEXES
	
		
	Annex 1
	Defined Terms

vii

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (this “Agreement”) is made and entered into as of the 2nd day of August, 2017 (the “Effective Date”), by and among (i) each party listed as a “Seller” on Schedule I attached hereto and made a party hereof (individually or collectively, as the context requires, “Seller”), (ii) each party listed as “Existing Operator” on Schedule I attached hereto and made a party hereof (individually or collectively, as the context requires, “Existing Operator”), each of Seller and Existing Operator having a principal address at c/o Fortress Investment Group, 1345 Avenue of the Americas, New York, New York 10105 and (iii) each party listed as a “Purchaser” on Schedule I, having a principal address at c/o Griffin-American Healthcare REIT IV, Inc., 18191 Von Karman Avenue, Suite 300, Irvine, CA 92612 (individually or collectively, as the context requires, “Purchaser”).

NOW, THEREFORE, in consideration of the mutual covenants set forth herein, Seller and Purchaser hereby agree as follows:

RECITALS

Seller owns the real property identified on Schedule I, as more particularly described in Exhibit A attached hereto and made a part hereof, together with the Facilities (as hereinafter defined) located thereon and identified on Schedule I, together with certain other personal property, and each Seller leases same to an Existing Operator.  Existing Operator also owns certain tangible and intangible property relating to the use and operation of the Facility it leases from a Seller.  Seller and Existing Operator each desires to sell, and Purchaser desires to purchase, such real property, the Facilities and certain related property, on the terms and conditions set forth below.

ARTICLE I 
DEFINED TERMS

Unless otherwise defined herein, any term with its initial letter capitalized in this Agreement shall have the meaning set forth in Annex 1 attached hereto and made a part hereof. 

ARTICLE II 
PURCHASE AND SALE & PURCHASE PRICE 

2.1    Purchase and Sale.  Seller and Existing Operator each agrees to sell and convey the Property to Purchaser (or one or more entities formed, owned or controlled by Purchaser for the purpose of acquiring all or a portion of the Property) and Purchaser agrees (for itself or on behalf of those entities formed, owned or controlled by Purchaser for the purpose of acquiring all or a portion of the Property) to purchase the Property from Seller and Existing Operator, all in accordance with the terms and conditions set forth in this Agreement.  Notwithstanding anything to the contrary contained herein, Seller and Existing Operator shall not sell, assign, transfer, convey or deliver to Purchaser, and Purchaser shall not purchase, and the Property shall not include any of the Seller’s or Existing Operator’s right, title and interest in the Excluded Assets.  Upon Closing, neither Purchaser nor any Affiliate thereof shall assume any liabilities of Seller or Existing Operator in connection with the Facilities or the Transactions other than the Assumed Liabilities.  Seller and Existing Operator shall retain and discharge when 

1

due all liabilities and obligations of Seller and Existing Operator, respectively, and Purchaser is not responsible for and does not assume, and shall not have any obligation to pay, perform, satisfy or discharge any liability or obligation of any kind or nature, including, without limitation, any claims, lawsuits, liabilities, obligations or debts of Seller and/or Existing Operator, whether contractual, statutory, judicially created or constitutional, including, without limitation, malpractice or other tort claims, statutory, regulatory or administrative claims, penalties, taxes, fines, assessments, deficiencies and/or claims of state or federal agencies, whether civil or criminal, fraud-based claims, or claims of breach of contract, except to the extent expressly and unambiguously expressed herein to the contrary, that arises from, out of, or relates to Seller’s or Existing Operator’s ownership or operation of the Facilities or Property or any activity of Seller or Existing Operator prior to the Closing Date or conduct of Seller or Existing Operator after the Closing Date (“Excluded Liabilities”).  Without limiting the generality of the foregoing provisions, in no event shall the Assumed Liabilities include any obligations of Seller or Existing Operator relating to third-party payor programs, including, without limitation, any Governmental Programs, arising, accruing, or relating to the time period before the Closing Date. 

2.2    Purchase Price.  The total purchase price (“Purchase Price”) for the Property shall be an amount equal to Seventy Million and no/100 Dollars ($70,000,000), subject to prorations and/or adjustments required by this Agreement, payable by or on behalf of Purchaser as follows: 

2.2.1    Within three (3) Business Days following the execution of this Agreement, and as a condition to the effectiveness and enforceability of this Agreement, Purchaser shall deliver to the Los Angeles, California office of First American Title Insurance Company (“Escrow Agent” or “Title Company”) a deposit in the amount of One Million Seven Hundred Eight-Seven Thousand Two Hundred Thirty-Four and no/100 Dollars ($1,787,234.00) (together with income and interest accrued thereon, the “Deposit”) by wire transfer of immediately available funds.

2.2.2    The balance of the Purchase Price for the Property, subject to prorations and/or adjustments required by this Agreement, shall be paid to and received by Escrow Agent by wire transfer of immediately available funds no later than 10:00 a.m. (Pacific) on the Closing Date, and Escrow Agent shall disburse all funds it receives from the parties in connection with the Closing pursuant to the Closing Statement; provided, however, that a portion of such Purchase Price so paid to the Escrow Agent equal to One Million Seven Hundred Eight-Seven Thousand Two Hundred Thirty-Four and no/100 Dollars ($1,787,234.00) will be deposited into an escrow account for the eighteen (18) month period following the Closing Date as a non-exclusive source of funds to satisfy any Seller Indemnifiable Damages (together with the Indemnity Escrow provided for in Section 2.2.2 of the Separate PSA, the “Indemnity Escrow”), it being understood that one hundred percent (100%) of the Indemnity Escrow then remaining in such escrow account, less the amount of any Seller Indemnifiable Damages (defined below) against the Indemnity Escrow that are outstanding as of said date or other amounts reserved in respect of any claim for indemnification pursuant to Article IX, will be released to Seller within five (5) Business Days after the eighteen (18) month anniversary of the Closing.  The conditions for the release or distribution of the Indemnity Escrow are more particularly set forth in that certain Indemnity Escrow Agreement, which shall be executed and delivered by Purchaser, 

2

Seller and the Escrow Agent at the Closing, in the form attached hereto as Exhibit B (the “Indemnity Escrow Agreement”).

2.2.3    Seller shall be responsible for any prepayment penalties or fees associated with the pay-off of any debt encumbering the Land or any of the other Property.

2.2.4     Solely for the purposes of calculating real estate transfer taxes or similar taxes imposed with respect to the Transactions, or as otherwise necessary or appropriate in connection with the consummation of the Transactions and the performance of each party’s obligations under this Agreement, each of Seller, Existing Operator and Purchaser shall agree prior to Closing to allocations of the Purchase Price and Deposit between and among the Facilities.  Notwithstanding the foregoing, each of Seller, Existing Operator and Purchaser agrees to file federal, state and local Tax Returns based on each party’s own determination of the proper allocations of the Purchase Price, each bearing its own consequences of any discrepancies.

2.2.5    All currency amounts set forth in this Agreement are expressed in United States Dollars.

2.2.6    The provisions of this Section 2.2 shall survive the Closing.

2.3    Escrow Provisions.  Escrow Agent has agreed to hold the Deposit and the Indemnity Escrow and act as escrow agent in connection with the Transactions in accordance with the terms of this Agreement, the Indemnity Escrow Agreement, and any other escrow agreement or instructions executed by Escrow Agent and the parties hereto.

(a)    Upon receipt of the Deposit, Escrow Agent shall deliver to Seller and Purchaser written notice confirming Escrow Agent’s receipt of the Deposit, the date on which Escrow Agent received the Deposit and that the Deposit has been deposited as required by this Agreement.  Escrow Agent shall invest the Deposit in a money market account reasonably satisfactory to Purchaser, and shall promptly provide Purchaser and Seller with confirmation of the investments made.

(b)    If Closing occurs, Escrow Agent shall deliver the Deposit to Seller at Closing and the same shall be credited against the Purchase Price.  If for any reason Closing does not occur, Escrow Agent shall deliver the Deposit to Seller or Purchaser only upon receipt of a written demand therefor from such party, except where this paragraph expressly provides for notice only from Purchaser. Subject to the last sentence of this clause (b), if for any reason the Closing does not occur and either party makes a written demand (the “Demand”) upon the Escrow Agent for payment of the Deposit, the Escrow Agent shall give written notice to the other party of the Demand within one Business Day after receipt of the Demand.  If the Escrow Agent does not receive a written objection from the other party to the proposed payment within five (5) Business Days after the giving of such notice by Escrow Agent, the Escrow Agent is hereby authorized to make the payment set forth in the Demand.  If the Escrow Agent does receive such written objection within such period, the Escrow Agent shall continue to hold such amount until otherwise directed by written instructions signed by Seller and Purchaser or a final judgment of a court.  Notwithstanding the foregoing provisions of this clause (b) if Purchaser 

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delivers a notice to Escrow Agent stating that Purchaser has terminated this Agreement on or prior to the expiration of the Due Diligence Period, a copy of which notice shall be simultaneously delivered to Seller and Existing Operator, then Escrow Agent shall immediately return the Deposit to Purchaser without the necessity of delivering any notice to, or receiving any notice from Seller, and Escrow Agent shall do so notwithstanding any objection by Seller.  

(c)    The parties acknowledge that the Escrow Agent is acting solely as a stakeholder at their request and for their convenience, that the Escrow Agent shall not be deemed to be the agent of either of the parties, and that the Escrow Agent shall not be liable to either of the parties for any action or omission on its part taken or made in good faith, and not in disregard of this Agreement, but shall be liable for its negligent acts and for any liabilities (including reasonable attorneys’ fees, expenses and disbursements) incurred by Seller or Purchaser resulting from the Escrow Agent’s mistake of law respecting the Escrow Agent’s scope or nature of its duties.  Seller and Purchaser shall jointly and severally indemnify and hold the Escrow Agent harmless from and against all liabilities (including reasonable attorneys’ fees, expenses and disbursements) incurred in connection with the performance of the Escrow Agent’s duties hereunder, except with respect to actions or omissions taken or made by the Escrow Agent in bad faith, in disregard of this Agreement or involving negligence on the part of the Escrow Agent.  The Escrow Agent has executed this Agreement in the place indicated on the signature page hereof in order to confirm that the Escrow Agent has received and shall hold the Deposit in escrow, and shall disburse the Deposit pursuant to the provisions of this Section 8. 

(d)    Purchaser and Seller, together, shall have the right to terminate the appointment of Escrow Agent hereunder by giving to it notice of such termination, specifying the date upon which such termination shall take effect and designating a replacement Escrow Agent, who shall sign a counterpart of this Agreement. Upon demand of such successor Escrow Agent, the Deposit shall be turned over and delivered to such successor Escrow Agent, who shall thereupon be bound by all of the provisions hereof.  Escrow Agent may resign at will and be discharged from its duties or obligations hereunder by giving notice in writing of such resignation specifying a date when such resignation shall take effect; provided, however, that (i) prior to such resignation a substitute escrow agent is approved in writing by Seller and Purchaser, which approval shall not be unreasonably withheld or delayed, or (ii) Escrow Agent shall deposit the Deposit with a court of competent jurisdiction.  After such resignation, Escrow Agent shall have no further duties or liability hereunder.

ARTICLE III 
PURCHASER DILIGENCE/PROPERTY CONTRACTS

3.1    Seller Deliveries. Seller, Existing Operator and Manager has delivered, or otherwise made available, to Purchaser, or within ten (10) Business Days following the execution of this Agreement Seller and Existing Operator will (and Seller will use commercially reasonable efforts to cause Manager to) deliver or make available to Purchaser (including by providing at the Property or by granting access to the Data Site to Purchaser), each of the following items set forth in this Article III (all diligence information contemplated by this Article III, collectively, the “Seller’s Deliveries”) to the extent such items are in Seller’s, Existing Operator’s or Manager’s control or possession or available to Seller, Existing Operator or Manager:

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3.1.1    Title/Survey.  Each Title Commitment and the related Title Documents (as such terms are defined in Section 4.2) and the most recent survey in Seller’s possession with respect to the Land and Improvements for each of the Facilities (collectively, the “Existing Surveys”).

3.1.2      Property Contracts.  A copy of each of the Property Contracts.

3.1.3      Rent Roll.  A Rent Roll for each Facility.

3.1.4     Licensing Surveys. A copy of all Licensing Surveys completed from and after August 1, 2013 which are currently in the possession or reasonable control of Seller.

3.1.5    Property Statements.  A copy of the Property Statements for each of the Facilities.

3.1.6    Resident Agreements.  The form(s) of Resident Agreement(s) (including all addendum and annexes) used at each of the Facilities (collectively, the “Resident Agreement Form”). 

3.1.7    Operating Licenses.  A copy of the Operating Licenses and other material required Permits owned or held by or issued to Seller or Manager relating to the Facilities or the Property (or any portion thereof).

3.1.8    Third Party Reports.  The Third Party Reports listed on Exhibit O.

3.1.9    Facility Employees List.  A list of all property-level employees engaged in the operation of the Facilities (the “Facility Employees”), along with wage and status information, has been made available to Purchaser prior to the Effective Date.  Any PTO (as defined in the MTA) due at Closing pursuant to the MTA shall be included as a debit to Seller and a credit to Purchaser on the Closing Statement.

3.1.10    Other Seller Deliveries. To the extent available to, or in the control or possession of Seller, Existing Operator or any of their respective Affiliates or Manager, those other materials requested on the Purchaser’s due diligence request list attached as Exhibit Q.

ARTICLE IV 
DUE DILIGENCE; TITLE

4.1    Inspection of the Property.  

4.1.1.    From the Effective Date until the date that is forty-five (45) days following the Effective Date (the “Inspection Period”), and thereafter until the Closing or earlier termination of this Agreement, Purchaser and an Affiliate of Meridian Senior Living, LLC (“JV Partner”), and their respective Affiliates, and their and their respective Affiliates’ employees, representatives, agents, consultants, engineers, appraisers, counsel, accountants, independent contractors and other authorized representatives (collectively, the “Purchaser Parties”) may enter upon the Property, upon Seller’s prior consent, which consent may not be unreasonably withheld, conditioned or delayed, for the purposes of performing, at Purchaser’s 

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sole cost and expense, investigations, inspections, tests, surveys, studies and analyses thereon so that the Purchaser Parties will have the opportunity to conduct a comprehensive due diligence review of the Property and the businesses conducted thereon, including for the purpose of (i) reviewing Resident Agreement files (subject to confidentiality restrictions required by applicable law), (ii) meeting with and interviewing the Manager’s Facility Management personnel and such other personnel at each of the Facilities as Seller and Existing Operator may approve (such approval not to be unreasonably withheld, conditioned or delayed), and Seller and Existing Operator shall use commercially reasonable efforts to cause Manager to provide the Purchaser Parties with all such access.  Seller and Existing Operator shall, and shall use commercially reasonable efforts to cause Manager to, furnish such additional financial and operating data and other information that is in their or Manager’s control or possession (or which is available thereto) as the Purchaser Parties shall from time to time reasonably request.  Seller, Existing Operator and Manager shall each be entitled to have a representative present during the entry by any of the Purchaser Parties onto the Property and in all meetings, calls or other contacts or communications with the their respective personnel.  Purchaser shall (and shall cause each of the other Purchaser Parties to) at all times (x) not cause damage, loss, liability, cost or expense to Seller, any Facility (or any other portion of the Property) or any Resident or tenant of any Facility, and (y) not unreasonably interfere with or disturb Manager’s operations or any Resident or tenant of the Facility.  To the extent of any damage caused by Purchaser or any other Purchaser Party to any Facility or any other portion of the Property, Purchaser shall indemnify Seller from and against, and promptly reimburse Seller for, the cost of restoration of (or at Seller’s demand, promptly restore) such Facility to its condition immediately preceding Purchaser Parties’ entry onto the Property, and shall keep the Property free and clear of any mechanic’s liens or materialmen’s liens arising as a result of such entry, inspections and investigations.  Purchaser shall indemnify, defend, and hold Seller, Existing Operator, Manager and their respective Affiliates harmless for, from, and against any and all claims and liabilities, including costs and expenses for loss, injury to or death of any of the Purchaser Parties (waiving all limitations under workers’ compensation), and any loss, damage to or destruction of any property owned, leased or otherwise used by Seller, Existing Operator, Manager or others (including claims or liabilities for loss of use of any property) resulting from the entry of any of the Purchaser Parties upon the Property pursuant to this Section 4.1.1, provided that (i) such obligation shall be subject in all respects to recoveries received by or available to Seller, Existing Operator and Manager pursuant to policies of casualty insurance maintained by them, it being the intent of the parties that such policies shall be the first source of recovery for any casualty event, and (ii) Purchaser’s indemnification obligations under this Section 4.1.1 expressly excludes (A) any damage, claims, liability, losses or expenses caused by Seller, Existing Operator, Manager, or any of their agents, employees or representatives, (B) the mere discovery of or existence of any pre-existing condition on the Property (including, without limitation, any pre-existing environmental contamination), and (C) and consequential, punitive or special damages or lost profits.   Purchaser’s indemnity obligation set forth in this Section 4.1.1 shall survive the termination of this Agreement and Closing, and shall not be subject to the terms and limitations set forth in Article IX.

4.1.2    Purchaser shall have the right at any time prior to 5:00 p.m. (Pacific) on the day of the expiration the Inspection Period, in its sole and absolute discretion, to terminate this Agreement in its entirety for any reason or for no reason whatsoever.  If Purchaser fails to deliver to Seller a written notice exercising its right to terminate this Agreement pursuant to this 

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Section 4.1.2 prior to 5:00 p.m. (Pacific) on the day of the expiration the Inspection Period, then Purchaser shall be deemed to have waived such termination right and this Section 4.1.2 shall be of no further force and effect.  If Purchaser delivers to Seller a written election to terminate this Agreement pursuant to this Section 4.1.2 prior to 5:00 p.m. (Pacific) on the day of the expiration of the Inspection Period, the Escrow Agent shall promptly return the Deposit to Purchaser and this Agreement shall terminate automatically and be of no further force or effect and the parties hereto shall have no further obligation to the other except for those obligations specifically surviving the termination of this Agreement.  Notwithstanding any provision of this Agreement to the contrary: (i) a termination notice delivered pursuant to this Section shall be valid for all purpose if transmitted via facsimile, email or other electronic means to the facsimile number or email address referenced in Section 12.6 of this Agreement, and (ii) Escrow Agent is hereby directed to, and in all instances shall, promptly return the Deposit to Purchaser as directed in such termination notice without being required to obtain, and without obtaining, the consent of Seller or Existing Operator, it being the intent of the parties that a termination notice timely delivered pursuant to this Section shall be deemed valid.

4.2    Title Documents.  Prior to the Effective Date, Seller has caused to be delivered to Purchaser, with respect to each Facility, a standard form commitment or preliminary title report (each a “Title Commitment”), together with copies of all instruments identified as exceptions therein (together with each Title Commitment, collectively, the “Title Documents”).

4.3    Permitted Exceptions.  Each Deed delivered with respect to each of the Facilities and the related Property pursuant to this Agreement shall convey good and marketable fee simple title to the applicable Real Property, subject only to the following, all of which shall be deemed “Permitted Exceptions” with respect to such Facility and such related Property:

4.3.1    All matters shown in the Title Commitments and Title Documents and the Existing Surveys (including in any Title Updates, subject to the terms of Section 4.5), other than  the following: 

(a) judgment liens, tax liens (except for the lien of real estate taxes for the current year not yet due and payable as of the Closing Date, which shall be a Permitted Exception, subject to apportionment as provided elsewhere in this Agreement), broker’s liens, any mechanic’s, materialmen’s or similar liens, or any other liens which can be removed by the payment of a fixed and ascertainable sum of money (other than Permitted Spring Haven Liens (as defined below)), in each case to the extent not caused by Purchaser or Purchaser’s Consultants (each, a “Monetary Lien”), 

(b) the standard exception regarding the rights of parties in possession, except to the extent limited to those parties in possession pursuant to the Resident Agreements and the Commercial Leases existing as of the Closing Date, and 

(c) the standard exception pertaining to taxes and assessments, except to the extent limited to taxes and assessments for the current year not yet due and payable as of the Closing Date.

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4.3.2    All Resident Agreements; and all Commercial Leases existing as of the Closing Date that Purchaser elects in writing to assume; 

4.3.3    Applicable zoning and governmental regulations and ordinances; and

4.3.4    Any matters, defects in or objections to title to the Property, or title exceptions or encumbrances, arising by, through, under, on behalf of or due to the fault of Purchaser, its Affiliates or Purchaser’s Consultants.

4.3.5    Mechanic’s, materialmen’s or similar liens arising out of the Current Capital Repair of the Spring Haven Facility to the extent permitted under Section 3 of the Access Agreement (“Permitted Spring Haven Liens”).

Seller and Existing Operator shall transfer and convey all of their respective interests in and to the Operating Assets owned by each of them to or as directed by Purchaser, free and clear of all liens, encumbrances and adverse claims. 

4.4    Existing Security Documents/Monetary Liens.  It is understood and agreed that any deed of trust and/or mortgage recorded against the Property or any portion thereof which secures any indebtedness for borrowed money and/or any related security agreement or instrument with respect to such indebtedness (each, a “Mortgage”) shall not be deemed a Permitted Exception, and shall be paid off, satisfied, discharged and/or cured at or prior to Closing. In addition, Seller shall cause each Monetary Lien (other than Permitted Spring Haven Liens) to be Removed at or prior to Closing. If Seller fails or refuses to so Remove any Mortgage or Monetary Lien (other than Permitted Spring Haven Liens) against the Property at or prior to Closing, Purchaser may elect to satisfy same and deduct such costs from the Purchase Price.

4.5    Title Review and Objection; Subsequently Disclosed Exceptions.

4.5.1    Purchaser may order any updates, continuations of, and supplements to, any of the Title Commitments or Existing Surveys (each, a “Title Update”) at Purchaser’s sole cost and expense.  Purchaser shall instruct the Title Company and any surveyor to simultaneously deliver directly to Purchaser and Seller (and their respective counsel referenced in Section 12.6 of this Agreement) copies of each Title Update (including tax and departmental searches) ordered by Purchaser or otherwise issued by the Title Company or any surveyor, and copies of all underlying documentation referenced as an exception as soon as available.  

4.5.2    Before the expiration of the Inspection Period, Purchaser may furnish to Seller a written statement (the “Title Objection Notice”) specifying any defects in or objection to the title to and/or the survey of any of the Real Property (the “Objections”).  Seller shall notify Purchaser within five (5) Business Days after receipt of the Objections whether Seller will cure the Objections.  If Seller does not respond within said (5) Business Days day period, Seller shall be deemed to have elected not to cure the Objections.  In that case, or if Seller states in its written response to the Title Objection Notice that Seller will not cure the Objections, Purchaser shall have the right, by written notice given to Seller within five (5) Business Days after receipt of Seller’s notice, either to (a) waive the Objections and close title without abatement or reduction of the Purchase Price, or (b) terminate this Agreement and obtain a refund of the 

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Deposit, and if Purchaser fails to timely elect one of either subclause (a) or (b), Purchaser shall be deemed to have elected the waiver under subclause (a).  If Purchaser fails to deliver the Title Objection Notice to Seller before the end of the Inspection Period, then Purchaser shall be deemed to have elected to waive its right to make Objections (other than with respect to any New Exception as set forth in Section 4.5.3).  If Purchaser elects to terminate this Agreement by the aforementioned Title Objection Notice, the Deposit shall be immediately returned to Purchaser, and upon such return, except as expressly provided herein, this Agreement and all rights and obligations of the respective parties hereunder shall be null and void. 

4.5.3    If at any time following the end of the Inspection Period but prior to the Closing any Title Update discloses any additional item(s) (i) not caused by or the result of any act or omission or fault of Purchaser, Purchaser’s Affiliate(s) or any Purchaser Party and (ii) which were not disclosed in a prior Title Update previously delivered to Purchaser and which are not Permitted Exceptions (each, a “New Exception”), Purchaser shall have the right to send a notice to Seller within five (5) Business Days of its receipt of such Title Update specifying any defects in or objection to the title to and/or the survey of any of the Real Property (the “Update Objections”) and the terms of Section 4.5.2 shall apply with respect to any such Update Objections. 

