Document:

salesagreement.htm

    
      

    

    Execution Version

     

    PURCHASE AND
SALE AGREEMENT

     

    BETWEEN

     

    O'BRIEN
RESOURCES, LLC

     

    SEPCO
II, LLC

     

    LIBERTY
ENERGY, LLC

     

    CROW
HORIZONS COMPANY

     

    AND

     

    O'BENCO
II, LP

     

    COLLECTIVELY,
AS SELLER,

     

    AND

     

    BERRY
PETROLEUM COMPANY,

     

    AS
PURCHASER,

     

    DATED
AS OF JUNE 10, 2008

     

    
      
        
        

      

      
         

        
          

        

      

      
        
           

        

      

    

     

    TABLE OF
CONTENTS

    ARTICLE I

    PURCHASE
AND SALE

     

    
      	
              Section
      1.1

            	
              Purchase
      and Sale

            	
              1

            
	
              Section
      1.2

            	
              Certain
      Definitions

            	
              1

            
	
              Section
      1.3

            	
              Excluded
      Assets

            	
              7

            

    

     

    ARTICLE
II

    PURCHASE
PRICE

     

    
      	
              Section
      2.1

            	
              Purchase
      Price

            	
              8

            
	
              Section
      2.2

            	
              Allocation
      of Purchase Price

            	
              8

            
	
              Section
      2.3

            	
              Adjustments
      to Purchase Price

            	
              9

            
	
              Section
      2.4

            	
              Ordinary
      Course Pre-Effective Date Costs Paid and Revenues Received
      Post-Closing

            	
              11

            
	
              Section
      2.5

            	
              Procedures

            	
              12

            

    

     

    ARTICLE
III

    TITLE
MATTERS

     

    
      	
              Section
      3.1

            	
              Seller's
      Title

            	
              13

            
	
              Section
      3.2

            	
              Definition
      of Defensible Title

            	
              14

            
	
              Section
      3.3

            	
              Definition
      of Permitted Encumbrances

            	
              14

            
	
              Section
      3.4

            	
              Allocated
      Values

            	
              17

            
	
              Section
      3.5

            	
              Notice
      of Title Defects; Defect Adjustments

            	
              17

            
	
              Section
      3.6

            	
              Consents
      to Assignment and Preferential Rights to Purchase

            	
              21

            
	
              Section
      3.7

            	
              Limitations
      on Applicability

            	
              23

            

    

     

    ARTICLE
IV

    ENVIRONMENTAL
MATTERS

     

    
      	
              Section
      4.1

            	
              Environmental
      Laws

            	
              23

            
	
              Section
      4.2

            	
              Environmental
      Defects

            	
              24

            
	
              Section
      4.3

            	
              Environmental
      Review

            	
              24

            
	
              Section
      4.4

            	
              Notice
      of Environmental Defects; Defect Adjustments

            	
              25

            
	
              Section
      4.5

            	
              Environmental
      Arbitration

            	
              28

            

    

     

    ARTICLE
V

    REPRESENTATIONS
AND WARRANTIES OF SELLER

     

    
      	
              Section
      5.1

            	
              Seller
      Parties

            	
              29

            
	
              Section
      5.2

            	
              Litigation

            	
              30

            
	
              Section
      5.3

            	
              Taxes
      and Assessments

            	
              30

            

    

    
      
        
        

      

      
        -i-

        
          

        

      

      
        
        

      

    

    
       

      TABLE OF
CONTENTS

      (continued) 

    
      	
              Section
      5.4

            	
              Compliance
      with Laws

            	
              30

            
	
              Section
      5.5

            	
              Contracts

            	
              31

            
	
              Section
      5.6

            	
              Payments
      for Production

            	
              31

            
	
              Section
      5.7

            	
              Imbalances

            	
              31

            
	
              Section
      5.8

            	
              Material
      Consents and Preferential Purchase Rights

            	
              32

            
	
              Section
      5.9

            	
              Liability
      for Brokers' Fees

            	
              32

            
	
              Section
      5.10

            	
              Bankruptcy;
      Solvency

            	
              32

            
	
              Section
      5.11

            	
              Bonus,
      Rentals, and Royalties; Lease Accounts; Recordation of Leases; Depth
      Limitations

            	
              32

            
	
              Section
      5.23

            	
              Limitations

            	
              34

            

    

     

    ARTICLE
VI

    REPRESENTATIONS
AND WARRANTIES OF PURCHASER

     

    
      	
              Section
      6.1

            	
              Existence
      and Qualification

            	
              36

            
	
              Section
      6.2

            	
              Power

            	
              36

            
	
              Section
      6.3

            	
              Authorization
      and Enforceability

            	
              36

            
	
              Section
      6.4

            	
              No
      Conflicts

            	
              36

            
	
              Section
      6.5

            	
              Consents,
      Approvals or Waivers

            	
              37

            
	
              Section
      6.6

            	
              Litigation

            	
              37

            
	
              Section
      6.7

            	
              Financing

            	
              37

            
	
              Section
      6.8

            	
              Investment
      Intent

            	
              37

            
	
              Section
      6.9

            	
              Independent
      Investigation

            	
              37

            
	
              Section
      6.10

            	
              Opportunity
      to Verify Information

            	
              38

            
	
              Section
      6.11

            	
              Liability
      for Brokers' Fees

            	
              38

            
	
              Section
      6.12

            	
              Bankruptcy

            	
              38

            
	
              Section
      6.13

            	
              Qualification
      and Bonding

            	
              38

            

    

     

    ARTICLE
VII

    COVENANTS
OF THE PARTIES

     

    
      	
              Section
      7.1

            	
              Access

            	
              38

            
	
              Section
      7.2

            	
              Notification
      of Breaches

            	
              39

            
	
              Section
      7.3

            	
              Press
      Releases

            	
              39

            
	
              Section
      7.4

            	
              Operation
      of Business

            	
              39

            
	
              Section
      7.5

            	
              Indemnity
      Regarding Access

            	
              41

            
	
              Section
      7.6

            	
              Governmental
      Reviews

            	
              42

            

    

    
      
        
        

      

      
        -ii-

        
          

        

      

      
        
        

      

    

    
       

      TABLE OF
CONTENTS

      (continued) 

    
      	
              Section
      7.7

            	
              Operatorship

            	
              42

            
	
              Section
      7.8

            	
              Letters-in-Lieu

            	
              43

            
	
              Section
      7.9

            	
              Hedges

            	
              43

            
	
              Section
      7.10

            	
              Exclusivity

            	
              43

            
	
              Section
      7.11

            	
              Updated
      Schedules

            	
              43

            
	
              Section
      7.12

            	
              Contract
      Pumpers

            	
              43

            
	
              Section
      7.13

            	
              Seller's
      Financial Records and Data

            	
              43

            
	
              Section
      7.14

            	
              Legal
      Existence

            	
              45

            
	
              Section
      7.15

            	
              Acquisition
      of Deep Rights

            	
              45

            
	
              Section
      7.16

            	
              Further
      Assurances

            	
              46

            

    

     

    ARTICLE
VIII

    CONDITIONS
TO CLOSING

     

    
      	
              Section
      8.1

            	
              Conditions
      of Seller to Closing

            	
              46

            
	
              Section
      8.2

            	
              Conditions
      of Purchaser to Closing

            	
              46

            

    

     

    ARTICLE
IX

    CLOSING

     

    
      	
              Section
      9.1

            	
              Time
      and Place of Closing

            	
              48

            
	
              Section
      9.2

            	
              Obligations
      of Seller at Closing

            	
              48

            
	
              Section
      9.3

            	
              Obligations
      of Purchaser at Closing

            	
              49

            
	
              Section
      9.4

            	
              Closing
      Payment and Post-Closing Purchase Price Adjustments

            	
              50

            

    

     

    ARTICLE
X

    TAX
MATTERS

     

    
      	
              Section
      10.1

            	
              Liability
      for Taxes

            	
              52

            
	
              Section
      10.2

            	
              Contest
      Provisions

            	
              53

            
	
              Section
      10.3

            	
              Post-Closing
      Actions Which Affect Seller's Tax Liability

            	
              54

            
	
              Section
      10.4

            	
              Refunds

            	
              54

            
	
              Section
      10.5

            	
              Access
      to Information

            	
              54

            
	
              Section
      10.6

            	
              Like
      Kind Exchange

            	
              55

            
	
              Section
      10.7

            	
              Conflict

            	
              56

            

    

     

    ARTICLE
XI

    TERMINATION
AND AMENDMENT

     

    
      	
              Section
      11.1

            	
              Termination

            	
              56

            
	
              Section
      11.2

            	
              Effect
      of Termination

            	
              56

            

    

    
      
        
        

      

      
        -iii-

        
          

        

      

      
        
        

      

    

    
       

      TABLE OF
CONTENTS

      (continued) 

       

    

    
      	
              Section
      11.3

            	
              Distribution
      of Deposit Upon Termination

            	
              57

            

    

     

    ARTICLE
XII

    INDEMNIFICATION;
LIMITATIONS

     

    
      	
              Section
      12.2

            	
              Indemnification

            	
              58

            
	
              Section
      12.3

            	
              Indemnification
      Actions

            	
              61

            
	
              Section
      12.4

            	
              Casualty
      and Condemnation

            	
              63

            
	
              Section
      12.5

            	
              Limitation
      on Actions

            	
              64

            

    

     

    ARTICLE
XIII

    MISCELLANEOUS

     

    
      	
              Section
      13.1

            	
              Counterparts

            	
              66

            
	
              Section
      13.2

            	
              Notices

            	
              66

            
	
              Section
      13.3

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

            	
              67

            
	
              Section
      13.4

            	
              Expenses

            	
              67

            
	
              Section
      13.5

            	
              Replacement
      of Bonds, Letters of Credit, and Guarantees

            	
              67

            
	
              Section
      13.6

            	
              Records

            	
              68

            
	
              Section
      13.7

            	
              Use
      of Seller Party Names

            	
              68

            
	
              Section
      13.8

            	
              Governing
      Law and Venue

            	
              68

            
	
              Section
      13.9

            	
              Dispute
      Resolution

            	
              69

            
	
              Section
      13.10

            	
              Captions

            	
              69

            
	
              Section
      13.11

            	
              Waivers

            	
              69

            
	
              Section
      13.12

            	
              Assignment

            	
              69

            
	
              Section
      13.13

            	
              Entire
      Agreement

            	
              69

            
	
              Section
      13.14

            	
              Amendment

            	
              69

            
	
              Section
      13.15

            	
              No
      Third-Person Beneficiaries

            	
              69

            
	
              Section
      13.16

            	
              References

            	
              70

            
	
              Section
      13.17

            	
              Construction

            	
              70

            
	
              Section
      13.18

            	
              Limitation
      on Damages

            	
              70

            

    

    
      
        
        

      

      
        -iv-

        
          

        

      

      
        
        

      

    

     

    TABLE OF
CONTENTS

    (continued) 

    EXHIBITS:

    

    
      	
              Exhibit
      A-1

            	
              Leases

            
	
              Exhibit
      A-2

            	
              Wells

            
	
              Exhibit
      A-3

            	
              Midstream
      Assets

            
	
              Exhibit
      A-4

            	
              Equipment

            
	
              Exhibit
      A-5

            	
              Plat

            
	
              Exhibit
      B

            	
              Form
      of Assignment and Bill of Sale

            
	
              Exhibit
      C

            	
              Form
      of Transition Services Agreement

            
	
              Exhibit
      D

            	
              Plan
      of Operations

            
	
              Exhibit
      E

            	
              Form
      of Non-Competition Agreement

            

    

    

    SCHEDULES:

     

    
      	
              Schedule
      1.3

            	
              Certain
      Excluded Assets

            
	
              Schedule
      3.1

            	
              Exclusion
      Acreage

            
	
              Schedule
      3.3

            	
              Permitted
      Encumbrances

            
	
              Schedule
      3.4

            	
              Allocated
      Values

            
	
              Schedule
      4.2

            	
              Environmental
      Disclosure

            
	
              Schedule
      5.2

            	
              Litigation

            
	
              Schedule
      5.3

            	
              Taxes
      and Assessments

            
	
              Schedule
      5.4

            	
              Compliance
      with Law

            
	
              Schedule
      5.5

            	
              Material
      Contracts

            
	
              Schedule
      5.6

            	
              Payments
      for Production

            
	
              Schedule
      5.7

            	
              Imbalances

            
	
              Schedule
      5.8

            	
              Consents
      and Preferential Rights to Purchase

            
	
              Schedule
      5.12

            	
              Outstanding
      Capital Commitments

            
	
              Schedule
      5.14

            	
              Payables

            
	
              Schedule
      5.15

            	
              Proceeds
      Held in Suspense

            
	
              Schedule
      5.19

            	
              Absence
      of Certain Changes

            
	
              Schedule
      5.20

            	
              Condition
      of the Properties

            
	
              Schedule
      5.22

            	
              Gross
      and Net Acres

            
	
              Schedule
      5.23

            	
              Knowledge
      of Seller Parties

            
	
              Schedule
      13.5

            	
              Bonds
      and Guarantees

            

    

     

    
      
        
        

      

      
        -v-

        
          

        

      

      
        
        

        
        

      

    

     

    TABLE OF DEFINED TERMS

     

    
      	 	
              Page

            
	 	 
	
              Accounting
      Arbitrator

            	
              50

            
	
              Accounting
      Principles 

            	
              11

            
	
              Adjustment
      Period 

            	
              11

            
	
              Affiliate 

            	
              3

            
	
              Agreed
      Rate

            	
              3

            
	
              Agreement 

            	
              1

            
	
              Allocated
      Value 

            	
              17

            
	
              Assets

            	
              1

            
	
              Assignment
      and Bill of Sale

            	
              13

            
	
              Assumed
      Seller Obligations 

            	
              57

            
	
              Business
      Day

            	
              4

            
	
              Casualty
      Loss

            	
              63

            
	
              Claim 

            	
              61

            
	
              Claim
      Notice 

            	
              61

            
	
              Closing 

            	
              48

            
	
              Closing
      Date

            	
              48

            
	
              Closing
      Payment

            	
              50

            
	
              Code

            	
              4

            
	
              Confidentiality
      Agreement 

            	
              38

            
	
              Contracts

            	
              2

            
	
              Cut-Off
      Date

            	
              4

            
	
              Damages

            	
              60

            
	
              Deposit

            	
              8

            
	
              Defensible
      Title

            	
              14

            

    

     

    
      
        
        

      

      
        -vi-

        
          

        

      

      
        
        

        
        

      

    

     

    TABLE OF DEFINED
TERMS

    
      	 	
              Page

            
	 	 
	
              Effective
      Date

            	
              4

            
	
              Environmental
      Arbitrator

            	
              28

            
	
              Environmental
      Consultant

            	
              24

            
	
              Environmental
      Defect

            	
              24

            
	
              Environmental
      Defect Amount

            	
              26

            
	
              Environmental
      Information

            	
              25

            
	
              Environmental
      Laws

            	
              23

            
	
              Environmental
      Review

            	
              24

            
	
              Environmental
      Review Plan

            	
              24

            
	
              Equipment 

            	
              2

            
	
              Escrow
      Agent 

            	
              8

            
	
              Escrow
      Agreement

            	
              8

            
	
              Escrow
      Amount

            	
              65

            
	
              Escrow
      Maintenance Period

            	
              65

            
	
              Exchange
      Property

            	
              55

            
	
              Excluded
      Assets 

            	
              7

            
	
              Excluded
      Records

            	
              3

            
	
              Governmental
      Authority 

            	
              4

            
	
              Hart-Scott-Rodino
      Act 

            	
              4

            
	
              Hydrocarbons 

            	
              4

            
	
              Indemnified
      Person

            	
              61

            
	
              Indemnifying
      Person

            	
              61

            
	
              Independent
      Appraiser 

            	
              9

            
	
              Lands

            	
              1

            

    

    
      
        
        

      

      
        -vii-

        
          

        

      

      
        
        

        
        

      

    

     

    TABLE OF DEFINED TERMS

     

    
      	 	
              Page

            
	 	 
	
              Laws

            	
              4

            
	
              Leases

            	
              1

            
	
              Lowest
      Cost Response 

            	
              4

            
	
              Material
      Adverse Effect

            	
              4

            
	
              Material
      Consent 

            	
              21

            
	
              Material
      Contract 

            	
              5

            
	
              Midstream
      Assets 

            	
              2

            
	
              Minimum
      Damage Amount 

            	
              65

            
	
              NORM 

            	
              24

            
	
              Party 

            	
              1

            
	
              Permitted
      Encumbrances

            	
              14

            
	
              Person  

            	
              5

            
	
              Post-Closing
      Period

            	
              52

            
	
              Pre-Closing
      Period 

            	
              52

            
	
              Properties 

            	
              2

            
	
              Property
      Costs 

            	
              6

            
	
              Purchase
      Price 

            	
              8

            
	
              Purchaser 

            	
              1

            
	
              Purchaser
      Group 

            	
              59

            
	
              Records

            	
              3

            
	
              Required
      Net Worth 

            	
              51

            
	
              Reserve
      Report

            	
              6

            
	
              Retained
      Seller Obligations

            	
              57

            
	
              SEC

            	
              43

            

    

    
      
        
        

      

      
        -viii-

        
          

        

      

      
        
        

        
        

      

    

     

    TABLE OF DEFINED TERMS

     

    
      	 	
              Page

            
	 	 
	
              Seller

            	
              1

            
	
              Seller
      Group 

            	
              58

            
	
              Seller-Operated
      Properties 

            	
              42

            
	
              Seller
      Party

            	
              1

            
	
              Seller's
      Proposed Allocation Schedule 

            	
              8

            
	
              Surface
      Rights

            	
              2

            
	
              Target
      Closing Date 

            	
              48

            
	
              Tax 

            	
              6

            
	
              Tax
      Audit

            	
              53

            
	
              Tax
      Indemnified Person  

            	
              53

            
	
              Tax
      Indemnifying Person 

            	
              53

            
	
              Tax
      Items 

            	
              52

            
	
              Tax
      Return 

            	
              30

            
	
              Title
      Arbitrator 

            	
              20

            
	
              Title
      Defect

            	
              14

            
	
              Title
      Defect Amount 

            	
              22

            
	
              Transition
      Services Agreement 

            	
              49

            
	
              Unadjusted
      Purchase Price

            	
              8

            
	
              Undeveloped
      Assumption Data 

            	
              13

            
	
              Undeveloped
      Locations

            	
              13

            
	
              Units

            	
              2

            
	
              Wells 

            	
              2

            

    

     

    
      
        
        

      

      
        -ix-

        
          

        

      

      
        
        

      

    

    PURCHASE AND SALE
AGREEMENT

    

    This
Purchase and Sale Agreement (this "Agreement"), is dated
as of June 10, 2008, by and between O'Brien Resources, LLC, a Texas limited
liability company, O'BENCO II, LP, a Delaware limited partnership, Liberty
Energy, LLC, a Massachusetts limited liability company, Crow Horizons Company, a
Louisiana general partnership, and Sepco II, LLC a Louisiana limited liability
company (collectively, the "Seller," and each a
"Seller
Party"), and Berry Petroleum Company, a Delaware corporation ("Purchaser").  Seller
and Purchaser are sometimes referred to herein collectively as the "Parties" and
individually as a "Party."

     

    RECITALS:

     

    Seller
desires to sell and Purchaser desires to purchase those certain interests in oil
and gas properties, rights and related assets that are defined and described as
"Assets" herein; and

     

    It is the
intent of the Seller to transfer, and the intent of Purchaser to acquire,
subject to the Excluded Assets and the further terms and conditions of this
Agreement, all other leases, lands, surface interests, and other assets owned by
Seller and located, as of the Effective Date or as of the Closing Date, on the
lands highlighted in yellow on the plat attached hereto as Exhibit A-5,
whether or not such leases, lands, surface interests, or other assets are
described on Exhibits A-1
through A-4
hereto.

     

    NOW,
THEREFORE, in consideration of the premises and of the mutual promises,
representations, warranties, covenants, conditions, and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree as
follows:

     

    ARTICLE
I

    PURCHASE
AND SALE

     

    Section
1.1           Purchase
and Sale.  On the terms and conditions contained in this
Agreement, Seller agrees to sell to Purchaser and Purchaser agrees to purchase,
accept, and pay for the Assets.

     

    Section
1.2            Certain
Definitions.  As used herein:

     

    (a)           "Assets" means all of
Seller's right, title, and interest in and to the following:

     

    (i)           The
oil and gas leases, oil, gas, and mineral leases and subleases described on
Exhibit A-1
(the "Leases")
together with the lands covered thereby (the "Lands"), and all
rights to production after the Effective Date relating to the Leases and the
Lands, including, without limitation, all royalties, overriding royalties, net
profits interests, mineral fee interests, carried interests, and, without
limiting the foregoing, other rights (of whatever character, whether legal or
equitable, and whether vested or contingent) in and to the oil, gas, and other
minerals in, on, under, and that may be produced from, the Leases and the
Lands;

     

    
      
        
          
          

        

        
           

          
            

          

        

        
          
          

        

      

    

    

    (ii)           Any
and all oil, gas, water, CO2, or
injection wells thereon or on pooled, communitized, or unitized acreage that
includes all or any part of the Leases, including, without limiting the
foregoing, the interests in the wells shown on Exhibit A-2
attached hereto, whether producing, non-producing, permanently or temporarily
plugged and abandoned, and whether or not fully described (the "Wells");

     

    (iii)           All
pooled, communitized, or unitized acreage which includes all or part of any
Leases (the "Units"), and all
tenements, hereditaments, and appurtenances belonging thereto;

     

    (iv)           The
gas processing plants, gas gathering systems, pipelines, drip stations, and
other mid-stream equipment described on Exhibit A-3 (the
"Midstream
Assets" and, together with the Leases, Wells, and Units, the "Properties");

     

    (v)           All
currently existing contracts, agreements, and instruments with respect to the
Properties, to the extent applicable to the Properties, including, without
limitation, operating agreements, unitization, pooling, and communitization
agreements, declarations and orders, area of mutual interest agreements, joint
venture agreements, farmin and farmout agreements, exchange agreements,
transportation agreements, agreements for the sale and purchase of Hydrocarbons,
and processing agreements; provided, however,
that the term "Contracts" shall not include (A) any contracts, agreements,
and instruments included within the definition of "Excluded Assets," and
(B) the Leases and other instruments constituting Seller's chain of title
to the Leases (subject to such exclusion and proviso, the "Contracts");

     

    (vi)           All
surface fee interests, easements, permits, licenses, servitudes, rights-of-way,
surface leases, and other rights to use the surface appurtenant to, and used or
held for use primarily in connection with, the Properties, but excluding any
permits and other appurtenances included within the definition of "Excluded
Assets" (subject to such exclusions, and including without limitation those
rights-of-way and other surface rights listed on Exhibit A-3, the
"Surface
Rights");

     

    (vii)          All
equipment, machinery, fixtures, and other tangible personal property and
improvements located on the Properties or used or held for use primarily in
connection with the operation of the Properties or the production of
Hydrocarbons from the Properties, the material items of which are described on
Exhibit A-4, including,
without limitation, the tubular inventory located on the Oakes Field yard in
Limestone County, Texas and in the Blocker Field location in Harrison County,
Texas and specifically described on Exhibit A-4, but
excluding items included within the definition of "Excluded Assets" (subject to
such exclusions, the "Equipment");

     

    (viii)         All
Hydrocarbons produced from, or directly attributable to, the Leases, Units, or
Wells after the Effective Date; all Hydrocarbon inventories from the Properties
in storage as of the end of the Effective Date; and, to the extent related to
the Properties, all production, plant, and transportation imbalances as of the
Effective Date (provided, however, that Purchaser's rights to the Assets
described in this subsection ‎(viii)
shall be satisfied solely pursuant to ‎Section
2.3); and

    
      
        
        

      

      
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    (ix)           The
data and records of Seller, to the extent directly relating to the Properties,
excluding, however:

     

    (A)           all
corporate, financial, Tax, and legal data and records of Seller that relate to
Seller's business generally (whether or not relating to the Assets) or to
Seller's business and operations not otherwise expressly included in this
Agreement;

     

    (B)           any
data, software, and records (including, without limitation, the licenses or
other agreements granting the right to use the same) to the extent disclosure or
transfer is prohibited or subjected to payment of a fee or other consideration
by any license agreement or other agreement with a Person other than Affiliates
of Seller, or by applicable Law, and for which no consent to transfer has been
received or for which Purchaser has not agreed in writing to pay the fee or
other consideration, as applicable;

     

    (C)           all
legal records and legal files of Seller including all work product of and
attorney-client communications with Seller's legal counsel (other than Leases,
title opinions, and Contracts);

     

    (D)           data
and records relating to the sale of the Assets, including, without limitation,
communications with the advisors or representatives of any Seller Party or
communications and arrangements among the Seller Parties and bids received from,
and records of negotiations with, third Persons;

     

    (E)           any
data and records relating to the other Excluded Assets; and

     

    (F)           original
data and records retained by Seller pursuant to ‎Section
13.6.

     

    (Clauses
(A) through (F) shall hereinafter be referred to as the "Excluded Records" and
subject to such exclusions, the data, software and records described in this
‎Section
1.2(a)(ix) shall hereinafter be referred to as the "Records.").

     

    (b)           "Affiliate" means,
with respect to any Person, a Person that directly or indirectly controls, is
controlled by, or is under common control with, such Person, with control in
such context meaning the ability to direct the management or policies of a
Person through ownership of voting shares or other securities, pursuant to a
written agreement, or otherwise.

     

    (c)           "Agreed Rate" means
the lesser of (i) the one month London Inter-Bank Offered Rate, as published on
Page BBAM of the Bloomberg Financial Markets Information Service on the last
Business Day prior to the Effective Date plus three percentage points (LIBOR
+3%) and (ii) the maximum rate allowed by applicable Laws.

    
      
        
        

      

      
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    (d)           "Business Day" means
any day other than a Saturday, a Sunday, or a day on which banks are closed for
business in New York, New York or Shreveport, Louisiana, United States of
America.

     

    (e)           "Code" means the
United States Internal Revenue Code of 1986, as amended.

     

    (f)           "Cut-Off Date" means
five o'clock local time at the location of the Properties on a date that is the
later to occur of (i) One-Hundred Eighty (180) days after the Closing Date
and (ii) December 31, 2008.

     

    (g)           "Effective Date" means
12:00 a.m. Central Time on February 1, 2008.

     

    (h)           "Governmental
Authority" means any national government and/or government of any
political subdivision, and departments, courts, commissions, boards, bureaus,
ministries, agencies, or other instrumentalities of any of them.

     

    (i)         
  "Hart-Scott-Rodino
Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.

     

    (j)        
   "Hydrocarbons" means
crude oil, gas, casinghead gas, condensate, natural gas liquids, and other
gaseous or liquid hydrocarbons (including, without limitation, ethane, propane,
iso-butane, nor-butane, gasoline, and scrubber liquids) of any type and chemical
composition.

     

    (k)           "Laws" means all laws,
statutes, rules, regulations, ordinances, orders, decrees, requirements,
judgments, and codes of Governmental Authorities.

     

    (l)        
   "Lowest Cost Response"
means, with respect to any Environmental Defect, the response required or
allowed under Environmental Laws that addresses such Environmental Defect to the
extent required by applicable Environmental Laws at the lowest cost (considered
as a whole taking into consideration any material negative impact such response
may have on the operations of the relevant Assets and any potential material
additional costs or liabilities that may likely arise as a result of such
response) as compared to any other response that is required or allowed under
Environmental Laws.

     

    (m)           "Material Adverse
Effect" means a material adverse effect (i) on the ownership or operation
of the Assets, taken as a whole, or (ii) on the ability of Seller to perform its
obligations under this Agreement to the extent such obligations are to be
performed prior to Closing or to consummate the transactions contemplated
hereby; provided,
however, that Material Adverse Effect shall not include material adverse
effects resulting from general changes in oil and gas prices; general changes in
industry, economic or political conditions, or markets; changes in condition or
developments generally applicable to the oil and gas industry in any area or
areas where the Assets are located; acts of God, including hurricanes and
storms; acts or failures to act of Governmental Authorities (where not caused by
the willful or negligent acts of Seller); civil unrest or similar disorder;
terrorist acts; changes in Laws; effects or changes that are cured or that no
longer exist by the earlier of the Closing and the termination of this Agreement
pursuant to Article 11; and changes resulting from the announcement of the
transactions

    
      
        
        

      

      
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    contemplated
hereby or the performance of the covenants set forth in Article 7 or ‎Section
9.4(e) hereof.

     

    (n)           "Material Contract"
means, to the extent binding on the Properties after Closing:

     

    (i)           
any farm-out agreements, participation, exploration, or other similar upstream
agreements, joint operating agreements, unit agreements, AMI agreements,
communitization agreements, pooling agreements, processing agreements,
transportation agreements, and water disposal agreements;

     

    (ii)          
 any Contract for the sale of Hydrocarbons produced or to be produced from
the Properties that is not terminable by Seller or its successors without
penalty on no more than ninety (90) days notice;

     

    (iii)           any
Contract that can reasonably be expected to result in aggregate payments by any
Seller Party or Purchaser of more than Two-Hundred Thousand dollars ($200,000)
during the current or any subsequent fiscal year;

     

    (iv)           any
Contract that can reasonably be expected to result in revenues to any Seller
Party or Purchaser of more than Two-Hundred Thousand dollars ($200,000) during
the current or any subsequent fiscal year;

     

    (v)       
    any Contract that constitutes a lease under which Seller
is the lessor or lessee of real or personal property which lease (A) cannot
be terminated by Seller without penalty upon sixty (60) days or less notice and
(B) pursuant to which Seller pays or receives an annual base rental of more
than One-Hundred Thousand dollars ($100,000);

     

    (vi)           any
Contract with any Affiliate of any Seller Party, except to the extent that the
obligations of Seller in and to the same will be merged or otherwise cease to
exist at Closing;

     

    (vii)          any
Contract pending for the acquisition or disposition, directly or indirectly (by
merger or otherwise), of Assets with a value in excess of Two-Hundred Thousand
dollars ($200,000) (other than sales of
Hydrocarbons in the ordinary course of business);

     

    (viii)         Any
Contract for the purchase of tubular or similar goods; and

     

    (ix)           any
Contract pending for the acquisition or disposition (by merger or otherwise) of
all or any part of the Properties, including, without limitation, farm-out
agreements, participation, exploration, or other similar agreements, and area of
mutual interest agreements, but excluding rights of reassignment upon intent to
abandon a Property.

     

    (o)           "Person" means any
individual, corporation, partnership, limited liability company, trust, estate,
Governmental Authority, or any other entity.

    
      
        
        

      

      
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    (p)           "Property Costs" means
all operating expenses (including without limitation costs of insurance,
rentals, shut-in payments, title examination and curative actions, production
and similar Taxes measured by units of production, and severance Taxes,
attributable to production of Hydrocarbons from the Assets, but excluding
Seller's other Taxes) and capital expenditures (including without limitation
bonuses, broker fees, and other Lease acquisition costs, costs of drilling and
completing wells, and costs of acquiring equipment) incurred in the ownership
and operation of the Assets in the ordinary course of business, general and
administrative costs with respect to the Assets, and overhead costs charged to
the Assets under the applicable operating agreement or, if none, charged to the
Assets on the same basis as charged on the date of this Agreement (provided
that, where Seller or its Affiliates operate a Well and there is no applicable
operating agreement, such overhead costs shall be Nine-Thousand dollars ($9,000)
per Well per month in the event that a Well is being drilled, reworked,
sidetracked, plugged and abandoned (whether permanently or temporarily), or
otherwise actively modified (provided that such operations are in the ordinary
course of business), or Nine-Hundred dollars ($900) per Well per month for all
other Wells, in either case, proportionately reduced to Seller's working
interest in any such Well), but excluding without limitation liabilities,
losses, costs, and expenses attributable to:

     

    (i)        
    claims, investigations, administrative proceedings,
arbitration, or litigation directly or indirectly arising out, of or resulting
from, actual or claimed personal injury, illness, or death; property damage;
environmental damage or contamination; other torts; private rights of action
given under any Law; or violation of any Law;

     

    (ii)         
  obligations to plug wells, dismantle facilities, close pits and
clear the site and/or restore the surface or seabed around such wells,
facilities, and pits;

     

    (iii)           obligations
to remediate actual or claimed contamination of groundwater, surface water,
soil, or Equipment;

     

    (iv)           title
and environmental claims (including claims that Leases have
terminated);

     

    (v)        
   claims of improper calculation or payment of royalties
(including overriding royalties and other burdens on production) related to
deduction of post-production costs or use of posted or index prices or prices
paid by Affiliates;

     

    (vi)           gas
balancing and other production balancing obligations;

     

    (vii)          casualty
and condemnation; and

     

    (viii)         any
claims for indemnification, contribution, or reimbursement from any third Person
with respect to liabilities, losses, costs, and expenses of the type described
in preceding clauses (i) through (vii), whether such claims are made pursuant to
contract or otherwise.

