Document:

Stockholder
Agreement

 

This STOCKHOLDER AGREEMENT
(this “Agreement”), dated as of December ___, 2012, is entered into by and between Gramercy Capital Corp., a
Maryland corporation (the “Company”), and KBS Acquisition Sub-Owner 2, LLC (the “Stockholder”),
a Delaware limited liability company.

 

WHEREAS, GPT GIG BOA
Portfolio Holdings LLC (f/k/a BBD1 Acquisition LLC), a Delaware limited liability company, entered into an Agreement for Sale of
Membership Interests, dated August 17, 2012 (in the form attached as Exhibit A hereto, as amended, the “Purchase Agreement”),
pursuant to which, inter alia, the Company agreed to issue and sell, and the Stockholder agreed to purchase 2,000,000 shares
of Common Stock, par value $0.001 per share, 2,000,000 shares of Class B-1 Common Stock, par value $0.001 per share, and 2,000,000
shares of Class B-2 Common Stock, par value $0.001 per share, for a purchase price of $2.50 per share, for an aggregate purchase
price of $15,000,000.00 (such shares being referred to herein collectively as the “Shares” and, for the avoidance
of doubt, all references herein to the Stockholder’s Shares shall include not only all the Shares stated above, but also
all additional shares of capital stock of the Company that are owned directly or indirectly by the Stockholder, subject in all
cases to Transfers of such Shares that have been made to Permitted Transferees to the extent permitted by and in accordance with
Section 2(a)).

 

NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby,
the parties hereby agree as follows:

 

1.Voting of
Shares. Unless otherwise requested by the Company, the Stockholder covenants and agrees that, until the termination of this
Agreement in accordance with the terms hereof, at any meeting of the stockholders of the Company, however called, and in any action
by written consent of the stockholders of the Company, the Stockholder will, if a meeting is held, appear at the meeting, in person
or by proxy, or otherwise cause its Shares to be counted as present thereat for purposes of establishing a quorum and will at a
meeting, if one is held or otherwise if consents are solicited, vote or consent to, or cause to be voted or consented to, all of
the Shares, in accordance with the recommendation or direction of the Company’s Board of Directors. The Stockholder further
agrees until the termination of this Agreement in accordance with its terms, not to commit or agree to take any action inconsistent
with the foregoing prior to such termination. For the avoidance of doubt, subject to Section 2 hereof, the Stockholder shall retain
at all times the right to vote the Stockholder’s Shares in the Stockholder’s sole discretion and without any other
limitations on those matters other than those set forth in this Section 1 that are at any time or from time to time presented for
consideration to the Company’s stockholders generally.

 

2.Transfer of
Shares.

 

(a)The Stockholder
covenants and agrees that, until the earlier of May 15, 2013 and termination of this Agreement in accordance with its terms, without
the written consent of the Company, the Stockholder will not directly or indirectly (i) subject to Section 2(c), sell, assign,
transfer (including by merger or by operation of law), encumber, grant a participation in, gift-over, assign or otherwise dispose
of, whether by liquidation, dissolution, dividend, distribution or otherwise (“Transfer”) any Shares or the
Beneficial Ownership (as hereinafter defined) thereof, (ii) deposit any Shares into a voting trust or enter into a voting agreement
or arrangement with respect to any Shares or the Beneficial Ownership thereof or grant or agree to grant any proxy or power of
attorney with respect thereto that is inconsistent with this Agreement or (iii) enter into any contract, option or other arrangement
or undertaking with respect to the direct or indirect Transfer of any Shares or the Beneficial Ownership thereof, except, in each
case under clause (i) and clause (iii), to a Permitted Transferee. For purposes of this Agreement, “Beneficial Ownership”
and “Beneficially Owned” shall have the meaning given to such term in Rule 13d-3 under the Exchange Act (disregarding
the reference to “within 60 days” in Rule 13d-3(d)(1)(i)). As used herein, a “Permitted Transferee”
shall mean a Person that before such action proposed under Section 2(a)(i) or Section 2(a)(iii) occurs, is (x) the Company, or
(y) any Affiliate of the Stockholder who, upon such Transfer, becomes a party to this Agreement and agrees in writing, in
form and substance to the reasonable satisfaction of the Company, to be bound as a Stockholder under this Agreement and has not
violated this Agreement. In connection with any Transfer of Shares to a Permitted Transferee, the transferring Stockholder may
transfer its rights and obligations under this Agreement to the Permitted Transferee, but the transferring Stockholder shall remain
liable for all breaches of such obligations whenever occurring.

 

    	 

    	 

    
 

(b)Notwithstanding anything in this Agreement to the contrary,
the Stockholder may enter into any contract, option, swap or other agreement or arrangement, grant a participation in, and pledge
and encumber the Shares thereunder in connection with any bona fide lending, hedging or other financing or derivative transaction
or arrangement (a “Permitted Transaction”); provided, that the Stockholder retains the right to vote
or consent to, or cause to be voted or consented to, all Shares as provided in Section 1 during the term of such Permitted Transaction.
Notwithstanding the foregoing, nothing in this Agreement shall be deemed to prohibit the Stockholder or any Permitted Transferee
from pledging their direct or indirect interests in any Shares as security for a loan contracted by the Stockholder, such Permitted
Transferee or any Affiliate thereof, or to prohibit any Pledgee thereof from exercising its rights under or in connection with
such pledge.

 

3.Reasonable
Efforts to Cooperate.

 

The Stockholder will,
upon receipt of reasonable advance notice by the Company, without further consideration, provide as promptly as reasonably practicable
any customary information reasonably requested by the Company that is necessary for any regulatory application or filing made or
approval sought in connection with the transactions contemplated by this Agreement or the Purchase Agreement (including filings
with the SEC or any other Governmental Entity).

 

(a)The Stockholder hereby consents
to the publication and disclosure in the Company’s proxy statement, statements of beneficial ownership filed by the Company
and its Affiliates (and any other documents or communications provided by the Company to any Governmental Entity or to security
holders of the Company) of the Stockholder’s identity and Beneficial Ownership of the Shares and the nature of the Stockholder’s
commitments, arrangements and understandings under and relating to this Agreement; provided, however, that the Stockholder
shall have the opportunity to review such disclosure prior to its publication in the Company’s proxy statement or such other
document or communication, and no information relating to the Stockholder shall be published in the Company’s proxy statement,
such other document or communication without the approval of the Stockholder (such approval not to be unreasonably withheld or
delayed).

 

(b)The Stockholder agrees, while
this Agreement is in effect, to notify the Company promptly in writing of the number of additional Shares, any options to purchase
Shares or other securities of the Company acquired by the Stockholder, if any, after the date hereof (and, for the avoidance of
doubt, the Stockholder agrees that any such additional shares shall be, for all purposes of this Agreement, “Shares”).

 

(c)While this Agreement is in effect,
the Stockholder shall use commercially reasonable efforts to take, or cause to be taken, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things reasonably necessary to carry out the intent and purposes of this
Agreement.

 

4.Standstill.
The Stockholder agrees that, for a period of 18 months from the date hereof, the Stockholder will not, and will not cause or permit
any of its directors, officers, partners, employees, representatives, financial, legal, accounting and other advisers and agents,
including persons who after the date of this Agreement cease to be within one of the foregoing categories (collectively, “Representatives”)
or affiliates or associates (as such terms are defined in Rule 12b-2 under the Exchange Act) to (i) directly or indirectly acquire,
or offer, propose or agree to acquire, any securities, debt obligations or assets (or any interests therein) of the Company or
any of its subsidiaries or any rights or options to acquire any such securities, debt obligations or assets (for purposes hereof,
“securities” shall include, without limitation, (x) all rights to acquire securities pursuant to the exercise of any
rights in connection with any option, warrant, convertible or exchangeable security or any agreement, regardless of when such rights
may be exercised and whether they are conditional, and (y) any economic interest relating to securities, including without limitation,
pursuant to a cash settled option or other derivative security, contract or instrument in any way related to the price of the underlying
security), (ii) participate in the solicitation of proxies, or seek to influence the vote of any person, regarding any securities
or debt obligations of the Company or any of its subsidiaries, (iii) engage, or offer, propose or agree to engage, in any merger
or other business combination or acquisition transaction or any tender or exchange offer, recapitalization, restructuring, reorganization,
or any purchase or sale of any material amount of assets or equity or debt securities or other indebtedness of or regarding the
Company or any of its subsidiaries, (iv) seek or propose to influence or control the Company’s management or policies, including
the management and policies of its subsidiaries, (v) advise, assist, encourage, finance or invest in any person in connection with
any of the foregoing, (vi) disclose any plan, intention or proposal to do any of the foregoing, (vii) make any communications with
the Company or its Representatives that could require the Company to make any public announcement or (viii) make any request to
waive or amend any provision of this agreement or to permit you to take any action specified herein, in each case without the prior
written approval of the Company. Nothing in this paragraph shall be deemed to prevent the Stockholder’s Representatives from
engaging, in the ordinary course of business, in brokerage, asset management, trust, underwriting, market making and other similar
financial services ordinary course business activities involving securities of the Company.

 

    	2

    	 

    
 

5.Representations
and Warranties.

 

(a)The Stockholder
hereby represents and warrants to the Company as of the date hereof as follows:

 

(1)Ownership
of Shares. The Stockholder (i) is the sole owner of record and has Beneficial Ownership of all of the Shares, free and clear
of any and all liens, claims, security interests, options, rights or other encumbrances whatsoever on title or transfer (other
than those imposed under the federal securities laws, this Agreement or any Permitted Transaction), (ii) has sole voting power
with respect to all of such Shares and has not entered into any voting agreement or voting trust with respect to any such Shares
and has not granted a proxy, a consent or power of attorney with respect to such Shares and, so long as this Agreement is in effect,
will not grant any such proxies, consents and powers of attorney with respect to such Shares that would violate this Agreement
and (iii) does not own of record or beneficially, any shares of capital stock of the Company or right to acquire such shares other
than the Shares.

 

(2)Due Organization.
The Stockholder is an entity duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization.

 

(3)Power, Binding
Agreement. The Stockholder has the requisite power and authority to enter into and perform all of its obligations under this
Agreement and no further proceedings or actions on the part of the Stockholder are necessary to authorize the execution, delivery
or performance by the Stockholder of this Agreement or the consummation by the Stockholder of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Stockholder and constitutes a valid and binding obligation
of the Stockholder, enforceable against the Stockholder in accordance with its terms, except that enforceability may be subject
to the effect of any applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors rights generally and to general principles of equity.

 

(4)No Conflicts.
The execution and delivery of this Agreement by the Stockholder does not, and the consummation of the transactions contemplated
hereby by the Stockholder will not, result in any breach or violation of, require any consent under, be in conflict with or constitute
a default (whether with notice of lapse of time or both) under any mortgage, bond, indenture, agreement, instrument, obligation
or Law to which the Stockholder is a party or by which the Stockholder or its Shares are bound, except for any such breach, violation,
conflict or default which, individually or in the aggregate, would not in any material respect impair, delay or adversely affect
the Stockholder’s ability to perform its obligations under this Agreement.

 

    	3

    	 

    
 

(5)Consents.
No consent of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to the Stockholder
in connection with the execution and delivery of this Agreement or the compliance by the Stockholder with the provisions of this
Agreement, except for (i) filings with the SEC of such reports under the Exchange Act as may be required in connection with this
Agreement, and (ii) such other items and consents the failure of which to be obtained or made, individually or in the aggregate,
would not in any material respect impair, delay or adversely affect the Stockholder’s ability to perform its obligations
under this Agreement.

 

(b)The Company hereby
represents and warrants to the Stockholder as of the date hereof as follows:

 

(1)Due Organization.
The Company is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its organization.

 

(2)Power, Binding
Agreement. The Company has the requisite power and authority to enter into and perform all of its obligations under this Agreement
and no further proceedings or actions on the part of the Company are necessary to authorize the execution, delivery or performance
by the Company of this Agreement or the consummation by the Company of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by the Company and constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except that enforceability may be subject to the effect of any applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting or relating to the enforcement of creditors rights generally
and to general principles of equity.

 

(3)No Conflicts.
The execution and delivery of this Agreement by the Company does not, and the consummation of the transactions contemplated hereby
by the Company will not, result in any breach or violation of, require any consent under, be in conflict with or constitute a default
(whether with notice of lapse of time or both) under any mortgage, bond, indenture, agreement, instrument, obligation or Law to
which the Company is a party or by which the Company is bound, except for any such breach, violation, conflict or default which,
individually or in the aggregate, would not in any material respect impair, delay or adversely affect the Company’s ability
to perform its obligations under this Agreement.

 

(4)Consents.
No consent of, or registration, declaration or filing with, any Governmental Entity is required by or with respect to the Company
in connection with the execution and delivery of this Agreement or the compliance by the Company with the provisions of this Agreement,
except for (i) filings with the SEC of such reports under the Exchange Act as may be required in connection with this Agreement,
and (ii) such other items and consents the failure of which to be obtained or made, individually or in the aggregate, would not
in any material respect impair, delay or adversely affect the Company’s ability to perform its obligations under this Agreement.

 

6.Legend.
The Stockholder hereby acknowledges and agrees that each of the certificates representing the Shares held by the Stockholder shall
be subject to stop transfer instructions and shall include the following legend:

 

The Shares
represented by this Certificate have not been registered under the Securities Act of 1933, as amended, and may be offered or sold
only if registered under the Securities Act of 1933, as amended, or if an exemption from registration is available. These Shares
are subject to certain limitations on transfer set forth in a stockholder agreement dated as of December ___, 2012, between Gramercy
Capital Corp. and KBS Acquisition Sub-Owner 2, LLC including, but not limited to, restrictions on the sale, assignment, transfer
(including by merger or by operation of law), encumbrance, granting of a participation in, gift-over, assignment or other disposition
of, whether by liquidation, dissolution, dividend, distribution or otherwise. A copy of such agreement is on file with the Secretary
of Gramercy Capital Corp.

 

    	4

    	 

    
 

Within five business
days after receipt by the Company of a demand by the Stockholder, the Company agrees to (i) terminate stop transfer instructions
and remove all but the first sentence of the above legend after the term of this Agreement and (ii) remove the first sentence of
the above legend if the Company is furnished an opinion of counsel reasonably satisfactory to the Company that such Shares may
be freely transferred under applicable securities laws.

 

Promptly upon the acquisition
by the Stockholder of any Shares other than pursuant to the Purchase Agreement, the Stockholder shall surrender the certificates
representing such Shares to the Company and the Company shall place the last two sentences of the foregoing legend on such certificates
and thereafter reissue such certificates to the Stockholder.

 

7.Term.
This Agreement shall remain in full force and effect for as long as the Stockholder continues to own any Shares of the Company.

 

8.Specific Performance.
The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition
to any other remedy at law or in equity.

 

9.Miscellaneous.

 

Definitions.
For purposes of this Agreement, the following terms have the respective meanings set forth below:

 

“Affiliate”
of any person means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is
under common control with, the first-mentioned person.

 

“Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Governmental Entity”
shall mean any municipal, local, state or federal government or governmental authority or by any United States or state court of
competent jurisdiction.

 

“Laws” shall
mean any order, writ, injunction, decree, statute, ordinance, requirement, rule or regulation applicable to the Stockholder or
any of its subsidiaries or any of their respective properties or assets.

 

“Person”
means an individual, corporation, limited liability company, partnership, joint venture, association, trust, unincorporated organization,
other entity or group (as defined in Section 13(d) of the Exchange Act).

 

“Pledgee”
shall mean any lender who has made a loan to the Stockholder or any Permitted Transferee or any Affiliate thereof and to whom either
the Stockholder, any Permitted Transferee or Affiliate thereof has pledged their direct or indirect interests in any Shares as
security for such loan.

 

“SEC” means
the United States Securities and Exchange Commission.

 

10.Entire Agreement.
This Agreement constitutes the entire agreement and supersedes any and all other prior agreements and undertakings, both written
and oral, among the parties hereto, or any of them, with respect to the subject matter hereof and is not intended to confer upon
any Person, other than the Company and the Stockholder, any rights or remedies hereunder. This Agreement may not be amended, modified
or rescinded except by an instrument in writing signed by each of the parties hereto; provided, that the Company may waive compliance
by any other party with any representation, agreement or condition otherwise required to be complied with by any such party under
this Agreement or release any other party from its obligations under this Agreement, but any such waiver or release shall be effective
only if in writing and executed by the Company.

 

    	5

    	 

    
 

11.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, then 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 manner adverse to any Party. If
the final judgment of a court of competent jurisdiction declares that any term or provision hereof is invalid or unenforceable,
the parties hereto agree that the court making such determination shall have the power to limit the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this
Agreement shall be enforceable as so modified. In the event such court does not exercise the power granted to it in the prior sentence,
upon a determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto 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 maximum extent possible.

 

12.Governing
Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT REGARD
TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF THAT WOULD RESULT IN THE APPLICATION OF LAW OF ANY OTHER JURISDICTION.

