Document:

exhibit10-1.htm

    Exhibit
10.1

     

     

    ASSET
PURCHASE AND SALE AGREEMENT

     

    THIS ASSET PURCHASE AND SALE
AGREEMENT dated July 17, 2009, is made by and between Segundo Navarro Drilling,
Ltd., a Texas limited partnership ("Seller"), and Vanguard Permian, LLC, a
Delaware limited liability company and Vanguard Natural Resources,
LLC, a Delaware limited liability company (collectively "Buyer").

     

    W I T N E S S E T
H:

     

    WHEREAS, Seller desires to
sell, assign and convey to Buyer, and Buyer desires to purchase and accept from
Seller, Seller’s interest in certain oil and gas wellbores as described on
Exhibit I and a fifty percent (50%) working interest equal to a thirty-seven and
one-half percent (37.5%) net revenue interest in certain oil and gas properties
as described herein on Exhibit II; and

     

    WHEREAS, Seller and Buyer deem
it in their mutual best interests to execute and deliver this
Agreement;

     

    NOW, THEREFORE, in
consideration of the foregoing Recitals and the mutual covenants and agreements
contained herein, Seller and Buyer do hereby agree as follows:

     

    ARTICLE
I

     

    

     

    PROPERTIES TO BE SOLD AND
PURCHASED

     

    Section
1.1. Assets
Included.

     

      Subject
to Section 1.2,
Seller agrees to sell and Buyer agrees to purchase, for the consideration
hereinafter set forth, and subject to the terms and provisions herein contained,
the following described properties, rights and interests:

     

    (a) That
working interest and net revenue interest in and to those wellbores described in
Exhibit I
attached hereto and made a part hereof for all purposes and all rights of Seller
to produce oil, gas and other minerals from those wellbores and all rights of
Seller in and to the oil, gas and other minerals that may be produced from those
wellbores under the leases referred to in Exhibit I;

     

    (b) Concurrent
rights, titles and interests with Seller in and to, or otherwise derived from,
the leases described in Exhibit I, all presently existing and valid oil, gas or
mineral unitization, pooling, and/or communitization agreements, declarations
and/or orders and in and to the wellbores covered and the units created thereby
(including all units formed under orders, rules, regulations, or other official
acts of any federal, state, or other authority having jurisdiction, voluntary
unitization agreements, designations and/or declarations) relating to the
wellbores described in paragraph (a)
above;

     

    (c) A
proportionate interest in the rights, titles and interests associated with all
presently existing and valid production sales (and sales related) contracts,
operating agreements, and other agreements and contracts to the extent and to
the extent they relate to any of the wellbores described in paragraph (a)
above, or to the extent and only to the extent they relate to the development,
operation, or maintenance thereof or the treatment, storage, transportation or
marketing of production therefrom (or allocated thereto).

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d) All
rights, titles and interests of Seller in and to all materials, supplies,
machinery, equipment, improvements and other personal property and fixtures
(including all wells, wellhead equipment, pumping units, tanks and surface
leases and other surface rights, all permits and licenses, and all other
appurtenances being used or held for use in connection with, or otherwise
related to, the exploration, development, operation or maintenance of any of the
wellbores described in paragraph (a)
above;

     

    (e) All of
Seller's production records, and well files, which relate to the wellbores
described in paragraph (a) above;

     

    (f) Without
limitation of the foregoing but subject to Section 1.2, a
fifty percent (50%) working interest equal to a thirty-seven and one-half
percent (37.5%) net revenue interest in and to those leases described in Exhibit II
attached hereto and made a part hereof for all purposes, SAVE AND EXCEPT THE
WELLBORES DESCRIBED IN EXHIBIT I ATTACHED HERETO;

     

    (g) Without
limitation of the foregoing but subject to Section 1.2, a
fifty percent (50%) working interest equal to a thirty-seven and one-half
percent (37.5%) net revenue interest in and to the oil, gas and other minerals
in and under or that may be produced from the leases described in Exhibit II
attached hereto (SAVE AND EXCEPT THE WELLBORES DESCRIBED IN EXHIBIT I ATTACHED
HERETO);

     

    (h) Fifty
percent (50%) of Seller’s rights, titles and interests in and to, or otherwise
derived from, all presently existing and valid oil, gas or mineral unitization,
pooling, and/or communitization agreements, declarations and/or orders and in
and to the properties covered and the units created thereby (including all units
formed under orders, rules, regulations, or other official acts of any federal,
state, or other authority having jurisdiction, voluntary unitization agreements,
designations and/or declarations) relating to the leases and properties
described in paragraphs (f) and
(g) above and none other and, with respect to such rights and interests
that relate to any of the leases and properties described in paragraphs (f) and
(g) above as well as other leases and properties of Seller, concurrent
rights, titles and interests with Seller in and to such rights and interests to
the extent and only to the extent they relate to the leases and properties
described in paragraphs (f) and
(g) above;

     

    (i)  Fifty
percent (50%) of Seller’s rights, titles and interests in and to all presently
existing and valid production sales (and sales related) contracts, operating
agreements, and other agreements and contracts to the extent and only to the
extent they relate to any of the leases and properties described in paragraphs (f), (g) and
(h) above, to the extent and only to the extent they relate to the
exploration, development, operation, or maintenance thereof and none other or
the treatment, storage, transportation or marketing of production
therefrom  (or allocated thereto) and none other and, with respect to
such rights and interests that relate to any of the leases and properties
described in paragraphs (f), (g) and
(h) above as well as other leases and properties of Seller, concurrent
rights, titles and interests with Seller in and to such rights and interests to
the extent and only to the extent they relate to the leases and properties
described in paragraphs (f), (g) and
(h) above;

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (j) Fifty
percent (50%) of Seller’s rights, titles and interests in and to all easements,
rights-of-way, surface leases and other surface rights, all permits and
licenses, and all other appurtenances being used or held for use in connection
with, or otherwise to the extent and only to the extent they relate to, the
exploration, development, operation or maintenance of any of the properties
described in paragraphs (f), (g) and
(h) above and none other, or the treatment, storage, transportation or
marketing of production therefrom and none other (or allocated thereto) and,
with respect to such rights and interests that relate to any of the leases and
properties described in paragraphs (f), (g) and
(h) above as well as other leases and properties of Seller, concurrent
rights, titles and interests with Seller in and to such rights and interests to
the extent and only to the extent they relate to the leases and properties
described in paragraphs (f), (g) and
(h) above; and

     

    (k) As used
herein:  (i) "Oil and Gas Properties" means
the properties and interests described in paragraphs (a), (f) and
(g) above, save and except for any such properties or assets that are
Excluded Assets; and (ii) "Properties" or “Property” means the Oil and
Gas Properties plus the properties and interests described in paragraphs (b), (c),
(d), (e), (h), (i) and (j) above, save and except for any such properties
or assets that are Excluded Assets.

     

    Section
1.2. Assets
Excluded.

     

      Notwithstanding
anything herein contained to the contrary, the Properties do not include, and
there is hereby excepted and reserved unto Seller, the following:

     

    (a) Any
accounts receivable or accounts payable accruing before the Effective Date
including, but not limited to, all payments held in suspense for title or other
reasons that are customary in the industry and which payments are attributable
to periods of time prior to the Effective Date;

     

    (b) All
corporate, financial, tax and legal (other than title) records of
Seller;

     

    (c) All oil,
gas or other hydrocarbon production from or attributable to the Properties with
respect to all periods prior to the Effective Date, all proceeds attributable
thereto, and all oil, gas or other hydrocarbons that, at the Effective Date, are
owned by Seller and are in storage or within processing plants;

     

    (d) Any
refund of costs, taxes or expenses borne by Seller or Seller's predecessors in
title attributable to periods prior to the Effective Date;

     

    (e) Any and
all proceeds from the settlements of contract disputes with purchasers of oil,
gas or other hydrocarbons from the Properties, including settlement of
take-or-pay disputes, insofar as said proceeds are attributable to periods of
time prior to the Effective Date;

     

    (f) Any and
all proceeds from settlements with regard to reclassification of gas produced
from the Properties, insofar as said proceeds are attributable to periods of
time prior to the Effective Date;

     

    (g) All
claims (including insurance claims) and causes of action of Seller against one
or more third parties arising from acts, omission or events occurring prior to
the Effective Date and all claims under any joint interest audit attributable to
any period prior to the Effective Date;

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (h) Any
geological, geophysical or seismic data, materials or information, including
maps, interpretations records or other technical information related to or based
upon any such data, materials or information, and any other asset, data,
materials or information, the transfer of which is restricted or prohibited
under the terms of any third party license, confidentiality agreement or other
agreement or the transfer of which would require the payment of a fee or other
consideration to any third party; provided, however, that if any such data,
materials or information is transferable upon payment of a fee or other
consideration, and if Buyer has paid such fee or other consideration prior to
the Closing Date, then such data, materials or information shall be transferred
to Buyer;

     

    (i) All
rights, titles, and interest of Seller in and to the properties and interests
described in Section
1.1, paragraphs (a), (f) and (g), above, BELOW THE BASE OF THE OLMOS
FORMATION AS DEPICTED AT 7778’ SUBSURFACE ON THE SCHLUMBERGER GAMMA RAY/ARRAY
INDUCTION LOG DATED SEPTEMBER 16, 2002 FOR THE LEWIS PETRO PROPERTIES, INC.
CHATO 24 #19 WELL (API NO. 42-283-31761).

     

    The
properties and interests specified in the foregoing paragraphs (a)
through (i) of
this Section 1.2 are
herein collectively called the "Excluded Assets".

     

    ARTICLE
II

     

    

     

    PURCHASE
PRICE

     

    Section
2.1. Purchase
Price.

     

    

    

    The purchase price for the Properties
is FIFTY-TWO MILLION TWO HUNDRED AND FIFTY THOUSAND DOLLARS and NO/100
($52,250,000.00) (the “Purchase Price”).  The Purchase Price, as
adjusted pursuant to this Article II and
the other applicable provisions hereof, is herein called the "Adjusted Purchase
Price".

     

    Section
2.2. Accounting
Adjustments.

     

    Appropriate
adjustments shall be made between Buyer and Seller so that (i) all expenses
(including all drilling costs, all capital expenditures, and all overhead
charges under applicable operating agreements, and all other overhead charges
actually charged by third parties) which are incurred in the operation of the
Properties after the Effective Date will be borne by Buyer, and all proceeds
(net of applicable production, severance, and similar taxes) from the sale of
oil, gas or other minerals, produced from the Oil and Gas Properties after the
Effective Date will be received by Buyer, including any settlements from
the  hedge contract set forth on Exhibit 7.9.1 and (ii) all
expenses which are incurred in the operation of the Properties before the
Effective Date will be borne by Seller and all proceeds (net of applicable
production, severance, and similar taxes) from the sale of oil, gas or other
minerals produced therefrom before the Effective Date will be received by
Seller.  It is agreed that, in making such
adjustments:  (i) oil which was produced from the Oil and Gas
Properties and which was, on the Effective Date, stored in tanks located on the
Oil and Gas Properties (or located elsewhere but used to store oil produced from
the Oil and Gas Properties prior to delivery to oil purchasers) and above
pipeline connections shall be deemed to have been produced before the Effective
Date (it is recognized that such tanks were not gauged on the Effective Date for
the purposes of this Agreement and that determination of the volume of such oil
in storage will be based on the best available data, which may include
estimates), (ii) ad valorem taxes assessed with respect to a period which
the Effective Date splits shall be prorated based on the number of days in such
period which fall on each side of the Effective Date (with the day on which the
Effective Date falls being counted in the period after the Effective Date), such
proration to be adjusted after Closing in the event actual ad valorem taxes are
different than projected, with appropriate payments from Seller to Buyer or from
Buyer to Seller, as the case may be, (iii)  no consideration shall be given
to the local, state or federal income tax liabilities of any party.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    Section
2.3. Closing and Post-Closing
Accounting Settlements.

     

    (a)           At
or before Closing, the parties shall determine, based upon the best information
reasonably available to them, the amount of the adjustments provided for in
Section 2.2.  If
the amount of adjustments so determined which would result in a credit to Buyer
exceed the amount of adjustments so determined which would result in a credit to
Seller, Buyer shall receive a credit, for the amount of such excess, against the
Purchase Price to be paid at Closing, and, if the converse is true, Buyer shall
pay to Seller, at Closing (in addition to amounts otherwise then owed), the
amount of such excess.

     

    (b)           Operating
revenues and expenses shall be settled after Closing and paid in the same manner
applicable to operating revenues and expenses as provided in the Operating
Agreement attached as Exhibit
7.10.

     

    (c)           On
or before 90 days after Closing, Buyer and Seller shall review any additional
information which may then be available pertaining to the adjustments provided
for in Section 2.2,
shall determine if any additional adjustments (whether the same be made to
account for expenses or revenues not considered in making the adjustments made
at Closing, or to correct errors made in such adjustments) should be made beyond
those made at Closing, and shall make any such adjustments by appropriate
payments from Seller to Buyer or from Buyer to Seller in
cash.  Following such additional adjustments, no further adjustments
shall be made under this Section 2.3,
except that, any adjustments to the proration of ad valorem taxes used at
Closing shall be made after such 90 day period promptly following such time as
the actual ad valorem taxes become known.