     

    (q)           "Reserve Report" means
that certain report dated February 1, 2008 from Ryder Scott & Company
entitled "Estimated Future Reserves and Income Attributable to Certain Working
Interests of the Consolidated Selling Interests Including Liberty Energy,
LLC."

     

    
      
        
        

      

      
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    (r)           "Tax" means all taxes,
including any foreign, federal, state, or local income tax, surtax, remittance
tax, presumptive tax, net worth tax, special contribution, production tax,
pipeline transportation tax, freehold mineral tax, value added tax, withholding
tax, gross receipts tax, windfall profits tax, profits tax, severance 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, imposed by a Governmental
Authority together with any interest, fine, or penalty thereon.

     

    Section
1.3            Excluded
Assets.  Notwithstanding anything to the contrary in ‎Section
1.2 or elsewhere in this Agreement, the "Assets" shall not include any rights
with respect to the Excluded Assets.  "Excluded Assets"
shall mean the following:

     

    (a)           the
Excluded Records;

     

    (b)           copies
of other Records retained by Seller pursuant to ‎Section
13.6;

     

    (c)           Assets
excluded from this Agreement pursuant to ‎Section
3.6;

     

    (d)           all
claims against insurers and other third Persons pending on or prior to the
Effective Date;

     

    (e)           all
trademarks, trade names, and other intellectual property;

     

    (f)           all
futures, options, swaps, and other derivatives, and all software used for
trading, hedging, and credit analysis;

     

    (g)           all
of Seller's interests in office leases, buildings and other real property unless
expressly identified in ‎Section
1.2(a)(i), ‎Section
1.2(a)(iii), ‎Section
1.2(a)(vi), or on Exhibit
A-3;

     

    (h)           any
leased equipment and other leased personal property to the extent the lease is
not transferable without payment of a fee or other consideration, subject,
however, to ‎Section
3.6;

     

    (i)           all
office equipment, computers, software, cell phones, pagers, and other hardware,
personal property, and equipment, and contracts related thereto
that:  (A) do not relate solely and exclusively to the Properties or
relate to Seller's business generally or to other businesses or assets of Seller
and its Affiliates, except to the extent the same are expressly identified on
Exhibit A-3 or
(B) are set forth on Schedule 1.3 (even if
relating solely and exclusively to the Assets);

     

    (j)           any
Tax refund (whether by payment, credit, offset, or otherwise, and together with
any interest thereon) in respect of any Taxes for which Seller is liable for
payment or required to indemnify Purchaser under ‎Section
10.1;

    
      
        
        

      

      
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    (k)      
     refunds relating to severance Tax abatements
(whether by payment, credit, offset, or otherwise, and together with any
interest thereon) with respect to all taxable periods or portions thereof ending
on or prior to the Effective Date, whether received before, on, or after the
Effective Date (including, without limitation, refunds relating to the
designation by the Railroad Commission of Texas of any Well or Unit as "High
Cost" pursuant to the terms of 16 Tex. Admin. Code Sec.3.101);

     

    (l)  
          all indemnities and other
claims against Persons (even if between the Seller Parties or their respective
Affiliates) for Taxes for which Seller or its Affiliates is liable for payment
or required to indemnify Purchaser under ‎Section
10.1;

     

    (m)          
claims against insurers under policies held by Seller or its
Affiliates;

     

    (n)           costs
and revenues associated with all joint interest audits and other audits of
Property Costs covering periods for which Seller is in whole or in part
responsible for the Assets;

     

    (o)        
   any royalty, overriding royalty, net profits interest,
volumetric production payment, or other such interest reserved by, or conveyed
to, any Seller Party prior to the Closing Date, including, without limitation,
(i) the interests set forth on Schedule 1.3,
and (ii) any overriding royalty interest reserved by, or conveyed to, O'Brien
Resources, LLC prior to the Closing Date; and

     

    (p)     
      any other assets, contracts, equipment,
accounts, or other rights or properties described on Schedule 1.3.

     

    ARTICLE
II

    PURCHASE
PRICE

     

    Section
2.1           Purchase
Price.  The purchase price for the Assets (the "Purchase Price")
shall be Five -Hundred Ninety Million dollars ($590,000,000) (the "Unadjusted Purchase
Price"), adjusted as provided in ‎Section
2.3.  Contemporaneously with the execution and delivery of this
Agreement, Purchaser has delivered or caused to be delivered to the Shreveport
branch of Capital One, N.A. (the "Escrow Agent"), a
wire transfer in the amount equal to ten percent (10%) of the Unadjusted
Purchase Price in same-day funds (the "Deposit") to be held,
invested, and disbursed in accordance with the terms of an escrow agreement of
even date herewith among Seller, Purchaser, and Escrow Agent (the "Escrow
Agreement").  The Deposit and all income earned thereon shall
be distributed in accordance with the terms of this Agreement and the Escrow
Agreement.

     

    Section
2.2            Allocation
of Purchase Price.

     

    (a)           At
least ten (10) Business Days prior to the Target Closing Date, Seller shall
prepare and deliver to Purchaser, using and based upon the best information
available to Seller, a schedule (the "Seller's Proposed Allocation
Schedule") setting forth the following items:

     

    (i)       
     the Unadjusted Purchase Price as set forth in
‎Section
2.1;

     

    
      
        
        

      

      
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    (ii)      
     the liabilities associated with the Assets as of
the Closing that are taken into account for purposes of Section 1060 of the Code
with respect to the cost basis of the Assets as of Closing; and

     

    (iii)           an
allocation of the sum of (A) the Unadjusted Purchase Price under clause (i) and
(B) the aggregate amount of liabilities under clause (ii) that are includable in
the Purchaser's tax basis in the Assets among the classes of the Assets (but not
the specific Assets) as of the Closing, which allocations shall be made in
accordance with Section 1060 of the Code and the Treasury Regulations
promulgated thereunder, but which need not be consistent with the Allocated
Values established pursuant to ‎Section
3.4.

     

    Seller
shall, at Purchaser's request, make reasonable documentation available to
support the proposed allocations provided in Seller's Proposed Allocation
Schedule.  As soon as reasonably practicable, but not later than five
(5) Business Days following receipt of Seller's Proposed Allocation Schedule,
Purchaser shall deliver to Seller a written report setting forth any changes
that Purchaser proposes to be made to Seller's Proposed Allocation Schedule
(which report shall specify the reasons for any such changes in reasonable
detail and shall include true and complete copies of any supporting
documentation pursuant to which such changes are proposed).  The
Parties shall undertake to agree on a final schedule no later than two (2)
Business Days prior to the Closing Date.  In the event the Parties
cannot reach agreement by that date, the allocations set forth in Seller's
Proposed Allocation Schedule shall be used pending adjustment under the
following paragraph.  Notwithstanding anything to the contrary
contained in this Agreement, the allocations of value to Assets other than the
Leases, Wells, and Units (including, without limitation the Midstream Assets),
if any, shall not exceed twenty-five million dollars ($25,000,000), whether by
the initial allocation of value, any adjustments thereto, or otherwise; provided, however,
that to the extent that any adjustment to the Unadjusted Purchase Price would
cause the Allocated Value of such other Assets to exceed twenty-five million
dollars ($25,000,000), the amount of such excess shall be allocated to the Wells
and Units.

     

    (b)           Within
thirty (30) days after the determination of the Purchase Price under ‎Section
9.4(b), Seller's Proposed Allocation Schedule shall be amended by Seller and
delivered to Purchaser to reflect the Purchase Price following final
adjustments.  Purchaser shall cooperate with Seller in the preparation
of such amended schedule.  If the Seller's amendments to Seller's
Proposed Allocation Schedule are not objected to by Purchaser (by written notice
to Seller specifying the reasons therefor in reasonable detail) within thirty
(30) days after delivery of Seller's adjustments to such schedule, it shall be
deemed agreed upon by the Parties.  In the event that the Parties
cannot reach an agreement within twenty (20) days after Seller receives notice
of any objection by Purchaser, then (i) Purchaser shall be entitled to report
its allocation of the Purchase Price for Tax purposes, (ii) each Seller Party
shall be entitled to report its respective allocation of the Purchase Price for
Tax purposes, and (iii) as between Purchaser and the Seller Parties
collectively, such separate reports as filed and reported for Tax purposes need
not be consistent.

     

    Section
2.3            Adjustments
to Purchase Price.  The Unadjusted Purchase Price shall be
adjusted as follows:

    
      
        
        

      

      
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    (a)           Increased
or decreased, as appropriate, in accordance with ‎Section
3.5 and ‎Section
4.4 (whether before or after the Closing);

     

    (b)           Decreased
as a consequence of Assets excluded from this transaction as a consequence of
the exercise of preferential rights to purchase or the existence of a Casualty
Loss, as described in ‎Section
3.6 or ‎Section
12.4, respectively;

     

    (c)           Except
with respect to amounts relating to item 1 on Schedule 5.2, decreased by
the amount of royalty, overriding royalty, and other burdens payable out of
production of Hydrocarbons from the Leases and Units or the proceeds thereof to
third Persons but held in suspense by Seller at the Closing, and any interest
accrued in escrow accounts for such suspended funds, to the extent such funds
are not transferred to Purchaser's control at the Closing;

     

    (d)           Increased
or decreased, as applicable, for the value of net underproduction or net
overproduction, if any, of gas from Seller's interest in the Properties as a
result of pipeline or other imbalances as of the Effective Date, based upon the
amount of the net imbalance in MMBtu multiplied by Inside FERC's Gas Market
Report Index price for East Texas, Houston Ship Channel as in effect on the
first day of the month of the Target Closing Date; provided, however
that:

     

    (i)           Notwithstanding
anything to the contrary contained in this Agreement, there shall be no
adjustment to the Purchase Price for imbalances between the Seller Parties to
the extent that any claim with respect to any such imbalance is assigned to
Purchaser; and

     

    (ii)           Except
with respect to breaches of the representation set forth in ‎Section
5.7 , the adjustment to the Purchase Price set forth in this ‎Section
2.3(d) shall be in full settlement of all imbalances of any type, and, at
Closing, Purchaser shall assume Seller's proportionate share of any imbalance
with respect to the Properties, including, without limitation, the
responsibility for the payment of royalties with respect to such imbalance and
any obligation to balance, whether in cash or in kind.

     

    (e)           Increased
by the aggregate amount of Hydrocarbon inventories from the Properties in
storage on the Effective Date and produced for the account of Seller with
respect to the Properties on or prior to the Effective Date, multiplied by the
Contract price therefor, or, if there is no applicable Contract, ninety dollars
($90.00) per barrel;

     

    (f)           Except
to the extent that such prepaid Taxes are included within the definition of the
"Excluded Assets," increased by the net amount of all prepaid expenses
(including prepaid Taxes, bonuses, rentals, cash calls to third Person
operators, and scheduled payments) less all third Person
cash call payments received by Seller as operator to the extent applying to the
operation of the Assets after the Effective Date; and

     

    (g)           Adjusted
for proceeds and other income attributable to the Assets, Property Costs, and
certain other costs attributable to the Assets as follows:

    
      
        
        

      

      
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    (i)         
  Decreased by an amount equal to the aggregate amount of the
following proceeds received by Seller or any of its Affiliates:

     

    (A)           amounts
earned from the sale, during the period from and including the Effective Date
through but excluding the Closing Date (such period being referred to as the
"Adjustment
Period"), of oil, gas, and other Hydrocarbons produced from or
attributable to the Properties (net of any (x) royalties, overriding
royalties, and other burdens payable out of production of oil, gas, or other
Hydrocarbons or the proceeds thereof that are not included in Property Costs;
(y) gathering, processing, and transportation costs paid in connection with
sales of oil, gas, or other Hydrocarbons that are not included as Property Costs
under ‎Section
2.3(g)(ii); and (z) production Taxes, other Taxes measured by units of
production, severance Taxes and any other Property Costs, that in any such case
are deducted by the purchaser of production, and excluding the effects of any
futures, options, swaps, or other derivatives), and

     

    (B)           other
income earned with respect to the Assets during the Adjustment Period (provided
that for purposes of this ‎Section
2.3(g), no adjustment shall be made for funds received by Seller for the account
of third Persons, and excluding any income earned from futures, options, swaps,
or other derivatives); and

     

    (ii)           Increased
by an amount equal to the amount of all Property Costs, and other amounts
(including those Taxes and other amounts expressly excluded from the definition
of Property Costs) which are incurred in the ownership and operation of the
Assets during the Adjustment Period but paid by or on behalf of Seller or any of
its Affiliates, except in each case (A) any costs already deducted in the
determination of proceeds in ‎Section
2.3(g)(i), (B) Taxes (other than production Taxes and other Taxes measured
by units of production and severance Taxes), which are addressed in ‎Section
10.1, and (C) costs attributable to futures, options, swaps or other
derivatives, or the elimination of the same pursuant to ‎Section
7.9.

     

    The
amount of each adjustment to the Unadjusted Purchase Price described in ‎Section 2.3(f) and
‎Section
2.3(g) shall be determined in accordance with the United States generally
accepted accounting principles (the "Accounting
Principles").

     

    Section
2.4           Ordinary
Course Pre-Effective Date Costs Paid and Revenues Received
Post-Closing.

     

    (a)           With
respect to any revenues earned or Property Costs incurred with respect to the
Assets on or prior to the Effective Date but received or paid after the Closing
Date:

     

    (i)       
    Seller shall be entitled to all amounts earned from the
sale, during the period up to but excluding the Effective Date, of oil, gas, and
other Hydrocarbons produced from or attributable to the Properties, which
amounts are received after Closing (net of any (A) royalties, overriding
royalties, and other burdens payable out of production of oil, gas, or other
Hydrocarbons or the proceeds thereof that are not included in Property Costs;
(B) gathering, processing, and transportation costs paid in connection with
sales of oil, gas, and other Hydrocarbons that are not included as Property
Costs under ‎Section
2.4(a)(ii); and (C) production Taxes, other Taxes measured by units of
production, severance Taxes, and other Property Costs, that in any such case are
deducted by the purchaser of production), and to all other income earned with
respect to the Assets up to but excluding the Effective Date and received after
Closing; and

    
      
        
        

      

      
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    (ii)           Seller
shall be responsible for (and entitled to any refunds and indemnities with
respect to) all Property Costs incurred up to but excluding the Effective Date
that are paid after the Closing.

     

    (b)           Without
duplication of any adjustments made pursuant to ‎Section
2.3(g), should any Party or its Affiliates receive after Closing any proceeds or
other income to which the other Party is entitled under ‎Section
2.4(a), such Party shall fully disclose, account for, and promptly remit the
same to such other Party.

     

    (c)           Without
duplication of any adjustments made pursuant to ‎Section
2.3(g), should any Party pay after Closing any Property Costs for which the
other Party is responsible under ‎Section
2.4(a), such Party shall reimburse the other Party promptly after receipt of
such other Party's invoice, accompanied by copies of the relevant vendor or
other invoice and proof of payment.

     

    (d)           Without
limiting the foregoing, Purchaser shall fully disclose, account for, and
promptly remit to Seller any amounts relating to item 1 on Schedule 5.2
until such time as, in the opinion of Seller (in the exercise of its sole
discretion), it is no longer necessary to hold such amounts in
suspense.

     

    "Earned"
and "incurred," as used in this Section and ‎Section 2.3, shall
be interpreted in accordance with accounting recognition guidance under the
Accounting Principles.

     

    Section
2.5            Procedures.

     

    (a)           For
purposes of allocating production (and accounts receivable with respect
thereto), under ‎Section
2.3 and ‎Section
2.4, (i) liquid Hydrocarbons shall be deemed to be "from or attributable
to" the Properties when they pass through the pipeline connecting into the
storage facilities into which they are run or, if there are no such storage
facilities, when they pass through the LACT units or similar meters at the point
of entry into the pipelines through which they are transported from the
applicable Lease or Unit, and (ii) gaseous Hydrocarbons shall be deemed to
be "from or attributable to" the Properties when they pass through the delivery
point sales meters or similar meters at the point of entry into the pipelines
through which they are transported.  Seller shall utilize reasonable
interpolative procedures to arrive at an allocation of production when exact
meter readings are not available.

     

    Surface
use fees, insurance premiums, and other Property Costs that are paid
periodically shall be prorated based on the number of days in the applicable
period falling on or before, or after, the Effective Date.  Production
Taxes and similar Taxes measured by units of production, and severance Taxes,
shall be prorated based on the amount of Hydrocarbons actually produced,
purchased or sold, as applicable, on or before, and after, the Effective
Date.

    
      
        
        

      

      
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    (b)           After
Closing, Purchaser shall handle all joint interest audits and other audits of
Property Costs covering periods for which Seller is in whole or in part
responsible under ‎Section
2.4.  Purchaser shall not agree to any adjustments to previously
assessed costs for which Seller is liable, or any compromise of any audit claims
to which Seller would be entitled, without the prior written consent of Seller,
which consent shall not be unreasonably withheld.  Purchaser shall
provide Seller with a copy of all applicable audit reports and written audit
agreements received by Purchaser and relating to periods for which Seller is
responsible.

     

    ARTICLE
III

    TITLE
MATTERS

     

    Section
3.1           
Seller's
Title.

     

    (a)           Subject
to ‎Section
13.18, Seller represents and warrants to Purchaser that Seller's title to the
Units and Wells shown on Exhibit A-2 and
the proved non-producing, undeveloped, probable, and possible locations shown on
Exhibit A-2 and
depicted on Exhibit A-5 (the "Undeveloped
Locations") is (and as of the Closing Date shall be) Defensible Title as
defined in ‎Section
3.2.  This representation and warranty provides Purchaser's exclusive
remedy with respect to any Title Defects.

     

    (b)           The
Assignment and Bill of Sale to be delivered by Seller to Purchaser at Closing
(the "Assignment and
Bill of Sale") shall be in form identical to the assignment attached
hereto as Exhibit
B and shall contain a special warranty of title to the Leases shown on
Exhibit A-1 by,
through, and under each Seller Party severally and not jointly, but not
otherwise, subject to the Permitted Encumbrances.  Purchaser shall not
be entitled to protection under Seller's special warranty of title in the
Assignment and Bill of Sale against any Title Defect reported by Purchaser to
Seller pursuant to this Article 3 or to the extent the same has been cured
or removed pursuant to ‎Section
3.5(b).

     

    (c)           With
respect to each Undeveloped Location, Purchaser shall not be entitled to
protection under Seller's representation in ‎Section
3.1(a) against any Title Defect to the extent based upon, or arising out of,
(i) Purchaser's change in the surface or bottom hole location of such
Undeveloped Location (or the path of the borehole thereof) (A) to or across
a location wholly or partially outside of the applicable Unit (or, with respect
to Undeveloped Locations located within the Alton Sims lease, the applicable
Lease), (B) to or across a location which is not in all respects in
compliance with any applicable Laws (including, without limitation, density and
spacing rules of the Texas Railroad Commission), or (C) to or across all or
any portion of the "Exclusion Acreage" described on Schedule 3.1; or
(ii) the completion of any Undeveloped Location at depths deeper than the
depth limitations applicable to such Undeveloped Location, if any, described on
Exhibit A-1
(collectively, the "Undeveloped Assumption
Data").

    
      
        
        

      

      
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    Section
3.2            Definition of Defensible
Title.

     

    (a)           As
used in this Agreement, the term "Defensible Title"
means that title of the Seller Parties which, subject to the Permitted
Encumbrances:

     

    (i)           
Entitles all of the Seller Parties, collectively, to receive (after satisfaction
of all royalties, overriding royalties, nonparticipating royalties, net profits
interests, or other similar burdens on or measured by production of oil and
gas), not less than the "net revenue interest" share shown in Exhibit A-2 of
all oil, gas, and other minerals produced, saved, and marketed from such Unit,
Well, or Undeveloped Location, except decreases in connection with those
operations in which any Seller Party may be a nonconsenting co-owner (provided
that, in the event of a decrease due to an actual election of non-consent by a
Seller Party in which a third Person is entitled to all or a portion of such
Seller Party's interests, such decrease is reflected on Exhibit A-2)
decreases resulting from reversion of interest to co-owners with respect to
operations in which such co-owners elected not to consent (to the extent
reflected in Exhibit
A-2), decreases resulting from the establishment or amendment of pools or
units, decreases required to allow other working interest owners to make up past
underproduction or pipelines to make up past under deliveries, and except as
otherwise stated in Exhibit A-2;

     

    (ii)      
     Obligates all of the Seller Parties, collectively,
to bear a percentage of the costs and expenses for the maintenance and
development of, and operations relating to, any Unit, Well, or Undeveloped
Location not greater than the "working interest" shown in Exhibit A-2,
except as stated in Exhibit A-2 and
except increases resulting from contribution requirements with respect to
defaulting or non-consenting co-owners under applicable operating agreements or
applicable Law and increases that are accompanied by at least a proportionate
increase in Seller's net revenue interest; and

     

    (iii)           Is
free and clear of liens, encumbrances, obligations, or defects, other than
Permitted Encumbrances.

     

    (b)           As
used in this Agreement, the term "Title Defect" means
any lien, charge, encumbrance, obligation, or defect, including, without
limitation, a discrepancy in net revenue interest or working interest that
causes a breach of Seller's representation and warranty in ‎Section
3.1.

     

    Section
3.3            Definition
of Permitted Encumbrances.  As used herein, the term "Permitted
Encumbrances" means any or all of the following:

     

    (a)           Lessors'
royalties and any overriding royalties, reversionary interests, back-in
interests, and other burdens to the extent that they do not, individually or in
the aggregate, reduce Seller's net revenue interest below that shown in Exhibit A-2 or
increase Seller's working interest above that shown in Exhibit A-2
without a corresponding increase in the net revenue interest;

     

    (b)           All
leases, unit agreements, pooling agreements, operating agreements, production
sales contracts, division orders, farmouts, exploration agreements, carried
interests, sales agreements, royalty or overriding royalty agreements, and other
contracts, agreements, and instruments applicable to the Assets, including
provisions for penalties, suspensions, or forfeitures contained therein, to the
extent that they do not, individually or in the aggregate, reduce Seller's net
revenue interest below that shown in Exhibit A-2 or
increase Seller's working interest above that shown in Exhibit A-2 without a
corresponding increase in the net revenue interest;

    
      
        
        

      

      
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     (c)           Subject
to ‎Section
3.6, rights of first refusal, preferential rights to purchase, and similar
rights with respect to the Assets;

     

    (d)           Third-party
consent requirements and similar restrictions (i) which are not applicable
to the sale of the Assets contemplated by this Agreement, (ii) with respect
to which waivers or consents are obtained from the appropriate Persons prior to
the Closing Date, (iii) with respect to which the appropriate time period
for asserting the right has expired, (iv) which need not be satisfied prior
to a transfer, (v) which are not Material Consents, or (vi) which
relate to Excluded Records;

     

    (e)           Liens
for Taxes or assessments not yet delinquent or, if delinquent, being contested
in good faith by appropriate actions;

     

    (f)           Materialman's,
mechanic's, repairman's, employee's, contractor's, operator's, and other similar
liens or charges arising in the ordinary course of business for amounts not yet
delinquent (including any amounts being withheld as provided by Law), or if
delinquent, being contested in good faith by appropriate actions;

     

    (g)           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 rights or interests therein if they are customarily obtained
subsequent to the sale or conveyance;

     

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

     

    (i)      
     Easements, rights-of-way, covenants, servitudes,
permits, surface leases, and other rights in respect of surface operations to
the extent that they do not reduce Seller's net revenue interest below that
shown on Exhibit
A-2 or increase Seller's working interest beyond that shown on Exhibit A-2 without a
corresponding increase in net revenue interest;

     

    (j)       
    Any actual or asserted termination of Seller's title to
any Lease held by production as a consequence of the failure to conduct
operations, cessation of production, or insufficient production over any period
prior to the Closing Date unless the lessor thereunder has asserted that such
Lease has terminated, whether by direct communication, refusal to accept payment
of royalty, shut-in royalty, or other amounts calculable as a share of
production from such Lease, or otherwise;

     

    (k)           All
rights reserved to or vested in any Governmental Authorities to control or
regulate any of the Assets in any manner or to assess Tax with respect to the
Assets, the ownership, use or operation thereof, or revenue, income, or capital
gains with respect thereto, and all obligations and duties under all applicable
Laws of any such Governmental Authority or under any franchise, grant, license,
or permit issued by any Governmental Authority;

     

    
      
        
        

      

      
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    (l)        
   The liens and encumbrances set forth on Schedule 3.3, and any
other lien, charge, or other encumbrance on or affecting the Assets which is
expressly waived, assumed, bonded, or paid by Purchaser at or prior to Closing
or which is discharged by Seller at or prior to Closing;

     

    (m)           Any
lien or trust arising in connection with workers' compensation, unemployment
insurance, pension, or employment laws or regulations;

     

    (n)           Assertions
that Seller's files lack information (including, without limitation, title
opinions);

     

    (o)           Failure
to recite marital status in a document or omissions of successors or heirship or
estate proceedings, unless Purchaser provides affirmative evidence that such
failure or omission has resulted in another Person's actual and superior claim
of title to the relevant Property and either (i) such other Person has asserted
an actual and superior claim of title to the relevant Property or (ii) less than
two (2) years have elapsed since the date of such document;

     

    (p)           Lack
of a survey, unless a survey is required by applicable Law;

     

    (q)           Lack
of corporate or other entity authorization absent reasonable evidence of an
actual claim of superior title from a third Person attributable to such alleged
lack of authorization;

     

    (r)        
   Failure to record assignments of any Property between any
Seller Parties in the county in which such Property is located;

     

    (s)           Matters
for which the applicable statue of limitations for assertion thereof has expired
(including, without limitation, title by limitations or adverse
possession);

     

    (t)        
   Matters cured by the acquisition by Purchaser of all right,
title, and interest of all Seller Parties in and to the Assets (including
requirements for stipulations between the Seller Parties or their respective
predecessors in interest) to the extent that the same do not, individually or in
the aggregate, reduce Seller's collective net revenue interest below that shown
in Exhibit A-2 or
increase Seller's collective working interest above that shown in Exhibit A-2
without a corresponding increase in the net revenue interest;

     

    (u)           Unreleased
instruments (including leases covering oil, gas, and other minerals), absent
specific evidence that such instruments continue in force and effect and
constitute a superior claim of title with respect to the Wells, Units, or
Undeveloped Locations shown on Exhibit A-2;

     

    (v)           Leases
or other instruments entitling a third Person to the rights to coal, lignite,
sulphur, uranium, or any other mineral, and operations (including, without
limitation, reclamation operations) conducted by third Persons pursuant thereto
absent specific evidence that existence thereof, and operations currently being
conducted pursuant thereto, materially interfere with operations (i) currently
being conducted by Seller or (ii) for which Seller has specific plans existing
as of the date hereof with respect to the Wells and Units shown on Exhibit A-2;

    
      
        
        

      

      
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    (w)           Depth
severances or any other change in the working interest or net revenue interest
of Seller with depth to the extent that they do not reduce Seller's net revenue
interest below that shown on Exhibit A-2 or
increase Seller's working interest beyond that shown on Exhibit A-2 without a
corresponding increase in net revenue interest;

     

    (x)           Any
matters reflected on Exhibit A-2 or Schedule 3.3;
and

     

    (y)           Any
other liens, charges, encumbrances, defects, or irregularities which do not,
individually or in the aggregate, materially detract from the value of or
materially interfere with the use or ownership of the Assets subject thereto or
affected thereby (as currently used or owned) and which would be accepted by a
reasonably prudent purchaser engaged in the business of owning and operating oil
and gas properties, including, without limitation, the absence of any lease
amendment or consent by any royalty interest or mineral interest holder
authorizing the pooling of any leasehold interest, royalty interest, or mineral
interest, matters for which Seller owns a protection or top lease or other
instrument, and the failure of Exhibits A-1 and
A-2 to reflect
any lease or any unleased mineral interest where the owner thereof was treated
as a non-participating co-tenant during the drilling of any well.

     

    Section
3.4           Allocated
Values.  Schedule 3.4 sets
forth the agreed allocation of the Unadjusted Purchase Price among the
Properties for purposes of Seller's title representation in this
Article 3.  The "Allocated Value" for
any Well, Unit, or Undeveloped Location equals the portion of the Unadjusted
Purchase Price that is allocated to such Well, Unit, or Undeveloped Location on
Schedule 3.4,
increased or decreased by a share of each adjustment to the Unadjusted Purchase
Price under ‎Section
2.3(c), ‎(d),
‎(e),
‎(f),
and ‎(g).  The
share of each adjustment allocated to a particular Well, Unit, or Undeveloped
Location shall be obtained by allocating that adjustment among the various
Assets on a pro-rata basis in proportion to the Unadjusted Purchase Price
allocated to each such Asset on Schedule 3.4.  Seller
has accepted such Allocated Values for purposes of this Article 3, but otherwise
makes no representation or warranty as to the accuracy of such
values.  Notwithstanding anything to the contrary contained in this
Agreement, the Allocated Value of the Assets other than the Leases, Wells, and
Units (including, without limitation the Midstream Assets) if any, shall not
exceed twenty-five million dollars ($25,000,000), whether by the initial
allocation of value made pursuant to this ‎Section
3.4, any adjustments thereto, or otherwise; provided, however,
that to the extent that any adjustment to the Unadjusted Purchase Price would
cause the Allocated Value of such other Assets to exceed twenty-five million
dollars ($25,000,000), the amount of such excess shall be allocated to each of
the other Wells, Units, and Undeveloped Locations to which a portion of the
Unadjusted Purchase Price was allocated in proportion to the relationship that
the Allocated Value for such Well, Unit, or Undeveloped Location bears to the
aggregate Allocated Values of such Wells, Units, and Undeveloped
Locations.

     

    Section
3.5            Notice of
Title Defects; Defect Adjustments.

     

    (a)           To
assert a claim arising out of a breach of ‎Section
3.1, Purchaser must deliver a defect claim notice or notices to Seller on or
before the Cut-Off Date; provided, however,
that Purchaser shall use its commercially reasonable efforts to deliver a defect
claim notice with respect to a specific alleged Title Defect on or before five
(5) Business Days after Purchaser obtains knowledge of the existence of such
Title Defect, even if the date of delivery of such defect claim notice is prior
to the Cut-Off Date.  Each such notice shall be in writing and shall
include:

    
      
        
        

      

      
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    (i)           a
description of the alleged Title Defect(s);

     

    (ii)           the
Units, Wells, or Undeveloped Locations affected;

     

    (iii)           the
Allocated Values of the Units, Wells, or Undeveloped Locations subject to the
alleged Title Defect(s);

     

    (iv)           true
and complete copies of any documentation supporting the existence, nature, and
basis of the alleged Title Defect(s); and

     

    (v)           the
amount by which Purchaser reasonably believes the Allocated Values of those
Units, Wells, or Undeveloped Locations are reduced by the alleged Title
Defect(s) and the computations and information upon which Purchaser's belief is
based.

     

    PURCHASER SHALL BE DEEMED TO HAVE
WAIVED ALL BREACHES OF ‎SECTION 3.1 OF WHICH SELLER HAS NOT
BEEN GIVEN NOTICE ON OR BEFORE THE CUT-OFF DATE.

     

    (b)           Seller
shall have the right, but not the obligation, to attempt, at Seller's sole cost,
to cure or remove on or before sixty (60) days after the Cut-Off Date any Title
Defects of which Seller has been advised by Purchaser.  No reduction
shall be made in the Unadjusted Purchase Price with respect to a Title Defect if
Seller has provided notice at least five (5) Business Days after the Cut-Off
Date of Seller's intent to attempt to cure the Title Defect.  If the
Title Defect is not cured at the end of the sixty (60) day period, the
adjustment required under this Article 3 shall be made pursuant to ‎Section
2.3(a).  Seller's election to attempt to cure a Title Defect shall not
constitute a waiver of any rights of Seller under this Article 3,
including, without limitation, Seller's right to dispute the existence, nature
or value of, or cost to cure, the Title Defect.

     

    (c)           With
respect to each Unit, Well, or Undeveloped Location affected by Title Defects
reported under ‎Section
3.5(a), the Unit, Well, or Undeveloped Location shall be assigned at Closing,
subject to all uncured Title Defects, and, subject to Seller's election under
‎Section
3.5(b), the Unadjusted Purchase Price shall be reduced by an amount (the "Title Defect Amount")
equal to the reduction in the Allocated Value for such Unit, Well, or
Undeveloped Location caused by such Title Defects, as determined pursuant to
‎Section
3.5(e).  Notwithstanding the foregoing provisions of this ‎Section
3.5(c), no reduction shall be made in the Unadjusted Purchase Price with respect
to any Title Defect for which Seller at its election executes and delivers to
Purchaser a written indemnity agreement, in form and substance reasonably
satisfactory to Purchaser, under which Seller agrees to fully, unconditionally,
and irrevocably indemnify and hold harmless Purchaser and its successors and
assigns from any and all Damages (irrespective of any limitation on amount
contained in ‎Section
12.2(d)(iii)) arising out of or resulting from such Title Defect.