4.5.4    Notwithstanding any provision of this Agreement to the contrary, neither Seller nor Existing Operator shall create, place, grant, convey, or otherwise voluntarily cause or otherwise consent to any liens, encumbrances or restrictions affecting the Real Property, or any part thereof, being created, suffered to be placed or recorded against the title to the Real Property, nor will Seller or Existing Operator during said period convey any interest in the Property to anyone other than Purchaser without Purchaser’s prior written consent, which consent Purchaser may withhold in its absolute discretion.  

4.6    Occupancy Rates.    Within five (5) Business Days of the end of the calendar month ending immediately prior to the expiration of the Inspection Period, Seller and/or Existing Operator shall deliver to Purchaser an updated Rent Roll for the Facilities and the Separate Facilities, considered as a whole (the “Aggregate Facilities”), together with a calculation of the average monthly occupancy rate of the Aggregate Facilities for the three-month period ending on the last day of such immediately preceding calendar month (the “Updated Average Occupancy Rate”).  In the event that the Updated Average Occupancy Rate of the Aggregate Facilities as set forth with such Rent Roll is more than 5% lower than the occupancy rate of the Aggregate Facilities calculated based upon the Rent Rolls for the Aggregate Facilities for the month ending immediately prior to the Effective Date, Purchaser shall have the right at any time prior to 5:00 p.m. (Eastern) on the fourteenth (14th) day following expiration of the Inspection Period (the “Rent Roll Review Period”), in its sole and absolute discretion, to terminate this Agreement in its entirety.  If Purchaser fails to deliver to Seller a written notice exercising its right to terminate this Agreement pursuant to this Section 4.6 prior to the expiration of the Rent Roll Review Period, then Purchaser shall be deemed to have waived such termination right, and this Section 4.6 shall be of no further force and effect.  If Purchaser delivers to Seller a written election to terminate this Agreement pursuant to this Section 4.6 prior to the expiration of the Rent Roll Review Period, the parties shall provide written instructions to the Escrow Agent directing the Escrow Agent to return the Deposit to Purchaser, and this Agreement shall terminate automatically and be of no further force or effect, 

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and the parties hereto shall have no further obligation to the other except for those obligations specifically surviving the termination of this Agreement.

ARTICLE V 
CLOSING

5.1    Closing Date.  Subject to the terms of this Agreement and satisfaction (or waiver) of the conditions to Closing set forth in Article VIII and unless this Agreement shall have been terminated pursuant to an express right to terminate as herein provided, the closing hereunder related to the purchase and sale of the Property (the “Closing”) shall occur at 10:00 a.m. Eastern Time on October 1, 2017, or such earlier date as may be mutually agreed to by the parties (the “Closing Date”).  The Closing Date may be extended by Seller, Existing Operator or Purchaser in the event that the conditions to Closing set forth in Sections 8.1.8 and 8.2.6 have not been satisfied by the Closing Date, but in no event shall the Closing occur after November 1, 2017 (the “Outside Closing Date”); provided, however, the parties hereto acknowledge that their respective intention is to have a Closing Date which is the first (1st) day of a calendar month following the date on which all such conditions to Closing are so satisfied or waived.  The Closing will be effective for accounting purposes as of 12:01 a.m. Eastern Time on the Closing Date, such that the Closing Date will be a day of income and expense to Purchaser.  The Closing shall occur on the Closing Date through escrow with Escrow Agent, whereby Seller, Existing Operator, Purchaser and their respective attorneys need not be physically present at the Closing and may deliver documents by overnight air courier or other means.  Subject to the terms of Section 8.2 and Section 10.1 hereof, if the Closing does not occur on or prior to the Outside Closing Date (as the same may be extended as provided above), this Agreement shall terminate and the Deposit shall be returned to Purchaser.  

5.2    Seller and Existing Operator Closing Deliveries.  Seller and Existing Operator, as applicable or requested by Purchaser, shall and they shall use commercially reasonable efforts to cause the Manager to, as applicable or as requested by Purchaser, execute and deliver to Escrow Agent (or cause to be delivered to Escrow Agent) each of the following items on or before the Business Day immediately preceding the Closing Date:

5.2.1    A Deed conveying each parcel of Land and the related Improvements and other real property to the Purchaser or its designated Affiliate, subject to the Permitted Exceptions.  If the legal description of the Land set forth on the Existing Surveys or in any of the Title Update differs from the legal description of the Land set forth on the deed by which Seller acquired title, a quit claim deed conveying the Land and the related Improvements to the Purchaser or its designated Affiliate, subject to the Permitted Exceptions utilizing such alternate legal description;

5.2.2    A Bill of Sale from each of Seller and Existing Operator in the form attached as Exhibit D conveying the Fixtures and Tangible Personal Property owned by each of them to the Purchaser or its designated Affiliate;

5.2.3    A General Assignment and Assumption in the form attached as Exhibit E (the “General Assignment”).

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5.2.4    An Assignment and Assumption of Resident Agreements in the form attached as Exhibit F (the “Resident Agreements Assignment”).

5.2.5    A certificate in the form of Exhibit M attached hereto (the “Bring Down Certificate”).

5.2.6    The closing statement prepared by the Title Company, which shall include such prorations and adjustments calculated in accordance with the terms of this Agreement (the “Closing Statement”).

5.2.7    A title affidavit reasonably acceptable to Seller and the Title Company, or an indemnity in favor of the Title Company, in each case sufficient to enable the Title Company to delete the standard exceptions to the title insurance policy to be issued pursuant to the Title Commitment.

5.2.8    A certification of Seller’s non-foreign status pursuant to Section 1445 of the Internal Revenue Code of 1986, as amended (the “Code”), in the form of Exhibit G attached hereto.

5.2.9    With respect to any Land and Improvements (and related real property), any applicable sales tax, real property transfer tax forms and returns, transfer declaration, ownership information or other similar disclosure forms or reports required by the laws of the State where such Land and Improvements is located or any other Governmental Authority.

5.2.10    Resolutions, certificates of good standing, and such other organizational documents as the Title Company or Purchaser shall reasonably require evidencing Seller’s and Existing Operator’s authority to consummate the Transactions.

5.2.11    An updated Rent Roll for each Facility effective as of a date no more than three (3) Business Days prior to the Closing Date; provided, however, that the content of such updated Rent Roll shall in no event expand or modify the conditions to Purchaser’s obligations to close the Transactions as specified under Section 8.1.

5.2.12    An updated Property Contracts List effective as of a date no more than three (3) Business Days prior to the Closing Date; provided, however, that the content of such updated Property Contracts List shall in no event expand or modify the conditions to Purchaser’s obligations to close the Transactions as specified under Section 8.1.

5.2.13    Such notices, transfer disclosures, affidavits or other similar documents that are required by applicable law to be executed by Seller and/or Existing Operator or otherwise reasonably necessary in order to consummate the Transactions.

5.2.14    Evidence reasonably satisfactory to Purchaser that Seller and Existing Operator have obtained “tail coverage” for all commercial general liability and professional liability policies described on Schedule 6.1.29.

5.2.15    The Indemnity Escrow Agreement.

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5.2.16     Originals or true, correct and complete copies, to the extent in the Seller’s or Existing Operator’s possession, of all of the Assigned Contracts, Resident Agreements, and Permits, to the extent such Permits are, with or without consent, assignable or transferable (other than Excluded Permits).

5.2.17    A guaranty in the form of Exhibit I, executed by NIC 4 Florida Owner LLC (the “Guaranty”), guaranteeing the payment by Seller and Existing Operator of any Seller Indemnifiable Damages payable to Purchaser pursuant to Section 9.2 hereof, subject to the terms and limitations specified therein.

5.2.18    Evidence reasonably acceptable to Purchaser of the termination of (i) the Management Agreements and (ii) all leases between Seller and Existing Operator with respect to the Facilities.

5.2.19    The Access Agreement executed by Seller.  

5.2.20    Duly executed Non-Competition and Non-Solicitation Agreements (the “Non-Compete Agreement”) from each Seller and Existing Operator and their respective ultimate parent entity in favor of the Purchaser, in such form attached hereto as Exhibit R.

5.2.21    Reserved.

5.2.23    Reserved.

5.2.24    Reserved.

5.2.25    Such additional assignments in form reasonably acceptable to Purchaser of all Property that is intangible property, including, without limitation, documents, chattel paper, instruments, contract rights, goodwill, going concern value, general intangibles and Intellectual Property, but excluding the Excluded Assets, to the extent necessary to convey the same to Purchaser at Closing pursuant to the terms hereof.

5.2.26    A satisfaction, waiver and release of all liens that Financial Advisor may have in connection with a claim for commissions or other compensation due to the Closing of the transaction contemplated by this Agreement, and in form and substance reasonably acceptable to Title Company Insurer and which will permit Title Company to issue its title insurance policy to Buyer without exception for and insuring against such Financial Advisor claims.

5.2.27    An updated list of Facility Employees.

5.2.28    Any other documents reasonably required by the Title Company to effectuate the Transactions.

5.3    Purchaser Closing Deliveries.  Except for the balance of the Purchase Price, which is to be delivered at the time specified in Section 2.2.2, Purchaser shall execute and deliver to Escrow Agent (or cause to be delivered to Escrow Agent) each of the following items on or before the Business Day immediately preceding the Closing Date:

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5.3.1    The full Purchase Price (with credit for the Deposit), plus or minus the adjustments or prorations required by this Agreement.

5.3.2    Purchaser’s counterpart signature to the Closing Statement.

5.3.3    A countersigned counterpart of the General Assignment.

5.3.4    A countersigned counterpart of the Resident Agreements Assignment.

5.3.5    An executed certificate in the form of the Bring Down Certificate.

5.3.6    Notification letters to all Residents prepared and executed by Purchaser in the form attached hereto as Exhibit J, which shall be delivered to all Residents by Purchaser immediately after Closing, and in any event not more than seven (7) days following issuance of the Operating Licenses solely for the provision of assisted living services.

5.3.7    Resolutions, certificates of good standing, and such other organizational documents as the Title Company or Seller shall reasonably require evidencing Purchaser’s authority to consummate the Transactions. 

5.3.8    Such notices, transfer disclosures, affidavits or other similar documents that are required by applicable law to be executed by Purchaser or otherwise reasonably necessary in order to consummate the Transactions.

5.3.9    Reserved.

5.3.10    Purchaser’s and Escrow Agent’s countersigned counterparts to the Indemnity Escrow Agreement.

5.3.11    The Access Agreement executed by Purchaser.

5.3.12    The Non-Compete Agreement executed by Purchaser.

5.3.13    Any other documents reasonably required by the Title Company to effectuate the Transactions.

5.4    Originals; Document Delivery.  Each of Seller, Existing Operator and Purchaser shall provide the number of duplicate originals of the documents referenced above in Section 5.2 and Section 5.3 as the other party may reasonably request.  Additionally, at the request of a party’s counsel, in advance of Closing, attorneys for the parties shall exchange electronic copies of executed Closing documents (to be held in trust pending Closing) to enable counsel to confirm that all required Closing documents have been executed and delivered.

5.5    Closing Prorations and Adjustments.

5.5.1    General.  All customarily proratable items, including, without limitation, collected rents, operating expenses, real and personal property taxes and other operating expenses and fees (collectively, “Proratable Items”), shall be prorated as of 11:59 p.m. (Local 

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Time) on the day immediately prior to the Closing Date in accordance with the proration schedule agreed upon by Seller and Purchaser prior to Closing, the parties agreeing that Seller and Existing Operator shall be responsible and charged for all of the Proratable Items attributable to the period up to the Closing Date (and credited for any amounts paid by Seller or Existing Operator attributable to the period on or after the Closing Date) and Purchaser shall be responsible and charged for all of the Proratable Items attributable to the period on and after the Closing Date.  

5.5.2    Operating Expenses.  All of the operating, maintenance, taxes (other than real estate taxes), and other expenses incurred in operating the Property, and any other costs incurred in the ordinary course of business for the management and operation of the Property, shall be prorated on an accrual basis.  Seller and/or Existing Operator shall pay all such expenses accruing prior to the Closing Date and Purchaser shall pay all such expenses accruing from and after the Closing Date.

5.5.3    Utilities.  A proration for utilities shall be made based upon the most recently ascertainable bills.  Seller and/or Existing Operator shall be entitled to the return of any deposit(s) posted by it with any utility company.  Seller and Existing Operator shall notify each utility company serving the Property to terminate their respective account, effective as of the Closing.  Neither Seller nor Existing Operator shall have no responsibility or liability for Purchaser’s failure to arrange utility service for the Property in name directed by Purchaser as of the Closing.

5.5.4    Real Estate Taxes.  Any real estate ad valorem or similar taxes for the Property, or any installment of assessments payable in installments which installment is payable in the calendar year of Closing, shall be prorated to the date of Closing, based upon actual days involved.  The proration of real property taxes or installments of assessments shall be based upon the assessed valuation and tax rate figures for the year in which the Closing occurs to the extent the same are available; provided, however, that in the event that actual figures (whether for the assessed value of the Property or for the tax rate) for the year of Closing are not available at the Closing Date, the proration shall be made using figures from the preceding year or based on a prior installment payment for such calendar year, but such figures shall be subject to adjustment as provided in Section 5.6.

5.5.5    Property Contracts.  Purchaser shall assume at Closing the obligations arising from and after the Closing Date under the Assigned Contracts, subject to the proration of operating expenses pursuant to Section 5.5.2.

5.5.6    Resident Agreements/Commercial Leases.  All collected rent (whether fixed monthly rentals, additional rentals, escalation rentals, retroactive rentals, operating cost pass-throughs or other sums and charges payable by Residents under the Resident Agreements), and any income and revenues from any portion of the Property (including in connection with any Commercial Lease) shall be prorated as of 11:59 p.m. (Local Time) on the day immediately prior to the Closing Date on the basis of the actual number of days of the month (or year, as applicable) which shall have elapsed as of the Closing Date.  Purchaser shall receive all collected rent, income and revenues attributable to dates from and after the Closing Date.  Existing Operator shall receive all collected rent, income and revenues attributable to dates prior to the 

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Closing Date.  Notwithstanding the foregoing, no prorations shall be made in relation to rents which have not been collected as of the Closing Date (the “Uncollected Rents”).  No adjustments shall be made in Existing Operator’s favor for rents which have accrued and are unpaid as of the Closing, but Purchaser shall pay Existing Operator such accrued Uncollected Rents as and when collected by Purchaser.  Purchaser agrees to bill Residents and tenants of the Property for all Uncollected Rents and to take reasonable actions (which shall not include an obligation to commence legal action) to collect Uncollected Rents.  Purchaser’s collection of rents shall be applied in the following order of priority: (i) first, in payment of rent for the month in which the Closing Date occurs, with such amounts being prorated between Purchaser and Existing Operator based upon the number of days each owned the Property during the month in which the Closing occurs (it being the intent of the parties that, if the Closing Date is the first day of a calendar month, then Purchaser shall receive the entirety of the rents received with respect to said month), (ii) second, in payment of rents for any month which commenced after the Closing, but only to the extent payments of rents for such month are then currently due, and (iii) third, in payment of rents for months preceding the month in which the Closing occurs.  After the Closing, Existing Operator shall continue to have the right, but not the obligation, in its own name, to demand payment of and to collect Uncollected Rents owed to Existing Operator by any current or former Resident or tenant, which right shall include, without limitation, the right to continue or commence legal actions or proceedings and the delivery of the Resident Agreements Assignment shall not constitute a waiver by Existing Operator of such right.  If Existing Operator receives rents with respect to the period of time form and after the Closing Date, it shall immediately pay same to or as directed by Purchaser.  

5.5.7    Insurance.  No proration shall be made in relation to insurance premiums.  Insurance policies will not be assigned to Purchaser.

5.5.8    Closing Costs.

(a)    Seller and Existing Operator shall be responsible for payment of the following Transactions costs: (i) fees of Seller’s and Existing Operator’s attorneys, accountants and other consultants (ii) one-half of the fees and expenses for the Escrow Agent; (iii) all state, city, county and municipal recording fees and all related charges and costs in connection with recording of the deeds delivered pursuant to Section 5.2.1; (iv) real estate transfer taxes, deed taxes, stamp taxes or similar taxes imposed with respect to the Transactions, and any sales taxes imposed upon the portion of the Purchase Price allocated to transferred personal property included in the Property; (v) the cost of Third-Party reports prepared by or for Seller or Existing Operator prior to the date of this Agreement; (vi) all fees (including defeasance fees), charges and expenses imposed or assessed in connection with the payoff or prepayment of all loans secured by a mortgage or deed of trust encumbering the Property; and (vii) all costs and expenses incurred by Seller and Existing Operator in connection with its cooperation with Purchaser or Purchaser’s affiliate relating to Purchaser’s or its affiliates applications for, and the issuance of, any and all Operating Licenses.  In addition to the foregoing, Seller and Existing Operator shall pay all fees, charges and related costs in connection with the assignment of any Assigned Contract to Purchaser, the removal of any Facility from any National Contract, or the termination of any utility service for a Facility.  Notwithstanding anything to the contrary contained in this Agreement, neither Seller nor Existing Operator shall have any obligation to assign to Purchaser any Property Contract if Seller or Existing Operator (as applicable) and Purchaser have been 

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unable to obtain any consent to such assignment required by the terms of such Property Contract and, in such case of the failure to obtain any such required consent to assign any Property Contract, the parties shall consummate the Transactions by excluding such Property Contract from the Assigned Contracts without any reduction in the Purchase Price.

(b)    Purchaser shall be responsible for payment of the following Transactions costs (and shall reimburse Seller, at Closing, to the extent such costs are paid by Seller prior to Closing): (i) all fees of Purchaser’s attorneys, accountants and other consultants; (ii) all fees, costs and expenses in connection with Purchaser’s due diligence, (iii) all costs for any Third-Party Reports prepared at Purchaser’s request for purposes of this transaction (excluding the cost of Third-Party Reports prepared by or for Seller or Existing Operator prior to the date of this Agreement); (iv) premiums for each Title Policy and all endorsements to any such policy; (v) all state, city, county and municipal recording fees and all related charges and costs in connection with recording of any mortgage against any of the Facilities; (vi) mortgage taxes, intangibles taxes or similar taxes imposed on mortgages given by Purchaser with respect to the Transactions; (vii) one-half of the fees and expenses for the Escrow Agent; (viii) fees and expenses for the investment of the Deposit; (ix) except as provided in Section 5.5.8(a), all costs and expenses in connection with, or relating to, any Purchaser’s applications for, and the issuance of, any and all Operating Licenses (including the preparation of the same); and (x) any and all costs, expenses and fees incurred in connection with, or relating to, the preparation of any statements, reports or filings with or required by the Securities and Exchange Commission as a result of the Transactions (or the status of Purchaser or any of its Affiliates as a public company).

5.5.9    Resident Deposits.  The amount of any refundable deposits held (and not yet applied) by Seller or Existing Operator as of the Closing Date, pursuant to the terms of any Resident Agreements, shall be a credit to the cash to be paid by Purchaser at the Closing, or paid as otherwise directed by Purchaser.

5.5.10    Possession. Possession of the Property, subject to the Resident Agreements, Assigned Contracts, and Permitted Exceptions, shall be delivered to Purchaser at the Closing upon release from escrow of all items to be delivered by Purchaser pursuant to the terms of Section 5.3.  Seller and Existing Operator shall make available to Purchaser at the Property (or at such other location agreed upon by the parties) on the Closing Date originals or copies of the Resident Agreements, Assigned Contracts, lease files, warranties, guaranties, operating manuals, keys and access codes to the property, and Seller’s and Existing Operator’s books and records (other than proprietary information) that are in the possession of Seller or Existing Operator or are located at the Facilities (collectively, “Seller’s Property-Related Files and Records”) exclusively relating to the Property.  Purchaser agrees, for the applicable period required by law, but in no event less than one (1) year after the Closing (the “Records Hold Period”), to (a) provide and allow Seller and Existing Operator reasonable access, upon reasonable prior written notice and during standard business hours, to Seller’s Property-Related Files and Records for purposes of inspection and copying thereof (which shall be at Seller’s and Existing Operator’s sole cost and expense), and (b) reasonably maintain and preserve Seller’s Property-Related Files and Records.  If at any time during the two (2) year period following the Records Hold Period, Purchaser desires to dispose of Seller’s Property-Related Files and Records, Purchaser shall first provide Seller not less than thirty (30) days’ prior written notice (the “Records Disposal Notice”).  Seller shall have a period of thirty (30) days after receipt of 

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the Records Disposal Notice, upon reasonable prior written notice and during standard business hours, to enter the Property (or such other location where such records are then stored) and remove or copy those of Seller’s Property-Related Files and Records that Seller desires to retain (which shall be at Seller’s sole cost and expense).

5.5.11    Capital Expenditure Adjustment.  Seller has commenced a certain plumbing project at the Facility located at 1225 Havendale Blvd NW, Winter Haven, FL 33881 (the “Spring Haven Facility”), of which Seller has previously notified Purchaser (the “Current Capital Repair”).  To the extent that the Current Capital Repair is not completed by Seller prior to the Closing, Seller shall be responsible for completion of the Current Capital Repair following the Closing, at Seller’s sole cost and expense, and the Seller and Purchaser at Closing shall enter into an Access Agreement in the form of Exhibit K attached hereto (the “Access Agreement”), pursuant to which Seller and its representatives, agents, employees and contractors shall be permitted to enter the Spring Haven Facility for the purposes of completing the Current Capital Repair.

5.5.12    Advance Payments.

(a)    If the Closing occurs at calendar month end, then Purchaser shall receive a credit at the Closing equal to 100% of the resident fees billed and collected by Seller, Existing Operator and Manager in advance for the calendar month after the Closing occurs, subject to the reconciliation process set forth in Section 5.6.

(b)    If the Closing occurs other than at calendar month end, Purchaser shall receive a credit at the Closing equal to the following, subject to the reconciliation process set forth in Section 5.6:

(i)    For the calendar month in which the Closing occurs, a credit equal to Purchaser’s pro rata share of the amount of the total fees billed and collected by Seller, Existing Operator and Manager in advance for such calendar month; and

(ii)    For the calendar month after the Closing occurs, to the extent that Seller, Existing Operator and Manager have billed and collected for that calendar month in advance, a credit equal to 100% of the resident fees so billed and collected.

5.6    Post-Closing Adjustments. To the extent applicable, Seller and Purchaser, acting in good faith, shall reconcile with each other within ninety (90) days of the later of (i) the Closing Date or (ii) the date an allocated amount becomes fixed and ascertainable (provided that in no event shall such date be later than six (6) months following the Closing Date), the amounts prorated and adjusted pursuant to this Article V using any new or updated information, including the reconciliation of estimated amounts with actual amounts, the correction of any errors and the inclusion of any items which should have been included at the Closing.  Notwithstanding anything to the contrary contained herein, Seller’s obligations for real estate and personal property taxes shall be based on the assessed value set forth on Schedule 5.6.  All adjustments to be made based on the mutual agreement of the parties shall be paid to the party entitled to the benefit of such adjustment within thirty (30) days after the final determination thereof.  In the event the parties have not agreed with respect to all adjustments 

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required to be made pursuant to this Section 5.6 within thirty (30) days following expiration of such ninety (90) day period, upon application by any such party, a certified public accountant reasonably acceptable to the parties shall determine any such adjustments which have not theretofore been agreed to between such parties.  The charges of such accountant shall be split equally by the parties, unless one party prevails in all matters relating to such dispute, in which case the party that is not the prevailing party shall pay all charges of such accountant.  All adjustments to be made as a result of the final results of the adjustments shall be paid to the party entitled to the benefit of such adjustment within thirty (30) days after the final determination thereof.  Notwithstanding anything to the contrary contained in this Agreement, (i) in the event that, following the Closing, Purchaser shall receive a refund of real estate taxes which relates to any period of time all or partly prior to the Closing (whether such refund is made by direct payment or in the form of a credit against future real estate tax obligations), such refund (net of the reasonable, out-of-pocket costs of obtaining such refund, which shall be apportioned in the same percentages as the refund itself) shall be apportioned between the parties in proportion to the amount of time that each party owned the Property during the tax period to which the refund relates, and (ii) subject to the requirements of clause (i), neither party shall have any obligation to re-adjust any items after the expiration of the periods set forth in this Section 5.6.

