Document:

form8k_exh102-121010.htm

SUPERVISORY AGREEMENT

This Supervisory Agreement (Agreement) is made this 10th day of December, 2010, by and through the Board of Directors (Board) of Atlantic Coast Federal, MHC, Waycross, Georgia,  OTS Docket No. H-3882 (Holding Company) and the Office of Thrift Supervision (OTS), acting by and through its Regional Director for the Southeast Region (Regional Director);

WHEREAS, the OTS, pursuant to 12 U.S.C. § 1818, has the statutory authority to enter into and enforce supervisory agreements to ensure the establishment and maintenance of appropriate safeguards in the operation of the entities it regulates; and

WHEREAS, the OTS is the primary Federal regulator of the Holding Company pursuant to the Home Owners’ Loan Act (HOLA), 12 U.S.C. §§ 1461 et seq., and is the Holding Company’s appropriate Federal banking agency for purposes of the Federal Deposit Insurance Act (FDIA), 12 U.S.C. §§ 1811 et seq.; and

WHEREAS, based on its July 12, 2010 report of examination of the Holding Company (2010 Examination), the OTS finds that the Holding Company has engaged in unsafe or unsound practices and/or violations of law or regulation; and

WHEREAS, in furtherance of their common goal to ensure that the Association addresses the unsafe or unsound practices and/or violations of law or regulation identified by the OTS in the 2010 Examination, the Association and the OTS have mutually agreed to enter into this Agreement; and

           WHEREAS, on December 9, 2010, the Association’s Board, at a duly constituted meeting, adopted a resolution (Board Resolution) that authorizes the Association to enter into this Agreement and directs compliance by the Association and its directors, officers, employees, and other institution-affiliated parties with each and every provision of this Agreement.

Atlantic Coast Federal, MHC

Supervisory Agreement

Page 1 of 9

  

  

  

NOW THEREFORE, in consideration of the above premises, it is agreed as follows:

Business Plan.

1.           Within sixty (60) days, the Holding Company shall submit an updated comprehensive business plan for calendar years 2011 and 2012 (Business Plan) that addresses all corrective actions in the 2010 Examination relating to the Holding Company’s business operations to the Regional Director for review and non-objection.  At a minimum, the updated Business Plan shall conform to applicable laws, regulations, and regulatory guidance and include:

(a)           consideration of the corrective actions and requirements related to the business operations of the Holding Company’s wholly owned savings association subsidiary, Atlantic Coast Bank, Waycross, Georgia, OTS Docket No. 17022 (Association);

(b)           the Holding Company’s plans to improve the core earnings of and achieve profitability on a consistent basis for the Holding Company and the Association throughout the term of the Business Plan;

(c)           detailed strategies for monitoring and maintaining the Association’s compliance with applicable regulatory capital requirements, satisfying the Association’s liquidity needs and ensuring the adequacy of the Association’s financial and human capital resources to implement its Business Plan; and

(d)           consideration of the requirements of this Agreement.

Thereafter, the Holding Company shall submit an updated one year Business Plan at least ninety (90) days prior to the end of each calendar year.

2.           Upon receipt of written notification of non-objection from the Regional Director, the Holding Company shall implement and adhere to the Business Plan.  A copy of the Business Plan and the Board meeting minutes reflecting the Board’s adoption thereof shall be provided to the Regional Director within twenty (20) days after the Board meeting.

Atlantic Coast Federal, MHC

Supervisory Agreement

Page 2 of 9

  

  

  

3.           Any material modifications1 to the Business Plan must receive the prior written non-objection of the Regional Director.  The Holding Company shall submit proposed material modifications to the Regional Director at least thirty (30) days prior to implementation.

4.           Within forty-five (45) days after the end of each quarter, beginning with the Quarter ending March 31, 2011, the Board shall review quarterly variance reports on the Holding Company’s compliance with the Business Plan (Variance Reports).  The Variance Reports shall:

(a)           identify variances in the Holding Company’s actual performance during the preceding quarter as compared to the projections set forth in the Business Plan;

(b)           contain an analysis and explanation of identified variances; and

(c)           discuss the specific measures taken or to be taken to address identified  variances.

5.           A copy of the Variance Reports and Board meeting minutes shall be provided to the Regional Director within ten (10) days after the Board meeting.

Association Oversight.

6.           Effective immediately, the Holding Company shall ensure the Association’s compliance with the terms of Supervisory Agreement issued by the OTS to the Association effective December 10, 2010.

Transactions with Affiliates.

7.           Effective immediately, the Holding Company shall not engage in any transactions with the Association unless, with respect to each such transaction, the Association has complied with the notice requirements set forth in 12 C.F.R. § 563.41(c)(4), which shall include the information set forth in 12 C.F.R. § 563.41(c)(3).  The Holding Company shall ensure that any transaction with the Association complies with the requirements of 12 C.F.R. § 563.41 and Regulation W, 12 C.F.R. Part 223.

  

1 A modification shall be considered material under this Section of the Order if the Holding Company plans to: (a) engage in any activity that is inconsistent with the Business Plan; or (b) exceed the level of any activity contemplated in the Business Plan or fail to meet target amounts established in the Business Plan by more than ten percent (10%), unless the activity involves assets risk-weighted fifty percent (50%) or less, in which case a variance of more than twenty-five percent (25%) shall be deemed to be a material modification.

Atlantic Coast Federal, MHC

Supervisory Agreement

Page 3 of 9

  

  

  

Dividends.

8.           Effective immediately, the Holding Company shall neither accept nor request that the Association make or pay any dividends or other capital distributions, as that term is defined in 12 C.F.R. § 563.141, or commit to make or pay dividends or any other capital distributions, without receiving the prior written non-objection of the Regional Director.  The Holding Company’s written request for non-objection shall be submitted to the Regional Director at least thirty (30) days prior to the anticipated date of the proposed dividend payment or distribution of capital.

9.           Effective immediately, the Holding Company shall not declare or pay any dividends or other capital distributions, as that term is defined in 12 C.F.R. § 563.141, without the prior written non-objection of the Regional Director.  The Holding Company’s written request for non-objection shall be submitted to the Regional Director at least forty-five (45) days prior to the anticipated date of the proposed dividend payment or distribution of capital.

Debt Limitations.

10.           Effective immediately, the Holding Company shall not incur, issue, renew, or rollover any debt or debt securities, increase any current lines of credit, guarantee the debt of any entity, or otherwise incur any additional debt without receiving the prior written non-objection of the Regional Director.  All written requests to the Regional Director shall include, at a minimum, a statement regarding the purpose of the debt, the terms of the debt, the planned source(s) for debt repayment, and an analysis of the cash flow resources available to meet such debt repayment.  The Holding Company’s written request for non-objection shall be submitted to the Regional Director at least forty-five (45) days prior to the anticipated date of the proposed debt issuance, renewal, or rollover; the proposed increase in any current lines of credit; the proposed guarantee of the debt of any entity; or any other incurrence of additional debt.

Atlantic Coast Federal, MHC

Supervisory Agreement

Page 4 of 9

  

  

  

Golden Parachute and Indemnification Payments.

11.           Effective immediately, the Holding Company shall not make any golden parachute payment2 or prohibited indemnification payment3 unless, with respect to each such payment, the Holding Company has complied with the requirements of 12 C.F.R. Part 359.

Directorate and Management Changes.

12.           Effective immediately, the Holding Company shall comply with the prior notification requirements for changes in directors and Senior Executive Officers4 set forth in 12 C.F.R. Part 563, Subpart H.

Employment Contracts and Compensation Arrangements.

13.           Effective immediately, the Holding Company shall not enter into, renew, extend or revise any contractual arrangement relating to compensation or benefits for any Senior Executive Officer or director of the Holding Company, unless it first provides the Regional Director with not less than thirty (30) days prior written notice of the proposed transaction.  The notice to the Regional Director shall include a copy of the proposed employment contract or compensation arrangement or a detailed, written description of the compensation arrangement to be offered to such officer or director, including all benefits and perquisites.  The Board shall ensure that any contract, agreement or arrangement submitted to the Regional Director fully complies with the requirements of 12 C.F.R. Part 359, 12 C.F.R. §§ 563.39 and 563.161(b), and 12 C.F.R. Part 570 – Appendix A, and the Interagency Guidance on Sound Incentive Compensation Policies contained in OTS Chief Executive Officer Memorandum No. 354.

  

2 The term “golden parachute payment” is defined at 12 C.F.R. § 359.1(f).

  

3 The term “prohibited indemnification payment” is defined at 12 C.F.R. § 359.1(l).

  

4 The term “Senior Executive Officer” is defined at 12 C.F.R. § 563.555.

Atlantic Coast Federal, MHC

Supervisory Agreement

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Effective Date.

14.           This Agreement is effective on the Effective Date as shown on the first page.

Duration.

15.           This Agreement shall remain in effect until terminated, modified or suspended, by written notice of such action by the OTS, acting by and through its authorized representatives.

Time Calculations.

16.           Calculation of time limitations for compliance with the terms of this Agreement run from the Effective Date and shall be based on calendar days, unless otherwise noted.

Submissions and Notices.

17.           All submissions to the OTS that are required by or contemplated by the Agreement shall be submitted within the specified timeframes.

18.           Except as otherwise provided herein, all submissions, requests, communications, consents or other documents relating to this Agreement shall be in writing and sent by first class U.S. mail (or by reputable overnight carrier, electronic facsimile transmission or hand delivery by messenger) addressed as follows:

 

	  	
(a)

	
To the OTS:

	  	  	
Regional Director

	  	  	
Office of Thrift Supervision

	  	  	
1475 Peachtree St., NE

	  	  	
Atlanta, Georgia 30309

Atlantic Coast Federal, MHC

Supervisory Agreement

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(b)

	
To the Association

	  	  	
Atlantic Coast Federal, MHC

	  	  	
Board of Directors

	  	  	
c/o Charles E. Martin, Jr., Chairman

	  	  	
12724 Gran Bay Parkway

	  	  	
Suite 150

	  	  	
Jacksonville, Florida  32258

No Violations Authorized.

19.           Nothing in this Agreement shall be construed as allowing the Association, its Board, officers or employees to violate any law, rule, or regulation.

OTS Authority Not Affected.

20.           Nothing in this Agreement shall inhibit, estop, bar or otherwise prevent the OTS from taking any other action affecting the Association if at any time the OTS deems it appropriate to do so to fulfill the responsibilities placed upon the OTS by law.

Other Governmental Actions Not Affected.

21.           The Association acknowledges and agrees that its execution of the Agreement is solely for the purpose of resolving the matters addressed herein, consistent with Paragraph [xx] above, and does not otherwise release, discharge, compromise, settle, dismiss, resolve, or in any way affect any actions, charges against, or liability of the Association that arise pursuant to this action or otherwise, and that may be or have been brought by any governmental entity other than the OTS.

Miscellaneous.

22.           The laws of the United States of America shall govern the construction and validity of this Agreement.

Atlantic Coast Federal, MHC

Supervisory Agreement

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23.           If any provision of this Agreement is ruled to be invalid, illegal, or unenforceable by the decision of any Court of competent jurisdiction, the validity, legality, and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby, unless the Regional Director in his or her sole discretion determines otherwise.

24.           All references to the OTS in this Agreement shall also mean any of the OTS’s predecessors, successors, and assigns.

25.           The section and paragraph headings in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

26.           The terms of this Agreement represent the final agreement of the parties with respect to the subject matters thereof, and constitute the sole agreement of the parties with respect to such subject matters.

Enforceability of Agreement.

27.           This Agreement is a “written agreement” entered into with an agency within the meaning and for the purposes of 12 U.S.C. § 1818.

Signature of Directors/Board Resolution.

28.           Each Director signing this Agreement attests that he or she voted in favor of a Board Resolution authorizing the consent of the Association to the issuance and execution of the Agreement.  This Agreement may be executed in counterparts by the directors after approval of execution of the Agreement at a duly called board meeting.  A copy of the Board Resolution authorizing execution of this Agreement shall be delivered to the OTS, along with the executed original(s) of this Agreement.

Atlantic Coast Federal, MHC

Supervisory Agreement

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WHEREFORE, the OTS, acting by and through its Regional Director, and the Board of

the Association, hereby execute this Agreement.

 

	  	
ATLANTIC COAST BANK

	  	
OFFICE OF THRIFT SUPERVISION

	  	
Waycross, Georgia

	  	  
	  	  	  	  
	  	  	  	  
	
By:

	
/s/ Chares E. Martin, Jr.

	
By:

	
/s/ James G. Price

	  	
Charles E. Martin, Jr.

	  	
James G. Price

	  	
Chairman

	  	
Regional Director, Southeast Region

	  	
Director Signatures

	  
	  	  	  
	  	  	  
	
/s/ Forrest W. Sweat, Jr.

	  	
/s/ Robert J. Larison, Jr.

	
Forrest W. Sweat, Jr., Director

	  	
Robert J. Larison, Jr., Director

	  	  	  
	  	  	  
	
/s/ Thomas F. Beeckler

	  	
/s/ Frederick D. Franklin, Jr.