     

    (d)‎          
SECTION 3.5(C) SHALL, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BE THE EXCLUSIVE RIGHT AND
REMEDY OF PURCHASER WITH RESPECT TO SELLER'S BREACH OF ITS WARRANTY AND
REPRESENTATION IN ‎SECTION 3.1.  EXCEPT AS
SPECIFICALLY PROVIDED IN ‎SECTION 3.5(C) AND THE ASSIGNMENT AND BILL OF SALE, PURCHASER RELEASES, REMISES, AND
FOREVER DISCHARGES EACH SELLER PARTY AND ITS RESPECTIVE AFFILIATES AND ALL SUCH
PARTIES' MEMBERS, PARTNERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS,
AND REPRESENTATIVES FROM ANY AND ALL SUITS, LEGAL OR ADMINISTRATIVE PROCEEDINGS,
CLAIMS, DEMANDS, DAMAGES, LOSSES, COSTS, LIABILITIES, INTEREST, OR CAUSES OF
ACTION WHATSOEVER, IN LAW OR IN EQUITY, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT
NOW OR SUBSEQUENTLY MAY HAVE, BASED ON, RELATING TO OR ARISING OUT OF, ANY TITLE
DEFECT.

    
      
        
        

      

      
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     (e)           The
Title Defect Amount resulting from a Title Defect shall be determined as
follows:

     

    (i)       
     if Purchaser and Seller agree on the Title Defect
Amount, that amount shall be the Title Defect Amount;

     

    (ii)        
   if the Title Defect is a lien, encumbrance, or other charge
which is undisputed and liquidated in amount, then the Title Defect Amount shall
be the amount necessary to be paid to remove the Title Defect from Seller's
interest in the affected Unit, Well, or Undeveloped Location;

     

    (iii)           if
the Title Defect represents a discrepancy between (A) the net revenue
interest for any Unit, Well, or Undeveloped Location and (B) the net
revenue interest or percentage stated on Exhibit A-2,
then the Title Defect Amount shall be the product of the Allocated Value of such
Unit, Well, or undeveloped location multiplied by a fraction, the numerator of
which is the net revenue interest or percentage ownership decrease and the
denominator of which is the net revenue interest or percentage ownership stated
on Exhibit A-2,
provided that if the Title Defect does not affect the Unit, Well, or Undeveloped
Location throughout its entire productive life, or, with respect to a
Undeveloped Location, if the Hydrocarbons (if any) attributable to such
Undeveloped Location would not be produced until a future date, the Title Defect
Amount determined under this ‎Section
3.5(e)(iii) shall be reduced to take into account the applicable time period
only;

     

    (iv)           if
the Title Defect represents an obligation, encumbrance, burden, or charge upon
or other defect in title to the affected Unit, Well, or Undeveloped Location of
a type not described in subsections ‎(i),
‎(ii),
or ‎(iii)
above, the Title Defect Amount shall be determined by taking into account the
Allocated Value of the Unit, Well, or Undeveloped Location so affected, the
portion of Seller's interest in the Unit, Well, or Undeveloped Location affected
by the Title Defect, the legal effect of the Title Defect, the potential
economic effect of the Title Defect over the life of the affected Unit, Well, or
Undeveloped Location, the values placed upon the Title Defect by Purchaser and
Seller, and such other factors as are necessary to make a proper
evaluation;

    
      
        
        

      

      
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    (v)           notwithstanding
anything to the contrary in this Article 3, (A) an individual claim
for a Title Defect for which a claim notice is given prior to the Cut-Off Date
shall only generate an adjustment to the Unadjusted Purchase Price under this
Article 3 if the Title Defect Amount with respect thereto exceeds
Two-Hundred Thousand dollars ($200,000), (B) the aggregate Title Defect
Amounts attributable to the effects of all Title Defects upon any given Unit,
Well, or Undeveloped Location shall not exceed the Allocated Value of such Unit,
Well, or Undeveloped Location and (C) there shall be no adjustment to the
Unadjusted Purchase Price for Title Defects unless and until the aggregate Title
Defect Amounts that are entitled to an adjustment under ‎Section
3.5(e)(v)(A) and for which claim notices were timely delivered in accordance
with the requirements of this Article 3 exceed Two Million dollars
($2,000,000), after which the Unadjusted Purchase Price may be adjusted for all
Title Defect Amounts that are entitled to an adjustment under ‎Section
3.5(e)(v)(A);

     

    (vi)           if
a Title Defect is reasonably susceptible of being cured, the Title Defect Amount
determined under subsections ‎(iii)
or ‎(iv)
above shall not be greater than the reasonable cost and expense of curing such
Title Defect; and

     

    (vii)           the
Title Defect Amount with respect to a Title Defect shall be determined without
duplication of any costs or losses (A) included in another Title Defect Amount
hereunder or (B) for which Purchaser otherwise receives credit in the
calculation of the Purchase Price.

     

    (f)    
       If Seller and Purchaser are unable to
agree upon a Title Defect Amount (or the adjustment to the Unadjusted Purchase
Price to be made pursuant thereto) on or before the Cut-Off Date, then, subject
to ‎Section
3.5(b), Seller's good faith estimate shall be used to determine the Title Defect
Amount pending resolution of the dispute pursuant to this ‎Section
3.5(f), and the Title Defect Amounts in dispute shall be exclusively and finally
resolved by arbitration pursuant to this ‎Section
3.5(f) (subject to ‎Section
3.5(b)).  During the 10-day period following the Cut-Off Date, Title
Defect Amounts in dispute shall be submitted to a title attorney with at least
10 years' experience in oil and gas titles in Texas as selected by mutual
agreement of Purchaser and Seller, or, absent such agreement during the 10-day
period, by the Houston office of the American Arbitration Association (the
"Title
Arbitrator").  Likewise, if by the end of the sixty (60) day
cure period under ‎Section
3.5(b), Seller has failed to cure any Title Defects which it provided notice
that it would attempt to cure, and Seller and Purchaser have been unable to
agree on the Title Defect Amounts for such Title Defects (or their existence),
the Title Defect Amounts in dispute shall be submitted to the Title
Arbitrator.  The Title Arbitrator shall not have worked as an employee
or outside counsel for any Party or its Affiliates during the five (5) year
period preceding the arbitration or have any financial interest in the
dispute.  The arbitration proceeding shall be held in Houston, Texas
and shall be conducted in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, to the extent such rules do not conflict
with the terms of this Section.  The Title Arbitrator's determination
shall be made within forty-five (45) days after submission of the matters in
dispute and shall be final and binding upon the Parties, without right of
appeal.  In making his determination, the Title Arbitrator shall be
bound by the rules set forth in ‎Section
3.5(e) and may consider such other matters as in the opinion of the Title
Arbitrator are necessary or helpful to make a proper
determination.  Additionally, the Title Arbitrator may consult with
and engage disinterested third Persons to advise the arbitrator, including title
attorneys from other states and petroleum engineers.  The Title
Arbitrator shall act as an expert for the limited purpose of determining the
specific disputed Title Defect Amounts submitted by any Party and may not award
damages, interest, or penalties to any Party with respect to any
matter.  Seller and Purchaser shall each bear its own legal fees and
other costs of presenting its case.  Purchaser shall bear one-half of
the costs and expenses of the Title Arbitrator and Seller shall be responsible
for the remaining one-half of the costs and expenses.

    
      
        
        

      

      
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    Section
3.6            Consents
to Assignment and Preferential Rights to Purchase.

     

    (a)           Promptly
after the date hereof, Seller shall prepare and send (i) notices to the
holders of any required consents to assignment that are set forth on Schedule 5.8
requesting consents to the transactions contemplated by this Agreement and
(ii) notices to the holders of any applicable preferential rights to
purchase or similar rights that are set forth on Schedule 5.8 in
compliance with the terms of such rights and requesting waivers of such
rights.  Any preferential purchase right must be exercised subject to
all terms and conditions set forth in this Agreement, including the successful
Closing of this Agreement pursuant to Article 9.  The
consideration payable under this Agreement for any particular Asset for purposes
of preferential purchase right notices shall be the Allocated Value for such
Asset.  Seller shall use commercially reasonable efforts to cause such
consents to assignment and waivers of preferential rights to purchase or similar
rights (or the exercise thereof) to be obtained and delivered prior to Closing,
provided that Seller shall not be required to make payments or undertake
obligations to or for the benefit of the holders of such rights in order to
obtain the required consents and waivers.  Purchaser shall cooperate
with Seller in seeking to obtain such consents to assignment and waivers of
preferential rights.

     

    (b)           In
no event shall there be transferred at Closing any Asset (i) for which a
consent requirement providing that transfer of the Asset without the consent
will result in a termination or other material impairment of any rights in
relation to the Asset pursuant to the express terms of the instrument containing
such restriction without the consent, or (ii) that is a Lease if a consent
to assign requirement contained in such Lease has not been satisfied (in the
case of either (i) or (ii), above, a "Material Consent");
provided,
however, that restrictions upon the pledge, mortgage, or other granting
of a lien or security interest on an Asset shall not be considered to be a
Material Consent.  In cases in which the Asset subject to such a
Material Consent is a Contract and Purchaser is assigned the Lease(s) or other
Asset(s) to which the Contract relates, but the Contract is not transferred to
Purchaser due to the unwaived Material Consent requirement, Purchaser shall
continue after Closing to use commercially reasonable efforts to obtain the
consent so that such Contract can be transferred to Purchaser upon receipt of
the consent, the Contract shall be held by Seller for the benefit of Purchaser,
Purchaser shall pay all amounts due thereunder, and Purchaser shall be
responsible for the performance of any obligations under such Contract to the
extent that Purchaser has been transferred the Assets necessary to perform under
such Contract until such consent is obtained.  In cases in which the
Asset subject to such a Material Consent is a Lease and the third Person consent
to the transfer of the Lease is not obtained by Closing, Purchaser may elect to
treat the unsatisfied Material Consent requirements as a Title Defect (without
regard to the limitations set forth in ‎Section
3.5(e)(v) and receive the appropriate adjustment to the Unadjusted Purchase
Price under ‎Section
2.3 by giving Seller written notice thereof in accordance with ‎Section
3.5(a), except that such notice may be given on or before six (6) days
prior to the Target Closing Date.  If an unsatisfied Material Consent
requirement with respect to which an adjustment to the Unadjusted Purchase Price
is made under ‎Section
3.5 is subsequently satisfied prior to the date of the final adjustment to the
Unadjusted Purchase Price under ‎Section
9.4(b), Seller shall be reimbursed in that final adjustment for the amount of
any previous deduction from the Unadjusted Purchase Price, the Lease, if not
previously transferred to Purchaser, shall be transferred, and the provisions of
this ‎Section
3.6 shall no longer apply to such Material Consent requirement.

    
      
        
        

      

      
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     (c)           If
any preferential right to purchase any Assets is exercised prior to Closing, the
Purchase Price shall be decreased by the Allocated Value for such Assets, the
affected Assets shall not be transferred at Closing, and the affected Assets
shall be deemed to be deleted from Exhibits A-1
through A-4 to
this Agreement, as applicable, for all purposes.

     

    (d)           Should
a third Person fail to exercise or waive its preferential right to purchase as
to any portion of the Assets prior to Closing and the time for exercise or
waiver has not yet expired, then subject to the remaining provisions of this
‎Section
3.6, such Assets shall be included in the transaction at Closing, there shall be
no adjustment to the Purchase Price at Closing with respect to such preferential
right to purchase, and Seller shall, at its sole expense, continue to use
commercially reasonable efforts to obtain the waiver of the preferential
purchase rights and shall continue to be responsible for the compliance
therewith.

     

    (e)           Should
the holder of the preferential purchase right validly exercise same (whether
before or after Closing), then:

     

    (i)        
   Seller shall convey the affected Assets to the holder on the
terms and provisions set out in the applicable preferential right
provision.  If the affected Assets were previously transferred to
Purchaser at Closing, Purchaser agrees to transfer the affected Assets back to
Seller on the terms and provisions set out herein to permit Seller to comply
with this obligation (or, if Seller so requests, shall transfer the affected
Assets directly to the holder on the terms and provisions set out in the
applicable preferential purchase right provision);

     

    (ii)           Pursuant
to ‎Section
2.3(b), Seller shall credit Purchaser with the Allocated Value of any Asset
transferred pursuant to ‎Section
3.6(e)(i);

     

    (iii)           Seller
shall be entitled to the consideration paid by such holder;

     

    (iv)           If
the affected Assets were previously transferred to Purchaser at Closing,
Purchase Price adjustments calculated in the same manner as the adjustments in
Section 2.3(g) shall be calculated for the period from the Closing Date to the
date of the reconveyance and the net amount of such adjustment, if positive,
shall be paid by Purchaser to Seller and, if negative, by Seller to Purchaser;
and

     

    (v)           If
the affected Assets were previously transferred to Purchaser at Closing, Seller
shall assume all obligations assumed by Purchaser with respect to such Assets
under ‎Section
12.1, and shall indemnify, defend, and hold harmless Purchaser from all Damages
incurred by Purchaser caused by or arising out of or resulting from the
ownership, use, or operation of such Asset from the Closing Date to the date of
the reconveyance, excluding, however, any such Damages (irrespective of any
limitation on amount contained in ‎Section
12.2(d)(iii)) resulting from any violation of any Law caused by the actions of,
or implementation of policies or procedures of, Purchaser, breach of any
contract by Purchaser after Closing, or gross negligence or willful misconduct
of Purchaser after Closing.

    
      
        
        

      

      
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     (f)           If
any Material Consent requirement that is unsatisfied as of the Closing Date is
not subsequently satisfied prior to the date of the final adjustment to the
Unadjusted Purchase Price under ‎Section
9.4(b) and has not otherwise been transferred to Purchaser, Purchaser may, by
giving Seller written notice thereof on or before five (5) Business Days prior
to the date of the final adjustment to the Unadjusted Purchaser Price under
‎Section
9.4(b), elect (i) to treat the Asset subject to such unsatisfied Material
Consent requirement as an Excluded Asset (whereupon such Asset shall be deemed
to have been included in the definition of the term "Excluded Asset," and the
terms and provisions of this ‎Section
3.6 shall no longer apply to such Asset), or (ii) to cause Seller to assign the
Asset subject to such unsatisfied Material Consent requirement to Purchaser
notwithstanding the unsatisfied Material Consent requirement, subject, however,
to the agreement of Purchaser to save, indemnify, and hold harmless Seller Group
under ‎Section
12.2(a) from and against any Damages (excluding, however, the application of
‎Section
12.2(d)(ii) and ‎Section
12.2(d)(iii)) incurred or suffered by Seller Group caused by, arising out of, or
resulting from, the transfer of such Asset without consent, in which case the
amount of any downward adjustment to the Unadjusted Purchase Price made pursuant
to ‎Section
3.6(b) shall be credited to Seller pursuant to ‎Section
9.4(b).

     

    Section
3.7            Limitations
on Applicability.  The representation and warranty in ‎Section
3.1 shall terminate as of the Cut-Off Date and shall have no further force and
effect thereafter, provided there shall be no termination of Purchaser's or
Seller's rights under ‎Section
3.5 with respect to any bona fide Title Defect claim properly reported on or
before the Cut-Off Date.

     

    ARTICLE
IV

    ENVIRONMENTAL
MATTERS

     

    Section
4.1            Environmental
Laws.  

     

    (a)           Subject
to ‎Section
13.18, each Seller Party severally represents and warrants that (i) the
Properties and Surface Rights, and each Seller Party's ownership and operation
of the Properties and Surface Rights is, since the Effective Date has been, and
as of the Closing Date shall be, in compliance with all applicable Environmental
Laws except such failures to comply as would not, individually or in the
aggregate, have a Material Adverse Effect; (ii) no written notice from any
Person has been delivered to any Seller Party which asserts the existence of an
Environmental Defect on or before the Effective Date and relating to the Lands
or any other Property or Surface Right that constitutes a violation of
Environmental Laws or gives rise to or results in any common law or other
liability of Seller to any Person; and (iii) with regard to the Properties and
Surface Rights, Seller has not entered into, or is subject to, any agreements,
consents, orders, decrees, judgments, or other directives of any Governmental
Authority based on any Environmental Laws that require any change in the
conditions of any of the Properties or Surface Rights on or before the Effective
Date.  As used in this Agreement, the term "Environmental Laws"
means, as the same have been amended to the date hereof, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Sec. 9601
et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. Sec. 6901 et seq.; the Federal
Water Pollution Control Act, 33 U.S.C. Sec. 1251 et seq.; the Clean Air
Act, 42 U.S.C. Sec. 7401 et seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. Sec. 5101 et seq.; the Toxic
Substances Control Act, 15 U.S.C. Sec.Sec. 2601 through 2629; the Oil
Pollution Act, 33 U.S.C. Sec. 2701 et seq.; the Emergency
Planning and Community Right to Know Act, 42 U.S.C. Sec. 11001 et seq.; and the Safe
Drinking Water Act, 42 U.S.C. Sec.Sec. 300f through 300j, in each case as
amended to the date hereof, and all similar Laws as of the date hereof of any
Governmental Authority having jurisdiction over the property in question,
together with common law claims or theories of liability in negligence,
trespass, nuisance, strict liability or any other common law theory, in each
case addressing or relating to pollution or protection of the environment, or
public or employee health, safety, or welfare, and all regulations, orders,
decrees, or judgments implementing the foregoing.

    
      
        
        

      

      
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    (b)           Purchaser
acknowledges that the Assets have been used for the exploration, development,
and production of Hydrocarbons and that there may be petroleum, produced water,
wastes, or other substances or materials located in, on, or under the Properties
or associated with the Assets.  Equipment and sites included in the
Assets may contain hazardous materials, including 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 Properties or included in the Assets may contain hazardous materials,
including NORM.  Hazardous materials, including NORM, may have come
into contact with various environmental media, including water, soils, or
sediment.  Notwithstanding anything to the contrary in this Section or
elsewhere in this Agreement, Seller makes no, and hereby disclaims any,
representation or warranty, express or implied, with respect to the presence or
absence of NORM, asbestos, mercury, drilling fluids and chemicals, and produced
waters and Hydrocarbons in or on the Properties or Equipment in quantities
typical for oilfield operations in the areas in which the Properties and
Equipment are located, except to the extent the presence of the same causes a
breach of Seller's representation in ‎Section
4.1.

     

    Section
4.2            Environmental
Defects.  As used in this Agreement, the term "Environmental Defect"
means any matter that causes a breach of Seller's representation in ‎Section
4.1.

     

    Section
4.3            
Environmental
Review.

     

    (a)           From
and after the date of this Agreement, and prior to the Cut-Off Date, Purchaser
shall have the right to conduct, or cause a reputable environmental consulting
or engineering firm approved in advance in writing by Seller, such approval not
to be unreasonably withheld (the "Environmental
Consultant"), to conduct an environmental review of the Properties (the
"Environmental
Review").

     

    (b)           With
respect to an Environmental Review conducted prior to Closing, prior to
commencing its Environmental Review, Purchaser shall furnish to Seller for
Seller's review a written plan setting forth the proposed time, scope, and
approximate location of the activities to be conducted pursuant to the
Environmental Review, which plan shall include a description of the activities
to be conducted, a description of the approximate locations of such activities,
and the name of the Environmental Consultant, and a list of any sampling,
boring, drilling, or other invasive activity to be conducted (the "Environmental Review
Plan").  Purchaser shall not begin its Environmental Review
until Seller has approved the Environmental Review Plan, which approval shall
not be unreasonably withheld or delayed; provided, however,
that Seller may withhold its consent to any sampling, boring, drilling,
operation of machinery, or other invasive activity proposed to be conducted in
the Environmental Review Plan if Seller reasonably believes that such activities
would substantially interfere with Seller's ownership or operation of the Assets
or violate any Law.  For any Property not operated by Seller, Seller
shall, upon written notice from Purchaser, use commercially reasonable efforts
to obtain permission from the operator of such Property for Purchaser to conduct
its Environmental Review, but, provided that Seller has exercised such
commercially reasonable efforts, Seller shall have no liability to Purchaser for
failure to obtain such operator's permission.  Purchaser shall not
contact any such operator without the written consent of Seller, which consent
shall not be unreasonably withheld or delayed.  Seller shall have the
right to have one or more representatives accompany Purchaser and the
Environmental Consultant at all times during the Environmental Review (whether
or not such Environmental Review is conducted before, on, or after
Closing).

    
      
        
        

      

      
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    (c)        
   In performing its Environmental Review, Purchaser shall (and
shall cause the Environmental Consultant to): (i) perform all work in a safe and
workmanlike manner; (ii) perform all work in such a way as to not unnecessarily
and unreasonably interfere with Seller's operations; (iii) comply with all
applicable Laws; (iv) comply in all respects with the Environmental Review Plan
(except as may be agreed to in a writing executed by the Parties); (v) at its
sole cost, risk, and expense, restore the Properties to their condition prior to
the commencement of the Environmental Review, and, unless Seller requests
otherwise, promptly dispose of all drill cuttings, corings, or other wastes
generated in the course of the Environmental review; and (vi) with respect to
any samples taken, take split samples and provide one of such samples, properly
labeled and identified, to Seller free of charge.

     

    (d)           Purchaser
and its Affiliates shall maintain, and shall cause their respective officers,
directors, employees, contractors, consultants (including the Environmental
Consultant), and other advisors to maintain, all information, reports (whether
interim, draft, final, or otherwise), data, work product, and other matters
(including the fact of the existence of the Environmental Review) obtained or
generated from or attributable to the Environmental Review (the "Environmental
Information") strictly confidential pursuant to the terms of the
Confidentiality Agreement (as such term is defined in ‎Section
7.1).  Unless otherwise required by Law, Purchaser may not use the
Environmental Information except in connection with the transaction contemplated
by this Agreement.  If this Agreement is terminated prior to the
Closing, Purchaser shall deliver the Environmental Information to Seller, which
Environmental Information shall become the sole property of
Seller.  Without limiting any of the foregoing, the Environmental
Information shall be subject to the Confidentiality Agreement.

     

    Section
4.4            Notice of
Environmental Defects; Defect Adjustments.

     

    (a)           To
assert a claim arising out of a breach of ‎Section
4.1, Purchaser must deliver a claim notice or notices to Seller on or before the
Cut-Off Date; provided, however,
that Purchaser shall use commercially reasonable efforts to deliver a defect
claim notice with respect to a specific alleged Environmental Defect on or
before five (5) Business Days after Purchaser obtains knowledge of the existence
of such alleged Environmental Defect, even if the date of delivery of such
defect claim notice is prior to the Cut-Off Date.  Each such notice
shall be in writing and shall include:

    
      
        
        

      

      
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    (i)           
a description of the alleged Environmental Defect(s), including the specific
citation of the provisions of the Environmental Laws alleged to be violated and
the facts that substantiate such violation;

     

    (ii)           the
Properties affected, including, if available, a site plan showing the location
of all sampling events, boring logs, and other field notes describing the
sampling methods utilized and field conditions observed, and the chain of
custody documents and laboratory reports for any samples taken;

     

    (iii)           Purchaser's
estimate of the Environmental Defect Amount as calculated pursuant to ‎Section
4.4(e); and

     

    (iv)           true
and complete copies of any documents and other Environmental Information
supporting the existence of the alleged Environmental Defects and the
computations and information upon which Purchaser's estimate of the
Environmental Defect Amount is based.

     

    PURCHASER SHALL BE DEEMED TO HAVE
WAIVED ALL BREACHES OF ‎SECTION 4.1 OF WHICH SELLER HAS NOT
BEEN GIVEN NOTICE PURSUANT TO THIS ‎SECTION 4.4 ON OR BEFORE THE CUT-OFF
DATE.  SELLER'S
REPRESENTATION IN ‎SECTION 4.1 SHALL
NOT SURVIVE THE CUT-OFF DATE.

     

    (b)           Seller
shall have the right, but not the obligation, to attempt, at Seller's sole cost,
to cure or remove, on or before sixty (60) days (or such other period of time as
the Parties may agree to in writing) after the Cut-Off Date, any Environmental
Defect of which Seller has been advised by Purchaser pursuant to ‎Section
4.4(a).  No reduction in the Unadjusted Purchase Price shall be made
with respect to a notice of Environmental Defects if Seller has provided notice
at least five (5) Business Days after the Cut-Off Date of Seller's intent to
attempt to cure the Environmental Defect.  If the Environmental Defect
is not cured at the end of such period of time, the adjustment required under
this Article 4 shall be made pursuant to ‎Section
2.3(a).  Seller's election to attempt to cure an alleged Environmental
Defect shall not constitute a waiver of Seller's right to dispute the existence,
nature, or value of, or cost to cure, the alleged Environmental
Defect.

     

    (c)           With
respect to each Property affected by an Environmental Defect reported in
accordance with ‎Section
4.4(a), the Property shall be assigned at Closing, subject to all uncured
Environmental Defects, and, subject to ‎Section
4.4(b), the Unadjusted Purchase Price shall be reduced by an amount (the "Environmental Defect
Amount") determined pursuant to ‎Section
4.4(e).  Notwithstanding the foregoing provisions of this ‎Section
4.4(c), no reduction shall be made in the Unadjusted Purchase Price with respect
to any Environmental Defect for which Seller, at its election, executes and
delivers to Purchaser a written indemnity agreement, in form and substance
reasonably satisfactory to Purchaser, pursuant to which Seller agrees to fully,
unconditionally, and irrevocably indemnify, defend, and hold harmless Purchaser
and its successors and assigns from any and all Damages (irrespective of any
limitation on amount contained in ‎Section
12.2(d)(iii)) arising out of, or resulting from, such Environmental
Defect.

    
      
        
        

      

      
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    (d)‎         
SECTION 4.4(C) AND
‎SECTION 12.2(B) (WITH RESPECT TO THE
RETAINED SELLER OBLIGATIONS) SHALL, TO THE FULLEST EXTENT PERMITTED UNDER
APPLICABLE LAW, BE THE EXCLUSIVE RIGHT AND REMEDY OF PURCHASER WITH RESPECT TO
SELLER'S BREACH OF ITS WARRANTY AND REPRESENTATION IN ‎SECTION 4.1 AND, THE RELEASE OF
MATERIALS INTO THE ENVIRONMENT, THE PROTECTION OF THE ENVIRONMENT OR HEALTH OR
ANY OTHER MATTERS THAT PURCHASER COULD HAVE INCLUDED IN A NOTICE DELIVERED
PURSUANT TO ‎SECTION 4.4(A).  PURCHASER
ACKNOWLEDGES THAT, EXCEPT TO THE EXTENT SET FORTH IN ‎SECTION 4.1(A) SELLER HAS NOT MADE,
AND WILL NOT MAKE, ANY REPRESENTATION OR WARRANTY REGARDING THE
SAME.  EXCEPT AS SPECIFICALLY PROVIDED IN ‎SECTION 4.4(C) AND ‎SECTION 12.2(B) (WITH RESPECT TO THE
RETAINED SELLER OBLIGATIONS), PURCHASER RELEASES, REMISES, AND FOREVER
DISCHARGES SELLER GROUP FROM ANY AND ALL SUITS, LEGAL OR ADMINISTRATIVE
PROCEEDINGS, CLAIMS, DEMANDS, DAMAGES, LOSSES, COSTS, LIABILITIES, INTEREST OR
CAUSES OF ACTION WHATSOEVER, IN LAW OR IN EQUITY, KNOWN OR UNKNOWN, WHICH
PURCHASER MIGHT NOW OR SUBSEQUENTLY HAVE, BASED ON, RELATING TO, OR ARISING OUT
OF ANY ENVIRONMENTAL DEFECT OR DEFICIENCY, EVEN IF SUCH SUITS, LEGAL OR
ADMINISTRATIVE PROCEEDINGS, CLAIMS, DEMANDS, DAMAGES, LOSSES, COSTS,
LIABILITIES, OR CAUSES OF ACTION ARE CAUSED IN WHOLE OR IN PART BY THE
NEGLIGENCE (WHETHER SOLE, JOINT, OR CONCURRENT) OF SELLER OR THE STRICT
LIABILITY OF SELLER GROUP.

     

    (e)           The
Environmental Defect Amount resulting from an Environmental Defect shall be
determined as follows:

     

    (i)          
  if Purchaser and Seller agree on the Environmental Defect Amount,
that amount shall be the Environmental Defect Amount;

     

    (ii)         
  the Environmental Defect Amount shall not be greater than the Lowest
Cost Response;

     

    (iii)           the
Environmental Defect Amount with respect to an Environmental Defect shall be
determined without duplication of any costs or losses (A) included in
another Environmental Defect Amount or Casualty Loss hereunder; (B) for
which Purchaser otherwise receives credit in the calculation of the Purchaser
Price; or (C) which has been taken into account in the formulation of the
Unadjusted Purchase Price; and

    
      
        
        

      

      
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    (iv)           notwithstanding
anything to the contrary in this Agreement, (A) an individual claim for an
Environmental Defect for which a claim notice is given in accordance with the
requirements of this Article 4 shall only generate an adjustment to the
Unadjusted Purchase Price under this Article 4 if the Environmental Defect
Amount with respect thereto exceeds Two-Hundred Thousand dollars ($200,000);
(B) the aggregate Environmental Defect Amounts attributable to the effects
of all Environmental Defects upon any given Property shall not exceed the
Allocated Value of such Property; and (C) there shall be no adjustment to
the Unadjusted Purchase Price for Environmental Defects unless and until the
aggregate of all Environmental Defect Amounts for Environmental Defects which
are entitled to an adjustment under ‎Section
4.4(e)(iv)(A) and for which claim notices were timely delivered in accordance
with the requirements of this Article 4 exceed Two Million dollars
($2,000,000), after  which the Unadjusted Purchase Price may be
adjusted for all Environmental Defect Amounts that are entitled to an adjustment
under ‎Section
4.4(e)(iv)(A).

     

    Section
4.5            Environmental
Arbitration.  If Seller and Purchaser are unable to agree upon
an Environmental Defect Amount (or the adjustment to the Unadjusted Purchase
Price to be made pursuant thereto) on or before the Cut-Off Date, then, subject
to ‎Section
4.4(b), Seller's good faith estimate shall be used to determine the
Environmental Defect Amounts pending resolution of the dispute pursuant to this
‎Section
4.5, and the Environmental Defect Amounts in dispute shall be exclusively and
finally resolved by arbitration pursuant to this ‎Section
4.5.  During the 10-day period following the Cut-Off Date,
Environmental Defect Amounts in dispute shall be submitted to a reputable
environmental consultant or engineer with at least 10 years' experience in
corrective environmental action regarding oil and gas properties in Texas as
selected by mutual agreement of Purchaser and Seller, or, absent such agreement
during the 10-day period, by the Houston office of the American Arbitration
Association (the "Environmental
Arbitrator").  Likewise, if by the end of the sixty (60) day
cure period under ‎Section
4.4(b), Seller has failed to cure any Environmental Defects which it provided
notice that it would attempt to cure, and Seller and Purchaser have been unable
to agree on the Environmental Defect Amounts for such Environmental Defects (or
their existence), the Environmental Defect Amounts in dispute shall be submitted
to the Environmental Arbitrator.  The Environmental Arbitrator shall
not have performed professional services as an employee or outside counsel for
any Party or its Affiliates during the five (5) year period preceding the
arbitration or have any financial interest in the dispute.  The
arbitration proceeding shall be held in Houston, Texas and shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, to the extent such rules do not conflict with the terms of this
Section.  The Environmental Arbitrator's determination shall be made
within forty-five (45) days after submission of the matters in dispute and shall
be final and binding upon the Parties, without right of appeal.  In
making his determination, the Environmental Arbitrator shall be bound by the
rules set forth in ‎Section
4.4(e) and may consider such other matters as in the opinion of the
Environmental Arbitrator are necessary or helpful to make a proper
determination.  Additionally, the Environmental Arbitrator may consult
with and engage disinterested third Persons to advise the
arbitrator.  The Environmental Arbitrator shall act as an expert for
the limited purpose of determining the specific disputed Environmental Defect
Amounts submitted by any Party and may not award damages, interest or penalties
to any Party with respect to any matter.  Seller and Purchaser shall
each bear its own legal fees and other costs of presenting its
case.  Purchaser shall bear one-half of the costs and expenses of the
Environmental Arbitrator and Seller shall be responsible for the remaining
one-half of the costs and expenses.

    
      
        
        

      

      
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    Section
4.6             Limitations on
Applicability.

     

    (a)           The
representation and warranty in ‎Section
4.1 shall terminate as of the Cut-Off Date and shall have no further force and
effect thereafter, provided that there shall be no termination of Purchaser's or
Seller's rights under ‎Section
4.4 with respect to any Environmental Defect claim properly reported pursuant to
the requirements of this Article 4 on or before the Cut-Off
Date.  Purchaser shall not be entitled to protection under Seller's
representation in ‎Section
4.1 or Seller's indemnity in ‎Section
12.2(b) with respect to any Environmental Defect to the extent that it has been
cured or removed by Seller pursuant to ‎Section
4.4(b).

     

    (b)           It
is understood and agreed by the Parties that Seller's representation in ‎Section
4.1 shall be Purchaser's sole remedy with respect to Environmental Defects and
other environmental deficiencies with the Assets prior to the Cut-Off
Date.  Purchaser shall not be entitled to protection under Seller's
indemnity under ‎Section
12.2(b) with respect to (i) Environmental Defects and other environmental
deficiencies with the Assets until the occurrence of the Cut-Off Date, and
(ii) Environmental Defects and other environmental deficiencies with the
Assets of which Purchaser notified Seller on or before the Cut-Off Date pursuant
to ‎Section
4.4(a).