ARTICLE VI 
REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER

The disclosure schedules attached hereto (the “Disclosure Schedules”) are arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Agreement to which such sections and subsections of the Disclosure Schedules relate.  An exception to a representation or warranty in this Article VI set forth in the Disclosure Schedules effectively modifies the corresponding representation or warranty in this Article VI; provided that any fact or condition disclosed in any section of the Disclosure Schedules in such a way as to make its relevance to a representation or representations made elsewhere in this Article VI reasonably apparent on its face shall be deemed to be an exception to such representation or representations notwithstanding the omission of a reference or cross reference thereto.  Any fact or item disclosed in any section of the Disclosure Schedules shall not be deemed, solely by reason of such inclusion, to be material.   

6.1    Seller’s Representations. Each Seller and Existing Operator, jointly and severally with all other Sellers and Existing Operators, represents and warrants to Purchaser the following, as of the Effective Date and as of the Closing, each of which representations and warranties is material to and is relied upon by Purchaser:

6.1.1    Each of Seller and Existing Operator (collectively, the “Sale Participants”) is validly existing and in good standing under the laws of the state of its formation, and is duly licensed and qualified to do business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the operation of its business as currently conducted makes such licensing or qualification necessary; and has the full and unrestricted entity power and authority to carry on its business as it is currently being conducted and to own, lease and operate its assets as and in the places they have been and now are owned, leased or operated, to execute this Agreement and each other agreement, contract, instrument, certificate or other document contemplated hereby or by the Transactions (including, 

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without limitation, the MTA) (the “Transaction Documents”) to which it is a party or is otherwise bound (and, in the case of Seller, to sell and convey the Property), and has taken all corporate, partnership, limited liability company or equivalent entity actions and obtained all organizational approvals required for the execution and delivery of the Transaction Documents to which it is a party or is otherwise bound, and the consummation of the Transactions. Each Sale Participant’s execution, delivery and compliance with or fulfillment of the terms and conditions hereof and of the other Transaction Documents to which it is a party or is otherwise bound will not (i) conflict with or result in any breach of the provisions of, or constitute a default under the articles of incorporation, bylaws, articles of organization, operating agreement, partnership agreement or other governing organizational or charter documents, as the case may be, of such Sale Participant, (ii) conflict with, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, any contract or instrument to which such Sale Participant is a party or by which such Sale Participant or its assets is or are otherwise bound, or result in the termination of any such contract or instrument or termination of any provisions or rights in respect of any of the Property, or result in the creation or imposition of any lien, charge or encumbrance upon the Property, (iii) result in a violation or breach, in any material respect, of any legal requirement applicable to such Sale Participant or by which such Sale Participant or its assets is or are otherwise bound, (iv) create any liens or other encumbrances on the Property, (v) result in the breach or violation of any of the warranties and representations made herein or in any other Transaction Document by or on behalf of such Sale Participant, or (vi) result in the loss of any rights, privileges, authorizations or benefits afforded or intended by any of the Property or the Permits.  This Agreement is, and the other Transaction Documents to which a Sale Participant is a party shall be, when executed and delivered thereby, a valid and binding agreement, enforceable against such Sale Participant in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency and other laws affecting the rights of creditors generally and equitable principles and except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction. 

6.1.2    Seller is not a “foreign person,” as that term is used and defined in the Internal Revenue Code, Section 1445, as amended.

6.1.3    Other than as described on Schedule 6.1.3, there are no actions, claims, proceedings, litigation or governmental investigations or condemnation actions or other legal or administrative proceedings, or any orders, decrees or judgments in progress, pending or in effect, or to Seller’s Knowledge or Existing Operator Knowledge, threatened against any Sale Participant, the Facilities or the Property or against or relating to the Transactions, which if decided adversely, would reasonably be expected to materially and adversely affect the Facilities or the Property or any Sale Participant’s ownership, operation or management thereof, or the Transactions (including the consummation thereof pursuant to the terms of the Transaction Documents). 

6.1.4    Exhibit L (the “Property Contracts List”) sets forth a true and correct list, as of the Effective Date, of all outstanding contracts, leases or other agreements, whether written or oral, to which any Sale Participant is a party and relating to the Property or the ownership, operation or management of the Facilities, excluding (i) the Residency Agreements, (ii) any contract, lease or other agreement which is cancellable without penalty on thirty (30) days or less notice, (iii) any contract, lease or other agreement which is entered into in the 

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ordinary course of business consistent with past practice, is not material to the ownership, operation or management of the Facilities and does not require the expenditure of more than Fifty Thousand and no/100 Dollars ($50,000.00) per year (either individually or together with any related agreements), and (iv) any of the insurance policies listed in Schedule 6.1.29 (or the renewal of any such policies) (such contracts and agreements, but expressly excluding those described in clauses (i) – (iv), collectively, the “Material Contracts”).  Other than matters reflected in the Title Documents, the Property Contracts List, the Permits identified on Schedule 6.1.12(a), the Resident Agreements and the insurance policies listed in Schedule 6.1.29, no Sale Participant is party to or bound by any contract, agreement, lease, license, sublicense or other arrangement material to the use, ownership, management, operation, leasing, maintenance or repair of the Facilities and the Property.  Seller and Existing Operator have made available to Purchaser complete and correct copies of each of the Material Contracts.  Neither any Sale Participant nor, to Seller’s Knowledge or Existing Operator Knowledge, any other party is in default under any of the Material Contracts, no Sale Participant has received notice of any default thereunder, and each Material Contract is in full force and effect and is valid and enforceable by Sale Participants party thereto in accordance with its terms.  

6.1.5    A rent roll for each Facility (each, a “Rent Roll”) as of a date not more than thirty (30) days prior to the Effective Date has been made available to Purchaser, which Rent Roll is true, correct and complete in all material respects. 

6.1.6    Seller and Existing Operator have made available to Purchaser true and complete copies of the Resident Agreement Form, and all Resident Agreements with respect to any Facility are consistent in all material respects with the applicable form of the Resident Agreement Form and all Residents (or their authorized agents) have executed Resident Agreements as of the Effective Date.  All Resident Agreements comply in all material respects with all Laws, including, without limitation, all required regulatory standards of any Governmental Authorities with regulatory jurisdiction over the Facilities and all Third Party Payor Programs.  All Resident Agreements were entered into on an arms’ length basis, do not provide for payment of a single sum in exchange for lifetime care or other prepaid services and do not contain any provisions that prohibit or limit the right to raise monthly occupancy or other fees or rents payable thereunder for more than twelve (12) months after the initial occupancy date under such Resident Agreement. True, correct and complete copies of all Resident Agreements are located at the Facility to which they relate (to the extent necessary to comply in all material respects with all Laws) and, subject to Section 4.1.1 hereof, access to all Resident Agreements has been or will be provided to Purchaser as part of its due diligence review.

6.1.7    (a)    Reserved.

(b)    Each Sale Participant and Manager is currently conducting, and to the Sellers’ Knowledge and Existing Operator Knowledge, has at all times since August 1, 2013 conducted, and between the Effective Date and the Closing, will conduct its operation of the Facilities, in material compliance with all Laws, including, without limitation, all Healthcare Laws, all applicable local, state and federal building codes, fire codes, life safety codes and other similar regulatory requirements and no waivers of such physical plant standards exist at any Facility.

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(c)    Other than as described on Schedule 6.1.7(b), no Facility has been cited for any deficiency that resulted or would reasonably be expected to result in a denial of payment for new admissions, civil monetary penalty, termination, final revocation or cancellation of any Permit or termination or other restriction of a Medicaid Provider Agreement, and none of the Sale Participants or Manager has received written notice from any Governmental Authority with jurisdiction over the Facilities or the Property, and no Seller or Existing Operator has Knowledge, (i) that any such actions will or may be taken or that any Sale Participant, Manager or any Facility is under investigation or review with respect to the foregoing, or (ii) of any violation of any Laws, ordinances or regulations applicable to the Facilities or the Property that remains uncured or unresolved as of the Effective Date.  No Sale Participant nor Manager has received any written notice or communication from any Governmental Authority alleging, and no Seller or Existing Operator has Knowledge of, any violation of accreditation, professional, trade, industry, ethical or other applicable standards by any Sale Participant, Manager or the Facilities.

6.1.8    (a)    Except as set forth on Title Commitments and Existing Surveys, the Seller and Existing Operator are the holders of good and marketable fee simple title to the Real Property Assets, which in each case will, on or before the Closing Date, be free and clear of all Monetary Liens and without exception to title other than for the Permitted Exceptions.  Existing Operator has continuously operated the Facilities during the period of their ownership by Seller and using no names other than (i) the legal names and/or trade names of the Existing Operator and (ii) the Facility names identified on Schedule I. Except for those agreements, documents and instruments that have been delivered by Seller or Existing Operator to Purchaser, to Seller’s and the Existing Operator’s Knowledge, there are no unrecorded agreements, documents or instruments that materially affect the title to any Real Property Assets other than the Permitted Exceptions.

(b)    Except for items leased by the Sale Participants and listed on Schedule 6.1.8(b), one or more of the Seller or Existing Operator owns title to all Operating Assets that are personal property free and clear of all mortgages, security interests, liens or other encumbrances, other than any Monetary Liens, which Seller and Existing Operator shall pay and discharge in full prior to or at the Closing.

(c)    The Facilities are supplied with such utilities as are necessary for the ownership, operation and management of such Facilities as currently operated and for their intended purposes.  All utility bills and deposits due and payable to any utility provider have been or will be timely paid in the ordinary course of business by Existing Operator.

(d)    Reserved.

(e)    Neither Seller nor Existing Operator has received any written notice or has Knowledge of any existing, pending or, to Seller’s Knowledge or Existing Operator Knowledge,  threatened zoning, building code or other moratorium proceedings, or similar matters which would reasonably be expected to materially and adversely affect the ability to operate the Facilities as currently operated. Except as disclosed in the Title Documents, (i) neither Seller nor Existing Operator has submitted or received written notice from any Governmental Authority that any other Person has submitted, in each case as of the Effective Date, an application for the 

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creation of any special taxing district affecting the Property (or any part thereof), or annexation thereby, or inclusion therein and (ii) neither Seller nor Existing Operator has received written notice on or prior to the Effective Date that any Governmental Authority has commenced or intends to commence construction of any special or off-site improvements or has imposed or increased or intends to impose or increase any special or other assessment against the Property (or any part thereof).

(f)    Reserved. 

(g)    Neither Seller nor Existing Operator has received any written notice of any condemnation or eminent domain proceedings pending nor, to the Knowledge of Seller and Existing Operator, are any such proceedings threatened or contemplated against the Property or any part thereof.  

(h)    There are no parties other than a Sale Participant in possession of the Property, or any portion thereof, pursuant to lease, management agreement or otherwise, other than Residents pursuant to Resident Agreements and any tenants under any Commercial Leases.

(i)    Reserved. 

(j)    The Property and the National Contracts constitute all of the assets necessary and sufficient to conduct the ownership, operation and management of the Facilities in the manner that such operations have been conducted and as required by Law. Except for the Property and the National Contracts, there are no other assets which are used in connection with the ownership, operation and management of the Facilities.

(k)    The only Commercial Leases are those referenced in Schedule 6.1.8(k) of this Agreement. Each Commercial Lease is in full force and effect.  Seller or Existing Operator is “landlord” or “lessor” under each Commercial Lease and is entitled to assign to (or as directed by) Purchaser, without the consent of any party, each Commercial Lease.  Neither Seller nor Existing Operator is in default under any respective Commercial Lease, and there exists no condition or circumstance or written notice of any condition or circumstance which, with the passage of time, would constitute a default under any Commercial Lease by any party.  No tenant under a Commercial Lease has asserted any claim of default, offset or other defense in respect of Seller’s or Existing Operator’s obligations under the Commercial Leases. 

6.1.9    No Sale Participant has (a) made a general assignment for the benefit of creditors, (b) filed any voluntary petition in bankruptcy or suffered the filing of any involuntary petition by its creditors, (c) suffered the appointment of a receiver to take possession of all, or substantially all, of Seller’s or Existing Operator assets, which remains pending as of the Effective Date, (d) suffered the attachment or other judicial seizure of all, or substantially all, of its assets, which remains pending as of the Effective Date, or (e) made an offer of settlement, extension or composition to its creditors generally.

6.1.10    Except as disclosed in the Title Documents, no Sale Participant has granted any option or right of first refusal or first opportunity to any party to acquire any fee or ground leasehold interest in any portion of the Property or any interest therein.

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6.1.11    Other than as described on Schedule 6.1.11 (the “Required Consents”), no consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Authority is required to be obtained or made by any Sale Participant in connection with the execution and delivery of this Agreement or the other Transaction Documents to which it is a party or by which it is bound, or the consummation of the Transactions.

6.1.12    (a)  Existing Operator has all Operating Licenses and other material Permits required by applicable Healthcare Laws to operate the Facilities as currently operated. Set forth on Schedule 6.1.12(a) is a true, correct and complete list of all of the Operating Licenses and other material required Permits owned or held by or issued to Seller, Existing Operator or Manager as of the Effective Date relating to the Facilities or the Property (or any portion thereof).  There is no action pending or, to Seller’s Knowledge or Existing Operator Knowledge, threatened in writing by or before any Governmental Authority to revoke, cancel, rescind, restrict, modify, suspend or refuse to renew any of the Operating Licenses or other material required Permits set forth on Schedule 6.1.12(a).  True, correct and complete copies of all the Operating Licenses and other material required Permits set forth on Schedule 6.1.12(a) have been furnished to Purchaser.  As of the Effective Date, neither Seller, Existing Operator nor Manager has received written notice from any Governmental Authority asserting a material violation of the terms of any such Operating License or such other material required Permit set forth on Schedule 6.1.12(a) or threatening to revoke, cancel, rescind, restrict, modify, suspend or not renew the terms of any such Operating License or other material required Permits.  Each Operating License and Permit set forth on Schedule 6.1.12(a) (i) has not (A) been transferred to any location other than the applicable Facility or (B) been pledged as collateral security, and (ii) is free from restrictions or known conflicts that would materially impair the use or operation of the applicable Facility as intended.  Such Operating Licenses and Permits are valid and in full force and effect.  Since August 1, 2013, no Sale Participant or Manager has taken any action to rescind, withdraw, revoke, amend, modify, supplement or otherwise alter the nature, tenor or scope of any such Operating License or Permit or applicable Third Party Payor Program participation other than non-material alterations effected in the ordinary course of the business consistent with past practice.  Seller and Existing Operator are the sole holders of all the Operating Licenses and Permits with respect to each Facility, and, except for Manager, acting pursuant to the Management Agreements, and tenants under Commercial Leases disclosed to Purchaser prior to the Effective Date, there is no other person or entity that operates, manages or leases any Facility.  To the Knowledge of Seller and Existing Operator, each Facility Employee who is required by Law to hold a Permit to deliver health care services to Residents (including the performance of diagnostic services such as x-ray or lab services) holds such Permit and is performing only those services which are permitted by such Permit.

(b)    As of the Effective Date, each of the Sale Participants, as applicable, is certified for participation in, and party to, valid provider agreements for payment by Medicaid for the provision of assisted living services.  All Governmental Programs in which any of the Sale Participants has participated since August 1, 2013 are listed on Schedule 6.1.12(b) (each a “Third Party Payor Program”) and Manager, with respect to the Facilities, has participated in no such programs except as listed on Schedule 6.1.12(b).  As of the Effective Date, except as set forth on Schedule 6.1.12(b)], (i) each of the Sale Participants, as applicable, is in good standing in each Third Party Payor Program, (ii) there is no existing or pending revocation, suspension, termination, probation, restriction, limitation, or non-renewals proceedings by any Third Party 

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Payor Program of which any of the Sale Participants has received written notice under any Third Party Payor Program (and, to Seller’s Knowledge or Existing Operator Knowledge, none of the foregoing has been threatened to any Sale Participant in writing by any Governmental Authority), and (iii) none of the Sale Participants or Manager, with respect to the Facilities, has been excluded from participation in any Third Party Payor Program; and as of the Effective Date, none of the Sale Participants or Manager, with respect to the Facilities, has any material liabilities to any third party fiscal intermediary or carrier administering the Governmental Programs, directly to the Governmental Programs or any Governmental Authority, or to any other Payor for the recoupment of any amounts previously paid to any of the Sale Participants or any predecessor by any such third party fiscal intermediary, carrier, Governmental Program or other Payor. None of the Sale Participants or Manager, with respect to the Facilities, has received written notice of any dispute from any Governmental Authority or Government Program regarding any such claims, other than with respect to adjustments in the ordinary course of business.  None of the Sale Participants or Manager, with respect to the Facilities, has received written notice of currently scheduled audits or violations with respect to any claims, and, to the Knowledge of Seller or Existing Operator, no such audits or violations are threatened. There are no facts or circumstances which could reasonably be expected to give rise to any material disallowance under such claims.  Each of the Sale Participants, as applicable, is now and has been in material compliance with all applicable conditions of participation and all applicable conditions of payment for all Government Programs in which it participates or participated.  None of the Sale Participants is required file costs reports under any Third Party Payor Program. 

(c)    Reserved. 

(d)    True, correct and complete copies of all surveys involving the Facilities (Licensing Surveys, Audits or otherwise) completed from and after August 1, 2013 have been delivered or made available to Purchaser, along with true, correct and complete copies of all Governmental Authority reports, Licensing Surveys, Audits, statements of deficiencies, plans of correction and any other written investigation notices, warnings, waivers, related correspondence or reports filed, issued, sent and received with respect to the Facilities or provider agreements of Governmental Authorities (collectively, “Governmental Correspondence”), and, except as set forth in Schedule 6.1.12(d), there have been no deficiencies or violations noted in any Governmental Correspondence for which a plan of correction has not been, or would not reasonably be expected to be, accepted. The Sale Participants have remedied, discharged and complied in all material respects with all applicable plans of correction or other requirements.

(e)    Neither any Facility, Seller, Existing Operator, Manager, nor any of their respective current or former directors, officers, employees, contractors, or agents has been or is currently suspended, excluded or debarred from contracting with the United States federal or any state government or from participating in any Federal Health Care Program (as defined in 42 USC § 1320a-7b(f)) or is subject to an investigation or proceeding by any Governmental Authority that has resulted in or could reasonably be expected to result in such suspension, exclusion, or debarment; nor has any Facility, Seller, Existing Operator, Manager, or any of their respective current or former directors, officers, employees or agents received notice of any impending or potential exclusion or listing.  Neither any Facility nor Seller, Existing Operator or Manager has been subject to sanction pursuant to 15 U.S.C. §41 et seq. or 42 U.S.C. §1320a-7a or 1320a-8, or been charged with or convicted of a crime described at 42 U.S.C. §1320a-7b, and 

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no such sanction or proceeding is pending or, to the Knowledge of Seller or Existing Operator, threatened.

(f)    Neither Seller, Existing Operator, Manager or any of their respective current or former directors, officers, employees, agents have solicited, received, paid, or offered to pay any illegal remuneration, directly or indirectly, overtly or covertly, in cash or in kind, for any referral or generation of business in violation of any applicable Healthcare Law.

(g)    Except as disclosed on Schedule 6.1.12(g), neither Seller, Existing Operator, Manager or any Facility is: (i) a party to a corporate integrity agreement with the Office of the Inspector General of the Department of Health and Human Services, (ii)  the subject of any investigation, program-integrity review, or audit disclosed in writing and currently being conducted by any federal, state, or local Governmental Authority, (iii) a defendant or named party in any unsealed qui tam/False Claims Act litigation, (iv) a party to a consent decree, judgment, order, or settlement with any Governmental Authority that (A) requires the payment of money by Seller, Existing Operator, Manager or any Facility to any Governmental Authority or third party, (B) requires any recoupment of money from Seller, Existing Operator, Manager or any Facility by any Governmental Authority or third party, or (C) prohibits any activity currently conducted by Seller, Existing Operator, Manager or any Facility, (v) subject to any actual settlement agreement or corporate integrity agreement or certification of compliance agreement with any Governmental Authority, or (vi) subject to any mandatory or discretionary exclusion or suspension from federal or state health care program participation.

(h)    Neither Seller, Existing Operator, Manager, nor any Facility has: (i)  had any security or data breaches compromising or otherwise involving Protected Health Information (as such term is defined in HIPAA) that are required to be reported to any Governmental Authority in accordance with HIPAA or (ii) received any written communication from any Governmental Authority alleging that Seller, Existing Operator, Manager, nor any Facility is not in compliance in all material respects with HIPAA that has not been resolved, and no event has occurred that required, or now requires, Seller, Existing Operator, Manager, or any Facility to provide notification to any Governmental Authority under any state  privacy and/or breach notification law.

(i)    Reserved 

(j)    There are no ongoing obligations with respect to any funding received in connection with the Facilities under the federal Hill-Burton Act.

(k)    Reserved.  

(l)     Seller or Existing Operator is the sole party owning and/or in control of all certificate of need rights or bed rights, if any, administered under any Healthcare Laws related to the ownership, operation, maintenance, management, use, regulation, development, expansion or construction of a health care facility at or on the Property.  

6.1.13    Each Facility is managed by Manager pursuant to the Management Agreements.  No Sale Participant has any employees and, to Seller’s and Existing Operator’s Knowledge, all Facility Employees are employed by Manager or Manager’s Affiliates.

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6.1.14    True, correct and complete copies of the Property Statements have been previously provided to Purchaser.  The Property Statements are accurate and complete and the Financial Statements contained therein have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered thereby and fairly present the financial condition of Seller and Existing Operator and the results of operations for the Facilities, as applicable, as of the respective dates indicated therein. Except and to the extent reflected or reserved against in the Most Recent Financial Statements, as of the date of such Most Recent Financial Statements, Seller and Existing Operator have no any material liabilities or obligations of any nature, whether accrued, absolute, contingent, or otherwise, due or to become due, other than obligations of future performance arising in the ordinary course of business under executory contracts (but only to the extent not relating any breach or default by any party under any such executory contract).

6.1.15    (a)    To Seller or Existing Operator’s Knowledge and except as disclosed in the Third Party Reports or on Schedule 6.1.15(a), the Property does not contain any regulated quantity of any Hazardous Substance.  Notwithstanding the above, there may be the presence of Hazardous Substances typically used in, and in quantities necessary for the day-to-day operation of, the Facilities and which are commonly used in other similar facilities, such as, but not limited to, cleaning fluids, insecticides, pharmaceuticals and medicines, which have been used, transported, stored and disposed of by Seller and Existing Operator in material compliance with all applicable Environmental Laws.

(b)    Except as provided in the Third Party Reports or on Schedule 6.1.15(b), there is no pending or to Seller’s or Existing Operator’s Knowledge, threatened litigation or proceeding before any Governmental Authority in which any Person alleges the unlawful presence, release or threat of release of any Hazardous Substance on or emanating from the Property or violation of Environmental Laws at the Facilities.

(c)    Except as provided in the Third Party Reports or on Schedule 6.1.15(c), no Sale Participant has received any notice that any Governmental Authority or employee or agent thereof has determined, or threatens to determine, or is investigating, that there is an unlawful presence, release or threat of release on, in or from the Property of any Hazardous Substance, or the generation, transportation, storage, treatment or disposal at the Property, of any Hazardous Waste. 

(d)    Except as provided in the Third Party Reports or on Schedule 6.1.15(d), Seller has owned and Seller and Existing Operator have operated the Property in material compliance with all applicable Environmental Laws, has obtained all necessary licenses, permits and other authorizations under the Environmental Laws for the operation of the Property, and has not used any of the Property for the generation, storage, manufacture, use, transportation, disposal or treatment of Hazardous Wastes.

(e)    Except as disclosed in the Third-Party Reports or Schedule 6.1.15(e), there has been no discharge of any Hazardous Substance on or from the Property that would trigger any reporting, assessment or remedial obligations under Environmental Laws during the time of Seller’s ownership or occupancy thereof.

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(f)    Seller and Existing Operator have delivered to Purchaser copies of the Third-Party Reports and all other reports or tests in the possession of any Sale Participant with respect to (i) the compliance of the Property with Environmental Laws and (ii) the release or threatened release of Hazardous Substances on, in or from the Facilities or the Land, each of which is listed on Schedule 6.1.15(f).   

(g)    Reserved.

(h)    Except as disclosed in the Third-Party Reports or Schedule 6.1.15(h), to Seller’s and Existing Operator’s Knowledge, no underground storage tanks are or were present on the Land.