	
Thomas F. Beeckler, Director

	  	
Frederick D. Franklin, Jr., Director

	  	  	  
	  	  	  
	
/s/ W. Eric Palmer

	  	
/s/ Robert J. Smith

	
W. Eric Palmer, Director

	  	
Robert J. Smith, Director

	  	  	  
	  	  	  
	
/s/ H. Dennis Woods

	  	  
	
H. Dennis Woods, Director

	  	  

Atlantic Coast Federal, MHC

Supervisory Agreement

Page 9 of 9exv10w4

Exhibit 10.4

PURCHASE AND SALE AGREEMENT

by and between

Oasis Petroleum North America LLC,

a Delaware limited liability company

as Buyer

and

Zenergy Onshore Properties, LLC, a Delaware limited liability company, Zenergy

Operating Company, LLC, a Delaware limited liability company, Zeneco, Inc. an

Oklahoma corporation and Garden Isle Investments, LLC, an Oklahoma limited liability

company

as Seller

Dated November 5, 2010

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 1

PURCHASE AND SALE	 	 	 	 
	 
	 	 	 	 	 	 
	1.1

	 	Purchase and Sale
	 	 	2	 
	1.2

	 	Assets
	 	 	2	 
	1.3

	 	Excluded and Reserved Assets
	 	 	4	 
	1.4

	 	Effective Time
	 	 	6	 
	1.5

	 	Termination of Agreements and AMI
	 	 	6	 
	1.6

	 	Non-Compete
	 	 	6	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 2

PURCHASE PRICE	 	 	 	 
	 
	 	 	 	 	 	 
	2.1

	 	Purchase Price
	 	 	7	 
	2.2

	 	Adjustments to Purchase Price
	 	 	7	 
	2.3

	 	Allocated Values
	 	 	9	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 3

SELLER’S REPRESENTATIONS AND WARRANTIES	 	 	 	 
	 
	 	 	 	 	 	 
	3.1

	 	Existence
	 	 	10	 
	3.2

	 	Power and Authority
	 	 	10	 
	3.3

	 	Authorization
	 	 	10	 
	3.4

	 	Execution and Delivery
	 	 	10	 
	3.5

	 	Foreign Person
	 	 	10	 
	3.6

	 	Liabilities for Brokers’ Fees
	 	 	10	 
	3.7

	 	No Liens
	 	 	11	 
	3.8

	 	Taxes
	 	 	11	 
	3.9

	 	Litigation
	 	 	11	 
	3.10

	 	No Knowledge of Violation
	 	 	11	 
	3.11

	 	Material Agreements: Notice of Defaults
	 	 	11	 
	3.12

	 	Production Sales Contracts
	 	 	12	 
	3.13

	 	Current Plugging Obligations
	 	 	12	 
	3.14

	 	Imbalances
	 	 	13	 
	3.15

	 	Governmental Licenses
	 	 	13	 
	3.16

	 	Royalties
	 	 	13	 
	3.17

	 	Leases
	 	 	13	 

i

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	3.18

	 	Non-Consents and Force Pooled Interests
	 	 	13	 
	3.19

	 	Payout Balances
	 	 	13	 
	3.20

	 	Preferential Rights and Consents
	 	 	14	 
	3.21

	 	Environmental
	 	 	14	 
	3.22

	 	Investment Company
	 	 	14	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 4

BUYER’S REPRESENTATION AND WARRANTIES	 	 	 	 
	 
	 	 	 	 	 	 
	4.1

	 	Existence
	 	 	15	 
	4.2

	 	Power and Authority
	 	 	15	 
	4.3

	 	Authorization
	 	 	15	 
	4.4

	 	Execution and Delivery
	 	 	15	 
	4.5

	 	Liabilities for Brokers’ Fees
	 	 	15	 
	4.6

	 	Litigation
	 	 	15	 
	4.7

	 	Independent Evaluation
	 	 	16	 
	4.8

	 	Securities Laws
	 	 	16	 
	4.9

	 	Qualification
	 	 	17	 
	4.10

	 	Financial Resources
	 	 	17	 
	4.11

	 	Preferential Rights and Consents
	 	 	17	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 5

CLOSING	 	 	 	 
	 
	 	 	 	 	 	 
	5.1

	 	Date of Closing
	 	 	17	 
	5.2

	 	Closing Obligations
	 	 	17	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 6

POST-CLOSING OBLIGATIONS	 	 	 	 
	 
	 	 	 	 	 	 
	6.1

	 	Post-Closing Adjustments
	 	 	19	 
	6.2

	 	Dispute Resolution
	 	 	19	 
	6.3

	 	Proceeds and Invoices For Property Expenses Received After the Final Settlement Date
	 	 	20	 
	6.4

	 	Records
	 	 	20	 
	6.5

	 	Suspense Accounts
	 	 	21	 
	6.6

	 	Removal of Name
	 	 	21	 
	6.7

	 	Further Assurances
	 	 	21	 

ii

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	6.8

	 	Survival
	 	 	21	 
	6.9

	 	Change of Operator
	 	 	21	 
	6.10

	 	Employee Overrides
	 	 	21	 
	6.11

	 	Flaring Authorization
	 	 	22	 
	6.12

	 	Letters in Lieu
	 	 	22	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 7

TAXES	 	 	 	 
	 
	 	 	 	 	 	 
	7.1

	 	Apportionment of Taxes: General Allocation
	 	 	22	 
	7.2

	 	Transfer Taxes
	 	 	22	 
	7.3

	 	Tax Reports and Returns
	 	 	22	 
	7.4

	 	Form 8594
	 	 	23	 
	7.5

	 	Indemnification Payments
	 	 	23	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 8

ASSUMPTION AND RETENTION OF OBLIGATIONS; INDEMNIFICATION	 	 	 	 
	 
	 	 	 	 	 	 
	8.1

	 	Buyer’s Assumption of Liabilities and Obligations
	 	 	23	 
	8.2

	 	Buyers’ Plugging and Abandonment Obligations
	 	 	24	 
	8.3

	 	Seller’s Retention of Liabilities and Obligations
	 	 	24	 
	8.4

	 	Indemnification
	 	 	24	 
	8.5

	 	Procedure
	 	 	26	 
	8.6

	 	Limitation on Claims
	 	 	28	 
	8.7

	 	No Insurance; Subrogation
	 	 	29	 
	8.8

	 	Reservation as to Non-Parties
	 	 	29	 
	8.9

	 	Exclusive Remedy
	 	 	29	 
	8.10

	 	Waiver of Right to Rescission
	 	 	30	 
	8.11

	 	Mutual Releases
	 	 	30	 
	8.12

	 	Anti-Indemnity Statute Limitation
	 	 	30	 
	 
	 	 	 	 	 	 
	 

	 	ARTICLE 9

MISCELLANEOUS	 	 	 	 
	 
	 	 	 	 	 	 
	9.1

	 	Exhibits and Schedules
	 	 	30	 
	9.2

	 	Expenses
	 	 	31	 
	9.3

	 	Notices
	 	 	31	 
	9.4

	 	Entire Agreement
	 	 	32	 

iii

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	9.5

	 	Amendments; Waivers
	 	 	33	 
	9.6

	 	Assignment
	 	 	33	 
	9.7

	 	Headings
	 	 	33	 
	9.8

	 	Counterparts
	 	 	34	 
	9.9

	 	References; Certain Definitions
	 	 	34	 
	9.10

	 	Governing Law
	 	 	35	 
	9.11

	 	Consent to Jurisdiction; Venue
	 	 	35	 
	9.12

	 	Binding Effect
	 	 	35	 
	9.13

	 	Survival
	 	 	35	 
	9.14

	 	No Third-Party Beneficiaries
	 	 	36	 
	9.15

	 	Limitation on Damages
	 	 	36	 
	9.16

	 	Severability
	 	 	36	 
	9.17

	 	Disclaimers
	 	 	36	 
	9.18

	 	WAIVER OF CONSUMER RIGHTS
	 	 	37	 

iv

 

PURCHASE AND SALE AGREEMENT

     This PURCHASE AND SALE AGREEMENT (this “Agreement”), dated November 5, 2010, is by and
between Oasis Petroleum North America LLC, a Delaware limited liability company (“Buyer”),
and Zenergy Onshore Properties, LLC, a Delaware limited liability company, Zenergy Operating
Company, LLC, a Delaware limited liability company, Zeneco, Inc., an Oklahoma corporation and
Garden Isle Investments, LLC, an Oklahoma limited liability company (collectively,
“Seller”).

RECITALS

     WHEREAS, Seller and Buyer are parties to that certain Participation Agreement, dated May 1,
2008 (“Participation Agreement”) relating to the Hebron Prospect, which covers certain
lands in Roosevelt County, Montana; and

     WHEREAS, pursuant to the Participation Agreement, Seller earned the right to assignments from
Buyer of an undivided fifty percent (50%) interest in certain oil and gas leases covering lands in
Roosevelt County, Montana and related properties; and

     WHEREAS, as to certain of such leasehold interests earned by Seller, as more fully described
in Exhibit A-1 (Part Two), Buyer holds record title to such leases, and Seller owns an
undivided fifty percent (50%) of the beneficial interest in and to such leases (the
“Beneficially Owned Leases”), subject to the terms of the Participation Agreement;

     WHEREAS, Seller also has acquired and holds record title to certain additional leasehold
interests in the Hebron Prospect and Buyer owns an undivided fifty percent (50%) of the beneficial
interests in and to such leases;

     WHEREAS, Seller has been the operator of the Hebron Prospect and has drilled and completed
several wells on lands included in the Hebron Prospect; and

     WHEREAS, Seller desires to sell the entirety of its interests and rights in such leases and
the other properties comprising the Assets, as defined herein, whether owned of record or
beneficially by Seller, and Buyer desires to purchase the Assets pursuant to the terms of this
Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual promises contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and
Buyer agree as follows:

1

 

ARTICLE 1

PURCHASE AND SALE

	1.1	 	Purchase and Sale. Subject to the reservations and exceptions and the other terms
and conditions herein set forth, Seller agrees to sell, assign, convey and deliver to Buyer,
and Buyer agrees to purchase and acquire from Seller at the Closing, but effective as of the
Effective Time, all of the Assets.
	 
	1.2	 	Assets. The Assets mean and are all of the Seller’s right, title and interest in, to
and under the following real and personal property interests, whether owned of record or
beneficially:

	 	a.	 	(i) The oil and gas leases, oil, gas and mineral leases, mineral fee interests,
other fee interests, royalty interests, overriding royalty interests, net profits
interests and other leasehold interests described in Exhibit A-1 (Exhibit
A-1 Part One being such interests as to which Seller holds legal title, and
Exhibit A-1 Part Two being the Beneficially Owned Leases; provided however, any
reference in this Agreement to Exhibit A-1 which does not specify Part One or
Part Two shall mean both Exhibit A-1 Part One and Exhibit A-1 Part
Two); and (ii) any other oil and gas leases, leasehold, royalty interests,
overriding royalty interests, net profits interests or other mineral or fee interest
covering lands within the boundaries of the Area of Mutual Interest described and
designated in the Participation Agreement and the Operating Agreement attached thereto
(“Operating Agreement”) and also outlined in the Exhibit B to the
Operating Agreement (“AMI”), whether or not described on Exhibit A-1,
and (iii) any other oil, gas and mineral leases, options, extensions and amendments to
oil, gas and mineral leases covering lands in the AMI, (x) acquired by Buyer whether or
not offered to Seller for which Seller has paid or has not paid, but which have not yet
been assigned by Buyer to Seller, or (y) acquired by Seller whether or not offered to
Buyer for which Buyer has paid or has not paid, but which have not yet been assigned by
Seller to Buyer, in each case, whether or not described on Exhibit A-1; and
(iv) any oil and gas leases, oil, gas and mineral leases, mineral fee interests, other
fee interests, royalty interests, overriding royalty interests, net profits interests
and other leasehold interests, extensions, renewals or amendments to any oil, gas and
mineral leases covering lands in the AMI acquired by Seller after the Closing Date and
prior to the second anniversary date of the Closing Date (all the foregoing described
in clauses (i), (ii) (iii) and (iv) are herein referred to as the “Leases”).
	 
	 	b.	 	The unitization, pooling and communitization agreements, declarations and
orders covering any of the lands covered by the Leases (the lands covered by the Leases
are herein called the “Lands”).

2

 

	 	c.	 	(i) The oil, gas and all other hydrocarbons and minerals (including but not
limited to coalbed methane, casinghead gas, condensate, natural gas liquids, ethane,
propane, iso-butane, nor-butane, and gasoline) (“Hydrocarbons”) produced from
or attributable to the Leases or the Lands from and after the Effective Time; (ii) all
Hydrocarbons in storage tanks as of the Closing Date for which Seller receives an
upward adjustment to the Purchase Price pursuant to Sections 2.2a(ii) or (iii); and
(iii) Hydrocarbons that at the Effective Time are below the fill line at the bottom of
the tank metering outlet or below the load level connection).
	 
	 	d.	 	(i) The oil, gas, water, or injection wells located on the Leases or Lands or
on lands pooled or unitized therewith, whether producing, shut-in, or abandoned,
including any wells in progress that have been spudded, if any, specifically including
the wells described in Exhibit A-2 (collectively, the “Wells”) and (ii)
all gathering lines, pipelines, tanks, separation equipment, processing plants,
boilers, buildings, injection facilities, saltwater disposal facilities, compression
facilities, other personal property, fixtures, improvements and facilities located on
or used or obtained for use in connection with or otherwise related to the exploration
for or production, gathering, treatment, processing, storing, sale or disposal of
Hydrocarbons or water produced from the Leases, Lands or lands pooled therewith,
including, without limitation, the equipment described in Exhibit I.
	 
	 	e.	 	All Hydrocarbon sales, purchase, exchange, gathering and processing contracts,
operating agreements, balancing agreements, joint venture agreements, partnership
agreements, farmout agreements, service agreements, exploration agreements, surface
leases, permits and licenses, surface use agreements, (including the rights-of-way, and
easements and surface use agreements described on Exhibit A-3), and other
surface rights, subsurface use agreements, servitudes, and other contracts, agreements
and instruments described in Exhibit B, to the extent such contracts,
agreements and rights are assignable without causing a termination of the right, but
excluding any master service agreements (the “Material Agreements”), and
provided that “Material Agreements” shall not include the instruments
constituting the Leases and other instruments constituting the Seller’s chain of title
to the Leases.
	 
	 	f.	 	All the files, records and data maintained by Seller and relating to the
interests described in this Section 1.2, including without limitation, all cores (whole
and sidewalls), thin sections prepared from any of the Wells, lease files, land files,
well files, drilling reports, files relating to the Material Agreements, division order
files, abstracts and title opinions and copies of applicable accounting records, and
copies of all JIB’s, AFE’s and revenue remittance advices, directly related to the
foregoing Assets; and all land, geological and geophysical data associated with the
Leases or Wells (the “Records”); provided, however, that the Records shall not
include the

3

 

	 	 	 	general corporate files and records of Seller, any data or records which are subject to
transfer restrictions or confidentiality obligations owed to third parties that prohibit
disclosure to Buyer (provided that Seller will, at Buyer’s request, at no cost or
expense to Seller, request waivers of such transfer and confidentiality restrictions),
or files and records, other than title opinions, that are subject to attorney-client
privilege.
	 
	 	g.	 	Except for the excluded assets described in Section 1.3, it is the intent of
Seller to convey to Buyer (and the Assets shall include) all of the rights, estates, or
interests of Seller described in Sections 1.2a through f above that cover lands located
in the AMI and that are owned directly or indirectly by (i) Seller or any Affiliate of
Seller, (ii) any trust, estate or other entity in which Seller or any Affiliate of
Seller is a beneficiary or owns a beneficial interest, (iii) any nominee or agent for
Seller or any Affiliate of Seller, and, (iv) any executor, executrix, or administrator
for Seller or any Affiliate of Seller, and Seller shall cause such to be conveyed to
Buyer. “Affiliate” means, when used with respect to any Person (as hereinafter
defined), any individual, corporation, partnership, joint venture, trust, limited
liability company, limited liability limited partnership, unincorporated organization
or other entity (each, a “Person”) which is directly or indirectly controlled
by, controlling or under common control with such Person. For purposes of this
definition, “control” means, when used with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the management
of such Person, whether through ownership of voting securities, by contract, or
otherwise. Notwithstanding the foregoing, for purposes of this Section 1.2g, any
Affiliate of Och-Ziff Capital Management Group LLC (“Och-Ziff”) other than a Seller
shall not be deemed an Affiliate of Seller.

