Document:

Exhibit
10.1

 

 

 

AGREEMENT

FOR PURCHASE AND SALE

OF ASSETS

 

 

BY AND BETWEEN

 

FOREST OIL CORPORATION

 

As Seller,

 

FOREST OIL PERMIAN
CORPORATION

 

As Seller,

 

LINN OPERATING, INC.

 

As Purchaser

 

AND

 

LINN ENERGY HOLDINGS, LLC

 

 

As Purchaser,

 

 

Dated as of August 5,
2009

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  	
   

  	
  1

  
	
   

  	
   

  	
   

  
	
  PURCHASE AND SALE

  	
  1

  
	
  Section 1.1

  	
  Purchase and Sale

  	
  1

  
	
  Section 1.2

  	
  Assets

  	
  1

  
	
  Section 1.3

  	
  Excluded
  Assets

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  	
  4

  
	
   

  	
   

  	
   

  
	
  PURCHASE PRICE

  	
  4

  
	
  Section 2.1

  	
  Purchase Price

  	
  4

  
	
  Section 2.2

  	
  Performance Deposit

  	
  4

  
	
  Section 2.3

  	
  Allocation of the Purchase
  Price

  	
  4

  
	
  Section 2.4

  	
  Adjustment to Purchase Price

  	
  5

  
	
  Section 2.5

  	
  Payment and Calculation of
  Estimated Final Purchase Price; Payment at Closing

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  	
  7

  
	
   

  	
   

  	
   

  
	
  ASSET INSPECTION AND TITLE EXAMINATION

  	
  7

  
	
  Section 3.1

  	
  Access to Records and
  Properties of Seller

  	
  7

  
	
  Section 3.2

  	
  On-Site Tests and Inspections

  	
  7

  
	
  Section 3.3

  	
  Title Matters

  	
  8

  
	
  Section 3.4

  	
  Title Adjustments

  	
  10

  
	
  Section 3.5

  	
  Casualty Loss

  	
  12

  
	
  Section 3.6

  	
  Identification of Additional
  Defective Interests

  	
  13

  
	
  Section 3.7

  	
  Termination Due to Title
  Matters and Conditions

  	
  14

  
	
  Section 3.8

  	
  Title Benefits

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  	
  15

  
	
   

  	
   

  	
   

  
	
  SELLER’S REPRESENTATIONS AND WARRANTIES

  	
  15

  
	
  Section 4.1

  	
  Organization, Standing and
  Power

  	
  15

  
	
  Section 4.2

  	
  Authority and Enforceability

  	
  15

  
	
  Section 4.3

  	
  Claims Affecting the Assets

  	
  16

  
	
  Section 4.4

  	
  Claims Affecting the Sale

  	
  16

  
	
  Section 4.5

  	
  No Demands

  	
  16

  
	
  Section 4.6

  	
  Taxes

  	
  16

  
	
  Section 4.7

  	
  Leases

  	
  17

  
	
  Section 4.8

  	
  Non-Foreign Representation

  	
  17

  
	
  Section 4.9

  	
  Commitments for Expenditures

  	
  17

  
	
  Section 4.10

  	
  Compliance with Laws

  	
  17

  
	
  Section 4.11

  	
  Material Contracts

  	
  18

  
	
  Section 4.12

  	
  Payments for Production and
  Imbalances

  	
  18

  
	
  Section 4.13

  	
  Governmental Authorizations

  	
  19

  
	
  Section 4.14

  	
  Payout Balances

  	
  19

  
	
  Section 4.15

  	
  Bankruptcy

  	
  19

  
	
  Section 4.16

  	
  Brokerage Fees

  	
  19

  

 

ii

 

	
  ARTICLE V

  	
   

  	
  19

  
	
   

  	
   

  	
   

  
	
  PURCHASER’S REPRESENTATIONS AND WARRANTIES 

  	
  19

  
	
  Section 5.1

  	
  Organization, Standing and
  Power

  	
  19

  
	
  Section 5.2

  	
  Authority and Enforceability

  	
  20

  
	
  Section 5.3

  	
  Independent Evaluation

  	
  20

  
	
  Section 5.4

  	
  Suits Affecting the Sale

  	
  20

  
	
  Section 5.5

  	
  Eligibility

  	
  21

  
	
  Section 5.6

  	
  Financing

  	
  21

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  	
  21

  
	
   

  	
   

  	
   

  
	
  ASSUMPTION OF OBLIGATIONS AND INDEMNIFICATION 

  	
  21

  
	
  Section 6.1

  	
  Assumption of Certain
  Liabilities and Obligations by Purchaser

  	
  21

  
	
  Section 6.2

  	
  Indemnification by Purchaser

  	
  21

  
	
  Section 6.3

  	
  Indemnification by Seller

  	
  22

  
	
  Section 6.4

  	
  Interpretation

  	
  23

  
	
  Section 6.5

  	
  Notices

  	
  24

  
	
  Section 6.6

  	
  Tax Treatment of
  Indemnification Amounts

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
   

  	
  25

  
	
   

  	
   

  	
   