     

    ARTICLE
V

    REPRESENTATIONS
AND WARRANTIES OF SELLER

     

    Subject
to the provisions of this Article 5, and the other terms and conditions of
this Agreement (including, without limitation ‎Section 13.18),
each Seller Party represents and warrants to Purchaser the matters set out in
‎Section 5.1
through ‎Section
5.21.

     

    Section
5.1            Seller
Parties.

     

    (a)           Existence and
Qualification.  O'Brien Resources, LLC is a limited liability
company duly organized, validly existing, and in good standing under the laws of
the state of Texas.  O'BENCO II, LP is a limited partnership duly
organized, validly existing, and in good standing under the laws of the state of
Delaware.  Sepco II, LLC is a limited liability company duly
organized, validly existing, and in good standing under the laws of the state of
Louisiana. Crow Horizons Company is a general partnership duly organized,
validly existing, and in good standing under the laws of the state of
Louisiana.  Liberty Energy, LLC is a limited liability company duly
organized, validly existing, and in good standing under the laws of the state of
Massachusetts.  Each Seller Party, other than Crow Horizons Company
and Sepco II, LLC, is qualified to do business as a foreign limited partnership
or foreign limited liability company in, and is in good standing under, the laws
of the state of Texas.

     

    (b)           Power.  Each
Seller Party has the power to enter into and perform this Agreement (and all
documents required to be executed and delivered by Seller at Closing) and to
consummate the transactions contemplated by this Agreement (and such
documents).

    
      
        
        

      

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

     

    (d)           No
Conflicts.  The execution, delivery, and performance of this
Agreement by each Seller Party, and the consummation of the transactions
contemplated by this Agreement shall not (i) violate any provision of the
certificate of incorporation or bylaws, or certificate or articles of formation
or organization, and limited liability company or partnership agreement, of such
Seller Party, (ii) except with respect to the items set forth under the
heading "Liens to be Released at Closing" on Schedule 3.3, which
shall be terminated and/or released as to the Assets at Closing, result in a
default (with due notice or lapse of time or both) or the creation of any lien
or encumbrance or give rise to any right of termination, cancellation, or
acceleration under any material note, bond, mortgage, indenture, or other
financing instrument to which such Seller Party is a party or by which it is
bound, (iii) violate any judgment, order, ruling, or decree applicable to
such Seller Party as a party in interest or (iv) violate any Laws
applicable to such Seller Party, except any matters described in clauses (ii),
(iii), or (iv) above which would not have a Material Adverse
Effect.

     

    Section
5.2            Litigation.  Except
as disclosed on Schedule 5.2,
there are no claims, demands, actions, suits, or proceedings pending, or to each
Seller Party's knowledge threatened in writing, by or before any Governmental
Authority or arbitrator with respect to the Assets.  There are no
claims, demands, actions, suits, or proceedings pending, or to each Seller
Party's knowledge, threatened in writing, before any Governmental Authority or
arbitrator against any Seller Party or any of its Affiliates, which are
reasonably likely to impair or delay materially such Seller Party's ability to
perform its obligations under this Agreement.  To each Seller Party's
knowledge, no event has occurred and no event exists that is reasonably likely
to give rise to, or serve as the basis for, any such claim, demand, action,
suit, or proceeding.

    
      
        
        

      

      
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    Section
5.3            Taxes and
Assessments.  Except as disclosed on Schedule 5.3:

     

    (a)           To
the knowledge of each Seller Party, such Seller Party has filed each material
Tax return, declaration, report, claim for refund or information return or
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof (a "Tax Return") required
to be filed by it and paid all material Taxes with respect to the Assets;
and

     

    (b)           To
the knowledge of each Seller Party, such Seller Party has not received written
notice of any pending claim against it (which remains outstanding) from any
applicable taxing authority for assessment of material Taxes with respect to the
Assets.

     

    Section
5.4            Compliance
with Laws.  Except with respect to
Environmental Laws, which are addressed in Article 4 and except as
disclosed on Schedule 5.4, to
each Seller Party's knowledge, such Seller Party's ownership and operation of
the Assets is, and since the Effective Date has been, in compliance with all
applicable Laws, except such failures to comply as would not, individually or in
the aggregate, have a Material Adverse Effect. 

     

    Section
5.5            Contracts.  Schedule 5.5 contains
a complete and accurate list of all Material Contracts.  Except as
disclosed on Schedule
5.5, and except to the extent that the same would not, individually or in
the aggregate, have a Material Adverse Effect:

     

    (a)           to
each Seller Party's knowledge, (i) each Material Contract and each Surface
Right is in full force and effect and is valid and enforceable in accordance
with its terms in all material respects; (ii) no event has occurred and no
circumstances exist which, presently or with the passage of time, would give any
other party to any Material Contract or Surface Right the right to declare a
default or exercise any remedy under, or to cancel, terminate, or modify in any
material respect any Material Contract or Surface Right.  There are no futures,
options, swaps, or other derivatives with respect to the sale of production that
will be binding on the Assets after Closing.

     

    (b)           with
respect to the Leases and Material Contracts, (i) Seller is fully qualified
to own and hold all of the Leases and Material Contracts, (ii) other than
with respect to the expiration of a Lease due solely to the end of the primary
term thereof, there are no obligations to engage in continuous development
operations in order to maintain any Lease or other interest in real property in
full force and effect for the areas and depths covered thereby, (iii) there
are no royalty provisions (other than those (x) allowing a lessor the right
to take in kind or (y) disallowing the deduction of certain expenses
relating to the transportation, processing, or other handling of Hydrocarbons
prior to the sale thereof from the amount due to a lessor) requiring the payment
of royalty on any basis other than proceeds actually received by the
lessee;

     

    (c)           with
respect to the Material Contracts that are joint, unit, and other operating
agreements, (i) Seller has informed Purchaser of the status of all material
operations by less than all parties; (ii) there are no material operations
with respect to which Seller, or, to the knowledge of Seller (and except as
reflected on Exhibit
A-2), any other Person, has become a non-consenting party, and
(iii) all third Persons owning interests in the contract areas or similar
areas covered by such joint, unit, or other operating agreements have executed
such agreements, except to the extent that such agreements need not be
executed.

     

    
      
        
          
          

        

        
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    Section
5.6           Payments
for
Production.  Except as disclosed on Schedule 5.6, no
Seller Party is obligated by virtue of a take-or-pay payment, advance payment,
or other similar payment (other than royalties, overriding royalties, and
similar arrangements established in the Leases or reflected on Exhibit A-1 or
Exhibit A-2), to
deliver oil or gas, or proceeds from the sale thereof, attributable to such
Seller Party's interest in the Properties at some future time without receiving
payment therefor at or after the time of delivery.

     

    Section
5.7           Imbalances.  Except
as set forth on Schedule 5.7, as
of the Effective Date, no Seller Party had production, transportation, plant, or
other imbalances with respect to production from the Properties.

     

    Section
5.8      
     Material
Consents and Preferential Purchase Rights.  There are no
preferential rights to purchase or required third Person Material Consents,
which may be applicable to the sale of Assets by any Seller Party as
contemplated by this Agreement, except (a) for consents and approvals of
Governmental Authorities that are customarily obtained after Closing,
(b) as set forth on Schedule 5.8,
and (c) Material Consents related to Excluded Records.

     

    Section
5.9           Liability
for Brokers' Fees.  Purchaser shall not directly or indirectly
have any responsibility, liability or expense, as a result of undertakings or
agreements of any Seller Party prior to Closing, for brokerage fees, finder's
fees, agent's commissions, or other similar forms of compensation to an
intermediary in connection with the negotiation, execution, or delivery of this
Agreement or any agreement or transaction contemplated hereby.

     

    Section
5.10         Bankruptcy;
Solvency.  There are no bankruptcy, reorganization, or
receivership proceedings pending, being contemplated by, or, to the knowledge of
any Seller Party, threatened against, such Seller Party or any Affiliate thereof
(whether by such Seller Party or a third Person).  No Seller Party is
entering into this Agreement with actual intent to hinder, delay, or defraud any
creditor.  Immediately prior to, and immediately subsequent to, the
Closing, (a) no Seller Party will have incurred, nor does it intend to or
believe that it will incur, debts (including, without limitation, contingent
obligations) beyond its ability to pay such debts as such debts mature or come
due (taking into account the timing and amounts of cash to be received from any
source, and amounts to be payable on or in respect of debts), (b) the
amount of cash available to such Seller Party after taking into account all
other anticipated uses of funds is anticipated to be sufficient to pay all such
amounts on or in respect of debts, when such amounts are required to be paid,
and (c) each Seller Party will have sufficient capital with which to
conduct its business.

    
      
        
        

      

      
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    Section
5.11         Bonus,
Rentals, and Royalties; Lease Accounts; Recordation of Leases; Depth
Limitations.

     

    (a)           Seller
has properly and timely paid, or by Closing will have properly and timely paid,
all accrued bonuses, delay rentals, and royalties due with respect to Seller's
interests in the Leases, in each case in accordance with the Leases and
applicable Law.

     

    (b)           Except
as would not have a Material Adverse Effect, with respect to federal and state
Leases, all Lease accounts are current and all payments required thereunder have
been made.

     

    (c)           Except
as identified on Exhibit A-1, all
Leases have been, or by the Closing Date will be, properly recorded in the
official public records of the applicable county.

     

    (d)           Except
as identified on Exhibit A-1, no
Lease is subject to a depth limitation.

     

    Section
5.12        Outstanding
Capital Commitments.  Except (i) as disclosed on Schedule 5.12,
(ii) as would not be binding upon Purchaser or the Properties after
Closing, or (iii) with respect to periods between the date hereof and the
Closing Date, as are permitted pursuant to ‎Section
7.4, there are no outstanding authorities for expenditure or other commitments
to make capital expenditures which are now, and will be after Closing, binding
on the Properties of which Seller has received notice and which Seller
reasonably anticipates will require expenditures by all Seller Parties in excess
of One-Hundred Thousand dollars ($100,000) per authority for
expenditure.

     

    Section
5.13         The
Records.  The Records have been maintained in the ordinary
course of Seller's business, and Seller has not intentionally omitted any
material information from the Records.

     

    Section
5.14         Payables.  Except
(i) as disclosed on Schedule 5.14,
(ii) for revenues which are being suspended in accordance with applicable
Law, and (iii) for payment of amounts that Seller is contesting in good
faith, all oil and gas production proceeds payable by Seller to other Persons
from the Properties have been paid in material compliance with all of the terms
and conditions of the Leases and other applicable instruments.

     

    Section
5.15        No
Suspense.  Except as disclosed on Schedule 5.15, to the
knowledge of each Seller Party, proceeds from the sale of all oil, condensate,
and gas produced from the Properties are being received by Seller and are not
being held in suspense by any purchaser thereof for any reason.

     

    Section
5.16         Permits
and Licenses.  Seller holds all licenses, permits, or other
authorizations necessary to carry on operations connected with the Properties as
currently conducted in compliance with all applicable Laws.  All such
licenses, permits, and other authorizations are in full force and
effect.  No material violations of such licenses, permits, or other
authorizations exist or have been recorded in respect of any such licenses,
permits, or other authorizations, and no proceeding is pending, or, to the
knowledge of each Seller Party, threatened seeking to challenge, revoke, or
limit such licenses, permits, or authorizations.

    
      
        
        

      

      
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    Section
5.17         Plugging
and Abandonment.  As of the date of this Agreement, to the
knowledge of each Seller Party, there are no wells located on the Leases that
are required by any Governmental Authority to be plugged, abandoned, and
reclaimed that have not been plugged, abandoned, and reclaimed.

     

    Section
5.18         Reserve
Report.  Seller has delivered to Purchaser a copy of the
Reserve Report.  To the knowledge of Seller, the historical factual
information, excluding title information, provided to Ryder Scott & Company
by Seller regarding the Properties for preparation of such report consisting of
production volumes, sales prices for production, contractual pricing provisions
under oil or gas sales or marketing contracts under hedging arrangements, and
costs of operations and development relating to the Properties was accurate in
all material respects when furnished.

     

    Section
5.19         Absence
of Certain Changes and Events.  Except as set forth on Schedule 5.19, to the
knowledge of Seller, since the Effective Date:

     

    (a)           In
the case of claims or rights pertaining to the Properties, Seller has not
cancelled, compromised, waived, or released any claims with a value in excess of
Two-Hundred Thousand dollars ($200,000) individually, or One Million dollars
($1,000,000) in the aggregate;

     

    (b)           No
Seller Party has merged or consolidated with any other Person;

     

    (c)           No
Seller Party has made any loan to, or entered into any other transaction with,
any of the members, directors, officers, or employees of such Seller Party that
is not in the ordinary course of business of such Seller Party and that would be
binding upon the Properties after the Closing;

     

    (d)           Seller
has not transferred, sold, or disposed of any material portion of the
Properties, other than Hydrocarbons sold in the ordinary course of
business;

     

    (e)           There
has not been a Material Adverse Effect, or any event or circumstance reasonably
likely to have a Material Adverse Effect, on the Properties; and

     

    (f)       
    No Seller Party has entered into any agreement, whether
oral or written, to do any of the foregoing.

     

    Section
5.20          Condition
of the Property.  Except as set forth on Schedule 5.20, and
except as would not have a Material Adverse Effect, (a) all Wells have been
drilled and completed at legal locations within the boundaries of the respective
Leases, and all drilling and completion of the Wells and all development and
operation of the Wells have been conducted in all material respects in
compliance with applicable Law; (b) to the knowledge of Seller, no Well is
subject to allowables after the date hereof because of any overproduction or
violation of applicable Laws or order of any court or other Governmental
Authority which would prevent such Well from being entitled to its full legal
and regular allowance from and after the date hereof; (c) all currently
producing Wells are, to the knowledge of Seller, in an operable state of repair
adequate to maintain normal operations in accordance with past practices,
ordinary wear and tear excepted, and, to the knowledge of Seller, do not contain
junk, fish, or other mechanical obstructions that would impede or interfere with
production, recompletions, or stimulations with respect to reserves categorized
as "Proved" in the Reserve Report; and (d) except to the extent idled or
abandoned as of the date hereof, the Equipment is in an operable state of repair
adequate to maintain normal operations in accordance with past practices,
ordinary wear and tear excepted.

    
      
        
        

      

      
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    Section
5.21         Sufficiency
of Assets.  Except for the Excluded Assets and equipment and
other assets not located on the Lands and not used solely in connection with the
Properties, and except as would not have a Material Adverse Effect, the Assets
constitute all of the assets necessary to operate the Properties in the manner
presently operated by Seller and in compliance with applicable
Laws.

     

    Section
5.22         Gross and
Net Acres.  Except as would not have a Material Adverse Effect,
Schedule 5.22
accurately sets forth the number of gross and net acres owned by Seller in the
Leases and Units.

     

    Section
5.23          Limitations.

     

    (a)           Except
as and to the extent expressly set forth in Article 3, Article 4,
Article 5, the Assignment and Bill of Sale, or in the certificate of the
Seller Parties to be delivered pursuant to ‎Section
9.2(e), (i) no Seller Party makes any representations or warranties,
express or implied, and (ii) each Seller Party expressly disclaims all
liability and responsibility for any representation, warranty, statement, or
information made or communicated (orally or in writing) to Purchaser or any of
its Affiliates, employees, agents, consultants, or representatives (including,
without limitation, any opinion, information, projection, or advice that may
have been provided to Purchaser by any officer, director, employee, agent,
consultant, representative or advisor of any Seller Party or any of their
Affiliates).

     

    (b)           EXCEPT AS EXPRESSLY REPRESENTED
OTHERWISE IN ARTICLE 3, ARTICLE 4, THIS ARTICLE 5, IN THE ASSIGNMENT AND BILL OF SALE,
OR IN THE CERTIFICATE OF THE SELLER PARTIES TO BE DELIVERED AT CLOSING PURSUANT
TO ‎SECTION
9.2(E), WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, SELLER PARTIES MAKE NO, AND EXPRESSLY DISCLAIM,
ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO (I) TITLE TO ANY
OF THE ASSETS, (II) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE
MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY
GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE ASSETS,
(III) THE QUANTITY, QUALITY, OR RECOVERABILITY OF PETROLEUM SUBSTANCES IN
OR FROM THE ASSETS, (IV) THE EXISTENCE OF ANY PROSPECT, RECOMPLETION,
INFILL, OR STEP-OUT DRILLING OPPORTUNITIES, (V) ANY ESTIMATES OF THE VALUE
OF THE ASSETS OR FUTURE REVENUES GENERATED BY THE ASSETS, (VI) THE
PRODUCTION OF PETROLEUM SUBSTANCES FROM THE ASSETS, OR WHETHER PRODUCTION HAS
BEEN CONTINUOUS, OR IN PAYING QUANTITIES, OR ANY PRODUCTION OR DECLINE RATES,
(VII) THE MAINTENANCE, REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN, OR
MARKETABILITY OF THE ASSETS, (VIII) INFRINGEMENT OF ANY INTELLECTUAL
PROPERTY RIGHT, OR (IX) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE
BEEN MADE AVAILABLE OR COMMUNICATED TO PURCHASER OR ITS AFFILIATES, OR ITS OR
THEIR EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES, OR ADVISORS IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR
PRESENTATION RELATING THERETO, AND FURTHER DISCLAIM ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS OF ANY EQUIPMENT, IT
BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT, EXCEPT AS
EXPRESSLY PROVIDED HEREIN, THE ASSETS ARE BEING TRANSFERRED "AS IS, WHERE IS,"
WITH ALL FAULTS AND DEFECTS, AND THAT PURCHASER HAS MADE OR CAUSED TO BE MADE
SUCH INSPECTIONS AS PURCHASER DEEMS APPROPRIATE.

    
      
        
        

      

      
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    (c)           Without
limiting the provisions of ‎Section
13.18, any representation "to the knowledge of Seller", "to Seller's knowledge",
or words of similar import, is limited to matters within the actual knowledge of
the individuals identified on Schedule 5.23
without any duty of investigation.  Any representation "to the
knowledge of each Seller Party" or to the knowledge of a specific Seller Party
is limited to matters within the actual knowledge of the individuals identified
on Schedule 5.23
under the name of such Seller Party, without any duty of
investigation.

     

    (d)           Any
representation of any Seller Party in this Article 5 that relates to
Properties in which any Seller Party is a non-operator under a joint operating
agreement or similar agreement is limited to the knowledge of such Seller
Party.

     

    (e)           Inclusion
of a matter on a schedule attached hereto with respect to a representation or
warranty that addresses matters having a Material Adverse Effect shall not be
deemed an indication that such matter does, or may, have a Material Adverse
Effect.  Schedules may include matters not required by the terms of
the Agreement to be listed on the Schedule, which additional matters are
disclosed for purposes of information only, and inclusion of any such matter
does not mean that all such matters are included.

     

    (f)           A
matter scheduled as an exception for any representation shall be deemed to be an
exception to all representations for which it is relevant.

     

    (g)           In
the event that a schedule or exhibit to this Agreement is amended or
supplemented prior to Closing, any reference to such schedule or exhibit in this
Agreement shall be deemed to be a reference to such schedule or exhibit as so
amended or supplemented.

    
      
        
        

      

      
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    ARTICLE
VI

    REPRESENTATIONS
AND WARRANTIES OF PURCHASER

     

    Purchaser
represents and warrants to Seller the following:

     

    Section
6.1          Existence
and Qualification.  Purchaser is a corporation organized,
validly existing and in good standing under the laws of
Delaware.  Purchaser is duly qualified as a foreign corporation in,
and is in good standing under, the laws of the state of Texas.

     

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

     

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

     

    Section
6.4            No
Conflicts.  The execution, delivery, and performance of this
Agreement by Purchaser, and the consummation of the transactions contemplated by
this Agreement, will not (i) violate any provision of the certificate of
incorporation or bylaws (or other governing instruments) of Purchaser,
(ii) result in a material default (with due notice or lapse of time or
both) or the creation of any lien or encumbrance or give rise to any right of
termination, cancellation, or acceleration under any material note, bond,
mortgage, indenture, or other financing instrument to which Purchaser is a party
or by which it is bound, (iii) violate any judgment, order, ruling, or
regulation applicable to Purchaser as a party in interest, or (iv) violate
any Law applicable to Purchaser, except any matters described in clauses (ii),
(iii) or (iv) above which would not have a material adverse effect on Purchaser
or its properties.

     

    Section
6.5           Consents,
Approvals or Waivers.  Except with respect to the
Hart-Scott-Rodino Act (if applicable), and except with respect to consents that
are typically obtained after the consummation of transactions of the nature
contemplated herein (to the extent the same would not interfere with the ability
of Purchaser to consummate the transactions contemplated hereby), the execution,
delivery, and performance of this Agreement by Purchaser will not be subject to
any consent, approval, or waiver from any Governmental Authority or other third
Person.

    
      
        
        

      

      
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    Section
6.6            Litigation.  There
are no claims, demands, actions, suits, or proceedings pending, or to
Purchaser's knowledge, threatened in writing before any Governmental Authority
or arbitrator against Purchaser or any Affiliate of Purchaser which are
reasonably likely to impair or delay materially Purchaser's ability to perform
its obligations under this Agreement.

     

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

     

    Section
6.8            Investment
Intent.  Purchaser is acquiring the Assets for its own account
and not with a view to their sale or distribution in violation of the Securities
Act of 1933, as amended, the rules and regulations thereunder, any applicable
state blue sky Laws, or any other applicable securities Laws.

     

    Section
6.9            Independent
Investigation.  Purchaser is (or its advisors are) experienced
and knowledgeable in the oil and gas business and aware of the risks of that
business.  Purchaser acknowledges and affirms that (a) it has
been provided the opportunity to conduct its independent investigation,
verification, analysis, and evaluation of the Assets, and (b) it has made
all such reviews and inspections of the Assets as it has deemed necessary or
appropriate to enter into this Agreement.  Except for the
representations and warranties expressly made by Seller in Articles 3, 4,
and 5 of this Agreement or in the Assignment and Bill of Sale or the certificate
to be delivered to Purchaser pursuant to ‎Section
9.2(e) of this Agreement, Purchaser acknowledges that there are no
representations or warranties, express or implied, as to the financial
condition, liabilities, operations, business, or prospects of the Assets and
that, in making its decision to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser has relied solely upon its own
independent investigation, verification, analysis and
evaluation.  Purchaser understands and acknowledges that neither the
United States Securities and Exchange Commission nor any federal, state, or
foreign agency has passed upon the Assets or made any finding or determination
as to the fairness of an investment in the Assets or the accuracy or adequacy of
the disclosures made to Purchaser, and except as set forth in Article 11,
Purchaser is not entitled to cancel, terminate, or revoke this
Agreement.  

     

    Section
6.10          Opportunity
to Verify Information.  Without limitation of Purchaser's
rights under ‎Section
7.1 hereof, or the disclaimers contained in ‎Section
7.5 Purchaser and its representatives have (a) been permitted full and complete
access to all materials relating to the Assets, (b) been afforded the
opportunity to ask all questions of Seller (or one or more Persons acting on
Seller's behalf) concerning the Assets, (c) been afforded the opportunity to
investigate the condition, including the subsurface condition, of the Assets,
and (d) had the opportunity to take such other actions and make such other
independent investigations as Purchaser deems necessary to evaluate the Assets
and understand the merits and risks of an investment therein and the verify the
truth, accuracy, and completeness of the materials, documents, and other
information provided or made available to Purchasers (whether by Seller or
otherwise).

     

    Section
6.11         Liability
for Brokers' Fees.  Seller shall not directly or indirectly
have any responsibility, liability or expense, as a result of undertakings or
agreements of Purchaser, for brokerage fees, finder's fees, agent's commissions,
or other similar forms of compensation to an intermediary in connection with the
negotiation, execution or delivery of this Agreement or any agreement or
transaction contemplated hereby.

    
      
        
        

      

      
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    Section
6.12         Bankruptcy.  There
are no bankruptcy, reorganization, or receivership proceedings pending, being
contemplated by, or, to the knowledge of Purchaser, threatened against Purchaser
or any Affiliate of Purchaser (whether by Purchaser or a third
Person).

     

    Section
6.13         Qualification
and Bonding.  Purchaser is now, or as of the Closing Date shall
be, and after the Closing shall continue to be, qualified under all applicable
Laws and with all applicable Governmental Authorities to own and, where
applicable, operate the Assets.  Without limiting ‎Section
13.5 hereof, as of the Closing Date, Purchaser shall have and shall maintain all
necessary bonds to own and operate of the Assets.

     

    ARTICLE
VII

    COVENANTS
OF THE PARTIES

     

    Section
7.1            Access.  Subject
to the limitations expressly set forth in this Agreement, Seller will give
Purchaser and its representatives access to the Assets and access to and the
right to copy, at Purchaser's sole expense, the Records in Seller's possession,
for the purpose of conducting a confirmatory review of the Assets, but only to
the extent that Seller may do so without (i) violating applicable Laws,
including the Hart-Scott Rodino Act, (ii) violating any obligations to any
third Person, and (iii) to the extent that Seller has authority to grant such
access without breaching any restriction binding on any Seller
Party.  Such access by Purchaser shall be limited to Seller's normal
business hours, and Purchaser's investigation shall be conducted in a manner
that minimizes interference with the operation of the Assets or Seller's
business with respect thereto or the business of Seller
generally.  Except as set forth in Article 4, Purchaser's right
of access shall not entitle Purchaser to operate Equipment or conduct intrusive
testing or sampling.  All information obtained by Purchaser and its
representatives under this ‎Section
7.1 shall be subject to the terms of that certain confidentiality agreement
between the Seller Parties and Purchaser dated March 17, 2008 (as amended
hereby, the "Confidentiality
Agreement") and any applicable privacy laws regarding personal
information.  Purchaser and Seller Parties agree that, notwithstanding
that Liberty Energy, LLC was not a signatory to the Confidentiality Agreement,
for the purposes of this Agreement, the schedules and exhibits hereto, the
documents to be executed in connection herewith, and the transactions
contemplated hereby, Liberty Energy, LLC shall be deemed to have been a
signatory to the Confidentiality Agreement, and each of the Parties agrees that
the rights, benefits, obligations contained therein shall be binding upon, and
shall accrue to the benefit of, Liberty Energy, LLC as though it were a party
thereto and included in the definition of the term "Company"
thereunder.

     

    Section
7.2            Notification
of Breaches.  Until the Closing,

     

    (a)           Purchaser
shall notify Seller promptly after Purchaser obtains actual knowledge that any
representation or warranty of any Seller Party contained in this Agreement is
untrue in any material respect or will be untrue in any material respect as of
the Closing Date or that any covenant or agreement to be performed or observed
by Seller prior to or on the Closing Date has not been so performed or observed
in any material respect; and

    
      
        
        

      

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

     

    If any of
Purchaser's or Seller's representations or warranties is untrue or shall become
untrue in any material respect between the date of execution of this Agreement
and the Closing Date, or if any of Purchaser's or Seller's covenants or
agreements to be performed or observed prior to or on the Closing Date shall not
have been so performed or observed in any material respect, but if such breach
of representation, warranty, covenant or agreement shall (if curable) be cured
on or before the Closing (or, if the Closing does not occur, by the date set
forth in ‎Section 11.1) or
if the Closing otherwise occurs notwithstanding such breach, then such breach
shall be considered not to have occurred for all purposes of this
Agreement.

     

    Section
7.3            Press
Releases.  Until the Closing, neither Seller nor Purchaser, nor
any Affiliate thereof, shall make any press release regarding the existence of
this Agreement, the contents hereof or the transactions contemplated hereby
without the prior written consent of the Purchaser (in the case of announcements
by any Seller Party or its Affiliates) or Seller (in the case of announcements
by Purchaser or its Affiliates), which consent shall not be unreasonably
withheld or delayed; provided, however,
the foregoing shall not restrict disclosures by Purchaser or any Seller Party
(i) to the extent that such disclosures are required by applicable
securities or other Laws or the applicable rules of any stock exchange having
jurisdiction over the disclosing Party or its Affiliates or (ii) to
Governmental Authorities and third Persons holding preferential rights to
purchase, rights of consent or other rights that may be applicable to the
transactions contemplated by this Agreement, as reasonably necessary to provide
notices, seek waivers, amendments or terminations of such rights, or seek such
consents.  Each Seller Party and Purchaser shall each be liable for
the compliance of its respective Affiliates with the terms of this
Section.

     

    Section
7.4            Operation
of Business.  Except as may be required by ‎Section
7.9 or otherwise by this Agreement, and except as otherwise approved by
Purchaser, until the Closing Seller shall operate its business with respect to
the Assets in the ordinary course, and, without limiting the generality of the
preceding, shall:

     

    (a)           not
transfer, sell, hypothecate, encumber, or otherwise dispose of any of the
Assets, except for sales and dispositions of oil and gas and equipment and
materials made in the ordinary course of business;

     

    (b)           where
it operates Leases, Units, or Wells, produce oil, gas and/or other Hydrocarbons
from those Leases, Units, or Wells consistent with recent practices, subject to
the terms of the applicable Leases and Contracts, applicable Laws and
requirements of Governmental Authorities and interruptions resulting from force
majeure, mechanical breakdown and planned maintenance;

    
      
        
        

      

      
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    (c)           not
terminate, materially amend, execute, or extend any Material Contract other than
the execution or extension of a contract for the sale or exchange of oil, gas
and/or other hydrocarbons terminable on ninety (90) days or shorter
notice;

     

    (d)           maintain
insurance coverage on the Assets in the amounts and of the types presently in
force;

     

    (e)           use
commercially reasonable efforts to maintain in full force and effect all Leases
to the extent that such Leases are capable of producing in paying quantities at
applicable prices in effect as of the date that Seller proposes to allow such
Leases to terminate;

     

    (f)         
  maintain all material governmental permits and approvals affecting
the Assets;

     

    (g)           not
act in any manner with respect to the Assets other than in the ordinary course
of business, consistent with prior practice, and in compliance with applicable
Law;

     

    (h)           not
waive, compromise, or settle any claim with a value in excess of Two-Hundred
Thousand dollars ($200,000) with respect to the Assets;

     

    (i)        
   not approve, expend, or cause any operation or series or
related operations except in accordance with the Plan of Operations attached
hereto as Exhibit D except
as would not require an expenditure (or series of expenditures) net to the
collective interests of the Seller Parties of greater than or equal to
Two-Hundred Thousand dollars ($200,000) per operation, unless in the case of an
emergency or to conduct an operation required to perpetuate a Lease (or as
otherwise required pursuant to a Contract);

     

    (j)          
 not resign as operator of any of the Properties;

     

    (k)           except
as would not have a Material Adverse Effect, not merge or consolidate with any
other Person or undergo a change of control of fifty-percent (50%) or more of
any Seller's Party's equity ownership;

     

    (l)    
       use commercially reasonable efforts to
preserve relationships with all third Persons having material business dealings
with respect to the Properties; and

     

    (m)           promptly
after the same becomes known to Seller, notify Purchaser of any cessation of
production from any Unit or Well and any other event that would reasonably be
expected to have a Material Adverse Effect.

     

    Requests
for approval of any action restricted by this ‎Section 7.4 shall
be delivered to either of the following individuals, each of whom shall have
full authority to grant or deny such requests for approval on behalf of
Purchaser:

     

     

    
      	
              George
      Ciotti

            	
              Ken
      Frost

            
	
              gwc@bry.com

            	
              krf@bry.com

            
	
              (303)
      870-4623 (cell)

            	
              (661)
      616-3900 (office)

            
	
              (303)
      825-3344 (office)

            	
              (661)
      616-3381 (Fax)

            
	
              (303)
      825-3350 (fax)

            	 
      

    

     

    
      
        
        

      

      
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    Purchaser's
approval of any action restricted by this ‎Section 7.4 shall
not be unreasonably withheld or delayed and shall be considered granted in full
within five (5) days (unless a shorter time is reasonably required by the
circumstances and such shorter time is specified in Seller's notice) of Seller's
notice to Purchaser requesting such consent unless Purchaser notifies Seller to
the contrary during that period.  Notwithstanding the foregoing
provisions of this ‎Section 7.4, in
the event of an emergency, Seller may take such action as reasonably necessary
and shall notify Purchaser of such action promptly
thereafter.  Purchaser acknowledges that Seller may own undivided
interests in certain of the Assets, and Purchaser agrees that the acts or
omissions of third Persons who are not affiliated with Seller shall not
constitute a violation of the provisions of this ‎Section 7.4, nor
shall any action required by a vote of working interest owners constitute such a
violation so long as each Seller Party has voted its interests in a manner
consistent with the provisions of this ‎Section
7.4.