 

13.Counterparts
and Signature. This Agreement may be executed in one or more counterparts, and by the different parties in separate counterparts,
each of which when executed shall be deemed to be an original, but all of which shall constitute one and the same agreement. This
Agreement may be executed and delivered by facsimile or other electronic or portable document format (pdf) transmission.

 

14.Notices.
All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date of receipt and shall be delivered personally or mailed by registered or certified mail (postage prepaid,
return receipt requested), sent by overnight courier or sent by facsimile, to the parties at the following addresses or facsimile
numbers (or at such other address or facsimile number for a party as shall be specified by like notice):

 

if to the Stockholder:

 

KBS Acquisition Sub-Owner 2, LLC

c/o KBS Capital Advisors LLC

620 Newport Center Drive, Suite 1300

Newport Beach, CA 92660

Attention: David E. Snyder

Facsimile: 949-417-6518

 

with a copy not constituting notice to:

 

Greenberg Traurig, LLP

3161 Michelson Drive, Suite
1000

Irvine, CA 92612

Attention: Bruce Fischer, Esq.

Facsimile: 949-732-6501

 

    	6

    	 

    
 

if to the Company to:

 

Gramercy Capital Corp.

420 Lexington Avenue

New York, New York 10170

Attention: Edward J. Matey Jr.

Facsimile: 212-297-1090

 

with a copy not constituting notice to:

Clifford Chance US LLP

31 West 52nd Street

New York, New York 10019

Attention: Larry P. Medvinsky

Facsimile: 212-878-8375

 

15.Assignment.
Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole
or in part, by operation of law or otherwise by any of the parties hereto without the prior written consent of the other parties,
and any such assignment or delegation without such prior written consent shall be null and void, except that the Company may assign
this Agreement to any direct or indirect wholly owned subsidiary of the Company without the consent of the Stockholder (provided
that the Company shall remain liable for all of its obligations under this Agreement) and the Stockholder may assign this Agreement
to the extent permitted by, and in accordance with, Section 2(a). Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns.

 

16.Interpretation.
When reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement, unless otherwise
indicated. The headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning
or interpretation of this Agreement. The language used in this Agreement shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction shall be applied against any party. Whenever the context
may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns and pronouns shall include the plural, and vice versa. Any reference to any federal, state, local or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.
Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall
be deemed to be followed by the words “without limitation.” No summary of this Agreement prepared by the parties shall
affect in any way the meaning or interpretation of this Agreement.

 

17.Submission
to Jurisdiction. Each of the Company and the Stockholder hereby irrevocably and unconditionally consents to submit to the sole
and exclusive jurisdiction of the courts of the State of Maryland or any court of the United States located in the State of Maryland
(the “Maryland Courts”) for any litigation arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement, or the transactions contemplated hereby (and agrees not to commence any litigation relating
thereto except in such courts), waives any objection to the laying of venue of any such litigation in the Maryland Courts and agrees
not to plead or claim in any Maryland Court that such litigation brought therein has been brought in any inconvenient forum. Each
of the parties hereto agrees that service of process may be made on such party by prepaid certified mail with a proof of mailing
receipt validated by the United States Postal Service constituting evidence of valid service. Service made pursuant to the preceding
sentence shall have the same legal force and effect as if served upon such party personally within the State of Maryland.

 

18.Waiver of
Jury Trial. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREUNDER.

 

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19.Expenses.
All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expenses.

 

20.No Ownership
Interest. Except as expressly set forth in this Agreement, nothing contained in this Agreement shall be deemed to vest in the
Company any direct or indirect ownership or incidence of ownership of or with respect to, or pecuniary interest in, any Shares.
All rights and ownership of and relating to, and pecuniary interest in, any Shares shall remain and belong to the Stockholder,
and the Company shall not have any authority to exercise any power or authority to direct the Stockholder in the voting of any
of the Shares, except as otherwise expressly provided in this Agreement.

 

[Remainder of page intentionally blank]

 

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IN WITNESS WHEREOF, each of the parties
hereto has caused this Agreement to be signed individually or by its respective duly authorized officer as of the date first written
above.

 

 

 

KBS
Acquisition Sub-Owner 2, LLC

 

 

 

By: /s/ David E. Snyder                                         

Name: David E. Snyder

Title: Chief Financial Officer

 

 

Gramercy
Capital Corp.

 

 

By: /s/ Benjamin P. Harris                                      

Name: Benjamin P. Harris

Title: Authorized Signatory

 

    	9Exhibit 10.1

 

Execution Version

 

 

 

 

 

PURCHASE AND SALE AGREEMENT

 

BETWEEN

 

 

 

CrownRock, L.P.,

 

a Delaware limited partnership,

 

AS SELLER

 

 

 

AND

 

BREITBURN OPERATING L.P.,

 

a Delaware limited partnership

 

 

AS BUYER

 

    	 

    	 

    

 

TABLE OF CONTENTS

 

	Article I  Assets	1
	Section 1.01	Agreement to Sell and Purchase	1
	Section 1.02	Assets	1
	Section 1.03	Excluded Assets	3
	Article II  Purchase Price	4
	Section 2.01	Purchase Price	4
	Section 2.02	Allocated Values	4
	Section 2.03	Effective Time	4
	Article III  Title Matters	4
	Section 3.01	Examination Period	4
	Section 3.02	Defensible Title and Permitted Encumbrances	4
	Section 3.03	Title Defect	7
	Section 3.04	Notice of Title Defects	7
	Section 3.05	Remedies for Title Defects	8
	Section 3.07	Preferential Rights To Purchase	9
	Section 3.08	Consents to Assignment	9
	Section 3.09	Remedies for Title Benefits	10
	Article IV  Environmental Matters	11
	Section 4.01	Environmental Review	11
	Section 4.02	Environmental Definitions	12
	Section 4.03	Notice of Environmental Defects	13
	Section 4.04	Remedies for Environmental Defects	14
	Article V  Representations and Warranties of Seller	15
	Section 5.01	Seller’s Existence	15
	Section 5.02	Legal Power	15
	Section 5.03	Execution	15
	Section 5.04	Brokers	16
	Section 5.05	Bankruptcy	16
	Section 5.06	Suits	16
	Section 5.07	Royalties	16
	Section 5.08	Taxes	16
	Section 5.09	Contracts	17
	Section 5.10	No Conflict or Violation	17
	Section 5.11	Consents; Preferential Rights	17
	Section 5.12	Compliance with Laws	17
	Section 5.13	Wells	17
	Section 5.14	Proposed Operations or Expenditures	18
	Section 5.15	Status of Seller	18
	Section 5.16	Suspense Funds	18

 

    	(i)

    	 

    
 

	Section 5.17	Imbalances	18
	Section 5.18	Seller’s Knowledge	18
	Section 5.19	Affiliate Transactions	18
	Section 5.20	Governmental Licenses	18
	Article VI  Representations and Warranties of Buyer	19
	Section 6.01	Buyer’s Existence	19
	Section 6.02	Legal Power	19
	Section 6.03	Execution	19
	Section 6.04	Brokers	19
	Section 6.05	Bankruptcy	19
	Section 6.06	Suits	19
	Section 6.07	Qualifications	20
	Section 6.08	Investment	20
	Section 6.09	Funds	20
	Article VII  Seller’s Conditions to Close	20
	Section 7.01	Representations	20
	Section 7.02	Performance	20
	Section 7.03	Pending Matters	20
	Section 7.04	Purchase Price	20
	Section 7.05	Title and Environmental	20
	Section 7.06	Execution and Delivery of the Closing Documents	20
	Article VIII  Buyer’s Conditions to Close	21
	Section 8.01	Representations	21
	Section 8.02	Performance	21
	Section 8.03	Pending Matters	21
	Section 8.04	Execution and Delivery of the Closing Documents	21
	Section 8.05	Title and Environmental	21
	Section 8.06	Letter Regarding Financial Statements	21
	Section 8.07	Transition Services Agreement	21
	Section 8.08	Concurrent Rights Agreement	21
	Article IX  Tax Matters	21
	Section 9.01	Transfer Taxes	21
	Section 9.02	Asset Taxes	22
	Section 9.03	Purchase Price Allocation	22
	Section 9.04	Tax Cooperation	23
	Section 9.05	754 Elections	23
	Section 9.06	Tax Definitions	23
	Article X  The Closing	24
	Section 10.01	Time and Place of the Closing	24
	Section 10.02	Adjustments to Purchase Price at the Closing	24

 

    	(ii)

    	 

    
 

	Section 10.03	Closing Statement	26
	Section 10.04	Actions of Seller at the Closing	26
	Section 10.05	Actions of Buyer at the Closing	27
	Article XI  Termination	27
	Section 11.01	Right of Termination	27
	Section 11.02	Effect of Termination	28
	Section 11.03	Termination Remedies	28
	Section 11.04	Attorneys’ Fees, Etc	28
	Article XII  Post Closing Obligations	29
	Section 12.01	Gas Imbalances	29
	Section 12.02	Final Statement	29
	Section 12.03	Financial Statements	30
	Section 12.04	Further Cooperation	30
	Article XIII  Operation of the Assets	30
	Section 13.01	Operations after Effective Time	30
	Section 13.02	Limitations on the Operational Obligations and Liabilities of Seller	31
	Section 13.03	No Liability of Seller	32
	Section 13.04	Operation of the Assets After the Closing	32
	Section 13.05	Casualty Loss	32
	Section 13.06	Operatorship	33
	Section 13.07	Records	33
	Section 13.08	Administrative Duties and Other Obligations	33
	Article XIV  Obligations and Indemnification	33
	Section 14.01	Retained Obligations	33
	Section 14.02	Assumed Obligations	34
	Section 14.03	Buyer’s Indemnification	34
	Section 14.04	Seller’s Indemnification	35
	Section 14.05	Notices and Defense of Indemnified Matters	35
	Section 14.06	Exclusive Remedies	35
	Article XV  Limitations on Representations and Warranties	36
	Section 15.02	Independent Investigation	37
	Section 15.03	Survival	37
	Article XVI  Dispute Resolution	37
	Section 16.01	General	37
	Section 16.02	Senior Management	37
	Section 16.03	Dispute by Independent Expert	37
	Section 16.04	Limitation on Arbitration	38
	Article XVII  Miscellaneous	38

 

    	(iii)

    	 

    
 

	Section 17.01	Names	38
	Section 17.02	Expenses	38
	Section 17.03	Document Retention	39
	Section 17.04	Entire Agreement	39
	Section 17.05	Waiver	39
	Section 17.06	Publicity	39
	Section 17.07	Construction	39
	Section 17.08	No Third Party Beneficiaries	39
	Section 17.09	Assignment	39
	Section 17.10	Governing Law	40
	Section 17.11	Notices	40
	Section 17.12	Severability	40
	Section 17.13	Time of the Essence	40
	Section 17.14	Counterpart Execution	40
	Section 17.15	Jury Trial Waiver	41
	Section 17.16	Financial Statements	41

 

 

EXHIBITS AND SCHEDULES

 

Exhibit A – Subject Interests (Listing
of Leases)

Exhibit B – Wells and Interests

Exhibit C – Allocated Values

Exhibit D – Assignment and Bill of
Sale

Exhibit E – Transition Services Agreement

Exhibit F – Concurrent Rights Agreement

 

Schedule 1.02(d) – Well Equipment
and Phone Numbers

Schedule 3.02(d)(i) – Permitted Contracts

Schedule 3.06 – Termination of Participation
Agreement

Schedule 3.07 – Preferential Rights

Schedule 5.06 – Suits

Schedule 5.07 – Royalties in Suspense

Schedule 5.08(b) – Tax Partnerships

Schedule 5.08(c) – Tax Liens

Schedule 5.09 – Material Contracts

Schedule 5.11 – Consents

Schedule 5.12 – Compliance with Laws

Schedule 5.13 – Wells

Schedule 5.14 – Proposed Operations
or Expenditures

Schedule 5.20 – Permits

Schedule 12.01 – Imbalances

 

    	(iv)

    	 

    
 

DEFINITIONS

 

	TERM	SECTION
	Agreed Imbalance	12.01
	Agreement	Preamble
	Allocated Values	2.02
	Asset Taxes	9.06(a)
	Assets	1.02
	Assignment	10.04(a)
	Assumed Obligations	14.02
	Audit Firm	17.16(b)
	Breaching Party	11.03
	Buyer	Preamble
	Buyer Indemnitees	14.04
	Buyer’s Environmental Consultant	4.01(a)
	Buyer’s Environmental Review	4.01(a)
	CERCLA	4.02(c)
	Closing	10.01
	Closing Date	10.01
	Concurrent Rights Agreement	8.08
	Contracts	1.02(e)
	Defensible Title	3.02
	Disputes	16.01
	Documents	17.03
	Easements	1.02(c)
	Effective Time	2.03
	Environmental Defect	4.02(a)
	Environmental Defect Value	4.02(d)
	Environmental Information	4.01(b)
	Environmental Laws	4.02(c)
	Examination Period	3.01
	Exchange Act	17.16(a)
	Excluded Assets	1.03
	Final Settlement Date	12.02(a)
	Final Statement	12.02(a)
	Financial Statements	17.16(a)
	Governmental Authority	4.02(b)
	Hydrocarbons	1.02(d)
	Independent Expert	16.03(a)
	Leases	1.02(a)
	Losses	14.03
	Material Contracts	5.09
	New Subject Interests	1.01(c)
	Net Revenue Interest	3.02(a)
	NORM	4.01(c)

 

    	(i)

    	 

    
 

	TERM	SECTION
	Notice of Disagreement	12.02(a)
	Party or Parties	Preamble
	Participation Agreement	3.06
	Performing Party	11.03
	Permitted Encumbrances	3.02(d)
	Person	5.09
	Personal Property	1.02(d)
	Preference Rights	3.07
	Property Expenses	10.02(c)
	Purchase Price	2.01
	Purchase Price Adjustments	10.02(d)
	Purchase Price Allocation	9.03
	Records	1.02(f)
	Retained Obligations	14.01
	SEC	17.16(a)
	Securities Act	17.16(a)
	Seller	Preamble
	Seller Indemnitees	14.03
	Seller Permits	5.20
	Seller’s knowledge	5.18
	Specified Retained Obligations	14.01
	Statement	10.03
	Straddle Period	9.06(b)
	Subject Interest(s)	1.02(a)
	Tax or Taxes	9.06(c)
	Tax Return	9.06(d)
	Termination of Participation Agreement	3.06
	Third Party	1.02(g)
	Third Party Confidential Data	1.03
	Title Benefit	3.09(a)
	Title Defect	3.03
	Title Defect Value	3.04(c)
	Transfer Taxes	9.01
	Transition Services Agreement	8.07
	Wells	1.02(d)
	Working Interest	3.02(b)

 

    	(ii)

    	 

    

 

PURCHASE AND SALE AGREEMENT

 

This Purchase and Sale
Agreement (this “Agreement”) is made and entered into this 11th day of December, 2012, by and between CrownRock,
L.P., a Delaware limited partnership (the “Seller”), and BreitBurn Operating L.P., a Delaware limited partnership
(the “Buyer”). Buyer and Seller are collectively referred to herein as the “Parties” and
are sometimes referred to individually as a “Party.”

 

W I T N E S S E T H:

 

WHEREAS, Seller is
willing to sell to Buyer, and Buyer is willing to purchase from Seller, the Assets (as defined in Section 1.02), all upon
the terms and conditions hereinafter set forth;

 

NOW, THEREFORE, in
consideration of the mutual benefits derived and to be derived from this Agreement by each Party, Seller and Buyer hereby agree
as follows:

 

Article
I

Assets

 

Section 1.01       
Agreement to Sell and Purchase. Subject to and in accordance with the terms and conditions of this Agreement, Buyer
agrees to purchase the Assets from Seller, and Seller agrees to sell the Assets to Buyer, effective as of the Effective Time (as
defined in Section 2.03).