  
	
  SELLER’S OBLIGATIONS PRIOR TO CLOSING 

  	
  25

  
	
  Section 7.1

  	
  Restrictions on Operations

  	
  25

  
	
  Section 7.2

  	
  Seller’s Operations

  	
  26

  
	
  Section 7.3

  	
  Operated Assets

  	
  26

  
	
  Section 7.4

  	
  Contract Operating, Marketing
  and Financial Services Agreement

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
   

  	
  27

  
	
   

  	
   

  	
   

  
	
  ADDITIONAL AGREEMENTS OF THE PARTIES 

  	
  27

  
	
  Section 8.1

  	
  Government Reviews and Filings

  	
  27

  
	
  Section 8.2

  	
  Confidentiality

  	
  27

  
	
  Section 8.3

  	
  Taxes

  	
  27

  
	
  Section 8.4

  	
  Receipts and Credits

  	
  30

  
	
  Section 8.5

  	
  Suspense Accounts

  	
  30

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
   

  	
  30

  
	
   

  	
   

  	
   

  
	
  CONDITIONS TO CLOSING 

  	
  30

  
	
  Section 9.1

  	
  Seller’s Conditions

  	
  30

  
	
  Section 9.2

  	
  Purchaser’s Conditions

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
   

  	
  32

  
	
   

  	
   

  	
   

  
	
  RIGHT OF TERMINATION AND ABANDONMENT 

  	
  32

  
	
  Section 10.1

  	
  Termination

  	
  32

  
	
  Section 10.2

  	
  Liabilities Upon Termination

  	
  32

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
   

  	
  33

  
	
   

  	
   

  	
   

  
	
  CLOSING MATTERS 

  	
  33

  
	
  Section 11.1

  	
  Time and Place of Closing

  	
  33

  
	
  Section 11.2

  	
  Closing Obligations

  	
  33

  

 

iii

 

	
  ARTICLE XII

  	
   

  	
  34

  
	
   

  	
   

  	
   

  
	
  POST-CLOSING OBLIGATIONS 

  	
  34

  
	
  Section 12.1

  	
  Post-Closing Adjustments

  	
  34

  
	
  Section 12.2

  	
  Files and Records

  	
  35

  
	
  Section 12.3

  	
  Further Assurances

  	
  35

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIII

  	
   

  	
  35

  
	
   

  	
   

  	
   

  
	
  ENVIRONMENTAL MATTERS 

  	
  35

  
	
  Section 13.1

  	
  Purchaser Acknowledgment
  Concerning Possible Contamination of the Assets

  	
  35

  
	
  Section 13.2

  	
  Adverse Environmental
  Conditions

  	
  36

  
	
  Section 13.3

  	
  Disposal of Materials,
  Substances, and Wastes; Compliance with Law

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE XIV

  	
   

  	
  38

  
	
   

  	
   

  	
   

  
	
  EMPLOYEE MATTERS  

  	
  38

  
	
  Section 14.1

  	
  Continuing Employees

  	
  38

  
	
  Section 14.2

  	
  No Obligation to Hire Seller
  Employees

  	
  38

  
	
  Section 14.3

  	
  Interview, Screening, and
  Offers to Seller Employees

  	
  39

  
	
  Section 14.4

  	
  Employee Benefits

  	
  39

  
	
  Section 14.5

  	
  Control of Seller Employees

  	
  41

  
	
  Section 14.6

  	
  Solicitation of Continuing
  Employees

  	
  41

  
	
  Section 14.7

  	
  Waiver of Restrictions on
  Continuing Employees

  	
  42

  
	
  Section 14.8

  	
  No Third Party Beneficiaries

  	
  42

  
	
   

  	
   

  	
   

  
	
  ARTICLE XV

  	
   

  	
  42

  
	
   

  	
   

  	
   

  
	
  MISCELLANEOUS 

  	
  42

  
	
  Section 15.1

  	
  Notices

  	
  42

  
	
  Section 15.2

  	
  Binding Effect

  	
  43

  
	
  Section 15.3

  	
  Counterparts

  	
  43

  
	
  Section 15.4

  	
  Expenses

  	
  43

  
	
  Section 15.5

  	
  Section Headings

  	
  43

  
	
  Section 15.6

  	
  Entire Agreement

  	
  43

  
	
  Section 15.7

  	
  Conditions

  	
  44

  
	
  Section 15.8

  	
  Governing Law

  	
  44

  
	
  Section 15.9

  	
  Assignment

  	
  44

  
	
  Section 15.10

  	
  Public Announcements

  	
  44

  
	
  Section 15.11

  	
  Notices After Closing

  	
  44

  
	
  Section 15.12

  	
  Waiver of Compliance with Bulk
  Transfer Laws

  	
  44

  
	
  Section 15.13

  	
  Waiver

  	
  45

  
	
  Section 15.14

  	
  Bonds

  	
  46

  

 

iv

 

SCHEDULES

 

	
  SCHEDULE A-1

  
	
  DESCRIPTION OF PROPERTIES

  
	
  SCHEDULE A-2

  
	