     

    Section
2.4. Payment of Adjusted Purchase
Price.

     

      The Adjusted
Purchase Price shall be paid to Seller as follows:

     

    (a)           Contemporaneously
with the execution and delivery of this Agreement, Buyer shall tender to Seller
cash equal to $2,612,500 as a deposit (such amount to be referred to as the
"Deposit").

     

    (b)           At
Closing, Buyer shall pay to Seller by bank transfer in immediately available
funds to the account designated by Seller an amount equal to the Adjusted
Purchase Price, less the
Deposit.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    ARTICLE
III

     

    

     

    THE
CLOSING

     

    The
closing of the transactions contemplated hereby (the "Closing") shall take place
(i) at the offices of Seller, at 10:00 a.m. (local time) (i) three Business
Days following notice from Buyer but in no event later than August 17, 2009, or
(ii) at such other time or place or on such other date as the parties
hereto shall agree.  The date on which the Closing is required to take
place is herein referred to as the "Closing Date".  All
Closing transactions shall be deemed to have occurred
simultaneously.

     

    ARTICLE
IV

     

    

     

    REPRESENTATIONS AND
WARRANTIES OF SELLER

     

    Except as
provided in Seller's Disclosure Schedule, Seller hereby represents and warrants
to Buyer on the date of Seller’s execution of this Agreement and on the Closing
Date as follows:

     

    Section
4.1. Organization and
Existence.

     

      Seller
is a Texas Limited Partnership duly formed, validly existing, and in good
standing under the laws of the State of Texas.

     

    Section
4.2. Power and
Authority.

     

      Seller
has all requisite power and authority to execute, deliver, and perform this
Agreement and each other agreement, instrument, or document executed or to be
executed by Seller in connection with the transactions contemplated hereby to
which it is a party and to consummate the transactions contemplated hereby and
thereby.  The execution, delivery, and performance by Seller of this
Agreement and each other agreement, instrument, or document executed or to be
executed by Seller in connection with the transactions contemplated hereby to
which it is a party, and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary  action
of Seller.

     

    Section
4.3. Valid and Binding
Agreement.

     

      This
Agreement has been duly executed and delivered by Seller and constitutes, and
each other agreement, instrument, or document executed or to be executed by
Seller in connection with the transactions contemplated hereby to which it is a
party has been, or when executed will be, duly executed and delivered by Seller
and constitutes, or when executed and delivered will constitute, a valid and
legally binding obligation of Seller, enforceable against it in accordance with
their respective terms, except that such enforceability may be limited by
(a) applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws affecting creditors' rights generally and (b) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances.

     

    Section
4.4. Non-Contravention.

     

      Other
than requirements (if any) that there be obtained consents to assignment (or
waivers of preferential rights to purchase) from third parties, neither the
execution, delivery, and performance by Seller of this Agreement and each other
agreement, instrument, or document executed or to be executed by Seller in
connection with the transactions contemplated hereby to which it is a party nor
the consummation by it of the transactions contemplated hereby and thereby do
and will (a) conflict with or result in a violation of any provision of the
charter, bylaws or other governing instruments of Seller, (b) conflict with
or result in a violation of any provision of, or constitute (with or without the
giving of notice or the passage of time or both) a default under, or give rise
(with or without the giving of notice or the passage of time or both) to any
right of termination, cancellation, or acceleration under, any bond, debenture,
note, mortgage or indenture, or any material lease, contract, agreement, or
other instrument or obligation to which Seller is a party or by which Seller or
any of its properties may be bound, (c) result in the creation or
imposition of any lien or other encumbrance upon the properties of Seller, or
(d) violate any Applicable Law binding upon Seller, except, in the instance
of clause (b) or
clause (d)
above, for any such conflicts, violations, defaults, terminations, cancellations
or accelerations which would not, individually or in the aggregate, have a
Material Adverse Effect.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    Section
4.5. Approvals.

     

      Other
than requirements (if any) that there be obtained consents to assignment (or
waivers of preferential rights to purchase) from third parties, no consent,
approval, order, or authorization of, or declaration, filing, or registration
with, any court or governmental agency or of any third party is required to be
obtained or made by Seller in connection with the execution, delivery, or
performance by Seller of this Agreement, each other agreement, instrument, or
document executed or to be executed by Seller in connection with the
transactions contemplated hereby to which it is a party or the consummation by
it of the transactions contemplated hereby and thereby, except for such
consents, approvals, orders, authorizations, declarations, filings or
registrations which, if not obtained or made (as applicable), would not,
individually or in the aggregate, have a Material Adverse Effect.

     

    Section
4.6. Pending
Litigation.

     

      There
are no Proceedings pending or, to Seller's Knowledge, threatened against or
affecting Seller or the Properties (including any actions challenging or
pertaining to Seller's title to any of the Properties), or affecting the
execution and delivery of this Agreement by Seller or the consummation of the
transactions contemplated hereby by Seller.

     

    Section
4.7. Basic Documents;
Title.

     

      The
oil, gas and/or mineral leases, Seller's interests in which comprise parts of
the Oil and Gas Properties, and all other material contracts and agreements,
licenses, permits and easements, rights-of-way and other rights-of-surface use
comprising any part of or otherwise relating to the Properties (such leases and
such material contracts, agreements, licenses, permits, easements, rights-of-way
and other rights-of-surface use being herein called the "Basic Documents"), are in all
material respects in full force and effect and constitute valid and binding
obligations of the parties thereto.  Seller is not in breach or
default (and no situation exists which with the passing of time or giving of
notice would create a breach or default) of its obligations under the Basic
Documents, and (to the best of Seller's knowledge) no breach or default by any
third party (or situation which with the passage of time or giving of notice
would create a breach or default) exists, to the extent such breach or default
(whether by Seller or such a third party) could reasonably be expected to
materially adversely affect the ownership, operation, value or use of any Oil
and Gas Property after the Effective Date.  All payments (including
all delay rentals, royalties, shut-in royalties and valid calls for payment or
prepayment under operating agreements) owing under Basic Documents have been and
are being made (timely, and before the same became delinquent) by Seller (and,
where the non-payment of same by a third party could materially adversely affect
the ownership, operation, value or use of an Oil and Gas Property after the
Effective Date, have been and are being made, to Seller's Knowledge, by such
third parties).  Schedule 4.7 of the Seller Disclosure Schedule
is a list of all material contracts and agreements to which any of the Oil and
Gas Properties are bound, including (a) joint operating agreements,
(b) agreements with any Affiliate of Seller, (c) any Production Sales
Contracts, (d) any agreement of Seller to sell, lease, farmout or otherwise
dispose of any of its interests in the Oil and Gas Properties other than
conventional rights of reassignment, (e) gas balancing agreements,
(f) exploration agreements, (g) pooling, unitization or
communitization agreement, (h) area of mutual interest agreements, (i)
Hedges and (j) agreements containing seismic licenses, permits and other
rights to geological or geophysical data and information directly or indirectly
relating to the Oil and Gas Properties.  Since July 2, 2009, the
Seller has not taken any action or been the subject of any event which has
caused or which is likely to cause the Seller to not have Defensible Title with
respect to any of the Properties.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    Section
4.8. Commitments, Abandonments or
Proposals.

     

      Except
as set forth in Schedule 4.8 of the Seller Disclosure
Schedule:  (a) Seller has incurred no expenses, and has made no
commitments to make expenditures in connection with the ownership or operation
of the Properties after the Effective Date, other than routine expenses incurred
in the normal operation of existing wells on the Oil and Gas Properties in
accordance with generally accepted practices in the oil and gas industry;
(b) Seller has not abandoned any wells (or removed any material items of
equipment, except those replaced by items of materially equal suitability and
value) on the Oil and Gas Properties since the Effective Date; and (c) no
proposals are currently outstanding (whether made by Seller or by any other
party) to drill additional wells, or to deepen, plug back, or rework existing
wells, or to conduct other operations for which consent is required under the
applicable operating agreement, or to conduct any other operations other than
normal operation of existing wells on the Oil and Gas Properties, or to abandon
any wells, on the Oil and Gas Properties.

     

    Section
4.9. Production Sales
Contracts.

     

      There
exist no agreements or arrangements for the sale of Hydrocarbons from the Oil
and Gas Properties (including calls on, or other rights to purchase, production,
whether or not the same are currently being exercised) other than
(a) production sales contracts (in this Section, the "Scheduled Production Sales
Contracts") disclosed in Schedule 4.9 of the Seller Disclosure
Schedule or (b) agreements or arrangements which are cancelable on 90 days
notice or less without penalty or detriment.  Seller is presently
receiving a price for all production from (or attributable to) each Oil and Gas
Property covered by a Scheduled Production Sales Contract as computed in
accordance with the terms of such contract, and is not having deliveries of gas
from any Oil and Gas Property subject to a Scheduled Production Sale Contract
curtailed substantially below such Property's delivery capacity.

     

    Section
4.10. Plugging and
Abandonment.

     

      Except
for wells listed in Schedule 4.10 of the Seller Disclosure Schedule, there
are no dry holes, or shut in or otherwise inactive wells, drilled by Seller, or
to Seller’s Knowledge, any other party, located on the Oil and Gas Properties or
on lands pooled or unitized therewith, except for wells that have been plugged
and abandoned, and except for wells drilled to depths not included within the
Oil and Gas Properties or within units in which the Oil and Gas Properties
participate which have never been completed in such depths.

     

    Section
4.11. Permits.

     

      Seller
has all Permits necessary or appropriate to own and operate the Properties as
presently being owned and operated, except for such Permits the absence of which
would not be reasonably expected to have a Material Adverse Effect, and such
Permits are in full force and effect (and are transferable to Buyer or are
subject to being routinely replaced by a license or permit issued to Buyer as a
successor owner of the Properties).  Except as set forth in
Schedule 4.11 of the Seller Disclosure Schedule, Seller has not received
written notice of any violations in respect of any Permits and, to Seller's
Knowledge, there are no violations in respect of any Permit and no one has
communicated to Seller that there are any violations in respect of any Permit,
except for such violations which would not reasonably be expected to have a
Material Adverse Effect.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    Section
4.12. Payment of
Expenses.

     

      All expenses
(including all bills for labor, materials and supplies used or furnished for use
in connection with the Properties, and all severance, production, ad valorem and
other similar taxes) relating to the ownership or operation of the Properties,
have been, and are being, paid (timely, and before the same become delinquent)
by Seller, except such expenses and taxes as are disputed in good faith by
Seller and for which an adequate accounting reserve has been established by
Seller.  Seller is not delinquent with respect to its obligations to
bear costs and expenses relating to the development and operation of the Oil and
Gas Properties.

     

    Section
4.13. Compliance with
Laws.

     

      The ownership and
operation of the Properties have been in compliance with all Applicable Laws,
except for such non-compliance which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect.  Without
limiting the foregoing, all wells on the Oil and Gas Properties have been
located, drilled and completed in material compliance with all Applicable Laws
relating thereto.

     

    Section
4.14. Environmental
Matters.

     

    (a) Seller,
and to Seller’s Knowledge, all prior owners of the Properties,
have  operated the Properties in compliance with Environmental Laws,
except for such non-compliance which, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect.

     

    (b) To
Seller’s Knowledge, there are no liabilities, responsibilities, claims, suits,
losses, costs (including remedial, removal, response, abatement, clean-up,
investigative, or monitoring costs and any other related costs and expenses),
other causes of action, damages, settlements, expenses, charges, assessments,
liens, penalties, fines, pre-judgment and post-judgment interest, attorneys'
fees and other legal fees attributable to the period of Seller’s ownership of
the Properties, or to Seller’s Knowledge, attributable to the period preceding
Seller’s ownership of the Properties (i) pursuant to any agreement, order,
notice, or responsibility, directive (including directives embodied in
Environmental Laws), injunction, judgment, or similar documents (including
settlements), arising out of or in connection with any Environmental Laws, or
(ii) pursuant to any claim by a Governmental Entity or other Person for
personal injury, property damage, damage to natural resources, remediation, or
payment or reimbursement of response costs incurred or expended by the
governmental authority or person pursuant to common law or statute (collectively
"Environmental
Liabilities") pending or, to Seller's Knowledge, threatened by or before
any Governmental Entity directed against Seller relating to the development or
operation of the Properties that pertain or relate to (A) any remedial
obligations under any applicable Environmental Law, (B) violations by
Seller of any Environmental Law, (C) personal injury or property damage
claims relating to a release of Environmental Contaminants, or
(D) response, removal, or remedial costs under CERCLA, RCRA or any similar
state laws.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (c) To
Seller’s Knowledge, all Environmental Permits required under Environmental Laws
that are necessary to the operation of the Properties by Seller have been
obtained and are in full force and effect and Seller is unaware of any basis for
revocation or suspension of any such environmental permits.

     

    (d) To
Seller’s Knowledge there has been no disposal or release of any Environmental
Contaminants on, at, or under the Oil and Gas Properties by Seller,
or  any other party, except in compliance with Environmental
Laws.

     

    (e) To
Seller’s Knowledge, there are no written notices of violation, non-compliance,
or similar notifications relating to Environmental Liabilities currently pending
or threatened, relating or pertaining to the Properties.

     

    Section
4.15. Imbalances;
Prepayments.