 

Section 1.02Assets.
Subject to Section 1.03, the term “Assets” shall mean the following (less and except the Excluded Assets,
as hereinafter defined):

 

		(a)	all of Seller’s right, title and interest in and to the leasehold estates in and to the oil,
gas and mineral leases described or referred to in Exhibit A (the “Leases”) and any overriding royalty
interests in and to the lands covered by the Leases, assignments and other documents of title described or referred to in Exhibit A,
all as more specifically described in Exhibit A, provided that all of the foregoing are subject to the limitations
described in Exhibit A, (as so limited, collectively, the “Subject Interests,” or singularly, a
“Subject Interest”);

 

		(b)	all of Seller’s right, title and interest in and to all rights incident to the Subject Interests,
including, without limitation, all rights with respect to any pooled, communitized or unitized acreage by virtue of any Subject
Interest being a part thereof, including all Hydrocarbon (as defined in Subsection (d) of this Section 1.02)
production after the Effective Time attributable to the Subject Interests or any such pool or unit allocated to any such Subject
Interest;

 

		(c)	all of Seller’s right, title and interest in and to all easements, rights-of-way, surface
leases, servitudes, permits, licenses, franchises and other estates or similar rights and privileges (i) with respect to the Subject
Interests identified on Exhibit A as “New Subject Interests” (the “New Subject Interests”),
necessary or useful, and (ii) with respect to the Subject Interests other than the New Subject Interests, directly related to or
used solely, in each case, in connection with the Subject Interests (the “Easements”), including, without limitation,
the Easements described or referred to in Exhibit A;

 

    	(1)

    	 

    
 

		(d)	all of Seller’s (and its affiliates’) right, title and interest in and to all personal
property, equipment, fixtures, inventory and improvements located on or used in connection with the Subject Interests and the Easements
or with the production, treatment, sale, or disposal of oil, gas or other hydrocarbons (collectively, “Hydrocarbons”),
byproducts or waste produced therefrom or attributable thereto, including, without limitation, all wells located on the lands covered
by the Subject Interests or on lands with which the Subject Interests may have been pooled, communitized or unitized (whether producing,
shut in or abandoned, and whether for production, injection or disposal), including, without limitation, the wells described in
Exhibit B (the “Wells”), wellhead equipment, pumps, pumping units, flowlines, gathering systems,
piping, tanks, buildings, treatment facilities, injection facilities, disposal facilities, compression facilities, and other materials,
supplies, equipment, facilities and machinery, including (i) the central or individual batteries, (ii) the remote tanks, (iii)
the pump-off controllers, (iv) radios to transmit pump-off controller and tank information located on or about the Wells and (v)
cellular modems, accounts and associated phone numbers specifically installed for electronic alarms (the foregoing (i) through
(v) as shown on Schedule 1.02(d)) (collectively, “Personal Property”);

 

		(e)	all of Seller’s (and its affiliates’) right, title and interest in and to the extent
assignable (provided that Seller shall use commercially reasonable efforts to obtain consent to assignment to Buyer), all contracts,
agreements and other arrangements that directly relate to the Subject Interests, the Leases, the Personal Property or the Easements,
insofar only as applicable thereto, including, without limitation, production sales contracts, farmout agreements, operating agreements,
service agreements, wireless contracts and similar arrangements, excluding the Leases (collectively, the “Contracts”);

 

		(f)	all of Seller’s and its affiliates’ books, records, files, all of Seller’s right,
title and interest in and to all books muniments of title, reports and similar documents and materials, including, without limitation,
lease records, well records, and division order records, well files, title records (including abstracts of title, title opinions
and memoranda, and title curative documents related to the Assets), contracts and contract files, and correspondence that relates
to the foregoing interests in the possession of, and maintained by, Seller (or its affiliates) (collectively, the “Records”);

 

    	(2)

    	 

    
 

		(g)	all of Seller’s (and its affiliates’) right, title and interest in and to all geological
and geophysical data relating to the Subject Interests, other than such data which cannot be transferred without the consent of
(provided that Seller shall use commercially reasonable efforts to obtain such consent) or payment to any Third Party (unless
paid by Buyer). For purposes of this Agreement, “Third Party” means any person or entity, governmental or otherwise,
other than Seller or Buyer, and their respective affiliates; the term includes, but is not limited to, working interest owners,
royalty owners, lease operators, landowners, service contractors and governmental agencies; and

 

		(h)	any other improvements, fixtures, and tangible personal property presently located on the Subject
Interests and Wells and utilized in connection with the ownership or operation thereof.

 

Section 1.03Excluded
Assets. Notwithstanding the foregoing, the Assets shall not include, and there are excepted, reserved and excluded from the
sale contemplated hereby (the following, collectively, the “Excluded Assets”): (a) all trade credits and refunds
(other than those relating to Taxes, which are governed by (e) below) and all accounts, instruments and general intangibles (as
such terms are defined in the Texas Uniform Commercial Code), attributable to the Assets with respect to any period of time prior
to the Effective Time, except to the extent relating to pre-Effective Time obligations or liabilities assumed by Buyer under this
Agreement; (b) all claims and causes of action of Seller arising from acts, omissions or events occurring prior to the Effective
Time, except to the extent relating to pre-Effective Time obligations or liabilities assumed by Buyer under this Agreement; (c)
all rights and interests of Seller (i) under any policy or agreement of insurance or indemnity, (ii) under any bond or deposit
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, occurring prior to the Effective Time; (d) all Hydrocarbons produced from or attributable to the Subject
Interests with respect to all periods prior to the Effective Time, together with all proceeds from the sale of such Hydrocarbons;
(e) all claims of Seller for refunds of or loss carry forwards with respect to any Taxes, and refunds for amounts paid in
connection with the Assets, attributable to any period prior to the Effective Time; (f) all amounts due or payable to Seller as
adjustments to insurance premiums related to the Assets with respect to any period prior to the Effective Time; (g) all proceeds,
income or revenues (and any security or other deposits made) attributable to the Assets for any period prior to the Effective Time;
(h) all data and other information that cannot be disclosed or assigned to Buyer without the consent of or payment to any Third
Party (the “Third Party Confidential Data”); provided that, prior to the Closing, Seller shall use its
reasonable efforts to obtain waivers or consents from such Third Parties to the transfer or use of the Third Party Confidential
Data to or by Buyer, provided that Buyer pays any fees or other sums of Third Parties requisite to such transfer; (i) all
vehicles, vessels, trailers, software, computers and associated peripherals and all radio, telephone and other communications equipment,
except for any such items shown on attached Schedule 1.02(d) and/or physically attached to a Well; (j) any Contracts with
respect to which consent to assignment is required but has not been obtained; and (k) the CrownRock Easements as defined in the
Concurrent Rights Agreement attached hereto as Exhibit F.

 

    	(3)

    	 

    
 

Article
II

Purchase Price

 

Section
2.01        Purchase
Price. The total consideration for the purchase, sale and conveyance of the Assets to Buyer is Buyer’s payment to Seller
of the sum of ONE HUNDRED SIXTY FIVE MILLION DOLLARS ($165,000,000.00) (the “Purchase Price”), as allocated
and as adjusted in accordance with the provisions of this Agreement. The adjusted Purchase Price shall be paid to Seller at the
Closing (as defined in Section 10.01) by means of a completed federal funds transfer to an account designated in writing
by Seller.

 

Section
2.02        Allocated
Values. Buyer and Seller have agreed on the allocation of values among the Assets as set forth in Exhibit C attached
hereto (the “Allocated Values”).  Seller and Buyer agree that the Allocated Values shall be used for federal
income tax purposes, for computation of any adjustments pursuant to the provisions of Article III and Article IV,
and for all other purposes incident to this Agreement.

 

Section
2.03        Effective
Time. If the transactions contemplated hereby are consummated in accordance with the terms and provisions hereof, the ownership
of the Assets shall be transferred from Seller to Buyer on the Closing Date, but effective as of 7:00 a.m. local time where the
Assets are located on December 1, 2012 (the “Effective Time”).

 

Article
III

Title Matters

 

Section
3.01        Examination
Period. Following the execution date of this Agreement until 12:00 noon, local time in Midland, Texas on December 24, 2012
(the “Examination Period”), Seller shall permit Buyer and/or its representatives (including Buyer’s Environmental
Consultant) to examine, at all reasonable times, in Seller’s offices, all abstracts of title, title opinions, title files,
ownership maps, lease files, contract files, assignments, division orders, operating and accounting records and agreements pertaining
to the Assets insofar as same may now be in existence and in the possession of Seller, subject to such restrictions on disclosure
as may exist under confidentiality agreements or other agreements binding on Seller or such data.

 

Section
3.02        Defensible
Title and Permitted Encumbrances. For purposes of this Agreement, the term “Defensible Title” means, with
respect to a given Asset, such ownership by Seller in such Asset during the productive life of that Asset, that, subject to and
except for the Permitted Encumbrances (as defined in Subsection (d) of this Section 3.02):

 

		(a)	entitles Seller to receive not less than the percentage set forth in Exhibit B as Seller’s
“Net Revenue Interest” of all Hydrocarbons produced, saved and marketed from each Well or unit as set forth
in Exhibit B, all without reduction, suspension or termination of such interest throughout the productive life of such
Well except as specifically set forth in Exhibit B;

 

		(b)	obligates Seller to bear not greater than the percentage set forth in Exhibit B as
Seller’s “Working Interest” of the costs and expenses relating to the maintenance, development and operation
of each Well or unit as set forth in Exhibit B, all without increase (unless accompanied by a corresponding increase
in Seller’s Net Revenue Interest) throughout the productive life of such Well except as specifically set forth in Exhibit B;

 

    	(4)

    	 

    
 

		(c)	is free and clear of all liens, encumbrances and defects in title.

 

		(d)	The term “Permitted Encumbrances” shall mean any of the following matters to
the extent the same are valid and subsisting and affect the Assets:

 

		(i)	The contracts listed on Schedule 3.02(d)(i);

 

		(ii)	any (A) undetermined or inchoate liens or charges constituting or securing the payment of expenses
that were incurred incidental to the maintenance, development, production or operation of the Assets or for the purpose of developing,
producing or processing Hydrocarbons therefrom or therein and (B) materialman’s, mechanics’, repairman’s, employees’,
contractors’, operators’ liens under joint operating agreements or other similar liens or charges for liquidated amounts
arising in the ordinary course of business which Seller has agreed to pay pursuant to the terms thereof and that are not yet due
and payable or are being contested in good faith in the ordinary course of business;

 

		(iii)	any liens for Taxes not yet delinquent or, if delinquent, that are being contested in good faith
in the ordinary course of business and which Seller has agreed to pay pursuant to the terms hereof;

 

		(iv)	the terms, conditions, restrictions, exceptions, reservations, limitations and other matters contained
in (including any liens or security interests created by law or reserved in oil and gas leases for royalty, bonus or rental, or
created to secure compliance with the terms of) the Leases and any other recorded agreements, instruments and documents that create
or reserve to Seller its interest in the Assets, to the extent the same do not reduce the Net Revenue Interests of Seller below
those set forth in Exhibit B or increase the Working Interests of Seller above those set forth in Exhibit B without
a corresponding increase in the Net Revenue Interest;

 

		(v)	any obligations or duties affecting the Assets to any municipality or public authority with respect
to any franchise, grant, license or permit and all applicable laws, rules, regulations and orders of any Governmental Authority
(as defined in Section 4.02(b));

 

		(vi)	any (A) easements, rights-of-way, servitudes, permits, surface leases and other rights in respect
of surface operations, pipelines, grazing, hunting, lodging, canals, ditches, reservoirs or the like and (B) easements for streets,
alleys, highways, pipelines, telephone lines, power lines, railways and other similar rights-of-way on, over or in respect of property
owned or leased by Seller or over which Seller owns rights-of-way, easements, permits or licenses, to the extent that same do not
materially interfere with the ownership of, or oil and gas operations to be conducted on, the Assets;

 

    	(5)

    	 

    
 

		(vii)	all lessors’ royalties, overriding royalties, net profits interests, carried interests, production
payments, reversionary interests and other burdens on or deductions from the proceeds of production created or in existence as
of the Effective Time, whether recorded or unrecorded, provided that such matters do not operate to reduce the Net Revenue
Interests of Seller below those set forth in Exhibit B or increase the Working Interests of Seller above those set
forth in Exhibit B without a corresponding increase in the Net Revenue Interests;

 

		(viii)	preferential rights to purchase or similar agreements with respect to which (A) waivers
or consents are obtained from the appropriate parties for the transaction contemplated hereby or (B) required notices have been
given for the transaction contemplated hereby to the holders of such rights and the appropriate period for asserting such rights
has expired without an exercise of such rights;

 

		(ix)	required Third Party consents to assignments or similar agreements with respect to which (A) waivers
or consents are obtained from the appropriate parties for the transaction contemplated hereby, (B) required notices have been given
for the transaction contemplated hereby to the holders of such rights and the appropriate period for asserting such rights has
expired without an exercise of such rights, or (C) failure to obtain the same does not (i) expressly render the transfer of the
applicable Assets void or voidable, (ii) result in lease termination, or (iii) result in liquidated damages.

 

		(x)	all rights to consent by, required notices to, filings with, or other actions by Governmental Authorities
in connection with the sale or conveyance of oil and gas leases or interests therein that are customarily obtained subsequent to
such sale or conveyance;

 

		(xi)	division orders to the extent the same do not reduce the Net Revenue Interests of Seller below
those set forth in Exhibit B or increase the Working Interests of Seller above those set forth in Exhibit B without a corresponding
increase in the Net Revenue Interest;

 

		(xii)	rights reserved to or vested in any Governmental Authority to control or regulate any of the Assets
and the applicable laws, rules, and regulations of such Governmental Authorities;

 

    	(6)

    	 

    
 

		(xiii)	any liens of record to be released by Seller at the Closing;

 

		(xiv)	all defects and irregularities affecting the Assets which in the aggregate (A) do not operate to
(1) reduce the Net Revenue Interest of Seller, (2) increase the proportionate share of costs and expenses of leasehold operations
attributable to or to be borne by the Working Interests of Seller, (3) otherwise interfere materially with the operation, value
or use of the Assets or (4) that would not be considered material when applying general industry standards or (B) operate to increase
the proportionate share of costs and expenses of leasehold operations attributable to or to be borne by the Working Interest of
Seller, so long as there is a proportionate increase in Seller’s Net Revenue Interest.

 

Section
3.03        Title Defect.
The term “Title Defect,” as used in this Agreement, shall mean: (a) any encumbrance, encroachment, irregularity,
defect in or objection to Seller’s ownership of any Asset (expressly excluding Permitted Encumbrances) that causes Seller
not to have Defensible Title to such Asset or (b) any default by Seller under a lease, farmout agreement or other contract or agreement
that would (i) have a material adverse affect on the operation, value or use of such Asset, (ii) prevent Seller from receiving
the proceeds of production attributable to Seller’s interest therein or (iii) result in cancellation of Seller’s interest
therein.

 

Section
3.04        Notice of
Title Defects.

 

		(a)	If Buyer discovers any Title Defect affecting any Asset, Buyer shall notify Seller as promptly
as possible, but no later than the expiration of the Examination Period of such alleged Title Defect. To be effective, such notice
must (i) be in writing, (ii) be received by Seller by 5:00 p.m. Central Standard Time on the expiration date of the Examination
Period and (iii) describe the Title Defect in reasonable detail, to the extent then reasonably known by Buyer (including the
estimated value of such Title Defect as determined by Buyer). Any matters that may otherwise constitute Title Defects, but of which
Seller has not been notified by Buyer in accordance with the foregoing, shall be deemed to have been waived by Buyer for all purposes
and shall constitute Permitted Encumbrances.

 

		(b)	Upon the receipt of such effective notice from Buyer, Seller, at Seller’s option, shall (i)
subject to Section 3.05(a), attempt to cure such Title Defect at any time prior to the Closing or (ii) exclude the affected
Asset from the sale and reduce the Purchase Price by the Allocated Value of such affected Asset as set forth on Exhibit C.

 

		(c)	The value attributable to each Title Defect (the “Title Defect Value”) that
is asserted by Buyer in the Title Defect notices shall be determined based upon the criteria set forth below:

 

    	(7)

    	 

    
 

		(i)	If the Title Defect is a lien upon any Asset, the Title Defect Value is the amount reasonably expected
to be necessary to be paid to remove the lien from the affected Asset.

 

		(ii)	If the Title Defect asserted is that the Net Revenue Interest attributable to any Well or unit
or Well location is less than that stated in Exhibit C or the Working Interest attributable to any Well or unit or
Well location is greater than that stated in Exhibit C, then the Title Defect Value shall take into account the relative
change in the interest from Exhibit C and the appropriate Allocated Value attributed to such Asset.

 

		(iii)	If the Title Defect represents an obligation, encumbrance, burden or charge upon the affected Asset
(including any increase in Working Interest for which there is not a proportionate increase in Net Revenue Interest) for which
the economic detriment to Buyer is unliquidated, the amount of the Title Defect Value shall be determined by taking into account
the Allocated Value of the affected Asset, the portion of the Asset affected by the Title Defect, the legal effect of the Title
Defect, the potential discounted economic effect of the Title Defect over the life of the affected Asset.

 

		(iv)	If a Title Defect is not in effect or does not adversely affect an Asset throughout the entire
productive life of such Asset, such fact shall be taken into account in determining the Title Defect Value.

 

		(v)	The Title Defect Value shall be determined without duplication of any costs or losses included
in another Title Defect Value hereunder.

 

		(vi)	Notwithstanding anything herein to the contrary, in no event shall a Title Defect Value exceed
the Allocated Value of the Wells, units or other Assets affected thereby.

 

		(vii)	Such other factors as are reasonably necessary to make a proper evaluation.

 

Section
3.05        Remedies
for Title Defects.

 

		(a)	With respect to each Title Defect that Seller does not cure on or before the Closing, except as
otherwise provided in this Section 3.05, the Purchase Price shall be reduced by an amount equal to the Title Defect Value
agreed upon in writing by Buyer and Seller or, if Buyer agrees, Seller shall indemnify Buyer pursuant to Section 14.04 against
all costs which Buyer may incur in connection with such Title Defect. If any Title Defect is in the nature of an unobtained consent
to assignment or other restriction on assignability, the provisions of Section 3.08 shall apply.