     

    Section
7.5           Indemnity
Regarding Access.  Purchaser's access to the Assets and its
(and its Affiliates and representatives, including the Environmental Consultant)
examinations and inspections, whether under ‎Section
7.1, ‎Section
4.3, or otherwise, shall be at Purchaser's sole risk, cost, and expense, and
Purchaser WAIVES
AND RELEASES ALL CLAIMS AGAINST ALL SELLER PARTIES, THEIR AFFILIATES, AND THEIR
RESPECTIVE PARTNERS, MEMBERS, OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS,
CONTACTORS, AGENTS, OR OTHER REPRESENTATIVES, ARISING IN ANY WAY THEREFROM, OR
IN ANY WAY CONNECTED THEREWITH.  Purchaser agrees to indemnify,
defend, and hold harmless each Seller Party and its Affiliates and all such
Seller Party's directors, officers, employees, agents, and representatives from
and against any and all claims, liabilities, losses, costs, and expenses
(including court costs and reasonable attorneys' fees), including claims,
liabilities, losses, costs, and expenses attributable to personal injury, death,
or property damage, arising out of, or relating to, access to the Assets prior
to the Closing by Purchaser, its Affiliates, or its or their directors,
officers, employees, agents, or representatives, EVEN IF
CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR
CONCURRENT), STRICT LIABILITY, OR OTHER LEGAL FAULT OF ANY INDEMNIFIED PERSON,
OTHER THAN GROSS NEGLIGENCE AND WILLFUL MISCONDUCT OF ANY INDEMNIFIED
PERSON.  PURCHASER RECOGNIZES AND
AGREES THAT, EXCEPT AS SPECIFICALLY SET FORTH IN ‎SECTION 5.13, ALL MATERIALS,
DOCUMENTS, SAMPLES, REPORTS, AND OTHER INFORMATION OF ANY TYPE AND NATURE MADE
AVAILABLE TO IT, ITS AFFILIATES OR REPRESENTATIVES, IN CONNECTION WITH THE
TRANSACTION CONTEMPLATED HEREBY, WHETHER MADE AVAILABLE PURSUANT TO THIS SECTION
OR OTHERWISE, ARE MADE AVAILABLE TO IT AS AN ACCOMMODATION, AND WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED, OR STATUTORY,
AS TO THE ACCURACY AND COMPLETENESS OF SUCH MATERIALS, DOCUMENTS, SAMPLES,
REPORTS, AND OTHER INFORMATION.  NO WARRANTY OF ANY KIND IS MADE BY
ANY SELLER PARTY AS TO THE INFORMATION SUPPLIED TO PURCHASER OR ITS AFFILIATES
OR REPRESENTATIVES OR WITH RESPECT TO PROPERTIES TO WHICH THE INFORMATION
RELATES.  PURCHASER EXPRESSLY AGREES THAT ANY RELIANCE UPON, OR
CONCLUSIONS DRAWN THEREFROM, SHALL BE THE RESULT OF ITS OWN INDEPENDENT REVIEW
AND JUDGMENT.

    
      
        
        

      

      
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    Section
7.6           Governmental
Reviews.  Seller and Purchaser shall each in a timely manner
make (or cause its applicable Affiliate to make) (i) all required filings,
including (if applicable) filings required under the Hart-Scott-Rodino Act, and
prepare applications to and conduct negotiations with, each Governmental
Authority as to which such filings, applications or negotiations are necessary
or appropriate in the consummation of the transactions contemplated hereby, and
(ii) provide such information as the other may reasonably request in order
to make such filings, prepare such applications and conduct such
negotiations.  Each Party shall cooperate with and use all reasonable
efforts to assist the other with respect to such filings, applications and
negotiations.  Purchaser shall bear the cost of all filing or
application fees payable to any Governmental Authority with respect to the
transactions contemplated by this Agreement, regardless of whether Purchaser,
Seller, or any Affiliate of any of them is required to make the
payment.

     

    Section
7.7           Operatorship.  Seller
makes no representation or warranty as to Purchaser's ability to succeed to
operatorship of the Properties currently operated by Seller (the "Seller-Operated
Properties").  Seller shall use commercially reasonable efforts
on or before the Closing Date to assist Purchaser in Purchaser's efforts to
succeed Seller as operator of the Seller-Operated Properties.  Without
limiting the rights of Seller and obligations of Purchaser pursuant to ‎Section
13.5, Purchaser shall, promptly following Closing, file all appropriate forms
and declarations or bonds with any applicable Governmental Authority relative to
Purchaser's assumption of operatorship.  For all Seller-Operated
Properties, Seller shall execute and deliver to Purchaser on the Closing Date,
and Purchaser shall promptly (but in no event later than thirty (30) days after
the Closing Date) file all appropriate forms with the applicable Governmental
Authority (including, without limitation, P-4 forms designating Purchaser as
operator of any Seller-Operated Properties) transferring operatorship of such
Properties to Purchaser, and assuming responsibility for all wells located on
the Properties or the lands covered thereby to the extent consistent with this
Agreement.

     

    Section
7.8           Letters-in-Lieu.  Seller
shall execute and deliver to Purchaser on the Closing Date letters in lieu of
division and transfer orders relating to the Assets to reflect the transaction
contemplated hereby.  Such letters shall be on forms prepared by
Seller and reasonably satisfactory to Purchaser.

     

    Section
7.9            Hedges.  At
or prior to Closing, Seller and its Affiliates shall eliminate all futures,
options, swaps, and other derivatives, with respect to the sale of production
from the Assets that are currently binding on the Assets.

     

    Section
7.10         Exclusivity.  Upon
the execution of this Agreement and until the termination of this Agreement
pursuant to Article 11, Seller shall not, directly or indirectly, solicit
or entertain, or cause any other Person to solicit or entertain, any other offer
to acquire the Assets, or any portion thereof, or provide information to others
concerning the purchase and sale of the Assets contemplated herein, or enter
into any negotiation or agreement that provides for the acquisition of any
portion of the Assets by any Person other than Purchaser.

    
      
        
        

      

      
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    Section
7.11         Updated
Schedules.  Both of Purchaser and Seller shall notify the other
Party promptly after such Party obtains actual knowledge that any representation
or warranty of the other Party contained in this Agreement is, or has become,
untrue in any material respect.  Each Party shall, prior to Closing,
supplement the Schedules and Exhibits to this Agreement with additional
information that, if existing or known to it on the date of this Agreement,
would have been required to have been included in one or more of the Schedules
or Exhibits to this Agreement.  For the purpose of determining the
satisfaction of any of the conditions of the obligations of each Party in
Article 8, and the liability of each Party following Closing for breaches
of its representations, warranties, and covenants herein, the Schedules and
Exhibits to this Agreement shall be deemed to include only (a)  the
information contained therein on the date of this Agreement, (b) 
information added to such Schedules and Exhibits by written supplements to this
Agreement delivered prior to Closing by a Party that are accepted by both
Parties or reflect actions permitted by this Agreement to be taken prior to
Closing, and (c) information actually known to a Party on or prior to the
Closing Date that such Party would be required to report to the other Party
pursuant to the first sentence of this ‎Section
7.11.

     

    Section
7.12         Contract
Pumpers.  At the request of Purchaser, Seller shall use
commercially reasonable efforts to cooperate with Purchaser in Purchaser's
efforts to retain Seller's four contract pumpers engaged with respect to
Seller's Freestone Consolidated Navasota area and Seller's two contract pumpers
engaged with respect to Seller's Darco SE Field.

     

    Section
7.13          Seller's
Financial Records and Data.  

     

    (a)           Notwithstanding
anything in ‎Section
7.1 or elsewhere herein to the contrary, during the period beginning on the date
hereof and continuing through the seventy-fifth (75th) day following the Closing
Date, upon reasonable advance written notice from Purchaser each Seller Party
shall provide to Purchaser, its auditors, PricewaterhouseCoopers LLP, and other
representatives, within the time period requested by Purchaser in such notice,
but in no event earlier than five (5) Business Days after such Seller Party
receives such notice (provided that Purchaser shall use commercially reasonable
efforts to request any information that it requires, or reasonably expects that
it may require, as soon as possible prior to the date that Purchaser requires
such information for the purposes described in this ‎Section
7.13, and provided further that O'Brien Resources, LLC shall exercise its
commercially reasonable efforts to provide the requested information and access
listed below as promptly as practicable and in any event no later than two (2)
Business Days after such receipt, but O'Brien Resources, LLC shall not be deemed
to be in breach of this covenant if, notwithstanding the exercise of such
commercially reasonable efforts, O'Brien Resources, LLC is unable to timely
provide such information or access and it so notifies Purchaser prior to the end
of such period), to the extent relating to historical information solely
regarding the Assets to the extent in existence and in the possession of such
Seller Party:

     

    (i)           any
audited or reviewed, segmented, or other financial statements of such Seller
Party as such presently exist; and

    
      
        
        

      

      
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    (ii)           access
for a representative previously designated in writing by Purchaser, during
normal business hours and in the presence of a representative of such Seller
Party, to such Seller Party’s financial, operating, and other books and records
(to the extent relating solely to the Assets), in each case at Purchaser’s
expense

     

    as
necessary in order to prepare and audit segmented and other financial statements
and other reports as may be required by the rules and regulations of the United
States Securities and Exchange Commission (“SEC”), the Securities
Act of 1933 or other applicable Law to be submitted by Purchaser in connection
with, or to be incorporated by Purchaser in, any Form 8-K, 10-QSB, registration
statement or other filing required to be submitted by Purchaser to the
SEC.  Notwithstanding the foregoing, O'Brien Resources, LLC shall
provide the foregoing information whether or not the information requested is
contained in documents or records which contains information not solely
regarding the Assets.  O'Brien Resources, LLC reserves the right to
redact all such information which is not related in whole or in part to the
Assets.

     

    (b)           In
addition, (i) at Purchaser's sole cost and expense, and upon reasonable
advance written notice by Purchaser, its auditors, or other representatives,
each Seller Party shall make available knowledgeable financial and other
personnel who shall respond to requests for information and other materials
requested by Purchaser, its auditors, and other representatives in connection
with such filings within the time frames requested by Purchaser, its auditors or
other representatives, and (ii) at Purchaser’s sole cost and expense, each
Seller Party shall arrange for its auditor, if any, to promptly furnish such
assistance to Purchaser as Purchaser shall reasonably request in connection with
Purchaser’s SEC filings.

     

    (c)           Notwithstanding
the foregoing, except with respect to  ‎Section
7.13(b)(ii) above, in no event shall any Seller Party be obligated to:
(i) make modifications to its existing systems, equipment, records, or
procedures; (ii) acquire or expand assets, equipment, rights, or properties
(including, without limitation, computer equipment, software, furniture,
fixtures, machinery, vehicles, tools, and other tangible personalty) beyond the
level and location currently provided by such Seller Party as of the date
hereof; (iii) hire additional employees or contractors; or (iv) pay
any costs related to the transfer or conversion of data from such Seller Party
or its Affiliates or any other Person to Purchaser.

     

    (d)           Each
Seller Party acknowledges that Purchaser’s rights under ‎Section
7.13 are unique and that Purchaser shall, in addition to such other remedies as
may be available to it at law or in equity, have the right to enforce its rights
under ‎Section
7.13 by actions for specific performance to the extent permitted by applicable
Law.  Each Seller Party further acknowledges that monetary Damages
would not be adequate compensation for any Damages suffered as a result of such
Seller Party’s breach of ‎Section
7.13, and waives the defense in any action for specific performance that a
remedy at Law would be adequate, and any requirement for security or the posting
of any bond or other surety in connection with any temporary or permanent award
of equitable relief.

     

    (e)           The
fact that the SEC subjects any filing by Purchaser to supplementation shall not
create any presumption of a breach by any Seller Party of any of its obligations
under this ‎Section
7.13.  No Seller Party shall have any liability to Purchaser with
respect to any registration rights agreement or obligation involving Purchaser
or the pricing, salability, market response, or any other matter relating to the
issuance or sale of any security by or on behalf of Purchaser, and PURCHASER SHALL SAVE, INDEMNIFY, AND
HOLD HARMLESS EACH SELLER PARTY AND ITS RESPECTIVE AFFILIATES AND ALL SUCH
SELLER PARTY’S MEMBERS, PARTNERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
ADVISORS AND REPRESENTATIVES FROM AND AGAINST ANY AND ALL DAMAGES (IRRESPECTIVE
OF SIZE OR AMOUNT) WHICH PURCHASER OR ANY THIRD PERSON OR GOVERNMENTAL AUTHORITY
MIGHT NOW OR SUBSEQUENTLY MAY HAVE RELATING TO THE
FOREGOING.

    
      
        
        

      

      
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    Section
7.14          Legal
Existence.  During the period
beginning on the Closing Date and ending on December 31, 2010, each Seller Party
shall maintain its legal existence, and no Seller Party shall voluntarily take
any action or make any election as a result of which such Seller Party would be
dissolved during such period; provided, however,
that nothing contained in this ‎Section
7.14 shall restrict the ability of a Seller Party to merge, consolidate,
dissolve, or otherwise terminate or change its legal existence if, as of the
date of such merger, consolidation, dissolution, termination or change, another
Person has agreed in writing to assume such Seller Party's obligations under
this Agreement, which Person is in compliance with ‎Section
9.4(e), or the obligations of such Seller Party hereunder have been bonded or
otherwise financially secured to the reasonable satisfaction of
Purchaser.  Notwithstanding the foregoing, in the event that, on or
after January 1, 2010, O'Benco II, LP closes or otherwise consummates a
transaction (or series of transactions) pursuant to which it disposes (whether
by sale, merger, consolidation, assignment, change of control, or otherwise) of
all or substantially all of its assets, such transaction shall not constitute a
breach of this ‎Section
7.14, and this covenant shall be of no further force and effect with respect to
O'Benco II, LP as of the date of the closing or consummation of such transaction
(or series of transactions).

     

    Section
7.15         Acquisition
of Deep Rights.  From the date hereof until the Closing Date,
O'Brien Resources, LLC shall continue to exercise its commercially reasonable
efforts to arrange for the purchase by Purchaser (at Purchaser's sole cost and
expense) of leasehold and other similar rights to all depths lying below the
deepest depth covered by any Lease which as of the date hereof is limited in
depth as to any portion of the lands highlighted in yellow on the plat attached
hereto as Exhibit A-5.

     

    Section
7.16          Further
Assurances.  After Closing, Seller and Purchaser each agrees to
take such further actions and to execute, acknowledge, and deliver all such
further documents as are reasonably requested by the other for carrying out the
purposes of this Agreement or of any document delivered pursuant to this
Agreement.

     

    ARTICLE
VIII

    CONDITIONS
TO CLOSING

     

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

    
      
        
        

      

      
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    (a)           Representations.  The
representations and warranties of Purchaser set forth in Article 5 shall be
true and correct in all material respects (considering the transaction as a
whole) as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date;

     

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

     

    (c)          
 No
Action.  On the Closing Date, no injunction, order, or award
restraining, enjoining, or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, or granting substantial damages in
connection therewith, shall have been issued and remain in force, and no suit,
action, or other proceeding (excluding any such matter initiated by Seller or
any of its Affiliates) shall be pending before any Governmental Authority or
body of competent jurisdiction seeking to enjoin or restrain or otherwise
prohibit the consummation of the transactions contemplated by this Agreement or
recover substantial damages from Seller or any Affiliate of Seller resulting
therefrom; and

     

    (d)           Governmental
Consents.  All material consents and approvals of any
Governmental Authority required for the transfer of the Assets from Seller to
Purchaser as contemplated under this Agreement, except consents and approvals of
assignments by Governmental Authorities that are customarily obtained after
closing, shall have been granted, or the necessary waiting period shall have
expired, or early termination of the waiting period shall have been
granted.

     

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

     

    (a)           Representations.  The
representations and warranties of Seller set forth in Article 5 shall be
true and correct in all material respects (considering the transaction as a
whole) as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (other than representations and warranties
that refer to a specified date, which need only be true and correct on and as of
such specified date);

     

    (b)           Performance.  Seller
shall have performed and observed, in all material respects, all covenants and
agreements to be performed or observed by it under this Agreement prior to or on
the Closing Date except, in the case of breaches of ‎Section
7.4, for such breaches, if any, as would not have a Material Adverse
Effect;

     

    (c)           No
Action.  On the Closing Date, no injunction, order, or award
restraining, enjoining, or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, or granting substantial damages in
connection therewith, shall have been issued and remain in force, and no suit,
action, or other proceeding (excluding any such matter initiated by Purchaser or
any of its Affiliates) shall be pending before any Governmental Authority or
body of competent jurisdiction seeking to enjoin or restrain or otherwise
prohibit the consummation of the transactions contemplated by this Agreement or
recover substantial damages from Purchaser or any Affiliate of Purchaser
resulting therefrom;

    
      
        
        

      

      
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    (d)           Governmental
Consents.  All material consents and approvals of any
Governmental Authority required for the transfer of the Assets from Seller to
Purchaser as contemplated under this Agreement, except consents and approvals of
assignments by Governmental Authorities that are customarily obtained after
closing, shall have been granted or the necessary waiting period shall have
expired, or early termination of the waiting period shall have been
granted;

     

    (e)     
      Encumbrances.  Seller
shall have delivered to Purchaser partial releases of the liens set forth under
the heading "Liens to be Released at Closing" on Schedule 3.3 with
respect to the Assets; and

     

    (f)         
  Termination.  No
Seller Party shall have terminated this Agreement without the other Seller
Parties assuming and performing all of the obligations (including the obligation
to sell and convey its undivided interest in the Assets) of such terminating
Seller Party hereunder or without such terminating Seller Party agreeing
pursuant to a separate agreement with Purchaser to perform such
obligations.

     

    (g)           Non-Competition
Covenant.  Each Seller Party (except Liberty Energy, LLC), and
William J. O'Brien III shall have executed and delivered for the benefit of
Purchaser, a non-competition covenant in the form attached hereto as Exhibit E.

     

    ARTICLE
IX

    CLOSING

     

    Section
9.1           Time and
Place of Closing.  The consummation of the purchase and sale of
the Assets contemplated by this Agreement (the "Closing") shall,
unless otherwise agreed to in writing by Purchaser and Seller, take place at the
offices of Bracewell & Giuliani LLP located at 711 Louisiana St., Suite
2300, Houston, Texas, at 10:00 a.m., local time, on July 15, 2008 (the "Target Closing
Date"), or if all conditions in Article 8 to be satisfied prior to
Closing have not yet been satisfied or waived, as soon thereafter as such
conditions have been satisfied or waived, subject to the provisions of
Article 11.  The date on which the Closing occurs is referred to
herein as the "Closing
Date."

     

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

     

    (a)           Counterparts
of the Assignment and Bill of Sale in the form attached hereto as Exhibit B, duly
executed by each Seller Party, in sufficient duplicate originals to allow
recording in all appropriate jurisdictions and offices;

     

    (b)           Assignments
in form required by any Governmental Authority for the assignment of any Assets
controlled by such Governmental Authority, duly executed by any applicable
Seller Party, in sufficient duplicate originals to allow recording in all
appropriate offices;

    
      
        
        

      

      
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    (c)           Executed
certificates described in Treasury Regulation Sec. 1.1445-2(b)(2)
certifying that no Seller Party is a foreign person within the meaning of the
Code;

     

    (d)           Letters-in-lieu
of transfer orders with respect to the Properties duly executed by all
applicable Seller Parties;

     

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

     

    (f)           A
certificate duly executed by the secretary or any assistant secretary (or other
authorized officer) of each Seller Party, dated as of the
Closing,(i) attaching and certifying on behalf of such Seller Party
complete and correct copies of (A) the resolutions of the Board of
Directors, managers, or other equivalent governing body of such Seller Party
authorizing the execution, delivery, and performance by such Seller Party of
this Agreement and the transactions contemplated hereby, and (B) any
required approval by the stockholders, members, or partners, as applicable, of
such Seller Party of this Agreement and the transactions contemplated hereby and
(ii) certifying on behalf of such Seller Party the incumbency of each
officer of such Seller Party executing this Agreement or any document delivered
in connection with the Closing;

     

    (g)           Where
notices of approval are received by Seller pursuant to a filing or application
under ‎Section
7.6, copies of those notices of approval;

     

    (h)           Counterparts
of a transition services agreement between O'Brien Resources, LLC and Purchaser
in the form attached hereto as Exhibit C (the "Transition Services
Agreement"), duly executed by O'Brien Resources, LLC;

     

    (i)           For
the Seller-Operated Properties, validly executed transfer of Railroad Commission
form P-4s designating Purchaser as operator of such Seller-Operated Properties
and any other forms or documents required to designate Purchaser as operator of
the such Seller-Operated Properties;

     

    (j)           Any
other forms required by any Governmental Authority relating to the assignments
of the Assets and relating to the assumption of operations by
Purchaser;

     

    (k)           Releases
of the liens listed on Schedule 3.3 under
the heading "Liens to be Released at Closing"; and

     

    (l)           All
other instruments, documents, and other items reasonably necessary to effectuate
the terms of this Agreement, as may be reasonably requested by
Purchaser.

     

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

    
      
        
        

      

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

     

    (b)           Counterparts
of the Assignment and Bill of Sale, duly executed by Purchaser, in sufficient
duplicate originals to allow recording in all appropriate jurisdictions and
offices;

     

    (c)           Assignments
in form required by any Governmental Authority for the assignment of any Assets
controlled by such Governmental Authority, duly executed by Purchaser, in
sufficient duplicate originals to allow recording in all appropriate
offices;

     

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

     

    (e)           A
certificate duly executed by the secretary or any assistant secretary (or other
authorized officer) of Purchaser, dated as of the Closing, (i) attaching
and certifying on behalf of Purchaser complete and correct copies of
(A) the resolutions of the Board of Directors, managers, or other
equivalent governing body of Purchaser authorizing the execution, delivery, and
performance by Purchaser of this Agreement and the transactions contemplated
hereby, and (B) any required approval by the stockholders, members, or
partners, as applicable, of Purchaser of this Agreement and the transactions
contemplated hereby, and (ii) certifying on behalf of Purchaser the
incumbency of each officer of Purchaser executing this Agreement or any document
delivered in connection with the Closing;

     

    (f)           Where
notices of approval are received by Purchaser pursuant to a filing or
application under ‎Section
7.6, copies of those notices of approval;

     

    (g)           Evidence
of replacement bonds, guarantees, and letters of credit, pursuant to ‎Section
13.5; and

     

    (h)           Counterparts
of the Transition Services Agreement, duly executed by Purchaser;
and

     

    (i)       
    All other instruments, documents, and other items
reasonably necessary to effectuate the terms of this Agreement, as may be
reasonably requested by Seller.

     

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

     

    (a)           Not
later than five (5) Business Days prior to the Closing Date, Seller shall
prepare and deliver to Purchaser, using and based upon the best information
available to Seller, a preliminary settlement statement estimating the Purchase
Price for the Assets after giving effect to all adjustments set forth in ‎Section
2.3 and the amount of the Deposit (but excluding any income
thereon).  The estimate delivered in accordance with this ‎Section
9.4(a) shall constitute the dollar amount to be payable by Purchaser to Seller
at the Closing (the "Closing
Payment").

     

    
      
        
        

      

      
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    (b)           As
soon as reasonably practicable after the Closing but not later than the one
hundred and twentieth (120th) day following the Closing Date, Seller shall
prepare and deliver to Purchaser a draft statement setting forth the final
calculation of the Purchase Price and showing the calculation of each adjustment
under ‎Section
2.3, based on the most recent actual figures for each
adjustment.  Seller shall, at Purchaser's request, make reasonable
documentation available to support the final figures.  As soon as
reasonably practicable, but not later than the thirtieth (30th) day following
receipt of Seller's statement hereunder, Purchaser shall deliver to Seller a
written report containing any changes that Purchaser proposes be made to such
statement.  Seller may deliver a written report to Purchaser during
this same period reflecting any changes that Seller proposes to be made to such
statement as a result of additional information received after the statement was
prepared.  The Parties shall undertake to agree on the final statement
of the Purchase Price no later than ninety (90) days after delivery of Seller's
statement.  In the event that the Parties cannot reach agreement
within such period of time, any Party may refer the items of adjustment which
are in dispute to the Houston office of Deloitte & Touche LLP, or, if such
firm is not able or willing to serve, a nationally-recognized independent
accounting firm or consulting firm mutually acceptable to both Purchaser and
Seller (the "Accounting
Arbitrator"), for review and final determination by
arbitration.  The Accounting Arbitrator shall conduct the arbitration
proceedings in Houston, Texas in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, to the extent such rules do not
conflict with the terms of this Section.  The Accounting Arbitrator's
determination shall be made within forty-five (45) days after submission of the
matters in dispute and shall be final and binding on all Parties, without right
of appeal.  In determining the proper amount of any adjustment to the
Purchase Price, the Accounting Arbitrator shall be bound by the terms of ‎Section
2.3 and may not increase the Purchase Price more than the increase proposed by
Seller nor decrease the Purchase Price more than the decrease proposed by
Purchaser, as applicable.  The Accounting Arbitrator shall act as an
expert for the limited purpose of determining the specific disputed aspects of
Purchase Price adjustments submitted by any Party and may not award damages,
interest (except as expressly provided for in this Section), or penalties to any
Party with respect to any matter.  Seller and Purchaser shall each
bear their own legal fees and other costs of presenting their
case.  Seller shall bear one-half and Purchaser shall bear one-half of
the costs and expenses of the Accounting Arbitrator.  Within ten
(10) days after the earlier of (i) the expiration of Purchaser's
thirty (30) day review period without delivery of any written report or
(ii) the date on which the Parties or the Accounting Arbitrator finally
determine the Purchase Price, (x) Purchaser shall pay to Seller the amount
by which the Purchase Price exceeds the Closing Payment or (y) Seller shall
pay to Purchaser the amount by which the Closing Payment exceeds the Purchase
Price, as applicable.  Any post-Closing payment pursuant to this ‎Section
9.4 shall bear interest from the Closing Date to the date of payment at the
Agreed Rate.

     

    (c)           Purchaser
shall assist Seller in preparation of the final statement of the Purchase Price
under ‎Section
9.4(b) by furnishing invoices, receipts, reasonable access to personnel and such
other assistance as may be requested by Seller to facilitate such process
post-Closing.

     

    (d)           All
payments made or to be made under this Agreement to Seller shall be made by
electronic transfer of immediately available funds to O'Brien Resources, LLC,
acting as representative of the Seller Parties, at a bank account to be
specified in writing by O'Brien Resources, LLC on or before ten (10) Business
Days prior to the Closing Date, for the credit of the Seller Parties, or to such
other bank and account as may be specified by Seller in writing.  All
payments made or to be made hereunder to Purchaser shall be by electronic
transfer or immediately available funds to a bank and account specified by
Purchaser in writing to Seller, for the credit of Purchaser.

    
      
        
        

      

      
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    (e)           During
the period beginning on the Closing Date and ending on December 31, 2010, each
Seller Party shall maintain a net worth of not less than twenty-five percent
(25%) of its proportionate share of the final Purchase Price (the "Required Net
Worth").  Each Seller Party's proportionate share of any Escrow
Amount (as the same may be reduced from time to time pursuant to ‎Section
12.6) shall be taken into account for the purposes of calculating such Seller
Party's net worth pursuant to this ‎Section
9.4(e); provided however, in the event the Escrow Amount is reduced as a result
of payments from the Escrow Account to Purchaser, the Required Net Worth amount
shall be reduced proportionately to give effect to such
payment.  Notwithstanding the foregoing, in the event that, on or
after January 1, 2010, O'Benco II, LP closes or otherwise consummates a
transaction (or series of transactions) pursuant to which it disposes (whether
by sale, merger, consolidation, assignment, change of control, or otherwise) of
all or substantially all of its assets, such transaction shall not constitute a
breach of this ‎Section 9.4(e),
and this covenant shall be of no further force and effect with respect to
O'Benco II, LP as of the date of the consummation of such transaction (or
series of transactions).  At Closing and on the first and second
anniversary of Closing, each Seller shall deliver a certification as to its
financial condition in the form and with such substance as is delivered by each
Seller in the certifications delivered at the execution of this
Agreement.  Any information disclosed to Purchaser pursuant to this
‎Section
9.4(e), ‎Section
7.13, and ‎Section
7.1, together with any other information regarding any Seller Party, including,
without limitation, its existence, structure, assets (other than the Assets),
businesses, employees, and Affiliates, shall be considered to be "Evaluation
Material" pursuant to the terms of the Confidentiality Agreement (as modified
hereby), which Confidentiality Agreement shall, notwithstanding the terms or
termination provisions set forth therein, (i) terminate as of the Closing
with respect to the Records and other information or data to the extent the same
relate directly to the Assets (excluding, however, the Excluded Asssets), and
(ii) survive the Closing indefinitely in all other respects.

     

    ARTICLE
X

    TAX
MATTERS

     

    Section
10.1          Liability
for Taxes.

     

    (a)           Taxes with Respect to
Assets.  Seller shall be responsible for filing any Tax Return
(as defined in ‎Section
5.3(a)) with respect to Taxes attributable to the Assets for a taxable period
ending on or prior to the Closing Date, and, except with respect to Seller's
income Tax Returns, Purchaser shall be responsible for filing any other Tax
Return with respect to the Assets.  Subject to the further terms of
this ‎Section
10.1, from and after Closing, Seller shall be liable for, and shall indemnify,
defend, and hold harmless Purchaser from and against, all Taxes with respect to
the Assets attributable to any taxable period ending on or prior to the Closing
Date, including income Taxes arising as a result of Seller's gain on the sale of
the Assets as contemplated by this Agreement.  From and after Closing,
Purchaser shall be liable for, and shall indemnify, defend, and hold harmless
Seller and its Affiliates from and against, all such Taxes attributable to any
taxable period beginning after the Closing Date and shall reimburse Seller and
its Affiliates for any such money paid by Seller or its Affiliates with respect
to such Taxes no later than seven (7) calendar days after Purchaser's receipt of
notice from Seller of Purchaser's liability therefor.  If a taxable
period includes the Closing Date, any Taxes with respect to the Assets allocable
to any taxable period beginning on or prior to the Closing Date and ending after
the Closing Date which is allocable to the portion of such period occurring on
or prior to the Closing Date (the "Pre-Closing Period")
and determined as described in ‎Section
10.1(b) shall be the liability of Seller and any other Taxes with respect to the
Assets, including, without limitation, to the extent allocable to the portion of
a taxable period occurring after the Closing Date, shall be the liability of
Purchaser.

     

    
      
        
        

      

      
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    (b)           Straddle Period
Taxes.  Whenever it is necessary for purposes of this Agreement
to determine the portion of any Taxes with respect to any Asset for a taxable
period beginning on or prior to and ending after the Closing Date which is
allocable to the Pre-Closing Period or any taxable period beginning on or prior
to the Effective Date and ending after the Closing Date which is allocable to
the portion of such period occurring after the Closing Date (the "Post-Closing
Period"), the determination shall be made as follows: any Taxes allocable
to the Pre-Closing Period that are based on or related to income, gains, or
receipts will be computed (by an interim closing of the books) as if such
taxable period ended as of the Closing Date and any other Pre-Closing Period
Taxes (except production Taxes and other Taxes measured by units of production,
and severance Taxes) will be prorated based upon the number of days in the
applicable period falling on or before, or after, the Closing
Date.  To the extent necessary, Seller shall estimate Taxes based on
the Seller's liability for Taxes with respect to the same or similar items of
income, gain, loss, deduction, and credit or other items (collectively "Tax Items") in the
immediately preceding year.  Notwithstanding anything to the contrary
herein, any ad valorem or property Taxes paid or payable with respect to the
Assets shall be allocated to the taxable period applicable to the ownership of
the Assets regardless of when such Taxes are assessed

     

    (c)           Production
Taxes.  Notwithstanding anything to the contrary in this
Agreement, production Taxes and other Taxes measured by units of production, and
severance Taxes, shall not be subject to ‎Section
10.1 and responsibility therefor and payment thereof shall be exclusively
addressed by ‎Section
1.3(j), ‎Section
1.3(k), ‎Section
1.3(l), ‎Section
2.3, ‎Section
2.4 and ‎Section
10.4.

     

    (d)           Allocation Audits and
Damages.  Tax Audits and Taxes, liabilities, losses, costs,
expenses, claims, awards, judgments, or other damages related thereto suffered
by any Person with respect to the reporting of allocations of value and amounts
realized by each Party for Tax purposes pursuant to the third sentence of ‎Section
2.2(b) shall be the sole responsibility of such Person, and, from and after
Closing, each of Purchaser and Seller shall save, indemnify, and hold harmless
the other Party from and against any and all such Taxes, liabilities, losses,
costs, expenses, claims, awards, judgments, and other damages that are such
Party's sole responsibility hereunder.

     

    Section
10.2          Contest
Provisions.

     

    (a)           Each
of Purchaser, on the one hand, and Seller, on the other hand (the "Tax Indemnified
Person"), shall notify the chief tax officer (or other appropriate
person) of Seller or Purchaser, as the case may be (the "Tax Indemnifying
Person"), in writing within ten (10) days of receipt by the Tax
Indemnified Person of written notice of any pending or threatened audits,
adjustments, claims, examinations, assessments, or other proceedings (a "Tax Audit") which are
likely to affect the liability for Taxes of such other Party.  If the
Tax Indemnified Person fails to give such timely notice to the other Party, it
shall not be entitled to indemnification for any Taxes arising in connection
with such Tax Audit if such failure to give notice adversely affects the other
Party's right to participate in the Tax Audit. 