     

      All
proceeds from the sale of Hydrocarbons attributable to the Oil and Gas
Properties are currently being paid in full and as of the Closing Date no
imbalances exist between Seller and the third party purchasers of the
Hydrocarbons.  Seller is not obligated by virtue of a take or pay
payment, advance payment or other similar payment (other than royalties,
overriding royalties and similar arrangements), to deliver Hydrocarbons, or
proceeds from the sale thereof, attributable to the Oil and Gas Properties at
some future time without receiving payment therefor at or after the time of
delivery.

     

    Section
4.16. State of Repair.

     

      All
wells, wellhead equipment, pumping units, flowlines, tanks, buildings, injection
facilities, saltwater disposal facilities, compression facilities, gathering
systems, fixtures and equipment that are necessary to conduct normal operations
on the Oil and Gas Properties are in good working condition, reasonable wear and
tear excepted and are being maintained in a state adequate to conduct normal
operations, except for such conditions which, individually or in the aggregate,
would not be reasonably expected to have a Material Adverse Effect.

     

    Section
4.17. Intellectual
Property.

     

      Seller owns or has
valid licenses or other rights to use all patents, copyrights, trademarks,
software, databases, geological data, geophysical data, engineering data, maps,
interpretations and other technical information used in connection with its
ownership and operation of the Oil and Gas Properties as presently conducted,
subject to the limitations contained in the agreements governing the use of the
same, which limitations are customary for companies engaged in the business of
the exploration and production of Hydrocarbons.

     

    Section
4.18. Taxes.

     

    (a) All ad
valorem and severance taxes due and payable for the Properties through the year
2008 have been paid.

     

    (b) With
respect to all Taxes related to the Properties, (i) all reports, returns,
statements (including estimated reports, returns or statements), and other
similar filings (the "Tax
Returns") relating to the Properties required to be filed on or before
the date hereof by Seller with respect to any Taxes for any period ending on or
before the date hereof have been timely filed with the appropriate Governmental
Entity, (ii) such Tax Returns are true and correct in all material
respects, and (iii) all Taxes reported on such Tax Returns have been paid,
except those being contested in good faith.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (c) With
respect to all Taxes related to the Properties (i) there are not currently
in effect any extension or waiver by Seller of any statute of limitations of any
jurisdiction regarding the assessment or collection of any Tax related to the
Properties and (ii) there are no administrative proceedings or lawsuits
pending against the Properties or Seller with respect to the Properties by any
taxing authority.

     

    (d) None of
the Properties were bound as of the Effective Date or will be bound following
the Closing by any tax partnership agreement binding upon Seller.

     

    Section
4.19. Fees and
Commissions.

     

      No
broker, investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Seller.

     

    Section
4.20. Disclaimer of
Warranties.

     

      Of
and from the Closing Date, other than those expressly set out in this Article IV or in
the Conveyance, Seller hereby expressly disclaims and negates, any
representation or warranty, express or implied, relating to the condition of the
Assets (including, without limitations (a) any implied or express warranty of
merchantability, (b) any implied or express warranty of fitness for a particular
purpose, (c) any implied or express warranty of conformity to models or samples
of materials, (d) any rights of Buyer under appropriate statues to claim
diminution of consideration or return of the purchase price, (e) any implied or
express warranty of freedom from patent or trademark infringement, (f) any and
all implied warranties existing under applicable law now or hereafter in effect,
and (g) any implied or express warranty regarding environmental laws, the
release of materials into the environment or protection or the environment or
health), it being the express intention of Buyer and Seller that the Assets are
to be conveyed to Buyer “AS IS,” “WHERE IS” and in their present condition
and state of repair.

     

    

    ARTICLE
V

     

    

     

    REPRESENTATIONS AND
WARRANTIES OF BUYER

     

    Buyer
hereby represents and warrants to Seller on the date of Buyer’s execution of
this Agreement and on the Closing Date as follows:

     

    Section
5.1. Organization and
Existence.

     

      Buyer
is a Delaware limited liability company duly organized, legally existing and in
good standing under the laws of the State of Delaware.

     

    Section
5.2. Power and
Authority.

     

      Buyer
has full company power and authority to execute, deliver, and perform this
Agreement and each other agreement, instrument, or document executed or to be
executed by Buyer in connection with the transactions contemplated hereby to
which it is a party and to consummate the transactions contemplated hereby and
thereby.  The execution, delivery, and performance by Buyer of this
Agreement and each other agreement, instrument, or document executed or to be
executed by Buyer in connection with the transactions contemplated hereby to
which it is a party, and the consummation by it of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary company action of
Buyer.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    Section
5.3. Valid and Binding
Agreement.

     

      This
Agreement has been duly executed and delivered by Buyer and constitutes, and
each other agreement, instrument, or document executed or to be executed by
Buyer in connection with the transactions contemplated hereby to which it is a
party has been, or when executed will be, duly executed and delivered by Buyer
and constitutes, or when executed and delivered will constitute, a valid and
legally binding obligation of Buyer, enforceable against it in accordance with
their respective terms, except that such enforceability may be limited by
(a) applicable bankruptcy, insolvency, reorganization, moratorium, and
similar laws affecting creditors' rights generally and (b) equitable
principles which may limit the availability of certain equitable remedies (such
as specific performance) in certain instances.

     

    Section
5.4. Non-Contravention.

     

      The
execution, delivery, and performance by Buyer of this Agreement and each other
agreement, instrument, or document executed or to be executed by Buyer in
connection with the transactions contemplated hereby to which it is a party and
the consummation by it of the transactions contemplated hereby and thereby do
not and will not (a) conflict with or result in a violation of any
provision of the membership agreement or other governing instruments of Buyer,
(b) conflict with or result in a violation of any provision of, or
constitute (with or without the giving of notice or the passage of time or both)
a default under, or give rise (with or without the giving of notice or the
passage of time or both) to any right of termination, cancellation, or
acceleration under, any bond, debenture, note, mortgage, indenture, lease,
contract, agreement, or other instrument or obligation to which Buyer is a party
or by which Buyer or any of its properties may be bound, (c) result in the
creation or imposition of any lien or other encumbrance upon the properties of
Buyer, or (d) violate any Applicable Law binding upon Buyer.

     

    Section
5.5. Approvals.

     

      No
consent, approval, order, or authorization of, or declaration, filing, or
registration with, any court or governmental agency or of any third party is
required to be obtained or made by Buyer in connection with the execution,
delivery, or performance by Buyer of this Agreement and each other agreement,
instrument, or document executed or to be executed by Buyer in connection with
the transactions contemplated hereby to which it is a party or the consummation
by it of the transactions contemplated hereby and thereby.

     

    Section
5.6. Pending
Litigation.

     

      There
are no Proceedings pending or, to Buyer's Knowledge, threatened against or
affecting the execution and delivery of this Agreement by Buyer or the
consummation of the transactions contemplated hereby by Buyer.

     

    Section
5.7. Knowledgeable
Purchaser.

     

      Buyer
is a knowledgeable purchaser, owner and operator of oil and gas properties, has
the ability to evaluate (and in fact has evaluated) the Properties for purchase,
and is acquiring the Properties for its own account and not with the intent to
make a distribution within the meaning of the Securities Act (and the rules and
regulations pertaining thereto) or a distribution thereof in violation of any
other applicable securities laws.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    Section
5.8. Fees and
Commissions.

     

      No
broker, investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Buyer.

     

    ARTICLE
VI

     

    

     

    CERTAIN COVENANTS OF SELLER
PENDING CLOSING

     

    Section
6.1. Access to
Files.

     

      From
the date hereof until Closing, Seller will give Buyer, and its attorneys and
other representatives, access at all reasonable times to the Properties and to
any contract files, lease or other title files, production files, well files,
accounting records and other files of Seller pertaining to the ownership and/or
operation of the Properties, and Seller will use its reasonable best efforts to
arrange for Buyer, and its attorneys and other representatives, to have access
to any such files in the office of Seller.  Seller shall not be
obligated to provide Buyer with access to any records or data which Seller
cannot provide to Buyer without, in its opinion, breaching confidentiality
agreements with other parties.  All information obtained by Buyer
shall be maintained in strict confidence, for use solely in connection with its
evaluation of the Properties, and shall not be disclosed to any other party
without Seller's prior written consent.

     

    Section
6.2. Conduct of
Operations.

     

      Seller will
(i) continue the routine operation of the Properties in the ordinary course
of business and as would a prudent operator; (ii) operate the Properties in
material compliance with all Applicable Laws and Environmental Laws, in
compliance with all oil, gas or mineral leases, and in material compliance with
all Basic Documents other than such leases; and (iii) fulfill all
obligations (including all obligations to make payments under leases or other
Basic Documents) under such leases, and under such other Basic Documents and, in
all material respects, under such Applicable Laws and Environmental
Laws.  Without limitation of the foregoing, the failure to perform an
obligation, when such failure could result in forfeiture or termination of
rights of Seller under a Basic Document, shall be considered material for
purposes hereof.

     

    Section
6.3. Restrictions on Certain
Actions.

     

      Seller will not,
without Buyer's prior consent:

     

    (a) except as
described on Schedule 6.3 of the Seller’s Disclosure
Schedule, expend any funds in excess of twenty five thousand dollars
($25,000), or make any commitments to expend funds (including entering into new
agreements which would obligate Seller to expend funds in excess of $25,000), or
otherwise incur any other obligations or liabilities, in connection with the
ownership or operation of the Properties after the Effective Date, other than
routine expenses incurred in the normal operation of the existing wells on the
Oil and Gas Properties and except in the event of an emergency requiring
immediate action to protect life or preserve the Properties;

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (b) except
where necessary to prevent the termination of an oil and gas lease or other
material agreement governing Seller's interest in the Properties, propose the
drilling of any additional wells, or propose the deepening, plugging back or
reworking of any existing wells, or propose the conducting of any other
operations which require consent under the applicable operating agreement, or
propose the conducting of any other operations other than the normal operation
of the existing wells on the Oil and Gas Properties, or propose the abandonment
of any wells on the Oil and Gas Properties (and Seller agrees that it will
advise Buyer of any such proposals made by third parties and will respond to
each such proposal made by a third party in the manner requested by
Buyer);

     

    (c) sell,
transfer or abandon any portion of the Properties other than items of materials,
supplies, machinery, equipment, improvements or other personal property or
fixtures forming a part of the Properties (and then only if the same is replaced
with an item of substantially equal suitability, free of liens and security
interests, which replacement item will then, for the purposes of this Agreement,
become part of the Properties); or

     

    (d) release
(or permit to terminate), or modify or reduce its rights under, any oil, gas or
mineral lease forming a part of the Oil and Gas Properties, or any other Basic
Document, or enter into any new agreements which would be Basic Documents, or
modify any existing production sales contracts or enter into any new production
sales contracts, except contracts terminable by Seller with notice of 60 days or
less.

     

    Section
6.4. Payment of
Expenses.

     

      Seller
will cause all expenses (including all bills for labor, materials and supplies
used or furnished for use in connection with the Properties and all severance,
production, and similar taxes) relating to the ownership or operation of the
Properties prior to the date of Closing to be promptly paid and discharged,
except for expenses disputed in good faith.

     

    Section
6.5. Preferential Rights and
Third Party Consents.

     

      Seller will
request, from the appropriate parties (and in accordance with the documents
creating such rights and/or requirements), waivers of the preferential rights to
purchase, or requirements that consent to assignment be obtained, if any, which
are identified in Section 6.5 of the Seller Disclosure
Schedule.  Seller shall have no obligation hereunder other than to so
request such waivers (i.e., Seller shall
have no obligation to assure that such waivers are obtained), and if all such
waivers (or any other waivers of preferential rights to purchase or requirements
that consent be obtained to assignment, even if the same are not listed on such
Section 6.5) are not obtained, Buyer may treat any waiver which is not
obtained as a matter which causes Seller's title to not be Defensible Title ;
provided, however, that if the unobtained waiver is a waiver of a preferential
right to purchase, and if both Buyer and Seller agree to this treatment of such
matter (and agree upon an appropriate allocation of the Purchase Price), Seller
will tender (at the agreed allocated portion of the Purchase Price) the required
interest in the Property affected by such unwaived preferential right to
purchase to the holder, or holders, of such right who have elected not to waive
such preferential right to purchase, and if, and to the extent that, such
preferential right to purchase is exercised by such party or parties, such
interest in such Property will be excluded from the transaction contemplated
hereby and the Purchase Price will be reduced by the amount paid, or to be paid,
by the party exercising such preferential right to purchase (and Seller shall
collect such amount from such purchaser).

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    Section
6.6. Delay
in Obtaining Consents.  Unless
otherwise waived by the Buyer, in the event that there are any third party
consents that have not been acquired by the Closing, then the Adjusted Purchase
Price shall be reduced by the Allocated Value for any Property lacking consent
(the “Retained Value”) and the Property lacking consent shall be deleted from
the Conveyance delivered at Closing (the “Retained Property”).  The
Allocated Value of the Properties is set forth on Schedule 6.6.  The
Seller will convey to the Buyer title to the Retained Property in accordance
with this Agreement promptly upon the obtainment of the requisite consent, if
such consent is obtained on or before October 17, 2009. The Retained Value
amount shall be paid by Buyer to Seller contemporaneously with delivery of an
executed conveyance of the Retained Property in a form substantially similar to
Exhibit 9.1(f)) after the requisite consent has been
obtained.   Notwithstanding the terms of this Section 6.6, in the
event that Seller is unable to deliver Defensible Title to the Retained Property
on or before October 17, 2009, then the Buyer has no further obligation to
acquire the Retained Property from Seller.