 

    	(8)

    	 

    
 

		(b)	Except for those affected Assets which Seller elects to exclude from this transaction pursuant
to Section 3.04(b)(ii), if on or before Closing the Parties have not agreed upon the validity of any asserted Title Defect
or have not agreed on the Title Defect Value attributable thereto, either Party shall have the right to elect to have the validity
of such Title Defect and/or such Title Defect Value determined by an Independent Expert pursuant to Section 16.03; provided
that if the validity of any asserted Title Defect, or the Title Defect Value attributable thereto, is not determined before Closing,
the affected Asset shall be excluded from the sale and the Purchase Price shall be reduced by the Allocated Value of such affected
Asset as set forth on Exhibit C. Upon resolution of such dispute, the Allocated Value of that Asset less the Title Defect
Value, if any, found to be attributable to such Title Defect shall, subject to this Section 3.05, be paid by Buyer to Seller
and the Asset conveyed to Buyer, if that is part of the mutually agreed settlement.

 

		(c)	Notwithstanding anything to the contrary in this Agreement, (i) if the value of a given individual
Title Defect (or individual Title Benefit (as defined in Section 3.09(a)) does not exceed $50,000 then no adjustment to
the Purchase Price shall be made for such Title Defect (or Title Benefit), (ii) if the aggregate adjustment to the Purchase Price
determined in accordance with this Agreement for Title Defects and Environmental Defects (as hereinafter defined) does not exceed
three percent (3%) of the Purchase Price prior to any adjustments thereto, then no adjustment of the Purchase Price shall be made
therefor and (iii) if the aggregate adjustment to the Purchase Price determined in accordance with this Agreement for Title Defects
and Environmental Defects does exceed three percent (3%) of the Purchase Price prior to any adjustments thereto, then the Purchase
Price shall only be adjusted by the amount of such excess.

 

Section 3.06       
Termination of Participation Agreement. At Closing, Buyer and Seller agree to execute that Termination of Participation
Agreement attached hereto as Schedule 3.06 (the “Termination of Participation Agreement”), whereby said
parties expressly and permanently terminate their rights as between each other and as to the Zebulon and Knott properties under
that certain Participation Agreement dated as of April 1, 2009, by and among Seller, Element Petroleum, LP (whose interest is now
owned by Buyer) and CrownQuest Operating, LLC (the “Participation Agreement”).

 

Section
3.07        Preferential
Rights To Purchase. Schedule 3.07 lists all agreements containing a preferential right to purchase (the “Preference
Rights”).

 

Section
3.08        Consents
to Assignment. Seller shall use all reasonable efforts to obtain all necessary consents set forth on Schedule 5.11 
from Third Parties to assign the Assets prior to the Closing (other than governmental approvals that are customarily
obtained after the Closing) and Buyer shall use reasonable efforts to assist Seller with such efforts. If prior to the Closing,
Seller fails to obtain a consent to assign that would invalidate the conveyance of the Asset affected by the consent to assign
to Buyer or materially affect the value or use of the Asset, then Seller shall retain the affected Asset and the Purchase Price
shall be reduced by the Allocated Value of the affected Asset. If such consent has been obtained as of the Final Settlement Date,
then Seller shall convey the affected Asset to Buyer effective as of the Effective Time, subject to the same terms and conditions
set forth in this Agreement, and Buyer shall pay Seller the Allocated Value of the affected Asset, in accordance with the terms
and conditions of this Agreement. If such consent has not been obtained as of the Final Settlement Date, the affected Asset shall
be excluded from the sale and the Purchase Price shall be deemed to be reduced by an amount equal to the Allocated Value of the
affected Asset. For purposes of the foregoing, consent requirements that do not expressly (i) render transfer of the applicable
Assets to Buyer void or voidable if such consent is not obtained, (ii) result in lease termination, or (iii) result in liquidated
damages or otherwise materially affect the value or the use of the Asset, shall not be objectionable by Buyer and any such Assets
shall be conveyed and paid for at Closing without regard to whether or not consents thereto are obtained. Buyer shall reasonably
cooperate with Seller in obtaining any required consent including providing assurances of reasonable financial conditions, but
Buyer shall not be required to expend funds or make any other type of financial commitments as a condition of obtaining such consent.

 

    	(9)

    	 

    
 

Section
3.09        Remedies
for Title Benefits.

 

		(a)	If either Party discovers any Title Benefit during the Examination Period affecting the Assets,
it shall promptly notify the other Party in writing thereof on or before the expiration of the Examination Period. Subject to Section
3.05, Seller shall be entitled to an upward adjustment to the Purchase Price pursuant to Section 10.02(a)(iv) with respect
to all Title Benefits in excess of $50,000 in an amount mutually agreed upon by the Parties; provided, that notwithstanding
anything in this Agreement to the contrary (i) if the aggregate adjustment to the Purchase Price for Title Benefits determined
in accordance with this Agreement does not exceed three percent (3%) of the Purchase Price prior to any adjustments thereto, then
no adjustment of the Purchase Price shall be made therefor and (ii) if the aggregate adjustment to the Purchase Price for Title
Benefits determined in accordance with this Agreement does exceed three percent (3%) of the Purchase Price prior to any adjustments
thereto, then the Purchase Price shall only be adjusted by the amount of such excess. For purposes of this Agreement, the term
“Title Benefit” shall mean Seller’s interest in any Subject Interest that is greater than or in addition
to that set forth in Exhibit B (including, without limitation, a Net Revenue Interest that is greater than that set
forth in Exhibit B) or Seller’s Working Interest in any Subject Interest that is less than the Working Interest
set forth in Exhibit B (without a corresponding decrease in the Net Revenue Interest). Any matters that may otherwise
constitute Title Benefits, but of which Buyer has not been specifically notified by Seller in accordance with the foregoing, shall
be deemed to have been waived by Seller for all purposes.

 

		(b)	If, with respect to a Title Benefit, the Parties are not deemed to have agreed on the amount of
the upward Purchase Price Adjustment or have not otherwise agreed on such amount prior to the Closing Date, Seller or Buyer shall
have the right to elect to have such Purchase Price Adjustment determined by an Independent Expert pursuant to Section 16.03.
If the amount of such adjustment is not determined pursuant to this Agreement by the Closing, the undisputed portion of the Purchase
Price with respect to the Asset affected by such Title Benefit shall be paid by Buyer at the Closing and, subject to Section
3.05, upon determination of the amount of such adjustment, any unpaid portion thereof shall be paid by Buyer to Seller.

 

    	(10)

    	 

    
 

Article
IV

Environmental Matters

 

Section
4.01        Environmental
Review.

 

		(a)	Buyer shall have the right to conduct or cause a consultant (“Buyer’s Environmental
Consultant”) to conduct an environmental review of the Assets and Seller’s records pertaining to the Assets (as
set forth in Section 3.01) prior to the expiration of the Examination Period (“Buyer’s Environmental Review”).
The cost and expense of Buyer’s Environmental Review, if any, shall be borne solely by Buyer. The scope of work comprising
Buyer’s Environmental Review shall not include any intrusive test or procedure without the prior written consent of Seller.
Buyer shall (and shall cause Buyer’s Environmental Consultant to): (i) consult with Seller before conducting any work comprising
Buyer’s Environmental Review, (ii) perform all such work in a safe and workmanlike manner and so as to not unreasonably interfere
with Seller’s operations and (iii) comply with all applicable laws, rules, and regulations. Seller shall use commercially
reasonable efforts to obtain any Third Party consents and otherwise cooperate with Buyer in conducting Buyer’s Environmental
Review and any activities related thereto. Seller shall have the right to have a representative or representatives accompany Buyer
and Buyer’s Environmental Consultant at all times during Buyer’s Environmental Review. With respect to any samples
taken in connection with Buyer’s Environmental Review, Buyer shall take split samples, providing one of each such sample,
properly labeled and identified, to Seller. The Parties shall execute a “common undertaking” letter regarding the confidentiality
for the Environmental Review where appropriate. Buyer hereby agrees to release, defend, indemnify and hold harmless Seller from
and against all claims, losses, damages, costs, expenses, causes of action and judgments of any kind or character (including
those resulting from Seller’s sole, joint, COMPARATIVE or concurrent negligence or strict liability) to the extent
arising out of Buyer’s Environmental Review. Buyer hereby covenants and agrees that it will have at least $2,000,000 of general
liability insurance to cover its indemnification hereunder prior to the commencement of the Environmental Review. 

 

    	(11)

    	 

    
 

		(b)	Unless otherwise required by applicable law, Buyer shall (and shall cause Buyer’s Environmental
Consultant to) treat confidentially any matters revealed by Buyer’s Environmental Review and any reports or data generated
from such review (the “Environmental Information”), and Buyer shall not (and shall cause Buyer’s Environmental
Consultant to not) disclose any Environmental Information to any Governmental Authority or other Third Party without the prior
written consent of Seller unless otherwise required by law. Unless otherwise required by law, prior to the Closing, Buyer may use
the Environmental Information only in connection with the transactions contemplated by this Agreement. If Buyer, Buyer’s
Environmental Consultant, or any Third Party to whom Buyer has provided any Environmental Information become legally compelled
to disclose any of the Environmental Information, Buyer shall, as soon as reasonably practicable, provide Seller with good faith
notice prior to any such disclosure so as to allow Seller to attempt to file any protective order, or seek any other remedy, as
it deems appropriate under the circumstances. If this Agreement is terminated prior to the Closing, Buyer shall deliver the Environmental
Information to Seller, which Environmental Information shall become the sole property of Seller. Buyer shall provide two (2) copies
of the Environmental Information to Seller without charge.

 

		(c)	Buyer acknowledges that the Assets have been used for exploration, development, and production
of oil and gas and that there may be petroleum, produced water, wastes, or other substances or materials located in, on or under
or associated with the Assets. Equipment and sites included in the Assets may contain asbestos, hazardous substances, or naturally
occurring radioactive material (“NORM”). NORM may affix or attach itself to the inside of wells, materials,
and equipment as scale, or in other forms. The wells, materials, and equipment located on the Assets may contain 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 without limitation, water, soils or sediment. Special procedures may be required for the
assessment, remediation, removal, transportation, or disposal of environmental media, wastes, asbestos, hazardous substances and
NORM from the Assets.

 

Section
4.02        Environmental
Definitions.

 

		(a)	Environmental Defects. For purposes of this Agreement, the term “Environmental
Defect” shall mean, with respect to any given Asset, any environmental condition that (i) constitutes, pursuant to Environmental
Laws (as hereinafter defined) in effect as of the date of this Agreement in the jurisdiction in which such Asset is located, violation
of such Environmental Laws or environmental permits, (ii) would reasonably be expected to constitute a violation of such Environmental
Laws or environmental permits if investigated by a Governmental Authority (as hereinafter defined), regardless of whether Seller
has been so notified or investigated by a Governmental Authority or (iii) would require remediation under such Environmental Laws
(other than any plugging and abandonment and associated surface restoration obligations under any applicable Environmental Laws,
except for any of the foregoing covered by clauses (i) or (ii)).

 

    	(12)

    	 

    
 

		(b)	Governmental Authority. For purposes of this Agreement, the term “Governmental
Authority” shall mean, as to any given Asset, the United States and the state, county, parish, city and political subdivisions
in which such Asset is located and that exercises jurisdiction over such Asset, and any agency, department, board or other instrumentality
thereof that exercises jurisdiction over such Asset.

 

		(c)	Environmental Laws. For purposes of this Agreement, the term “Environmental Laws”
shall mean all laws, statutes, ordinances, court decisions, rules and regulations of any Governmental Authority pertaining to health
or the environment as may be interpreted by applicable court decisions or administrative orders, including, without limitation,
the Clean Air Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act, as amended (“CERCLA”),
the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act, as amended, the Resources Conservation
and Recovery Act, as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund
Amendment and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, and comparable state
and local laws.

 

		(d)	Environmental Defect Value. For purposes of this Agreement, the term “Environmental
Defect Value” shall mean, with respect to any Environmental Defect, the value, as of the Closing Date, of the estimated
costs and expenses to correct such Environmental Defect in the most cost-effective manner reasonably available, consistent with
Environmental Laws, taking into account that non-permanent remedies (such as mechanisms to contain or stabilize hazardous materials,
including monitoring site conditions, natural attenuation, risk-based corrective action, institutional controls or other appropriate
restrictions on the use of property, caps, dikes, encapsulation, leachate collection systems, etc.) may be the most cost-effective
manner reasonably available.

 

Section
4.03        Notice of
Environmental Defects.

 

		(a)	If Buyer discovers any Environmental Defect affecting the Assets, Buyer shall notify Seller prior
to the expiration of the Examination Period of such alleged Environmental Defect. To be effective, such notice must: (i) be
in writing; (ii) be received by Seller prior to the expiration of the Examination Period and (iii) describe the Environmental Defect
in reasonable detail, to the extent reasonably known by Buyer (including the estimated value of such Environmental Defect as determined
by Buyer).

 

    	(13)

    	 

    
 

		(b)	Except for the matters described in Section 14.01(f) and Section 14.04(a) as it relates
solely to Section 5.13, any matters that may otherwise constitute Environmental Defects, but of which Seller has not been
notified by Buyer in accordance with the foregoing, together with any environmental matter that does not constitute an Environmental
Defect, shall be deemed to have been waived by Buyer for all purposes and constitute an Assumed Obligation (as defined in Section
14.02). Upon the receipt of such effective notice from Buyer, Seller, at Seller’s option, shall (i) cure such Environmental
Defect at any time prior to the Closing or (ii) exclude the affected Asset from the sale and reduce the Purchase Price by the Allocated
Value of such affected Asset as set forth on Exhibit C, or (iii) may, with Buyer’s agreement, take any remedial
action with respect to the alleged Environmental Defect and indemnify Buyer pursuant to Section 14.04 against all costs
which Buyer may incur in connection with same.

 

Section
4.04        Remedies
for Environmental Defects.

 

		(a)	If any Environmental Defect described in a notice delivered in accordance with Section 4.03
is not cured on or before the Closing, and Seller has not elected to exclude the affected Assets from this sale or Buyer and Seller
have not agreed for Seller to indemnify Buyer for the Environmental Defect, then the Purchase Price shall be reduced by the Environmental
Defect Value of such Environmental Defect as agreed by the Parties.

 

		(b)	If Buyer and Seller have not agreed as to the validity of any asserted Environmental Defect, or
if the Parties have not agreed on the Environmental Defect Value therefor, and if Seller shall not have elected to exclude the
affected Assets from this sale pursuant to Section 4.03(b)(ii), then either Party shall have the right to elect to have
the validity of the asserted Environmental Defect, and/or the Environmental Defect Value for such Environmental Defect, determined
by an Independent Expert pursuant to Section 16.03. If the validity of any such asserted Environmental Defect or the amount
of any such Environmental Defect Value is not determined by the Closing, the Asset affected by such disputed Environmental Defect
shall be excluded from the Closing and the Purchase Price paid at the Closing shall be reduced by the Allocated Value of that Asset.
Upon resolution of such dispute, the Allocated Value of that Asset less the Environmental Defect Value, if any, found to be attributable
to such Environmental Defect shall, subject to this Section 4.04, be paid by Buyer to Seller and the Asset conveyed to Buyer,
if that is part of the mutually agreed settlement. Notwithstanding the foregoing, either Buyer or Seller shall have the right to
exclude an Asset from the sale if the Environmental Defect Value exceeds the Allocated Value of the Asset(s) affected thereby.

 

    	(14)

    	 

    
 

		(c)	Notwithstanding anything to the contrary in this Agreement, (i) if the Environmental Defect Value
for a given individual Environmental Defect does not exceed $50,000, then no adjustment to the Purchase Price shall be made
for such Environmental Defect; (ii) if the aggregate adjustment to the Purchase Price determined in accordance with this Agreement
for Title Defects and Environmental Defects does not exceed three percent (3%) of the Purchase Price prior to any adjustments thereto,
then no adjustment of the Purchase Price shall be made therefore and (iii) if the aggregate adjustment to the Purchase Price determined
in accordance with this Agreement for Title Defects and Environmental Defects does exceed three percent (3%) of the Purchase Price
prior to any adjustments thereto, then the Purchase Price shall only be adjusted by the amount of such excess. 

 

Article
V

Representations and Warranties of Seller

 

Seller represents and
warrants and covenants to and with Buyer that:

 

Section
5.01        Seller’s
Existence. Seller is a limited partnership duly organized, in good standing and validly existing under the laws of the State
of Delaware and is qualified to conduct business in the State of Texas. Seller has full legal power, right and authority to carry
on its business as such is now being conducted and as contemplated to be conducted. Seller’s headquarters and principal offices
are all located in the State of Texas.