	1.3	 	Excluded and Reserved Assets. Notwithstanding the foregoing, the Assets shall not
include, and there is excepted, reserved and excluded from the sale contemplated hereby

	 	a.	 	all trade credits, accounts receivable, notes receivable, and other receivables
accruing or attributable to the period before the Effective Time (except those for
which there is a related upward adjustment to the Purchase Price pursuant to Section
2.2a,
	 
	 	b.	 	all production of Hydrocarbons from or attributable to the Assets with respect
to all periods prior to the Effective Time and all proceeds attributable thereto except
such Hydrocarbons for which Seller is credited an upward adjustment to the Purchase
Price pursuant to Section 2.2a(ii) and (iii) and except for tank bottoms or line fill
volumes,
	 
	 	c.	 	any refund of, or loss carry forwards with respect to, costs, taxes (including
production, windfall profit, severance, ad valorem or any other taxes) or expense borne
by Seller or Seller’s predecessors in title attributable to the period prior to the

4

 

	 	 	 	Effective Time, except to the extent attributable to any obligations or liabilities
assumed by Buyer, or for which Buyer is required to indemnify Seller Indemnified
Parties;
	 
	 	d.	 	any and all proceeds from the settlements of contract disputes with purchasers
of Hydrocarbons from the Assets, including settlement of disputes, insofar as said
proceeds are attributable to periods of time prior to the Effective Time, except to the
extent attributable to any obligations or liabilities assumed by Buyer, or for which
Buyer is required to indemnify Seller Indemnified Parties,
	 
	 	e.	 	the right to exercise any audit rights under operating agreements or other
agreements with respect to periods prior to the Effective Time (and Buyer will
cooperate with Seller to facilitate Seller’s exercise of such rights), except to the
extent attributable to any obligations or liabilities assumed by Buyer, or for which
Buyer is required to indemnify Seller Indemnified Parties,
	 
	 	f.	 	all cash advances made by third parties to Seller under applicable joint
operating agreements attributable to such parties’ interests in the Leases,
	 
	 	g.	 	all claims and causes of action of Seller arising from acts, omissions or
events, or damage to or destruction of the Assets occurring prior to the Effective
Time, except to the extent attributable to any obligations or liabilities assumed by
Buyer, or for which Buyer is required to indemnify Seller Indemnified Parties,
	 
	 	h.	 	all office furniture, furnishings, computer equipment, computer software, and
other office equipment located at the offices of Seller,
	 
	 	i.	 	any and all files, records, and documents relating to Seller’s sale of the
Assets, including any research, valuation or pricing information prepared by Seller
and/or its consultants in connection with Seller’s efforts to sell the Assets, and any
bids received for such interests and information and correspondence in connection
therewith,
	 
	 	j.	 	all rights, titles, claims and interests of Seller to or under any policy or
agreement of insurance or any insurance proceeds, except to the extent specifically
contemplated by this Agreement,
	 
	 	k.	 	all rights, titles, claims and interests of Seller to or under any agreement of
indemnity or indemnity proceeds relating to an event that occurred prior to the
Effective Time, except to the extent attributable to any obligations or liabilities
assumed by Buyer, or for which Buyer is required to indemnify Seller Indemnified
Parties, and

5

 

	 	l.	 	all bonds posted by Seller.

	1.4	 	Effective Time. The purchase and sale of the Assets shall be effective as of August
1, 2010, at 7:00 a.m., at the location of the applicable Assets (the “Effective
Time”).
	 
	1.5	 	Termination of Agreements and AMI. Effective as of the Closing Date, Buyer and
Seller hereby agree to terminate, as between themselves the AMI, the Participation Agreement
and the Operating Agreement; provided, however, that notwithstanding such termination, both
Buyer and Seller shall remain obligated to discharge any outstanding obligations under the
Participation Agreement and the Operating Agreement (and any associated agreements), with
respect to payment of costs accrued, which arose prior to the Closing Date, except to the
extent such costs and expenses are included in the adjustments to the Purchase Price made
pursuant to Section 2.2. In addition, as of the Closing Date, Seller and Buyer hereby
release, discharge and covenant not to sue the other in respect of any claim or obligation
related to the failure of Buyer to deliver assignments of Leases to Seller and any claims of
Buyer to receive overriding royalty interests in extensions and renewals of Leases and any
other claims related to the Participation Agreement or Operating Agreement except that the
termination of the Participation Agreement and Operating Agreement and the release of claims
in this Section 1.5 shall not affect or modify the responsibility of the parties for Property
Expenses and other obligations and liabilities as set forth in Articles 2 and 8.
	 
	1.6	 	Non-Compete.

	 	a.	 	Seller shall not, directly or indirectly, acquire, (and shall ensure that,
except as set forth herein, its Affiliates, and the respective members, partners,
employees, officers and directors of Seller and such Affiliates do not acquire,
directly or indirectly) in any capacity for a period of two (2) years following the
Closing Date, any interest in any Restricted Opportunity (whether alone or as a
partner, joint venturer, or equity interest holder of, or lender to, any person or
business acquiring such interest). “Restricted Opportunity” means any
opportunity for (including an opportunity to finance) the leasing, acquisition,
exploration, development, production, gathering or marketing or any combination of the
foregoing, of oil, gas or other hydrocarbons in the AMI, but for the avoidance of doubt
shall specifically exclude with respect to Och-Ziff only, any gathering, marketing or
transportation opportunity or any opportunity relating to providing materials, labor or
field services in connection with the drilling of wells.
	 
	 	b.	 	Notwithstanding anything to the contrary contained in this Agreement, Section
1.6a shall not apply to, and shall not limit or restrict in any way, any direct or
indirect investment made by Och-Ziff and/or any of its Affiliates (excluding for
purposes of

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	 	 	 	this Section 1.6(b), any Seller, any Person controlled (as defined in Section 1.2g) by
any Seller and any of such Seller’s or Person’s current members, partners, employees,
officers, managers and directors) (A) in any debt or equity securities of any Person
(including without limitation, any options, warrants or other derivatives with respect
thereto and including any securities of Buyer) listed on a national securities exchange
or actively traded in the public over-the-counter market or otherwise offered to the
public in compliance with federal or state securities laws to the extent such investment
constitutes a passive investment or (B) in any non-convertible debt of any Person
(including without limitation, any options, warrants or other derivatives with respect
thereto) listed on a national securities exchange, actively traded in the public
over-the-counter market or otherwise offered to the public in compliance with federal or
state securities laws or (C) in any Person (other than any Seller, any Person controlled
(as defined in Section 1.2(g)) by any Seller and any of such Seller’s or Person’s
current members, partners, employees, officers, managers and directors) who owns rights
in any oil, gas or other hydrocarbons in the AMI (whether by way of a subsurface lease
or otherwise), regardless of whether or not such investment is a passive investment,
provided that (i) such rights in the AMI constitute less than 30% of such Person’s
consolidated assets as of the end of any fiscal year and represent less than 30% of such
Person’s consolidated revenue in any fiscal year and (ii) Och-Ziff and its Affiliates do
not provide or cause to be provided to such Person any Confidential Information.

ARTICLE 2

PURCHASE PRICE

	2.1	 	Purchase Price. The purchase price for the Assets shall be forty-eight million
dollars ($48,000,000.00) (the “Purchase Price”). The Purchase Price shall be paid by
Buyer to Seller, as adjusted pursuant to Section 2.2, at Closing, by means of a completed
federal funds wire transfer to the account set forth in Schedule 2.1. The Purchase Price shall
be apportioned among the entities comprising Seller as provided in Schedule 2.1; provided,
however, payment of the Purchase Price as so adjusted to the account designated in Schedule
2.1 shall discharge Buyer’s obligation to remit the Purchase Price as so adjusted payable at
Closing to all Sellers.
	 
	2.2	 	Adjustments to Purchase Price. The Purchase Price shall be adjusted according to
this Section without duplication. For all adjustments known or capable of reasonable
estimation as of the Closing Date, the Purchase Price shall be adjusted at Closing pursuant to
the “Preliminary Settlement Statement” approved by Seller and Buyer.

          For the purposes of this Agreement, the term “Property Expenses” shall mean all
capital expenses, joint interest billings, prepaid insurance, lease operating expenses, lease
rentals (but

7

 

not prepaid rentals or bonuses), maintenance costs, royalties, Taxes (as defined and
apportioned as of the Effective Time pursuant to Article 7) and shut-in payments, drilling
expenses, workover expenses, geological, geophysical and any other exploration, operation
production and development expenditures chargeable to the joint account under applicable operating
agreements, or absent an applicable operating agreement, consistent with the standards established
by the Council of Petroleum Accountant Societies of North America; including without limitation,
Seller’s general and administrative expenses, to the extent provided for and chargeable to the
joint account under the applicable operating agreement.

	 	a.	 	Upward Adjustments. The Purchase Price shall be adjusted upward by the
following, without duplication:

	 	(i)	 	The amount of all Property Expenses attributable to the ownership or
operation of the Assets from and after the Effective Time and paid by Seller prior
to Closing.
	 
	 	(ii)	 	To the extent not otherwise accounted for hereunder, the amount equal
to all proceeds (net of applicable Taxes and royalties, overriding royalties and
other burdens on Seller’s share of production not otherwise accounted for
hereunder) received and retained by Buyer from the sale of Hydrocarbons produced
from and attributable to the Assets prior to the Effective Time;
	 
	 	(iii)	 	The amount equal to the value of Seller’s share of all crude oil in
storage tanks, measured at the fill line at the bottom of the tank metering outlet,
on the day immediately preceding the Effective Time, to be calculated as the
product of (i) the volume of crude oil in each storage tank (attributable to the
Seller’s net revenue interest) as of the Effective Time as shown by the gauge
report at the Effective Time (provided that the gauge report shall be adjusted for
a mutually agreed upon amount of basic sediments and water and provided further
that if no gauge report exists, such volumes shall be determined by reference to
reasonable interpolative procedures, including reference to applicable run
tickets), multiplied by (ii) the last purchase price as of the Effective Time for
the Well from which the crude oil in such tank was produced, less applicable Taxes
and other adjustments for other matters that were made or would have been made by
the purchasers of such production consistent with past practices; provided,
however, that the adjustment contemplated by this subsection (iii) shall be made
only to the extent that Seller does not receive and retain the proceeds, or portion
thereof, attributable to crude oil in the storage tanks that was produced from or
credited to the Assets prior to the Effective Time; and

8

 

	 	(iv)	 	With respect to net Imbalances, if the Assets are, as of the Effective
Time, in the aggregate, underproduced, the Purchase Price shall be adjusted upward
by the volume of such net underproduction, multiplied by the relevant commodity
price in effect for the applicable Hydrocarbon on the Closing Date under the
applicable commodity sales contract under which Seller is selling such production
as of the Closing Date.

	 	b.	 	Downward Adjustments. The Purchase Price shall be adjusted downward by
the following, without duplication:

	 	(i)	 	The amount equal to all proceeds (net of applicable Taxes and
royalties, overriding royalties (other than overriding royalties that are part of
the Assets) and other burdens on Buyer’s share of production not otherwise
accounted for hereunder) received and retained by Seller from the sale of
Hydrocarbons produced from and attributable to the Assets from and after the
Effective Time;
	 
	 	(ii)	 	The amount of all Property Expenses attributable to the ownership or
operation of the Assets prior to the Effective Time and paid by Buyer;
	 
	 	(iii)	 	The amount of Seller’s share of lease bonuses, extension payments,
brokerage costs and prepaid rentals paid by Buyer prior to the Effective Time with
respect to the Assets for which Seller has not reimbursed Buyer; and
	 
	 	(iv)	 	With respect to net Imbalances, if the Assets are, as of the Effective
Time, in the aggregate, overproduced, the Purchase Price shall be adjusted downward
by the volume of such net overproduction, multiplied by the relevant commodity
price in effect for the applicable Hydrocarbon on the Closing Date under the
applicable commodity sales contract under which Seller is selling such production
as of the Closing Date.

	 	c.	 	At Closing, Buyer shall pay Seller an amount (the “Closing Amount”)
equal to the amount of the Purchase Price, as adjusted pursuant to this Section 2.2,
(i) minus the amount of revenue suspense account funds maintained by Seller, as
described in Section 6.5 ; and (ii) plus the amount of Buyer’s joint interest billings
attributable to Buyer’s pre-Closing interest in the Leases for all periods occurring on
or before October 31, 2010, as provided in the Preliminary Settlement Statement.

	2.3	 	Allocated Values. Seller and Buyer agree to allocate the Purchase Price among the
Assets as set forth on Exhibit C. Each portion of the Assets to which a value is
separately allocated on Exhibit C is herein called an “Asset” and such
separate value is herein called the “Allocated Value” of such Asset.

9

 

ARTICLE 3

SELLER’S REPRESENTATIONS AND WARRANTIES

Seller makes the following representations and warranties as of the date of this Agreement.

	3.1	 	Existence. Each Seller (i) is duly organized, validly existing and in good standing
under the laws of its respective State of organization or formation and (ii) is duly qualified
to do business in the states where it owns and operates the Assets.
	 