     

    Section
6.7. Exclusive
Negotiations.   In consideration of the time, expense and
effort to be expended by Buyer in connection with the transactions contemplated
hereby, Seller will not, and will use its Reasonable Best Efforts to insure that
its Affiliates and representatives do not, directly or indirectly, solicit any
offer from, initiate or engage in any discussions or negotiations with, or
provide any information to, any Person (other than Buyer, its Affiliates and
representatives) concerning any possible proposal regarding a transaction
involving the Properties.  Seller shall promptly advise Buyer orally
and in writing of any inquiry or proposal by a third party regarding such a
transaction.

     

    ARTICLE
VII

     

    

     

    ADDITIONAL AGREEMENTS OF THE
PARTIES

     

    Section
7.1. Reasonable Best Efforts;
Title.

     

      Each
party hereto agrees that it will not voluntarily undertake any course of action
inconsistent with the provisions or intent of this Agreement and will use its
Reasonable Best Efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things reasonably necessary, proper, or advisable under
Applicable Laws to consummate the transactions contemplated by this Agreement
and for the Buyer to acquire Defensible Title to the Properties at the Closing,
including (i) cooperation in determining whether any consents, approvals,
orders, authorizations, waivers, declarations, filings, or registrations of or
with any Governmental Entity or third party are required in connection with the
consummation of the transactions contemplated hereby; (ii) Reasonable Best
Efforts to obtain any such consents approvals, orders, authorizations, and
waivers and to effect any such declarations, filings, and registrations;
(iii) Reasonable Best Efforts to cause to be lifted or rescinded any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby;
(iv) Reasonable Best Efforts to defend, and cooperation in defending, all
Proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby; and (v) the execution of any additional instruments
necessary to consummate the transactions contemplated hereby.  The
Seller will not take any action or permit any event to occur subsequent to the
execution of this Agreement which causes or which is likely to cause the Seller
to not have Defensible Title with respect to any of the Properties.

    
 

    Section
7.2. Notice of
Litigation.

     

      Until
the Closing, (i) Buyer, upon learning of the same, shall promptly notify
Seller of any Proceeding which is commenced or threatened against Buyer and
which affects this Agreement or the transactions contemplated hereby and
(ii)  Seller, upon learning of the same, shall promptly notify Buyer of any
Proceeding which is commenced or threatened against Seller which affects this
Agreement or the transactions contemplated hereby.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    Section
7.3. Notification of Certain
Matters.

     

      Seller
shall give prompt notice to Buyer of:  (i) the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which would be
likely to cause any representation or warranty made by Seller in Article III to
be untrue or inaccurate at or prior to the Closing and (ii) any failure of
Seller to comply with or satisfy any covenant, condition, or agreement to be
complied with or satisfied by Seller hereunder prior to
Closing.  Buyer shall give prompt notice to Seller
of:  (i) the occurrence or nonoccurrence of any event the
occurrence or nonoccurrence of which would be likely to cause any representation
or warranty contained in Article VI to be
untrue or inaccurate at or prior to the Closing, and (ii) any failure of
Buyer to comply with or satisfy any covenant, condition, or agreement to be
complied with or satisfied by Buyer hereunder prior to Closing.  The
delivery of any notice pursuant to this Section shall not be deemed
to:  (x) modify the representations or warranties hereunder of
the party delivering such notice, (y) modify the conditions set forth in
Article X
or (z) limit or otherwise affect the remedies available hereunder to the
party receiving such notice.

     

    Section
7.4. Fees and
Expenses.

     

      All fee and
expenses incurred in connection with this Agreement by Seller will be borne by
and paid by Seller.  All fees and expenses incurred in connection with
this Agreement by Buyer will be borne by and paid by Buyer.

     

    Section
7.5. Public
Announcement.

     

       After
the execution of this Agreement, Seller and Buyer shall issue the press release
attached hereto as Exhibit 7.5.

     

    Section
7.6. Casualty Loss Prior to
Closing.

     

      In the event of
damage by fire or other casualty to the Properties after the Effective Date and
prior to the Closing, then this Agreement shall remain in full force and effect,
and (unless Buyer and Seller shall otherwise agree) in such event

     

    (a) as to
each such Property so damaged which is an Oil and Gas Property, the parties
shall mutually agree on a Purchase Price adjustment unless  Seller
should be entitled to make any claims under any insurance policy with respect to
such damage, in which case Seller shall, at Seller's election, either collect
(and when collected pay over to Buyer), or assign to Buyer, such claims,
and

     

    (b) as to
each such Property which is other than an Oil and Gas Property, Seller shall, at
Seller's election, either collect (and when collected pay over to Buyer), or
assign to Buyer, any and all insurance claims relating to such loss, and Buyer
shall take title to the Property affected by such loss without reduction of the
Purchase Price.

     

    Section
7.7. Books and
Records.

     

      At
or promptly after Closing (but in any event within five Business Days after the
Closing), Seller shall make available for copying all books and records
pertaining to the Properties that are in Seller's possession or
control.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    Section
7.8. Further
Assurances.

     

      After
the Closing, Buyer and Seller shall execute and deliver, and shall otherwise
cause to be executed and delivered, from time to time, such further instruments,
notices, division orders, transfer orders and other documents, and do such other
and further acts and things, as may be reasonably necessary to more fully and
effectively grant, convey and assign the Properties to Buyer.

     

    Section
7.9. Hedges.

     

    Within
one business day after Closing, Seller shall arrange a financial hedge as more
fully described on Schedule 7.9.1 of
Seller’s Disclosure Schedule of production from the Oil and Gas Properties (the
“Hedge”).  At Closing, Seller shall assign, and Buyer shall cause
Buyer to assume, the Hedge by having Buyer execute a Novation Agreement in the
form of such Novation Agreement attached hereto as set forth in Schedule 7.9.2 of
Seller' Disclosure Schedule.  The “Novation Date”, as such term is
used herein (and as such term is used in the relevant documents comprising and
governing the novation of the Hedge) shall be the date upon which Closing
occurs.

    

    Section 7.10. Operation
of the Assets Post Closing.

    

    At the
Closing, the Parties agree to enter into mutually agreeable Operating Agreements
affecting the Oil and Gas Properties on the agreed AAPL Form (Exhibit 7.10)
containing the following provisions, among others:

    
      	
              ·  

            	
              Lewis
      Petro Properties, Inc. (“LPP”) will be the Operator of the Oil and Gas
      Properties, however in the event that Seller (or its affiliate) sells more
      than fifty percent (50%) of its interest in the Oil and Gas Properties to
      a non-affiliated third party or parties, Buyer shall have the right to
      take over operations effective as of the date of the
  sale.

            

    

    
      	
              ·  

            	
              LPP
      shall propose the drilling of 7 wells per year (beginning in 2010) through
      2015. No more than 1 well shall be drilling at any time without the mutual
      consent of both parties

            

    

    
      	
              ·  

            	
              Should
      LPP fail to propose said wells, Buyer shall have the right to propose
      same.

            

    

    
      	
              ·  

            	
              In
      the event a well is proposed and a party elects not to participate in said
      well, then, provided the well is drilled timely, the non-consenting party
      shall assign to the consenting party all of its right, title and interest
      in the well and in the 20 acres of leasehold around such
    well.

            

    

    
      	
              ·  

            	
              LPP
      shall serve as the marketing representative for Buyer for the sale of its
      natural gas, oil/condensate, NGL’s from processing and Buyer shall be
      entitled to the same benefits of pricing and other terms as if Buyer had
      been a signatory to said contracts.  LPP shall make
      disbursement of revenues to Buyer within five (5) days after receipt of
      corresponding revenues but no later than thirty (30) days following the
      end of the calendar month in which production
    occurs.

            

    

    
      	
              ·  

            	
              A
      right of first refusal to acquire any interest subject to the Operating
      Agreement and being sold by a
party.

            

    

    
      	
              ·  

            	
              In
      the accounting procedure to be included in the Operating Agreement, the
      Operator shall be entitled to the following fees for providing services to
      Buyer, proportionately reduced to Buyer’s
  interest:

            

    

    
      	
              §  

            	
              Operating/Gauging
      Fee: $505.00 per month per producing well with a 4% per year escalator
      commencing on July 1, 2012.

            

    

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    
      	
              ·  

            	
              As
      to the wellbores described on Exhibit I and for regulatory purposes only,
      Buyer shall have the right to use, designate and assign as much as forty
      acres around the borehole of each well for purposes of obtaining permits,
      assigning allowables and allocating allowable production. In the event the
      use, designation or assignment of such acreage would materially impede,
      impair or curtail the Operator’s rights to acquire drilling permits or to
      maximize allowables for wells drilled on the Properties, including wells
      the Parties may drill on acreage otherwise assigned to said well by Buyer,
      Buyer will take all commercially reasonable actions to designate and
      assign other acreage on the Properties to the borehole for the purposes
      described above. Seller will take all commercially reasonable actions to
      give effect to any designations and assignments made by Buyer as
      contemplated by this paragraph.

            

    

    
      	
              ·  

            	
              While
      Buyer will have the right to re-complete a well up the hole within the
      existing wellbore described in Exhibit I, Buyer is strictly prohibited
      from the following activities, without the consent of
    Seller:

            

    

    
      	
              §  

            	
              Deepening
      an existing well;

            

    

    
      	
              §  

            	
              Moving
      down the well to perforate or
stimulate;

            

    

    
      	
              §  

            	
              Drilling
      a horizontal lateral from the well.

            

    

    

    Section
7.11. Audit.

     

    Within 45
days after the execution of this Agreement, Seller shall cause its outside
auditor to audit the revenues and direct operating expenses for the Oil and Gas
Properties for the calendar year 2008.  Such outside auditor shall
agree that said financial data and related audit opinion can be used by VNR in
its public filings. The cost of preparing said audit shall be paid by
Buyer.  Also, Seller will provide Buyer unaudited statement of
revenues and direct operating expenses for the six months ended June 30, 2008
and 2009 for the Oil and Gas Properties prepared on the same basis as the
audited statement for 2008 and will assist Buyer in preparing the unaudited
reserve disclosures as required by FASB 69.

    

    Section 7.12. Confidentiality.

     

    The
parties agree that the terms and conditions of this Agreement shall be treated
as confidential as to third parties or disclosure to third parties concerning
the Agreement without the prior written consent of the other, except as may be
required by law or the rules of any stock exchange or securities
market.  Notwithstanding anything herein to the contrary, the parties
agree that Seller shall be allowed to disclose the terms and conditions of this
Agreement to one or more Lessors for the purposes of obtaining consents to
assign and/or addressing any rights of first refusal existing as of the date of
this Agreement and (ii) Buyer shall be allowed to file a Form 8-K and issue the
press release attached as Exhibit 7.5 in connection with the transactions
contemplated by this Agreement and Buyer shall be allowed to disclose the terms
and conditions of this Agreement to its financing sources.

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    Section
7.13. Gathering
Agreement.

     

    The parties agree that at the Closing
they will enter into a Gathering Agreement in the form attached hereto as
Exhibit 7.13.

    

    Section 7.14. Development Leases Limited
to Forty-Two PUDs.

    

    Buyer and Seller hereby acknowledge and
agree that development of the Leases collectively described on Exhibit II hereto
(the “Development Leases”) shall be limited to no more than forty-two wells
(PUDs).   The Buyer and Seller further agree that each producing
well shall earn a 20-acre unit surrounding each said well under the Development
Leases (unless a lesser or larger unit is required as opposed to permitted by
governmental regulations in order to maintain a full allowable, in which case
the retained unit size shall be reduced or enlarged to the appropriate
size).  The Buyer and Seller shall mutually agree to the configuration
(including spacing) of each retained unit.  If and when the forty-two
PUDs have been drilled and if the Development Leases have not all terminated,
then the Buyer agrees to assign any unearned acreage remaining in any of the
Development Leases to Seller within 30 days of abandonment or completion of the
42nd well.  Notwithstanding any term to the contrary, this Section
7.14 shall survive the Closing until the obligations set forth herein have been
met or the Development Leases terminate, whichever is sooner.