 

Section
5.02        Legal Power.
Seller has the legal power and right to enter into and perform this Agreement and the transactions contemplated hereby. The consummation
of the transactions contemplated by this Agreement will not violate, nor be in conflict with:

 

		(a)	any provision of Seller’s limited partnership agreement or other governing documents;

 

		(b)	except for any preferential purchase rights and consents to assignment which constitute Permitted
Encumbrances, any agreement or instrument to which Seller is a party or by which Seller or the Assets are bound that will materially
adversely affect the Assets or the use, operation, or value thereof following the Closing; or

 

		(c)	any judgment, order, ruling or decree applicable to Seller as a party in interest or any law, rule
or regulation applicable to Seller that will materially adversely affect the Assets or the use, operation, or value thereof following
the Closing.

 

Section
5.03        Execution.
The execution, delivery and performance of this Agreement and the transactions contemplated hereby are duly and validly authorized
by all requisite partnership and/or limited liability company action on the part of Seller. This Agreement constitutes the legal,
valid and binding obligation of Seller enforceable in accordance with its terms, except as such enforceability may be limited by
the effect of bankruptcy, insolvency, reorganization, moratorium, and similar laws from time to time in effect relating to the
rights and remedies of creditors, as well as to general principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).

 

    	(15)

    	 

    
 

Section
5.04        Brokers.
No broker or finder is entitled to any brokerage or finder’s fee, or to any commission, based in any way on agreements, arrangements
or understandings made by or on behalf of Seller or any affiliate of Seller for which Buyer has or will have any liabilities or
obligations (contingent or otherwise), and Seller shall indemnify Buyer with respect thereto.

 

Section
5.05        Bankruptcy.
There are no bankruptcy, reorganization or arrangement proceedings pending, being contemplated by or to the knowledge of Seller
threatened against Seller or any of its affiliates.

 

Section
5.06        Suits.
Except as shown on Schedule 5.06, there is no suit, action, claim, investigation or inquiry by any person or entity
or by any administrative agency or Governmental Authority and no legal, administrative or arbitration proceeding pending or, to
Seller’s knowledge, threatened against Seller or any of its affiliates with respect to the Assets or against any of the Assets.

 

Section
5.07        Royalties.
All rentals, royalties and other payments due under the Subject Interests described in Exhibit A have been paid, except
those amounts in suspense which are listed on Schedule 5.07.

 

Section
5.08        Taxes.

 

		(a)	Each material Tax Return required to be filed by Seller with respect to the Assets has been timely
and properly filed under applicable laws and all material Taxes due and owed by Seller relating to the Assets have been timely
and properly paid.

 

		(b)	Except as set forth on Schedule 5.08(b), none of the Assets are subject to or owned by any
tax partnership (other than Seller) requiring a partnership income Tax Return to be filed under Subchapter K of Chapter 1 of Subtitle
A of the Internal Revenue Code.

 

		(c)	Except as set forth on Schedule 5.08(c), the Assets are not subject to any lien for Taxes,
other than for current period Taxes not yet due and payable.

 

		(d)	Neither Seller nor any of its affiliates has received written notice of any pending claim with
respect to the Assets from any taxing authority for assessment of Taxes, and there are no ongoing audits, suits, proceedings, assessments,
reassessments, deficiency claims or other claims relating to any Taxes with respect to the Assets by any applicable taxing authority.

 

    	(16)

    	 

    
 

		(e)	Neither Seller nor any of its affiliates have waived any statute of limitations in respect of Asset
Taxes, nor has Seller or any of its affiliates agreed to any extension of time with respect to any Asset Tax assessment or deficiency.

 

Section
5.09        Contracts.
Schedule 5.09 sets forth a list of all material Contracts that exist as of the date of this Agreement (the “Material
Contracts”). As of the Closing Date, except as set forth on Schedule 5.09, Seller and its affiliates are not in
material breach of, or material default under, and to the knowledge of Seller, no other Person is in material breach of, or material
default under, any Material Contract, and there does not exist under any provision thereof, to the knowledge of Seller, any event
that, with the giving of notice or the lapse of time or both, would constitute such a material breach or material default by any
Person. For the purposes of this Agreement, “Person” shall mean any individual, firm, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated organization, Governmental Authority or any other
entity.

 

Section
5.10        No Conflict
or Violation. Neither the execution and delivery of this Agreement nor the consummation of the transactions and performance
of the terms and conditions contemplated hereby by Seller will (i) conflict with or result in any breach of any provision
of the partnership agreement or other governing documents of Seller; (ii) be rendered void or ineffective by or under the
terms, conditions or provisions of any agreement, instrument or obligation to which Seller is a party or is subject; (iii) result
in a default under the terms, conditions or provisions of any Asset (or of any agreement, instrument or obligation relating to
or burdening any Asset); or (iv) violate or be rendered void or ineffective under any law, other than, in the case of the
matters described in clauses (ii), (iii) and (iv) of this Section 5.10, the matters referenced in Section 5.11 and
such conflicts, breaches, violations, defaults or other events as will not have a material adverse effect on the value of the Assets,
taken as a whole.

 

Section
5.11        Consents;
Preferential Rights. Except for (i) consents or approvals of, or filings with, any applicable Governmental Authorities
in connection with assignments of the Assets which are not customarily obtained prior to the assignment of the Assets, (ii) Preference
Rights and (iii) the consents, filings or notices expressly described and set forth on Schedule 5.11, no material consent,
approval, authorization or permit of, or filing with or notification to, any Third Party is required for or in connection with
the execution and delivery of this Agreement by Seller or for or in connection with the consummation of the transactions and performance
of the terms and conditions contemplated hereby by Seller. All agreements containing a Preference Right are set forth in Schedule 3.07.

 

Section
5.12        Compliance
with Laws. Except with respect to (i) matters set forth on Schedule 5.12 and (ii) compliance with laws concerning
taxes (as to which certain representations and warranties are made pursuant to Section 5.08), Seller has no knowledge of
any material violation by Seller or any of its affiliates of any law applicable to the Assets.

 

Section
5.13        Wells.
Except as set forth on Schedule 5.13, there is no Well included in the Assets that:

 

    	(17)

    	 

    
 

(i)Seller
or any of its affiliates is obligated on the date of this Agreement by law or agreement to cause to be immediately plugged and
abandoned; and

 

(ii)to
the knowledge of Seller, has been plugged and abandoned other than in compliance in all material respects with law.

 

Section
5.14        Proposed
Operations or Expenditures. Except as set forth on Schedule 5.14, as of the date of this Agreement, there are no outstanding
authorities for expenditure or other commitments to conduct any operations or expend any amount of money on or with respect to
the Assets which are binding on Seller or any of its affiliates or the Assets and will be binding on Buyer after the Closing and
which Seller reasonably anticipates will require the expenditure of money in excess of $100,000.00 per item (net to Seller’s
interest).

 

Section
5.15        Status of
Seller. Seller is not an “investment company” or a company “controlled” by an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.

 

Section
5.16        Suspense
Funds. Schedule 5.07 sets forth (a) all funds held in suspense by Seller or any of its affiliates as of the date
hereof that are attributable to the Assets, (b) a description of the source of such funds and the reason they are being held in
suspense and (c) if known, the name or names of the Persons claiming such funds or to whom such funds are owed.

 

Section
5.17        Imbalances.
Except as set forth on Schedule 12.01, there are no well or gas imbalances associated with the Assets as of the Effective
Time.

 

Section
5.18        Seller’s
Knowledge. For purposes of this Agreement, the term “Seller’s knowledge” or words of similar import
shall mean and refer solely to the actual knowledge of the following representatives of Seller without duty of investigation or
inquiry on the part of any of them: Ken Beattie, Craig Clark, Curt Kamradt, Tim Dunn and Bobby Floyd.

 

Section
5.19        Affiliate
Transactions. Except for the operating agreements described on Schedule 5.09, none of the Material Contracts are between
Seller, on the one hand, and any affiliate of Seller, on the other hand, other than any such Material Contracts that will be terminated
at or prior to Closing.

 

Section
5.20        Governmental
Licenses. To Seller’s knowledge and except as set forth on Schedule 5.20, each consent, license, permit, grant
or other authorization from any Governmental Authority (a) pursuant to which Seller (or any of its affiliates) currently operates
or holds any interest in any of the Assets or (b) which is required for the operation of the Assets as currently conducted or currently
contemplated to be conducted or the holding of any interest (collectively, the “Seller Permits”) has been issued
or granted to the Seller (or any of its affiliates). The Seller Permits are in full force and effect and constitute all Seller
Permits required to permit Seller (or any of its affiliates) to operate the Assets for which Seller (or any of its affiliates)
is the operator or to conduct its business in respect of, or hold any interest in, the Assets.

 

    	(18)

    	 

    
 

Article
VI

Representations and Warranties of Buyer

 

Buyer represents and
warrants and covenants to and with Seller that:

 

Section
6.01        Buyer’s
Existence. Buyer is a limited partnership, duly organized and validly existing and in good standing under the laws of the State
of Delaware and is qualified to conduct business in the State of Texas. Buyer has full legal power, right and authority to carry
on its business as such is now being conducted and as contemplated to be conducted.

 

Section
6.02        Legal Power.
Buyer has the legal power and right to enter into and perform this Agreement and the transactions contemplated hereby. The consummation
of the transactions contemplated by this Agreement will not violate, nor be in conflict with:

 

		(a)	any provision of Buyer’s limited partnership agreement or other governing documents;

 

		(b)	any material agreement or instrument to which Buyer is a party or by which Buyer is bound; or

 

		(c)	any judgment, order, ruling or decree applicable to Buyer as a party in interest or any law, rule
or regulation applicable to Buyer.

 

Section
6.03        Execution.
The execution, delivery and performance of this Agreement and the transactions contemplated hereby are duly and validly authorized
by all requisite limited liability company action on the part of Buyer. This Agreement constitutes the legal, valid and binding
obligation of Buyer enforceable in accordance with its terms, except as such enforceability may be limited by the effect of bankruptcy,
insolvency, reorganization, moratorium, and similar laws from time to time in effect relating to the rights and remedies of creditors,
as well as to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or
at law).

 

Section
6.04        Brokers.
No broker or finder is entitled to any brokerage or finder’s fee, or to any commission, based in any way on agreements, arrangements
or understandings made by or on behalf of Buyer or any affiliate of Buyer for which Seller has or will have any liabilities or
obligations (contingent or otherwise), and Buyer shall indemnify Seller with respect thereto.

 

Section
6.05        Bankruptcy.
There are no bankruptcy, reorganization or arrangement proceedings pending, being contemplated by or to the knowledge of Buyer
threatened against Buyer or any affiliate of Buyer.

 

Section
6.06        Suits.
There is no suit, action, claim, investigation or inquiry by any person or entity or by any administrative agency or Governmental
Authority and no legal, administrative or arbitration proceeding pending or, to Buyer’s knowledge, threatened against Buyer
or any affiliate of Buyer that has materially affected or will materially affect Buyer’s ability to consummate the transactions
contemplated herein.

 

    	(19)

    	 

    
 

Section
6.07        Qualifications.
Buyer is qualified with all applicable Governmental Authorities to own and operate the Assets and has all necessary bonds to own
and operate the Assets.

 

Section
6.08        Investment.
Prior to entering into this Agreement, Buyer has relied solely on this Agreement and was advised by its own legal, tax and other
professional counsel concerning this Agreement, the Assets and the value thereof. Buyer is acquiring the Assets for its own account
and not for distribution or resale in any manner that would violate any state or federal securities law, rule, regulation or order.
Buyer understands and acknowledges that if any of the Assets were held to be securities, they would be restricted securities and
could not be transferred without registration under applicable state and federal securities laws or the availability of an exemption
from such registration.

 

Section
6.09        Funds.
Buyer will have arranged to have available by the Closing Date sufficient funds to enable Buyer to pay in full the Purchase Price
as herein provided and otherwise to perform its obligations under this Agreement.

 

Article
VII

Seller’s Conditions to Close

 

The obligations of
Seller to consummate the transaction provided for herein are subject, at the option of Seller, to the fulfillment on or prior to
the Closing Date of each of the following conditions (except those which by their nature are, or will be, satisfied at the Closing):

 

Section
7.01        Representations.
The representations and warranties of Buyer herein contained shall be true and correct in all material respects on the Closing
Date as though made on and as of such date.

 

Section
7.02        Performance.
Buyer shall have performed all material obligations, covenants and agreements contained in this Agreement to be performed or complied
with by it at or prior to the Closing.

 

Section
7.03        Pending
Matters. No suit, action or other proceeding shall be pending or threatened that seeks to restrain, enjoin or otherwise prohibit
the consummation of the transactions contemplated by this Agreement.

 

Section
7.04        Purchase
Price. Buyer shall have delivered to Seller the Purchase Price, as the same may be adjusted hereunder, in accordance with the
provisions of Article II.

 

Section
7.05        Title and
Environmental. The aggregate amount to be deducted from the Purchase Price at the Closing as determined by the Parties on account
of Title Defects, Environmental Defects and Casualty Losses, and the Allocated Value of the Assets (or portion thereof) to be excluded
on account of preferential purchase rights and consents shall not exceed twenty percent (20%) of the Purchase Price.

 

Section
7.06        Execution
and Delivery of the Closing Documents. Buyer shall have executed, acknowledged and delivered, as appropriate, to Seller all
closing documents described in Section 10.05.

 

    	(20)

    	 

    
 

Article
VIII

Buyer’s Conditions to Close

 

The obligations of
Buyer to consummate the transaction provided for herein are subject, at the option of Buyer, to the fulfillment on or prior to
the Closing Date of each of the following conditions (except those which by their nature are, or will be, satisfied at the Closing):

 

Section
8.01        Representations.
The representations and warranties of Seller herein contained shall be true and correct in all material respects on the Closing
Date as though made on and as of such date.

 

Section
8.02        Performance.
Seller shall have performed all material obligations, covenants and agreements contained in this Agreement to be performed or complied
with by it at or prior to the Closing.

 

Section
8.03        Pending
Matters. No suit, action or other proceeding shall be pending or threatened that seeks to restrain, enjoin, or otherwise prohibit
the consummation of the transactions contemplated by this Agreement.

 

Section
8.04        Execution
and Delivery of the Closing Documents. Seller (or its affiliates) shall have executed, acknowledged and delivered, as appropriate,
to Buyer all closing documents described in Section 10.04.

 

Section
8.05        Title and
Environmental. The aggregate amount to be deducted from the Purchase Price at the Closing as determined by the Parties on account
of Title Defects, Environmental Defects and Casualty Losses, and the Allocated Value of the Assets (or portion thereof) to be excluded
on account of preferential purchase rights and consents shall not exceed 20 percent (20%) of the Purchase Price.

 

Section
8.06        Letter Regarding
Financial Statements. Seller shall have delivered to Buyer the letter required by Section 17.16 regarding impracticability
of preparation of carved out financial statements.

 

Section
8.07        Transition
Services Agreement. Seller (or its affiliates) shall have executed and delivered to Buyer the transition services agreement
in substantially the form attached hereto as Exhibit E (the “Transition Services Agreement”).

 

Section
8.08        Concurrent
Rights Agreement. Seller (or its affiliates) shall have executed and delivered to Buyer the concurrent rights agreement in
substantially the form attached hereto as Exhibit F (the “Concurrent Rights Agreement”).

 

Article
IX

Tax Matters

 

Section
9.01        Transfer
Taxes. Buyer and Seller expect that this transaction will not be subject to any sales, use, transfer or similar Taxes (“Transfer
Taxes”) because the transaction is a transfer of realty and the transfer of tangible personal property, if any, is incidental
to the transfer of realty.  Accordingly, no Transfer Taxes will be collected at Closing from Buyer in connection with this
transaction.  Seller and Buyer agree to cooperate with each other in attempting to demonstrate that the requirements for any
exemption from such Taxes have been met. To the extent any Transfer Taxes or recording fees are nevertheless incurred by or imposed
with respect to the transfer of the Assets to Buyer pursuant to this Agreement, such Transfer Taxes or recording fees shall be
solely the responsibility of Buyer. Buyer and Seller shall reasonably cooperate in good faith to minimize, to the extent permissible
under applicable law, the amount of any such Transfer Taxes and recording fees. For the avoidance of doubt, Seller shall retain
all liability for and shall pay all income Tax, franchise Tax and similar Taxes imposed on any income or gain realized by Seller
pursuant to the transactions contemplated in this Agreement.