	3.2	 	Power and Authority. Each Seller has all requisite power and authority to carry on
its business as presently conducted, to enter into this Agreement and each of the documents
contemplated to be executed by Seller at Closing, and to perform its obligations under this
Agreement and under such documents. The consummation of the transaction contemplated by this
Agreement and each of the documents contemplated to be executed by Seller at Closing will not
violate, nor be in conflict with, (i) any provision of any Seller’s organizational or
governing documents, (ii) any agreement or instrument to which any Seller is a party or is
bound, or (iii) to Seller’s knowledge any law, judgment, decree, order, statute, rule or
regulation applicable to any Seller or the Assets.
	 
	3.3	 	Authorization. The execution, delivery and performance of this Agreement and each of
the documents contemplated to be executed by Seller at Closing and the contemplated
transaction have been duly and validly authorized by all requisite corporate or other company
action on the part of each Seller.
	 
	3.4	 	Execution and Delivery. This Agreement has been duly executed and delivered on
behalf of each Seller, and at the Closing, all documents and instruments required hereunder to
be executed and delivered by Seller shall have been duly executed and delivered. This
Agreement does, and such documents and instruments shall, constitute legal, valid and binding
obligations of Seller enforceable in accordance with their terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws of general
application with respect to creditors, (ii) general principles of equity, and (iii) the power
of a court to deny enforcement of remedies generally based upon public policy.
	 
	3.5	 	Foreign Person. Seller is not a “foreign person” within the meaning of Sections 1445
and 7701 of the Code (i.e. Seller is not a nonresident alien, foreign corporation, foreign
partnership, foreign trust, or foreign estate as those terms are defined in the Code and any
regulations promulgated thereunder).
	 
	3.6	 	Liabilities for Brokers’ Fees. Seller has incurred no liability, contingent or
otherwise, for brokers’ or finders’ fees relating to the transaction contemplated by this
Agreement for which Buyer shall have any responsibility whatsoever.

10

 

	3.7	 	No Liens. Subject to receipt of third-party approvals and consents and waivers of
preferential purchase rights listed in Exhibit A-4 (if any), the execution, delivery and
performance of this Agreement (and any agreement executed by Seller pursuant hereto) does not,
and the fulfillment of and compliance with the terms and conditions hereof, will not, create a
lien or encumbrance on the Assets or trigger an outstanding security interest in the Assets
that will remain in existence after Closing under any agreement or instrument (i) to which
Seller is a party, (ii) (A) executed by a Person other than Buyer or its Affiliates after the
date of the Participation Agreement and (B) by which any of the Assets is bound, or (iii) to
Seller’s knowledge by which any of the Assets is bound.
	 
	3.8	 	Taxes. Except as set forth in Section 3.8 of the Disclosure Schedule, all Taxes
attributable to Seller’s ownership or operation of the Assets have been paid when due. Seller
has no knowledge of any delinquency in the payment of Taxes on the Assets or the production of
Hydrocarbons from the Assets attributable to the period of Seller’s ownership or operation
thereof.
	 
	3.9	 	Litigation. Except as set forth in Section 3.9 of the Disclosure Schedule attached
to this Agreement (“Existing Seller Claims”), there is no action, suit, proceeding,
claim or, to its knowledge, investigation, pending or to Seller’s knowledge, threatened
against Seller or to which any of the Assets are subject in any court or by or before any
governmental authority or arbitration or mediation. No condemnation or eminent domain
proceedings are pending, or, to the Seller’s knowledge, threatened by any governmental
authority affecting any of the Assets.
	 
	3.10	 	No Knowledge of Violation. Except as set forth in Section 3.10 of the Disclosure
Schedule, Seller has no knowledge of any continuing or uncured violation on the part of Seller
of any laws (excluding Environmental Laws) applicable to the Assets or of any license or
permit which violation or violations would, singly or in the aggregate, adversely affect the
ownership, operation or value of Buyer’s interest in any of the Assets.
	 
	3.11	 	Material Agreements: Notice of Defaults.

	 
	 	a.	 	To Seller’s knowledge, Exhibit B and Exhibit A-3 list all
Material Agreements and all other Hydrocarbon sales, purchase, exchange, gathering and
processing contracts, operating agreements, balancing agreements, joint venture
agreements, partnership agreements, farmout agreements, service agreements (but
excluding master service agreements), exploration agreements, surface leases, permits
and licenses, surface use agreements, rights of way, easements, surface rights,
subsurface use agreements, servitudes, and other contracts and agreements relating to
the Wells or Leases, except for the instruments constituting the Leases and other
instruments constituting the Seller’s chain of title to the Leases. Except as set
forth on Exhibit B and Exhibit A-3,

11

 

	 	 	 	there are no agreements executed by a Person other than Buyer or its Affiliates after
the date of Seller’s acquisition of the affected Asset of the type described in the
prior sentence to which any of the Assets are bound or subject. Except for the Material
Agreements, Seller is not subject to any agreement relating to its interest in the
Assets with any affiliate of Seller that cannot be terminated by Buyer after Closing
without penalty, cost or liability. To Seller’s knowledge, all Material Agreements are
valid, legal and fully enforceable against the parties thereto according to their terms,
subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general application with respect to creditors, (ii) general principles
of equity, and (iii) the power of a court to deny enforcement of remedies generally
based upon public policy none of which, as of the date hereof has been asserted in
connection with a Material Agreement.
	 
	 	b.	 	Seller is not in default or breach under any contractual obligation (including
any Material Agreement), Seller has paid all joint interest billings due and owing
under the Material Agreements or other agreements related to the Wells, and to Seller’s
knowledge, the other parties to such Material Agreements (other than Buyer) are not in
default or breach thereunder. To Seller’s knowledge, there is no existing event or
circumstance which with notice or lapse of time would give rise to a material default
on the part of Seller or any other party under a Material Agreement.

	3.12	 	Production Sales Contracts. Except as set forth in Section 3.12 of the Disclosure
Schedule, Seller’s interest in the Assets is not subject to any contract for the sale of
Hydrocarbons attributable to periods after the Effective Time other than contracts that can be
terminated on sixty (60) days’ notice. Except as set forth in Sections 3.12 or 3.14 of the
Disclosure Schedule, to its knowledge, Seller’s interest in the Assets is not encumbered by
any obligation under a sales contract, hedging contract, take-or-pay clause, or any similar
arrangement, to deliver Hydrocarbons produced from such interest in the Assets without
receiving payment at the time of or subsequent to delivery, or to deliver Hydrocarbons in the
future for which payment has already been received (e.g., a “forward” sales contract).
	 
	3.13	 	Current Plugging Obligations. To Seller’s knowledge, all Wells have been produced in
compliance with allowables allocated thereto by the applicable governmental agency and are not
subject to any penalties or curtailments. Exhibit A-2 lists all of the Wells drilled
by Seller to be purchased as part of the Assets, whether producing, non-producing, injection
or disposal wells, or wells that are shut in, temporarily or permanently abandoned. Except as
set forth in Section 3.13 of the Disclosure Schedule, to Seller’s knowledge, there are no
Wells that are part of the Assets that may currently be required to be plugged and abandoned
by law, regulation or contract, or that are subject to an exception to a requirement to plug
and abandon issued by a regulatory authority and

12

 

	 	 	Seller has not received any notices or written demands from governmental authorities or
other third parties to plug any Wells.
	 
	3.14	 	Imbalances. To Seller’s knowledge, except as set forth in Section 3.14 of the
Disclosure Schedule, there are no gas, production, sales, processing, pipeline or
transportation imbalances with respect to the Assets (“Imbalances”) as of the Effective Date.
	 
	3.15	 	Governmental Licenses. Except as set forth in Section 3.15 of the Disclosure
Schedule, to Seller’s knowledge, all necessary governmental permits, licenses, registrations,
approvals, consents, certificates and other authorizations required to be obtained by Seller
to own and, with respect to that portion of the Assets, if any, operated by Seller, to operate
the Assets have been obtained and maintained in full force and effect by Seller and no
violations exist in respect of such permits, licenses, registrations, approvals, consents,
certificates and authorizations.
	 
	3.16	 	Royalties. During Seller’s period of ownership, to Seller’s knowledge, all lease
rentals, royalties, overriding royalties and similar payments based on production from the
Assets for Seller’s period of ownership through the Effective Time have been paid when due.
Seller has not received any written notice that any such payments for the period prior to
Seller’s period of ownership are due.
	 
	3.17	 	Leases. Except as set forth in Section 3.17 of the Disclosure Schedule, and except
with respect to those Leases that are being maintained by Buyer, to Seller’s knowledge, (i)
the Leases have been maintained according to their terms; (ii) no other party to any Lease is
in breach or default with respect to any of its material obligations thereunder; and (iii)
while owned by Seller there has not occurred any event, fact or circumstance (other than acts
or omissions of Buyer) which with the lapse of time or the giving of notice, or both, would
constitute such a breach or default on behalf of Seller or, to the Seller’s knowledge, with
respect to any other parties.
	 
	3.18	 	Non-Consents and Force Pooled Interests. To Seller’s knowledge, Section 3.18 of the
Disclosure Schedule contains a complete and accurate listing of all force-pooled interests and
non-consents pursuant to any applicable operating agreements affecting the Assets.
	 
	3.19	 	Payout Balances. Section 3.19 of the Disclosure Schedule (i) identifies those Wells
and Units that, as of the date hereof, are subject to a reversion or other adjustment at some
level of cost recovery or payout and (ii) the status of the “payout” balances provided by
Seller to Buyer at Closing reflect Seller’s reasonable estimate of such balances based on
invoices and revenues processed as of such date and information available to Seller as of such
date.

13

 

	3.20	 	Preferential Rights and Consents. To Seller’s knowledge, a listing of all
preferential purchase rights and consent to transfer requirements (other than under BLM or
State of Montana Leases or other governmental consents customarily obtained post-Closing),
affecting its interests in the Assets is set forth in Exhibit A-4 attached hereto.
	 
	3.21	 	Environmental. Except as set forth in Section 3.21 of the Disclosure Schedule, (i)
to Seller’s knowledge, the Wells and all operations conducted by or on behalf of Seller in
connection with the Wells are in substantial compliance with all applicable Environmental Laws
and orders or directives of any governmental authorities having jurisdiction under such
Environmental Laws, including any Environmental Laws or orders or directives with respect to
any cleanup or remediation of any release or threat of release of any industrial, hazardous or
similar substances and no amounts are required to be paid prior to the Closing Date in order
to comply with any such applicable Environmental Laws; (ii) Seller has not received any
citation, directive, letter or other written communication, or any written notice of any
proceeding, claim or lawsuit, from any person arising out of the ownership or occupation of
any of the Assets or the conduct of operations thereon, and the Seller does not have knowledge
of any basis therefor; and (iii) Seller has obtained and maintained in full force and effect
all permits, licenses and approvals required by all Environmental Laws applicable to the
Assets and the business operations conducted thereon and is in compliance with all such
permits, licenses and approvals. Notwithstanding the foregoing, some production equipment may
contain asbestos and/or Naturally Occurring Radioactive Material (“NORM”). In this
regard Buyer and Seller expressly understand that NORM may affix or attach itself to the
inside of wells, materials and equipment as scale or in other forms, that said wells, material
and equipment located on the Lands or included in the Assets described herein may contain
NORM, and that NORM containing material may have been buried or otherwise disposed of on the
Lands. Buyer and Seller also expressly understand that special procedures may be required for
the remediation, removal, transportation and disposal of NORM from the Assets and Lands where
such material may be found and that Buyer assumes all liability for or in connection with the
assessment, containment, removal, remediation, transportation and disposal of any such NORM,
in accordance with all past, present or future applicable laws, rules, regulations and other
requirements of any governmental or judicial entities having jurisdiction and also with the
terms and conditions of all applicable leases and other contracts.
	 
	3.22	 	Investment Company. Seller is not an investment company or a company controlled by
an investment company within the meaning of the Investment Company Act of 1940, as amended, or
subject to the provisions of said act.

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ARTICLE 4

BUYER’S REPRESENTATION AND WARRANTIES

          Buyer makes the following representations and warranties as of the date of this Agreement:

	4.1	 	Existence. Buyer is a Delaware limited liability company, duly organized, validly
existing and formed under the laws of its state formation, and Buyer is duly qualified and in
good standing in the states where the Assets are located.
	 
	4.2	 	Power and Authority. Buyer has all requisite power and authority to carry on its
business as presently conducted, to enter into this Agreement and each of the documents
contemplated to be executed by Buyer at Closing, and to perform its obligations under this
Agreement and under such documents. The consummation of the transaction contemplated by this
Agreement and each of the documents contemplated to be executed by Buyer at Closing will not
violate, nor be in conflict with: (i) any provision of Buyer’s organization or governing
documents, (ii) any agreement or instrument to which Buyer is a party or is bound, or (iii)
any judgment, decree, order, statute, rule or regulation applicable to Buyer.
	 
	4.3	 	Authorization. The execution, delivery and performance of this Agreement and each of
the documents contemplated to be executed by Buyer at Closing and the contemplated
transactions have been duly and validly authorized by all requisite action on the part of
Buyer.
	 
	4.4	 	Execution and Delivery. This Agreement has been duly executed and delivered on
behalf of the Buyer, and at the Closing all documents and instruments required hereunder to be
executed and delivered by Buyer shall have been duly executed and delivered. This Agreement
does, and such documents and instruments shall, constitute legal, valid and binding
obligations of Buyer enforceable in accordance with terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws of general
application with respect to creditors, (ii) general principles of equity, and (iii) the power
of a court to deny enforcement of remedies generally based upon public policy.
	 
	4.5	 	Liabilities for Brokers’ Fees. Buyer has incurred no liability, contingent or
otherwise, for brokers’ or finders’ fees relating to the transaction contemplated by this
Agreement for which Seller shall have any responsibility whatsoever.
	 
	4.6	 	Litigation. There is no action, suit, proceeding, claim or, to Buyer’s knowledge,
investigation by any person, entity, administrative agency or governmental body pending or
threatened against Buyer before any governmental authority that impedes or is likely

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	 	 	to impede Buyer’s ability to consummate the transactions contemplated by this Agreement and
to assume the liabilities to be assumed by Buyer under this Agreement.
	 