(i)    Notwithstanding anything in this Agreement to the contrary, this Section 6.1.15 sets forth the Seller’s and Existing Operator’s sole representations and warranties with respect to compliance with Environmental Laws and the matters set forth in this Section 6.1.15.

6.1.16    Reserved. 

6.1.17    All real and personal property taxes and assessments with respect to the Property and Facilities and allocable to the period prior to the Closing have been paid or, by the time of Closing, will be paid by Seller, or such taxes will be prorated between the parties as contemplated in Section 5.4.4. None of the Sale Participants nor any of their respective Affiliates has received any written notice for an audit or delinquency of Taxes which has not been resolved or completed. No Sale Participant is currently contesting any Taxes with respect to any Facility. All federal, state and other Tax Returns and Tax reports required to be filed by any of the Sale Participants or their respective Affiliates on or before the Closing Date have been timely filed with the appropriate governmental agencies in all jurisdictions in which such Tax Returns and reports are required to be filed, and all of such Tax Returns were true, correct and complete as filed to the extent required by applicable Laws. All Taxes (whether or not reflected on a Tax Return, and including interest and penalties and including estimated Tax installments where required to be filed and paid) of the Sale Participants due and payable prior to the Closing Date have been fully and timely paid. All Taxes and other assessments and levies which any of the Sale Participants or their respective Affiliates is required by Law to withhold or to collect have been duly withheld and collected, and have been paid over to the proper Governmental Authority to the extent due and payable. There are no outstanding or pending claims, deficiencies or assessments of Taxes due and payable, interest or penalties with respect to any of the Sale Participants or their respective Affiliates for any taxable period.

6.1.18     Reserved.

6.1.19    Each of the Sale Participants is in material compliance with the requirements of Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001), and other similar requirements contained in the rules and regulations of the Office of Foreign Property Control, Department of the Treasury (“OFAC”) and in any enabling legislation or other Executive Orders or regulations in respect thereof (the foregoing, the “Orders”).  No Sale Participant nor any Affiliate thereof (a) is listed on the Specially Designated Nationals and Blocked Person List maintained by OFAC or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to 

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any other applicable Orders (such lists are collectively referred to as the “Lists”), (b) is a Person who has been determined by any competent authority to be subject to the prohibitions contained in the Orders; or (c) is owned or controlled by (including, without limitation, by virtue of such Person being a director or owning voting shares or interests), or acts for or on behalf of, any Person on the Lists or any other Person who has been determined by any competent authority to be subject to the prohibitions contained in the Orders.

6.1.20    Other than, (a) as provided in Section 5.5.11, and (b) for ordinary course repair or maintenance projects that the Sale Participants or Manager may undertake with respect to the Facilities, no Sale Participant or Manager has any outstanding contracts for capital expenditures relating to the Facilities, nor does any Sale Participant have any agreement, obligation or commitment for capital expenditures relating to the Facilities, including, without limitation, additions to property, plant, equipment or tangible capital Property.

6.1.21    No Sale Participant has received any notice, and Seller and Existing Operator have no Knowledge, that any vendor or supplier of the Facilities intends to discontinue, substantially alter prices or terms to, or significantly diminish its relationship with the Facilities, either as a result of the transactions contemplated hereby or otherwise.  

6.1.22    Each Sale Participant’s and Manager’s Books and Records (a) are complete and correct in all material respects, (b) have been maintained in all material respects in accordance with Law (including but not limited to HIPAA) governing the preparation, maintenance of confidentiality, transfer and destruction of such records, and (c) there is no material deficiency in such Books and Records. 

6.1.23    Reserved. 

6.1.24    Each Facility is duly licensed as an assisted living facility as required under Law.  The total number of licensed beds/units (including any beds designated under any licensure classification) at each Facility as of the Date of Execution is as set forth on Schedule 6.1.24.  As of the Effective Date, there is no application pending, submitted by any Sale Participant or Manager, to reduce the number of licensed beds at any Facility or to amend or otherwise materially change the number of beds approved by any applicable Governmental Authority. To Seller’s and Existing Operator’s Knowledge, there are no proceedings or actions pending or contemplated to reduce the number of licensed beds of any Facility. Schedule 6.1.24 also identifies for each Facility the number of beds which are certified for participation in the Medicaid program (and each applicable waiver program thereunder) and the licensure category or categories maintained by such Facility.  Since August 1, 2013, the number of Residents at any Facility has not exceeded the licensed capacity for such Facility. 

6.1.25    Schedule 6.1.25 lists all Intellectual Property owned, licensed or used by Seller or Existing Operator in the ownership, operation and management of the Facilities, and Seller or Existing Operator owns or licenses or has the sole right to use all of such Intellectual Property. Since August 1, 2013, no claims have been asserted and no claims are pending or, to Seller’s or Existing Operator’s Knowledge, threatened by any person or entity, as to the use of any such Intellectual Property or challenging or questioning the validity or effectiveness of any state or federal registration of such Intellectual Property and no Sale Participant nor Manager has 

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received any notice of such claim or knows of any valid basis for such claim.  To Seller’s and Existing Operator’s Knowledge, each Sale Participant’s use of the Intellectual Property (and Purchaser’s or JV Partner’s continued use thereof following the Closing in the same manner) does not and will not infringe the rights of any person or entity.

6.1.26    Since March 31, 2017, no Sale Participant has:  

(a)    Reserved;

(b)    Reserved;

(c)    Other than in the ordinary course of business, consistent with past practices, sold, transferred or otherwise disposed of, or agreed to sell, transfer or otherwise dispose of, any Property related to or connected with the Facilities having a fair market value at the time of sale, transfer or disposition of Twenty-Five Thousand and no/100 Dollars ($25,000.00) or more in the aggregate, or cancelled, or agreed to cancel, any debts or claims relating primarily to the Facilities in the amount of Ten Thousand and no/100 Dollars ($10,000.00) or more in the aggregate; 

(d)    Made any change in any method of accounting or accounting practice relating to the Facilities;

(e)    To Seller’s and Existing Operator’s Knowledge, imposed any encumbrance, other than a Monetary Lien or a Permitted Exception, upon any of the Property; or

(f)    Entered into any contract to do any of the foregoing, or any taken action or omission that would reasonably be expected to result in any of the foregoing.

6.1.27    Reserved. 

6.1.28    As of the Effective Date and at the Closing, the Inventory will be in sufficient quantity and condition for the normal ownership, operation and management of the Facilities in material compliance with Law and all requirements of Governmental Authorities and consistent with past practices.    

6.1.29    Attached as Schedule 6.1.29 is a list of insurance policies carried and insurance coverages maintained by Seller and Existing Operator with respect to the Property and the Facilities.       

6.1.30    No Related Party of any Sale Participant: (i) has any contractual or other claim, express or implied, or of any kind whatsoever against any Sale Participant that would reasonably be expected to materially adversely effect the Property or prevent the transactions contemplated herein; (ii) has any interest in the Facilities or any of the Property; or (iii) is engaged in any other transaction involving or relating to the ownership, operation or management of the Facilities or the Property.

6.1.31    Reserved.

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6.1.32    When delivered pursuant to the terms of Section 7.15.2, the Accounts Receivable Schedule shall be true, complete and accurate in all material respects.

6.1.33    No representation, warranty or covenant made by or on behalf of any Sale Participant in this Agreement, the Schedules or the Exhibits attached to this Agreement, or any of the other Transaction Documents delivered pursuant to Section 5.2 to which such Sale Participant is a party or is otherwise bound contains an untrue statement of a material fact or omits to state a material fact required to be stated herein or therein or is necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.

6.2    Representations and Warranties of Purchaser. Purchaser represents and warrants to Seller and Existing Operator the following, as of the Effective Date and as of the Closing, each of which representations and warranties is material to and is relied upon by Seller and Existing Operator:

6.2.1    Purchaser is validly existing and in good standing under the laws of the state of its formation, and is duly licensed and qualified to do business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the operation of its business as currently conducted makes such licensing or qualification necessary; and has the full and unrestricted entity power and authority to carry on its business as it is currently being conducted and to own, lease and operate its assets as and in the places they have been and now are owned, leased or operated, to execute this Agreement and each other Transaction Document to which it is a party or is otherwise bound, and has taken all corporate, partnership, limited liability company or equivalent entity actions required for the execution and delivery of the Transaction Documents to which it is a party or is otherwise bound, and the consummation of the Transactions.

6.2.2    Purchaser’s execution, delivery and compliance with or fulfillment of the terms and conditions hereof and of the other Transaction Documents to which it is a party or is otherwise bound will not (i) conflict with or result in any breach of the provisions of, or constitute a default under the articles of incorporation, bylaws, articles of organization, operating agreement, partnership agreement or other governing organizational or charter documents, as the case may be, of Purchaser, (ii) conflict with, or result in a breach of, the terms, conditions or provisions of, or constitute a default under, any contract or instrument to which Purchaser is a party or by which Purchaser or its assets is or are otherwise bound, (iii) result in a violation or breach of any legal requirement applicable to Purchaser or by which Purchaser or its assets is or are otherwise bound, or (iv) result in the breach or violation of any of the warranties and representations made herein or in any other Transaction Document by or on behalf of Purchaser.  This Agreement is, and the other Transaction Documents to which Purchaser is a party shall be, when executed and delivered thereby, a valid and binding agreement, enforceable against Purchaser in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency and other laws affecting the rights of creditors generally and equitable principles and except that equitable remedies may be granted only in the discretion of a court of competent jurisdiction. Purchaser has obtained all required organizational approvals required for the execution and consummation of this Agreement and the other Transaction Documents, and all transactions contemplated hereby and thereby, to which they are a party or are otherwise bound.

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6.2.3    There are no actions, claims, proceedings, litigation or governmental investigations or condemnation actions or other legal or administrative proceedings, or any orders, decrees or judgments in progress, pending or in effect, or to Purchaser’s Knowledge, threatened against Purchaser, which, if decided adversely, would reasonably be expected to (i) materially and adversely restrain Purchaser’s ability to consummate the Transactions, or (ii) would or would reasonably be expected to declare illegal, invalid or non-binding any of Purchaser’s obligations or covenants to Seller and Existing Operator hereunder.

6.2.4    Purchaser is not a Prohibited Person.

6.2.5    To Purchaser’s Knowledge, the funds transferred by Purchaser to Seller  and Existing Operator under this Agreement are not the property of, or beneficially owned, directly or indirectly, by a Prohibited Person or the proceeds of specified unlawful activity as defined by 18 U.S.C. § 1956(c)(7).

6.2.6    Other than for the Healthcare Approvals, no consent, approval, order or authorization of, action by or in respect of, or registration, declaration or filing with any applicable Governmental Authority is required to be obtained or made by Purchaser in connection with the execution and delivery of this Agreement, or the consummation of the Transactions, which Purchaser has not already obtained or made.

6.2.7    No representation, warranty or covenant made by Purchaser in this Agreement, the Schedules or the Exhibits attached to this Agreement, or any of the other Transaction Documents delivered pursuant to Section 5.3 to which Purchaser is a party or is otherwise bound contains an untrue statement of a material fact or omits to state a material fact required to be stated herein or therein or is necessary to make the statements contained herein or therein, in light of the circumstances under which they were made, not misleading.  

6.2.8    EXCEPT AS EXPRESSLY PROVIDED IN THE “SELLER’S REPRESENTATIONS” OR AS IS EXPRESSLY REPRESENTED AND WARRENTED IN THE MTA BY MANAGER, PURCHASER ACKNOWLEDGES THAT IT IS PURCHASING THE PROPERTY IN RELIANCE SOLELY ON: (I) PURCHASER’S INDEPENDENT INSPECTION AND INVESTIGATION OF THE PROPERTY BASED ON PURCHASER’S EXTENSIVE EXPERIENCE IN AND KNOWLEDGE OF REAL PROPERTIES AND ASSISTED LIVING FACILITY OPERATIONS IN THE VICINITY OF THE REAL PROPERTY; (II) THE OPINIONS AND ADVICE CONCERNING THE PROPERTY OF CONSULTANTS AND\OR AGENTS ENGAGED BY PURCHASER; AND (III) THE REPRESENTATIONS AND WARRANTIES BY EACH SALE PARTICIPANT AND MANAGER IN THIS AGREEMENT OR THE MTA TO WHICH THEY ARE A PARTY.

UPON THE CLOSING DATE, EXCEPT AS EXPRESSLY PROVIDED TO THE CONTRARY IN THIS AGREEMENT OR THE MTA, PURCHASER SHALL ACCEPT THE PROPERTY, IN THEIR “AS IS”, “WHERE IS” CONDITION OR STATUS AS OF THE CLOSING DATE AND WITHOUT ANY REPRESENTATION OR WARRANTY OTHER THAN THOSE SET FORTH HEREIN OR IN THE MTA REGARDING THEIR CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, MERCHANTABILITY, OR COMPLIANCE WITH LAWS, ORDINANCES OR REGULATIONS, OR WITH ANY OTHER WARRANTY, 

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EXPRESS OR IMPLIED BY LAW OR OTHERWISE.  PURCHASER ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR “SELLER’S REPRESENTATIONS”, NEITHER SELLER NOR EXISTING OPERATOR IS MAKING ANY EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER WITH RESPECT TO THE PROPERTY.  

ARTICLE VII 
ADDITIONAL COVENANTS/AGREEMENTS OF SELLER AND PURCHASER

7.1    Interim Operations.   For the period from the Effective Date until the Closing Date, Seller and Existing Operator shall (and they shall use commercially reasonable efforts to cause Manager to) use commercially reasonable efforts to operate, maintain and manage the Facilities and the remainder of the Property in the ordinary course consistent with past practice; provided, however, that, except as Purchaser in its sole discretion otherwise approves, in advance, in writing, or as otherwise expressly required hereunder, Seller and Existing Operator shall (and they shall use commercially reasonable efforts to cause Manager to): (i) operate, maintain and manage the Facilities and the remainder of the Property in a manner consistent with all Laws; (ii) maintain the Property in good order and condition (normal wear and tear excepted) to the extent required to operate the Facilities consistent with past practices and in material compliance with all Laws; (iii) materially comply with all Laws with respect to the Property and the operation of the Facilities; (iv) timely pay all payments due on or before the Closing Date under, and otherwise maintain and comply with, all Material Contracts and all Resident Agreements; (v) keep in full force and effect (and renew as applicable) present insurance policies through the Closing Date; (vi) maintain in good standing all material Permits; (vi) not enter into any contracts, agreements or leases (or amendments thereto) which would have had to be disclosed on any scheduled hereto had they been in effect prior to the Effective Date; and (viii) except as expressly permitted hereunder, not take any action that would cause any of the changes, events or conditions described in Section 6.1.26 hereto. 

7.2    Healthcare Approvals.  Purchaser will use commercially reasonable efforts to obtain or satisfy or cause to be obtained or satisfied, as applicable, all Healthcare Approvals promptly following the date hereof.  Without limiting the foregoing, as soon as practicable, but in no event later than ten (10) Business Days following the Effective Date, and subject to Seller and Existing Operator having provided such documents and information as reasonably requested by Purchaser in connection with same, Purchaser shall use commercially reasonable efforts to submit or cause to be submitted filings, notifications, applications, and/or submissions with AHCA to initiate obtaining the Healthcare Approvals.  Without limiting the foregoing or any of the other provisions of this Section 7.2, Purchaser shall act in good faith and exercise all due diligence to expeditiously procure all Healthcare Approvals, subject to Seller’s and Existing Operator’s reasonable cooperation in connection therewith.  Purchaser shall dedicate and devote reasonable resources toward obtaining all Healthcare Approvals, and shall timely make all required submissions and deliveries to AHCA in connection therewith and promptly respond to all requests of AHCA.  Seller and Existing Operator agree to cooperate with Purchaser, as reasonably requested by Purchaser, in connection with Purchaser’s efforts to obtain all Healthcare Approvals.  Purchaser agrees to promptly notify, consult with, and keep Seller reasonably advised as to the status of the matters contemplated above in this Section 7.2.  Notwithstanding anything to the contrary contained in this Agreement, Purchaser shall be 

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responsible for all costs and expenses related to its obtaining the Healthcare Approvals, other than the costs of Seller and Existing Operator incurred by providing the cooperation stated herein.  For its part, Seller and Existing Operator shall file with AHCA written notices of the transactions and changes of ownership and operations contemplated hereby in accordance with Fla. Stat. Ann §§ 408.807(1) & 409.907(6)(b) (regarding notices from transferors), including the timing requirements set forth therein.  Each of the Healthcare Approvals will be deemed to have been obtained upon the occurrence of any of the following events (each, an “Approval Event”): (i) receipt of the Required Operating Licenses, (ii) the receipt of confirmation from AHCA or its applicable subagency in writing or verbally (if such verbal confirmation is confirmed in a writing to AHCA or such subagency) that the parties are authorized to proceed with the Transactions and changes of ownership and operations contemplated hereby (each such confirmation, an “Agency Confirmation”) or (iii) where AHCA or such applicable subagency has failed to respond to a written communication seeking the Required Operating Licenses or Agency Confirmation, upon a subsequent written communication to AHCA or such subagency affirmatively stating that no further action by the parties hereto is required prior to the consummation of the transactions and changes of ownership and operations contemplated hereby and in which AHCA or such subagency is notified that the parties hereto are proceeding with same as disclosed unless the parties are informed otherwise by AHCA or such subagency prior to the Closing.  Following an Approval Event and prior to Closing, the condition to obtain or satisfy or cause to be obtained or satisfied, as applicable, all Healthcare Approvals will no longer be deemed satisfied as to such Healthcare Approval if (i) AHCA or its applicable subagency provides written or verbal withdrawal of authorization (if such verbal withdrawal of authorization is confirmed in a writing to AHCA or such subagency) to proceed with the transactions and changes of ownership and operations contemplated hereby or (ii) in a situation where such condition was previously believed to be satisfied, AHCA or such subagency notifies either party in writing or verbally (if such verbal notification is confirmed in a writing to AHCA or such subagency) that (A) formal or additional filings are required for AHCA or such subagency to provide authorization to proceed with the transactions and changes of ownership and operations contemplated hereby, or (B) that the matter requires further consideration or review before AHCA or such subagency will provide such authorization.

7.3    Reserved. 

7.4    Taxes. Seller and Existing Operator shall timely file all federal, state and local Tax Returns and, to the extent applicable, estimates and reports, and pay all amounts then due for all taxes for all periods through and including the Closing Date to the extent due and payable and otherwise to the extent necessary to transfer the Property and the Facilities in accordance with the terms of this Agreement. Furthermore, Seller and Existing Operator shall give all required notices and make all required filings, on behalf of itself and Buyer when required, of the transactions contemplated hereby.  In addition, Purchaser, Seller and Existing Operator shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with Tax matters related to the Property, including any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

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7.5    MSA. Seller’s and Existing Operator’s obligations to use commercially reasonable efforts to cause the Manager to perform certain specified actions under this Agreement shall include enforcing all applicable terms and all of Manager’s applicable obligations contained in the Management Agreements. 

7.6    No Shop. At no time between the Effective Date and the Closing Date shall Seller, Existing Operator or any of its officers, directors, employees, agents or Affiliates (or any of their respective agents), directly or indirectly, solicit, initiate, encourage, participate in any negotiation or discussion, enter into any agreement in respect of the Property, the Facilities or any Seller or Existing Operator, or cooperate with any person or entity regarding any Acquisition Proposal.  The term “Acquisition Proposal” shall mean any proposal (other than a proposal by Purchaser) for the acquisition of all or a substantial portion of the equity interests or assets of any Facility, any Property or any Seller or Existing Operator, or for a merger, consolidation or other business combination pursuant to which any other person or entity would acquire any Facility, any Property or any Seller or Existing Operator, or any substantial equity interest in any Facility, the Property or Seller or Existing Operator.  Seller and Existing Operator each represents and warrants that, prior to the Effective Date, they have ceased and caused to be terminated all discussions or negotiations with any parties other than Purchaser with respect to any Acquisition Proposal, and has terminated access of any such parties to any information with regard to the Property and the Facilities, and any such parties have returned any such information previously made available by or on behalf of Seller or Existing Operator.

7.7    No Disposition of Property. Except for Fixtures and Tangible Personal Property depleted and/or replaced in the ordinary course, Seller and Existing Operator shall not (and shall use commercially reasonable efforts to cause Manager not to) sell, lease or otherwise dispose of or distribute any of the Property, and, to the extent inventory is depleted in the ordinary course, Seller and Existing Operator shall (and shall use commercially reasonable efforts to cause Manager to), in the ordinary course and to the extent consistent with past practices, restock and replenish any portion of such inventory consumed or used between the Effective Date and the Closing Date with Property of comparable quality and quantity.

7.8    Financial Information. From the Effective Date and through the Closing, Seller and Existing Operator shall deliver to Purchaser not later than the thirtieth (30th) day of the next succeeding calendar month (i) internally-prepared, unaudited monthly individual Facility financial statements (including a balance sheet and detailed income statement) showing current month and year-to-date data; (ii) accounts receivable aging; (iii) month and year-to-date capital expenditures; and (iv) updated resident rolls.  The financial statements delivered by Seller and Existing Operator pursuant to this Section shall be prepared on a basis consistent with the Financial Statements.

7.9    Reserved.

7.10    Reserved.

7.11    Resident Records.

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7.11.1    From and after the Closing, Purchaser shall cause the JV Partner to retain possession of all Resident Records for the period of time required by Law but no less than 10 years from the date of discharge of any Resident, and, subject to Law, shall provide reasonable access thereto to Seller and Existing Operator during such period in connection with a valid business purpose and upon reasonable advance notice and to permit Seller and Existing Operator to obtain copies thereof, upon request. Prior to the Closing, Seller and Existing Operator may, subject to Law, make copies of any Resident Records.      

7.11.2    At least ten (10) Business Days prior to the Closing Date, Existing Operator shall (and shall use commercially reasonable efforts to cause Manager to) deliver to Purchaser and JV Partner customer data consisting of the names of all Residents, the names and addresses of the Residents’ responsible parties and such further information as Purchaser or JV Partner may reasonably require in order for the JV Partner to be able to assume full operation of the Facilities and full accounting functions in connection therewith on the Closing Date.

7.11.3    Prior to the Closing, subject to any restrictions under Law, Seller and Existing Operator may make copies, at its expense, of any Books and Records.  

7.12    Recoupment Claims. Seller and Existing Operator, on the one hand,  and Purchaser on the other each hereto agree (and each shall use commercially reasonable efforts to cause Manager and the JV Partner, respectively) to notify the other within five (5) business days after receipt of any notice of any Governmental Authority or its agent with respect to any of the following, relating to periods prior to the Closing: (i) an alleged Medicaid overpayment, or any other recoupment or adjustment to reimbursement, (ii) an alleged underpayment of any tax or assessment, or (iii) any other governmental or Third-Party Payor claims relating to an adjustment to reimbursement or an assessment (collectively “Recapture Claim”).  For the avoidance of doubt, the failure to provide notification of a Recapture Claim within the foregoing timeframe shall in no way affect a party’s rights to indemnification with respect thereto.   In the event Seller, Existing Operator or Manager fails to pursue any issue or issues relating to appeal of a Recapture Claim relating to an adjustment to reimbursement or an assessment, Purchaser may (and may permit the JV Partner to) pursue an appeal of such issue or issues and Seller and Existing Operator shall (and they shall use commercially reasonable efforts to cause Manager to) reasonably cooperate in such appeal.     

7.13    Surveys; Resolution of Audit Deficiencies; Cooperation. Seller and Existing Operator shall (and they shall use commercially reasonable efforts to cause Manager to) provide to Purchaser, within two (2) Business Day of receipt by them, any items related to or included in any Licensing Surveys and Audits with respect to the Facilities between the Effective Date and the Closing Date.

7.14    Medicaid Provider Agreements. 

7.14.1    For any periods following the Closing that Purchaser is not yet able to bill under their Medicaid Agreements, or any waiver agreements thereunder (collectively, the “Medicaid Provider Agreements”), Purchaser shall not bill under Seller’s or Existing Operator’s Medicaid Provider Agreements unless permitted to do so by AHCA.  Seller and Existing Operator shall (and, as applicable, shall use commercially reasonable efforts to cause 

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Manager to) forward to Purchaser periodically (and in any event, no less frequently than monthly) any payments received with respect to the Medicaid Provider Agreements for services provided by Purchaser or its Affiliates following the Closing Date.