    
      
        
        

      

      
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    (b)           If
such Tax Audit relates to any taxable period, or portion thereof, ending on or
before the Closing Date or for any Taxes for which only Seller would be liable
to indemnify Purchaser under this Agreement, Seller shall have the option, at
its expense, to control the defense and settlement of such Tax
Audit.  If such Tax Audit relates to any taxable period, or portion
thereof, beginning after the Closing Date or for any Taxes for which only
Purchaser would be liable under this Agreement, Purchaser shall, at its expense,
control the defense and settlement of such Tax Audit to the extent that such Tax
Audit relates to Tax Items for which Purchaser is liable to indemnify Seller
under ‎Section
10.1.

     

    (c)           If
such Tax Audit relates to Taxes for which both Seller and Purchaser could be
liable under this Agreement, to the extent practicable, such Tax Items will be
distinguished and each Party will have the option to control the defense and
settlement of those Taxes for which it is so liable.  If such Tax
Audit relates to a taxable period, or portion thereof, beginning on or before
and ending after the Closing Date and any Tax Item cannot be identified as being
a liability of only one party or cannot be separated from a Tax Item for which
the other party is liable, Seller, at its expense, shall have the option to
control the defense and settlement of the Tax Audit, provided that such Party
defends the items as reported on the relevant Tax Return and provided further
that no such matter shall be settled without the written consent of both
Parties, not to be unreasonably withheld.

     

    (d)           Any
Party whose liability for Taxes may be affected by a Tax Audit shall be entitled
to participate at its expense in such defense and to employ counsel of its
choice at its expense and shall have the right to consent to any settlement of
such Tax Audit (not to be unreasonably withheld) to the extent that such
settlement would have an adverse effect with respect to a period for which that
party is liable for Taxes, under this Agreement or otherwise.

     

    Section
10.3          Post-Closing
Actions Which Affect Seller's Tax Liability.

     

    (a)           Except
as set forth in ‎Section
10.1(d), Purchaser shall not and shall not permit its Affiliates to take any
action which could increase any Seller Party's liability for Taxes (including
any liability of Seller to indemnify Purchaser for Taxes under this
Agreement).

     

    (b)           Except
to the extent required by applicable Laws, Purchaser shall not and shall not
permit its Affiliates to amend any Tax Return with respect to a taxable period
for which any Seller Party may be liable to indemnify Purchaser for Taxes under
‎Section
10.1.

     

    Section
10.4          Refunds.  Purchaser
agrees to pay to Seller any refund received (whether by payment, credit, offset
or otherwise, and together with any interest thereon) after the Closing by
Purchaser or its Affiliates in respect of any Taxes for which any Seller Party
is liable or required to indemnify Purchaser under ‎Section
10.1.  Seller agrees to pay to Purchaser any refund received (whether
by payment, credit, offset, or otherwise, and together with any interest
received thereon) after the Closing by any Seller Party or any of their
respective Affiliates in respect of any Taxes for which Purchaser is liable or
required to indemnify Seller under ‎Section
10.1.  Each Party shall cooperate with the other and its Affiliates in
order to take all necessary steps to claim any such refund.  Any such
refund received by a Party or its Affiliates shall be paid to the Party entitled
to the refund hereunder within thirty (30) days after such refund is
received.  Each Party agrees to notify the other within ten (10) days
following the discovery of a right to claim any such refund and upon receipt of
any such refund.  Each Party agrees to claim any such refund as soon
as possible after the discovery of a right to claim a refund and to furnish to
the other Party all information, records and assistance necessary to verify the
amount of the refund or overpayment.

    
      
        
        

      

      
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    Section
10.5          Access to
Information.

     

    (a)           From
and after Closing, Seller shall grant to Purchaser (or its designees) access at
all reasonable times to all of the information, books and records relating to
the Assets within the possession of Seller (including without limitation work
papers and correspondence with taxing authorities, but excluding work product of
and attorney-client communications with any of Seller's legal counsel and
personnel files), and shall afford Purchaser (or its designees) the right (at
Purchaser's sole expense) to take extracts therefrom and to make copies thereof,
to the extent reasonably necessary to permit Purchaser (or its designees) to
prepare Tax Returns, to conduct negotiations with Tax authorities, and to
implement the provisions of, or to investigate or defend any claims between the
Parties arising under, this Agreement.

     

    (b)           From
and after Closing, Purchaser shall grant to Seller (or Seller's designees)
access at all reasonable times to all of the information, books and records
relating to the Assets within the possession of Purchaser (including without
limitation work papers and correspondence with taxing authorities, but excluding
work product of and attorney-client communications with any of Purchaser's legal
counsel and personnel files), and shall afford Seller (or Seller's designees)
the right (at Seller's expense) to take extracts therefrom and to make copies
thereof, to the extent reasonably necessary to permit Seller (or Seller's
designees) to prepare Tax Returns, to conduct negotiations with Tax authorities,
and to implement the provisions of, or to investigate or defend any claims
between the Parties arising under, this Agreement.

     

    (c)           Each
of the Parties hereto will preserve and retain all schedules, work papers and
other documents relating to any Tax Returns of or with respect to Taxes relating
to the Assets or to any claims, audits or other proceedings affecting the Assets
until the expiration of the statute of limitations (including extensions)
applicable to the taxable period to which such documents relate or until the
final determination of any controversy with respect to such taxable period, and
until the final determination of any payments that may be required with respect
to such taxable period under this Agreement.

     

    (d)           At
Seller's request, Purchaser shall provide reasonable access to Purchaser's and
its Affiliates' personnel who have knowledge of the information described in
this ‎Section
10.5.

    
      
        
        

      

      
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    Section
10.6         Like Kind
Exchange.  Either Purchaser and/or Seller may, at or before
Closing, elect to affect a tax-deferred exchange of the Assets for other
qualifying properties (the "Exchange Property")
in accordance with the following:

     

    (a)           In
the event that Seller makes such an election prior to the Closing, Seller may
elect, by notice to Purchaser delivered on or before the Closing Date, to have
the Purchase Price paid to a qualified intermediary until Seller has designated
the Exchange Property.  The Exchange Property shall be designated by
Seller and acquired by the qualified intermediary within the time periods
prescribed in Section 1031(a)(3) of the Code, and shall thereupon be conveyed to
Seller.  In the event Seller fails to designate, and the qualified
intermediary fails to acquire, the Exchange Property within such time periods,
unless the agreement with the qualified intermediary provides otherwise, the
agency or trust shall terminate and the proceeds then held by the qualified
intermediary shall be paid immediately to Seller.

     

    (b)           In
the event that Purchaser makes an election under this Section prior to Closing,
Purchaser may elect, by notice to Seller delivered on or before the Closing
Date, to have the Assets conveyed to a qualified intermediary or an exchange
accommodation titleholder (as such term is defined in Rec. Proc. 2000-37 issued
effective September 15, 2000).

     

    (c)           The
rights and responsibilities of Seller, Purchaser, and the qualified intermediary
or exchange accommodation titleholder shall be documented with such agreements
containing such terms and provisions as shall be reasonably determined by Seller
and Purchaser to be necessary to accomplish a tax deferred exchange under
Section 1031 of the Code, subject, however, to the limitations on costs and
liabilities of Purchaser and Seller set forth below.  If Seller makes
a tax deferred exchange election, Purchaser shall not be obligated to pay
additional costs or incur any additional obligations in the acquisition of the
Assets.  If Purchaser makes a tax deferred exchange election, no
Seller Party shall be obligated to pay any additional costs or incur any
additional obligations in the consummation of the transactions contemplated by
this Agreement.  Any such tax deferred exchange election by either
Party shall not affect the duties, rights, or obligations of the Parties except
as expressly set forth in this ‎Section
10.6.

     

    Should
either Seller or Purchaser make a tax deferred exchange election and should the
tax deferred exchange fail or be disallowed by the Internal Revenue Service for
any reason, (i) the non-electing Party's sole responsibility and liability
to the electing Party shall be to take such actions as are required by
subsections ‎(a), ‎(b), and ‎(c) above;
(ii) such non-electing Party shall have no other responsibility or
liability whatsoever to the electing Party pursuant to this ‎Section 10.6; and
(iii) the electing Party shall release, indemnify, and hold harmless the
non-electing Party from any responsibility or liability related to such election
except for such actions as may be required pursuant to subsections ‎(a), ‎(b), and ‎(c)
above.  Notwithstanding anything to the contrary in this Agreement,
the indemnities in this ‎Section 10.6 shall
survive the Closing and delivery of the Assignment and Bill of Sale
indefinitely.

     

    Section
10.7         Conflict.  In
the event of a conflict between the provisions of this Article 10 and any
other provision of this Agreement, except ‎Section
13.3 hereof, this Article 10 shall control.

    
      
        
        

      

      
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    ARTICLE
XI

    TERMINATION
AND AMENDMENT

     

    Section
11.1          Termination.  This
Agreement may be terminated at any time prior to Closing: (a) by the mutual
prior written consent of Seller and Purchaser; (b) by either Seller or
Purchaser, if Closing has not occurred on or before January 1, 2009; (c) by
either Party if the aggregate adjustment to the Unadjusted Purchase Price
pursuant to Articles 3 and 4 is greater than ten percent (10%) of the
Unadjusted Purchase Price, or (d) by either Party if the provisions of
‎Section
12.4 give it the right to do so; provided, however, that no
Party shall be entitled to terminate this Agreement under ‎Section
11.1(b) if the Closing has failed to occur because such Party negligently or
willfully failed to perform or observe in any material respect its covenants and
agreements hereunder or such Party is in breach of its representations and
warranties set forth in this Agreement.

     

    Section
11.2          Effect of
Termination.  If this Agreement is terminated pursuant to ‎Section
11.1, this Agreement shall become void and of no further force or effect (except
for the provisions of Article 1; the waiver provisions of ‎Section
3.5(a) and ‎Section
4.4(d); ‎Sections 3.5(d),
‎4.3(d),
‎4.4(d),
‎5.9,
‎5.23,
‎6.8,
‎6.9,
‎6.10,
‎6.11,
‎7.1
(solely to the extent of the modification of the Confidentiality Agreement),
‎7.3,
‎7.5,
‎7.6,
‎7.13
(solely with respect to the indemnity provisions thereof), ‎11.3,
‎13.2,
‎13.3,
‎13.4,
‎13.8,
‎13.9,
‎13.15,
‎13.16,
‎13.17,
and ‎13.18;
and the Confidentiality Agreement (as modified by this Agreement), all of which
shall continue in full force and effect).  Notwithstanding anything to
the contrary in this Agreement, the termination of this Agreement under ‎Section
11.1 shall not relieve any Party from liability for any willful or negligent
failure to perform or observe in any material respect any of its agreements or
covenants contained herein that are to be performed or observed at or prior to
Closing.  In the event this Agreement terminates under ‎Section
11.1 and any Party has willfully or negligently failed to perform or observe in
any material respect any of its agreements or covenants contained herein which
are to be performed or observed at or prior to Closing, then the other Party
shall be entitled to all remedies available at law or in equity and shall be
entitled to recover court costs and attorneys' fees in addition to any other
relief to which such Party maybe entitled.

     

    
      
        
        

      

      
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    Section
11.3          Distribution
of Deposit Upon Termination.

     

    (a)           If
Seller terminates this Agreement under ‎Section
11.1(b), and Purchaser has negligently or willfully failed to perform or observe
in any material respect its covenants and agreements or is in breach of its
representations and warranties hereunder, then Seller shall be entitled to
receive, as its sole and exclusive remedy, the Deposit and any income thereon as
liquidated damages, free of any claims by Purchaser or any other Person with
respect thereto.  In such event, Seller and Purchaser shall execute
and deliver joint written instructions to the Escrow Agent to disburse the
Deposit together with any income thereon to Seller.  It is expressly
stipulated by the Parties that the actual amount of damages resulting from such
a termination would be extremely difficult or impossible to determine accurately
because of (among other things) the unique nature of the Assets and the
uncertainties of applicable commodity markets, and the amount of the Deposit is
a fair and reasonable estimate by the Parties of such damages.

     

    (b)           If
this Agreement is terminated for any reason other than the reasons set forth in
‎Section
11.3(a), then Purchaser shall be entitled to receive the Deposit and any income
thereon, free of any claims by Seller or any other Person with respect
thereto.  In such event, Seller and Purchaser shall execute and
deliver joint written instructions to the Escrow Agent to disburse the Deposit
together with any income thereon to Purchaser.

     

    ARTICLE
XII

    INDEMNIFICATION;
LIMITATIONS

     

    Section
12.1          Assumption.  Without
limiting Purchaser's rights to indemnity under this Article 12, on the
Closing Date Purchaser shall assume and hereby agrees to fulfill, perform, pay
and discharge (or cause to be fulfilled, performed, paid or discharged) all
obligations and liabilities of Seller and its Affiliates, whether known or
unknown (the "Assumed
Seller Obligations"): (i) arising under or with respect to the
Assets and attributable to actions, omissions, or conditions first occurring on
or after the Effective Date, or to actions, omissions, or conditions first
occurring prior to the Effective Date to the extent that Damages (irrespective
of amount) with respect to such actions, omissions, or conditions relate to the
period of time on or after the Effective Date; (ii) relating or
attributable to the ownership, use, or operation of the Assets from and after
the Effective Date; (iii) for plugging and abandonment of all of the Wells
and dismantlement or abandonment of all structures and Equipment included in the
Assets and restoration of the surface of the Lands in accordance with applicable
Laws (whether or not required to be plugged, abandoned, dismantled, or restored
as of the Effective Date); (iv) to furnish makeup gas according to the
terms of applicable gas balancing, sales, gathering or transportation Contracts;
(v) subject to Article 3 and Article 4, relating to, or arising
from, Title Defects or environmental matters (solely to the extent that, with
respect to environmental matters, Purchaser knew or, in the exercise of
reasonable diligence, should have known prior to the Cut-Off Date of such
environmental matter or any Damages (irrespective of amount) relating thereto or
arising therefrom and did not notify Seller of the same pursuant to ‎Section
4.4(a)); (vi) subject to ‎Section
3.6 and ‎Section
5.8, obligations and liabilities related to or arising from the conveyance of
the Assets to Purchaser at Closing without the consent of a third Person;
(vii) continuing obligations under any agreements pursuant to which the
Seller or its Affiliates purchased Assets prior to the Closing to the extent
that Damages therefrom relate to periods of time on or after the Effective Date;
(viii) are required to be borne by Purchaser under ‎Section
2.3 or ‎Section
2.4; and (ix) are Tax obligations assumed by Purchaser pursuant to
Article 10; provided, however,
that Purchaser does not assume any obligations to the extent that they
(collectively, the "Retained Seller
Obligations"):

    
      
        
        

      

      
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    (a)           are
attributable to actions, omissions, or conditions occurring or existing prior to
the Effective Date, except to the extent addressed in clauses (i), (iii), (iv),
(v), (viii), or (ix) above;

     

    (b)           relate
or are attributable to the ownership, use, or operation of the Assets prior to
the Effective Date, except to the extent addressed in clauses (i), (iii), (iv),
(v), (viii), or (ix) above;

     

    (c)           are
attributable to or arise out of the Excluded Assets;

     

    (d)           are
required to be borne by Seller under ‎Section
2.3 or ‎Section
2.4;

     

    (e)           are
attributable to or arise out of any futures, options, swaps, or other
derivatives in place prior to Closing; or

     

    (f)           are
Tax obligations retained by Seller pursuant to Article 10.

     

    (g)           are
related to the matters shown on Schedule 5.2 and
Schedule 4.2.

     

    Section
12.2          Indemnification.

     

    (a)           From
and after Closing Purchaser shall indemnify, defend and hold harmless each
Seller Party and their Affiliates and their respective officers, directors,
employees, and agents (the "Seller Group") from
and against all Damages incurred or suffered by Seller Group:

     

    (i)          
 caused by, arising out of, or resulting from the Assumed Seller
Obligations,

     

    (ii)           caused
by, arising out of, or resulting from Purchaser's breach of any of Purchaser's
covenants or agreements contained in Article 7, or

     

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

     

    even if such Damages are caused in
whole or in part by the negligence (whether sole, joint, or concurrent), strict
liability or other legal fault of any Indemnified Person, invitee or third Person (but
excluding the gross negligence and willful misconduct of any Indemnified
Person), but excepting in each case Damages against which Seller would be
required to indemnify Purchaser under ‎Section 12.2(b) at
the time the claim notice is presented by Purchaser.

    
      
        
        

      

      
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    (b)           From
and after Closing (and, notwithstanding the foregoing, with respect to
environmental matters and deficiencies not assumed by Purchaser pursuant to
‎Section
12.1(v), from and after the Cut-Off Date), each Seller Party shall indemnify,
defend, and hold harmless Purchaser and its Affiliates, and its and their
respective officers, directors, employees, and agents (the "Purchaser Group")
against and from all Damages incurred or suffered by Purchaser
Group:

     

    (i)           caused
by, arising out of, or resulting from such Seller Party's breach of any of such
Seller Party's covenants or agreements contained in Article 7 and ‎Section
9.4(e);

     

    (ii)           caused
by, arising out of, or resulting from any breach of any representation or
warranty made by such Seller Party contained in Article 5 of this
Agreement, or in the certificates delivered at Closing pursuant to ‎Section
9.2(e);

     

    (iii)           caused
by, or arising out of, or resulting from, the Retained Seller Obligations, to
the extent of the ownership of such Seller Party in and to the affected
Asset;

     

    even
if such Damages are caused in whole or in part by the negligence (whether sole,
joint, or concurrent), strict liability or other legal fault of any Indemnified
Person, invitee, or third Person (but excluding the gross negligence and willful
misconduct of any Indemnified Person).

     

    (c)           Except
as set forth in ‎Section
12.2(f), each Party's sole and exclusive remedy against the other Party for
(i) any and all breaches of the representations, warranties, covenants, and
agreements of such other Party contained in Articles 5, 6, and 7; ‎Section
9.4(e) and the affirmations of such representations, warranties, covenants, and
agreements contained in the certificates delivered by Seller and Purchaser at
Closing pursuant to ‎Section
9.2(e) and ‎Section
9.3(d), respectively (provided, however, that Purchaser shall be entitled to
pursue whatever equitable remedies are available to it notwithstanding the terms
of this ‎Section
12.2 to enforce the covenants and agreements of Seller contained in ‎Section
7.6, ‎Section
7.13(d), ‎Section
7.14, ‎Section
7.16, and ‎Section
9.4(e)); and (ii) the Seller Retained Obligations and Seller Assumed
Obligations, is set forth in this ‎Section
12.2 (and, (x) where applicable with respect to Article 7, ‎Section
11.2 and (y) with respect to Taxes, Article 10), and if no such right
of indemnification is expressly provided, then such claims are hereby waived to
the fullest extent permitted by Law.  Except as expressly set forth
above, each Party hereto releases, remises, and forever discharges the other
Party and its Affiliates, and its and their respective officers, directors,
employees, and agents from any and all suits, legal, or administrative
proceedings, claims, demands, damages, losses, costs, liabilities, interest, or
causes of action whatsoever, in law or in equity, known or unknown, which such
Parties might now or subsequently may have, based on, relating to, or arising
out of, this Agreement or the ownership, use, or operation of the Assets, or the
condition, quality, status, or nature of the Assets, INCLUDING
RIGHTS TO CONTRIBUTION UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE,
COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED, BREACHES OF STATUTORY AND
IMPLIED WARRANTIES, NUISANCE OR OTHER TORT ACTIONS, RIGHTS TO PUNITIVE DAMAGES,
COMMON LAW RIGHTS OF CONTRIBUTION, ANY RIGHTS UNDER INSURANCE POLICIES ISSUED OR
UNDERWRITTEN BY THE OTHER PARTY OR ANY OF ITS AFFILIATES, AND ANY RIGHTS UNDER
AGREEMENTS BETWEEN ANY SELLER PARTY AND ANY OTHER SELLER PARTY AND/OR ANY
AFFILIATE OF ANY SELLER PARTY, EVEN IF CAUSED IN WHOLE OR IN PART BY THE
NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL
FAULT OF ANY RELEASED PERSON INVITEE, OR THIRD PARTY.  Without
limiting the generality of the preceding sentence, Purchaser agrees that its
only remedy with respect to the breach by any Seller Party of its respective
covenants and agreements in Article 7 and ‎Section
9.4(e) shall be (x) the indemnity of Seller in ‎Section
12.2(b), as limited by the terms of this Article 12, and, if applicable, as
set forth in ‎Section
11.2 and ‎Section
11.3, and (y) the equitable remedies described in ‎Section
12.2(c)(i), above.

    
      
        
        

      

      
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    (d)           "Damages," for
purposes of this Agreement, shall mean the amount of any actual liability, loss,
cost, expense, claim, award, or judgment incurred or suffered by any Indemnified
Person arising out of or resulting from the indemnified matter, whether
attributable to personal injury or death, property damage, contract claims,
torts, or otherwise, including reasonable fees and expenses of attorneys,
consultants, accountants, or other agents and experts reasonably incident to
matters indemnified against, and the costs of investigation and/or monitoring of
such matters, and the costs of enforcement of the indemnity; provided, however, that
"Damages" shall not include any adjustment for Taxes that may be assessed on
payments under this Article 12 or for Tax benefits received by the
Indemnified Person as a consequence of any Damages.  Notwithstanding
the foregoing, neither Purchaser nor Seller shall be entitled to indemnification
under this ‎Section
12.2 for, and Damages shall not include, (i) loss of profits, whether
actual or consequential, or other consequential damages suffered by the Party
claiming indemnification, or any punitive damages (other than loss of profits,
consequential damages, or punitive damages suffered by third Persons for which
responsibility is allocated among the Parties), (ii) any increase in
liability, loss, cost, expense, claim, award, or judgment to the extent such
increase is caused by the actions or omissions of any Indemnified Person after
the Closing Date or (iii)  any liability, loss, cost, expense, claim,
award, or judgment that does not individually exceed Two-Hundred Thousand
dollars ($200,000).

     

    (e)           Any
claim for indemnity under this ‎Section
12.2 by any Affiliate, director, officer, employee, or agent must be brought and
administered by the applicable Party to this Agreement.  No
Indemnified Person other than the Seller Parties and Purchaser shall have any
rights against either the Seller Parties or Purchaser under the terms of this
‎Section
12.2 except as may be exercised on its behalf by Purchaser or any of the Seller
Parties, as applicable, pursuant to this ‎Section
12.2(e).  Each of Seller and Purchaser may elect to exercise or not
exercise indemnification rights under this Section on behalf of the other
Indemnified Persons affiliated with it in its sole discretion and shall have no
liability to any such other Indemnified Person for any action or inaction under
this Section.

     

    (f)           ‎Section
12.2(b) shall not apply in respect of Title Defects, which are exclusively
covered by Article 3 and, until the Cut-Off Date Environmental Defects and
other environmental deficiencies, which are exclusively covered by
Article 4.  This ‎Section
12.2 shall not apply in respect of (i) tax matters other than ‎Section
5.3, which are exclusively covered by Article 2 and Article 10,
(ii) claims for Property Costs, which are covered exclusively by ‎Section
2.3, and ‎Section
2.4, (iii) any claims by a Party resulting or arising from the other
Party's intentional or willful misrepresentation of material fact contained in
this Agreement and the Schedules or Exhibits hereto, which misrepresentation
constitutes common law fraud pursuant to applicable Law, or (iv) any claims
by Purchaser to the extent based upon or arising out of the Excluded
Assets.

    
      
        
        

      

      
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    (g)           The
Parties shall treat, for Tax purposes, any amounts paid under this
Article 12 as an adjustment to the Purchase Price.

     

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

     

    (a)           For
purposes of this Article 12, the term "Indemnifying Person"
when used in connection with particular Damages shall mean the Person having an
obligation to indemnify another Person or Persons with respect to such Damages
pursuant to this Article 12, and the term "Indemnified Person"
when used in connection with particular Damages shall mean a Person having the
right to be indemnified with respect to such Damages pursuant to this
Article 12 (including, for the avoidance of doubt, those Persons identified
in ‎Section
12.2(e)).

     

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

     

    (c)           In
the case of a claim for indemnification based upon a Claim, the Indemnifying
Person shall have thirty (30) days from its receipt of the Claim Notice to
notify the Indemnified Person whether it admits or denies its obligation to
defend the Indemnified Person against such Claim under this
Article 12.  If the Indemnifying Person does not notify the
Indemnified Person within such thirty (30) day period regarding whether the
Indemnifying Person admits or denies its obligation to defend the Indemnified
Person, it shall be conclusively deemed obligated to provide such
indemnification hereunder.  The Indemnified Person is authorized,
prior to and during such thirty (30) day period, to file any motion, answer or
other pleading that it shall deem necessary or appropriate to protect its
interests or those of the Indemnifying Person and that is not prejudicial to the
Indemnifying Person.

     

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

    
      
        
        

      

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

     

    (f)         
  If Purchaser would be required to defend a Claim as provided in this
‎Section
12.3 but for the assertion that any liability, loss, cost, expense, claim,
award, judgment or other damages incurred or suffered by Seller would not
constitute "Damages" as defined in ‎Section
12.2(d), Purchaser shall nevertheless have the right and obligation to defend
against such Claim as set forth in ‎Section
12.3(d) subject to the indemnification obligations of Seller set forth in this
Article 12.

     

    (g)           In
the case of a claim for indemnification not based upon a Claim, the Indemnifying
Person shall have thirty (30) days from its receipt of the Claim Notice to
(i) cure the Damages complained of, (ii) admit its obligation to
provide indemnification with respect to such Damages or (iii) dispute the
claim for such Damages.  If the Indemnifying Person does not notify
the Indemnified Person within such thirty (30) day period that it has cured the
Damages or that it disputes the claim for such Damages, the Indemnifying Person
shall be conclusively deemed obligated to provide indemnification
hereunder.

     

    
      
        
        

      

      
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    Section
12.4          Casualty
and Condemnation.  If, after the date of this Agreement but
prior to Closing Date, any portion of the Assets is destroyed by fire or other
casualty or is expropriated or taken in condemnation or under right of eminent
domain that Seller has not been able to repair or otherwise cure (a "Casualty Loss"),
Seller and Purchaser shall agree prior to the Closing either to (a) delete
the Assets (or portion thereof) which are subject to the Casualty Loss from this
Agreement and reduce the Unadjusted Purchase Price in the same manner set forth
in ‎Section
3.5(e), or (b) to proceed with the purchase and sale of such Assets
notwithstanding the Casualty Loss (without any reduction in the Unadjusted
Purchase Price) in which case Seller shall pay to Purchaser all sums paid by
third Persons to Seller by reason of the Casualty Loss (without duplication of
any other sums or proceeds paid or to be paid to Purchaser pursuant to this
Agreement) to the extent paid with respect to the Assets (including, without
limitation proceeds of policies of insurance) promptly upon receipt of such sums
by Seller and, to the extent permitted pursuant to applicable Law, Seller shall
assign all right, title, and interest of Seller in and to any claims, causes of
action, unpaid proceeds, or other payments from third Persons arising out of
such Casualty Loss (to the extent related to the Assets).  In the
event that the value of the portion of the Assets affected by such Casualty Loss
(which shall be determined in the same manner set forth in ‎Section
3.5(e)) exceeds Thirty Million dollars ($30,000,000), Seller and Purchaser shall
have the right to terminate this Agreement upon written notification to the
other Party, and the Parties shall have the rights set forth in
Article 11.

     

    
      
        
        

      

      
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    Section
12.5          Limitation
on Actions.

     

    (a)           Except
as set forth to the contrary in this ‎Section
12.5(a), the representations and warranties of the Seller and Purchaser in
Article 5 and Article 6 and the covenants and agreements of the
Parties in Article 7 and the corresponding representations and warranties
given in the certificates delivered at Closing pursuant to ‎Section
9.2(e) and ‎Section
9.3(d), as applicable, shall survive the Closing until the Cut-Off Date (except
that the covenants of Sellers and Purchaser set forth in ‎Section
9.4(e) shall survive the Closing for the periods of time set forth
therein).  Notwithstanding the foregoing:

     

    (i)           the
representations and warranties of Seller set forth in ‎Section
5.14, ‎Section
5.15, ‎Section
5.11(d), and ‎Section
5.22, shall terminate as of the Closing;

     

    (ii)           the
representations of Seller set forth in ‎Section
5.3 and ‎Section
5.4 shall survive the Closing for the applicable statute of limitations
periods;

     

    (iii)           the
representations of Seller and Purchaser in ‎Section
5.1 and ‎Section
6.1, respectively shall survive the Closing indefinitely;

     

    (iv)           the
covenant of Seller in ‎Section
7.13 shall survive the Closing for the period of time set forth therein with
respect to Seller's obligations and indefinitely as to the indemnity provision
therein,

     

    (v)           the
covenant of Purchaser set forth in ‎Section
7.5 shall survive the Closing indefinitely;

     

    (vi)           the
covenants of Seller in ‎Section
7.6 and ‎Section
7.16 shall survive the Closing indefinitely; and

     

    (vii)           the
covenants of Seller set forth in ‎Section
7.14 shall survive the Closing for the period of time set forth
therein.

     

    (b)           Except
as specifically set forth in this Agreement, the remainder of this Agreement
shall survive the Closing without time limit except as may otherwise be
expressly provided herein.  Representations, warranties, covenants,
and agreements shall be of no further force and effect after the date of their
expiration, provided that there shall be no termination of any bona fide claim
asserted pursuant to this Agreement with respect to such a representation,
warranty, covenant, or agreement prior to its expiration date.

     

    (c)           The
indemnities in ‎Section
12.2(a)(ii), ‎Section
12.2(a)(iii), ‎Section
12.2(b)(i), and ‎Section
12.2(b)(ii) shall terminate as of the termination date of each respective
representation, warranty, covenant, or agreement that is subject to
indemnification, except in each case as to matters for which a specific written
claim for indemnity has been delivered to the Indemnifying Person on or before
such termination date.  The indemnity in ‎Section
12.2(b)(iii) shall survive the Closing for the applicable statute of limitations
with respect to ‎Section
12.1(a), ‎Section
12.1(b), and ‎Section
12.1(d), and indefinitely as to the remainder of the Seller Retained
Obligations. The indemnities in ‎Section
12.2(a)(i) shall continue without time limit, except with respect to ‎Section
12.1(x), which indemnity shall continue for the period of the applicable statute
of limitations.

     

    
      
        
        

      

      
        - 65
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    (d)           Neither
Party shall have any liability for any indemnification under ‎Section
12.2 until and unless the aggregate amount of the liability for all Damages
(i) for which Claim Notices are delivered by the other Party, and (ii) with
respect to which the indemnifying Party admits (or it is otherwise finally
determined) that the indemnifying Party has an obligation to indemnify the
indemnified Party pursuant to the terms of ‎Section
12.2 exceeds Two Million Five Hundred Thousand dollars ($2,500,000) (the "Minimum Damage
Amount"), at which time the indemnified Party will be entitled to recover
all such Damages; provided, however,
that, for the purposes of this ‎Section
12.5, the Minimum Damage Amount shall not apply with respect to any Damages to
the extent arising out of or resulting from (w) the breach by Seller of its
representations and warranties contained in ‎Section
5.3, (x)  breach by a Party of its covenants and agreements Parties
contained in Article 10, (y) the breach by a Party of its
representations in ‎Section
5.1 and ‎Section
6.1 through ‎Section
6.4, inclusive, (z) the Assumed Seller Obligations or the Retained Seller
Obligations.  Neither the Minimum Damage Amount nor the monetary
limitation on Damages set forth in ‎Section
12.2(d) shall apply to breaches of Seller's representation in ‎Section
5.7.  With respect to claims relating to Environmental Defects or
other environmental deficiencies with the Assets for which Purchaser is entitled
to indemnification pursuant to ‎Section
12.2(b), the amount of Damages shall be determined pursuant to ‎Section
4.4(e)(i), (ii), and (iii).

     

    (e)           Notwithstanding
anything to the contrary contained elsewhere in this Agreement, neither Party
shall be required to indemnify the other Party under this Article 12 for
aggregate Damages in excess of One-Hundred Fifty Million dollars
($150,000,000).

     

    (f)           The
amount of any Damages for which an Indemnified Person is entitled to indemnity
under this Article 12 shall be reduced by the amount of insurance proceeds
realized by the Indemnified Person or its Affiliates with respect to such
Damages (net of any collection costs, and excluding the proceeds of any
insurance policy issued or underwritten by the Indemnified Person or its
Affiliates).

     

    (g)           Neither
Party shall have any obligation or liability under this Agreement or in
connection with or with respect to the transactions contemplated by this
Agreement for any breach, misrepresentation, or noncompliance with respect to
any representation, warranty, covenant, indemnity, or obligation if such breach,
misrepresentation, or noncompliance shall have been waived by the other
Party.

     

    Section
12.6          Escrow.