    

    

    ARTICLE
VIII

     

    

     

    DUE DILIGENCE
EXAMINATION

     

    Section
8.1. Environmental
Inspections.                                                                

     

               Buyer
shall have the right, at Buyer’s sole cost and expense, to obtain such
inspections of the Properties as it deems appropriate prior to the Closing Date
including but not limited to a “Phase I” environmental inspection, and other
environmental inspections and surveys for the purpose of locating hazardous
substances, solid waste and any other matters or circumstances affecting the
environment and the use and usability of the Properties as a result
thereof.  Buyer's obligations and agreements hereunder are
specifically subject to its acceptance of the conditions disclosed by any such
inspections.  Any inspections obtained by Buyer shall be in addition
to and not in lieu of Buyer's representations, warranties and covenants in this
Agreement. If Buyer discovers any Environmental Liabilities or other
environmental matters based on such inspections and surveys affecting any of the
Properties, Buyer shall notify Seller prior to the expiration of the Examination
Period of such discovery.  To be effective, such notice must
(i) be in writing, (ii) be received by Seller prior to the expiration
of the Examination Period, (iii) describe the matter in reasonable detail,
(iv) identify the specific Oil and Gas Property affected by such matter,
and (v) include Buyer’s cost to remedy such matter as determined by Buyer
in good faith.  Upon the receipt of such notice from Buyer, Seller
shall have the option, but not the obligation, to attempt to cure such matter at
any time prior to the Closing. If Seller is unable to cure such matter, then
Buyer shall have the right to (i) reduce the Purchase Price by the cost to
remedy such matter as set forth in Buyer’s notice or (ii) terminate this
Agreement by delivering to Seller a written notice of termination at any time
prior to the Closing.

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    Section
8.2. Buyer
Indemnification.

     

    

     

     BUYER
HEREBY INDEMNIFIES AND SHALL DEFEND AND HOLD SELLER, AFFILIATES THEREOF, AND ITS
AND THEIR RESPECTIVE OWNERS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
REPRESENTATIVES, CONTRACTORS, SUCCESSORS, AND ASSIGNS HARMLESS FROM AND AGAINST
ANY AND ALL OF THE FOLLOWING CLAIMS ARISING FROM BUYER'S INSPECTING AND
OBSERVING THE PROPERTIES:  (I) CLAIMS FOR PERSONAL INJURIES TO OR
DEATH OF EMPLOYEES OF BUYER, ITS CONTRACTORS, AGENTS, CONSULTANTS, AND
REPRESENTATIVES, AND DAMAGE TO THE PROPERTY OF BUYER OR OTHERS ACTING ON BEHALF
OF BUYER, EXCEPT FOR INJURIES OR DEATH CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT OF SELLER, AFFILIATES THEREOF OR ITS OR THEIR RESPECTIVE EMPLOYEES,
CONTRACTORS, AGENTS, CONSULTANTS, OR REPRESENTATIVES; AND (II) CLAIMS FOR
PERSONAL INJURIES TO OR DEATH OF EMPLOYEES OF SELLER OR THIRD PARTIES, AND
DAMAGE TO THE PROPERTY OF SELLER OR THIRD PARTIES, TO THE EXTENT CAUSED BY THE
NEGLIGENCE, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT OF BUYER.  TO THE
EXTENT PROVIDED ABOVE, THE FOREGOING INDEMNITY INCLUDES, AND THE PARTIES INTEND
IT TO INCLUDE, AN INDEMNIFICATION OF THE INDEMNIFIED PARTIES FROM AND AGAINST
CLAIMS ARISING OUT OF OR RESULTING, IN WHOLE OR PART, FROM THE CONDITION OF THE
PROPERTY OR THE SOLE, JOINT, COMPARATIVE, OR CONCURRENT NEGLIGENCE OR STRICT
LIABILITY OF ANY OF THE INDEMNIFIED PARTIES.  THE PARTIES HERETO AGREE
THAT THE FOREGOING COMPLIES WITH THE EXPRESS NEGLIGENCE RULE AND IS
CONSPICUOUS.

     

    ARTICLE
IX

     

    

     

    CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF THE PARTIES

     

    Section
9.1. Conditions Precedent to the
Obligations of Buyer.

     

      The
obligations of Buyer under this Agreement are subject to each of the following
conditions being met:

     

    (a) Each and
every representation of Seller under this Agreement shall be true and accurate
in all material respects as of the date when made (except that where any
statement in a representation and warranty expressly includes a standard of
materiality, such statement shall be true and accurate in all respects giving
effect to such standard) and shall be deemed to have been made again at and as
of the time of Closing and shall at and as of such time of Closing be true and
accurate in all material  respects (except that where any statement in
a representation and warranty expressly includes a standard of materiality, such
statement shall be true and accurate in all respects giving effect to such
standard), except as to changes specifically contemplated by this Agreement or
consented to by Buyer.

     

    (b) Seller
shall have performed and complied in all material respects with (or compliance
therewith shall have been waived by Buyer) each and every covenant, agreement
and condition required by this Agreement to be performed or complied with by
Seller prior to or at the Closing.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    (c) Seller
shall have delivered a certificate executed by the president of Seller dated the
Closing Date, representing and certifying in such detail as Buyer may reasonably
request that the conditions set forth in subsections (a)
and (b) above
have been fulfilled.

     

    (d) No
Proceeding (excluding any Proceeding initiated by Buyer or any of its
affiliates) shall, on the Closing Date, be pending or threatened before any
Governmental Entity seeking to restrain, prohibit, or obtain damages or other
relief in connection with the consummation of the transactions contemplated by
this Agreement.

     

    (e) Buyer
shall have received a release of any liens covering or affecting the Properties,
executed in recordable form in form and substance agreeable to
Buyer.

     

    (f) Buyer
shall have received conveyances of the Properties executed and delivered by
Seller, which conveyances shall be substantially in the form of the instruments
attached hereto as Exhibit 9.1(f)
in all material respects (collectively the "Conveyance").

     

    (g) Buyer
shall have received a certificate of non-foreign status in form, date and
content reasonably acceptable to Buyer, executed and delivered by Seller
pursuant to Section 1445 of the Code and the regulations promulgated
thereunder.

     

    (h) Buyer
shall have received all other agreements, instruments and documents which are
required by other terms of this Agreement to be executed or delivered by Seller
or any other party to Buyer prior to or in connection with the
Closing.

     

    Section
9.2. Conditions Precedent to the
Obligations of Seller.

     

      The
obligations of Seller under this Agreement are subject to each of the following
conditions being met:

     

    (a) Each and
every representation of Buyer under this Agreement shall be true and accurate in
all material respects as of the date when made and shall be deemed to have been
made again at and as of the time of Closing and shall at and as of such time of
Closing be true and accurate in all respects except as to changes specifically
contemplated by this Agreement or consented to by Seller.

     

    (b) Buyer
shall have performed and complied in all material respects with (or compliance
therewith shall have been waived by Seller) each and every covenant, agreement
and condition required by this Agreement to be performed or complied with by
Buyer prior to or at the Closing.

     

    (c) No
Proceeding (excluding any Proceeding initiated by Seller or any of its
affiliates) shall, on the Closing Date, be pending or threatened before any
Governmental Entity seeking to restrain, prohibit, or obtain damages or other
relief in connection with the consummation of the transactions contemplated by
this Agreement.

     

    (d) Seller
shall have received all other agreements, instruments and documents which are
required by other terms of this Agreement to be executed or delivered by Buyer
or any other party to Seller prior to or in connection with the
Closing.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    ARTICLE
X

     

    

     

    TERMINATION, AMENDMENT AND
WAIVER

     

    Section
10.1. Termination.

     

      This
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing in the following manner:

     

    (a) by mutual
written consent of Seller and Buyer; or

     

    (b) by either
Seller or Buyer, if:

     

    (i) the
Closing shall not have occurred on or before August 17, 2009, unless such
failure to close shall be due to a breach of this Agreement by the party seeking
to terminate this Agreement pursuant to this clause (i);
or

     

    (ii) there
shall be any statute, rule, or regulation that makes consummation of the
transactions contemplated hereby illegal or otherwise prohibited or a
Governmental Entity shall have issued an order, decree, or ruling or taken any
other action permanently restraining, enjoining, or otherwise prohibiting the
consummation of the transactions contemplated hereby, and such order, decree,
ruling, or other action shall have become final and nonappealable;
or

     

    (iii)           Buyer
is not able to secure funding for payment of the Adjusted Purchase Price on or
before August 17, 2009.

     

    (c)           
by Seller, if (i) Buyer shall have failed to fulfill in any material
respect any of its obligations under this Agreement; or (ii) any of the
representations and warranties of Buyer contained in this Agreement shall not be
true and correct in all material respects and, in the case of each of clauses (i) and
(ii), such
failure, misrepresentation, or breach of warranty (provided it can be cured) has
not been cured within ten days after written notice thereof from the Seller to
Buyer; or

     

    (d)           by
Buyer, if (i) Seller shall have failed to fulfill in any material respect
any of their obligations under this Agreement, or (ii) any of the
representations and warranties of Seller contained in this Agreement shall not
be true and correct in all material respects (except that where any statement in
a representation and warranty expressly includes a standard of materiality, such
statement shall be true and accurate in all respects giving effect to such
standard) and, in the case of clauses (i) and
(ii), such
failure, misrepresentation or breach of warranty (provided it can be cured) has
not been cured within ten days after written notice thereof from Buyer to
Seller; or

     

    

     

    Section
10.2. Effect of
Termination.

     

    In the
event of the termination of this Agreement pursuant to Section 10.1 by the
Seller, on the one hand, or Buyer, on the other, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall become void
and have no effect, except that the agreements contained in this Article X,
in Sections 7.4, 7.5 and 8.2 and in Articles XII and XIII shall
survive the termination hereof. If this Agreement is terminated (i) by Seller or
Buyer pursuant to Section 10.1(b)(i) or Section 10.1(b)(iii) (and
Seller is not in material breach of this Agreement) or (ii) by Seller pursuant
to Section 10.1(c), Seller shall retain the Deposit.  If this
Agreement is terminated under Section 10.1 for any other reason, the amount
of the Deposit shall be paid to Buyer by Seller not later than 15 days
after Buyer gives written notice to Seller that such Deposit shall be returned
to Buyer and Buyer shall have no further liability or obligation under this
Agreement. The retention of the Deposit by Seller shall constitute the sole and
exclusive remedy of Seller as a result of any breach by Buyer of this Agreement.
If Closing does not occur because Seller wrongfully fails to tender performance
at Closing or otherwise breaches this Agreement prior to Closing, Buyer may
either: (a) pursue specific performance of Seller’s obligations under this
Agreement or (b) have Seller repay the amount of the Deposit not later than 15
days after Buyer gives written notice to Seller that such Deposit shall be
returned to Buyer without any other remedy available to it for Seller’s wrongful
failure to close hereunder.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    Section
10.4. Amendment.

     

      This
Agreement may not be amended except by an instrument in writing signed by or on
behalf of all the parties hereto.

     

    Section
10.5. Waiver.

     

      Seller,
on the one hand, or Buyer, on the other, may:  (i) waive any
inaccuracies in the representations and warranties of the other contained herein
or in any document, certificate, or writing delivered pursuant hereto, or
(ii) waive compliance by the other with any of the other's agreements or
fulfillment of any conditions to its own obligations contained
herein.  Any agreement on the part of a party hereto to any such
waiver shall be valid only if set forth in an instrument in writing signed by or
on behalf of such party.  No failure or delay by a party hereto in
exercising any right, power, or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power, or
privilege.

     

    ARTICLE
XI

     

    

     

    SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND COVENANTS;
INDEMNIFICATION

     

    Section
11.1. Survival.

     

    (a) The
representations and warranties of the parties hereto contained in this Agreement
or in any certificate, instrument, or document delivered pursuant hereto shall
survive the Closing, regardless of any investigation made by or on behalf of any
party, provided that (i) any representation and warranty of Seller contained in
Sections 4.7
through 4.18
pertaining to the payment of (x) royalties and (y) severance and other similar
taxes shall survive until the second anniversary of the Closing Date and (ii)
all other the representations and warranties of Seller contained in Sections 4.7
through 4.18
shall survive until the first anniversary of the Closing Date (such anniversary
date and time of expiration called a "Survival
Date").  From and after a Survival Date, no party hereto shall
be under any liability with respect to any representation or warranty to which
such Survival Date relates, except with respect to matters as to which notice
has been received in accordance with Section 11.1(b).

     

    (b) No party
hereto shall have any indemnification obligation pursuant to this Article XI or
otherwise in respect of any representation, warranty or covenant unless it
shall have received from the party seeking indemnification written notice of the
existence of the claim for or in respect of which indemnification in respect of
such representation, warranty or covenant is being sought, and such written
notice is properly given on or before the applicable Survival
Date.  Such notice shall set forth with reasonable specificity
(i) the basis under this Agreement, and the facts that otherwise form the
basis of such claim, (ii) the estimate of the amount of such claim (which
estimate shall not be conclusive of the final amount of such claim) and an
explanation of the calculation of such estimate, including a statement of any
significant assumptions employed therein, and (iii) the date on and manner
in which the party delivering such notice became aware of the existence of such
claim.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

    (c) From the
Closing Date through the Survival Date, any claim for indemnification for any
title defect(s) by Buyer from Seller pertaining to Section 4.7 (“Basic
Documents”) is only enforceable to the extent the aggregate sum of all claims
for title defect(s) is in excess of 2.5% of the Purchase Price.

     

    Section
11.2. Seller's Indemnification
Obligations.

     

      Seller
shall, on the date of Closing, agree (and, upon delivery to Buyer of the
Conveyance, shall be deemed to have agreed), subject to the limitations and
procedures contained in this Article XI,
following the Closing, to indemnify and hold Buyer, its Affiliates and its and
their respective successors and permitted assigns and all of their respective
stockholders, partners, members, managers, directors, officer, employees, agents
and representatives harmless from and against any and all claims, obligations,
actions, liabilities, damages or expenses (a) resulting from any
misrepresentation or breach of any warranty, covenant or agreement of Seller
contained in this Agreement or any certificate delivered by Seller at the
Closing, (b) relating to the Excluded Assets, or (c) relating to the
ownership or operation of the Properties before the Effective Date.