	4.7	 	Independent Evaluation. Buyer is knowledgeable about the oil and gas business, has
retained and taken advice concerning Assets and transactions herein from advisors and
consultants which are knowledgeable about the oil and gas business, and is aware of its risks.
Buyer has been and continues to be afforded the opportunity to examine the records and other
materials made available to it by Seller and Seller’s authorized representatives with respect
to the Assets (the “Background Materials”). The Background Materials include files,
or copies thereof, and other information about the Assets that Seller and Seller’s authorized
representatives have compiled or generated and used in Seller’s normal course of business.
However, Buyer acknowledges and agrees that except for the representations and warranties of
Seller contained in this Agreement, neither Seller nor any other Seller Indemnified Party has
made any representations or warranties, express or implied, written or oral, (i) as to the
accuracy or completeness of the Background Materials or, (ii) as to any other information
relating to the Assets, furnished or to be furnished to Buyer or its representatives by or on
behalf of Seller, including any estimate with respect to the value of the Assets or reserves,
the ability to develop the Assets or to obtain any permits required to develop the Assets, or
any projections as to events that could or could not occur. In entering into this Agreement,
Buyer acknowledges and affirms that it has relied and will rely solely on the terms of this
Agreement and upon its independent analysis, evaluation and investigation of, and judgment
with respect to, the business, economic, legal, tax or other consequences of this transaction
including its own estimate and appraisal of the extent and value of the petroleum, natural gas
and other reserves attributable to the Assets and the prices that may be received for
Hydrocarbons produced therefrom. Except for the Seller’s representations and warranties
expressly provided in this Agreement, neither Seller nor any other Seller Indemnified Party
shall have any liability to Buyer or its affiliates, agents, representatives or employees
resulting from any use of, authorized or unauthorized, or reliance on, the Background
Materials or other information relating to the Assets provided by or on behalf of Seller or
any other Seller Indemnified Party.
	 
	4.8	 	Securities Laws. Buyer has such knowledge, sophistication and experience in business
and financial matters that Buyer is capable of evaluating the merits and risks of the
acquisition of the Assets and has so evaluated the merits and risks of such acquisition.
Buyer is able to bear the economic risk of its acquisition of the Assets and, at the present
time, is able to afford a complete loss of such investment. The Assets are being acquired for
Buyer’s own account for the purpose of investment or consumption and not with a view to
reselling or distributing the Assets in violation of any securities registration or
qualification requirements of any securities laws.

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	4.9	 	Qualification. Buyer is and, for so long as it owns the Assets, will continue to be
qualified to own and operate the Assets, including the federal, state and fee Leases,
including meeting all bonding requirements. Completing the transaction set out in this
Agreement will not cause Buyer to be disqualified to own the Assets or to exceed any acreage
limitation imposed by law, statute or regulation with respect to Buyer’s ownership of the
Assets.
	 
	4.10	 	Financial Resources. Buyer has the financial resources available to close the
transactions contemplated by this Agreement without financing that is subject to any material
contingency.
	 
	4.11	 	Preferential Rights and Consents. To Buyer’s knowledge, Exhibit A-4 attached
hereto lists all preferential purchase rights and consent to transfer requirements (other than
under BLM or State of Montana Leases or other governmental consents customarily obtained
post-Closing) affecting the Assets.

ARTICLE 5

CLOSING

	5.1	 	Date of Closing. The closing of the transactions contemplated by this Agreement
(“Closing”) shall be held on November 5, 2010 at the offices of Andrews Kurth LLP, 600
Travis, Suite 4200, Houston, Texas 77002, commencing at 9:00 a.m. local time or at such other
time and place as the parties may agree in writing. The date on which Closing occurs is
referred to herein as the “Closing Date”.

	5.2	 	Closing Obligations. At Closing, the following events shall occur, each being a
condition precedent to the others and each being deemed to have occurred simultaneously with
the others:

	 	a.	 	Assignment. Seller and Buyer shall execute, acknowledge and deliver
(i) an Assignment, Bill of Sale and Conveyance of the Assets effective as of the
Effective Time (in sufficient counterparts to facilitate filing and recording)
substantially in the form of Exhibit D and (ii) such other assignments and
assumptions (in a form substantially similar to that contained in Exhibit D),
bills of sale, or deeds necessary to transfer the Assets to Buyer, including any
conveyances on official forms and related documentation necessary to transfer the
Assets to Buyer in accordance with requirements of state and federal government
regulations.
	 
	 	b.	 	Preliminary Settlement Statement. Seller and Buyer shall execute and
deliver the Preliminary Settlement Statement.

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	 	c.	 	Purchase Price. Buyer shall deliver to Seller the Closing Amount by
wire transfer of immediately available funds pursuant to Section 2.1.
	 
	 	d.	 	[Intentionally Omitted.]
	 
	 	e.	 	Releases. Seller shall deliver to Buyer duly executed and acknowledged
releases (reasonably acceptable to Buyer) in recordable form of all liens and
encumbrances on the Assets arising by, through or under Seller, except for Permitted
Encumbrances (as defined in the Assignment, Bill of Sale and Conveyance referenced in
Section 5.2a).
	 
	 	f.	 	Treasury Regulation Certificate. Seller shall deliver an executed
statement as described in Treasury Regulation Section 1.1445-2(b)(2) certifying that
Seller is not a foreign person within the meaning of the Internal Revenue Code.
	 
	 	g.	 	Change of Operator Forms. Seller and Buyer shall execute federal and
state change of operator forms with respect to those Assets that will be operated by
Buyer after the Closing Date, and Seller shall execute and deliver to Buyer resignation
of operator letters in a form reasonably acceptable to Buyer.
	 
	 	h.	 	Transition Services Agreement. Seller and Buyer shall execute the
Transition Services Agreement substantially in the form of Exhibit E.
	 
	 	i.	 	Required Bonding. Buyer shall provide copies of all required bonds and
other surety arrangements relating to the ownership or operation of the Assets
(including all bonds and surety arrangements required by the Bureau of Land Management
and the State of Montana).
	 
	 	j.	 	Required Insurance. Buyer shall provide evidence of insurance coverage
through a recognized insurance carrier at least in the amounts stipulated by those
operating agreements listed on Exhibit B for which Buyer shall be named
Operator.
	 
	 	k.	 	Intentionally omitted
	 
	 	l.	 	Consents and Waivers. Seller shall deliver to Buyer (i) evidence of
all consents obtained for the transfer of those Assets requiring a consent, (ii)
letters executed by Seller providing any notice of the assignment and transfer of the
Assets to Buyer which to Seller’s knowledge is required and (iii) any waivers obtained
in connection with preferential purchase or similar rights listed in Exhibit
A-4.
	 
	 	m.	 	Other Necessary Actions. Seller and Buyer shall take such other
actions and deliver such other documents as are contemplated by this Agreement.

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ARTICLE 6

POST-CLOSING OBLIGATIONS

	6.1	 	Post-Closing Adjustments. On or before one hundred twenty (120) days after the
Closing Date, Seller with the assistance of Buyer’s staff and with access to such records as
necessary, shall prepare and deliver to Buyer a final settlement statement (the “Final
Settlement Statement”) setting forth (i) each adjustment to the Purchase Price pursuant to
Section 2.2 and (ii) the items included in the calculation of the Closing Amount pursuant to
Section 2.2c, that was not finally determined as of the Closing, and showing the calculation
of each such amount and the resulting Purchase Price as finally adjusted (the “Final
Payment Amount”). As soon as practicable after receipt of Seller’s proposed Final
Settlement Statement, but in any event on or before thirty (30) days after receipt of Seller’s
proposed Final Settlement Statement, Buyer shall deliver to Seller a written report containing
any changes that Buyer proposes to make to the Final Settlement Statement. Buyer’s failure to
deliver to Seller a written report detailing changes to the proposed Final Settlement
Statement by that date shall be deemed an acceptance by Buyer of the Final Settlement
Statement as submitted by Seller. The parties shall attempt in good faith to agree with
respect to the changes proposed by Buyer, if any, no later than fifteen (15) days after
receipt by Seller of Buyer’s comments on the proposed Final Settlement Statement. The date
upon which such agreement is reached or upon which the Final Payment Amount is established
shall be called the “Final Settlement Date”. If the Final Payment Amount is more than
the Closing Amount, Buyer shall pay Seller the amount of such difference pursuant to Section
2.1. If the Final Payment Amount is less than the Closing Amount, Seller shall pay to Buyer
the amount of such difference. Any such payment by Buyer or Seller shall be by wire transfer
in immediately available funds within five (5) business days after the Final Settlement Date.
Without limiting the foregoing, Seller and Buyer shall account to one another and settle,
using the procedures under this Section 6.1, the amount of cash advances made by Buyer to
Seller relating to Buyer’s pre-Closing interest in the Leases that have not been paid to third
parties for Buyer’s share of unpaid costs and expenses attributable to the Leases, as if such
amount were an adjustment to the Purchase Price.
	 
	6.2	 	Dispute Resolution. If the parties are unable to resolve any dispute concerning the
Final Settlement Statement or Final Payment Amount on or before ninety (90) days after the
Final Settlement Statement is received by Buyer, such dispute shall be finally determined by
binding arbitration in Houston, Texas, with the Houston, Texas, office of KPMG LLP, acting as
a single arbitrator, pursuant to the Commercial Arbitration Rules of the American Arbitration
Association, and the arbitrator’s determination shall be final and binding upon Seller and
Buyer. The fees charged by the arbitrator for making a determination under this Section 6.2
shall be paid one-half by Buyer and one-half by Seller.

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	6.3	 	Proceeds and Invoices For Property Expenses Received After the Final Settlement Date.
After Closing, proceeds attributable to the Assets received by a Party, or invoices for
Property Expenses, or invoices paid by one Party for or on behalf of the other Party, in each
case, which were not already included as a Purchase Price adjustment, shall be settled as
follows:

	 	a.	 	Proceeds. Proceeds received by Buyer with respect to sales of
Hydrocarbons produced prior to the Effective Time shall be immediately remitted to
Seller. Proceeds received by Seller with respect to sales of Hydrocarbons produced
after the Effective Time shall be immediately remitted to Buyer.
	 
	 	b.	 	Property Expenses. Invoices for Property Expenses received by Buyer
which relate to operations on the Assets prior to the Effective Time shall be forwarded
to Seller by Buyer, or if already paid by Buyer, invoiced by Buyer to Seller. Invoices
for Property Expenses received by Seller which relate to operations on the Assets after
the Effective Time shall be immediately forwarded to Buyer by Seller, or if already
paid by Seller, invoiced by Seller to Buyer.

          The provisions of this Section 6.3 with respect to Seller’s obligation to reimburse Buyer for
any Property Expenses which relate to operations of the Assets prior to the Effective Time shall
terminate as set forth in Section 8.6d(iii).

	6.4	 	Records. Seller shall make the Records, together with the information listed on
Exhibit H available for pick up by Buyer at a mutually agreeable time on or before ten
days after the Closing Date. Seller may retain copies of the Records; provided that Seller
shall keep such Records that are not public information confidential and not disclose same
except as required to comply with applicable laws. Buyer will retain the Records delivered to
it hereunder and Seller shall have the right to review the Records during standard business
hours upon reasonable notice, in each case, for a period of (i) seven (7) years from the
Closing with respect to Tax Records and (ii) four (4) years from the Closing with respect to
other Records (provided however, that Buyer shall not have any liability to Seller for
inadvertent failure to maintain Records for such periods.) If and to the extent certain
portions of the Records are subject to unaffiliated third party contractual restrictions on
disclosure or transfer, Seller agrees to use reasonable efforts to obtain the waiver of such
contractual restrictions; provided, however, that Seller shall not be required to expend any
money in connection with obtaining such waivers. Should Buyer need access to any Records not
transferred hereunder, due to contractual restrictions mentioned above, for filing with
regulatory bodies, Buyer shall, except to the extent the Records are subject to unaffiliated
third Person contractual restrictions on disclosure, have the right to review such Records
during standard business hours upon reasonable notice for a period of three (3) years
following the Closing.

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	6.5	 	Suspense Accounts. On the Closing Date Seller shall credit to Buyer in the Closing
Amount, and Buyer shall assume any revenue suspense accounts maintained by Seller holding
monies payable to royalty owners, mineral owners and other persons with an interest in
pre-Effective Time production of Hydrocarbons that Seller has been unable to pay because of
title defects, or because such persons cannot be located or their identity is unknown or other
causes. Buyer will assume full and complete responsibility and liability for proper handling
and payment of such pre-Effective Time suspended amounts to the extent credited by Seller to
Buyer in the Closing Amount and all accounts and for all monies payable to royalty owners,
mineral owners and other persons with an interest in post-Effective Time production of
Hydrocarbons and of maintaining any necessary suspense accounts relating to post-Effective
Time production of Hydrocarbons. At Closing, Seller shall provide to Buyer a list of all
owners, Wells or other Assets for which revenues (and the amount of revenue for each owner
that) are being held in suspense.
	 
	6.6	 	Removal of Name. As promptly as practicable, but in any case within thirty (30) days
after the Closing Date, Buyer shall eliminate the name of Seller and any variants thereof from
the Assets and, except with respect to such grace period for eliminating existing usage, shall
have no right to use any logos, trademarks or trade names belonging to Seller or any of its
affiliates.
	 
	6.7	 	Further Assurances. From time to time after Closing, Seller and Buyer shall each
execute, acknowledge and deliver to the other such further instruments and take such other
action as may be reasonably requested in order more effectively assure to the other the full
beneficial use and enjoyment of the Assets and to accomplish the purposes of the transactions
contemplated by this Agreement.
	 
	6.8	 	Survival. The obligations of the parties set forth in this Article 6 shall survive
the Closing in accordance with Section 9.13.
	 
	6.9	 	Change of Operator. Seller shall, at no cost or expense to Seller, support and
reasonably cooperate with Buyer’s efforts to be elected as the operator of that portion of the
Assets currently operated by Seller.
	 