     

    (a)           The
Deposit, together with any interest thereon (the "Escrow Amount"),
shall be maintained in the Escrow Account until (i) the later to occur of
one-hundred eighty (180) days after the Closing Date and December 31, 2008 (the
"Escrow Maintenance
Period") and (ii) so long thereafter as is required to resolve any claims
asserted by Purchaser in accordance with the procedure described in ‎Section
12.6(b); provided,
however, that, from time to time upon and after the termination of the
Escrow Maintenance Period, the Escrow Amount shall be distributed to Seller to
the extent that Purchaser's unresolved claims which were asserted in accordance
with ‎Section
12.6(b) are less than the Escrow Amount, and Purchaser agrees to take all
actions as may be required to distribute such amounts to
Seller.

    
      
        
        

      

      
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    (b)           Upon
notice to Seller specifying in reasonable detail the basis therefor, Purchaser
may, prior to the termination of the Escrow Maintenance Period, give written
notice to the Escrow Agent of any claim to which it may be entitled pursuant to
the terms of this Agreement, excluding, however, any claims that may
indemnified, bonded, or cured pursuant to ‎Section
3.5 or ‎Section
4.4.  Such notice shall specify the Damages to which Purchaser
reasonably believes it is entitled and shall certify that, during the period of
time set forth in ‎Section
12.3(b) or ‎Section
12.3(g), as applicable, Seller has not paid the Damages claimed by Purchaser or
otherwise responded to Purchaser's Claim Notice in a manner acceptable to
Purchaser, in the exercise of its commercially reasonable
discretion.  The delivery by Purchaser of a notice of a claim for
Damages to the Escrow Agent hereunder shall not constitute an election of
remedies and shall not limit Purchaser in any manner in the enforcement of other
remedies to which it may be entitled hereunder.

     

    ARTICLE
XIII

    MISCELLANEOUS

     

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

     

    Section
13.2         Notices.  All
notices that are required or may be given pursuant to this Agreement shall be
sufficient in all respects if given in writing, in English and delivered
personally, by telecopy or by recognized courier service, as
follows:

     

    
      	
               
    

            	
              If to
      Seller:

            	
              O'Brien Resources,
      LLC

            

    

    
      	
               
    

            	
              425 Ashley Ridge
      Boulevard, Suite 300

            

    

    
      	
               
    

            	
              Shreveport,
      Louisiana 71106

            

    

    
      	 	
              Attention:

            	
              William J. O'Brien,
      III

            

    

    
      	 	
              Telephone:

            	
              (318)
      865-8568

            

    

    
      	 	
              Facsimile:

            	
              (318)
      865-5173

            

    

     

    
      	
               
    

            	
              with a copy
      to:

            	
              Bracewell &
      Giuliani LLP

            

    

    
      	
               
    

            	
              Pennzoil Place,
      South Tower

            

    

    
      	
               
    

            	
              711 Louisiana
      Street, Suite 2300

            

    

    
      	
               
    

            	
              Houston, Texas
      77002

            

    

    
      
        
          	 	
                  Attention:

                	
                  James McAnelly
      III

                

        

      

    

    
      
        	 	
                Telephone:

              	
                (713)
      221-1194

              

      

    

    
      	 	
              
                Telecopy:

              

            	
              
                (713)
      222-3241

              

            

    

    
      
        
        

      

      
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              If
      to Purchaser:

            	
              Berry
      Petroleum Company

            

    

    
      	
               
      

            	
              950
      – 17th Street, Suite 2400

            

    

    
      	
               
      

            	
              Denver,
      Colorado 80202

            

    

    
      	
               
      

            	
              Attention:

            	
              Michael Duginski

            

    

    
      	
               
      

            	
              Telephone:

            	
              (303)
      825-3344

            

    

    
      	
               
      

            	
              Telecopy:

            	
              (303) 825-3350

            

    

     

    
      	
               
      

            	
              With
      a copy to:

            	
              Holland
      & Hart LLP

            

    

    
      	
               
      

            	
              555
      – 17th Street, Suite 3200

            

    

    
      	
               
      

            	
              Denver,
      Colorado 80202

            

    

    
      	
               
      

            	
              Attention:

            	
              Davis O'Connor

            

    

    
      	
               
      

            	
              Telephone:

            	
              (303)
      295-8000

            

    

    
      	
               
      

            	
              Telecopy:

            	
              (303)
      295-8261

            

    

     

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

     

    Section
13.3         Sales or
Use Tax, Recording Fees and Similar Taxes and
Fees.  Notwithstanding anything to the contrary in
Article 10, Purchaser shall bear any sales, use, excise, real property
transfer or gain, gross receipts, goods and services, registration, capital,
documentary, stamp or transfer Taxes, recording fees, and similar Taxes and fees
incurred and imposed upon, or with respect to, the property transfers or other
transactions contemplated hereby.  Should any Seller Party or any
Affiliate of any Seller Party pay any amount for which Purchaser is liable under
this ‎Section
13.3, Purchaser shall, promptly following receipt of Seller's invoice, reimburse
the amount paid.  If such transfers or transactions are exempt from
any such taxes or fees upon the filing of an appropriate certificate or other
evidence of exemption, Purchaser shall timely furnish to Seller such certificate
or evidence.

     

    Section
13.4          Expenses.  Except
as provided in ‎Section
7.6 and in ‎Section
12.3, all expenses incurred by Seller in connection with or related to the
authorization, preparation or execution of this Agreement, and the Exhibits and
Schedules hereto and thereto, and all other matters related to the Closing,
including without limitation, all fees and expenses of counsel, accountants and
financial advisers employed by Seller, shall be borne solely and entirely by
Seller, and all such expenses incurred by Purchaser shall be borne solely and
entirely by Purchaser.

     

    Section
13.5         Replacement
of Bonds, Letters of Credit, and Guarantees.  The Parties
understand that none of the bonds, letters of credit and guarantees, if any,
posted by Seller or any Affiliate of Seller with any Governmental Authority or
third Person and relating to the Assets are to be transferred to
Purchaser.  On or before Closing, Purchaser shall obtain, or cause to
be obtained in the name of Purchaser, replacements for such bonds, letters of
credit and guarantees, and shall cause, effective as of the Closing, the
cancellation or return to Seller of the bonds, letters of credit, and guarantees
posted by Seller and such Affiliates.  Schedule 13.5
identifies the corporate guarantees (but not surety bonds or other forms of
security) posted by Seller or any Affiliate of Seller with respect to the Assets
as of the date noted on such schedule.

    
      
        
        

      

      
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    Section
13.6          Records.

     

    (a)           Within
thirty (30) days after the Closing Date, Seller shall deliver or cause to be
delivered to Purchaser any Records that are in the possession of Seller or its
Affiliates, subject to ‎Section
13.6(b).

     

    (b)           Seller
may retain the originals of those Records relating to Tax and accounting matters
and provide Purchaser, at its request, with copies of such Records that pertain
to non-income Tax matters solely related to the Assets.  Seller may
retain copies of any other Records.

     

    (c)           Purchaser,
for a period of seven (7) years following the Closing, shall:

     

    (i)           retain
the Records,

     

    (ii)           provide
Seller, its Affiliates, and their respective officers, employees, and
representatives with access to the Records during normal business hours for
review and copying at Seller's expense; and

     

    (iii)           provide
Seller, its Affiliates, and their respective officers, employees, and
representatives with access, during normal business hours, to materials received
or produced after Closing relating to

     

    (A)           Seller's
obligations under Article 10 (including to prepare Tax Returns and to
conduct negotiations with Tax Authorities), or

     

    (B)           any
claim for indemnification made under ‎Section
12.2 of this Agreement (excluding, however, attorney work product and
attorney-client communications with respect to any such claim being brought by
Purchaser under this Agreement)

     

    for
review and copying at Seller's expense and to the Purchaser's personnel for the
purpose of discussing any such matter or claim.

     

    Section
13.7         Use of
Seller Party Names.  As promptly as practicable, but in any
case within one hundred twenty (120) days after the Closing Date, Purchaser
shall eliminate the use of the names O'Brien Resources, O'Brien Energy, O'BENCO,
Sepco, and variants thereof from the Assets and business of Purchaser conducted
therewith, and, except with respect to such grace period for eliminating
existing usage, shall have no right to use any logos, trademarks or trade names
belonging to any Seller Party or any of Affiliate of any Seller
Party.  Purchaser shall be solely responsible for any direct or
indirect costs or expenses resulting from the change in use of name, and any
resulting notification or approval requirements.

     

    Section
13.8         Governing
Law and Venue.  This Agreement and the legal relations between
the Parties shall be governed by and construed in accordance with the laws of
the State of Texas, without regard to principles of conflicts of laws that would
direct the application of the laws of another jurisdiction.

     

    
      
        
        

      

      
        - 69
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    Section
13.9          Dispute
Resolution.  Each Party consents to personal jurisdiction in
any action brought in the United States federal courts located in the State of
Texas with respect to any dispute, claim or controversy arising out of or in
relation to or in connection with this Agreement, and each of the Parties hereto
agrees that any action instituted by it against the other with respect to any
such dispute, controversy, or claim (except to the extent a dispute,
controversy, or claim arising out of or in relation to or in connection the
determination of a Title Defect Amount pursuant to ‎Section
3.5(f), the Environmental Defect Amount pursuant to ‎Section
4.5, or the determination of Purchase Price adjustments pursuant to ‎Section
9.4(b) is referred to an expert pursuant to those Sections) will be instituted
exclusively in the United States District Court for the Southern District of
Texas, Houston Division.  The Parties hereby waive trial by jury in
any action, proceeding, or counterclaim brought by any Party against another in
any matter whatsoever arising out of or in relation to or in connection with
this Agreement.

     

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

     

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

     

    Section
13.12       Assignment.  No
Party shall assign (including, without limitation, by change of control, merger,
consolidation, or stock purchase) or otherwise transfer all or any part of this
Agreement, nor shall any Party delegate any of its rights or duties hereunder
(including, without limitation, by change of control, merger, consolidation, or
stock purchase), without the prior written consent of the other Party and any
transfer or delegation made without such consent shall be
void.  Subject to the foregoing, this Agreement shall be binding upon
and inure to the benefit of the Parties hereto and their respective successors
and assigns.

     

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

     

    Section
13.14       Amendment.  This
Agreement may be amended or modified only by an agreement in writing signed by
Seller and Purchaser and expressly identified as an amendment or
modification.

     

    Section
13.15       No
Third-Person Beneficiaries.  Nothing in this Agreement shall
entitle any Person other than Purchaser and Seller to any claim, cause of
action, remedy or right of any kind, except the rights expressly provided to the
Persons described in ‎Section
7.5 and ‎Section
12.2(e).

    
      
        
        

      

      
        - 70
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    Section
13.16        References.

     

    In this
Agreement:

     

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

     

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

     

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

     

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

     

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

     

    (f)           References
to "$" or "dollars" means United States dollars; and

     

    (g)           "Include"
and "including" shall mean include or including without limiting the generality
of the description preceding such term.

     

    Section
13.17       Construction.  Purchaser
is capable of making such investigation, inspection, review and evaluation of
the Assets as a prudent purchaser would deem appropriate under the
circumstances, including with respect to all matters relating to the Assets,
their value, operation, and suitability.  Each of Seller and Purchaser
has had the opportunity to exercise business discretion in relation to the
negotiation of the details of the transaction contemplated
hereby.  This Agreement is the result of arm's-length negotiations
from equal bargaining positions.  It is expressly agreed that this
Agreement shall not be construed against any Party, and no consideration shall
be given or presumption made, on the basis of who drafted this Agreement or any
particular provision thereof.

     

    Section
13.18       Limitation
on Damages.  Notwithstanding anything to the contrary contained
herein, none of Purchaser, any Seller Party, or any of their respective
Affiliates shall be entitled to consequential, special, or punitive damages in
connection with this Agreement and the transactions contemplated hereby (other
than special or punitive damages suffered by third Persons for which
responsibility is allocated between the Parties) and each of Purchaser and each
Seller Party, for itself and on behalf of its Affiliates, hereby expressly
waives any right to consequential, special, or punitive damages in connection
with this Agreement and the transactions contemplated hereby.  It is
understood and agreed by Purchaser that there are a number of Parties
constituting Seller under this Agreement, and that, except as specifically set
forth herein, any representations, warranties, covenants, or agreements made by
"Seller" hereunder are severally made by each Party constituting Seller with
respect to itself and its ownership interest in the Assets only, and not with
respect to any other Seller Party or any other interest in the
Assets.  The obligations of the Parties constituting "Seller"
hereunder shall be several and not joint, and no party who is a part of the
Parties constituting Seller shall be responsible for the obligations of any
other Party or any matters relating to any other Party or any other Party's
interest in the Assets.

    
      
        
        

      

      
        - 71
-

        
          

        

      

      
        
        

      

    

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

     

    
      	 	 	SELLER:
	 	 	 
	 	 	 
	 	 	O'BRIEN RESOURCES,
      LLC
	 	 	 
	 	 	By:   	 
	 	 	 	William
      J. O'Brien III
	 	 	 	Chairman
      and Chief Executive Officer

    

     

    
      	 	 	O'BENCO II,
  LP
	 	 	 	 
	 	 	By:	O'BENCO
      II GP, LLC, its General Partner
	 	 	 	 
	 	 	By:	O'Brien
      Resources, LLC, its Manager
	 	 	 	 
	 	 	By: 	 
	 	 	 	William
      J. O'Brien III
	 	 	 	Chairman
      and Chief Executive Officer
	 	 	 	 

    

     

    
      	 	 	SEPCO II,
  LLC
	 	 	 	 
	 	 	By:  	 
	 	 	 	 Jack R.
      Touchstone
	 	 	 	 Management
      Committee Chairman

    

     

    
      	 	 	CROW HORIZONS
      COMPANY
	 	 	 	 
	 	 	By:	O'Brien
      Resources, LLC, its Agent and Attorney-in-Fact
	 	 	 	 
	 	 	By: 	 
	 	 	 	William J. O'Brien
      III
	 	 	 	Chairman and Chief
      Executive Officer

    

     

    
      	 	 	LIBERTY ENERGY,
      LLC
	 	 	 	 
	 	 	By: 	 
	 	 	 	Scott
    Carson
	 	 	 	Investment
      Officer

    

    
    

     

    
      	 	 	PURCHASER:
	 	 	 	 
	 	 	BERRY PETROLEUM
      COMPANY
	 	 	 	 
	 	 	By:  	 
	 	 	Name:   	 
	 	 	Title:overridingroyalty.htm

    
      
         

      

      
         

      

      
         

        
          Execution
Version

        

      

    

    OVERRIDING
ROYALTY PURCHASE AGREEMENT

     

    BETWEEN

     

    O'BRIEN
RESOURCES, LLC

     

    AS
SELLER

     

    AND

     

    BERRY
PETROLEUM COMPANY

     

    AS
PURCHASER

     

    DATED
AS OF JUNE 10, 2008

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    OVERRIDING
ROYALTY PURCHASE AGREEMENT

     

    This Overriding Royalty Purchase
Agreement (this "Agreement"), is dated
as of June 10, 2008, by and between O'Brien Resources, LLC, a Texas limited
liability company ("Seller"), and Berry
Petroleum Company, a Delaware corporation ("Purchaser"), but
effective for all purposes as of the Effective Date.  Seller and
Purchaser are sometimes referred to herein collectively as the "Parties" and
individually as a "Party."

     

    RECITALS:

     

    Pursuant
to that certain Purchase and Sale Agreement by and among Purchaser, Seller, and
certain other parties dated as of June 10, 2008 (the "Purchase Agreement")
Seller assigned to Purchaser certain interests in and to, among other things,
certain oil and gas leases more specifically described therein;

     

    Seller
specifically excluded from the Purchase Agreement certain overriding royalty
interests reserved by Seller prior to the date of the Purchase Agreement in and
to the oil and gas leases covering the lands shown on Exhibit A
hereto, including, without limitation those overriding royalty interests more
specifically described on Exhibit B-1
hereto (the "Overriding Royalty
Interests"); and

     

    Seller
desires to sell and Purchaser desires to Purchase the Overriding Royalty
Interests pursuant to the terms hereof.

     

    NOW
THEREFORE, for and in consideration of the premises and of the mutual promises,
representations, warranties, covenants, conditions, and agreements contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree as
follows:

     

    Article
1

     

    PURCHASE
AND SALE

     

    1.1 Purchase
and Sale.  On the terms and conditions contained in this
Agreement, Seller agrees to sell to Purchaser, effective as of February 1, 2008
(the "Effective
Date") and Purchaser agrees to purchase, accept, and pay for the
Overriding Royalty Interests.

     

    1.2 Certain
Excluded Assets.  Notwithstanding anything to the contrary in
this Agreement or the Purchase Agreement, it is understood and agreed by the
Parties that the Overriding Royalty Interests shall not include, and there shall
not be transferred to Purchaser at Closing (a) any Tax refund (whether by
payment, credit, offset, or otherwise) with respect to Taxes applicable to the
Overriding Royalty Interests prior to the Effective Date and (b) refunds
relating to severance Tax abatements (whether by payment, credit, offset, or
otherwise, and together with any interest thereon) with respect to all taxable
periods or portions thereof ending on or prior to the Effective Date, whether
received before, on, or after the Effective Date (including, without limitation,
refunds relating to the designation by the Railroad Commission of Texas of any
Well or Unit as "High Cost" pursuant to the terms of 16 Tex. Admin.
Code § 3.101).

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    1.3 Incorporation
of Certain Definitions.  Capitalized terms used herein but not
defined shall have the meanings ascribed to such terms in the Purchase
Agreement.

     

    Article
2

    PURCHASE
PRICE

     

    2.1 Purchase
Price.  The purchase price for the Overriding Royalty Interests
(the "Purchase Price") shall be Thirty-Two Million Three Hundred Fifty-Six
Thousand dollars ($32,356,000) (the "Unadjusted Purchase
Price"), adjusted as provided in Section 2.4.

     

    2.2 Allocated
Values.  The allocations set forth in Schedule 2.2
(the "Allocated
Values") shall be used by Seller and Purchaser as the basis for
calculating Title Defect Amounts and reporting asset values and other items,
including preparing Internal Revenue Service Form 8594, Asset Acquisition
Statement (which Form 8594 shall be completed, executed and delivered by such
parties as soon as practicable after the Closing but in no event later than 15
days prior to the date such form is required to be filed).  Seller and
Purchaser agree not to assert, and will cause their Affiliates not to assert, in
connection with any audit or other proceeding with respect to Taxes, any asset
values or other items inconsistent with the amounts set forth in Schedule 2.2.

     

    2.3 Division
of Proceeds, Expenses, and Taxes.

     

    (a) Seller
shall be entitled to all amounts earned from the sale of Hydrocarbons produced
from, or attributable to, the Overriding Royalty Interests during the period up
to but excluding the Effective Date (net of any (i) gathering, processing,
and transportation costs paid in connection with sales of Hydrocarbons from an
Overriding Royalty Interest, and (ii) production Taxes, severance Taxes,
and other Taxes measured by units of production, in each case, to the extent not
otherwise deducted by a third Person, including, without limitation, a purchaser
of production), and to all other income earned with respect to the Overriding
Royalty Interests up to but excluding the Effective Date.  Purchaser
shall be entitled to all such amounts with respect to periods of time from and
after the Effective Date.

     

    (b) Seller
shall be responsible for (and entitled to any refunds and indemnities with
respect to) the costs, expenses, and expenditures (if any) incurred up to but
excluding the Effective Date, to the extent that the same have not been
otherwise deducted by a third Person (including, without limitation, a purchaser
or production, and Purchaser shall be responsible for all other costs, expenses,
and expenditures (if any).

     

    (c) Without
duplication of any amounts otherwise paid or received (or, in the case of costs,
expenses, and expenditures, deducted or otherwise accounted for by a third
Person, including, without limitation a purchaser of production) with respect to
the Overriding Royalty Interests, (i) should any Party or its Affiliates
receive any proceeds or other income to which the other Party is entitled under
this Section 2.3, such Party shall fully disclose, account for, and
promptly remit the same to such other Party, and (ii) should any Party pay
any costs, expenses, or expenditures for which the other Party is responsible
under this Section 2.3, such Party shall reimburse the other Party promptly
after receipt of such other Party's invoice, accompanied by copies of the
relevant vendor or other invoice and proof of payment.

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    (d) Real and
personal property Taxes, severance Taxes, and any other Taxes measured by units
of Production with respect to the Overriding Royalty Interests shall be prorated
between Purchaser and Seller as of the Effective Date.  If the actual
Taxes are not known on the Closing Date, Seller's share of such Taxes shall be
determined by using (i) the rates and millages for the year prior to the
year in which the Closing occurs, with appropriate adjustments for any known and
verifiable changes thereto, and (ii) the assessed values for the year in
which Closing occurs.  When Purchaser receives the actual tax
statements for or applicable to the Overriding Royalty Interests from the
appropriate taxing authorities, Purchaser shall deliver to Seller a copy of such
statements, together with the amount, if any, by which Seller's proration
exceeds the proration that would have been made had actual tax statements been
used to calculate Seller's proration.  If the proration for Seller
that would have been made using actual tax statements exceeds that made at
Closing, Seller shall pay to Purchaser such difference within five (5) days of
receipt of such statement.

     

    (e) "Earned"
or "Incurred," as used in this Section 2.3 shall be interpreted in
accordance with accounting recognition under the Accounting
Principles.

     

    2.4 Adjustments
to Purchase Price.  The Unadjusted Purchase Price shall be
adjusted as follows:

     

    (a) Increased
or decreased, as appropriate, in accordance with Article 3; and

     

    (b) Increased
or decreased, as appropriate, to give effect to the terms and provisions of
Section 2.3.

     

    Article
3

    TITLE
MATTERS

     

    3.1 Seller's
Title.

     

    (a) Seller
represents and warrants to Purchaser that Seller's title to the Overriding
Royalty Interests shown on Exhibit B-2 is
(and as of the Closing Date shall be) Defensible Title as defined in
Section 3.2.  This representation and warranty provides
Purchaser's exclusive remedy with respect to any Title Defects.  The
conveyance to be delivered by Seller to Purchaser at Closing (the "Conveyance") shall be
in form identical to the Conveyance attached hereto as Exhibit C and
shall contain a special warranty of title to the Overriding Royalty Interests
by, through, and under Seller, but not otherwise, subject to the Permitted
Encumbrances.

     

    (b) With
respect to each Overriding Royalty Interest that relates to an Undeveloped
Location, it is understood and agreed by Purchaser that the representation of
Seller in Section 3.1(a) is based upon the Undeveloped Assumption
Data.  Purchaser shall not be entitled to protection under Seller's
representation in Section 3.1(a) against any Title Defect to the extent
based upon, or arising out of, Purchaser's disagreement with, or change to, the
Undeveloped Assumption Data.  The Undeveloped Assumption Data was
provided to Purchaser previously in connection with the transactions
contemplated by the Purchase Agreement, and copies of the Undeveloped Assumption
Data described in Section 3.1(c)(i) and (ii) of the Purchase Agreement have
been provided to Purchaser in connection with the execution of the Purchase
Agreement.

     

    
      
         

      

      
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    3.2 Definition
of Defensible Title.

     

    (a) As used
in this Agreement, the term "Defensible Title"
means that title of Seller which, subject to the Permitted
Encumbrances:

     

    (i) entitles
Seller to receive not less than the "net revenue interest" share or percentage
shown in Exhibit B-2 of
all Hydrocarbons from a Lease, Well, or Unit attributable to the aggregate of
the Overriding Royalty Interests, whether in cash, in kind, or otherwise, except
decreases resulting from the establishment or amendment of pools or units, and
except as otherwise stated in Exhibit B-2;
and

     

    (ii) is free
of liens, encumbrances, obligations, or defects, other than Permitted
Encumbrances.  As used herein, the term "Permitted Encumbrances" shall
include (without limiting the definition set forth in the Purchase Agreement),
the failure to record assignments or reservations of any Overriding Royalty
Interest to the extent that the same would not reduce Seller's net revenue
interest below that shown in Exhibit B-2.

     

    (b) As used
in this Agreement, the term "Title Defect" means
any lien, charge, encumbrance, obligation, or defect, including, without
limitation, a discrepancy in net revenue interest that causes a breach of
Seller's representation and warranty in Section 3.1.

     

    3.3 Notice of
Title Defects.  To assert a claim arising out of a breach of
Section 3.1, Purchaser must deliver a defect claim notice or notices to
Seller on or before ten (10) Business Days prior to the Target Closing Date (the
"Defect Claim
Date"); provided, however,
that Purchaser shall use its commercially reasonable efforts to deliver a defect
claim notice with respect to a specific alleged Title Defect on or before five
(5) Business Days after Purchaser obtains knowledge of the existence of such
Title Defect, even if the date of delivery of such defect claim notice is prior
to the Defect Claim Date.  Each such notice shall be in writing and
shall include:

     

    (a) a
description of the alleged Title Defect(s);

     

    (b) the
Overriding Royalty Interests affected;

     

    (c) the
Allocated Values of the Overriding Royalty Interest(s) subject to the alleged
Title Defect(s);

     

    (d) true and
complete copies of any documentation supporting the existence, nature, and basis
of the alleged Title Defect(s); and

     

    (e) the
amount by which Purchaser reasonably believes the Allocated Values of those
Overriding Royalty Interests are reduced by the alleged Title Defect(s) and the
computations and information upon which Purchaser's belief is
based.

     

    
      
         

      

      
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    PURCHASER
SHALL BE DEEMED TO HAVE WAIVED ALL BREACHES OF SECTION 3.1 OF
WHICH SELLER HAS NOT BEEN GIVEN NOTICE ON OR BEFORE THE DEFECT CLAIM
DATE.

     

    3.4 Title
Defect Amounts.  The Title Defect Amount resulting from a Title
Defect (the "Title
Defect Amount") shall be determined as follows:

     

    (a) if
Purchaser and Seller agree on the Title Defect Amount, that amount shall be the
Title Defect Amount;

     

    (b) if the
Title Defect is a lien, encumbrance, or other such charge, then the Title Defect
Amount shall be the amount necessary to be paid to remove the Title Defect from
Seller's interest in the affected Overriding Royalty Interests;

     

    (c) if the
Title Defect represents a discrepancy between (i) the net revenue interest
for any Overriding Royalty Interest and (ii) the net revenue interest or
percentage stated on Exhibit B-2 with
respect to such Overriding Royalty Interest, then the Title Defect Amount shall
be the product of the Allocated Value of such Overriding Royalty Interest
multiplied by a fraction, the numerator of which is the net revenue interest or
percentage ownership decrease and the denominator of which is the net revenue
interest or percentage ownership stated on Exhibit B-2,
provided that if the Title Defect does not affect the Overriding Royalty
Interest throughout its entire productive life, the Title Defect Amount
determined under this Section 3.4(c) shall be reduced to take into account
the applicable time period only;

     

    (d) if the
Title Defect represents an obligation, encumbrance, burden, or charge upon or
other defect in title to the affected Overriding Royalty Interest of a type not
described in subsections (a), (b),or (c) above, the Title Defect Amount shall be
determined by taking into account the Allocated Value of the Overriding Royalty
Interest so affected, the legal effect of the Title Defect, the potential
economic effect of the Title Defect over the life of the affected Property to
which the Overriding Royalty Interest relates, the values placed upon the Title
Defect by Purchaser and Seller, and such other factors as are necessary to make
a proper evaluation (including, without limitation, the reasonable cost to cure
such Title Defect);

     

    (e) notwithstanding
anything to the contrary in this Article 3, (i) an individual claim for a Title
Defect for which a claim notice is given in accordance with Section 3.3
shall not be considered to be a Title Defect pursuant to this Article 3
 unless and until the Title Defect Amount with respect thereto exceeds
One-Hundred Thousand dollars ($100,000), and (ii) with respect to any Title
Defects entitled to an adjustment pursuant to subsection (i), unless and until
the aggregate amount of such Title Defects exceed One-Million dollars
($1,000,000); and

     

    (f) the Title
Defect Amount with respect to a Title Defect shall be determined without
duplication of any costs or losses included in another Title Defect Amount
hereunder.

     

    3.5 Cure
Notice.

     

    (a) Seller
shall have the right, but not the obligation, to attempt, at Seller's sole cost,
to cure or remove on or before sixty (60) days after the Closing Date (the
"Cure Period")
any Title Defects of which Seller has been advised by Purchaser if Seller has
provided written notice of its intent to cure or remove such Title Defects (a
"Cure
Notice").

     

    
      
         

      

      
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    (b) In the
event that Seller delivers a Cure Notice to Purchaser, Sections 3.6(a) and
3.7 shall apply with respect to any Overriding Royalty Interests for which
Seller has elected to attempt to cure or remove a Title
Defect.  Seller's election to attempt to cure a Title Defect shall not
constitute a waiver of any rights of Seller under this Article 3, including,
without limitation, Seller's right to dispute the existence, nature or value of,
or cost to cure, the Title Defect.

     

    3.6 Response
to Title Defect Claim.  In the event that Purchaser delivers to
Seller a notice pursuant to Section 3.3, Seller may, on or before a date
that is two (2) Business Days prior to the Closing Date (provided that, if
Seller does not provide such notice, Seller shall be deemed to have elected
Section 3.6(a), below):

     

    (a) deliver a
Cure Notice, in which case (i) the Unadjusted Purchase Price shall be
decreased by the Allocated Value of the Overriding Royalty Interests covered in
the Cure Notice, (ii) the affected Overriding Royalty Interests shall not
be conveyed to Purchaser at Closing pending Seller's attempt to cure such Title
Defect, and (iii) Seller shall have the rights set forth in
Section 3.7;

     

    (b) exclude
the Overriding Royalty Interests affected by the Title Defect from this
Agreement, in which case the Unadjusted Purchase Price shall be decreased by the
Allocated Value of any such Overriding Royalty Interest and the affected
Overriding Royalty Interest shall be deemed to be deleted from this Agreement
for all purposes and shall not be conveyed to Purchaser at Closing;
or

     

    (c) include
the Overriding Royalty Interests affected by the Title Defect in this Agreement
and convey the same to Purchaser at Closing, in which case the Unadjusted
Purchase Price shall be decreased by the Title Defect Amount of such Title
Defect.

     

    3.7 Title
Defects Subject to Cure.

     

    (a) If, with
respect to any Title Defect that Seller has elected to attempt to cure pursuant
to Section 3.6(a), if such Title Defect is cured on or before the end of
the Cure Period, Seller shall sell to Purchaser, and Purchaser shall purchase
from Seller, the affected Overriding Royalty Interests effective as of the
Effective Date pursuant to the terms of this Agreement.

     

    (b) Subject
to a final determination of the existence or Title Defect Amount with respect to
such Title Defect pursuant to Section 3.8, if Seller has not cured such
Title Defect on or before the end of the Cure Period, Seller shall not be
obligated to sell to Purchaser, and Purchaser shall not be obligated to
purchase, the affected Overriding Royalty Interests.

     

    (c) Notwithstanding
anything to the contrary contained herein, Seller shall have the right, at any
time before, during, or after the Cure Period, and without notice to, or consent
by, Purchaser, to cease its attempt to cure any alleged Title Defect and retain
the Overriding Royalty Interests affected thereby without liability or
obligation to Purchaser.

     

    
      
         

      

      
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    3.8 Title
Defect Resolution; Arbitration.

     

    (a) Seller
and Purchaser shall attempt to agree on all Title Defect Amounts and Title
Benefit Amounts on or before the Closing Date.  If Seller and
Purchaser are unable to agree by that date, the affected Overriding Royalty
Interests shall be not be conveyed to Purchaser at Closing, and, except to the
extent that Seller has elected to attempt to cure a Title Defect, all Title
Defect Amounts and Title Benefit Amounts in dispute shall be exclusively and
finally resolved by arbitration pursuant to this Section 3.8.

     

    (b) During
the 10-day period following the Closing Date, Title Defect Amounts and Title
Benefit Amounts in dispute shall be submitted to a title attorney with at least
10 years' experience in oil and gas titles in Texas as selected by mutual
agreement of Purchaser and Seller, or, absent such agreement during the 10-day
period, by the Houston office of the American Arbitration Association (the
"Title
Arbitrator").  Likewise, if by the end of the Cure Period,
Seller has failed to cure any Title Defects with respect to which it delivered a
Cure Notice or a dispute exists as to whether (or the extent to which) a Title
Defect has been cured, and Seller and Purchaser have been unable to agree on the
Title Defect Amounts for such Title Defects (or their existence), the Title
Defect Amounts in dispute shall be submitted to the Title
Arbitrator.  The Title Arbitrator shall not have worked as an employee
or outside counsel for any Party or its Affiliates during the five (5) year
period preceding the arbitration or have any financial interest in the
dispute.  The arbitration proceeding shall be held in Houston, Texas
and shall be conducted in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, to the extent such rules do not conflict
with the terms of this Section.  The Title Arbitrator's determination
shall be made within forty-five (45) days after submission of the matters in
dispute and shall be final and binding upon the Parties, without right of
appeal.  In making his determination, the Title Arbitrator shall be
bound by the rules set forth in this Article 3 and may consider such other
matters as in the opinion of the Title Arbitrator are necessary or helpful to
make a proper determination.  Additionally, the Title Arbitrator may
consult with and engage disinterested third Persons to advise the arbitrator,
including title attorneys from other states and petroleum
engineers.  The Title Arbitrator shall act as an expert for the
limited purpose of determining the specific disputed Title Defect Amounts
submitted by any Party and may not award damages, interest, or penalties to any
Party with respect to any matter.  Seller and Purchaser shall each
bear its own legal fees and other costs of presenting its
case.  Purchaser shall bear one-half of the costs and expenses of the
Title Arbitrator and Seller shall be responsible for the remaining one-half of
the costs and expenses.