     

    Section
11.3. Buyer's Indemnification
Obligations.

     

      Buyer
shall, on the date of Closing, agree (and, upon delivery to Buyer of the
Conveyance, shall be deemed to have agreed), subject to the limitations and
procedures contained in this Article XI,
following the Closing, to indemnify and hold Seller harmless from and against
any and all claims, obligations, actions, liabilities, damages, costs or
expenses, (collectively, "Seller's Losses")
(a) resulting from any misrepresentation or breach of any warranty,
covenant or agreement of Buyer contained in this Agreement or any certificate
delivered by Buyer at the Closing, or (b) relating to Buyer's ownership and
operation of the Properties after the Effective Date.

     

    Section
11.4. Indemnification
Proceedings.

     

      In
the event that any claim or demand for which a party (an "Indemnifying Party"), would be
liable to the other party under Section 11.2 or
Section 11.3 (an
"Indemnified Party") is
asserted against or sought to be collected from an Indemnified Party by a third
party, the Indemnified Party shall with reasonable promptness notify the
Indemnifying Party of such claim or demand, but the failure so to notify the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
under this Article XI,
except to the extent the Indemnifying Party demonstrates that the defense of
such claim or demand is materially prejudiced thereby.  The
Indemnifying Party shall have 30 days from receipt of the above notice from the
Indemnified Party (in this Section 11.4,
the "Notice Period") to
notify the Indemnified Party whether or not the Indemnifying Party desires, at
the Indemnifying Party's sole cost and expense, to defend the Indemnified Party
against such claim or demand; provided, that the Indemnified Party is hereby
authorized prior to and during the Notice Period to file any motion, answer or
other pleading that it shall deem necessary or appropriate to protect its
interests or those of the Indemnifying Party and not prejudicial to the
Indemnifying Party.  If the Indemnifying Party elects to assume the
defense of any such claim or demand, the Indemnified Party shall have the right
to employ separate counsel at its own expense and to participate in the defense
thereof.  If the Indemnifying Party elects not to assume the defense
of such claim or demand (or fails to give notice to the Indemnified Party during
the Notice Period), the Indemnified Party shall be entitled to assume the
defense of such claim or demand with counsel of its own choice, at the expense
of the Indemnifying Party.  If the claim or demand is asserted against
both the Indemnifying Party and the Indemnified Party and based on the advice of
counsel reasonably satisfactory to the Indemnifying Party it is determined that
there is a conflict of interest which renders it inappropriate for the same
counsel to represent both the Indemnifying Party and the Indemnified Party, the
Indemnifying Party shall be responsible for paying separate counsel for the
Indemnified Party; provided, however, that the Indemnifying Party shall not be
responsible for paying for more than one separate firm of attorneys to represent
all of the Indemnified Parties, regardless of the number of Indemnified
Parties.  If the Indemnifying Party elects to assume the defense of
such claim or demand, (i) no compromise or settlement thereof may be
effected by the Indemnifying Party without the Indemnified Party's written
consent (which shall not be unreasonably withheld) unless the sole relief
provided is monetary damages that are paid in full by the Indemnifying Party and
(ii) the Indemnifying Party shall have no liability with respect to any
compromise or settlement thereof effected without its written consent (which
shall not be unreasonably withheld).

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

    Section
11.5. Indemnification Exclusive
Remedy.

     

      Indemnification
pursuant to the provisions of this Article XI shall
be the exclusive remedy of the parties hereto for any misrepresentation or
breach of any warranty, covenant or agreement contained in this Agreement or in
any closing document executed and delivered pursuant to the provisions hereof or
thereof, or any other claim arising out of the transactions contemplated by this
Agreement.

     

    Section
11.6. Limited to Actual Damages;
No Consequential Damages.

     

      The
indemnification obligations of the parties pursuant to this Article XI shall
be limited to actual Damages and shall not include incidental, consequential,
indirect, punitive, or exemplary Damages, provided that any incidental,
consequential, indirect, punitive, or exemplary Damages recovered by a third
party (including a Governmental Entity, but excluding any Affiliate of any
party) against a party entitled to indemnity pursuant to this Article XI shall
be included in the Damages recoverable under such indemnity.

     

              ARTICLE
XII                                

     

    

    MISCELLANEOUS
MATTERS

     

    Section
12.1. Dispute
Resolution.

     

    (a) Any and
all claims, disputes, controversies or other matters in question arising out of
or relating to this Agreement, any provision hereof, the alleged breach of any
such provision, or in any way relating to the subject matter of this Agreement
or the relationship among the parties created by this Agreement, involving the
parties, their affiliates and/or their respective representatives (all of which
are referred to herein as "Disputes"), even though some
or all of such Disputes allegedly are extra-contractual in nature, whether such
Disputes sound in contract, tort, or otherwise, at law or in equity, under state
or federal law, whether provided by statute or the common law, for damages or
any other relief, shall be resolved solely in accordance with this Section 12.1.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

    (b) If a
Dispute occurs that the senior representatives of the parties responsible for
the transaction contemplated by this Agreement have been unable, in good faith,
to settle or agree upon within a period of 15 days after such Dispute arose, the
Seller shall nominate and commit one of its senior officers, and Buyer shall
nominate and commit one of its senior officers, to meet at a mutually agreed
time and place not later than 30 days after the Dispute has arisen to attempt to
resolve same.  If such senior management have been unable to resolve
such Dispute within a period of 15 days after such meeting, or if such meeting
has not occurred within 45 days following such Dispute arising, then any party
shall have the right, by written notice to the other, to resolve the
Dispute by arbitration in accordance with the provisions of Section 12.1(d).

     

    (c) Intentionally
Deleted

     

    (d) Any
Dispute that is not resolved pursuant to the foregoing provisions of this Section 12.1
shall be settled exclusively and finally by arbitration in accordance with this
Section 12.1(d).

     

    (i) Such
arbitration shall be conducted pursuant to the Federal Arbitration Act, except
as expressly provided otherwise in this Agreement.  The validity,
construction, and interpretation of this Section 12.1(d),
and all procedural aspects of the arbitration conducted pursuant hereto,
including the determination of the issues that are subject to arbitration (i.e.,
arbitrability), the scope of the arbitrable issues, allegations of "fraud in the
inducement" to enter into this Agreement or this arbitration provision,
allegations of waiver, laches, delay or other defenses to arbitrability, and the
rules governing the conduct of the arbitration (including the time for filing an
answer, the time for the filing of counterclaims, the times for amending the
pleadings, the specificity of the pleadings, the extent and scope of discovery,
the issuance of subpoenas, the times for the designation of experts, whether the
arbitration is to be stayed pending resolution of related litigation involving
third parties not bound by this Agreement, the receipt of evidence, and the
like), shall be decided by the arbitrators.  The arbitration shall be
administered by the American Arbitration Association (the "AAA"), and shall be conducted
pursuant to the Commercial Arbitration Rules of the AAA (the "Rules"), except as expressly
provided otherwise in this Agreement.  The arbitration proceedings
shall be subject to any optional rules contained in the Rules for emergency
measures and, in the case of Disputes with respect to amounts in excess of $1
million, optional rules for large and complex cases.

     

    (ii) The
arbitrators shall permit and facilitate such discovery as they determine is
appropriate in the circumstances, taking into account the needs of the parties
and the desirability of making discovery expeditious and
cost-effective.  Such discovery may include pre-hearing depositions,
particularly depositions of witnesses who will not appear personally to testify,
if there is a demonstrated need therefore.  The arbitrators may issue
orders to protect the confidentiality of proprietary information, trade secrets
and other sensitive information disclosed in discovery.

     

    (iii) All
arbitration proceedings hereunder shall be conducted in San Antonio, Bexar
County, Texas or such other mutually agreeable location.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    (iv) All
arbitration proceedings hereunder shall be before a panel of three (3)
arbitrators appointed in accordance with the Rules consisting of Persons (which
can include lawyers) having at least ten (10) years of experience in or relating
to the oil and gas industry.

     

    (v) In
deciding the substance of the Dispute, the arbitrators shall refer to the
substantive laws of the State of Texas for guidance (excluding choice-of-law
principles that might call for the application of the laws of another
jurisdiction).  Matters relating to arbitration shall be governed by
the Federal Arbitration Act.

     

    (vi) The
parties shall request the arbitrators to conduct a hearing as soon as reasonably
practicable after appointment of the third arbitrator, and to render a final
decision completely disposing of the Dispute that is the subject of such
proceedings as soon as reasonably practicable after the final
hearing.  The parties shall instruct the arbitrators to impose time
limitations they consider reasonable for each phase of such proceeding,
including, without limitation, limits on the time allotted to each party for the
presentation of its case and rebuttal.  The arbitrators shall actively
manage the proceedings as they deem best so as to make the proceedings fair,
expeditious, economical and less burdensome than litigation.  To
provide for speed and efficiency, the arbitrators may:  (i) limit
the time allotted to each party for presentation of its case; and
(ii) exclude testimony and other evidence they deem irrelevant or
cumulative.

     

    (vii) Notwithstanding
any other provision in this Agreement to the contrary, the parties expressly
agree that the arbitrators shall have absolutely no authority to award
consequential, incidental, special, treble, exemplary or punitive damages of any
type under any circumstances regardless of whether such damages may be available
under Applicable Law, or under the Federal Arbitration Act or the
Rules.

     

    (viii) The
parties agree that there shall be no transcript of any hearing before the
arbitrators.  The parties shall request that final decision of the
arbitrators be in writing, be as brief as possible, set forth the reasons for
such final decision, and if the arbitrators award monetary damages to either
party, contain a certification by the arbitrators that they have not included
any incidental, special, treble, exemplary or punitive damages.  To
the fullest extent permitted by law, the arbitration proceeding and the
arbitrators' decision and award shall be maintained in confidence by the parties
and the parties shall instruct the arbitrators to likewise maintain such matters
in confidence.

     

    (ix) The fees
and expenses of the arbitrators shall be borne equally by Seller and Buyer, but
the decision of the arbitrators may include such award of the arbitrators' fees
and expenses and of other costs and attorneys' fees as the arbitrators determine
appropriate (provided that such award of costs and fees may not exceed the
amount of such costs and fees incurred by the losing party in the
arbitration).

     

    (x) The
decision and award of the arbitrators shall be binding upon the parties and
final and nonappealable to the maximum extent permitted by law, and judgment
thereon may be entered in a court of competent jurisdiction and enforced by any
party as a final judgment of such court.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

    Section
12.2. Notices.

     

      All
notices, requests, demands, and other communications required or permitted to be
given or made hereunder by any party hereto shall be in writing and shall be
deemed to have been duly given or made if (i) delivered personally,
(ii) transmitted by first class registered or certified mail, postage
prepaid, return receipt requested, (iii) sent by a recognized prepaid
overnight courier service (which provides a receipt), or (iv) sent by
telecopy or facsimile transmission, with receipt acknowledged, to the parties at
the following addresses (or at such other addresses as shall be specified by the
parties by like notice):

     

    If to
Seller:

    

    Segundo
Navarro Drilling, Ltd.

    10101
Reunion Place, Suite 1000

    San
Antonio, Texas 78216

    210.384.3200

    210.340.0267:fax

    Attention:  Land
Department

    

    If to
Buyer:

    

    Vanguard
Natural Resources, LLC

    Vanguard
Permian, LLC

    7700 San
Felipe, Ste. 485

     

    Houston,
Texas 77063

     

    832.327.2255

     

    832.327.2260:fax

     

    

     

    Such
notices, requests, demands, and other communications shall be effective upon
receipt.

     

    Section
12.3. Entire
Agreement.

     

      This
Agreement, the Seller Disclosure Schedule, together with the Exhibits, and other
writings referred to herein or delivered pursuant hereto, constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.

     

    Section
12.4. Injunctive
Relief.

     

      The
parties hereto acknowledge and agree that irreparable damage would occur in the
event any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached.  It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement, and shall
be entitled to enforce specifically the provisions of this Agreement, in any
court of the United States or any state thereof having jurisdiction, in addition
to any other remedy to which the parties may be entitled under this Agreement or
at law or in equity.

     

    Section
12.5. Binding Effect; Assignment;
No Third Party Benefit.

     

      This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors, and permitted
assigns.  Except as otherwise expressly provided in this Agreement,
neither this Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties.  Except as provided in Article XI,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person other than the parties hereto, and their respective heirs, legal
representatives, successors, and permitted assigns, any rights, benefits, or
remedies of any nature whatsoever under or by reason of this
Agreement.

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

    Section
12.6. Severability.

     

      If
any provision of this Agreement is held to be unenforceable, this Agreement
shall be considered divisible and such provision shall be deemed inoperative to
the extent it is deemed unenforceable, and in all other respects this Agreement
shall remain in full force and effect; provided, however, that if any such
provision may be made enforceable by limitation thereof, then such provision
shall be deemed to be so limited and shall be enforceable to the maximum extent
permitted by Applicable Law.

     

    Section
12.7. GOVERNING
LAW.

     

      THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS THEREOF.