	6.10	 	Employee Overrides. Within fourteen (14) days after Closing, Seller shall deliver to
Buyer documentation reasonably acceptable to Buyer, executed by the employees and other
Persons entitled, as of the date hereof, to receive from Seller assignments of overriding
royalty interests in the Leases (collectively, the “Entitled Persons”), evidencing
such Persons’ relinquishment of rights to such assignments. In the event Seller fails to
provide such documentation for all Entitled Persons, then (i) the Purchase Price shall be
adjusted downward by the amount of Two Million Five Hundred Thousand Dollars; and (ii) Buyer
shall assign to Seller the affected overriding royalty interests.

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	6.11	 	Flaring Authorization. With respect to the flaring of hydrocarbons described on
Section 3.21 of the Disclosure Schedule, Seller shall, within thirty (30) days after Closing,
file, or cause to be filed, with the applicable regulatory authority, such applications as may
be required to permit such flaring under applicable law. Buyer and Seller shall reasonably
cooperate with each other in seeking to obtain such required authorization.
	 
	6.12	 	Letters in Lieu. Seller and Buyer shall execute and deliver all necessary letters in
lieu of transfer orders to be prepared by Seller directing all purchasers of production to pay
Buyer the proceeds attributable to production from the Assets from and after the Effective
Time.

ARTICLE 7

TAXES

	7.1	 	Apportionment of Taxes: General Allocation. All taxes, including, but not limited
to, excise taxes, state severance taxes, ad valorem taxes, property taxes, production taxes,
net profits taxes, and any other local, state and/or federal taxes or assessments, or based
upon or measured by the ownership of the Assets or the production of Hydrocarbons therefrom or
the receipt of proceeds therefrom, (“Taxes”), for all taxable periods during Seller’s
period of ownership prior to the Effective Time shall remain Seller’s responsibility, and all
deductions, credits, and refunds pertaining to such Taxes attributable to taxable periods
prior to the Effective Time, no matter when received, shall belong to Seller. All Taxes for
all taxable periods from and after the Effective Time, other than income or similar Taxes
based on the sale of the Assets from Seller to Buyer shall be the responsibility of Buyer.
	 
	7.2	 	Transfer Taxes. The Purchase Price excludes, and Buyer shall be liable for, any
Transfer Taxes required to be paid in connection with the sale of the Assets pursuant to this
Agreement. “Transfer Taxes” means any sales, use, excise, stock, stamp, documentary,
filing, recording, registration, authorization and similar taxes, fees and charges.
	 
	7.3	 	Tax Reports and Returns. For tax periods in which the Effective Time occurs, Seller
agrees to immediately forward to Buyer copies of any tax reports and returns received by
Seller after Closing and provide Buyer with any information Seller has that is necessary for
Buyer to file any required tax reports and returns related to the Assets. Buyer agrees to
file all tax returns and reports applicable to the Assets that Buyer is required to file after
the Closing and, subject to the provisions of Section 7.1, to pay all Taxes payable with
respect to the Assets.

22

 

	7.4	 	Form 8594. Seller and Buyer shall cooperate in the preparation of Internal Revenue
Service Form 8594 to report the allocation of the Purchase Price among the Assets. Unless
otherwise required by Code Section 1060 and any regulations promulgated thereunder, any such
allocations shall be consistent with the Purchase Price allocation as set for in Exhibit
C.
	 
	7.5	 	Indemnification Payments. Buyer and Seller agree to treat any payments made pursuant
to the indemnification provisions of this Agreement as adjustments to the Purchase Price for
tax purposes.

ARTICLE 8

ASSUMPTION AND RETENTION OF

OBLIGATIONS; INDEMNIFICATION

	8.1	 	Buyer’s Assumption of Liabilities and Obligations. Upon Closing, except for matters
for which Buyer is entitled to indemnification from Seller pursuant to Section 8.4a, Buyer
agrees to assume and pay, perform, fulfill and discharge (i) all obligations of Seller to the
extent same relate to the ownership and operation of the Assets after the Effective Time, all
claims, costs, expenses, liabilities and obligations accruing or relating to the Assets, the
Material Agreements, the ownership, development, exploration, operation or maintenance of the
Assets or the production, transportation and marketing of Hydrocarbons from the Assets,
including, without limitation, the payment of Property Expenses, the payment of Taxes, and the
payment of royalties and overriding royalties and of production or proceeds to forced pooled
interest owners in each case attributable to production from the Leases; (ii) Buyer’s Plugging
and Abandonment Obligations; (iii) all obligations of Seller relating to claims, costs,
expenses, liabilities and obligations (including any civil fines, penalties, costs of
assessment, clean-up, removal and remediation of pollution or contamination, and expenses for
the modification, repair or replacement of facilities on the Lands) brought or assessed by any
and all Persons and any agency or other body of federal, state or local government on account
of any personal injury, illness or death, any damage to, destruction or loss of property, and
any contamination or pollution of natural resources (including soil, air, surface water or
groundwater) to the extent any of the foregoing directly or indirectly is caused by or
otherwise involves any environmental condition of the Assets or Lands, whether created or
arising before, at, or after the Effective Time, including the presence, disposal or release
of any material (whether hazardous, extremely hazardous, toxic or otherwise) of any kind in,
on or under the Assets or the Lands (the “Assumed Environmental Liabilities”); (iv)
Imbalances with respect to the Assets attributable to production after the Effective Time and
(v) any other obligation or liability assumed by the Buyer pursuant to the provisions of this
Agreement (collectively, the “Assumed Liabilities”).

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	8.2	 	Buyers’ Plugging and Abandonment Obligations. Upon Closing except for matters for
which Buyer is entitled to indemnification from Seller pursuant to Section 8.4a, Buyer assumes
full responsibility and liability for all plugging and abandonment obligations of Seller
related to the Assets (“Buyer’s Plugging and Abandonment Obligations”), regardless of
whether they are attributable to the ownership or operation of the Assets before, at, or after
the Effective Time. Buyer shall conduct the following operations in a good and workmanlike
manner and in compliance with all applicable laws and regulations:

	 	a.	 	The necessary and proper plugging, replugging and abandonment of all Wells;
	 
	 	b.	 	The necessary and proper removal, abandonment and disposal of all structures,
pipelines, equipment, abandoned property, trash, refuse and junk located on or
comprising part of the Assets;
	 
	 	c.	 	The necessary and proper capping and burying of all associated flow lines
located on or comprising part of the Assets;
	 
	 	d.	 	The necessary and proper restoration of the surface and subsurface to the
condition required by applicable laws or regulations (except for Environmental Laws
that are addressed in other provisions of this Agreement) or contract;
	 
	 	e.	 	All obligations relating to the items described in Section 8.2a through 8.2d
arising from contractual requirements and demands made by courts, authorized regulatory
bodies or parties claiming a vested interest in the Assets; and
	 
	 	f.	 	Obtaining and maintaining all bonds, or supplemental or additional bonds, that
may be required contractually or by governmental authorities.

	8.3	 	Seller’s Retention of Liabilities and Obligations. Upon Closing Seller retains all
claims, costs, expenses, liabilities and obligations accruing to or arising from the rights,
properties or assets excepted, reserved and excluded from the sale contemplated hereby
pursuant to Sections 1.3 (excluding 1.3a and 1.3b to the extent the rights, properties or
assets described therein constitute Property Expenses) (collectively, the “Retained
Liabilities”).
	 
	8.4	 	Indemnification. “Losses” shall mean any actual losses, costs, expenses
(including court costs, reasonable fees and expenses of attorneys, technical experts and
expert witnesses and the costs of investigation), liabilities, damages, demands, suits,
claims, and sanctions of every kind and character (including civil fines) arising from,
related to or reasonably incident to matters indemnified against; excluding, however, any
special, consequential, punitive or exemplary damages, or loss of profits incurred by an
indemnified party

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	 	 	hereto. Losses arising from diminution of value of an Asset shall in no event exceed the
Allocated Value of such Asset set forth in Exhibit C, less the net proceeds received
by Buyer therefrom.

          After the Closing, Buyer and Seller shall indemnify each other as follow:

	 	a.	 	Seller’s Indemnification of Buyer. Subject to the limitations set
forth herein, Seller shall defend, indemnify, save and hold harmless Buyer, its
Affiliates and Buyer’s and such Affiliates’ respective officers, directors,
shareholders, members, managers, partners, employees, representatives, attorneys and
agents (the “Buyer Indemnified Parties”), from and against all Losses which
arise from or in connection with: (i) the Retained Liabilities; (ii) any breach of
representations, warranties, covenants, or agreements by Seller under this Agreement
(provided, however, for purposes of the interpretation of the indemnity under this
clause (ii), Seller’s covenants, agreements, representations and warranties qualified
by “material” or materiality generally shall be deemed to have been made without the
“material” or materiality qualification) (iii) the special warranty of title contained
in the Assignment, Bill of Sale and Conveyance delivered in connection herewith; (iv)
the payment of Property Expenses attributable to the period prior to the Effective Time
(except to the extent that Buyer has received an adjustment to the Purchase Price with
respect to such Property Expenses and excluding Property Expenses relating to the
Assumed Environmental Liabilities and Buyer’s Plugging and Abandonment Obligations);
(v) the payment of royalties, overriding royalties and of production or proceeds to
forced pooled interest owners in each case attributable to production from the Leases
prior to the Effective Time (except to the extent attributable to amounts held in
Suspense Accounts transferred to Buyer as provided in Section 6.5 hereof); (vi)
personal injury claims and third party property damage claims (other than, in each
case, such claims relating to or arising from alleged violation of Environmental Laws
or otherwise pertaining to pollution) relating to the ownership or operation of the
Assets prior to the Effective Time during Seller’s period of ownership of the Leases;
(vii) personal injury claims and third party property damage (other than pollution
damage) claims related to the period between the Effective Time and the Closing Date to
the extent attributable to Seller’s gross negligence or willful misconduct; (viii) any
Claims or entitlements to overriding royalty interests of any current or former
employees or officers of Seller, or (ix) Imbalances with respect to the Assets
attributable to production prior to the Effective Time (except to the extent that Buyer
has received an adjustment to the Purchase Price with respect to such Imbalance).
	 
	 	b.	 	Buyer’s Indemnification of Seller. Subject to the limitations set
forth herein, and except for matters for which Seller is required to indemnify Buyer
Indemnified Parties, Buyer shall defend, indemnify, save and hold harmless Seller,
their Affiliates

25

 

	 	 	 	and Seller’s and such Affiliates’ respective officers, directors, shareholders, members,
managers, partners, employees, representatives, attorneys and agents (the “Seller
Indemnified Parties”), from and against all Losses which arise from or in connection
with (i) the Assumed Liabilities, (ii) any breach of representations, warranties,
covenants, or agreements by Buyer under this Agreement; (iii) to the extent same relate
to the ownership and operation of the Assets at or prior to the Effective Time, all
claims, costs, expenses, liabilities and obligations accruing or relating to the Assets,
the Material Agreements, the ownership, development, exploration, operation or
maintenance of the Assets or the production, transportation and marketing of
Hydrocarbons from the Assets, including, without limitation, the payment of Property
Expenses, the payment of Taxes, and the payment of royalties and overriding royalties
and of production or proceeds to forced pooled interest owners in each case attributable
to production from the Leases.

	 	c.	 	Scope. EXCEPT AS OTHERWISE PROVIDED HEREIN, THE INDEMNIFICATION
OBLIGATIONS UNDER THIS AGREEMENT SHALL BE WITHOUT REGARD TO THE INDEMNIFIED PERSON’S
SOLE, JOINT OR CONCURRENT NEGLIGENCE, GROSS NEGLIGENCE, STRICT LIABILITY OR OTHER
FAULT.
	 
	 	d.	 	Survival. The obligations set forth in this Section 8.4 shall survive
the Closing in accordance with Section 9.13.

	8.5	 	Procedure. The indemnification obligations contained in Section 8.4 shall be
implemented as follows:

	 	a.	 	Coverage. Subject to Sections 8.6, 9.13 and 9.14, such indemnity shall
extend to all Losses suffered or incurred by the indemnified party.
	 
	 	b.	 	Claim Notice. The party seeking indemnification under the terms of
this Agreement (the “Indemnified Party”) shall submit a written “Claim
Notice” to the other party (the “Indemnifying Party”) which, to be
effective, must state: (i) the amount of each payment claimed by an Indemnified Party
to be owing, (ii) the basis for such claim, with supporting documentation, and (iii) a
list identifying to the extent reasonably possible each separate item of Loss for which
payment is so claimed. The amount claimed shall be paid by the Indemnifying Party to
the extent required herein within ten (10) days after receipt of the Claim Notice, or
after the amount of such payment has been finally established, whichever last occurs.
	 
	 	c.	 	Information. Within twenty (20) days after the Indemnified Party
receives notice of a claim or legal action that may result in a loss for which
indemnification may be sought under this Article 8 (“Claim”), the Indemnified
Party shall give written notice

26

 

	 	 	 	of such Claim to the Indemnifying Party, together with copies of all pleadings and other
information with respect to such Claim; provided that the failure of any Indemnified
Party to give notice of a Claim as provided in this Section 8.5c shall not relieve the
Indemnifying Person of its obligations to provide indemnity except to the extent such
failure results in insufficient time being available to permit the Indemnifying Party to
effectively defend against the Claim or otherwise materially prejudices the Indemnifying
Party’s ability to defend against the Claim. At the election of the Indemnifying Party
made within sixty (60) days after receipt of such notice, the Indemnified Party shall
permit the Indemnifying Party to assume control of such Claim (to the extent only that
such Claim legal action or other matter relates to a Loss for which the Indemnifying
Party is liable), including the determination of all appropriate actions, the
negotiation of settlements on behalf of the Indemnified Party, and the conduct of
litigation through attorneys of the Indemnifying Party’s choice; provided, however, that
(i) no compromise or settlement thereof or consent to any admission or the entry of any
judgment with respect to such Claim may be effected by the Indemnifying Party without
the Indemnified Party’s written consent unless the sole relief provided is monetary
damages that are paid in full by the Indemnifying Party (and no injunctive or other
equitable relief is imposed upon the Indemnified Party) and there is an unconditional
provision whereby each plaintiff or claimant in such Claim releases the Indemnified
Party from all liability with respect thereto and (ii) the Indemnified Party shall have
no liability with respect to any compromise or settlement thereof effected without its
written consent. If the Indemnifying Party elects to assume control of a claim or legal
action, (i) any expense incurred by the Indemnified Party thereafter for investigation
or defense of the matter shall be borne by the Indemnified Party, and (ii) the
Indemnified Party shall give all reasonable information and assistance, other than
pecuniary, that the Indemnifying Party shall deem necessary to the proper defense of
such Claim, legal action, or other matter. In the absence of such an election, the
Indemnified Party will use its reasonable efforts to defend, at the Indemnifying Party’s
expense, any claim, legal action or other matter to which such other party’s
indemnification under this Article 8 applies until the Indemnifying Party assumes such
defense, and, if the Indemnifying Party fails to assume such defense within the time
period provided above, settle the same in the Indemnified Party’s reasonable discretion
at the Indemnifying Party’s expense; provided, however, that (i) no compromise or
settlement thereof or consent to any admission or the entry of any judgment with respect
to such Claim may be effected by the Indemnified Party without the Indemnifying Party’s
written consent unless the sole relief provided is monetary damages that are paid in
full by the Indemnified Party (and no injunctive or other equitable relief is imposed
upon the Indemnifying Party) and there is an unconditional provision whereby each
plaintiff or claimant in such Claim releases the Indemnifying Party from all liability
with respect

27

 

	 	 	 	
 thereto and (ii) the Indemnifying Party shall have no liability with respect to any
compromise or settlement thereof effected without its written consent. If such a Claim
requires immediate action, both the Indemnified Party and the Indemnifying Party will
cooperate in good faith to take appropriate action so as not to jeopardize defense of
such Claim or either party’s position with respect to such Claim.