 

    	(21)

    	 

    
 

Section
9.02        Asset Taxes.
Seller shall retain responsibility for and bear all Asset Taxes for (A) any period ending prior to the Effective Time and (B) the
portion of any Straddle Period that ends immediately prior to the Effective Time. All Asset Taxes with respect to the ownership
or operation of the Assets arising on or after the Effective Time shall be allocated to and borne by Buyer. For purposes of allocation
between Seller and Buyer of Asset Taxes that are payable with respect to Straddle Periods, the portion of any such Taxes that are
attributable to the portion of the Straddle Period that ends immediately prior to the Effective Time shall (i) in the case
of Asset Taxes that are based upon or related to income or receipts or imposed on a transactional basis such as severance or production
Taxes, be deemed equal to the amount that would be payable if the tax year or period ended immediately prior to the Effective Time;
and (ii) in the case of other Asset Taxes, be deemed equal to the product of (1) the amount of such Asset Taxes multiplied
by (2) the quotient of the number of days in the portion of such Straddle Period ending on the day immediately prior to the day
on which the Effective Time occurs, divided by the total number of days in such Straddle Period. To the extent the actual amount
of Asset Taxes is not determinable at Closing or at the time the Final Statement is prepared, as applicable, Buyer and Seller shall
utilize the most recent information available in estimating the amount of Asset Taxes for purposes of Sections 10.02(a)(ii),
10.02(b)(iii), and 12.02. If, at the time the actual amount of an Asset Tax is determined, the amount of such Asset
Tax paid by Seller, plus, if applicable, the amount of any adjustment to the Purchase Price with respect to such Asset Tax made
pursuant to Section 10.02(b)(iii) and Section 12.02 minus, if applicable, the amount of any adjustment to
the Purchase Price with respect to such Asset Tax made pursuant to Section 10.02(a)(ii) and Section 12.02 is (x)
less than Seller’s share of the actual amount of such Asset Tax determined pursuant to the foregoing provisions of this Section
9.02, then Seller shall promptly pay Buyer an amount equal to such difference or (y) more than Seller’s share of the
actual amount of such Asset Tax, determined pursuant to the foregoing provisions of this Section 9.02, then Buyer shall
promptly pay Seller an amount equal to such difference.

 

Section
9.03        Purchase
Price Allocation. Seller and Buyer shall cooperate in the preparation of Internal Revenue Service Form 8594 pursuant to Section
1060 of the Internal Revenue Code of 1986, as amended and the Treasury Regulations promulgated thereunder, to report the allocation
of the Purchase Price, the Assumed Obligations and any other items constituting consideration for applicable income Tax purposes
(to the extent known at such time) among the Assets and in a manner that is, to the maximum extent possible, consistent with the
allocation set forth in Exhibit C (the “Purchase Price Allocation”). Buyer and Seller agree to amend
the Purchase Price Allocation to reflect adjustments to the Purchase Price and to report the transactions contemplated by this
Agreement consistently with the Purchase Price Allocation, as adjusted by the Parties, on any Tax Return, and will not assert,
and will cause their affiliates not to assert, in connection with any Tax audit or other proceeding with respect to Taxes, any
asset values or other items inconsistent with the amounts set forth in the Purchase Price Allocation except with the agreement
of the other Parties or as required by applicable law.

 

    	(22)

    	 

    
 

Section
9.04        Tax Cooperation.
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 Assets. 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. Seller and the Buyer agree to retain all
books and records with respect to tax matters pertinent to the Assets relating to any tax period beginning before the Effective
Time until the expiration of the statute of limitations of the respective tax periods and to abide by all record retention agreements
entered into with any taxing authority.

 

Section
9.05        754 Elections.
Seller shall, prior to the Closing, (i) cause each Asset that is classified as (or treated as being held by) a partnership (other
than Seller) for federal income tax purposes to either (x) have in effect an election under Section 754 of the Internal Revenue
Code for any taxable year that includes the Closing Date or (y) obtain all necessary consents therefor; and (ii) provide evidence
satisfactory to Buyer thereof.

 

Section
9.06        Tax Definitions.

 

		(a)	“Asset Taxes” means all ad valorem, property, excise, severance, production
or similar Taxes (including any interest, fine, penalty or addition to Tax imposed by a taxing authority in connection with such
Taxes) based upon operation or ownership of the Assets or the production of Hydrocarbons therefrom but excluding, for the avoidance
of doubt, (a) income, capital gains, franchise and similar Taxes and (b) Transfer Taxes.

 

		(b)	“Straddle Period” shall mean any tax period beginning before and ending after the Effective
Time.

 

		(c)	“Tax” or “Taxes” means (i) all taxes, assessments, fees, and other charges
of any kind whatsoever imposed by any taxing authority, including any federal, state, local and/or foreign income tax, surtax,
remittance tax, presumptive tax, net worth tax, special contribution tax, production tax, value added tax, withholding tax, gross
receipts tax, windfall profits tax, profits tax, ad valorem tax, personal property tax, real property tax, sales tax, goods and
services tax, service tax, transfer tax, use tax, excise tax, premium tax, stamp tax, motor vehicle tax, entertainment tax, insurance
tax, capital stock tax, franchise tax, occupation tax, payroll tax, employment tax, unemployment tax, disability tax, alternative
or add-on minimum tax and estimated tax, (ii) any interest, fine, penalty or additions to tax imposed by a taxing authority in
connection with any item described in clause (i), and (iii) any liability in respect of any item described in clauses (i) or (ii)
above, that arises by reason of a contract, assumption, transferee or successor liability, operation of law (including by reason
of participation in a consolidated, combined or unitary Tax Return) or otherwise.

 

    	(23)

    	 

    
 

		(d)	“Tax Return” shall mean any report, return, information statement, schedule, attachment,
payee statement or other information required to be provided to any taxing authority with respect to Taxes or any amendment thereof,
including any return of an affiliated, combined or unitary group, and any and all work papers relating to any Tax Return.

 

Article
X

The Closing

 

Section
10.01    Time and Place of the Closing.
If the conditions referred to in Articles VII and VIII of this Agreement have been satisfied or waived in writing,
the transactions contemplated by this Agreement (the “Closing”) shall take place on December 28, 2012 (the “Closing
Date”) at the offices of Seller at 303 Veterans Air Park Lane, Suite 5100, Midland, Texas 79705, or at such other time
and place as may be designated in writing by Buyer and Seller.

 

Section
10.02    Adjustments to Purchase Price at
the Closing.

 

		(a)	The Purchase Price shall be increased by the following amounts:

 

		(i)	The proceeds of production of Hydrocarbons attributable to the Assets before the Effective Time
and received by Buyer, plus to the extent proceeds thereof are or will be received by Buyer, an amount equal to the value of all
Hydrocarbons attributable to the Assets that, at the Effective Time, are owned by Seller and are in storage above the pipeline
connection based upon the price for which such production is sold (net of all royalties to be paid by or on behalf of Buyer with
respect thereto);

 

		(ii)	Asset Taxes prorated to Buyer pursuant to Section 9.02, but paid by Seller before Closing;

 

		(iii)	The amount of all Property Expenses incurred in the ordinary course of business attributable to
the Assets from and after the Effective Time and paid or payable by Seller, subject to the terms hereof;

 

		(iv)	all upward Purchase Price adjustments for Title Benefits determined in accordance with Article
III; and

 

		(v)	any other amount subject to an upward Purchase Price adjustment provided for in this Agreement
or agreed upon by Buyer and Seller.

 

    	(24)

    	 

    
 

		(b)	The Purchase Price shall be decreased by the following amounts:

 

		(i)	The proceeds of production of Hydrocarbons attributable to the Assets occurring from and after
the Effective Time and received by Seller (net of all royalties to be paid by or on behalf of Seller with respect thereto);

 

		(ii)	The amount of all Property Expenses incurred in the ordinary course of business attributable to
the Assets prior to the Effective Time and paid or payable by Buyer;

 

		(iii)	Asset Taxes prorated to Seller pursuant to Section 9.02 that are not paid by Seller prior
to Closing (which prorated Asset Taxes so deducted from the Purchase Price shall be the sole obligation of Buyer following Closing);

 

		(iv)	the Allocated Value of any Subject Interest excluded from sale due to failure to obtain consent
pursuant to Section 3.08;

 

		(v)	all downward Purchase Price Adjustments for Title Defects and Environmental Defects determined
in accordance with Article III and Article IV;

 

		(vi)	any other amount subject to a downward Purchase Price Adjustment provided for in this Agreement
or agreed upon by Buyer and Seller; and

 

		(vii)	an amount equal to all proceeds from sales of Hydrocarbons relating to the Assets and payable to
owners of working interests, royalties, overriding royalties and other similar interests (in each case) that are held in suspense
or escrow by Seller as of the Closing Date.

 

		(c)	For purposes of Sections 10.02(a) and (b), “Property Expenses”
shall mean all costs and expenses (other than Taxes) that are incurred in the ordinary course of business in the ownership or operation
of the Assets, including, without limitation, all drilling costs, all capital expenditures and all regular overhead charges under
applicable Third Party operating agreements.

 

		(d)	The adjustments described in Sections 10.02(a) and (b) are hereinafter referred to
as the “Purchase Price Adjustments.”

 

Section
10.03    Closing Statement. Not later
than three (3) calendar days prior to the Closing Date, Seller shall prepare a statement of the estimated Purchase Price Adjustments
taking into account the foregoing principles (the “Statement”). Within two (2) calendar days of receipt
of the Statement, Buyer will deliver to Seller a written report containing all changes with the explanation therefor that Buyer
proposes to be made to the Statement. Such Statement, as agreed upon by the Parties, will be used to determine the Purchase Price
payable by Buyer to Seller at the Closing pursuant to Section 10.05(a); provided that if the Parties do not agree
upon a Purchase Price Adjustment set forth in the Statement, then the amount of such Purchase Price Adjustment used to determine
the Purchase Price payable by Buyer to Seller at the Closing pursuant to Section 10.05(a) shall be the amount set forth
in the draft Statement delivered to Buyer, subject to final adjustment and resolution pursuant to Section 12.02. Prior to
or at the Closing, Buyer and Seller will execute and deliver to each other the final Statement as prepared in accordance with the
terms hereof.

 

    	(25)

    	 

    
 

Section
10.04    Actions of Seller at the Closing.

 

At the Closing, Seller
shall:

 

		(a)	execute, acknowledge and deliver to Buyer original copies of the assignment substantially in the
form as set forth in Exhibit D of this Agreement (the “Assignment”) in sufficient counterparts for
recordation in each of the counties in which the Leases and Wells are located and such other instruments (in form and substance
mutually agreed upon by Buyer and Seller) as may be reasonably necessary to convey the Assets to Buyer;

 

		(b)	execute, acknowledge and deliver to Buyer letters in lieu of transfer or division orders directing
all purchasers of production from the Subject Interests to make payment of proceeds attributable to such production to Buyer from
and after the Effective Time as reasonably requested by Buyer prior to the Closing Date;

 

		(c)	deliver to Buyer possession of the Assets;

 

		(d)	execute and deliver to Buyer a certificate of non-foreign status of Seller meeting the requirements
of Treasury Regulation Section 1.1445-2(b)(2);

 

		(e)	deliver to Buyer appropriate change of operator forms on those Assets operated by Seller (or any
of its affiliates);

 

		(f)	execute and deliver the Statement;

 

		(g)	execute and deliver the Transition Services Agreement;

 

		(h)	execute and deliver the Concurrent Rights Agreement;

 

		(i)	execute, acknowledge and deliver any other agreements provided for herein or necessary or desirable
to effectuate the transactions contemplated hereby;

 

		(j)	deliver to Buyer appropriate releases in recordable form of any financing liens upon the Assets,
duly executed by the lender(s) of record in form and substance reasonably satisfactory to Buyer; and

 

    	(26)

    	 

    
 

		(k)	execute and deliver the Termination of Participation Agreement.

 

Section
10.05    Actions of Buyer at the Closing.

 

At the Closing, Buyer
shall:

 

		(a)	deliver to Seller the Purchase Price (as adjusted pursuant to the provisions hereof) by wire transfer
to an account designated in writing by Seller;

 

		(b)	execute and deliver the Statement;

 

		(c)	take possession of the Assets;

 

		(d)	execute, acknowledge and deliver the Assignment and any other agreements provided for herein or
necessary or desirable to effectuate the transactions contemplated hereby;

 

		(e)	execute and deliver the Transition Services Agreement;

 

		(f)	execute and deliver the Concurrent Rights Agreement; and

 

		(g)	execute and deliver the Termination of Participation Agreement.

 

Article
XI

Termination

 

Section
11.01    Right of Termination. This
Agreement may be terminated at any time at or prior to the Closing:

 

		(a)	by mutual written consent of the Parties;

 

		(b)	by Seller on the Closing Date if the conditions set forth in Article VII have not been satisfied
in all material respects by Buyer or waived by Seller in writing by the Closing Date;

 

		(c)	by Buyer on the Closing Date if the conditions set forth in Article VIII have not been satisfied
in all material respects by Seller or waived by Buyer in writing by the Closing Date;

 

		(d)	by either Party, if the Closing shall not have occurred on or before December 31, 2012;

 

		(e)	by either Party if any Governmental Authority shall have issued an order, judgment or decree or
taken any other action challenging, delaying, restraining, enjoining, prohibiting or invalidating the consummation of any of the
transactions contemplated herein;

 

		(f)	by either Party if (i) the aggregate amount of the Purchase Price Adjustments agreed upon between
the Parties or otherwise finally determined pursuant to this Agreement with respect to all uncured Title Defects (net of the aggregate
amount of the Purchase Price Adjustments for all Title Benefits agreed by the Parties) plus (ii) the aggregate amount of the Environmental
Defect Values agreed upon between the Parties or otherwise finally determined pursuant to this Agreement with respect to all Environmental
Defects, exceeds twenty percent (20%) of the Purchase Price;

 

    	(27)

    	 

    
 

		(g)	by Buyer in accordance with Section 13.05(c); or

 

		(h)	as otherwise provided herein;

 

provided, however, that no
Party shall have the right to terminate this Agreement pursuant to clause (b), (c), or (d) above if such Party
is at such time in material breach of any provision of this Agreement.

 

Section
11.02    Effect of Termination. In the
event that the Closing does not occur as a result of any Party exercising its right to terminate pursuant to Section 11.01
then, except as set forth in Section 11.03, this Agreement (other than the provisions hereof which survive by their
terms) shall be null and void and no Party shall have any further rights, liabilities or obligations under this Agreement.

 

Section
11.03    Termination Remedies. If all
conditions precedent to the obligations of Buyer set forth in Article VII, or of Seller set forth in Article VIII,
(such Party that has satisfied its conditions precedent, the “Performing Party”) have been met and the transactions
contemplated by this Agreement are not consummated on or before the Closing Date because of the failure of Buyer or Seller to perform
any of its material obligations hereunder or the breach of any representation herein by Buyer or Seller (such party that has not
satisfied its conditions precedent, the “Breaching Party”) and the Performing Party has performed all of its
material obligations hereunder and has not breached any representation herein, then in such event, the Performing Party shall have
the option to terminate this Agreement and pursue remedies that might be available to it at law. Additionally, in lieu of terminating
this Agreement, the Performing Party shall have the right of specific performance of this Agreement against the Breaching Party.

 

Section
11.04    Attorneys’ Fees, Etc.
If either Party to this Agreement resorts to legal proceedings to enforce this Agreement, the prevailing Party in such proceedings
shall be entitled to recover all costs incurred by such Party, including reasonable attorneys’ fees, in addition to any other
relief to which such Party may be entitled. Notwithstanding anything to the contrary in this Agreement, in no event shall either
Party be entitled to receive any punitive, indirect or consequential damages unless same are a part of a Third Party claim for
which a Party is seeking indemnification hereunder, REGARDLESS OF WHETHER CAUSED OR CONTRIBUTED TO BY THE SOLE, JOINT, COMPARATIVE
OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF THE OTHER PARTY.

 

    	(28)

    	 

    
 

Article
XII

Post Closing Obligations

 

Section
12.01    Gas Imbalances. Buyer and Seller
agree that the net gas imbalance attributable to the Assets as of the Effective Time is believed to be that which is set forth
on Schedule 12.01 (the “Agreed Imbalance”), notwithstanding that the actual imbalance may be less
or greater. Buyer and Seller shall verify the actual net gas imbalance in the post-closing accounting pursuant to Section 12.02
and any imbalance shall be accounted for between the parties at the price of $2.45 per MMBTU but only as to those volumes
which exceed or are less than the Agreed Imbalance. Such settlement shall be final and neither party thereafter shall make claim
upon the other concerning the gas imbalances of the Assets. BUYER HEREBY ASSUMES ALL RIGHTS AND LIABILITIES RELATING TO GAS
IMBALANCES DISCOVERED AFTER THE FINAL STATEMENT INCLUDING ANY REVENUE ADJUSTMENT CAUSED BY SUCH SUBSEQUENTLY DISCOVERED IMBALANCE
AND AGREES TO DEFFEND AND INDEMNIFY SELLER FROM AND AGAINST ANY CLAIM BY ANYONE ARISING OUT OF SUCH GAS IMBALANCES REGARDLESS OF
SELLER’S NEGLIGENCE OR FAULT (INCLUDING STRICT LIABILITY).

 

Section
12.02    Final Statement.