     

    Section
12.8. Counterparts.

     

      This
instrument may be executed in any number of identical counterparts, each of
which for all purposes shall be deemed an original, and all of which shall
constitute collectively, one instrument.  It is not necessary that
each party hereto execute the same counterpart so long as identical counterparts
are executed by each such party hereto.  This instrument may be
validly executed and delivered by facsimile or other electronic
transmission.

     

    Section
12.9. Like-Kind
Exchange.

     

    NOTWITHSTANDING
ANY PROVISION HEREIN to the contrary, either party shall have the right to elect
to consummate this transaction in whole or in part as a tax free exchange
pursuant to Section 1031 of the Internal Revenue Code.  In the event a
party so elects, it may transfer the Property to a “qualified intermediary” (as
defined in Treasury Regulation Section 1.1031(k)-1), subject to this Agreement,
and pursuant to an agreement between the party and the “qualified intermediary”
which meets one of the safe harbors contained in Treasury Regulation Section
1.1031(k)-1), which provides that the “qualified intermediary” will transfer all
or part of the Property to the other party in accordance with the terms of this
Agreement and that the Proceeds shall not be distributed to the party outright
or otherwise, but shall be distributed to such “qualified
intermediary".  Each party electing to consummate this transaction in
whole or in part as a tax free exchange shall be responsible for ensuring that
such agreement meets the requirements of a safe harbor and shall provide the
other party with the name of the qualified person in writing prior to the
execution of this Agreement.  The parties agree to accommodate one
another in effectuating a like-kind exchange of the Property in exchange for
exchange property selected by each party, but in no event shall a party be
required or obligated to incur any liabilities, costs or expenses in connection
with accommodating the other party in effectuation of a like-kind
exchange.

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

    

    ARTICLE
XIII

     

    

     

    DEFINITIONS AND
REFERENCES

     

    Section
13.1. Certain Defined
Terms.

     

      When
used in this Agreement, the following terms shall have the respective meanings
assigned to them in this Section 13.1:

     

    "Affiliate" means any Person
directly or indirectly controlling, controlled by or under common control with a
Person.

     

    "Agreement" means this Asset
Purchase and Sale Agreement, as hereafter amended or modified in accordance with
the terms hereof.

     

    "Applicable Law" means any
statute, law, principle of common law, rule, regulation, judgment, order,
ordinance, requirement, code, writ, injunction, or decree of any Governmental
Entity, exclusive of Environmental Laws.

     

    "Business Day" means a day
other than a Saturday, Sunday or day on which commercial banks in the State of
Texas are authorized or required to be closed for business.

     

    "Code" means the Internal
Revenue Code of 1986, or any successor statute thereto, as amended.

     

    "Defensible Title" means, as of
the date of this Agreement and the Closing Date, with respect to the Oil and Gas
Properties, such record title and ownership by Seller that:

     

    (A) entitles
Seller to receive and retain, without reduction, suspension or termination, not
less than the percentage set forth in Exhibit I as Seller's
Net Revenue Interest of all Hydrocarbons produced, saved and marketed from each
Lease comprising such Oil and Gas Property as set forth in Exhibit I,
through plugging, abandonment and salvage of all wells comprising or included in
such Oil and Gas Property, and except for changes or adjustments that result
from the establishment of units, changes in existing units (or the participating
areas therein), or the entry into of pooling or unitization agreements after the
date hereof unless made in breach of the provisions of Section 6.3;

     

    (B) obligates
Seller to bear not greater than the percentage set forth in Exhibit I  as
Seller's Working Interest of the costs and expenses relating to the maintenance,
development and operation of each Lease comprising such Oil and Gas Property,
through plugging, abandonment and salvage of all wells comprising or included in
such Oil and Gas Property, and except for changes or adjustments that result
from the establishment of units, changes in existing units (or the participating
areas therein), or the entry into of pooling or unitization agreements after the
date hereof unless made in breach of the provisions of Section 6.3;

     

    (C) is free
and clear of all Liens, except Permitted Encumbrances; and

     

    (D) reflects
that all consents to assignment, notices of assignment or preferential purchase
rights which are applicable to or must be complied with in connection with the
transaction contemplated by this Agreement, or any prior sale, assignment or the
transfer of such Oil and Gas Property, have been obtained and complied with to
the extent the failure to obtain or comply with the same could render this
transaction or any such sale, assignment or transfer (or any right or interest
affected thereby) void or voidable or could result in Buyer or Seller incurring
any liability.

     

    

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    "Dollars" or "$" means U.S.
Dollars.

     

    "Effective Date" means 7:00
a.m., local time at the location of the Properties, on July 1,
2009.

     

    "Environmental Contaminants"
means any pollutant, waste, contaminant, or hazardous, extremely hazardous, or
toxic material, substance, chemical or waste identified, defined or regulated as
such under any Environmental Law.

     

    "Environmental Laws" means all
national, state, municipal or local laws, rules, regulations, statutes,
ordinances or orders of any Governmental Entity pertaining to the protection of
human health or the environment, including the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund Amendments
and Reauthorization Act, 42 U.S.C. § 9601 et seq. ("CERCLA"), the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. § 6901 et seq. ("RCRA"), the Federal Water
Pollution Control Act, as amended by the Clean Water Act, 33 U.S.C. § 1251 et
seq., the Clean Air Act, 42 U.S.C. §7401 et seq., the Toxic Substances Control
Act, 15 U.S.C. § 2601 et seq., and any similar state or local
statutes.

     

    "Environmental Permits" means
those Permits relating to environmental, health or safety necessary for the
ownership and operation of the Oil and Gas Properties.

     

    "Governmental Entity" means any
court or tribunal in any jurisdiction (domestic or foreign) or any federal,
state, county, municipal or other governmental or quasi-governmental body,
agency, authority, department, board, commission, bureau or
instrumentality.

     

    "Hedge" means any future
derivative, swap, collar, put, call, cap, option or other contract that is
intended to benefit from, relate to, or reduce or eliminate the risk of
fluctuations in interest rates, basis risk or the price of commodities,
including Hydrocarbons.

     

    "Hydrocarbons" means oil, gas,
other liquid or gaseous hydrocarbons, or any of them or any combination thereof,
and all products and substances extracted, separated, processed and produced
therefrom.

     

    "IRS" means the Internal
Revenue Service.

     

    "Knowledge" of a specified
Person (or similar references to a Person's knowledge) means all information,
after reasonable investigation, is known to (a) in the case of a Person who
is an individual, such Person, or (b) in the case of a Person which is
corporation or other entity, a current executive officer or employee who devoted
substantive attention to matters of such nature during the ordinary course of
his employment by such Person.

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

    "Lien" means any claim, lien,
mortgage, security interest, pledge, charge, option, right-of-way, easement,
encroachment, or encumbrance of any kind.

     

    "Material Adverse Effect" means
any change, development, or effect (individually or in the aggregate) which is,
or is reasonably likely to be, materially adverse (i) to the business,
assets, results of operations or condition (financial or otherwise) of a party,
or (ii) to the ability of a party to perform on a timely basis any material
obligation under this Agreement or any agreement, instrument, or document
entered into or delivered in connection herewith provided that none of the
following shall be deemed to constitute, and none of the following shall be
taken into account in determining whether there has been, a Material Adverse
Effect: (1) any adverse change, event, development, or effect arising from or
relating to (a) general business or economic conditions, (b) national or
international political or social conditions, including the engagement-or
continuation by the United States in hostilities, whether or not pursuant to the
declaration of a national emergency or war, or the occurrence of any military or
terrorist attack upon the United States, or any of its territories, possessions,
or diplomatic or consular offices or upon any military installation, equipment
or personnel of the United States, or (c) financial, banking, or securities
markets (including any disruption thereof and any decline in the price of any
security, commodity or market index).

     

    "Permits" means licenses,
permits, franchises, consents, approvals, variances, exemptions, and other
authorizations of or from Governmental Entities.

     

    "Permitted Encumbrances" shall
mean (A) Liens for taxes which are not yet delinquent or which are being
contested in good faith and for which adequate reserves have been established;
(B) normal and customary Liens of co-owners under operating agreements,
unitization agreements, and pooling orders relating to the Oil and Gas
Properties, which obligations are not yet due and pursuant to which Seller is
not in default; (C) mechanic's and materialman's Liens relating to the Oil
and Gas Properties, which obligations are not yet due and pursuant to which
Seller is not in default; (D) Liens in the ordinary course of business
consisting of minor defects and irregularities in title or other restrictions
(whether created by or arising out of joint operating agreements, farm-out
agreements, leases and assignments, contracts for purchases of Hydrocarbons or
similar agreements, or otherwise in the ordinary course of business) that are of
the nature customarily accepted by prudent purchasers of oil and gas properties
and do not decrease the Net Revenue Interest, increase the Working Interest
(without a proportionate increase in the Net Revenue Interest) or materially
affect the value of any property encumbered thereby; (E) all approvals
required to be obtained from Governmental Entities that are lessors under Leases
forming a part of the Oil and Gas Properties (or who administer such Leases on
behalf of such lessors) which are customarily obtained post-closing;
(F) preferential rights to purchase and consent to transfer requirements of
any Person (to the extent same have been complied with in connection with the
prior sale, assignment or the transfer of such Oil and Gas Property and are not
triggered by the consummation of the transactions contemplated
herein);  and (G)  conventional rights of reassignment
normally actuated by an intent to abandon or release a lease and requiring
notice to the holders of such rights.

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

    "Person" means any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, enterprise, unincorporated organization, or Governmental
Entity.

     

    "Proceedings" means all
proceedings, actions, claims, suits, investigations, and inquiries by or before
any arbitrator or Governmental Entity.

     

    "Reasonable Best Efforts" means
a party's reasonable best efforts in accordance with reasonable commercial
practice.

     

    "Securities Act" shall mean the
Securities Act of 1933, as amended, and all rules and regulations under such
Act.

     

    "Seller Disclosure Schedule"
shall mean a schedule delivered by Seller to Buyer on the date hereof which sets
forth additional information regarding the representations and warranties of
Seller contained herein and information called for hereby.

     

    "Taxes" means any income taxes
or similar assessments or any sales, excise, occupation, use, ad valorem,
property, production, severance, transportation, employment, payroll, franchise,
or other tax imposed by any United States federal, state, or local (or any
foreign or provincial) taxing authority, including any interest, penalties, or
additions attributable thereto.

     

    Section
13.2. Certain Additional Defined
Terms.

     

      In
addition to such terms as are defined in the preamble of and the recitals to
this Agreement and in Section 13.1,
the following terms are used in this Agreement as defined in the Articles or
Sections set forth opposite such terms:

     

    
      
        	
                Defined
      Term

              	
                Reference

              
	
                AAA

              	
                Section
      12.1(d)(i)

              
	
                Adjusted
      Purchase Price

              	
                Section
      2.1

              
	
                Basic
      Documents

              	
                Section
      4.7

              
	
                Closing

              	
                Article
      III

              
	
                Closing
      Date

              	
                Article
      III

              
	 
      	 
      
	
                Deposit

              	
                Section
      2.4

              
	
                Development
      Leases

              	
                Section
      7.16

              
	
                Disputes

              	
                Section
      12.1(a)

              
	
                Environmental
      Liabilities

              	
                Section
      4.14(b)

              
	
                Excluded
      Assets

              	
                Section
      1.2

              
	
                Hedge

              	
                Section
      7.9

              
	
                Indemnified
      Party

              	
                Section
      11.5

              
	
                Indemnifying
      Party

              	
                Section
      11.5

              
	
                Independent
      Expert

              	
                Section
      12.1(c)

              
	
                Notice
      Period

              	
                Section
      11.5

              
	
                Oil
      and Gas Properties

              	
                Section
      1.1

              
	
                Properties

                Property

              	
                Section
      1.1

                Section
      1.1

              
	
                Purchase
      Price

              	
                Section
      2.1

              
	
                Rules

              	
                Section
      12.1(d)(i)

              
	
                Scheduled
      Production Sales Contracts

              	
                Section
      4.9

              
	
                Seller's
      Losses

              	
                Section
      11.3

              
	
                Tax
      Returns

                Wellbore

              	
                Section
      4.18(b)

                Section
      1.1

              
	 
      	 
      
	 
      	 
      

      

    

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

    Section
13.3. References, Titles and
Construction.

     

    (a) All
references in this Agreement to articles, sections, subsections and other
subdivisions refer to corresponding articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise.

     

    (b) Titles
appearing at the beginning of any of such subdivisions are for convenience only
and shall not constitute part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions.

     

    (c) The words
"this Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder"
and words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited.

     

    (d) Words in
the singular form shall be construed to include the plural and vice versa, unless the
context otherwise requires.  Pronouns in masculine, feminine and
neuter genders shall be construed to include any other gender.

     

    (e) Unless
the context otherwise requires or unless otherwise provided herein, the terms
defined in this Agreement which refer to a particular agreement, instrument or
document also refer to and include all renewals, extensions, modifications,
amendments or restatements of such agreement, instrument or document, provided
that nothing contained in this subsection shall be construed to authorize such
renewal, extension, modification, amendment or restatement.

     

    (f) Examples
shall not be construed to limit, expressly or by implication, the matter they
illustrate.