7.14.2    Seller and Existing Operator shall (and, as applicable, shall use commercially reasonable efforts to cause Manager to) deliver to Purchaser a list, sorted by Facility, of all transfer agreements, whether oral or written, between any Facility, on the one hand, and hospitals, on the other hand (“Transfer Agreements”), together with a true and complete copy of each such written Transfer Agreement in Seller’s, Existing Operator’s or Manager’s possession, relating to transfer arrangements currently in place. In addition, Seller and Existing Operator shall (and, as applicable, shall use commercially reasonable efforts to cause Manager to) deliver to Purchaser a list, sorted by Facility, of all Medicaid Provider Agreements, whether oral or written, between any Facility, on the one hand, and Third Party Payor Programs, on the other hand, together with a true and complete copy of each such written Medicaid Provider Agreements in Seller’s, Existing Operator’s or Manager’s possession, relating to Third Party Payor Programs currently in place.

7.15    Residents Rents; Accounts Receivable.

7.15.1    Prior to the Closing, except as provided in this Section 7.15, Existing Operator shall (or shall use commercially reasonable efforts to cause Manager to) bill the Residents in the ordinary course of business for amounts due under Residency Agreements and the JV Partner shall (and Purchaser shall cause the JV Partner to) assume responsibility for the billing of such amounts on and after the Closing.  The parties acknowledge that private-pay Residents are billed monthly in advance on or about the last day of the preceding calendar month.  Existing Operator shall (or shall use commercially reasonable efforts to cause Manager to) bill private-pay Residents for the calendar month ending prior to the Closing, but not for any calendar month after the Closing.  JV Partner shall (and Purchaser shall cause the JV Partner to) bill Residents for those private pay items that are billed in arrears (including, if applicable, for items such as haircuts, guest meals, therapy services and other similar items) attributable to the calendar month of the Closing; provided, however Existing Operator shall (or they shall use commercially reasonable efforts to cause Manager to) bill Residents for such items for the calendar month immediately preceding the Closing.  Regardless of which party bills the Residents or Third Party Payor Programs and regardless of when received, the portion of all Resident rents and service fees allocable to the time period before the Closing shall be allocated to Existing Operator, and the portion thereof allocable to the time period on and after the Closing shall be allocable to Purchaser and the JV Partner, as applicable, and will be accounted for as part of the reconciliation process set forth in Section 5.6. 

7.15.2    Not earlier than five (5) days prior to the Closing, Existing Operator shall (or they shall use commercially reasonable efforts to cause Manager to) deliver to JV Partner a schedule that accurately reflects in all material respects all of the outstanding Accounts Receivable with respect to the Facilities as of such date (the “Accounts Receivable Schedule”).  As soon as practicable after the Closing, Existing Operator and the JV Partner shall (and Seller, Existing Operator and Purchaser shall use commercially reasonable efforts to cause Manager and the JV Partner, respectively, to) collectively update and finalize the Accounts Receivable Schedule as of the day prior to the Closing Date.    

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7.15.3    To the extent permitted by law and the applicable Third Party Payor Program, the JV Partner in the name and on behalf of Existing Operator shall (and Purchaser shall cause the JV Partner to) bill Third Party Payor Programs and applicable Government Authorities for services provided by Existing Operator or Manager, as applicable, for the last full calendar month ended prior to the Closing. Commencing the first calendar day after Closing, the JV Partner shall (and Purchaser shall cause the JV Partner to) be responsible for and agrees to use its commercially reasonable efforts to maximize collection of the Accounts Receivables on behalf of and for the account of Existing Operator, and Existing Operator shall (and shall use commercially reasonable efforts to cause Manager to) cooperate reasonably with the JV Partner in connection with the same.  Within ten (10) Business Days of receipt, Existing Operator shall (or shall use commercially reasonable efforts to cause Manager to) deliver to the JV Partner copies of any correspondence and documents relating to the Accounts Receivables of Existing Operator not previously available for delivery. Within ten (10) Business Days of receipt, the JV Partner shall (and Purchaser shall cause the JV Partner to) deliver to Existing Operator copies of any and all correspondence and documents relating to its Accounts Receivables not previously provided thereto.  The JV Partner shall have no obligation to and shall not engage any third party to pursue collection activities. 

7.15.4    Seller and Existing Operator shall retain all rights in and title to all of their respective Accounts Receivable.  The JV Partner, on the one hand, and Seller or Existing Operator, on the other hand, shall (and Purchaser and Seller/ Existing Operator shall use commercially reasonable efforts to cause the JV Partner and Manager, respectively, to) each deliver periodically (and in any event, no less frequently than monthly) to the other any payments actually received by such party with respect the other parties Accounts Receivable. Seller and Existing Operator shall (and they shall use commercially reasonable efforts to cause Manager to) notify the JV Partner prior to engaging any third party to pursue collection activities with respect to such Accounts Receivable.  For the period from the Effective Date until the Closing Date, Seller and Existing Operator may continue their respective past practices, including eviction practices, with respect to the collection of delinquent rents and service fees of Residents.  

7.15.5    Reserved.

7.15.6    Reserved.

7.15.7    Reserved.

7.15.8    Each party agrees that they will use commercially reasonable efforts to (and Purchaser and Seller/Existing Operator shall use commercially reasonable efforts to cause the JV Partner and Manager, respectively, to) provide each other with any information reasonably required to enable either party to complete its billing to Residents and Third Party Payor Programs.

7.16    Reserved. 

7.17    Reserved.

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7.18    Pre-Closing Access.  Subject to prior notice to Seller (which may be by email), during the one (1) week period prior to the Closing Date, Seller and Existing Operator agree to (and shall use commercially reasonable efforts to cause Manager to) permit the employees and representatives of the JV Partner to be present at the Facilities at scheduled times to, as applicable and reasonably desired by the JV Partner, commence installation of time clocks, computers, billing, accounting and security systems, and do such other things as may be reasonably necessary to effect an orderly transition of the Facilities (provided that the parties agree to conduct such activities in a manner so as to not disrupt the operations of the Facilities in any material manner). 

7.19    Reserved.  

7.20    Approvals and Consents.  Prior to the Closing Date, and without limiting the other provisions of this Agreement, Seller/Existing Operator and Purchaser will (and they shall use commercially reasonable efforts to cause Manager and the JV Partner, respectively, to) take all corporate and other action and exercise their respective commercially reasonable efforts to fulfill their respective obligations hereunder.  In addition, Existing Operator shall (and shall use commercially reasonable efforts to cause Manager to) use its respective commercially reasonable efforts to obtain in writing, at its cost and expense and in form and substance reasonably satisfactory to Purchaser as promptly as possible, all Required Consents (other than the Healthcare Approvals which under Section 7.2 are the responsibility of Purchaser) and Purchaser shall (and shall cause the JV Partner to) reasonably cooperate with Seller’s and Existing Operator’s efforts to obtain such consents. 

7.21    Reserved.

7.22    Information Systems, Records in Electronic Form, Software and Data. Seller and Existing Operator shall use commercially reasonable efforts to transfer all of their transferrable, non-proprietary software licenses and all current data in fully operational form for use by the JV Partner as of the Closing Date. At least ten (10) days prior to the Closing Date, Seller and Existing Operator shall provide the JV Partner and its representatives with access to Seller’s and Existing Operator’s hardware and transferrable, non-proprietary software so that JV Partner can train its representatives in the operation of such hardware and software.

7.23    Changes in Representations and Warranties. 

7.23.1    Throughout the period from the Effective Date through and including the Closing Date, Seller and Existing Operator shall give Purchaser prompt written notice of (a) any representation and warranty made by them in this Agreement which they hereafter learn was inaccurate or incorrect when originally made, (b) any event, change or occurrence arising after the Effective Date which would make any representation or warranty of Seller or Existing Operator inaccurate or incorrect as of the time of such event, change or occurrence, and (c) any event, change or occurrence arising after the Effective Date which is reasonably anticipated to prevent Seller and Existing Operator  from remaking any representation or warranty set forth herein at Closing. The giving of any such notices shall not limit or modify any rights of Purchaser hereunder arising in the case of a breach of a representation or warranty by Seller or Existing Operator.  

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7.23.2    Throughout the period from the Effective Date through and including the Closing Date, Purchaser shall give Seller prompt written notice of (a) any representation and warranty made by Purchaser in this Agreement which Purchaser hereafter learns was inaccurate or incorrect when originally made, (b) any event, change or occurrence arising after the Effective Date which would make any representation or warranty of Purchaser materially inaccurate or incorrect as of the time of such event, change or occurrence, and (c) any event, change or occurrence arising after the Effective Date which is reasonably anticipated to prevent Purchaser from remaking any representation or warranty set forth herein at Closing.  The giving of any such notices shall not limit or modify any rights of Seller hereunder arising in the case of a breach of a representation or warranty by Purchaser.

7.24    Further Documentation.  

7.24.1    Seller and Existing Operator agree that following the Closing Date, upon the reasonable request by Purchaser, they will (and they use commercially reasonable efforts to cause Manager to so) do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers, conveyances and assurances as may be reasonably required to fully assign, grant, transfer, convey, assure and confirm to Purchaser (or designee thereof), all of the Property sold to the Purchaser (or designee thereof) pursuant to this Agreement or to transition the operations of the Facilities to the JV Partner; provided, however, that neither Seller nor Existing Operator shall be required to assume any additional obligations or liabilities beyond those assumed thereby under this Agreement and the other agreements, certificates, instruments and other documents contemplated hereby or by the Transactions.

7.24.2    Purchaser agrees that following the Closing Date, upon request by Seller, Purchaser will (and will cause the JV Partner to so) do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such further acts, documents and assurances as may be reasonably required, without enlarging or extending any obligations or liability of Purchaser under this Agreement in any manner and without (except to the extent required by this Agreement) requiring the expenditure of any funds by Purchaser or the JV Partner which are not reimbursed by Seller or Existing Operator, to fully consummate the transactions contemplated by this Agreement.

7.25    Management Transfer. Each of Seller, Existing Operator and Purchaser agrees that (a) Manager, on the one hand, and the JV Partner, on the other hand, shall use commercially reasonable efforts to enter into a Management Transfer Agreement with respect to the Facilities on terms reasonably acceptable to each of Manager and JV Partner (the “MTA”) no later than ten (10) Business Days after the Effective Date, and (b) each of Seller, Existing Operator and Purchaser shall use its commercially reasonable efforts to cause Manager and JV Partner to comply with their obligations thereunder. 

ARTICLE VIII 
CONDITIONS PRECEDENT TO CLOSING

8.1    Purchaser’s Conditions to Closing.  Purchaser’s obligation to consummate the Transactions shall be subject to and conditioned upon the satisfaction and 

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fulfillment of the following conditions precedent, provided Purchaser may, at its sole option, waive any or all of these conditions, in whole or in part, in writing or otherwise as provided in this Agreement:

8.1.1    All of the documents required to be delivered by or on behalf of Seller and/or Existing Operator to Purchaser at the Closing pursuant to the terms and conditions of Section 5.2 shall have been delivered in accordance with the terms thereof;

8.1.2     Each of Seller’s Representations shall be true and correct in all material respects (except those representations and warranties which are qualified as to materiality, which shall be true and correct in all respects) on and as of the Closing Date, with the same effect as though made on such date;

8.1.3    Subject to Purchaser’s payment of all title insurance premiums and fees, the Title Company is irrevocably committed to issue a current ALTA owner’s form of title insurance policy, or irrevocable and unconditional binder to issue the same, with extended coverage for the Land and Improvements in the amount of the Purchase Price, dated, or updated to, the date of the Closing, insuring, or committing to insure, at its ordinary premium rates, Purchaser’s good and marketable title in fee simple to the Land and Improvements and otherwise in such form and with such endorsements as provided in the title commitment approved by Purchaser pursuant to this Agreement, subject only to the Permitted Exceptions;

8.1.4    Seller and each other Sale Participant shall have performed, in all material respects, each of the covenants to be performed hereunder or under any other Transaction Document to which such Person is a party or otherwise bound on or prior to the Closing Date;  

8.1.5    Neither Seller nor Existing Operator shall have filed for protection under applicable bankruptcy or insolvency Laws or otherwise be a debtor in any bankruptcy proceeding;

8.1.6    There shall not be in force any order, decree, judgment or injunction of any Governmental Authority enjoining or prohibiting the consummation of the Transactions or declaring illegal, invalid or nonbinding any of the material covenants or obligations of the Seller or Existing Operator hereunder; and there shall not be any pending litigation or, to the Knowledge of Purchaser, Seller or Existing Operator, any litigation threatened in writing, which, if adversely determined, would restrain the consummation of any of the Transactions or declare illegal, invalid or nonbinding any of the material covenants or obligations of the Seller or Existing Operator hereunder;

8.1.7    None of the following shall have occurred: (i) receipt by Seller, Existing Operator or Purchaser of notice from AHCA or other Governmental Authority of a termination, revocation, rescission, suspension, or refusal to renew any Operating License or other Healthcare Approval or material Permit, (ii) receipt by Seller, Existing Operator or Purchaser of notice from AHCA of a so-called “fast-track” decertification or a survey finding of immediate jeopardy at either Facility; or (iii) the imposition of a ban on admissions to either Facility; 

8.1.8     Purchaser shall have obtained the Healthcare Approvals in form and substance reasonably acceptable to Purchaser, and Seller shall have provided AHCA written 

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notices of the transactions and changes of ownership and operations contemplated hereby in accordance with the last sentence of Section 7.2; 

8.1.9    The closing of the transactions contemplated by the Separate PSA shall have occurred simultaneously with the Closing under this Agreement; 

8.1.11    There shall not have occurred a Material Adverse Effect; and

8.1.12    (i) Manager shall have performed, in all material respects, each of the covenants to be performed by Manager under the MTA prior to the Closing, and (ii) each of Manager’s representations and warranties in the MTA shall be true and correct in all material respects (except those representations and warranties which are qualified as to materiality, which shall be true and correct in all respects) on and as of the Closing Date, with the same effect as though made on such date.    

Subject to the terms of Section 4.5, if any condition set forth in this Section 8.1 is not satisfied at or prior to the Outside Closing Date (except with respect to Section 8.1.3, Section 8.1.6 and Section 8.1.8 by reason of a default by Purchaser hereunder or with respect to Section 8.1.9 by reason of a default by Purchaser or its Affiliates under the Separate PSA), Purchaser may (a) waive any of the foregoing conditions and proceed to Closing with no offset or deduction from the Purchase Price, (b) terminate this Agreement, in which case Purchaser shall receive a return of the Deposit from the Escrow Agent and neither party shall have any further obligation or liability to the other except with respect to those provisions of this Agreement which expressly survive a termination of this Agreement, or (c) if such failure constitutes a default by Seller and/or Existing Operator hereunder, exercise any of its remedies pursuant to Section 10.2.  

8.2    Seller’s Conditions to Closing. Seller’s and Existing Operator’s obligation to close under this Agreement shall be subject to and conditioned upon the satisfaction and fulfillment of the following conditions precedent, provided Seller and Existing Operator may, at their sole option, waive any or all of these conditions, in whole or in part, in writing or otherwise as provided in this Agreement:

8.2.1    All of the documents and funds required to be delivered by Purchaser to Seller or Escrow Agent at the Closing pursuant to the terms and conditions of Section 5.3 shall have been so delivered;

8.2.2    Each of the representations and warranties of Purchaser contained herein shall be true and correct in all material respects (except those representations and warranties which are qualified as to materiality, which shall be true and correct in all respects) on and as of the Closing Date with the same effect as though made on such date;

8.2.3    Purchaser shall have performed, in all material respects, each of the covenants to be performed hereunder or under any other Transaction Document to which Purchaser is a party or otherwise bound on or prior to the Closing Date; 

8.2.4    Purchaser shall not have filed for protection under applicable bankruptcy or insolvency Laws or otherwise be a debtor in any bankruptcy proceeding;

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8.2.5    There shall not be in force any order, decree, judgment or injunction of any Governmental Authority enjoining or prohibiting the consummation of the Transactions or declaring illegal, invalid or nonbinding any of the material covenants or obligations of the Purchaser hereunder; and there shall not be any pending litigation or, to the Knowledge of either Purchaser or Seller, any litigation threatened in writing, which, if adversely determined, would restrain the consummation of any of the Transactions or declare illegal, invalid or nonbinding any of the material covenants or obligations of the Purchaser hereunder;

8.2.6    Purchaser shall have obtained the Healthcare Approvals; and

8.2.7    The closing of the transactions contemplated by the Separate PSA shall have occurred simultaneously with the Closing under this Agreement.

8.2.8  (i) JV Partner shall have performed, in all material respects, each of the covenants to be performed by JV Partner under the MTA prior to the Closing, and (ii) each of JV Partner’s representations and warranties in the MTA shall be true and correct in all material respects (except those representations and warranties which are qualified as to materiality, which shall be true and correct in all respects) on and as of the Closing Date, with the same effect as though made on such date.    

Subject to the terms of Section 4.5, if any condition set forth in this Section 8.2 is not satisfied at or prior to the Outside Closing Date (except with respect to Section 8.2.5 or Section 8.2.6 by reason of a default by Seller hereunder or with respect to Section 8.2.7 by reason of a default by Seller or its Affiliates under the Separate PSA), Seller may (a) waive any of the foregoing conditions (other than the condition set forth in Section 8.2.6) and proceed to Closing, (b) terminate this Agreement, in which case Seller shall be entitled to receive and retain the Deposit from the Escrow Agent and neither party shall have any further obligation or liability to the other except with respect to those provisions of this Agreement which expressly survive a termination of this Agreement, or (c) if such failure constitutes a default by Purchaser hereunder, exercise any of its remedies pursuant to Section 10.1.

ARTICLE IX 
INDEMNIFICATION & SURVIVAL PROVISIONS 

9.1    Effective Date; Survival. All of the Seller’s Representations and the Purchaser’s Representations are made as of the Effective Date and shall be deemed remade as of the Closing Date pursuant to Seller’s Bring Down Certificate and Purchaser’s Bring Down Certificate, as applicable.  All of the Seller’s Representations and the Purchaser’s Representations and Manager’s representations and warranties under the MTA shall survive Closing for a period of eighteen (18) months after the Closing Date (the “Outside Claim Date”) except for (a) claims as to which notice has been given prior to such date and which are pending on such date, (b) claims based upon representations and warranties set forth in Sections 6.1.1 and 6.1.8(b) hereof or Seller’s and Existing Operator’s indemnification obligations with respect to Program Reimbursements, and claims based upon representations and warranties set forth in Sections 6.2.1, or 6.2.2 or the first sentence of Section 9.9, and claims based on Manager’s 

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representations and warranties under Sections 4.1 and 4.2 of the MTA or JV Partner’s representations and warranties under Sections 3.1 and 3.2 of the MTA (collectively, the “Fundamental Representations”), which shall survive without limitation, and (c) claims based upon representations and warranties set forth in Sections 6.1.15 or 6.1.17 and claims based on Manager’s representations and warranties under Section 4.4 of the MTA, which shall survive until the expiration of the applicable statute of limitations. The covenants contained in this Agreement shall survive the Closing until performed in accordance with their terms (unless and to the extent performance thereof of properly waived).  Any claim by Seller, Existing Operator or Purchaser with respect to any breach of the Seller’s Representations or the Purchaser’s Representations or Manager’s representations and warranties  under the MTA, respectively, shall be effective and valid only if made after Closing in writing (specifying in reasonable detail, to the extent then known, the nature of the claim and the factual and legal basis for any such claim, and the provisions of this Agreement upon which such claim is made) against the other party on or prior to the Outside Claim Date.  Notwithstanding anything to the contrary contained herein, no individual claim pursuant to Sections 9.2(i) or 9.3(i) shall be permitted hereunder unless the amount of such claim (or series of related claims) shall exceed Twenty Five Thousand and no/100 Dollars ($25,000.00) (any such claim, a “De Minimis Claim”), other than claims in respect of a breach of or inaccuracy in a Fundamental Representation.

9.2    Indemnification by Seller.  Subject to the other provisions of this Article IX, after the Closing, Seller and Existing Operator shall indemnify and hold harmless Purchaser, the JV Partner and their respective Affiliates, and their and their respective Affiliates’ members, managers, partners, directors, officers, shareholders, employees and agents (hereinafter referred to individually as a “Purchaser Indemnified Person” and collectively as “Purchaser Indemnified Persons”) from and against any and all Damages suffered by any of the Purchaser Indemnified Persons (without duplication) resulting from or arising out of (i) any breach of or inaccuracy in any of the Seller’s Representations or any of the representations of Manager under the MTA, (ii) any Sale Participant’s or Manager’s breach of or failure to perform when due any covenant required to be performed thereby under this Agreement, the MTA or any other Transaction Document to which such Sale Participant or Manager is a party or otherwise bound, (iii) the ownership, operation or management of any of the Facilities by any Sale Participant or its Affiliate, including any manager engaged by Seller, Existing Operator or their respective Affiliate pursuant to any Operating License in the name of Seller, Existing Operator or their respective Affiliate, or any operator or manager engaged by Seller, Existing Operator or their respective Affiliate, or (iv) any Excluded Asset or Excluded Liability (collectively, “Seller Indemnifiable Damages”).  

9.3    Indemnification by Purchaser.  Subject to the other provisions of this Article IX, after the Closing, Purchaser shall indemnify and hold harmless Seller, Existing Operator and their respective Affiliates, and their respective members, managers, partners, directors, officers, shareholders, employees and agents (hereinafter referred to individually as a “Seller Indemnified Person” and collectively as “Seller Indemnified Persons”) from and against any and all Damages suffered by any of the Seller Indemnified Persons (without duplication) resulting from or arising out of (i) any breach of or inaccuracy in any of the Purchaser Representations or any of the representations of JV Partner under the MTA, (ii) Purchaser’s or JV Partner’s breach of or failure to perform when due any covenant required to be performed thereby under this Agreement, the MTA or any other Transaction Document to which 

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Purchaser or JV Partner is a party or otherwise bound, and (iii) the ownership, operation or management of any of the Facilities by Purchaser, its Affiliate or any manager engaged by Purchaser or its Affiliate, pursuant to any Operating License in the name of Purchaser, its Affiliate or any operator or manager engaged by Purchaser or its Affiliate (collectively, “Purchaser Indemnifiable Damages”). 

9.4    Limitations on Indemnification. Notwithstanding anything to the contrary contained in this Agreement: 

9.4.1    Other than claims in respect of a breach of or inaccuracy in a Fundamental Representation, (i) in no event shall Seller or Existing Operator be liable, or required to make any payment pursuant to Section 9.2(i), for any Seller Indemnifiable Damages suffered by any of the Purchaser Indemnified Persons (a) for any De Minimis Claims, and (b) unless and until the aggregate dollar amount of all such Seller Indemnifiable Damages (together with all damages indemnifiable pursuant to Section 9.2(i) of the Separate PSA, as well as any De Minimis Claims) exceeds Five Hundred Eighty Five Thousand and no/100 Dollars ($585,000.00) (such amount, the “Basket Amount”), and then only to the extent of such excess and (ii) the maximum aggregate liability of Seller and Existing Operator in respect of all claims or rights of action against Seller and/or Existing Operator arising under or pursuant to Section 9.2(i) of this Agreement (together with all damages indemnifiable pursuant to Section 9.2(i) of the Separate PSA) shall be limited to, and not exceed, Six Million and no/100 Dollars ($6,000,000.00) (the “Liability Cap”).  Notwithstanding the foregoing, if the Separate PSA is terminated, but the Closing occurs under this Agreement, the Basket Amount and the Liability Cap shall be adjusted to Three Hundred Forty-Eight Thousand Five Hundred Eleven and no/100 Dollars ($348,511.00) and Three Million Five Hundred Seventy-Four Thousand Four Hundred Sixty-Eight and no/100 Dollars ($3,574,468.00), respectively.

9.4.2    Other than claims in respect of a breach of or inaccuracy in a Fundamental Representation, (i) in no event shall Purchaser be liable for, or required to make any payment pursuant to Section 9.3(i), for any Purchaser Indemnifiable Damages suffered by the Seller Indemnified Persons (a) for any De Minimis Claims, and (b) unless and until the aggregate dollar amount of all such Purchaser Indemnifiable Damages under this Agreement (together with all similar damages indemnifiable pursuant to Section 9.3(i) of the Separate PSA, but excluding De Minimis Claims) exceeds the Basket Amount, and then only to the extent of such excess, and (ii) the maximum aggregate liability of Purchaser in respect of all claims or rights of action against Purchaser arising under or pursuant to Section 9.3(i) of this Agreement (together with all similar damages indemnifiable pursuant to Section 9.3(i) of the Separate PSA) shall be limited to, and not exceed, the Liability Cap.