 

		(a)	On or before 180 days after the Closing Date, Seller shall prepare and deliver to Buyer a post-closing
statement setting forth a detailed calculation of all post-Closing Purchase Price Adjustments and supporting documentation pursuant
to Section 10.02 (the “Final Statement”). The Final Statement shall include any adjustment, estimate
or payment which was not finally determined as of the Closing Date and any amount to be accounted for pursuant to Section 12.01.
To the extent reasonably required by Seller, Buyer shall assist in the preparation of the Final Statement. Seller shall provide
Buyer such data and information as Buyer may reasonably request supporting the amounts reflected on the Final Statement in order
to permit Buyer to perform or cause to be performed an audit. The Final Statement shall become final and binding upon the parties
on the thirtieth (30th) calendar day following receipt thereof by Buyer (the “Final Settlement Date”) unless
Buyer gives written notice of its disagreement (a “Notice of Disagreement”) to Seller prior to such date. Any
Notice of Disagreement shall specify in detail the dollar amount, nature and basis of any disagreement so asserted. If a Notice
of Disagreement is received by Seller in a timely manner, then the Parties shall resolve the Dispute (as defined in Section
16.01) evidenced by the Notice of Disagreement in accordance with Article XVI.

 

		(b)	Within five (5) calendar days after the Final Settlement Date, Seller shall pay to Buyer or Buyer
shall pay to Seller in immediately available funds the net amount due upon (i) the undisputed Final Statement or (ii) resolution
of any Dispute regarding a Notice of Disagreement, the revised Final Statement reflecting such resolutions, which the Parties shall
issue, or cause the Independent Expert or arbitrators to issue, as applicable, following such resolution.

 

    	(29)

    	 

    
 

Section
12.03    Financial Statements. Seller
shall, no later than seventy-five (75) calendar days after the Closing, provide the Financial Statements to Buyer.

 

Section
12.04    Further Cooperation. Seller
shall make the Records available to be picked up by Buyer at the offices of Seller during normal business hours within five (5)
calendar days after the Closing to the extent the Records are in the possession of Seller and are not subject to contractual restrictions
on transferability. Seller shall have the right to retain copies of any of the Records pursuant to the rights granted under Section
17.03.

 

After the Closing Date, each Party, at
the request of the other and without additional consideration, 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 action as the other Party may reasonably
request to convey and deliver the Assets to Buyer and to accomplish the orderly transfer of the Assets to Buyer in the manner contemplated
by this Agreement. After the Closing, the Parties will cooperate to have all proceeds received attributable to the Assets be paid
to the proper Party hereunder and to have all expenditures to be made with respect to the Assets be made by the proper Party hereunder.

 

Article
XIII

Operation of the Assets

 

Section
13.01    Operations after Effective Time.
Seller agrees, from and after the date hereof until the Closing, except as expressly contemplated by this Agreement, as expressly
consented to in writing by Buyer, or in situations wherein emergency action is taken in the face of risk to life, property or the
environment, to, or to cause its affiliates to:

 

		(a)	operate the Assets in the usual, regular and ordinary manner consistent with past practice and
in compliance with law in all material respects;

 

		(b)	maintain the books of account and records relating to the Assets in the usual, regular and ordinary
manner, in accordance with the usual accounting practices of each such Person;

 

		(c)	not enter into a contract, or materially amend or change the terms of any such contract that would
involve individual commitments of more than $100,000 or enter into any other material contract;

 

		(d)	not plug or abandon any Well located on the Assets without Buyer’s prior written consent;

 

		(e)	not transfer, sell, mortgage, pledge or dispose of any of the Assets other than the sale and/or
disposal of Hydrocarbons in the ordinary course of business and, upon advance written notice to Buyer, sales of equipment that
is no longer necessary in the operation of the Assets or for which comparable replacement equipment has been obtained and installed
or create or suffer to exist any lien on the Assets other than a lien that is a Permitted Encumbrance;

 

    	(30)

    	 

    
 

		(f)	preserve in full force and effect and not waive, amend, change, revise or otherwise all oil and
gas leases, operating agreements, easements, rights-of-way, permits, licenses and agreements that relate to the Assets;

 

		(g)	not grant or create any Preferential Purchase Right or other transfer restriction with respect
to the Assets;

 

		(h)	not elect to go non-consent with respect to any operation with respect to the Assets;

 

		(i)	submit to Buyer for prior written approval, all requests for operating or capital expenditures
relating to the Assets that involve individual commitments of more than $100,000;

 

		(j)	maintain any bonds, insurance, letters of credit, guarantees or deposits with any Governmental
Authorities or any other Third Parties required or necessary for the operation of the Assets;

 

		(k)	maintain any consent, license, permit, grant or other authorization from any Governmental Authority
required or necessary for the operation of the Assets; and

 

		(l)	obtain Buyer’s written approval prior to voting under any operating, joint venture, partnership
or similar agreement, which approval shall not be unreasonably withheld or delayed.

 

Section
13.02    Limitations on the Operational
Obligations and Liabilities of Seller.

 

		(a)	From and after the date of execution of this Agreement and until the Closing, and subject to the
provisions of applicable operating and other agreements, Seller shall (or cause its affiliates to) operate the Assets in a manner
consistent with its past practices, and shall carry on its business with respect to the Assets in substantially the same manner
as before execution of this Agreement.

 

		(b)	Buyer acknowledges that Seller owns undivided interests in some or all of the Assets, and Buyer
agrees that the acts or omissions of the other working interest owners shall not constitute a violation of the provisions of this
Article XIII, nor shall any action required by a vote of working interest owners constitute such a violation so long as
Seller has voted its interests in a manner that complies with the provisions of this Article XIII.

 

Section
13.03    No Liability of Seller. Notwithstanding
anything to the contrary in this Article XIII, Seller shall have no liability to Buyer for, and Buyer hereby agrees to release,
defend, indemnify and hold harmless Seller from, the incorrect payment of delay rentals, royalties, shut-in royalties or similar
payments or for any failure to pay any such payments through mistake or oversight (including
those resulting from Seller’s sole, joint, COMPARATIVE or concurrent negligence or strict liability) provided
that such payments relate to production months after the Effective Time. In no event shall Buyer’s remedy for any Seller’s
breach of its obligations under this Article XIII exceed the Allocated Value of the Assets affected by such breach.

 

    	(31)

    	 

    
 

Section
13.04    Operation of the Assets After the
Closing. On and after the Closing, Seller (or Seller’s affiliate) will operate the Assets on behalf of the Buyer pursuant
to the Transition Services Agreement.

 

Section
13.05    Casualty Loss.

 

		(a)	Except as provided in this Section 13.05, Buyer shall assume all risk of loss with respect
to, and any change in the condition of, the Assets from the date of this Agreement until the Closing, including with respect to
the depletion of Hydrocarbons, the watering-out of any Well, the collapse of casing, sand infiltration of Wells, and the depreciation
of personal property.

 

		(b)	If after the date of this Agreement and prior to the Closing any part of the Assets shall be damaged
or destroyed by fire or other casualty or if any part of the Assets shall be taken in condemnation or under the right of eminent
domain or if proceedings for such purposes shall be pending or threatened, this Agreement shall remain in full force and effect
notwithstanding any such destruction, taking or proceeding, or the threat thereof and the Parties shall proceed with the transactions
contemplated by this Agreement notwithstanding such destruction or taking without reduction of the Purchase Price, but subject
to Section 13.05(c).

 

		(c)	Notwithstanding Section 13.05(a), in the event of any loss described in Section 13.05(b),
at the Closing, Buyer shall have the option to: (i) exclude the affected Asset from the sale and reduce the Purchase Price
by the Allocated Value of such affected Asset as set forth on Exhibit C or (ii) include the affected Asset in
the sale, in which event Seller shall pay to Buyer all sums paid to Seller by Third Parties by reason of the destruction or taking
of such Assets (up to the Allocated Value thereof), including any sums paid pursuant to any policy or agreement of insurance or
indemnity, and shall assign, transfer and set over unto Buyer all of the rights, title and interest of Seller in and to any claims,
causes of action, unpaid proceeds or other payments from Third Parties, including any policy or agreement of insurance or indemnity,
arising out of such destruction or taking (up to the Allocated Value thereof). Notwithstanding anything to the contrary in this
Section 13.05, other than as provided in any joint operating agreement to which any of the Assets are subject, Seller shall
not be obligated to carry or maintain, and shall have no obligation or liability to Buyer for its failure to carry or maintain,
any insurance coverage with respect to any of the Assets. Notwithstanding anything to the contrary contained in this Section
13.05, should the uncompensated loss exceed twenty percent (20%) of the Purchase Price, Buyer shall have the option to terminate
this Agreement.

 

    	(32)

    	 

    
 

Section
13.06    Operatorship. Seller makes
no representation and/or warranty to Buyer as to the transferability or assignability of operatorship of such Wells, but Seller
shall and shall cause its affiliates to, cooperate with Buyer and use its commercially reasonable efforts to cause operatorship
of the Wells and Leases to be transferred to Buyer. Buyer acknowledges that the rights and obligations associated with such wells
are governed by applicable agreements and that operatorship will be determined by the terms of those agreements.

 

Section
13.07    Records. Seller shall, and
shall cause its affiliates to, provide Buyer with all accounting records and information relating to the Assets for the period
from the Effective Time to the Closing Date, including all revenue and joint interest billing information and well master information.

 

Section
13.08    Administrative Duties and Other
Obligations. Seller and its affiliates shall complete all administrative duties and other obligations pertaining to the production
of minerals from the Assets up to the Closing Date, including without limitation, the filing of all state production and environmental
reports, payment of all production severance taxes and the filing of all severance tax reports, the calculation and payment of
all royalties due, the calculation and payment of all Third Party production, and/or the calculation of payments in kind information,
if applicable, and preparation of the revenue run for the calendar month immediately preceding the calendar month in which the
Closing occurs.

 

Article
XIV

Obligations and Indemnification

 

Section
14.01    Retained Obligations. Provided
that the Closing occurs, Seller shall retain (a) all obligations and liabilities of Seller for the payment or improper payment
of royalties, rentals and other similar payments under the Leases relating to the Subject Interests to the extent attributable
to periods prior to the Effective Time; (b) all obligations of Seller under the Contracts for (i) overhead charges related
to periods prior to the Effective Time, (ii) costs and expenses incurred prior to the Effective Time for goods and services provided
prior to the Effective Time and (iii) other payment obligations that accrue and become due prior to the Effective Time; (c)
all liability of Seller to Third Parties for personal injury or death to the extent occurring prior to the Effective Time as a
result of the operation of the Assets; (d)(i) any and all income Taxes, franchise Taxes and similar Taxes imposed by any applicable
law on Seller or any of its affiliates, or any combined, unitary, or consolidated group of which any of the foregoing is or was
a member, (ii) Asset Taxes allocable to Seller pursuant to Section 9.02 taking into account, and without duplication of,
such Asset Taxes effectively borne by Seller pursuant to Section 10.02(b)(iii) or Section 12.02, (iii) any Taxes
imposed on or with respect to the ownership or operation of the Excluded Assets, and (iv) and any all other Taxes imposed on or
with respect to the ownership or operation of the Assets for any tax period (or portion thereof) ending before the Effective Time;
(e) all litigation existing as of the Closing Date, to the extent it relates to the period of time prior to the Effective Time;
(f) any offsite disposal of hazardous materials by Seller from the Subject Interests to offsite locations occurring prior to the
Effective Time; (g) Seller’s employment relationship with its employees and Seller’s employee benefit plans; (h) all
liability of Seller under any credit facilities; (i) all liability of Seller under any hedging, swap, put, call, collar, future,
derivative or similar arrangement; and (j) the Excluded Assets (collectively, the “Retained Obligations”, and
the items specified in (c), (d), (f), (g), (h), (i), (j) and (k) herein, the “Specified Retained Obligations”).

 

    	(33)

    	 

    
 

Section
14.02    Assumed Obligations. Provided
that the Closing occurs, subject to Buyer’s indemnification rights under Section 14.04, Buyer hereby assumes all duties,
obligations and liabilities of every kind and character of Seller with respect to the Assets or the ownership or operation thereof
(other than the Retained Obligations), attributable to periods before and after the Effective Time, including, without limitation,
those arising out of (a) the terms of the Easements, Contracts, Leases, Personal Property or Subject Interests comprising part
of the Assets, (b) Gas Imbalances, (c) suspense accounts, (d)(i) Asset Taxes allocable to Buyer pursuant to Section 9.02
taking into account, and without duplication of, such Asset Taxes effectively borne by Buyer pursuant to Section 10.02(a)(ii)
or Section 12.02 and (ii) the Transfer Taxes, if any, allocable to Buyer pursuant to Section 9.01, (e) the condition
(including, without limitation, environmental condition) of the Subject Interests regardless of whether such condition arose before
or after the Effective Time, (f) obligations to properly plug and abandon or re-plug or re-abandon or remove wells, flowlines,
gathering lines or other facilities, equipment or other personal property or fixtures comprising part of the Assets, (g) obligations
to restore the surface of the Subject Interests and obligations to remediate or bring the Subject Interests into compliance with
applicable Environmental Laws (including conducting any remediation activities that may be required on or otherwise in connection
with activities on the Subject Interests) regardless of whether such obligations or conditions or event giving rise to such obligations
arose, occurred or accrued before or after the Effective Time and (h) any other duty, obligation, event, condition or liability
assumed by Buyer under the terms of this Agreement (collectively, the “Assumed Obligations”). Buyer’s
obligations under this Section 14.02 shall survive the Closing without time limitation.

 

Section
14.03    Buyer’s Indemnification.
Provided that the Closing occurs, except for matters for which Seller has an indemnification obligation hereunder, Buyer shall
release, defend, indemnify and hold harmless Seller, its partners, and their respective officers, directors, employees, agents,
partners, representatives, members, shareholders, affiliates, subsidiaries, successors and assigns (collectively, the “Seller
Indemnitees”) from and against any and all claims, damages, liabilities, losses, causes of action, costs and expenses
(including, without limitation, those involving theories of negligence or strict liability and including court costs and attorneys’
fees) (collectively, the “Losses”) to the extent resulting from or arising out of, (a) the Assumed Obligations,
(b) any breach by Buyer of any of Buyer’s representations and warranties contained in Article VI or (c) any breach
by Buyer of its covenants hereunder, REGARDLESS OF WHETHER CAUSED OR CONTRIBUTED TO BY THE SOLE, JOINT, COMPARATIVE OR CONCURRENT
NEGLIGENCE OR STRICT LIABILITY OF ANY OF THE SELLER INDEMNITEES. Buyer’s indemnification obligation under Section 14.03(b)
and Section 14.03(c) (other than as applicable to breaches of Buyer under Sections 3.05(b), 3.08, 4.04(b),
Article IX, 10.02, 10.03, 10.05(a), Article XII, Article XVII and Article XVI
only) shall apply only if Seller has provided Buyer with written notice claiming indemnification under those provisions within
twelve (12) months following Closing and (2) shall only apply after a deductible percentage of two percent (2%) of the Purchase
Price, and then only to the extent of the excess of the claims above the two percent (2%) deductible of the Purchase Price and
(3) shall never exceed a maximum aggregate sum of fifteen percent (15%) of the Purchase Price, inclusive of attorneys’ fees
and all other expenses of litigation.

 

    	(34)

    	 

    
 

Section
14.04    Seller’s Indemnification.
Provided that the Closing occurs, Seller shall release, defend, indemnify and hold harmless Buyer, its partners, and their respective
officers, directors, employees, agents, partners, representatives, members, shareholders, affiliates, subsidiaries, successors
and assigns (collectively, the “Buyer Indemnitees”) from and against any and all Losses to the extent resulting
from or arising out of (a) the Retained Obligations, (b) any breach by Seller of any of Seller’s representations and warranties
contained in Article V or (c) any breach by Seller of its covenants hereunder, REGARDLESS OF WHETHER CAUSED OR CONTRIBUTED
TO BY THE SOLE, JOINT, COMPARATIVE OR CONCURRENT NEGLIGENCE OR STRICT LIABILITY OF ANY OF THE BUYER INDEMNITEES. Notwithstanding
anything to the contrary contained herein, Seller’s indemnification obligation under Section 14.04(a) (other than
with respect to the Specified Retained Obligations), Section 14.04(b) and Section 14.04(c) (other than as applicable
to breaches of Seller under Sections3.05(b), 3.08, 4.04(b), Article IX, 10.02, 10.03,
10.05(a), Article XII, Article XVI and Article XVII only) (1) shall only apply if Buyer has provided
Seller with written notice claiming indemnification within twelve (12) months of the Closing and (2) shall only apply after a deductible
percentage of two percent (2%) of the Purchase Price, and then only to the extent of the excess of the claims above the two percent
(2%) deductible of the Purchase Price and (3) shall never exceed a maximum aggregate sum of fifteen percent (15%) of the Purchase
Price, inclusive of attorneys’ fees and all other expenses of litigation.

 

Section
14.05    Notices and Defense of Indemnified
Matters. Each Party shall promptly notify the other Party of any matter of which it becomes aware and for which it is entitled
to indemnification from the other Party under this Agreement; provided that the delay or failure of any Party to so notify
the indemnified Party shall only reduce the indemnified Party’s claim to the extent such claim was prejudiced as a result
of such delay or failure. The indemnifying Party shall be obligated to defend, at the indemnifying Party’s sole expense,
any litigation or other administrative or adversarial proceeding against the indemnified Party relating to any matter for which
the indemnifying Party has agreed to indemnify and hold the indemnified Party harmless under this Agreement; provided that
the indemnified Party shall not enter into any settlement without the indemnified Party’s consent, not to be unreasonably
withheld or delayed. However, the indemnified Party shall have the right to participate with the indemnifying Party in the defense
of any such matter at its own expense.