     

    (g) The word
"or" is not intended to be exclusive and the word "includes" and its derivatives
means "includes, but is not limited to" and corresponding derivative
expressions.

     

    (h) No
consideration shall be given to the fact or presumption that one party had a
greater or lesser hand in drafting this Agreement.

     

    (i) All
references herein to "$" or "dollars" shall refer to U.S. Dollars.

     

    (j) Exhibits I, II, 2.1,
7.5, 7.10, 7.13, and 9.1(f) are attached
hereto.  Each such Exhibit is incorporated herein by reference for all
purposes and references to this Agreement shall also include such Exhibit unless
the context in which used shall otherwise require.

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

    (k) Seller’s Disclosure
Schedules 4.7, 4.8, 4.9, 4.10, 4.11, 6.3, 6.5, 6.6, 7.9.1, and 7.9.2 are
attached hereto.  Each such Schedule is incorporated herein by
reference for all purposes and references to this Agreement shall also include
such Schedule unless the context in which used shall otherwise
require.

     

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

    IN WITNESS WHEREOF, this
Agreement is executed by the parties hereto on the date set forth
above.

     

    SELLER:

     

    

     

    SEGUNDO NAVARRO DRILLING,
LTD.       by and through TERCERO NAVARRO,
INC.    its general partner

     

    

     

    

     

    By:           /s/ Rodney R. Lewis

     

     Rodney R. Lewis,
President

     

    

    BUYER:

    

    VANGUARD
PERMIAN, LLC

    by and
through VANGUARD NATURAL GAS, LLC, its sole member

     

    

     

    By:     /s/ Scott W.
Smith      

     

    Name: Scott
W. Smith

     

    Title: Manager

     

    

    VANGUARD
NATURAL RESOURCES, LLC

     

    

     

    

     

    By:     /s/ Scott W.
Smith      

     

    Name: Scott
W. Smith

     

    Title: Presidentexh10-1.htm

	
  
	
EXHIBIT 10.1

NATIONAL PENN BANCSHARES, INC.

 

AMENDED AND RESTATED

 

DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN

 

AS AMENDED EFFECTIVE JULY 22, 2009

 

1.   Purpose.  The purpose of the National Penn Bancshares, Inc. (“National Penn”) Dividend
Reinvestment and Stock Purchase Plan (the “Plan”) is to provide holders of record and beneficial holders of National Penn’s common shares (the “Shares”) the opportunity to reinvest their dividends and invest other cash contributions in Shares.

 

2.   Appointment of Administrator.  National Penn hereby appoints The Bank of New York Mellon (the
“Administrator”) as Plan administrator, and the Administrator, by assuming its duties hereunder, accepts its appointment as Plan administrator and agrees to the terms and conditions of the Plan, as set forth herein.  National Penn may terminate the Administrator’s appointment at any time and appoint in its place another corporation, bank or other entity to serve as Plan administrator.

 

3.  Enrollment in the Plan.  Holders of record of Shares desiring to participate in the Plan must submit
a completed authorization form to the Administrator in the form required by the Administrator or enroll on-line in the manner permitted by the Administrator.  Beneficial holders of Shares desiring to participate in the Plan must either become shareholders of record by having Shares transferred into their own names or arrange with the record holders of such Shares (e.g., a broker or bank nominee) to participate in the Plan on their behalf.

 

4.   Commencement of Plan Participation.  An applicant’s participation in the Plan will begin
after the Administrator receives the applicant’s completed authorization form or on-line enrollment or, in the case of a beneficial owner, after completion of other arrangements by its record holder satisfactory to National Penn and the Administrator.

 

5.   Full or Partial Dividend Reinvestment.  Pursuant to a participant’s authorization, National
Penn will pay directly to the Administrator all of the dividends on Shares held of record by the participant and on Shares held by the Administrator under the Plan, except that a participant may elect for dividends on a fixed number of Shares not to be paid to the Administrator for reinvestment.  If a participant elects partial dividend reinvestment, any dividends not paid to the Administrator for reinvestment will be paid directly to such participant.

 

6.   Voluntary Cash Contributions.  A participant may make voluntary cash contributions to the Administrator
in any amount from a minimum of $100 to a maximum of $10,000 per calendar month, for investment in his or her Plan account.  In addition to payment by check, such payments may also be made by an individual automatic deduction, or automatic monthly deductions, from a participant’s bank account, in the manner permitted by the Administrator.

 

7.   Investment of Funds.  As agent for Plan participants, the Administrator will, on each date that
National Penn pays a dividend (usually the 17th of February, May, August and November), apply dividends paid to it to the purchase of whole and fractional Shares from National Penn for participants’ accounts.  The Administrator will, on or about the 17th day of each month that National Penn does not pay a dividend, purchase whole and fractional Shares from National Penn for participants’ accounts using voluntary cash contributions permitted by Section 6.  Each date on which the
Administrator purchases Shares either with dividends or voluntary cash contributions is referred to as an “investment date.”

 

 

 

6

 

 

8.   Timeliness of Voluntary Cash Contributions.  To be invested on a given investment date, voluntary
cash contributions permitted by Section 6 must be received by the Administrator at least two business days before the investment date.  Any voluntary cash contributions permitted by Section 6 that do not comply with the foregoing two business day requirement will be held by the Administrator for investment on the next following investment date.  No interest will be paid on voluntary cash contributions regardless of when they are received.

 

9.   Source of Shares.  Shares purchased for Plan accounts may be authorized but unissued Shares or
Shares held by National Penn as treasury stock, as National Penn shall elect.

 

10.   Price of Shares Purchased from National Penn.  The price of Shares purchased from National Penn
will be equal to the Fair Market Value of such Shares on the investment date.  The “Fair Market Value” of a Share as of any date shall be:

 

(a) the closing sale price of a Share on the given date, as reported on the National Association of Securities Dealers Automated Quotation (“Nasdaq”) Global Select Market and published in The
Wall Street Journal;

 

(b) if no closing sale price is reported on the given date, the closing sale price of a Share on the last preceding day on which the Shares were traded, as reported on the Nasdaq Global Select Market and published in The
Wall Street Journal;

 

(c) if the Shares are listed on a stock exchange other than Nasdaq, the closing sale price of a Share on the given date, as reported in The Wall Street Journal; or

 

(d) if the Shares are listed on a stock exchange other than Nasdaq, and if no closing sale price of a Share is reported on the given date, the closing sale price of a Share on the last preceding day on which the Shares were traded, as
reported in The Wall Street Journal; or

 

(e) if the Shares are not listed on Nasdaq or another stock exchange, by the Board in its sole discretion.

 

If an investment date falls on a Saturday, Sunday or holiday, Fair Market Value of a Share will be determined as if the investment date had fallen on the preceding Friday or business day, as the case may be.

11.   Open Market Purchases; Price of Shares.  National Penn reserves the right to direct the Administrator
from time to time to purchase Shares under the Plan in the open market, including in privately negotiated transactions (collectively, “open market purchases”).  Open market purchases may begin four business days before the investment date and shall be completed as soon as practical but in no circumstances later than 30 days after such date.  The purchase price to participants for Shares acquired through open market purchases will be the cost to the Administrator of such purchases,
except that National Penn shall pay all brokerage commissions.  In such event, the purchase price to all participants shall be based on the weighted averages of the prices of all Shares acquired from National Penn and/or through open market purchases.

 

 

 

7

 

12.   Shares Held by Nominee.  All shares purchased by the Administrator for Plan accounts shall be
held in its name or in the name of its nominee.

 

13.   Account Statements.  As soon as practicable after a transaction is completed for a participant’s
account, the Administrator shall send such participant a statement confirming the transaction and containing other information about the account, including the total Shares held by the Administrator in the account.

 

14.   Stock Certificates.  No certificate will be issued to a participant for the Shares held in his
or her account unless the participant so requests in writing or in a manner otherwise satisfactory to the Administrator.  Any such request must be submitted to the Administrator after the Shares have been purchased.  No certificates for fractional Shares will be issued.

 

15.   Safekeeping.  A participant may deposit certificates for Shares registered in his or her name
with the Administrator for safekeeping.  A participant who desires to do so must complete the appropriate box on an authorization form or other documentation satisfactory to the Administrator and submit the form or other documentation to the Administrator together with the certificates for the Shares.

 

16.   Service Fees.  The Administrator may charge service fees to Plan participants for such services,
and in such amounts, as shall be agreed upon from time to time by National Penn and the Administrator.

 

17.   Voting of Shares.  The Administrator shall forward proxies to participants (excluding persons
who also hold Shares of record or who are participating through arrangements made by record holders on their behalf, all of whom will receive proxies through other means) for Shares held under the Plan and will vote any Shares that it holds for such a participant’s account in accordance with the participant’s instructions.  If such a participant does not give proxy instructions, such Shares will not be voted.

 

18.   Transfers of Shares.  At a participant’s request and upon receipt of written or other
instructions and documentation satisfactory to the Administrator, the Administrator shall transfer to a person designated by a participant all or any portion of the Shares credited to the participant’s Plan account, as permitted by National Penn.  In such a transfer, the Administrator shall send the transferee a certificate issued by National Penn for the transferred Shares, or shall otherwise issue the shares in a manner permitted by National Penn.

 

19.   Sale of Shares.  At a participant’s request and upon receipt of written or other instructions
and documentation satisfactory to the Administrator, the Administrator shall sell on a participant’s behalf all or any portion of the whole number of Shares credited to the participant’s Plan account.  Any such sale may be effected by the Administrator in any manner deemed to be reasonable and appropriate by the Administrator.  At the Administrator’s sole option and discretion, the Administrator may aggregate Shares to be sold on behalf of various participants, sell any such
Shares through a broker of its choosing (the Administrator being authorized to effect sales of Shares through brokerage services provided by the Administrator or one of its affiliates) or in a negotiated transaction without a broker (including a sale to National Penn), and the Administrator may purchase any such Shares on behalf of other participants.  Any sale to National Penn or purchase by the Administrator on behalf of Plan accounts shall be made at Fair Market Value (as defined in Section 10) on
the date of the transaction.  Following any sale on behalf of a participant, the Administrator shall issue to the selling participant a check in an amount equal to his or her proportionate share of the net proceeds of such sale (after the deduction of brokerage commissions and other sale costs, if any, paid or incurred by or payable by the Administrator).

 

 

 

8

 

 

20.   Termination of Participation by Participant.  A participant may terminate his or her participation
in the Plan at any time by giving written notice of termination, or other notice of termination as permitted by the Administrator.  Dividends corresponding to a record date occurring after the Administrator receives such notice shall be sent directly to the former participant.

 

21.   Termination of Participation by National Penn.  National Penn reserves the right to terminate
a participant’s participation in the Plan at any time, in its sole discretion.  In such case, the Administrator, at the direction of National Penn, will give written notice of termination to the participant.

 

22.   Disposition of Shares after Termination of Account.  Promptly after termination of a participant’s
account, the Administrator shall, as its option, send the participant either a statement indicating the participant’s ownership in book-entry form of the whole Shares in such participant’s account or a certificate issued by National Penn for such whole Shares, in such participant’s account, unless the former participant shall have requested sale or transfer of such Shares by the Administrator pursuant to and in accordance with the requirements of Sections 18 and 19.  In every case
of termination, the Administrator shall convert the participant’s interest in fractional Shares to cash by the sale of such interest.

 

       23.           Participant’s Disposition of All Shares.  If a participant disposes of all Shares registered in such
participant’s name on the books of National Penn, the Administrator shall continue to reinvest the dividends on Shares held in the participant’s account unless National Penn shall direct the Administrator to terminate such participant’s account.

 

       24.   Notices.  All notices to the Administrator shall be addressed to such address or addresses as the Administrator shall
from time to time furnish for that purpose.

 

       25.   Stock Splits and Similar Events.  Any Shares distributed by National Penn on account of stock dividends
or splits on Shares held by the Administrator for a participant shall be credited to the participant’s account.  If National Penn makes available to its shareholders rights to purchase additional Shares or any other securities, or if any party makes a tender offer for Shares, each participant shall receive directly any such rights or offer.

 

    26.         Limitation of Liability.  Neither the Administrator nor National Penn shall be liable
hereunder for any act performed by it in good faith or for any good faith omission to act, including without limitation any claims of liability:

 

          (a)           arising out of failure to terminate the participant’s
account upon the participant’s death or judicially determined incapacity prior to receipt of notice in writing of such death or incapacity, or

 

          (b)           with respect to the prices at which Shares are purchased
for or sold from a participant’s account, the times such purchases or sales are made, and the parties from whom such Shares are purchased or to whom such Shares are sold.

 

 

9

 
     27.           Governing Law.  The terms and conditions of this Plan shall be governed by the laws of the Commonwealth of
Pennsylvania and the rules and regulations of the Securities and Exchange Commission.

 

     28.           Amendment or Termination of Plan.  National Penn reserves the
right to alter the terms and conditions of this Plan or to terminate this Plan at any time upon written notice thereof sent to each participant.

 

     29.           Captions.  The captions included herein are for convenience of
reference only and shall not affect the interpretation of the provisions hereof.

 

     30.           The foregoing Plan was amended by National Penn Bancshares, Inc. on July 22, 2009, effective July 22, 2009.

 

  

10

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00160-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00160-of-00352.parquet"}]]