9.5    Indemnification Procedures.  The party or parties making a claim for indemnification under this Article IX shall be, for purposes of this Agreement, referred to as the “Indemnified Person” and the party or the parties against whom such claims are asserted under this Article IX shall be, for purposes of this Agreement, referred to as the “Indemnifying Person.” All claims by any Indemnified Person under this Article IX for Third Party Claims shall be asserted and resolved as follows:

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9.5.1    In the event of any claim, demand, suit, action, arbitration, investigation, inquiry or proceeding brought by a third party against any Indemnified Person which is covered by the indemnification provisions of this Article IX (in each such case, a “Third Party Claim”), the Indemnified Person shall promptly cause written notice of the assertion of such Third Party Claim to be forwarded to the Indemnifying Person (a “Notice of Third Party Claim”). The failure of the Indemnified Person to deliver promptly to the Indemnifying Person a Notice of Third Party Claim shall not release, waive or otherwise affect the Indemnifying Person’s obligations with respect thereto except to the extent that the Indemnifying Person is actually prejudiced as a result of such failure. Subject to Section 9.5.2, the Indemnifying Person on behalf of the Indemnified Person shall have the right to elect to assume control of the defense of any Third Party Claim with counsel reasonably acceptable to the Indemnified Person. The costs and expenses incurred by the Indemnifying Person in connection with such defense (including reasonable out-of-pocket attorneys’ fees, other professionals’ and experts’ fees and court or arbitration costs) shall be paid by the Indemnifying Person (subject to the Basket Amount and Liability Cap, as applicable). In the event of a conflict of interest between the Indemnifying Person and the Indemnified Person as to any matter for which indemnification is required hereunder,  the Indemnified Person may engage counsel of its own choice to participate in such defense (which counsel shall be reasonably satisfactory to the Indemnifying Party) and at the expense of the Indemnifying Person (which expense shall be subject to the Basket Amount and the Liability Cap, as applicable), in the defense of any Third Party Claim.

9.5.2    With respect to the defense of any Third Party Claim, the Indemnifying Person shall not be entitled to continue control of such defense and shall pay the costs and expenses incurred by the Indemnified Person in connection with such defense if the Indemnifying Person fails to assume control of the defense or materially fails to defend such claim.

9.5.3    If the Indemnifying Person has the right to and does elect to defend any Third Party Claim, the Indemnifying Person shall: (i) conduct the defense of such Third Party Claim actively and diligently and keep the Indemnified Person reasonably informed of material developments in the Third Party Claim at all stages thereof and (ii) to the extent practicable, permit the Indemnified Person and its counsel to confer with the Indemnifying Person regarding the conduct of the defense thereof. Purchaser, Seller and Existing Operator will make available to each other and each other’s counsel and accountants, without charge, all of their and their Affiliates’ books and records relating or responsive to the Third Party Claim, and each party (at its own expense) will render to the other party such assistance as may be reasonably required  in order to ensure the proper and adequate defense thereof and shall furnish such records, information and testimony and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested by the other party in connection therewith; provided, however, the Indemnified Person shall not have an obligation to disclose any information or documents, that are proprietary, subject to confidentiality restrictions (unless the recipient of such information signs a confidentiality agreement reasonably acceptable to the disclosing Indemnified Person), or privileged (including pursuant to any attorney-client privilege).  The Indemnified Person and the Indemnifying Person shall render, and shall cause their respective employees to render, to each other, at the sole cost and expense of the Indemnifying Person (with costs and expenses being subject to the Liability Cap) such other assistance and cooperation as may reasonably be required to ensure the proper and adequate defense of such claim or demand. 

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9.5.4    If the Indemnifying Person has the right to and does elect to defend any Third Party Claim, the Indemnifying Person shall have the right to enter into any settlement of a Third Party Claim without the consent of the Indemnified Person provided that (i) no amount in excess of the Basket Amount (if applicable) is payable by such Indemnified Person in connection with such settlement, (ii) such settlement does not involve any injunctive or other equitable relief or the contractual equivalent thereof binding upon such Indemnified Person, and (iii) such settlement expressly and unconditionally releases such Indemnified Person from all liabilities and obligations with respect to such claim, with prejudice; provided, further, that no settlement by the Indemnifying Person of a Third Party Claim shall limit or reduce the right of the Indemnified Person to indemnity hereunder for all Damages they may incur arising out of or resulting from the Third Party Claim to the extent such Indemnified Person is otherwise entitled to be indemnified pursuant to this Article IX.

9.5.5    Subject to the limitations set forth in this Article IX, if an Indemnified Person wishes to make an indemnification claim under this Article IX that is not a Third Party Claim, such Indemnified Person shall deliver a written notice (an “Indemnification Claim Notice”) to the Indemnifying Person (i) stating that an Indemnified Person has paid, incurred, suffered or sustained, or reasonably anticipates that it may pay, incur, suffer or sustain Damages, and (ii) specifying in reasonable detail (to the extent then known) any Damages and the basis upon which indemnification is sought hereunder. The Indemnified Person may update an Indemnification Claim Notice from time to time to reflect any new information discovered with respect to the claim set forth in such Indemnification Claim Notice.  Except to the extent confidential or subject to any privilege protection or other disclosure restriction, following the delivery of an Indemnification Claim Notice, the Indemnified Person shall provide the Indemnifying Person and its representatives and agents with such documents and records as they may reasonably require, and reasonable access to such personnel or representatives (including but not limited to the individuals responsible for the matters that are subject of the Indemnification Claim Notice) as they may reasonably require, for the purposes of investigating or resolving any disputes or responding to any matters or inquiries raised in the Indemnification Claim Notice.

9.5.6    If no Indemnifying Person shall object in writing within the 30-day period after receipt of an Indemnification Claim Notice by delivery of a written notice of objection containing a reasonably detailed description of the facts and circumstances supporting an objection to the applicable indemnification claim (an “Indemnification Claim Objection Notice”), such failure to so object shall be an irrevocable acknowledgment by the Indemnifying Parties that the Indemnified Person is entitled to the full amount of the claim for Damages set forth in such Indemnification Claim Notice. In the event such indemnification claim arises under Section 9.2 hereof or of any Separate PSA, Purchaser, Seller and Existing Operator shall promptly, but in any event within five (5) days of the expiration of such thirty (30) day period, deliver joint instructions to the Escrow Agent instructing Escrow Agent to promptly release from the Indemnity Escrow to the Purchaser Indemnified Person an amount equal to the Damages set forth in such Indemnification Claim Notice. For any such indemnification claim that is not to be recovered from the Indemnity Escrow, or if the amount held in the Indemnity Escrow, if any, is insufficient to satisfy in whole the amount owed to a Purchaser Indemnified Person in accordance with this Agreement, then the Indemnifying Person shall, promptly, but in any event 

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within five (5) days of the expiration of such thirty (30) day period, pay to the Indemnified Person the amount of such shortfall in cash.

9.5.7    In the event that an Indemnifying Person shall deliver an Indemnification Claim Objection Notice in accordance with Section 9.5.6 within thirty (30) days after delivery of such Indemnification Claim Notice, such Indemnifying Person and the Indemnified Person shall attempt to agree upon the rights of the respective parties with respect to each of such claims. If such Indemnifying Person and the Indemnified Person should so agree, and the indemnification claim arises under Section 9.2 hereof or any Separate PSA, Purchaser, Seller and Existing Operator shall promptly, but in any event within five (5) days of such agreement, deliver joint instructions to the Escrow Agent instructing Escrow Agent to promptly release from the Indemnity Escrow to the Purchaser Indemnified Person an amount equal to the Damages that the parties have agreed are due to such Indemnified Person pursuant to such indemnification claim.  For any such indemnification claim that is not to be recovered from the Indemnity Escrow, or if the amount held in the Indemnity Escrow, if any, is insufficient to satisfy in whole the amount owed to a Purchaser Indemnified Person in accordance with this Agreement, then the Indemnifying Person shall, promptly, but in any event within five (5) days after the date of such agreement, pay to the Indemnified Person the amount of such shortfall in cash.

9.5.8    If no such agreement can be reached after good faith negotiation during the thirty (30) day period after delivery of an Indemnification Claim Objection Notice or if one party determines at any time during such thirty (30) day period that such negotiations are unlikely to result in any such agreement, the indemnification claim shall be resolved pursuant a suit, action or other proceeding brought in accordance with Section 12.7.

9.5.9    In respect of any Damages for which indemnification may be sought pursuant to this Article IX, in calculating amounts payable to an Indemnified Person, the amount of any Indemnified Damages shall be determined net of (i) any tax benefit actually realized by such Indemnified Person on account of such Damages, (ii) payments recovered by such Indemnified Person under any insurance policy with respect to such Damages (net of costs of collection), and (iii) any net prior recovery by such Indemnified Person from any third party with respect to such Damages.

9.5.10    In respect of any Damages for which indemnification may be sought pursuant to this Article IX, the Indemnified Person shall (and shall cause its Affiliates to) (a) use commercially reasonable efforts to pursue all legal rights and remedies available in order to minimize the Damages to which it may be entitled to indemnification under this Agreement except to the extent that the Indemnified Person believes that the taking of such action would have material and adverse consequences for the Indemnified Person, and (b) select the lowest cost remedy available consistent with good business practice. The terms of Section 9.5 are not intended to modify in any manner the limitations on liability set forth in Section 9.4.

9.6    Tax Treatment.  For all tax purposes, the parties agree to treat indemnity payments made pursuant to this Agreement as an adjustment to the Purchase Price.

9.7    Exclusive Remedy.  Subject to Section 10.4, Purchaser, Seller and Existing Operator acknowledge and agree that from and after the Closing, the rights granted to 

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the parties in the indemnification provisions of this Article IX shall be the exclusive rights and remedy of Purchaser (and all other Purchaser Indemnified Persons) and Seller and Existing Operator (and all other Seller Indemnified Persons) under this Agreement other than for claims arising our of or relating to fraud.

9.8    Manner of Payment. Any indemnification payments made by Seller, Existing Operator or Purchaser pursuant to this Article IX shall be effected by wire transfer of immediately available funds to the accounts designated by the other party, within five (5) days after the final determination thereof.  

9.9    Brokerage.  Seller, Existing Operator and Purchaser each represents and warrants to the other that it has not dealt with or utilized the services of any real estate broker, investment banker, sales person or finder in connection with this Agreement, other than the services of Greystone in its capacity as financial advisor to Seller and Existing Operator (“Financial Advisor”).  Seller shall pay any and all fees that may be due and payable to Financial Advisor in connection with the Transactions pursuant to a separate agreement with Financial Advisor. Each party agrees to indemnify, hold harmless, and, if requested in the sole and absolute discretion of the indemnitee, defend (with counsel approved by the indemnitee) the other party from and against any breach of the terms of this Section 9.9 and any Damages relating to brokerage commissions and finder’s fees arising from or attributable to the acts or omissions of the indemnifying party. 

ARTICLE X 
DEFAULT AND REMEDIES

10.1    Purchaser Default.  Prior to Closing, if Purchaser or any of its Affiliates party to the Separate PSA, as applicable, (a) defaults on its obligations to (x) deliver to Seller or Existing Operator or their Affiliates party to the Separate PSA, as applicable, the documents specified under Section 5.3 hereunder or under Section 5.3 of the Separate PSA, respectively, or (y) deliver the Purchase Price in accordance with Article II hereunder or under Article II of the Separate PSA and consummate the Transactions (as defined herein and in the Separate PSA) on the Closing Date, or (b) defaults, in any material respect, with respect to any of its representations, warranties or obligations under this Agreement or under the Separate PSA, and such default continues for more than ten (10) Business Days after written notice from Seller (each, a “Purchaser Default”), then Seller and Existing Operator shall have the right, as their sole and exclusive remedy (Seller and Existing Operator hereby expressly waive any and all other remedies available to them at law, in equity or otherwise) to (i) terminate this Agreement immediately, in which case Purchaser shall be deemed to forfeit the Deposit to Seller and Existing Operator and the Escrow Agent shall deliver the Deposit to Seller and Existing Operator, or (ii) if Purchaser is willing to proceed with the Closing, waive such default and any and all other remedies available to them at law, in equity or otherwise rights available to them and proceed with the Closing of the Transaction.  Upon a termination of this Agreement, neither Purchaser, Seller nor Existing Operator shall have any further rights, obligations or liabilities hereunder, except as otherwise expressly provided herein.  SELLER, EXISTING OPERATOR AND PURCHASER AGREE THAT (A) ACTUAL DAMAGES DUE TO PURCHASER’S DEFAULT HEREUNDER WOULD BE DIFFICULT AND INCONVENIENT TO ASCERTAIN AND THAT SUCH AMOUNT IS NOT A PENALTY AND IS FAIR AND 

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REASONABLE IN LIGHT OF ALL RELEVANT CIRCUMSTANCES, (B) THE AMOUNT SPECIFIED AS LIQUIDATED DAMAGES IS NOT DISPROPORTIONATE TO THE DAMAGES THAT WOULD BE SUFFERED AND THE COSTS THAT WOULD BE INCURRED BY SELLER AND/OR EXISTING OPERATOR AS A RESULT OF HAVING WITHDRAWN THE PROPERTY FROM THE MARKET, AND (C) PURCHASER DESIRES TO LIMIT ITS LIABILITY UNDER THIS AGREEMENT TO THE AMOUNT OF THE DEPOSIT PAID IN THE EVENT PURCHASER FAILS TO COMPLETE CLOSING.  SELLER, EXISTING OPERATOR AND PURCHASER AGREE THAT THIS SECTION 10.1 IS INTENDED TO AND DOES LIMIT THE AMOUNT OF DAMAGES DUE TO SELLER AND EXISTING OPERATOR AND THE REMEDIES AVAILABLE TO SELLER AND EXISTING OPERATOR, AND SHALL BE SELLER’S AND EXISTING OPERATOR’S EXCLUSIVE REMEDY PRIOR TO CLOSING AGAINST PURCHASER, BOTH AT LAW AND IN EQUITY ARISING FROM OR RELATED TO A BREACH BY PURCHASER OF ITS COVENANTS OR ITS OBLIGATION TO CONSUMMATE THE TRANSACTIONS. UNDER NO CIRCUMSTANCES SHALL SELLER OR EXISTING OPERATOR SEEK OR BE ENTITLED TO RECOVER DAMAGES PRIOR TO CLOSING (INCLUDING ANY SPECIAL, CONSEQUENTIAL, PUNITIVE, SPECULATIVE OR INDIRECT DAMAGES), ALL OF WHICH SELLER AND EXISTING OPERATOR SPECIFICALLY WAIVE, FROM PURCHASER FOR ANY BREACH BY PURCHASER OF ITS COVENANTS, PURCHASER’S REPRESENTATIONS OR ITS OTHER OBLIGATIONS UNDER THIS AGREEMENT.

10.2    Seller Default.  Prior to Closing, if Seller and/or Existing Operator or any of their Affiliates party to the Separate PSA defaults on its obligations hereunder or under the Separate PSA, as applicable, to deliver to Escrow Agent the deliveries specified under Section 5.2 hereunder or under Section 5.2 of the Separate PSA on the date required by the terms of this Agreement or the Separate PSA or, defaults in any material respect with respect to any of its representations, warranties, covenants or obligations under this Agreement or the Separate PSA, and such default continues for more than ten (10) Business Days after written notice from Purchaser, then Purchaser shall have the right to (a) terminate this Agreement, whereupon (i) the Deposit shall be returned to Purchaser, and (ii) Seller and Existing Operator shall pay to Purchaser all documented out-of-pocket costs and expenses incurred by Purchaser and JV Partner in connection with this Agreement and the Transaction (taken in the aggregate with all costs and expenses incurred hereunder and under each Separate PSA), including without limitation their reasonable attorneys’ fees and expenses (which obligations shall survive such termination) up to a maximum aggregate amount of Three Hundred Thousand and no/100 Dollars ($300,000.00) (inclusive of reasonable attorney’s fees and expenses incurred in connection with the Separate PSA), or (b) subject to the conditions below, seek specific performance of Seller’s and Existing Operator’s obligation to consummate the Transactions pursuant to this Agreement.  Purchaser may seek specific performance of Seller’s and Existing Operator’s obligation to close on the sale of the Property pursuant to this Agreement only if, as a condition precedent to initiating such litigation for specific performance, Purchaser shall (x) not otherwise be in default under this Agreement beyond the applicable notice and cure periods, and (y) file suit therefor with the court on or before the 90th day after the delivery of written notice of the default.  If Purchaser fails to file an action for specific performance within such 90 day period, then Purchaser shall be deemed to have elected to terminate this Agreement in accordance with subsection (a) above.  SELLER, EXISTING OPERATOR AND PURCHASER 

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AGREE THAT THIS SECTION 10.2 IS INTENDED TO AND DOES LIMIT THE AMOUNT OF DAMAGES DUE PURCHASER AND THE REMEDIES AVAILABLE TO PURCHASER, AND SHALL BE PURCHASER’S EXCLUSIVE REMEDY PRIOR TO CLOSING AGAINST SELLER AND EXISTING OPERATOR BOTH AT LAW AND IN EQUITY ARISING FROM OR RELATED TO A BREACH BY SELLER AND/OR EXISTING OPERATOR OF ITS COVENANTS OR ITS OBLIGATION TO CONSUMMATE THE TRANSACTIONS. UNDER NO CIRCUMSTANCES SHALL PURCHASER SEEK OR BE ENTITLED TO RECOVER DAMAGES PRIOR TO CLOSING (INCLUDING ANY SPECIAL, CONSEQUENTIAL, PUNITIVE, SPECULATIVE OR INDIRECT DAMAGES), ALL OF WHICH PURCHASER SPECIFICALLY WAIVES, FROM SELLER OR EXISTING OPERATOR FOR ANY BREACH BY SELLER OR EXISTING OPERATOR OF ITS PRE-CLOSING COVENANTS, SELLER’S REPRESENTATIONS OR ITS OTHER OBLIGATIONS UNDER THIS AGREEMENT. 

10.3    Termination of Separate PSA. In the event that the Separate PSA is terminated by any party thereto, Seller, Existing Operator and Purchaser shall each have the right to terminate this Agreement (provided that if no Purchaser Default exists hereunder and under the Separate PSA, upon such termination the Deposit shall be returned to Purchaser, and (Seller and Existing Operator shall pay to Purchaser all documented out-of-pocket costs and expenses incurred by Purchaser and JV Partner in connection with this Agreement and the Transaction (taken in the aggregate with all costs and expenses incurred hereunder and under each Separate PSA), including without limitation their reasonable attorneys’ fees and expenses (which obligations shall survive such termination) up to a maximum aggregate amount of Three Hundred Thousand and no/100 Dollars ($300,000.00) (inclusive of reasonable attorney’s fees and expenses incurred in connection with the Separate PSA)). 

10.4    Post-Closing Defaults. The parties agree that irreparable damage would result and that the parties would not have any adequate remedy at law if any of the provisions of this Agreement to be performed at any time from and after Closing were not performed in accordance with their specific terms or were otherwise breached or threatened to be breached from and after Closing. It is accordingly agreed that the parties shall be entitled to equitable relief, without the proof of actual damages, including in the form of an injunction or injunctions or orders for specific performance, in addition to all other remedies available to the parties at law or in equity as a remedy for any such post-Closing breach or threatened breach, in the courts specified in Section 12.7 hereof. Each party agrees (a) not to object to any attempt by the other party to obtain any such equitable remedy (provided, that it is understood that clause (a) of this sentence is not intended to, and shall not, preclude any party from litigating on the merits the substantive claim to which such remedy relates) and (b) to waive any requirement for the security or posting of any bond in connection with any such equitable remedy.

ARTICLE XI 
CASUALTY; EMINENT DOMAIN

11.1    Damage.  Until Closing, the risk of loss or damage to the Property shall be borne by Seller; provided that, this Section shall in no event expand of modify Seller’s obligations under Section 7.1 to operate, maintain and manage the Property prior to the Closing 

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Date in the ordinary course consistent with past practices and in material compliance with Laws.  In the event that any Property is damaged or destroyed by fire or other casualty prior to Closing, Seller shall promptly provide Purchaser with written notice of such occurrence, whereupon the parties shall promptly ascertain the cost to repair or replace same by hiring a mutually acceptable contractor to estimate same.  If the costs of repair or replacement of such fire or casualty exceeds ten percent (10%) of the allocated value to the Property taken as a whole, then Purchaser shall have the right to terminate this Agreement and, at Purchaser’s election, the Separate PSA by giving Seller written notice of its intention to do so, such notice by Purchaser to Seller to be given not later than ten (10) Business Days after Purchaser shall have received notice of such costs (whereupon this Agreement and, if so elected by Purchaser, the Separate PSA shall terminate and be of no further force or effect whatsoever except with respect to those rights and obligations, if any, which specifically survive such termination).  If Purchaser elects not to terminate this Agreement, then the parties shall consummate the Transactions in accordance with the terms of this Agreement, subject to the terms of Section 11.2 below.

11.2    Closing.  In  the event of a casualty as set forth in Section 11.1, if Purchaser elects not to terminate the Agreement, then the parties shall consummate the Transactions in accordance with the terms of this Agreement for the full Purchase Price, notwithstanding any such damage, destruction or casualty, in which case Seller and Purchaser shall, at Closing, execute and deliver an assignment and assumption (in a form reasonably and mutually agreed) of Seller’s rights and obligations with respect to the insurance claim related to such damage, destruction or casualty, and thereafter Purchaser shall receive all insurance proceeds pertaining to such claim, plus a credit against the Purchase Price at Closing in the amount of any deductible payable by Seller in connection therewith, less (i) any out-of-pocket costs incurred by Seller in pursuing or collecting such insurance claim and (ii) any amounts which may already have been spent by Seller for Repairs.

11.3    Repairs.  To the extent that Seller elects to commence any Repairs prior to Closing, then Seller shall be entitled to receive and apply available insurance proceeds to pay the costs of such Repairs completed or installed prior to Closing, with Purchaser being responsible for completion of such Repairs after Closing.  To the extent that any Repairs have been commenced prior to Closing, then the Assigned Contracts shall include, and Purchaser shall assume at Closing, all construction and other contracts entered into by Seller in connection with such Repairs; provided, however, that (except in the event of emergency (including any threatened material loss to or at the Property or threatened bodily injury to persons) on or about any Property, as determined in Seller’s sole discretion) Seller will consult with Purchaser prior to entering into any such contract if Purchaser would, or could reasonably be expected to, have to assume such contract.  Notwithstanding the foregoing, Seller retains the sole right and authority to pursue any Repair and/or enter into any such contract.

11.4    Eminent Domain.  In the event that, at the time of Closing, all or any material portion of any Facility is (or previously, but after the Effective Date, has been) acquired, or may or will be acquired, by any Governmental Authority by the powers of eminent domain or transfer in lieu thereof,  Seller shall promptly provide Purchaser with written notice of such occurrence, and Purchaser shall have the right to terminate this Agreement and, at Purchaser’s election, the Separate PSA, by giving Seller written notice of its intention to do so, such notice by Purchaser to Seller to be given not later than ten (10) Business Days after Purchaser shall 

51

have received notice from Seller of such aforesaid occurrence (whereupon this Agreement and, if so elected, the Separate PSA shall terminate and be of no further force or effect whatsoever except with respect to those rights and obligations, if any, which specifically survive termination of this Agreement).  If Purchaser elects not to terminate this Agreement, then the parties shall consummate the Transactions in accordance with the terms of this Agreement for the full Purchase Price and Purchaser shall have all rights to, and receive the full benefit of, any condemnation award.

ARTICLE XII 
MISCELLANEOUS

12.1    Binding Effect of Agreement.  This Agreement shall not be binding on any party hereto until executed by both Purchaser, Seller and Existing Operator.  Escrow Agent’s execution of this Agreement shall not be a prerequisite to the effectiveness of this Agreement.  Subject to the terms of Section 12.3, this Agreement shall be binding upon and inure to the benefit of Seller, Existing Operator and Purchaser, and their respective successors and permitted assigns.