	8.6	 	Limitation on Claims.

	 	a.	 	Neither Party shall be required to indemnify any Indemnified Parties for any
individual Claim for Losses of less than $100,000 (the “Individual
Deductible”).
	 
	 	b.	 	Seller shall not be required to indemnify the Buyer Indemnified Parties with
respect to any Claim hereunder for Losses unless, and then only to the extent that, the
aggregate amount of such Losses exceeds two percent (2%) of the Purchase Price (the
“Claims Deductible”).
	 
	 	c.	 	Seller shall not be required to indemnify the Buyer Indemnified Parties to the
extent that the aggregate amount of all Claims for which Seller is required to
indemnify the Buyer Indemnified Parties exceeds seventeen and one-half percent (17.5%)
of the Purchase Price (the “Indemnity Cap”);

provided, however, that (1) the following Claims shall not be subject to the Individual
Deductible, the Claims Deductible or the Indemnity Cap: (i) Claims with respect to Taxes;
(ii) Claims with respect to breach by Seller of the representations and warranties in
Sections 3.1-3.4, 3.6 or 3.7; (iii) Claims in respect of the Retained Liabilities; (iv)
Claims with respect to breach by Seller of the special warranty of title contained in the
Assignment, Bill of Sale and Conveyance delivered in connection herewith; (v) Claims under
Sections 8.4a(iv), 8.4a(v) 8.4a(viii) or 8.4a(ix); (vi) Claims with respect to a breach of
Section 1.6; (vii) Claims with respect to breach by Buyer of the representations and
warranties in Sections 4.1- 4.5; and (viii) Claims against Buyer for Assumed Liabilities
described in Sections 8.1(i), 8.1(ii), 8.1(iv); and (v) and (2) Claims against Buyer for
Assumed Liabilities described in Section 8.1(iii) shall not be subject to the Claims
Deductible or Indemnity Cap.

	 	d.	 	Buyer’s Claims for indemnification under this Article 8 shall be made in
writing as provided herein on or before May 5, 2011 or shall be deemed waived;
provided, however, there shall be no termination of any bona fide claim for which a
Claim Notice is given under this Agreement prior to such date, provided further, that
(i) Claims related to Taxes may be given at any time prior to the expiration of the
statute of limitations applicable to the collection of such Tax by the collecting
agency, plus ninety (90) days; (ii) there shall be no time limitation with respect to
(A) Claims related to breach by Seller in respect of (x) Sections 3.1-3.4, 3.6, or 3.7,
or (y) the

28

 

	 	 	 	special warranty of title contained in the Assignment, Bill of Sale and Conveyance
delivered in connection herewith, (B) Claims in respect of Retained Liabilities, and (C)
Claims under Section 8.4a(viii), (iii) Notice of Claims with respect to breach by Seller
of Section 1.6 may be given by Buyer prior to expiration of the statute of limitations
applicable to such Claim; (iv) Notice of Claims under Section 8.4a(iv) and Section
8.4(a)(ix) may be given by Buyer at any time on or before November 5, 2011; and (v)
Notice of Claims under Section 8.4a(v) may be given by Buyer at any time on or before
May 5, 2012.

	 	e.	 	Buyer’s obligation to indemnify Seller pursuant to Section 8.4b shall survive
the Closing without limitation on duration except to the extent otherwise provided in
Section 9.13; provided, however, that the foregoing shall in no event constitute a
waiver of any applicable statute of limitations.

	8.7	 	No Insurance; Subrogation. To the extent of the indemnification obligations in this
Agreement, Buyer and Seller hereby waive for themselves, their successors and assigns,
including any insurers, any rights to subrogation for Losses for which each of them is
respectively liable or against which each respectively indemnifies the other, and, if required
by applicable policies, Buyer and Seller shall obtain waiver of such subrogation from their
respective insurers.
	 
	8.8	 	Reservation as to Non-Parties. Nothing in this Agreement is intended to limit or
otherwise waive any recourse Buyer or Seller may have against any person not a party to this
Agreement for any obligations or liabilities that may be incurred with respect to the Assets.
	 
	8.9	 	Exclusive Remedy. The sole and exclusive remedy of Buyer and Seller with respect to
the Assets shall be pursuant to the express provisions of this Agreement. Without limitation
of the foregoing, if the Closing occurs, the sole and exclusive remedy of Buyer and Seller,
for any and all: (a) claims relating to any representations, warranties, covenants and
agreements that are contained in this Agreement, (b) other claims pursuant to or in connection
with this Agreement, and (c) other claims relating to the Assets and the purchase and sale
thereof, shall be any right to indemnification from such claims that is expressly provided 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. If the Closing occurs, Buyer
and Seller shall also be deemed to have waived, to the fullest extent permitted by law, any
right to contribution against the other (including any contribution claim arising under any
applicable Environmental Law) and any and all other rights, claims and causes of action it may
have against the other arising under or based on any federal, state or local statutes, law,
ordinance, rule or regulation or common

29

 

	 	 	law or otherwise. Each of the Persons comprising Seller shall be jointly and severally
liable to Buyer for all obligations and liabilities of Seller under this Agreement.

	8.10	 	Waiver of Right to Rescission. Buyer and Seller acknowledge that the payment of
money, as limited by the terms of this Agreement, shall be adequate compensation for breach of
any representation, warranty, covenant or agreement contained herein or for any other claim
arising in connection with or with respect to the transactions contemplated by this Agreement.
Buyer and Seller waive any right to rescind this Agreement, the sale of the Assets to Buyer,
or any of the transactions contemplated hereby.
	 
	8.11	 	Mutual Releases. Buyer shall be deemed to have released the Seller Indemnified
Parties at Closing from any and all Losses for which Buyer has agreed to indemnify the Seller
Indemnified Parties hereunder, and Seller shall be deemed to have released the Buyer
Indemnified Parties at Closing from any and all Losses for which Seller has agreed to
indemnify the Buyer Indemnified Parties hereunder.
	 
	8.12	 	Anti-Indemnity Statute Limitation. Notwithstanding the other provisions of this
Agreement, to the extent, if at all, that Montana statutes are applicable, no provision of
this Agreement shall be construed or applied to require any Indemnifying Party to indemnify
any Indemnified Party against loss or liability for damages for (i) death or bodily injury to
persons, (ii) injury to property or (iii) any other loss, damage or expense arising under (i)
or (ii) from the sole or concurrent negligence of such Indemnified Party or its agents or
employees, the sole or concurrent negligence of an independent contractor who is directly
responsible to such Indemnified Party, or any accident that occurs in operations carried on at
the direction or under the supervision of such Indemnified Party or an employee or
representative of such Indemnified Party or in accordance with methods and means specified by
such Indemnified Party of employees or representatives of such Indemnified Party.

ARTICLE 9

MISCELLANEOUS

	9.1	 	Exhibits and Schedules. The Exhibits and Schedules referred to in this Agreement are
hereby incorporated in this Agreement by reference and constitute a part of this Agreement.
In the event of a conflict or inconsistency between the provisions of the Exhibits or
Schedules and the provisions of this Agreement, the provisions of this Agreement shall take
precedence. In the event of a conflict or inconsistency between the provisions of the pro
forma transaction documents attached to this Agreement as Exhibits or Schedules and the
transaction documents actually executed by the parties, the provisions of the executed
transaction documents shall take precedence.

30

 

	9.2	 	Expenses. Except as otherwise specifically provided, all fees, costs and expenses
incurred by Seller or Buyer in negotiating this Agreement or in consummating the transactions
contemplated by this Agreement shall be paid by the party incurring same, including legal and
accounting fees, costs and expenses.
	 
	9.3	 	Notices. All notices and communications required or permitted under this Agreement
shall be in writing and addressed as follows:

If to Seller or any of them:

Zenergy Onshore Properties, LLC

One Warren Place

6100 South Yale Avenue, Suite 1700

Tulsa, Oklahoma 74136

Telephone: 918-743-5096

Facsimile: 918-743-5159

Attention:

With a copy to:

White, Coffey & Fite, P.C.

Attorneys At Law

1001 N.W. 63rd St., Suite 100

Oklahoma City, Oklahoma 73116-7335

Telephone (405) 842-7545

Direct (405) 842-7570

Facsimile (405) 840-9890

Email: jwhite@wcgflaw.com

Attn: James U. White, Jr.

and

Och-Ziff Capital Investments

9 West 57th Street, 13th Floor

New York, NY 10019

Telephone: 212-790-0000

Facsimile: 212- 790-0077

Attn: General Counsel

31

 

and

Andrews Kurth, LLP

600 Travis, Suite 4200

Houston, TX 77002

Telephone: 713-220-4446

Facsimile: 713-238-7414

Attn: Cheryl S. Phillips

If to Buyer:

Oasis Petroleum North America LLC

First City Tower

1001 Fannin, Suite 1500

Houston, TX 77002

Telephone: 281-404-9440

Facsimile: 281-401-9501

Attention: Mr. Taylor L. Reid, Executive Vice President and COO

With a copy to:

Oasis Petroleum North America LLC

First City Tower

1001 Fannin, Suite 1500

Houston, TX 77002

Telephone: 281-404-9606

Facsimile: 281-401-9609

Attn: Nickolas J. Lorentzatos,

Senior VP, General Counsel & Corporate Secretary

	 	 	Any communication or delivery hereunder shall be deemed to have been duly made and the
receiving party charged with notice (i) if personally delivered, when received, (ii) if
faxed, when the time when received by the addressee, and receipt has been confirmed, (iii)
if mailed, certified mail, return receipt requested, on the date set forth on the return
receipt or (iv) if sent overnight courier, when received. Any party may, by written notice
so delivered to the other party, change the address or individual to which delivery shall
thereafter be made.
	 
	9.4	 	Entire Agreement. This Agreement, the documents to be executed hereunder and the
exhibits attached hereto constitute the entire Agreement between Seller and Buyer

32

 

	 	 	pertaining to the subject matter hereof and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of Seller and Buyer pertaining to the
subject matter hereof, including that certain letter agreement dated October 15, 2010
between Buyer and Seller (“Letter Agreement”), provided, however, that the
provisions of Article II, Section 1 of the Letter Agreement (Confidentiality) shall, as to
Seller, not be superseded and shall survive the execution and delivery of this Agreement for
the term set forth in such Article II, Section 1 and Seller shall remain subject to such
provisions; provided, further that the provisions of Article II, Section 1 of the Letter
Agreement (Confidentiality) shall, as to Buyer, be superseded and shall not survive the
execution and delivery of this Agreement. Notwithstanding any other provision hereof,
Och-Ziff may (i) disclose Confidential Information, as defined in the Letter Agreement, to
existing investors in it or any fund managed by it, provided that such existing investors to
whom Confidential Information is disclosed shall be deemed to be “Representatives” under the
Letter Agreement, and have shall agreed in writing to be bound by obligations of
confidentiality and non-disclosure as set forth in the Letter Agreement, and (ii) disclose
to potential investors in Och-Ziff or any fund managed by it select portions of the
Confidential Information for marketing and capital raising purposes, to the extent the
disclosed information relates solely to the nature and performance of the investment in the
Assets, does not specifically identify the AMI or include information from which the AMI
could be so identified.

	9.5	 	Amendments; Waivers. Except for waivers specifically provided for in this Agreement,
this Agreement may not be amended nor any rights hereunder waived except by an instrument in
writing signed by the party to be charged with such amendment or waiver and delivered by such
party to the party claiming the benefit of such amendment of waiver. No waiver by any party
of any condition, or of the breach of any term, provision, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver of any such
condition or breach or a waiver of any other condition or of the breach of any other term,
provision, covenant, representation or warranty.
	 
	9.6	 	Assignment. The rights, duties and obligations of the parties under the Agreement
may not be assigned or transferred, by operation of law or otherwise, nor may the duties
hereunder be delegated, by either of the parties, except with the prior written consent of the
other party; provided, however, that at any time after the Closing Date the Buyer shall have
the right to assign any rights to any Assets at any time.
	 
	9.7	 	Headings. The headings of the articles and sections of this Agreement are for
guidance and convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions of this Agreement.

33

 

	9.8	 	Counterparts. This Agreement may be executed by Seller and Buyer in any number of
counterparts, each of which shall be deemed an original instrument, but all of which together
shall constitute one and the same instrument. Execution can be evidenced by fax or PDF
signatures.
	 
	9.9	 	References; Certain Definitions. References made in this Agreement, including use of
a pronoun, shall be deemed to include, where applicable, masculine, feminine, singular or
plural, individuals, limited liability companies, partnerships or corporations. As used in
this Agreement, the term “including” shall mean “including without limitation.” References in
this Agreement to Articles or Sections are references to Articles or Sections of this
Agreement, except as otherwise indicated.
	 