 

Section
14.06    Exclusive Remedies. The Parties
acknowledge and agree that, following Closing, the remedies set forth in this Article XIV for each Party, as limited above
in this Article XIV, shall be the exclusive remedies of such Party for any claimed breaches by the other Party of its representations,
warranties, and covenants under this Agreement.

 

Article
XV

Limitations on Representations and Warranties

 

Section 15.01   
Disclaimers of Representations and Warranties. The express representations and warranties of Seller contained in
this Agreement are exclusive and are in lieu of all other representations and warranties, express, implied or statutory. except
for the express representations of seller in this agreement AND THE ASSIGNMENT (including section 2.01 thereof), BUYER
ACKNOWLEDGES THAT SELLER HAS NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY EXPRESSLY WAIVES, ANY
REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED, AT COMMON LAW, BY STATUTE OR OTHERWISE RELATING TO (A) PRODUCTION RATES, RECOMPLETION
OPPORTUNITIES, DECLINE RATES, GAS BALANCING INFORMATION OR THE QUALITY, QUANTITY OR VOLUME OF THE RESERVES OF HYDROCARBONS, IF
ANY, ATTRIBUTABLE TO THE ASSETS, (B) THE ACCURACY, COMPLETENESS OR MATERIALITY OF ANY INFORMATION, DATA OR OTHER MATERIALS (WRITTEN
OR ORAL) NOW, HERETOFORE OR HEREAFTER FURNISHED TO BUYER BY OR ON BEHALF OF SELLER AND (C) THE ENVIRONMENTAL CONDITION OF
THE ASSETS. except for the express WARRANTIES
of seller in THIS AGREEMENT AND THE ASSIGNMENT, SELLER EXPRESSLY DISCLAIMS AND NEGATES, AND BUYER HEREBY WAIVES, AS TO PERSONAL
PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES CONSTITUTING A PART OF THE ASSETS (I) ANY IMPLIED OR EXPRESS WARRANTY OF
MERCHANTABILITY, (II) ANY IMPLIED OR EXPRESS WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (III) ANY IMPLIED OR EXPRESS WARRANTY
OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (IV) ANY RIGHTS OF PURCHASERS UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF
CONSIDERATION OR RETURN OF THE PURCHASE PRICE, (V) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM FROM DEFECTS, WHETHER KNOWN OR UNKNOWN,
(VI) ANY AND ALL IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAW AND (VII) ANY IMPLIED OR EXPRESS WARRANTY REGARDING ENVIRONMENTAL
LAWS, THE RELEASE OF MATERIALS INTO THE ENVIRONMENT, OR PROTECTION OF THE ENVIRONMENT OR HEALTH, IT BEING THE EXPRESS INTENTION
OF BUYER AND SELLER THAT, EXCEPT AS PROVIDED IN THIS AGREEMENT AND THE ASSIGNMENT, THE PERSONAL PROPERTY, EQUIPMENT, INVENTORY,
MACHINERY AND FIXTURES INCLUDED IN THE ASSETS SHALL BE CONVEYED TO BUYER, AND BUYER SHALL ACCEPT SAME, AS IS, WHERE IS, WITH ALL
FAULTS AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR AND BUYER REPRESENTS TO SELLER THAT BUYER WILL MAKE OR CAUSE TO BE MADE
SUCH INSPECTIONS WITH RESPECT TO SUCH PERSONAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY AND FIXTURES AS BUYER DEEMS APPROPRIATE.
SELLER AND BUYER AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED
IN THIS SECTION ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER.

 

    	(35)

    	 

    
 

Section
15.02    Independent Investigation.
Buyer represents and acknowledges that it is knowledgeable of the oil and gas business and of the usual and customary practices
of producers such as Seller and that it has had (or will have prior to the Closing) access to the Assets, the officers and employees
of Seller, and the books, records and files of Seller relating to the Assets, and in making the decision to enter into this Agreement
and consummate the transactions contemplated hereby, Buyer will rely solely on the basis of its own independent due diligence investigation
of the Assets and upon the representations and warranties made in Article V, and not on any other representations or warranties
of Seller or any other person or entity.

 

    	(36)

    	 

    
 

Section
15.03    Survival. Except as specifically
provided otherwise elsewhere in this Agreement, the representations, warranties and covenants of Buyer and Seller under this Agreement
shall survive for a period of twelve (12) months from the Closing. Notwithstanding anything to the contrary herein, (a) Buyer’s
obligation to indemnify under Section 14.03(a) shall survive the Closing without time limitation, (b) Seller’s obligation
to indemnify under Section 14.04(a) with respect to the Specified Retained Obligations only shall survive the Closing and
terminate upon the statute of limitations applicable thereto, (c) the provisions of Article XV, Article XVI and Article
XVII shall survive without time limitation, and (d) the other covenants contained herein that by their terms are to be performed
after the Closing shall survive the Closing on the terms thereof.

 

Article
XVI

Dispute Resolution

 

Section
16.01    General. Any and all claims,
disputes, controversies or other matters in question arising out of or relating to title issues, environmental issues, or calculation
of the Statement or revisions thereto (all of which are referred to herein as “Disputes” which term shall not
include any other disputes, claims, controversies or other matters in question arising under this Agreement) shall be resolved
in the manner prescribed by this Article XVI.

 

Section
16.02    Senior Management. If a Dispute
occurs that the senior representatives of the Parties responsible for the transaction contemplated by this Agreement have been
unable to settle or agree upon within a period of fifteen (15) calendar days after such Dispute arose, Seller shall nominate and
commit one of its senior officers, and Buyer shall nominate and commit one of its senior officers, to meet at a mutually agreed
time and place not later than thirty (30) calendar days after the Dispute has arisen to attempt to resolve same. If such senior
management have been unable to resolve such Dispute within a period of fifteen (15) calendar days after such meeting, or if such
meeting has not occurred within forty-five (45) calendar days following such Dispute arising, then either Party shall have the
right, by written notice to the other, to resolve the Dispute through the relevant Independent Expert pursuant to Section 16.03.

 

Section
16.03    Dispute by Independent Expert.

 

		(a)	Each Party shall have the right to submit Disputes regarding title issues, environmental issues,
or calculation of the Statement, the Final Statement or revisions thereto, to an independent expert appointed in accordance with
this Section 16.03 (each, an “Independent Expert”), who shall serve as sole arbitrator. The Independent
Expert shall be appointed by mutual agreement of the Parties from among candidates with experience and expertise in the area that
is the subject of such Dispute, and failing such agreement, such Independent Expert for such Dispute shall be selected by the Chief
Judge of the United States District Court for the Southern District of Texas.

 

    	(37)

    	 

    
 

		(b)	Disputes to be resolved by an Independent Expert shall be resolved in accordance with mutually
agreed procedures and rules and failing such agreement, in accordance with the rules and procedures of the Texas Arbitration Act
and the Rules of the American Arbitration Association to the extent such Rules do not conflict with such Texas Arbitration Act
or the provisions of this Agreement. The Independent Expert shall be instructed by the Parties to resolve such Dispute as soon
as reasonably practicable in light of the circumstances. The decision and award of the Independent Expert shall be binding upon
the Parties as an award under the Federal Arbitration Act and final and nonappealable to the maximum extent permitted by law, and
judgment thereon may be entered in a court of competent jurisdiction and enforced by any Party as a final judgment of such court.

 

		(c)	The charges and expenses of the arbitration (including, without limitation, the Independent Expert)
shall be shared equally by Seller and Buyer.

 

		(d)	Any arbitration hearing held pursuant to Section 16.03 shall be held in Midland, Texas.

 

Section
16.04    Limitation on Arbitration.
ALL OTHER DISAGREEMENTS, DIFFERENCES, OR DISPUTES ARISING BETWEEN SELLER AND BUYER UNDER THE TERMS OF THIS AGREEMENT (AND NOT COVERED
BY SECTION 16.03) SHALL NOT BE SUBJECT TO ARBITRATION AND SHALL BE DETERMINED BY A COURT OF COMPETENT JURISDICTION, UNLESS
THE PARTIES OTHERWISE MUTUALLY AGREE.

 

Article
XVII

Miscellaneous

 

Section
17.01    Names. As soon as reasonably
possible after the end of the Term in the Transition Services Agreement, but in no event later than sixty (60) calendar days after
the end of the Term in the Transition Services Agreement, Buyer shall remove the names of Seller and its affiliates, and all variations
thereof, from all of the Assets and make the requisite filings with, and provide the requisite notices to, the appropriate federal,
state or local agencies to place the title or other indicia of ownership, including operation of the Assets, in a name other than
the name of Seller or any of its affiliates, or any variations thereof.

 

Section
17.02    Expenses. Except as otherwise
expressly set forth in this Agreement, each Party shall be solely responsible for all expenses, including due diligence expenses,
incurred by it in connection with this transaction, and neither Party shall be entitled to any reimbursement for such expenses
from the other Party.

 

Section
17.03    Document Retention. As used
in this Section 17.03, the term “Documents” shall mean all files, documents, books, records and other
data delivered to Buyer by Seller pursuant to the provisions of this Agreement (other than those that Seller has retained either
the original or a copy of), including, but not limited to: financial and tax accounting records; land, title and division of interest
files; contracts; engineering and well files; and books and records related to the operation of the Assets prior to the Closing
Date. Prior to the Closing, Seller or its representatives shall have the right to make and retain copies of the Documents at its
or their expense.

 

    	(38)

    	 

    
 

Section
17.04    Entire Agreement. This Agreement,
the documents to be executed hereunder, and the exhibits attached hereto constitute the entire agreement between the Parties pertaining
to the subject matter hereof and supersede all prior agreements, understandings, negotiations and discussions, whether oral or
written, of the Parties pertaining to the subject matter hereof. No supplement, amendment, alteration, modification or waiver of
this Agreement shall be binding unless executed in writing by the Parties and specifically referencing this Agreement.

 

Section
17.05    Waiver. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar),
nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

 

Section
17.06    Publicity. Neither Seller nor
Buyer will issue any public announcement or press release concerning this transaction without the written consent of the other
Party (except as required by law or the applicable rules or regulations of any Governmental Authority or stock exchange, and in
such case the Parties shall consult with each other with regard to the wording of the announcement or press release).

 

Section
17.07    Construction. The captions
in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of
any provision of this Agreement. The Parties acknowledge that they have participated jointly in the negotiation and drafting of
this Agreement and as such the Parties agree that if an ambiguity or question of intent or interpretation arises hereunder, this
Agreement shall not be construed more strictly against one Party than another on the grounds of authorship.

 

Section
17.08    No Third Party Beneficiaries.
Except as provided in Sections 14.03 and 14.04, nothing in this Agreement shall provide any benefit to any Third
Party or entitle any Third Party to any claim, cause of action, remedy or right of any kind, it being the intent of the Parties
that this Agreement shall otherwise not be construed as a Third Party beneficiary contract.

 

Section
17.09    Assignment. No Party may assign
or delegate any of its rights or duties hereunder without the prior written consent of the other Party, and any such assignment
shall be void. Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their respective permitted successors, assigns and legal representatives.

 

Section
17.10    Governing Law. This Agreement,
other documents delivered pursuant hereto and the legal relations between the Parties shall be governed and construed in accordance
with the laws of the State of Texas, without giving effect to principles of conflicts of laws that would result in the application
of the laws of another jurisdiction.

 

    	(39)

    	 

    
 

Section
17.11    Notices. Any notice, communication,
request, instruction or other document required or permitted hereunder shall be given in writing and delivered in person or sent
by U.S. Mail postage prepaid, return receipt requested, nationally recognized, receipt overnight courier, email or facsimile to
the addresses of Seller and Buyer set forth below. Any such notice shall be effective only upon receipt.

 

 

	Seller:	
        CrownRock, L.P.

        P.O. Box 53310

        Midland, Texas 79701

        Attn: Robert W. Floyd

        Phone: 432-818-0300

        Fax: 432-687-4804

         

	Buyer:	
        Greg Brown

        c/o BreitBurn Management Company, LLC

        515 S. Flower Street, Ste. 4800

        Los Angeles, CA 90071

        Fax: (213) 225-5916

         

 

Either Party may, by written notice so
delivered to the other Party, change its address for notice purposes hereunder.

 

Section
17.12    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 and the Parties shall negotiate
in good faith to modify this Agreement so as to effect their original intent as closely as possible in an acceptable manner to
the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

Section
17.13    Time of the Essence. Time shall
be of the essence with respect to all time periods and notice periods set forth in this Agreement.

 

Section
17.14    Counterpart Execution. This
Agreement may be executed in any number of counterparts, and each counterpart hereof shall be effective as to each party that executes
the same whether or not all of such parties execute the same counterpart. If counterparts of this Agreement are executed, the signature
pages from various counterparts may be combined into one composite instrument for all purposes. All counterparts together shall
constitute only one Agreement, but each counterpart shall be considered an original. Any counterpart submitted or transmitted via
facsimile or email shall have the same force and effect as an original manually executed counterpart.

 

Section
17.15    Jury Trial Waiver. SELLER AND
BUYER HEREBY EXPRESSLY AND KNOWINGLY WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY OF ANY AND ALL CLAIMS AND CAUSES OF ACTION ARISING
UNDER OR IN CONNECTION WITH THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, ANY AND ALL CLAIMS AND CAUSES OF ACTION IN ANY WAY BASED
UPON OR RELATING TO THE NEGOTIATION, FORMATION, CONSTRUCTION, INTERPRETATION, ENFORCEABILITY, PERFORMANCE, AND/OR BREACH OF THIS
AGREEMENT.

 

    	(40)

    	 

    
 

Section
17.16    Financial Statements.

 

		(a)	Seller acknowledges that full carve out
audited financial statements are not available for the subject properties and that full carve out financial statements are impracticable
for Seller to prepare. Seller will deliver a letter to Buyer at closing stating that full carve out audited financial statements
are not available and are impracticable for Seller to prepare. Seller
will prepare statements of revenues and direct operating expenses and supplemental reserve disclosures including proved reserve
tables and the standardized measure of discounted cash flows as required by the Securities Exchange Commission (“SEC”)
by Buyer pursuant to the Securities Act of 1933, as amended (the
“Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and that such statements of revenues and direct operating expenses
will be audited so that they comply with the requirements of a Registration
Statement, report or other filing under the Securities Act and the rules set forth in Regulation S-X. Within seventy-five
(75) calendar days after Closing Seller will prepare, at Buyer’s expense
audited, statements of revenues and direct operating expenses applicable to the Assets for the calendar year 2011, along with quarterly
stub periods for the calendar years of 2011 and 2012 and any other financial information necessary to comply with the requirements
of a Registration Statement of Form S-1 under the Securities Act and the rules set forth in Regulation S-X (the “Financial
Statements”). 

 

		(b)	Seller agrees to consent to the inclusion
or incorporation by reference of the statements of revenues and direct operating expenses and all supplemental information therein
in any registration statement, report, or other document of Buyer to be filed with the SEC upon receipt of written notice from
Buyer’s counsel that the statements of revenues and direct operating expenses and all supplemental information therein are
required to be included or incorporated by reference to satisfy any
rule or regulation of the SEC or to satisfy relevant financial disclosure obligations under the Securities Act or the Exchange
Act. Upon request of Buyer, Seller agrees to request the external audit firm that audits the statements of revenues and direct
operating expenses (the “Audit Firm”) to consent to the inclusion
or incorporation by reference of its audit opinion with respect to the audited statements of revenues and direct operating expenses
in any such registration statement, report or other document. Seller shall (i) provide Buyer and Buyer’s independent accountants
with access to management by Seller to Seller’s independent
accountants to the extent applicable to the Assets and (ii) authorize Seller’s Audit Firm to provide such Audit Firm’s
consent to the incorporation of the audited statements of revenues and direct operating expenses by reference to satisfy any rule
or regulation of the SEC or to satisfy relevant financial disclosure obligations under the Securities Act or the Exchange Act.

 

    	(41)

    	 

    
  

THIS SPACE INTENTIONALLY LEFT BLANK/

SIGNATURES ON FOLLOWING PAGE

 

    	(42)

    	 

    
 

IN WITNESS WHEREOF, Seller and Buyer have
executed and delivered this Agreement as of the date first set forth above.

	
        SELLER:

        CrownRock, L.P.

        By: CrownRock GP, LLC, its general partner

         

         

        By: /s/ Robert W. Floyd

        Name: Robert W. Floyd

        Title: President

         

	
        BUYER:

        BreitBurn Operating L.P.

        By: BreitBurn Operating GP, LLC,

        its general partner

         

         

        By: /s/ Halbert S. Washburn

        Name: Halbert S. Washburn

        Title: Chief Executive Officer

	 

 

 

 

 

 

Signature Page to

Purchase and
Sale Agreement

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