12.2    Exhibits; Schedules; Annexes.  All Exhibits, Schedules and Annexes, whether or not annexed hereto, are a part of this Agreement for all purposes.

12.3    Assignability.  Purchaser may assign its rights under this Agreement to one or more Affiliates thereof; provided, however, that no such assignment shall relieve Purchaser of any of its obligations hereunder.  Purchaser may assign this Agreement in part with respect to any one Property to facilitate the acquisition of the Property by a separate entity formed by Purchaser with respect to the Property.  

12.4    Captions.  The captions, headings, and arrangements used in this Agreement are for convenience only and do not in any way affect, limit, amplify, or modify the terms and provisions hereof.

12.5    Number and Gender of Words.  Whenever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender shall include each other gender where appropriate.

12.6    Notices.  All notices, demands, requests and other communications required or permitted hereunder shall be in writing, and shall be (a) personally delivered; (b) sent by a nationally-recognized overnight delivery service; (c) sent by certified or registered mail, return receipt requested; or (d) sent by electronic delivery with an original copy thereof transmitted to the recipient by one of the means described in subsections (a) through (c) no later than 3 Business Days thereafter.  All notices shall be deemed effective when actually received; provided, however, that if the notice was sent by overnight courier or mail as aforesaid and is affirmatively refused or cannot be delivered during customary business hours by reason of a change of address with respect to which the addressor did not have either knowledge or written notice delivered in accordance with this paragraph, then the first attempted delivery shall be deemed to constitute delivery.  Each party shall be entitled to change its address for notices from time to time by delivering to the other party notice thereof in the manner herein provided for the 

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delivery of notices.  All notices shall be sent to the addressee at its address set forth following its name below: 
	
		
	To Purchaser:   
	c/o Griffin-American Healthcare REIT IV, Inc. 
18191 Von Karman Avenue, Suite 300
Irvine, CA 92612  
Attention:  Brooks Barton
Email: bbarton@ahinvestors.com 

	 
	 

	with a copy to:   
	Arnall Golden Gregory LLP 
171 17th Street, NW, Suite 2100 
Atlanta, GA  30363 
Attn.: Steven A. Kaye, Esq.  
Fax No.:  404-873-8101  
Email:  steven.kaye@agg.com 

	 
	 

	To Seller and Existing Operator:
	c/o Fortress Investment Group LLC
1345 Avenue of the Americas
New York, New York 10105
Attn:  Max Luce
Facsimile: 917-639-9638
Email:  mluce@fortress.com

	 
	 

	with a copy to:    
	c/o Fortress Investment Group LLC
1345 Avenue of the Americas
New York, New York 10105
Attn:  Ivy Hernandez
Facsimile: 917-639-9638
Email:  ihernandez@fortress.com  

	 
	 

	with a copy to:    
	Williams Mullen
200 South 10th Street, Suite 1600
Richmond, Virginia 23219
Attention:  Robert C. Dewar
Email:  rdewar@williamsmullen.com 

Any notice required hereunder to be delivered to the Escrow Agent shall be delivered in accordance with above provisions as follows:
	
		
	 
	First American Title Insurance Company
777 South Figueroa Street, 4th Floor
Los Angeles, CA 90017
Attention: Brian M. Serikaku
Email: bmserikaku@firstam.com

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Unless specifically required to be delivered to the Escrow Agent pursuant to the terms of this Agreement, no notice hereunder must be delivered to the Escrow Agent in order to be effective so long as it is delivered to the other party in accordance with the above provisions.

12.7    Governing Law and Venue.  This Agreement shall be construed and enforced in accordance with the laws of the State of New York, without giving effect to any principles regarding conflict of laws to the extent such principles would require or permit the application of the laws of another jurisdiction.  Each of Purchaser, Seller and Existing Operator shall submit to the exclusive jurisdiction of the state courts of the State of New York in New York County and to the jurisdiction of the United States District Court for the Southern District of New York for the purposes of each and every suit, action or other proceeding arising out of or based upon this Agreement or the subject matter hereof brought by the parties, it being expressly understood and agreed that this consent to jurisdiction shall be self-operative and no further instrument or action, other than service of process in one of the manners specified in this Agreement or as otherwise permitted by such law, shall be necessary in order to confer jurisdiction upon a party in any such court.  Each of Purchaser, Seller and Existing Operator shall waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any suit, action or proceeding brought in any such court, any claim that either Purchaser, Seller or and Existing Operator is not subject personally to the jurisdiction of the above-named courts, that Purchaser’s, Seller’s or and Existing Operator’s property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court, and further agrees to waive, to the fullest extent permitted under applicable law, the benefit of any defense that would hinder, fetter or delay the levy, execution or collection of any amount to which Seller, and Existing Operator Purchaser or their successors or permitted assigns are entitled pursuant to the final judgment of any court having jurisdiction.

12.8    Entire Agreement.  This Agreement embodies the entire agreement between the parties hereto concerning the subject matter hereof and supersedes all prior conversations, proposals, negotiations, understandings and contracts, whether written or oral.

12.9    Amendments.  This Agreement shall not be amended, altered, changed, modified, supplemented or rescinded in any manner except by a written contract executed by all of the parties; provided, however, that, the signature of the Escrow Agent shall not be required as to any amendment of this Agreement other than an amendment of Section 2.3.

12.10    Severability.  If any provision of this Agreement is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

12.11    Multiple Counterparts/Facsimile Signatures. This Agreement may be executed in a number of identical counterparts.  This Agreement may be executed by facsimile signatures or electronic delivery of signatures which shall be binding on the parties hereto.

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12.12    Construction.  No provision of this Agreement shall be construed in favor of, or against, any particular party by reason of any presumption with respect to the drafting of this Agreement; both parties, being represented by counsel, having fully participated in the negotiation of this instrument.

12.13    Confidentiality/Press Releases.  Each party hereto agrees that this Agreement, the provisions of this Agreement, all understandings, agreements and other arrangements between and among the parties, and all other non-public information received from or otherwise relating to, the Property (or any portion thereof), Purchaser, Seller and/or and Existing Operator or their respective Affiliates shall be, and be kept, confidential, and shall not be disclosed or otherwise released to any other Person (other than by any party to such party’s Affiliates, provided that such party shall be responsible and liable to the other party for any breach of this Section 12.13 by its Affiliates), without the written consent of Purchaser, Seller and Existing Operator, as applicable.  Any non-public information obtained by Purchaser in the course of its inspection of the Property, and any Seller’s Deliveries or Third Party Reports, in each case that is proprietary to and maintained as confidential by Seller (including, without limitation, Licensing Surveys and any information regarding Seller’s operating results from the Property) shall be confidential and Purchaser shall be prohibited from making public or disclosing such information to any other Person, without Seller’s prior written authorization, which may be granted or denied in Seller’s sole discretion. Notwithstanding the foregoing, the obligations of the parties hereunder shall not apply in the following instances: 

12.13.1    the disclosure of confidential information to any of such party’s lessors, lenders, Governmental Authorities, Purchaser Parties and other third parties to the extent necessary in order to consummate the Transactions;

12.13.2    to the extent that the disclosure of information otherwise determined to be confidential is required by legal requirements (other than as addressed by paragraph (iv) below), provided that (A) prior to disclosing such confidential information, such disclosing party shall notify the other party thereof, which notice shall include the basis upon which such disclosing party believes the information is required to be disclosed; and (B) such disclosing party shall, if requested by the other party, provide commercially reasonable cooperation with the other party to protect the continued confidentiality thereof; 

12.13.3    the disclosure of confidential information to any financial and other professional advisors, shareholders, investors, lessors and lenders (both actual and potential) of a party who agree to hold confidential such information substantially in accordance with the terms of this Section 12.13 or who are otherwise bound by a duty of confidentiality to such party, provided that the disclosing party shall be responsible and liable to the other party for any breach of the confidentiality terms of this Section 12.13 by such advisor;

12.13.4    Purchaser (or any of its Affiliates) shall have the right to disclose such confidential information as is required to be disclosed by any regulations or securities exchange listing rules applicable to Purchaser (or any of its Affiliates), including in connection with Purchaser’s (or any of its Affiliates’) quarterly earnings results or financing activities or otherwise pursuant to the Registered Company’s SEC Filings that relate to the Audited Years and the stub period; and

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12.13.5    Seller and Existing Operator (or any of their Affiliates) shall have the right to disclose such confidential information to their shareholders as part of ordinary course updates regarding the Transaction; provided that, such disclosure is aggregated with a Sale Participant’s other businesses and operations and not presented in a transaction specific format, and shall not include (a) the identity of Purchaser, the JV Partner or any of their Affiliates, (b) the specific Facilities that are the subject of this Agreement or (c) the specific terms of this Agreement.
 
12.14    Time of the Essence.  It is expressly agreed by the parties hereto that time is of the essence with respect to this Agreement and any aspect thereof.

12.15    Waiver.  No delay or omission to exercise any right or power accruing upon any default, omission, or failure of performance hereunder shall impair any right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient.  No waiver, amendment, release, or modification of this Agreement shall be established by conduct, custom, or course of dealing and all waivers must be in writing and signed by the waiving party.

12.16    Time Periods.  In computing any period of time pursuant to this Agreement, the day of the act or event from which the designated period of time begins to run will not be included.  Should the last day of a time period contemplated by this Agreement fall on a day other than a Business Day, the next Business Day thereafter shall be considered the end of the time period.  All references to a period of days herein shall be deemed to refer to calendar days unless the term “Business Day” is used.

12.17    No Personal Liability of Officers, Trustees or Directors.  Each party acknowledges that this Agreement is entered into by the Sale Participants and Purchaser and agrees that none of the individual officers, trustees, directors, managers, or members of the Indemnified Persons shall have any personal liability under this Agreement or any document executed in connection with the Transactions, except in cases of fraud, fraudulent transfer, willful misconduct or gross negligence.  

12.18    No Recording.  Purchaser shall not cause or allow this Agreement or any contract or other document related hereto, nor any memorandum or other evidence hereof, to be recorded or become a public record without Seller’s prior written consent, which consent may be withheld at Seller’s sole discretion.  If Purchaser records this Agreement or any other memorandum or evidence thereof, Purchaser shall be in default of its obligations under this Agreement.  

12.19    Relationship of Parties.  Purchaser, Seller and Existing Operator acknowledge and agree that the relationship established between the parties pursuant to this Agreement is only that of a seller and a purchaser of property.  Neither Purchaser, on the one hand, nor Seller or Existing Operator, on the other, is, nor shall either hold itself out to be, the agent, employee, joint venturer or partner of the other party. 

12.20    Reserved.

12.21    Multiple Parties.  

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12.21.1  As used in this Agreement, the term “Purchaser” includes all entities acquiring any interest in the Property at the Closing.  In the event that “Purchaser” has any obligations or makes any covenants, representations or warranties under this Agreement, the same shall be made jointly and severally by all entities being a Purchaser hereunder.  If Seller delivers notice to one Purchaser hereunder, such notice shall be deemed delivered to each Purchaser.  

12.21.2  As used in this Agreement, the term “Seller” includes all entities selling an interest in the Land and Improvements at the Closing.  In the event that “Seller” has any obligations or makes any covenants, representations or warranties under this Agreement, the same shall be made jointly and severally by all entities being a Seller hereunder.  

 12.21.3  As used in this Agreement, the term “Existing Operator” includes all entities currently operating the Facilities as tenants of a Seller.  In the event that “Existing Operator” has any obligations or makes any covenants, representations or warranties under this Agreement, the same shall be made jointly and severally by all entities being an Existing Operator hereunder.  

12.22    WAIVER OF JURY TRIAL.  THE PARTIES HERETO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY ON ANY MATTER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.  THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER INTO AND ACCEPT THIS AGREEMENT AND SHALL SURVIVE THE CLOSING OF TERMINATION OF THIS AGREEMENT.

12.23    Appointment of Seller’ Agent. Each Seller and Existing Operator hereby appoints Ivy Hernandez  (“Seller’ Agent”), as its agent and attorney-in-fact, on its behalf and on behalf of each of its Affiliates in accordance with the terms of this Section 12.23, and hereby authorize the Seller’ Agent (i) to perform all acts which, by the provisions of this Agreement are to be performed by such Seller or Existing Operator; (ii) to waive on behalf of each of them any of the provisions of this Agreement and to execute and deliver such amendments on behalf of each of them to this Agreement as the Seller’ Agent, in its sole judgment, shall deem necessary or advisable; (iii) to execute and deliver documents pursuant to this Agreement as the Seller’ Agent, in its sole judgment, shall deem necessary or advisable, including any amendments to any such agreements; (iv) to execute and give all notices, requests and other communications required, permitted or contemplated under this Agreement as Seller’ Agent, in its sole judgment, shall deem necessary or advisable; (v) to consent, dispute, compromise, adjust, settle, litigate, appeal or otherwise deal with any and all set-offs, claims breaches, obligations, liabilities, assessments, suits, actions, proceedings, liens, charges, encumbrances, orders, judgments and decrees with respect to this Agreement or to refrain so to do as Seller’ Agent shall, in its sole judgment, deem necessary or advisable; (vi) to delegate all or any of its power or authority under this Agreement to any person or entity, as Seller’ Agent, in its sole judgment, shall deem necessary or advisable; (vii) to expend such amounts in the exercise of its rights and powers and in the performance of its duties hereunder as Seller’ Agent shall, in its sole judgment, deem necessary or advisable; and (viii) generally to act for and on behalf of each of them in all matters connected with this Agreement, with the same force and effect as though such an act had been taken by any of them personally.  Each Seller and Existing Operator agrees with Purchaser that 

57

the Seller’ Agent shall be the sole and exclusive person with legal capacity and standing to contest, dispute, compromise, adjust, settle, litigate, appeal or otherwise deal with Purchaser with respect to the indemnification of the Purchaser Indemnified Persons as set forth in Article IX of this Agreement.  This appointment and power-of-attorney shall be a special power-of-attorney coupled with an interest, shall be irrevocable and shall survive the dissolution, death, disability or incapacity of any of the Seller or Existing Operator. Each Seller and Existing Operator further agrees that Purchaser may deal solely with the Seller’ Agent as the exclusive representative of such Seller and Existing Operator with reference to the matters set forth in this Agreement, that the actions of the Seller’ Agent are binding on each Seller and Existing Operator and such Seller’s Affiliates, and its and their respective successors and assigns, and that Purchaser has no duty to ascertain if the Seller’ Agent is properly carrying out its obligations under this Agreement.  

12.24    Attorneys’ Fees.  In any action between Purchaser, on the one hand, and Seller and/or Existing Operator, on the other hand, as a result of a party’s failure to perform or a default under this Agreement, the prevailing party shall be entitled to recover from the other party, and the other party shall pay to the prevailing party, the prevailing party’s attorneys’ fees, expenses and court costs incurred in such action.

12.25    Reserved.  

12.26    Bulk Transfer Tax Clearance.  Seller and Existing Operator agree to act in good faith and with reasonable diligence to apply for, obtain and (upon receipt) deliver to Purchaser all statutorily required tax clearance certificates, evidencing the payment of certain taxes and assessments, at or as soon after the Closing Date as is reasonably possible.

12.27    Audit.  Seller and Existing Operator acknowledges that (a) Purchaser and its intended assignee(s) are or may be affiliated with a publicly registered company (“Registered Company”) promoted by Purchaser or its Affiliates; and (b) it has been advised that Purchaser or such assignee(s) may be required to make certain filings with the Securities and Exchange Commission (the “SEC Filings”) that relate to the most recent three (3) pre-acquisition fiscal years (the “Audited Years”) and the current fiscal year through the date of acquisition (the “stub period”) for the Facilities.  To assist the assignee(s) in preparing the SEC Filings, and notwithstanding anything to the contrary in this Section 12.13, Seller and Existing Operator covenants to provide (and to use commercially reasonable efforts to cause Manager to provide, as necessary) said assignee(s) with the following, to the extent it is in the possession or control of, or is available to, Seller, Existing Operator or Manager, until the first anniversary of the Closing: (i) access to bank statements for the Audited Years and stub period; (ii) rent roll as of the end of the Audited Years and stub period; (iii) operating statements for the Audited Years and stub period; (iv) access to the general ledger for the Audited Years and stub period; (v) cash receipts schedule for each month in the Audited Years and stub period; (vi) access to invoices for expenses and capital improvements in the Audited Years and stub period; (vii) accounts payable ledger and accrued expense reconciliations; (viii) check register for the 3-months following the Audited Years and stub period; (ix) all leases and 5-year lease schedules; (x) copies of all insurance documentation for the Audited Years and stub period; (xi) copies of accounts receivable aging as of the end of the Audited Years and stub period along with an explanation for all accounts over 30 days past due as of the end of the Audited Years and stub period; (xii) a 

58

signed representation letter in the form attached hereto as Schedule 12.13-A (the “Representation Letter”), and (xiii) to the extent necessary, a signed audit letter in the form attached hereto as Schedule 12.27-B (the “Audit Letter”).  Seller and Existing Operator also agrees to deliver (and to use commercially reasonable efforts to cause Manager to deliver, as necessary) a signed Representation Letter and signed Audit Letter to Purchaser within five (5) business days prior to Closing, and such delivery shall be a condition to Closing. Seller and Existing Operator also agree to reasonably cooperate (and to use commercially reasonable efforts to cause Manager to cooperate, as necessary) with Purchaser to obtain a comfort letter, as may be requested by Purchaser.
    

[Remainder of Page Intentionally Left Blank]

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NOW, THEREFORE, the parties hereto have executed this Agreement as of the date first set forth above.
Seller:
	
		
	NIC 5 SPRING HAVEN OWNER LLC,

	a Delaware limited liability company

	 
	 

	By:
	/s/ Jane Ryu

	Name:
	Jane Ryu

	Title
	Chief Executive Officer

	
		
	NIC 5 LAKE MORTON PLAZA OWNER LLC,

	a Delaware limited liability company

	 
	 

	By:
	/s/ Jane Ryu

	Name:
	Jane Ryu

	Title
	Chief Executive Officer

	
		
	NIC 5 RENAISSANCE RETIREMENT OWNER

	LLC, a Delaware limited liability company

	 
	 

	By:
	/s/ Jane Ryu

	Name:
	Jane Ryu

	Title
	Chief Executive Officer

	
		
	NIC 5 FOREST OAKS OWNER LLC,

	a Delaware limited liability company

	 
	 

	By:
	/s/ Jane Ryu

	Name:
	Jane Ryu

	Title
	Chief Executive Officer

Existing Operator:
	
		
	NIC 5 SPRING HAVEN LEASING LLC,

	a Delaware limited liability company

	 
	 

	By:
	/s/ Ivy Hernandez

	Name:
	Ivy Hernandez

	Title
	Vice President

	
		
	NIC 5 LAKE MORTON PLAZA LEASING LLC,

	a Delaware limited liability company

	 
	 

	By:
	/s/ Ivy Hernandez

	Name:
	Ivy Hernandez

	Title
	Vice President

	
		
	NIC 5 RENAISSANCE RETIREMENT LEASING

	LLC, a Delaware limited liability company

	 
	 

	By:
	/s/ Ivy Hernandez

	Name:
	Ivy Hernandez

	Title
	Vice President

	
		
	NIC 5 FOREST OAKS LEASING LLC,

	a Delaware limited liability company

	 
	 

	By:
	/s/ Ivy Hernandez

	Name:
	Ivy Hernandez

	Title
	Vice President

Purchaser:
	
		
	GAHC4 CENTRAL FL SENIOR HOUSING 

	PORTFOLIO, LLC, a Delaware limited liability

	company

	 
	 

	By:
	/s/ Brian S. Peay

	Name:
	Brian S. Peay

	Title
	Authorized Signatory

Escrow Agent (for purposes of agreeing to the terms of Sections 2.2.2, 2.3 and 4.1.2 of this Agreement)
	
		
	First American Title Insurance Company

	 
	 

	 
	 

	By:
	/s/ Brian M. Serikaku

	Name:
	Brian M. Serikaku

	Title
	Escrow Officer

ANNEX 1

DEFINED TERMS

“Access Agreement” shall mean the meaning set forth in Section 5.5.11.

“Accounts Receivable” means, collectively, accounts receivable, credit balances with regard to the Medicare Program and Medicaid Program, and unbilled work in process. 

“Accounts Receivable Schedule” shall mean the meaning set forth in Section 7.15.2.

“Affiliate” shall mean, with respect to any Person, any other Person which Controls, is Controlled by or is under common Control with the first Person.

“Aggregate Facilities” shall have the meaning set forth in Section 4.6.

“Agreement” shall have the meaning set forth in the introductory paragraph.

“AHCA” means the State of Florida, Agency for Health Care Administration. 

“ALF” means Assisted Living Facility.

“Assigned Contract” means each Commercial Lease and each other Property Contract set forth on Exhibit N attached hereto, which exhibit Purchaser shall deliver to Seller no later than the expiration of the Inspection Period, and which Assigned Contracts are subject to receipt of any required consent.

“Assumed Liabilities” shall mean only the following (a) liabilities and obligations assumed by Purchaser pursuant hereto with respect to the Assigned Contract to the extent such obligations and liabilities relate to periods from and after Closing, and (b) such other liabilities as Purchaser may elect to assume in its sole and absolute discretion.

“Audit” shall mean any written surveys and other Governmental Authority reports, statements of deficiencies, plans of correction, audits and any other investigation notices, warnings, waivers, related correspondence or reports filed, issued, sent by or to each Sale Participant, or received by any Sale Participant, with respect to any Medicaid Provider Agreement.

“Basket Amount” shall have the meaning set forth in Section 9.4.1. 

“Business” means the business of the Facility as conducted on the Effective Date, including, without limitation, licensed ALF operations. 

“Business Day” means any day other than a Saturday or Sunday or Federal holiday or legal holiday in the State of New York.

ANNEX I-1

“Closing” means the consummation of the purchase and sale and related transactions contemplated by this Agreement with respect to the Facilities in accordance with the terms and conditions of this Agreement.

“Closing Date” shall have the meaning set forth in Section 5.1.

“Closing Statement” shall have the meaning set forth in Section 5.2.6.

“CMS” means United States Department of Health and Human Services (“HHS”), Centers for Medicare and Medicaid Services.

“Code” shall have the meaning set forth in Section 5.2.8.

“Commercial Lease” means all real property leases, subleases and other occupancy contracts, whether or not of record, to which Seller is a party and which provide for the use or occupancy of space or facilities at any Facility or any portion of the Property and which are in force as of the Closing Date, other than any Resident Agreement with any Resident.   

“Control” shall mean, as applied to any Person, the possession, directly or indirectly, of the power to direct the management and policies of that Person, whether through ownership, voting control, by contract or otherwise.

“Current Capital Repair” shall have the meaning set forth in Section 5.5.11.

“Damages” means all actions, suits, proceedings, governmental investigations, injunctions, demands, charges, claims, judgments, awards, orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid in settlement, liabilities, obligations, taxes, liens, losses, fees and expenses (including court costs and reasonable and documented out-of-pocket attorneys’ and accountants’ fees and expenses (but excluding costs of investigation)); provided, however, Damages specifically excludes punitive, incidental, consequential, special or indirect damages, including without limitation business interruption, loss of future revenue, profits or income, or loss of business reputation or diminution in value. 

“Data Site” means the data room titled “Project Vice.”

“Deed” shall mean a special warranty deed (or the equivalent in the applicable jurisdiction).

“De Minimis Claim” shall have the meaning set forth in Section 9.1.

“Disclosure Schedules” shall have the meaning set forth in Article VI. 

“Environmental Laws” means the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. Section 6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. Sections 9601 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Toxic Substances Control Act (15 U.S.C. §2601 et seq.), the Clean Air Act (42 U.S.C. §7401 et seq.), the Safe Water Drinking Act (42 U.S.C. §300(f) et seq.), the Occupational Safety and Health Act, and all other applicable state, county, municipal, 

ANNEX I-2

administrative, environmental, Hazardous Waste or Hazardous Substance, health and safety laws, ordinances, rules, regulations, judgments, orders and requirements of any Governmental Authority relating or pertaining to (A) protection of the environment, (B) the preservation or reclamation of natural resources, (C) the management, release and threatened release of Hazardous Substances, (D) response actions and corrective actions regarding Hazardous Substances, (E) the ownership, operation or maintenance of personal and real property where Hazardous Wastes are stored, managed, generated, treated or disposed of and releases of Hazardous Substances, (F) common law torts relating the Hazardous Substances, including so-called “toxic torts”, and (G) environmental or ecological conditions on, under or about the Property, all as in effect as of the Effective Date and on the Closing Date.