     

    (c) On or
before five (5) Business Days after the date on which (i) the Parties agree
upon the existence or Title Defect Amounts with respect to all disputed Title
Defects affecting an Overriding Royalty Interest or Seller receives the final
determination of the Title Arbitrator with respect thereto and (ii) the
Cure Period with respect to all alleged Title Defects has expired, Seller shall
elect to sell or retain any Overriding Royalty Interest affected by a Title
Defect pursuant to Section 3.6(b) or 3.6(c); provided, however,
that, if Seller does not timely make such an election, Seller shall be deemed to
have elected to exclude such affected Overriding Royalty Interest pursuant to
Section 3.6(b).

     

    
      
         

      

      
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    3.9 Limitations;
Disclaimers.

     

    (a) THE REMEDIES PROVIDED FOR
IN THIS ARTICLE 3 SHALL, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BE THE EXCLUSIVE RIGHT AND
REMEDY OF PURCHASER WITH RESPECT TO SELLER'S BREACH OF ITS WARRANTY AND
REPRESENTATION IN SECTION 3.1.  EXCEPT
AS SPECIFICALLY PROVIDED IN THIS ARTICLE 3 AND THE CONVEYANCE,
PURCHASER ACKNOWLEDGES AND AGREES THAT THE OVERRIDING ROYALTIES ARE BEING SOLD
HEREBY WITHOUT WARRANTY OF TITLE, EXPRESS OR IMPLIED, AND HEREBY RELEASES,
REMISES, AND FOREVER DISCHARGES SELLER AND ITS AFFILIATES AND ALL SUCH PARTIES'
MEMBERS, PARTNERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS, AND
REPRESENTATIVES FROM ANY AND ALL SUITS, LEGAL OR ADMINISTRATIVE PROCEEDINGS,
CLAIMS, DEMANDS, DAMAGES, LOSSES, COSTS, LIABILITIES, INTEREST, OR CAUSES OF
ACTION WHATSOEVER, IN LAW OR IN EQUITY, KNOWN OR UNKNOWN, WHICH PURCHASER MIGHT
NOW OR SUBSEQUENTLY MAY HAVE, BASED ON, RELATING TO OR ARISING OUT OF, ANY TITLE
DEFECT OR DEFICIENCY IN TITLE WHATSOEVER.

     

    (b) The
representation and warranty in Section 3.1 shall terminate as of the Defect
Claim Date and shall have no further force and effect thereafter, provided there
shall be no termination of Purchaser's or Seller's rights under this Article 3
with respect to any Title Defect claim properly reported pursuant to
Section 3.3 on or before the Defect Claim Date.

     

    Article
4

    DISCLAIMERS;
REPRESENTATIONS AND WARRANTIES

     

    4.1 Environmental.  PURCHASER ACKNOWLEDGES THAT SELLER
HAS NOT MADE, AND WILL NOT MAKE, ANY REPRESENTATION OR WARRANTY REGARDING THE
RELEASE OF MATERIALS INTO THE ENVIRONMENT, THE PROTECTION OF THE ENVIRONMENT,
HEALTH OR SAFETY, OR ANY OTHER MATTERS RELATED TO THE ENVIRONMENTAL CONDITION OF
THE OVERRIDING ROYALTY INTERESTS OR ANY ENVIRONMENTAL DEFICIENCY WITH RESPECT
THERETO.

     

    4.2 Other
representations.  EXCEPT AS EXPRESSLY REPRESENTED OTHERWISE IN
THIS AGREEMENT OR IN THE CONVEYANCE, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, SELLER MAKES NO, AND EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, AS TO (A) TITLE TO ANY OF THE OVERRIDING
ROYALTY INTERESTS, (B) THE CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE
MEMORANDUM, OR ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY
GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE OVERRIDING ROYALTY
INTERESTS, (C) THE QUANTITY, QUALITY, OR RECOVERABILITY OF PETROLEUM
SUBSTANCES IN OR FROM THE OVERRIDING ROYALTIES, (D) THE EXISTENCE OF ANY
PROSPECT, RECOMPLETION, INFILL, OR STEP-OUT DRILLING OPPORTUNITIES, (E) ANY
ESTIMATES OF THE VALUE OF THE OVERRIDING ROYALTIES OR FUTURE REVENUES GENERATED
BY THE OVERRIDING ROYALTIES, (F) THE PRODUCTION OF PETROLEUM SUBSTANCES
FROM THE OVERRIDING ROYALTIES, OR WHETHER PRODUCTION HAS BEEN CONTINUOUS, OR IN
PAYING QUANTITIES, OR ANY PRODUCTION OR DECLINE RATES, (G) THE MAINTENANCE,
REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN, OR MARKETABILITY OF THE
OVERRIDING ROYALTIES, (H) INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHT,
OR (I) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE AVAILABLE
OR COMMUNICATED TO PURCHASER OR ITS AFFILIATES, OR ITS OR THEIR EMPLOYEES,
AGENTS, CONSULTANTS, REPRESENTATIVES, OR ADVISORS IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE PURCHASE AGREEMENT OR ANY
DISCUSSION OR PRESENTATION RELATING THERETO, AND FURTHER DISCLAIMS ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE, OR CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, IT BEING
EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO THAT, EXCEPT AS EXPRESSLY
PROVIDED HEREIN, THE OVERRIDING ROYALTIES ARE BEING TRANSFERRED "AS IS, WHERE
IS," WITH ALL FAULTS AND DEFECTS, AND THAT PURCHASER HAS MADE OR CAUSED TO BE
MADE SUCH INSPECTIONS AS PURCHASER DEEMS APPROPRIATE.

     

    
      
         

      

      
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    4.3 Seller's
Representations.  Section 5.1 of the Purchase Agreement is
incorporated herein by this reference, with all references therein to "Seller
Party" deemed to mean "Seller" (as defined in this Agreement) and all references
to "Assets" deemed to mean "Overriding Royalty Interests."

     

    4.4 Purchaser's
Representations.

     

    (a) Sections 6.1
through 6.4, inclusive, of the Purchase Agreement are incorporated herein by
this reference.

     

    (b) Purchaser
is acquiring the Overriding Royalty Interests for its own account and not with a
view to their sale or distribution in violation of the Securities Act of 1933,
as amended, the rules and regulations thereunder, any applicable state blue sky
Laws, or any other applicable securities Laws.

     

    (c) Purchaser
is (or its advisors are) experienced and knowledgeable in the oil and gas
business and aware of the risks of that business.  Purchaser
acknowledges and affirms that (i) it has been provided the opportunity to
conduct its independent investigation, verification, analysis, and evaluation of
the Overriding Royalty Interests, and (ii) it has made all such reviews and
inspections of the Overriding Royalty Interests as it has deemed necessary or
appropriate to enter into this Agreement.  Except for the
representations and warranties expressly made by Seller in Article 3 of this
Agreement or in the Conveyance, Purchaser acknowledges that there are no
representations or warranties, express or implied, as to the financial
condition, liabilities, operations, business, or prospects of the Overriding
Royalty Interests and that, in making its decision to enter into this Agreement
and to consummate the transactions contemplated hereby, Purchaser has relied
solely upon its own independent investigation, verification, analysis, and
evaluation.  Purchaser understands and acknowledges that neither the
United States Securities and Exchange Commission nor any federal, state, or
foreign agency has passed upon the Overriding Royalty Interests or made any
finding or determination as to the fairness of an investment in the Overriding
Royalty Interests or the accuracy or adequacy of the disclosures made to
Purchaser, and except as set forth in Article 7, Purchaser is not entitled to
cancel, terminate, or revoke this Agreement.  

     

    
      
         

      

      
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    (d) Purchaser
and its representatives have (i) been permitted full and complete access to
all materials relating to the title to the Overriding Royalty Interests,
(ii) been afforded the opportunity to ask all questions of Seller (or one
or more Persons acting on Seller's behalf) concerning the title to the
Overriding Royalty Interests, (iii) been afforded the opportunity to investigate
the condition, including the subsurface condition, of the Overriding Royalty
Interests, and (iv) had the opportunity to take such other actions and make
such other independent investigations as Purchaser deems necessary to evaluate
the Overriding Royalty Interests and understand the merits and risks of an
investment therein and the verify the truth, accuracy, and completeness of the
materials, documents, and other information provided or made available to
Purchaser (whether by Seller or otherwise).

     

    4.5 Further
Assurances.  After Closing, Seller and Purchaser each agrees to
take such further actions and to execute, acknowledge, and deliver all such
further documents as are reasonably requested by the other for carrying out the
purposes of this Agreement or of any document delivered pursuant to this
Agreement.

     

    Article
5

    CONDITIONS
TO CLOSING

     

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

     

    (a) Representations.  The
representations and warranties of Purchaser set forth in
Section 4.4 shall be true and correct in all material respects
(considering the transaction as a whole) as of the date of this Agreement and as
of the Closing Date as though made on and as of the Closing Date;

     

    (b) No
Action.  On the Closing Date, no injunction, order, or award
restraining, enjoining, or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, or granting substantial damages in
connection therewith, shall have been issued and remain in force, and no suit,
action, or other proceeding (excluding any such matter initiated by Seller or
any of its Affiliates) shall be pending before any Governmental Authority or
body of competent jurisdiction seeking to enjoin or restrain or otherwise
prohibit the consummation of the transactions contemplated by this Agreement or
recover substantial damages from Seller or any Affiliate of Seller resulting
therefrom;

     

    
      
         

      

      
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    (c) Governmental
Consents.  All material consents and approvals of any
Governmental Authority or other Person required for the transfer of the
Overriding Royalty Interests from Seller to Purchaser as contemplated under this
Agreement, except consents and approvals of assignments by Governmental
Authorities that are customarily obtained after closing, shall have been
granted, or the necessary waiting period shall have expired, or early
termination of the waiting period shall have been granted;

     

    (d) Purchase
Agreement.  The closing contemplated by Article IX of the
Purchase Agreement shall have occurred, or shall be consummated
contemporaneously herewith; and

     

    (e) No
termination.  Neither Purchaser nor Seller shall have
terminated this Agreement pursuant to the terms of Article 7.

     

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

     

    (a) Representations.  The
representations and warranties of Seller set forth in Section 4.3 shall be
true and correct in all material respects (considering the transaction as a
whole) as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date.

     

    (b) No
Action.  On the Closing Date, no injunction, order, or award
restraining, enjoining, or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, or granting substantial damages in
connection therewith, shall have been issued and remain in force, and no suit,
action, or other proceeding (excluding any such matter initiated by Purchaser or
any of its Affiliates) shall be pending before any Governmental Authority or
body of competent jurisdiction seeking to enjoin or restrain or otherwise
prohibit the consummation of the transactions contemplated by this Agreement or
recover substantial damages from Purchaser or any Affiliate of Purchaser
resulting therefrom;

     

    (c) Governmental
Consents.  All material consents and approvals of any
Governmental Authority or other Person required for the transfer of the
Overriding Royalty Interests from Seller to Purchaser as contemplated under this
Agreement, except consents and approvals of assignments by Governmental
Authorities that are customarily obtained after closing, shall have been granted
or the necessary waiting period shall have expired, or early termination of the
waiting period shall have been granted;

     

    (d) Encumbrances.  Seller
shall have delivered to Purchaser partial releases of the liens set forth under
the heading "Liens to be Released at Closing" on Schedule 3.3 of
the Purchase Agreement with respect to the Overriding Royalty
Interests;

     

    (e) Purchase
Agreement.  The closing contemplated by Article IX of the
Purchase Agreement shall have occurred, or shall be consummated
contemporaneously herewith.

     

    (f) No
termination.  Neither Purchaser nor Seller shall have
terminated this Agreement pursuant to the terms of Article 7.

     

    
      
         

      

      
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    Article
6

    CLOSING

     

    6.1 Time and
Place of Closing.  The consummation of the purchase and sale of
the Overriding Royalty Interests contemplated by this Agreement (the "Closing") shall,
unless otherwise agreed to in writing by Purchaser and Seller, take place at the
offices of Bracewell & Giuliani LLP located at 711 Louisiana St., Suite
2300, Houston, Texas, at 10:00 a.m., local time, on July 15, 2008 (the "Target Closing
Date"), or if all conditions in Article 5 to be satisfied prior to
Closing have not yet been satisfied or waived, as soon thereafter as such
conditions have been satisfied or waived, subject to the provisions of Article
7.  The date on which the Closing occurs is referred to herein as the
"Closing
Date."

     

    6.2 Obligations
of Seller at Closing.  At the Closing, upon the terms and
subject to the conditions of this Agreement, and subject to the simultaneous
performance by Purchaser of its obligations pursuant to Section 6.3, Seller
shall deliver or cause to be delivered to Purchaser, among other things, the
following:

     

    (a) Counterparts
of the Conveyance in the form attached hereto as Exhibit C, duly
executed by Seller, in sufficient duplicate originals to allow recording in all
appropriate jurisdictions and offices;

     

    (b) Assignments
in form required by any Governmental Authority necessary for the assignment of
any Overriding Royalty Interests, duly executed by Seller, in sufficient
duplicate originals to allow recording in all appropriate offices;

     

    (c) A
certificate by an authorized officer of Seller, dated as of Closing, certifying
on behalf of Seller that the condition set forth in Section 5.2(a) has been
fulfilled.

     

    (d) Executed
certificates described in Treasury Regulation § 1.1445-2(b)(2) certifying
that Seller is not a foreign person within the meaning of the Code;

     

    (e) A
certificate duly executed by the secretary or any assistant secretary (or other
authorized officer) of Seller, dated as of the Closing, (i) attaching and
certifying on behalf of Seller complete and correct copies of (A) the
resolutions of the Board of Directors, managers, or other equivalent governing
body of Seller authorizing the execution, delivery, and performance by Seller of
this Agreement and the transactions contemplated hereby and (B) any
required approval by the stockholders, members, or partners, as applicable, of
Seller of this Agreement and the transactions contemplated hereby and
(ii) certifying on behalf of Seller the incumbency of each officer of
Seller executing this Agreement or any document delivered in connection with the
Closing;

     

    (f) Releases
of the liens listed on Schedule 3.3 of
the Purchase Agreement under the heading "Liens to be Released at Closing" with
respect to the Overriding Royalty Interests; and

     

    (g) All other
instruments, documents, and other items reasonably necessary to effectuate the
terms of this Agreement, as may be reasonably requested by
Purchaser.

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

     

    6.3 Obligations
of Purchaser at Closing.  At the Closing, upon the terms and
subject to the conditions of this Agreement, and subject to the simultaneous
performance by Seller of its obligations pursuant to Section 6.2, Purchaser
shall deliver or cause to be delivered to Seller, among other things, the
following:

     

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

     

    (b) Counterparts
of the Conveyance, duly executed by Purchaser, in sufficient duplicate originals
to allow recording in all appropriate jurisdictions and offices;

     

    (c) Assignments
in form required by any Governmental Authority for the assignment of any
Overriding Royalty Interests controlled by such Governmental Authority, duly
executed by Purchaser, in sufficient duplicate originals to allow recording in
all appropriate offices;

     

    (d) A
certificate by an authorized corporate officer of Purchaser, dated as of the
Closing, certifying on behalf of Purchaser that the condition set forth in
Section 5.1(a) has been fulfilled;

     

    (e) A
certificate duly executed by the secretary or any assistant secretary (or other
authorized officer) of Purchaser, dated as of the Closing, (i) attaching
and certifying on behalf of Purchaser complete and correct copies of
(A) the resolutions of the Board of Directors, managers, or other
equivalent governing body of Purchaser authorizing the execution, delivery, and
performance by Purchaser of this Agreement and the transactions contemplated
hereby and (B) any required approval by the stockholders, members, or
partners, as applicable, of Purchaser of this Agreement and the transactions
contemplated hereby and (ii) certifying on behalf of Purchaser the
incumbency of each officer of Purchaser executing this Agreement or any document
delivered in connection with the Closing;

     

    (f) All other
instruments, documents, and other items reasonably necessary to effectuate the
terms of this Agreement, as may be reasonably requested by Seller.

     

    6.4 Closing
and Post-Closing Purchase Price Adjustments.

     

    (a) Not later
than five (5) Business Days prior to the Closing Date, Seller shall prepare and
deliver to Purchaser, using and based upon the best information available to
Seller, a preliminary settlement statement estimating the Purchase Price for the
Assets after giving effect to all adjustments set forth in
Section 2.4.  The estimate delivered in accordance with this
Section 1.1(a) shall constitute the dollar amount to be payable by Purchaser to
Seller at the Closing (the "Closing Payment").

     

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

     

    (b) As soon
as reasonably practicable after the Closing but not later than the later of
(a) the one hundred and twentieth (120th) day following the Closing Date
and (b) the fifth (5th) Business Day after the Title Arbitrator finally
determines all disputed Title Defect and Title Benefit Amounts pursuant to
Section 3.8, Seller shall prepare and deliver to Purchaser a draft
statement setting forth the final calculation of the Purchase Price and showing
the calculation of each adjustment under Section 2.4, based on the most
recent actual figures for each adjustment.  Seller shall, at
Purchaser's request, make reasonable documentation available to support the
final figures.  As soon as reasonably practicable, but not later than
the thirtieth (30th) day following receipt of Seller's statement hereunder,
Purchaser shall deliver to Seller a written report containing any changes that
Purchaser proposes be made to such statement.  Seller may deliver a
written report to Purchaser during this same period reflecting any changes that
Seller proposes to be made to such statement as a result of additional
information received after the statement was prepared.  The Parties
shall undertake to agree on the final statement of the Purchase Price no later
than ninety (90) days after delivery of Seller's statement.  In the
event that the Parties cannot reach agreement within such period of time, any
Party may refer the items of adjustment which are in dispute to the Houston
office of Deloitte & Touche LLP, or, if such firm is not able or willing to
serve, a nationally-recognized independent accounting firm or consulting firm
mutually acceptable to both Purchaser and Seller (the "Accounting
Arbitrator"), for review and final determination by
arbitration.  The Accounting Arbitrator shall conduct the arbitration
proceedings in Houston, Texas in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, to the extent such rules do not
conflict with the terms of this Section.  The Accounting Arbitrator's
determination shall be made within forty-five (45) days after submission of the
matters in dispute and shall be final and binding on all Parties, without right
of appeal.  In determining the proper amount of any adjustment to the
Purchase Price, the Accounting Arbitrator shall be bound by the terms of
Sections 2.3 and 2.4 and may not increase the Purchase Price more than the
increase proposed by Seller nor decrease the Purchase Price more than the
decrease proposed by Purchaser, as applicable.  The Accounting
Arbitrator shall act as an expert for the limited purpose of determining the
specific disputed aspects of Purchase Price adjustments submitted by any Party
and may not award damages, interest (except as expressly provided for in this
Section), or penalties to any Party with respect to any
matter.  Seller and Purchaser shall each bear their own legal fees and
other costs of presenting their case.  Seller shall bear one-half and
Purchaser shall bear one-half of the costs and expenses of the Accounting
Arbitrator.  Within ten (10) days after the earlier of
(i) the expiration of Purchaser's thirty (30) day review period
without delivery of any written report or (ii) the date on which the
Parties or the Accounting Arbitrator finally determine the Purchase Price,
(x) Purchaser shall pay to Seller the amount by which the Purchase Price
exceeds the Purchase Price or (y) Seller shall pay to Purchaser the amount
by which the Closing Payment exceeds the Purchase Price, as
applicable.

     

    (c) Purchaser
shall assist Seller in preparation of the final statement of the Purchase Price
under this Section 6.4 by furnishing invoices, receipts, reasonable access
to personnel and such other assistance as may be requested by Seller to
facilitate such process post-Closing.

     

    Article
7

    TERMINATION

     

    7.1 Termination.  This
Agreement may be terminated at any time prior to Closing: (a) by the mutual
prior written consent of Seller and Purchaser; (b) by either Seller or
Purchaser, if Closing has not occurred on or before January 1, 2009; (c) by
either Party if the Purchase Agreement is terminated; or (d) by either
Party if the aggregate adjustment to the Unadjusted Purchase Price pursuant to
Article 3 is greater than ten percent (10%) of the Unadjusted Purchase Price;
provided,
however, that no Party shall be entitled to terminate this Agreement
under Section 7.1(b) if the Closing has failed to occur because such Party
negligently or willfully failed to perform or observe in any material respect
its covenants and agreements hereunder or such Party is in breach of its
representations and warranties set forth in this Agreement.

     

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

     

    7.2 Effect of
Termination.  If this Agreement is terminated pursuant to
Section 7.1, this Agreement shall become void and of no further force or
effect (except for the provisions of Sections 9.1, 9.2, 9.4, 9.5, 9.6, 9.7,
9.8, 9.9, 9.10, 9.12, 9.13, and 9.14, all of which shall continue in full force
and effect).  Notwithstanding anything to the contrary in this
Agreement, the termination of this Agreement under Section 7.1 shall not
relieve any Party from liability for any willful or negligent failure to perform
or observe in any material respect any of its agreements or covenants contained
herein that are to be performed or observed at or prior to
Closing.  In the event this Agreement terminates under
Section 7.1 and any Party has willfully or negligently failed to perform or
observe in any material respect any of its agreements or covenants contained
herein which are to be performed or observed at or prior to Closing, then the
other Party shall be entitled to all remedies available at law or in equity and
shall be entitled to recover court costs and attorneys' fees in addition to any
other relief to which such Party maybe entitled.

     

    Article
8

    ASSUMPTION
AND INDEMNIFICATION

     

    8.1 Assumption.
On the Closing Date Purchaser shall assume and hereby agrees to fulfill,
perform, pay and discharge (or cause to be fulfilled, performed, paid or
discharged) all obligations and liabilities of Seller and its Affiliates,
whether known or unknown (the "Assumed Obligations")
with respect to the Overriding Royalty Interests, regardless of whether such
obligations or liabilities arose prior to, on, or after the Effective Date,
including, without limitation, obligations arising from or relating to Title
Defects or title to the Overriding Royalty Interests.

     

    8.2 Indemnification.  From
and after Closing Purchaser shall indemnify, defend and hold harmless each
Seller Party and their Affiliates and their respective officers, directors,
employees, and agents (the "Seller Group") from
and against all Damages (irrespective of any limitation upon amount) incurred or
suffered by Seller Group caused by, arising out of, or resulting from the
Assumed Obligations.

     

    8.3 Procedures.  Section 12.3
of the Purchase Agreement shall be incorporated herein mutatis
mutandis.

     

    8.4 Survival.  The
representations, warranties, covenants, and agreements of the Parties hereunder
and the corresponding representations and warranties given in the certificates
delivered at Closing pursuant to Sections 6.2(c) and 6.3(d), as applicable,
shall survive the Closing indefinitely except with respect the representation
set forth in Section 3.1, which representation shall terminate as of the
date more specifically set forth therein.

     

    8.5 Claims by
Related Third Persons.  Any claim for indemnity under this
Section 8.2 by any Affiliate, director, officer, employee, or agent must be
brought and administered by the applicable Party to this
Agreement.  No Indemnified Person other than the Seller and Purchaser
shall have any rights against either the Seller or Purchaser under the terms of
this Section 8.2 except as may be exercised on its behalf by Purchaser or
Seller, as applicable, pursuant to this Section 8.5.  Each of
Seller and Purchaser may elect to exercise or not exercise indemnification
rights under this Section on behalf of the other Indemnified Persons affiliated
with it in its sole discretion and shall have no liability to any such other
Indemnified Person for any action or inaction under this Section.

     

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

     

    8.6 Exclusive
Remedies.  Each Party's sole and exclusive remedy against the
other Party for (a) any and all breaches of the representations,
warranties, covenants, and agreements of such other Party contained in this
Agreement, respectively; and (b) the Assumed Obligations, is set forth in
this Article 8, and if no such right of indemnification is expressly provided,
then such claims are hereby waived to the fullest extent permitted by
Law.  Except as expressly set forth above, each Party hereto releases,
remises, and forever discharges the other Party and its Affiliates, and its and
their respective officers, directors, employees, and agents from any and all
suits, legal, or administrative proceedings, claims, demands, damages, losses,
costs, liabilities, interest, or causes of action whatsoever, in law or in
equity, known or unknown, which such Parties might now or subsequently may have,
based on, relating to, or arising out of, this Agreement or the ownership, use,
or operation of the Overriding Royalty Interests, or the condition, quality,
status, or nature of the Overriding Royalty Interests, INCLUDING
RIGHTS TO CONTRIBUTION UNDER THE COMPREHENSIVE ENVIRONMENTAL RESPONSE,
COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED, BREACHES OF STATUTORY AND
IMPLIED WARRANTIES, NUISANCE OR OTHER TORT ACTIONS, RIGHTS TO PUNITIVE DAMAGES,
COMMON LAW RIGHTS OF CONTRIBUTION, ANY RIGHTS UNDER INSURANCE POLICIES ISSUED OR
UNDERWRITTEN BY THE OTHER PARTY OR ANY OF ITS AFFILIATES, AND ANY RIGHTS UNDER
AGREEMENTS BETWEEN SELLER AND ANY AFFILIATE OF SELLER, EVEN IF CAUSED IN WHOLE
OR IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT
LIABILITY OR OTHER LEGAL FAULT OF ANY RELEASED PERSON INVITEE, OR THIRD
PARTY.  Notwithstanding the foregoing, this Article 8 shall not
apply in respect of title matters and Title Defects which are exclusively
covered by Article 3 and the Conveyance.

     

    Article
9

    MISCELLANEOUS

     

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

     

    9.2 Notices.  All
notices that are required or may be given pursuant to this Agreement shall be
sufficient in all respects if given in writing, in English and delivered
personally, by telecopy or by recognized courier service, as
follows:

     

    
      	
               
      

            	
              If
      to Seller:

            	
              O'Brien
      Resources, LLC

            

    

     

    
      	
               
      

            	
              425
      Ashley Ridge Boulevard, Suite 300

            

    

     

    
      	
               
      

            	
              Shreveport,
      Louisiana 71106

            

    

     

    
      	
               
      

            	
              Attention:  William
      J. O'Brien, III

            

    

     

    
      	
               
      

            	
              Telephone:
      (318) 865-8568

            

    

     

    
      	
               
      

            	
              Facsimile:  (318)
      865-5173

            

    

     

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              with
      a copy to:

            	
              Bracewell
      & Giuliani LLP

            

    

     

    
      	
               
      

            	
              Pennzoil
      Place, South Tower

            

    

     

    
      	
               
      

            	
              711
      Louisiana Street, Suite 2300

            

    

     

    
      	
               
      

            	
              Houston,
      Texas 77002

            

    

     

    
      	
               
      

            	
              Attention:

            	
              James
      McAnelly III

            

    

     

    
      	
               
      

            	
              Telephone:

            	
              (713)
      221-1194

            

    

     

    
      	
               
      

            	
              Telecopy:

            	
              (713)
      222-3241

            

    

     

    
      	
               
      

            	
              If
      to Purchaser:

            	
              Berry
      Petroleum Company

            

    

     

    
      	
               
      

            	
              950
      – 17th Street, Suite 2400

            

    

     

    
      	
               
      

            	
              Denver,
      Colorado 80202

            

    

     

    
      	
               
      

            	
              Attention:

            	
              Michael
      Duginski

            

    

     

    
      	
               
      

            	
              Telephone:

            	
              (303)
      825-3344

            

    

     

    
      	
               
      

            	
              Telecopy:

            	
              (303)
      825-3350

            

    

     

    
      	
               
      

            	
              With
      a copy to:

            	
              Holland
      & Hart LLP

            

    

     

    
      	
               
      

            	
              555
      – 17th Street, Suite 3200

            

    

     

    
      	
               
      

            	
              Denver,
      Colorado 80202

            

    

     

    
      	
               
      

            	
              Attention:

            	
              Davis
      O'Connor

            

    

     

    
      	
               
      

            	
              Telephone:

            	
              (303)
      295-8000

            

    

     

    
      	
               
      

            	
              Telecopy:

            	
              (303)
      295-8261

            

    

     

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

     

    9.3 Sales or
Use Tax, Recording Fees and Similar Taxes and Fees.  Purchaser
shall bear any sales, use, excise, real property transfer or gain, gross
receipts, goods and services, registration, capital, documentary, stamp or
transfer Taxes, recording fees, and similar Taxes and fees incurred and imposed
upon, or with respect to, the property transfers or other transactions
contemplated hereby.  Should any Seller Party or any Affiliate of any
Seller Party pay any amount for which Purchaser is liable under this
Section 9.3, Purchaser shall, promptly following receipt of Seller's
invoice, reimburse the amount paid.  If such transfers or transactions
are exempt from any such taxes or fees upon the filing of an appropriate
certificate or other evidence of exemption, Purchaser shall timely furnish to
Seller such certificate or evidence.

     

    9.4 Expenses.  Except
as provided to the contrary herein or in the Purchase Agreement all expenses
incurred by Seller in connection with or related to the authorization,
preparation or execution of this Agreement, and the Exhibits and Schedules
hereto and thereto, and all other matters related to the Closing, including
without limitation, all fees and expenses of counsel, accountants and financial
advisers employed by Seller, shall be borne solely and entirely by Seller, and
all such expenses incurred by Purchaser shall be borne solely and entirely by
Purchaser.

     

    9.5 Governing
Law and Venue.  This Agreement and the legal relations between
the Parties shall be governed by and construed in accordance with the laws of
the State of Texas, without regard to principles of conflicts of laws that would
direct the application of the laws of another jurisdiction.

     

    
      
         

      

      
        -17-

        
          

        

      

      
         

      

    

     

    9.6 Dispute
Resolution.  Each Party consents to personal jurisdiction in
any action brought in the United States federal courts located in the State of
Texas with respect to any dispute, claim, or controversy arising out of or in
relation to or in connection with this Agreement, and each of the Parties hereto
agrees that any action instituted by it against the other with respect to any
such dispute, controversy, or claim (except to the extent a dispute,
controversy, or claim arising out of or in relation to or in connection the
determination of a Title Defect Amount pursuant to Section 3.8 is referred
to an expert pursuant to that Section) will be instituted exclusively in the
United States District Court for the Southern District of Texas, Houston
Division.  The Parties hereby waive trial by jury in any action,
proceeding, or counterclaim brought by any Party against another in any matter
whatsoever arising out of or in relation to or in connection with this
Agreement.

     

    9.7 Captions.  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.

     

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

     

    9.9 Assignment.  No
Party shall assign (including, without limitation, by change of control, merger,
consolidation, or stock purchase) or otherwise transfer all or any part of this
Agreement, nor shall any Party delegate any of its rights or duties hereunder
(including, without limitation, by change of control, merger, consolidation, or
stock purchase), without the prior written consent of the other Party and any
transfer or delegation made without such consent shall be
void.  Subject to the foregoing, this Agreement shall be binding upon
and inure to the benefit of the Parties hereto and their respective successors
and assigns.

     

    9.10 Entire
Agreement.  This Agreement and the documents to be executed
hereunder, and the Exhibits and Schedules attached hereto, constitute the entire
agreement among 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.

     

    9.11 Amendment.  This
Agreement may be amended or modified only by an agreement in writing signed by
Seller and Purchaser and expressly identified as an amendment or
modification.

     

    
      
         

      

      
        -18-

        
          

        

      

      
         

      

    

     

    9.12 No
Third-Person Beneficiaries.  Nothing in this Agreement shall
entitle any Person other than Purchaser and Seller to any claim, cause of
action, remedy or right of any kind, except the rights expressly provided to the
Persons described in Section 8.3.

     

    9.13 References.

     

    In this
Agreement:

     

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

     

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

     

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

     

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

     

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

     

    (i) References
to "$" or "dollars" means United States dollars; and

     

    (j) "Include"
and "including" shall mean include or including without limiting the generality
of the description preceding such term.

     

    9.14 Construction.  Purchaser
is capable of making such investigation, inspection, review and evaluation of
the Assets as a prudent purchaser would deem appropriate under the
circumstances, including with respect to all matters relating to the Assets,
their value, operation, and suitability.  Each of Seller and Purchaser
has had the opportunity to exercise business discretion in relation to the
negotiation of the details of the transaction contemplated
hereby.  This Agreement is the result of arm's-length negotiations
from equal bargaining positions.  It is expressly agreed that this
Agreement shall not be construed against any Party, and no consideration shall
be given or presumption made, on the basis of who drafted this Agreement or any
particular provision thereof.

     

    
      
         

      

      
        -19-

        
          

        

      

      
         

      

    

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

     

    SELLER:

    

    O'BRIEN
RESOURCES, LLC

    

    By:                                                                      

    William
J. O'Brien III

    Chairman
and Chief Executive Officer

    

    

    PURCHASER:

    

    BERRY
PETROLEUM COMPANY

    

    By:           

    Name:                                                                      

    Title:

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