	 	 	As used in this Agreement, “Knowledge” of a specified Person (or similar references
to a Person’s knowledge) means all information actually known to (a) in the case of Buyer,
any of the following: Taylor Reid, Kent Beers, and Tom Hawkins; and (b) in the case of
Seller, any of the following:Robert M. Zinke, Richard E. Siler, Michele R. Knotts, Robert
McNamara, Joe Gold, Robert Graham, and Keith Hill.
	 
	 	 	As used in Section 3.21, “Environmental Law” means any statute, rule, regulation,
code or order, issued by any federal, state, or local government entity in effect on or
before the Closing Date relating to the protection of the environment or the release or
disposal of waste materials, including the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (42 U.S.C.
§§ 9601 et seq.), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et
seq.), the Clean Water Act (33
U.S.C. §§ 466 et seq.), the Safe Drinking Water Act (14 U.S.C. §§ 1401-1450), the Oil
Pollution Act (33 U.S.C. §§ 2702-2761), the Federal Water Pollution Control Act (33 U.S.C. §
1251 et seq.), the Emergency Planning and Community Right to Know Act (U.S.C. 42 §§
301-313), the Hazardous Materials Transportation Act (49 U.S.C.
§§ 1801 et seq.), the Toxic
Substances Control Act (15 U.S.C. §§ 2601-2629), the Clean
Air Act (42 U.S.C.§ 7401 et seq.)
as amended, the Clean Air Act Amendments of 1990 and all other federal, state, tribal and
local laws, rules, regulation and orders relating to reclamation of land, wetlands and
waterways or relating to use, storage, emissions, discharges, cleanup, releases or
threatened releases of pollutants, contaminants, chemicals or industrial, toxic or hazardous
substances on or into the workplace or the environment (including ambient air, oceans,
waterways, wetlands, surface water, ground water (tributary and non-tributary), land surface
or subsurface strata, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transportation or handling of pollutants, contaminants,
chemicals, or industrial, toxic, hazardous or similar substances, as all of the foregoing
may be amended, supplemented or reauthorized from time to time.

34

 

	9.10	 	Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT
OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT WOULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
	 
	9.11	 	Consent to Jurisdiction; Venue. THE PARTIES AGREE THAT JURISDICTION AND VENUE IN ANY
ACTION BROUGHT BY ANY PARTY PURSUANT TO THIS AGREEMENT SHALL EXCLUSIVELY LIE IN ANY STATE OR
FEDERAL COURT LOCATED IN DALLAS COUNTY IN THE STATE OF TEXAS. BY EXECUTION AND DELIVERY OF
THIS AGREEMENT, THE PARTIES IRREVOCABLY SUBMIT TO THE JURISDICTION OF SUCH COURTS FOR
THEMSELVES AND IN RESPECT OF THEIR PROPERTY WITH RESPECT TO SUCH ACTION. THE PARTIES
IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION
THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION.
	 
	9.12	 	Binding Effect. This Agreement shall be binding upon, and shall inure to the benefit
of, the parties hereto, and their respective successors and assigns.
	 
	9.13	 	Survival. Unless otherwise provided herein, the representations and warranties set
forth in this Agreement shall survive: (i) the Closing; and (ii) the delivery and acceptance
of the Assignment, Bill of Sale and Conveyance, subject to the terms and conditions of this
Agreement, until May 5, 2011 after such time no claim may be asserted under such
representations or warranties. Covenants and obligations of Buyer and Seller to be performed
after Closing shall survive the Closing and the delivery and acceptance of the Assignment,
Bill of Sale and Conveyance until such covenants and obligations are performed in accordance
with their terms, after which time such covenants and obligations shall expire and no claim
may be made with respect to such expired covenants or obligations; provided that there shall
be no termination of a bona fide claim for which a Claim Notice has been given pursuant to
this Agreement with respect to a covenant or obligation prior to its expiration. It is
understood and agreed that unless a Claim Notice is given on or prior to May 5, 2011, neither
Seller nor Buyer may under any circumstance make any claim with respect to such
representations or warranties; provided that there shall be no termination of any bona fide
claim for which a Claim Notice has been given pursuant to this Agreement with respect to such
a representation or warranty prior to its expiration or termination date. Notwithstanding the
foregoing, the representations and warranties set forth in Sections 3.1 through 3.4, 3.6, 3.7
and Sections 4.1 through 4.5 shall survive the Closing without time limits. The other
provisions of this

35

 

	 	 	Agreement shall survive the Closing and the delivery of any Assignment, Bill of Sale and
Conveyance in accordance with the terms and provisions of this Agreement or if they are
required by their context to survive the Closing.
	 
	9.14	 	No Third-Party Beneficiaries. This Agreement is intended only to benefit the parties
hereto and their respective successors and permitted assigns, provided however, that the
Persons specified as indemnified parties hereunder are intended beneficiaries of the indemnity
provisions hereof.
	 
	9.15	 	Limitation on Damages. The parties hereto expressly waive any and all rights to
consequential, special, incidental, punitive or exemplary damages, or loss of profits
resulting from breach of this Agreement, provided, however, any such damages recovered by a
third party that is not an indemnified party hereunder and for which a party owes indemnity
under this Agreement shall not be waived.
	 
	9.16	 	Severability. It is the intent of the parties that the provisions contained in this
Agreement shall be severable. Should any provision of this Agreement, in whole or in part, be
held by a court of competent jurisdiction to be invalid or unenforceable as a matter of law,
(i) that provision will be deemed modified to the extent necessary to make it valid and
enforceable and if it cannot be so modified, then it shall be deemed deleted; and (i) such
holding shall not affect the other portions of this Agreement, and such portions that are not
invalid shall be given effect without the invalid portion.
	 
	9.17	 	Disclaimers. THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE
OPERATIVE, THE DISCLAIMERS OF WARRANTIES CONTAINED IN THIS SECTION 9.16 ARE “CONSPICUOUS”
DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE LAW, RULE OR ORDER. THE EXPRESS
REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT, AND THE SPECIAL WARRANTY
OF TITLE IN THE ASSIGNMENT, BILL OF SALE AND CONVEYANCE TO BE DELIVERED AT CLOSING,
(COLLECTIVELY “SELLERS WARRANTIES”) ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE. EXCEPT FOR SELLERS
WARRANTIES, SELLER EXPRESSLY DISCLAIMS ANY AND ALL SUCH OTHER REPRESENTATIONS AND WARRANTIES.
WITHOUT LIMITATION OF THE FOREGOING AND EXCEPT FOR SELLER’S WARRANTIES, THE ASSETS SHALL BE
CONVEYED PURSUANT HERETO WITHOUT (A) ANY WARRANTY OR REPRESENTATION, WHETHER EXPRESS, IMPLIED,
STATUTORY OR OTHERWISE, RELATING TO (I) TITLE TO THE ASSETS, THE CONDITION, QUANTITY, QUALITY,
FITNESS FOR A PARTICULAR

36

 

	 	 	PURPOSE, CONFORMITY TO THE MODELS OR SAMPLES OF MATERIALS OR MERCHANTABILITY OF ANY
EQUIPMENT OR ITS FITNESS FOR ANY PURPOSE (II) THE ACCURACY, COMPLETENESS, OR MATERIALITY OF
ANY DATA, INFORMATION, OR RECORDS FURNISHED TO BUYER IN CONNECTION WITH THE ASSETS OR
OTHERWISE CONSTITUTING A PORTION OF THE ASSETS; (III) THE PRESENCE, QUALITY, AND QUANTITY OF
HYDROCARBON RESERVES (IF ANY) ATTRIBUTABLE TO THE ASSETS; (IV) THE ABILITY OF THE ASSETS TO
PRODUCE HYDROCARBONS, INCLUDING WITHOUT LIMITATION PRODUCTION RATES, DECLINE RATES, AND
RECOMPLETION OPPORTUNITIES; (V) IMBALANCE OR PAYOUT ACCOUNT INFORMATION, ALLOWABLES, OR
OTHER REGULATORY MATTERS; (v) THE PRESENT OR FUTURE VALUE OF THE ANTICIPATED INCOME, COSTS,
OR PROFITS, IF ANY, TO BE DERIVED FROM THE ASSETS, (VI) THE ENVIRONMENTAL CONDITION OF THE
ASSETS; (VII) ANY PROJECTIONS AS TO EVENTS THAT COULD OR COULD NOT OCCUR; AND (VIII) ANY
OTHER MATTERS CONTAINED IN OR OMITTED FROM ANY INFORMATION OR MATERIAL FURNISHED TO BUYER BY
SELLER OR OTHERWISE CONSTITUTING A PORTION OF THE ASSETS. EXCEPT FOR SELLERS WARRANTIES,
ANY DATA, INFORMATION, OR OTHER RECORDS FURNISHED BY SELLER ARE PROVIDED TO BUYER AS A
CONVENIENCE TO BUYER, AND BUYER’S RELIANCE ON OR USE OF THE SAME IS AT BUYER’S SOLE RISK.
BUYER SHALL HAVE INSPECTED, OR WAIVED (AND UPON CLOSING SHALL BE DEEMED TO HAVE WAIVED) ITS
RIGHT TO INSPECT THE ASSETS FOR ALL PURPOSES AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND
ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING BUT NOT LIMITED TO
CONDITIONS SPECIFICALLY RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS
SUBSTANCES, SOLID WASTES, ASBESTOS AND OTHER MAN MADE FIBERS, OR NORM. OTHER THAN AS
SPECIFICALLY SET OUT IN THIS AGREEMENT OR SELLERS WARRANTIES, BUYER IS RELYING SOLELY UPON
THE TERMS OF THIS AGREEMENT AND ITS OWN INSPECTION OF THE ASSETS, AND BUYER SHALL ACCEPT ALL
OF THE SAME IN THEIR “AS IS, WHERE IS” CONDITION.
	 
	9.18	 	WAIVER OF CONSUMER RIGHTS. AS PARTIAL CONSIDERATION FOR THE PARTIES ENTERING INTO THIS
AGREEMENT, EACH PARTY HEREBY WAIVES THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES
CONSUMER PROTECTION ACT, ARTICLE 17.41 ET SEQ., TEXAS BUSINESS AND COMMERCE CODE, A LAW THAT
GIVES

37

 

	 	 	CONSUMERS SPECIAL RIGHTS AND PROTECTION, AND ALL OTHER CONSUMER PROTECTION LAWS OF THE STATE
OF TEXAS, OR OF ANY OTHER STATE, THAT MAY BE APPLICABLE TO THIS TRANSACTION, THAT MAY BE
WAIVED BY SUCH PARTY. IT IS NOT THE INTENT OF EITHER PARTY TO WAIVE, AND NEITHER PARTY DOES
HEREBY WAIVE, ANY LAW OR PROVISION THEREOF THAT IS PROHIBITED BY LAW FROM BEING WAIVED.
EACH PARTY REPRESENTS THAT IT HAS HAD AN ADEQUATE OPPORTUNITY TO REVIEW THE PRECEDING WAIVER
PROVISION, INCLUDING THE OPPORTUNITY TO SUBMIT THE SAME TO LEGAL COUNSEL FOR REVIEW AND
ADVICE AND AFTER CONSULTATION WITH AN ATTORNEY OF ITS OWN SELECTION VOLUNTARILY CONSENTS TO
THIS WAIVER, AND UNDERSTANDS THE RIGHTS BEING WAIVED HEREIN.

[Signature Page Follows]

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          IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above.

	 	 	 	 	 
	 	BUYER

OASIS PETROLEUM NORTH AMERICA LLC

 	 
	 	By:  	/s/ Taylor L. Reid
 	 
	 	 	Name:  	Taylor L. Reid 	 
	 	 	Title:  	Executive Vice President & 

Chief Operating Officer 	 
	 
	 	SELLER

ZENERGY ONSHORE PROPERTIES, LLC

 	 
	 	By:  	/s/ Robert M. Zinke
 	 
	 	 	Robert M. Zinke, President 	 
	 	 	 	 
	 
	 	ZENERGY OPERATING COMPANY, LLC

 	 
	 	By:  	/s/ Robert M. Zinke
 	 
	 	 	Robert M. Zinke, President: 	 
	 	 	 	 
	 
	 	ZENECO, INC.

 	 
	 	By:  	/s/ Robert M. Zinke
 	 
	 	 	Robert M. Zinke, President 	 
	 	 	 	 
	 
	 	GARDEN ISLE INVESTMENTS, LLC

 	 
	 	By:  	/s/ Robert E. Siler
 	 
	 	 	Richard E. Siler, Manager 	 
	 	 	 	 
	 

39

 

OMITTED SCHEDULES

     The portions identified below in the following exhibits and schedules have been omitted from
the Purchase and Sale Agreement filed as Exhibit 10.4 to this Amendment No. 1 on Form 10-Q/A:

	 	 	Exhibit A-1 (Part One): Leases

	 	 	Exhibit A-1 (Part Two): Beneficial Leases

	 	 	Exhibit A-2: Wells

	 	 	Exhibit A-3: Right of Way/Surface Use

	 	 	Exhibit A-4: Consents

	 	 	Exhibit B: Material Agreements

	 	 	Exhibit C: Value Allocation

	 	 	Exhibit D: Assignment, Bill of Sale and Conveyance

	 	 	Exhibit E: Transition Services Agreement

	 	 	Exhibit H: Accounting Data

	 	 	Exhibit I: Equipment

      

	 	 	Schedule 2.1: Seller Wire Instructions

	 	 	Schedule 3.8: Taxes

	 	 	Schedule 3.9: Litigation

	 	 	Schedule 3.10: Violations

	 	 	Schedule 3.12: Purchase Contracts

	 	 	Schedule 3.13: Plugging Obligations

	 	 	Schedule 3.14: Imbalances

	 	 	Schedule 3.15: Licenses

	 	 	Schedule 3.17: Leases

	 	 	Schedule 3.18: Non-Consent — Force Pooled

	 	 	Schedule 3.19: Wells Subject to Reversion

	 	 	Schedule 3.21: Environmental

     Oasis Petroleum Inc. agrees to furnish a copy of any omitted exhibit or schedule to the
Securities and Exchange Commission upon request.

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