“Escrow Agent” shall have the meaning set forth in Section 2.2.1.

“Excluded Assets” means (i) receivables accruing prior to the Closing, (ii) Excluded Permits, (iii) any Property Contracts (other than the Assigned Contracts), (iv) cash or other funds (other than petty cash on hand at the Facilities and deposits paid by Residents or pursuant to Commercial Leases), whether in house “banks,” or on deposit in bank accounts or in transit for deposit, (v) refunds, rebates, claims, proceeds and awards, or any interest thereon, for periods or events occurring prior to the Closing Date, (vi) utility deposits, (vii) insurance or other prepaid items, (viii) Seller’s proprietary books and records, (ix) Seller’s proprietary or non-transferrable software, and (x) any right, title or interest in or to the Seller Marks.

“Excluded Liabilities” shall have the meaning set forth in Section 2.1.

“Excluded Permits” means those Permits which, under applicable law, are nontransferable.

“Existing Operator’s Knowledge” or words of similar import in this Agreement, shall be deemed to refer exclusively to matters within the actual knowledge of Max Luce, Associate, Ivy Hernandez, Senior Vice President, and Jane Ryu, Vice President of Asset Management (“Seller Knowledge Individuals”) upon reasonable investigation with respect to the representations and warranties contained in this Agreement (including due inquiry of relevant Facility Management).

“Existing Surveys” shall have the meaning set forth in Section 3.1.1.

“Facilities” shall mean the facilities identified on Schedule I, and each a “Facility”.

“Facility Employees” shall have the meaning set forth in Section 3.1.9.

“Facility Management” means the following personnel with respect to each Facility: all “home office” management personnel of Manager and the executive director/administrator of each Facility, the director of nursing at each Facility, the social services director at each Facility, the director of rehabilitation services at each Facility, the head reimbursement person at each Facility, the head sales person at each Facility and the head maintenance person at each Facility (in each case, to the extent such positions exist).

“Financial Advisor” shall have the meaning set forth in Section 9.9.

ANNEX I-3

“Fixtures and Tangible Personal Property” means all right, title and interest of Seller or Existing Operator in and to all fixtures, furniture, furnishings, fittings, equipment, office equipment, machinery, apparatus, appliances, supplies, automobiles, vans, buses or other vehicles and all other articles of tangible personal property located on the Land or in the Improvements as of the Closing Date, to the extent transferable, and related to, used exclusively in connection with the ownership, operation or management of any of the Facilities, including but not limited to all supplies, inventory, consumables, linens, pharmaceutical products and other medical goods and supplies, perishable and nonperishable food products, and other similar tangible property; provided, however, that the term “Fixtures and Tangible Personal Property” specifically excludes (i) assets that are not owned or leased by Seller or Existing Operator (including, without limitation, assets owned or leased by any Resident, tenant, guest, employee or other person furnishing goods or services to the Property), and (ii) assets owned by Seller or Existing Operator but not primarily related to, used in connection with, and which are not necessary, for the business or the ownership, operation or management of any of the Facilities.  In addition, the term “Fixtures and Tangible Personal Property” specifically excludes (i) all mobile and personal communication devices, including, without limitation all cellular phones, smartphones, tablets, phablets, netbooks and check and credit card scanning devices and (ii) desktop, laptop and peripheral computers and data storage devices together with related electronic devices, accessories, printers (other than any copier machines owned or leased by Seller or Existing Operator), monitors and keyboards other than computer equipment necessary to operate security or gate systems at the Property.

“General Assignment” shall have the meaning set forth in Section 5.2.3.

“Governmental Authority” means, individually and collectively, any federal, state, municipal, local or foreign government, including each of their respective branches, departments, agencies, Commissions, boards, bureaus, courts, instrumentalities or other government appointed, quasi-governmental or regulatory authority, reporting entity or agency, domestic, foreign or supranational, including without limitation AHCA and CMS. 

“Governmental Program” means any Federal, state or local governmental reimbursement programs administered through a Governmental Authority or contractor thereof (including a Governmental Program Payor), including without limitation the Medicaid program or any successor program.

“Governmental Program Payor” means a Payor which has a contract with a Governmental Authority to arrange for the provision of health care and/or related services to Governmental Program beneficiaries, and who receives reimbursement from a Governmental Authority to do so, and without limitation includes Payors under such contracts with AHCA for the Medicaid program.

“Governmental Program Payor Contract” means an agreement between Seller and a Governmental Program Payor.

“Hazardous Substance” means any and all substances, wastes, materials, pollutants, contaminants, compounds, chemicals or elements which are defined or classified as a “hazardous substance”, “hazardous material”, “toxic substance”, “Hazardous Waste”, “pollutant”, 

ANNEX I-4

“contaminant” or words of similar import under any Environmental Law, including, without limitation, all dibenzodioxins and dibenzofurans, polychlorinated biphenyls (PCBs), petroleum hydrocarbon, including crude oil or any derivative thereof, any radioactive material, raw materials used or stored at the Facilities or building components that are regulated by Environmental Laws, including asbestos-containing materials in any form, radon gas and mold of a type or in amounts that may present a health hazard.

“Hazardous Waste” is as defined in the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. Section 6901 et seq., and any equivalent state laws where the Facilities and Property are located.

“Healthcare Approvals” means (a) the issuance of all Operating Licenses listed on Attachment 1.1 to this Annex 1 by AHCA or its applicable subagencies (collectively, the “Required Operating Licenses”) or (b) written assurance from AHCA or its applicable subagencies with respect to the Required Operating Licenses authorizing the parties to proceed with the transactions and changes of ownership and operations contemplated hereby.

“Healthcare Laws” means any and all federal, state, and locals Laws, including regulations, rules, judgments, orders, manuals, program transmittals, and official guidance from any Government Authorities, relating to healthcare regulatory matters, including 42 U.S.C. §§ 1320a-7, 7a, and 7b, which are commonly referred to as the “Federal Fraud Statutes”; 42 U.S.C. § 1395nn, which is commonly referred to as the “Stark Statute”; 31 U.S.C. §§ 3729-3733, which is commonly referred to as the “federal False Claims Act”; the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-3812; the Anti-Kickback Act of 1986, 41 U.S.C. §§ 8701-8707; HIPAA and its implementing regulations at 45 C.F.R. Parts 160, 162 and 164 and any other rules or regulations promulgated thereunder and similar state laws; 18 U.S.C. § 1347; the Patient Protection and Affordable Care Act of 2010 (Public Law 111-148); Government Programs; any federal, state, or local statute or regulation relevant to false statements or claims, or the respective state-law counterparts of any of the foregoing; and all applicable federal, state, and local licensing, certificate of need, corporate practice of medicine, and fee-splitting Laws applicable to the health care items and services that the Seller or the Facilities provide.

“HIPAA” means collectively, and as may from time-to time maybe amended, the (i) Health Insurance Portability and Accountability Act of 1996 (the “Act”), (ii) applicable provisions of the Health Information Technology for Economic and Clinical Health Act as incorporated in the American Recovery and Reinvestment Act of 2009, and (iii) their accompanying regulations, including the Privacy Rule and the Security Rule.  The “Privacy Rule” means the Standards for Privacy of Individually Identifiable Health Information at 45 CFR, part 160 and part 164, subparts A and E, and it provides Federal law privacy protections for an individual’s protected health information (“PHI”) held by entities subject to HIPAA requirements (each, a “covered entity”) such describes patient rights with respect to their PHI.  The Security Rule means the HIPAA Security Standards (45 C.F.R. Parts 160, 162, and 164), and requires covered entities and their business associates that use PHI to use administrative, physical, and technical safeguards to assure the confidentiality, integrity, and availability of electronic PHI.

ANNEX I-5

“Improvements” means Seller’s fee simple title in and to all buildings, structures, facilities, amenities, driveways, walkways, parking lots and other improvements located on the Land.

“Indemnified Person” shall have the meaning set forth in Section 9.5. 

“Indemnifying Person” shall have the meaning set forth in Section 9.5. 

“Inspection Period” shall have the meaning set forth in Section 4.1.1.

“Intellectual Property” means, collectively, all: (i) United States or foreign patents, patent applications, patent disclosures and all renewals, reissues, divisions, continuations, extensions or continuations-in-part thereof; (ii) trademarks, service marks, trade dress, trade names, fictitious names, corporate names and registrations and applications for registration thereof; and (iii) copyrights (registered or unregistered), registrations and applications for registration thereof, including all renewals, derivative works, enhancements, modifications, updates, new releases or other revisions thereof.  

“Land” means all of those certain tracts of land and all other rights, title and interest of Seller in and to the parcels of real property described on Exhibit A, and all rights, privileges and appurtenances pertaining thereto. 

“Law” or “Laws” means all applicable local, Federal and state laws, statutes, rules, regulations, ordinances and any amendments thereto, as well as each, any, and all legal directives, orders, and any amendments thereto, of all local, Federal, state and other governmental and regulatory bodies, including any Governmental Authority, administrative tribunals, and courts which have jurisdiction over the operation and conduct of the Business.

 “Licensing Surveys” shall mean survey reports, waivers of deficiencies, plans of correction, investigation notices, any other investigation reports and similar correspondence or documentation issued by the applicable Governmental Authority with respect to any Facility in respect of any Operating Licenses.

“Management Agreements” means, collectively, those certain Management Agreements more particularly described on Exhibit P attached hereto, as they may have been amended, restated or otherwise modified from time to time.

“Manager” means Holiday AL NIC Management, LLC and its Affiliates.

“Material Adverse Effect” means any result, occurrence, fact, event, change or effect that, individually or in the aggregate with other such results, occurrences, facts, events, changes, or effects, has had or would have a materially adverse effect on (a) the business, affairs, assets, results of operations or financial condition of the Facilities and the Separate Facilities, taken as a whole, or (b) the ability of Seller, Existing Operator and the Manager to consummate the Transactions; provided, however, that for purposes of clause (a) “Material Adverse Effect” shall not include any event, circumstance, change or effect to the extent arising out of or resulting from (i) any failure of Seller or Existing Operator to meet any projections or forecasts (it being understood and agreed that any event, circumstance, change or effect giving rise to such failure 

ANNEX I-6

shall be taken into account in determining whether there has been a Material Adverse Effect), (ii) any events, circumstances, changes or effects that affect the senior living industry in the United States generally, (iii) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (iv) any changes in the applicable laws in the geographic regions in which Seller and Existing Operator operate or own or lease properties, (v) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage, (vi) the negotiation, execution or announcement of this Agreement, or the consummation or anticipation of the Transactions (including the identity of the Purchaser and the impact of any of the foregoing on relationships, contractual or otherwise, with tenants, suppliers, lenders, investors, future partners or employees), (vii) the taking of any action permitted by the terms of this Agreement, or the failure to take any action expressly prohibited by, this Agreement, or the taking of any action at the written request or with the prior written consent of Purchaser, (viii) earthquakes, hurricanes or other natural disasters, (ix) any damage or destruction of the Property (or any portion thereof) that is substantially covered by insurance, or (x) changes in law or generally accepted accounting principles, which in the case of each of clauses (ii), (iii), (v) and (x) do not disproportionately affect Seller and Existing Operator, taken as a whole, relative to other participants in the senior living industry in the United States, and in the case of clauses (iv) and (viii) do not disproportionately affect Seller and Existing Operator, taken as a whole, relative to other participants in the senior living industry in the geographic regions in which Seller and Existing Operator operate or own or lease properties.

“Material Contracts” shall have the meaning set forth in Section 6.1.4.

“Medicaid” means the Florida Medicaid Program as administered by the AHCA.

“Miscellaneous Property Assets” means all right, title and interest of Seller in and to (a) all Intellectual Property related to, used in connection with, or necessary for, the ownership, operation or management of any of the Facilities, including all of Seller’s or Existing Operator’s rights in and to the Facility names identified in Schedule I, but excluding the Seller Marks (b) all telephone and facsimile numbers relating to the Facilities (including all “800” numbers) and all e-mail addresses and domain names associated with the Facilities, (c) all post office box addresses associated with the Facilities; and all non-proprietary and transferable software or other computer programs related to, used in connection with, or necessary for, the ownership, operation or management of any of the Facilities, (d) all books, data and records (including electronic versions thereof) maintained in connection with the ownership, operation or management of any of the Facilities, (e) all warranties, plans, drawings, customer lists, prospect lists, petty cash on hand at the Facilities, transferable non-proprietary software, and all other items of intangible personal property maintained in any form or format, relating to the ownership, operation or management of the Property or the Facilities, and (f) all goodwill associated with the businesses operated at the Facilities.   

“Monetary Lien” shall have the meaning set forth in Section 4.3.1. 

“Mortgage” shall have the meaning set forth in Section 4.4.  

“MTA” shall have the meaning set forth in Section 7.25.

ANNEX I-7

“National Contract” means any national contracts entered into by Seller, Existing Operator, Manager or any Affiliate of Seller relating to the Property and other facilities that are not included in the Property.

“New Exception” shall have the meaning set forth in Section 4.5.3.

“Notice of Third Party Claim” shall have the meaning set forth in Section 9.5.1.

“Operating Assets” means (a) all rights, title, interest and privileges of Seller or Existing Operator, whether legally or beneficially held, in and to any and all Assigned Contracts, Resident Agreements, and Permits, to the extent such Permits are, with or without consent, assignable or transferable (other than Excluded Permits), and (b) all right, title and interest of Seller or Existing Operator in and to the Miscellaneous Property Assets, but specifically excluding the Excluded Assets.

“Operating Licenses” means the Permits required by AHCA in order to operate the Facilities, and all certificates of need (if any) or certificates of authority required by AHCA to operate the Facilities.

“Outside Claim Date” shall have the meaning set forth in Section 9.1.

“Payor” means any third party, which is not a Governmental Authority, and which provides for reimbursement to Seller for health care and/or    services rendered or to be rendered to a Resident, and without limitation includes a health insurer, a health maintenance organization, and any managed care organization not licensed as either of the foregoing, and which includes any Governmental Program Payor.

“Permits” means all healthcare permits, licenses, agreements, provider numbers, approvals, certificates, certifications, accreditation and authorizations issued by or required by any Governmental Authority, necessary to own, operate or manage (including post-Closing to the extent permitted) the Facilities as currently operated in the ordinary course, including, without limitation, those agreements necessary for the Facilities to secure reimbursement for ALF and related services from any Governmental Program, including without limitation provider agreements with and provider numbers under the Medicaid (including its fiscal intermediaries) program, and from any Payor, including without limitation any Governmental Program Payor.

“Permitted Exceptions” shall have the meaning set forth in Section 4.3.

“Program Reimbursements” means any deficiencies, recoupments, reimbursements, audit adjustments, disallowances, unresolved claims or disputes or other amounts owed or alleged to be owed to any Governmental Authorities or any other third parties under any Provider Agreements or Third Party Payor Programs.

“Prohibited Person” means any of the following:  (a) a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, Executive Order No. 13224 on Terrorist Financing (effective September 24, 2001) (the “Executive Order”); (b) a person or entity owned or controlled by, or acting for or on behalf of any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order; (c) a person or 

ANNEX I-8

entity that is named as a “specially designated national” or “blocked person” on the most current list published by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) at its official website, http://www.treas.gov/offices/enforcement/ofac; (d) a person or entity that is otherwise the target of any economic sanctions program currently administered by OFAC; or (e) a person or entity that is affiliated with any person or entity identified in clause (a), (b), (c) and/or (d) above.

“Property” means (a) the Real Property Assets, and (b) the Operating Assets, but specifically excluding the Excluded Assets.

“Property Contracts” means all contracts, agreements, equipment leases, purchase orders, maintenance, service, and similar contracts, regardless of whether entered into by Seller, Existing Operator, Manager or an Affiliate of either, which relate exclusively to the ownership, maintenance, on-going repair and/or operation of the Property (or any portion thereof), whether or not assignable by their terms, including any Commercial Lease, but specifically excluding (i) any Resident Agreements, (ii) National Contracts, and (iii) any property management contract for the Property.

“Property Contracts List” shall have the meaning set forth in Section 6.1.4.

“Property Statements” shall mean (i) the consolidated income statements and balance sheets for Seller for the calendar years ended 2015 and 2016 (collectively, the “Year-End Financial Statements”); (ii)  the unaudited, consolidated income statements and balance sheets as of and for the three (3) month period ended March 31, 2017 (the “Most Recent Financial Statements”; collectively, with the Year-End Financial Statements, the “Financial Statements”); and (iii) a schedule of capital improvements to each Facility that were completed in the fiscal years ended 2015 and  2016 and the period covered by the Most Recent Financial Statements, in each case identified in Schedule 6.1.14, including the notes and schedules thereto, if applicable.

“Proratable Items” shall have the meaning set forth in Section 5.5.1.

“Purchase Price” means the consideration to be paid by Purchaser to Seller for the purchase of the Property pursuant to Section 2.2.

“Purchaser” shall have the meaning set forth in the introductory paragraph.

“Purchaser Indemnified Persons” shall have the meaning set forth in Section 9.2.

“Purchaser Parties” shall have the meaning set forth in Section 4.1.1.

“Purchaser’s Consultants” shall mean any consultant, engineer or inspector retained by Purchaser.

“Purchaser’s Knowledge” or words of similar import in this Agreement, shall be deemed to refer exclusively to matters within the actual knowledge of Danny Prosky upon reasonable investigation with respect to any of the representations and warranties contained in this Agreement.

ANNEX I-9

“Purchaser’s Representations” means the representations and warranties set forth in Section 6.2.

“Real Property Assets” means (a) the Land and Improvements, (b) all right, title and interest of Seller in and to any alleys, strips or gores adjoining the Land, any easements, rights of way or other interests in, on, under or to, any land, highway, street, road or right of way, open or proposed, in, under, across, abutting or benefiting the Land, and any pending or future action for condemnation, eminent domain or similar proceeding, or for any damage to the Land or Improvements by reason of a change of grade thereof, and all other accessions, appurtenant rights and privileges of Seller in and to the Land and the Improvements, (c) and all right, title and interest of Seller and Existing Operator in and to the Fixtures and Tangible Personal Property, and (d) all right, title and interest of Seller in and to the books, records, documents, surveys, reports, drawings, plans, specifications, diagrams, environmental assessments and other architectural or engineering work product related to the Land and Improvements, but specifically excluding the Excluded Assets.

“Records Disposal Notice” shall have the meaning set forth in Section 5.5.10.

“Records Hold Period” shall have the meaning set forth in Section 5.5.10.

“Related Party” means, with respect to any Person, any of the shareholders, members or partners of such Person, and any officers, managers or directors of such Person, as well as any immediate family member of any such shareholders, members, partners, officers, managers or directors, or any Affiliate of the foregoing.

“Remove” shall mean, with respect to any matter disclosed in the Title Documents, that Seller causes the Title Company to remove or affirmatively insure over such matter as an exception to the applicable Title Policy for the benefit of Purchaser, whether such removal or insurance is made available, at the sole discretion of Seller, in consideration of payment, bonding, indemnity of Seller or otherwise (provided that in the case of a mortgage or security interest granted by Seller, “Remove” shall mean the delivery by the holder thereof of a recordable cancellation or release or a payoff letter satisfactory to the Title Company unconditionally obligating such holder to release or cancel upon repayment at Closing of the loan secured thereby). 

“Rent Roll” shall have the meaning set forth in Section 6.1.5.

“Rent Roll Review Period” shall have the meaning set forth in Section 4.6.

“Repairs” means demolition, restoration and/or replacement of all or any portion of any Facility and the related Property that is reasonably necessary for the continued operation of the any Facility as an assisted living facility.

“Required Consents” shall have the meaning set forth in Section 6.1.11.

“Resident” means any person or entity entitled to occupy any portion of the Property under a Resident Agreement.

ANNEX I-10

“Resident Agreement Form” shall have the meaning set forth in Section 3.1.6.

“Resident Agreements” means all leases, subleases and other occupancy contracts, whether or not of record which provide for the use or occupancy of residential space or facilities in any Facility and which are in force as of the Closing Date.

“Resident Agreements Assignment” shall have the meaning set forth in Section 5.2.4.

“Seller” shall have the meaning set forth in the introductory paragraph.

“Seller Indemnifiable Damages” shall have the meaning set forth in Section 9.2.

“Seller Indemnified Persons” shall have the meaning set forth in Section 9.3.

“Seller Marks” means all words, phrases, slogans, materials, proprietary software, proprietary systems, trade secrets, proprietary information and lists, and other Intellectual Property owned or used by Seller, Existing Operator, Manager, or any Affiliate of Seller, Existing Operator or Manager in the marketing, operation or use of the Property (or in the marketing, operation or use of any other properties managed by the Manager or owned by Seller, Existing Operator or an Affiliate of either Manager, Existing Operator or Seller), except that the “Seller Marks” shall not include the Facility names identified on Schedule I and all trade names, service marks, and trademarks owned or used by Seller or Existing Operator and related to, used in connection with, or necessary for, the ownership, operation or management of any of the Facilities.

“Seller’s Deliveries” shall have the meaning set forth in Section 3.1. 

“Seller’s Knowledge” or words of similar import in this Agreement, shall be deemed to refer exclusively to matters within the actual knowledge of the Seller Knowledge Individuals upon reasonable investigation with respect to the representations and warranties contained in this Agreement (including due inquiry of Facility Management).

“Seller’s Property-Related Files and Records” shall have the meaning set forth in Section 5.5.10.

“Seller’s Representations” means the representations and warranties of Seller and/or Existing Operator set forth in Section 6.1, in each case as modified by the Disclosure Schedules in accordance with the first paragraph of Article VI and the representations of NIC 4 Florida Owner LLC in the Guaranty.

“Senior Living Facility” shall mean, with respect to each Facility, the type of facility identified in Schedule 6.1.12(a). 

“Separate Facilities” shall mean the facilities identified on Schedule II.

“Separate PSA” shall mean that certain Purchase and Sale Agreement dated as of even date herewith by and among certain Affiliates of Purchaser and certain Affiliates of Seller pursuant to which such Affiliates of Seller shall sell, and such Affiliates of Purchaser shall 

ANNEX I-11

purchase, the real property and certain related assets of the Separate Facilities, on the terms and conditions set forth therein.

“Spring Haven Facility” shall have the meaning set forth in Section 5.5.11.

“Tax” shall mean all federal, state, local and foreign taxes including, without limitation, income, gains, unemployment, withholding, payroll, social security, real property, personal property, excise, sales, use and franchise taxes, levies, assessments, imposts, duties, licenses and registration fees and charges of any nature whatsoever, including interest, penalties and additions with respect thereto and any interest in respect of such additions or penalties.

“Tax Return” shall mean any return, filing, report, form, statement, declaration, questionnaire or other document filed or required to be filed for any period with any taxing authority (whether domestic or foreign) in connection with the calculation, determination, assessment, collection, or administration of any Taxes whether or not payment is required to be made with respect to such document).

“Third Party Claim” shall have the meaning set forth in Section 9.5.1. 

“Third Party Reports” means any reports, studies or other information prepared or compiled for Seller or Purchaser by any consultant or other third-party in connection with Purchaser’s investigation of the Property including, without limitation, the Third Party Reports identified on Exhibit O attached hereto.  

“Title Commitment” shall have the meaning set forth in Section 4.2.

“Title Company” shall have the meaning set forth in Section 2.2.1.

“Title Documents” shall have the meaning set forth in Section 4.2.

“Title Policy” means, with respect to each Facility, a standard American Land Title Association owner’s title insurance policy for the Land and Improvements issued by the Title Company pursuant to the applicable Title Commitment, using the current policy jacket customarily provided by the Title Company, in an amount equal to that portion of the Purchase Price allocated to real property relating to such Facility, subject only to the Permitted Exceptions.

“Title Update” shall have the meaning set forth in Section 4.5.

“Transaction Documents” shall have the meaning set forth in Section 6.1.1.

“Transactions” means any and all transactions contemplated by the terms of this Agreement.

“Uncollected Rents” shall have the meaning set forth in Section 5.5.6.

“Updated Average Occupancy Rate” shall have the meaning set forth in Section 4.6.

 “Update Objections” shall have the meaning set forth in Section 4.5.3.

ANNEX I-12

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