  WELLS

  
	
  SCHEDULE A-3

  
	
  AGREEMENTS

  
	
  SCHEDULE B

  
	
  VALUE ALLOCATION

  
	
  SCHEDULE C

  
	
  SUITS AND CLAIMS

  
	
  SCHEDULE D

  
	
  TRANSITION SERVICES AGREEMENT

  
	
  SCHEDULE E

  
	
  OUTSTANDING AFE’S

  
	
  SCHEDULE F-1

  
	
  GENERAL ASSIGNMENT AND BILL OF SALE FORM

  
	
  SCHEDULE F-2

  
	
  ASSIGNMENT FORM

  
	
  SCHEDULE G

  
	
  ENVIRONMENTAL CONDITIONS

  
	
  SCHEDULE 1.3

  
	
  EXCLUDED ASSETS

  
	
  SCHEDULE 2.3

  
	
  TANGIBLE/INTANGIBLE ASSET ALLOCATION

  
	
  SCHEDULE 3.6

  
	
  PREFERENTIAL RIGHTS TO PURCHASE

  
	
  SCHEDULE 4.10

  
	
  LAW VIOLATIONS

  
	
  SCHEDULE 4.11

  
	
  UNPAID OBLIGATIONS

  
	
  SCHEDULE
  4.12(a)

  
	
  TAKE OR PAY OBLIGATIONS

  
	
  SCHEDULE
  4.12(b)

  
	
  IMBALANCES

  
	
  SCHEDULE 4.13

  
	
  MISSING PERMITS

  
	
  SCHEDULE 4.14

  
	
  PAYOUT BALANCES

  
	
  SCHEDULE 15.14

  
	
  BONDS AND PERMITS

  

 

v

 

AGREEMENT FOR PURCHASE

AND SALE OF ASSETS

 

This Agreement for Purchase and Sale of Assets (the “Agreement”), dated
as of August 5 2009, is made and entered into by and among Forest Oil
Corporation, a New York corporation, and Forest Oil Permian Corporation, a
Delaware corporation (collectively “Seller”), and Linn Operating, Inc. a
Delaware corporation and Linn Energy Holdings, LLC a Delaware limited liability
company (collectively “Purchaser”).

 

RECITALS

 

A.            Seller desires to
sell to Purchaser the assets, properties and rights hereinafter described upon
the terms and subject to the conditions, exceptions and reservations
hereinafter set forth;

 

B.            Purchaser desires to
purchase from Seller such assets, properties and rights as hereinafter set
forth upon the terms and subject to the conditions, exceptions and reservations
hereinafter set forth; and

 

C.            In consideration of
the premises and of the mutual promises, representations, warranties,
covenants, conditions and agreements contained herein, Seller and Purchaser,
intending to be legally bound by the terms hereof, agree as follows:

 

ARTICLE I

 

PURCHASE AND SALE

 

Section 1.1             Purchase and Sale.

 

Subject to the provisions of this Agreement, Seller agrees to sell and
convey at the Closing (as defined in Section 11.1), and Purchaser agrees
to purchase and accept at the Closing, such conveyance to be effective for all
purposes as of 7:00 a.m. at the location of each of the respective Assets
on July 1, 2009 (the “Effective Time”), all of the following, less and
except the Excluded Assets (as hereinafter defined), which shall be herein
referred to collectively as the “Assets”.

 

Section 1.2             Assets.

 

The
Assets shall mean the following:

 

 

(a)  All right, title and interest of Seller in
and to all oil and gas leases, other similar leases, mineral interests,
royalties, and overriding royalties, whether producing or non-producing, as
described on Schedule A-1 attached hereto (the “Leases”), and any other rights
and interests of any type in, on or under or relating to the lands also
described on Schedule A-1 or in any of the Leases (the “Land”), and including
any and all right, title and interest of Seller in and to the oil, gas and
other hydrocarbons and other products produced in association therewith in, on
or under any of the foregoing, and all oil and gas wells and injection and
disposal wells located on any of the foregoing, or used or useful in connection
therewith, or on lands pooled or unitized therewith, including, without limitation,
the wells described in Schedule A-2 attached hereto (the “Wells”);

 

(b)  All right, title
and interest of Seller in, to and under or derived from all presently existing
or proposed unitization, pooling and communitization agreements, declarations
and orders, and the properties covered and the units created or to be created
thereby (including, but not limited to, all units formed or to be formed under
orders, regulations, rules or other official actions of any federal, state
or other governmental agency having jurisdiction) including without limitation,
the agreements, declarations, orders, properties and units described in
Schedule A-3 attached hereto to the extent that they relate to or affect all or
any part of the Leases , Lands or Wells (“Unit Agreements”) ;

 

(c)  Subject to any and
all applicable consents to assign and other limitations on Seller’s rights to
assign, all right, title and interest of Seller in, to and under or derived
from all contracts, agreements, and instruments to the extent that they relate
to or affect any of the Leases, Lands, Wells or Unit Agreements, including
presently existing and effective oil, gas liquids, condensate, casinghead gas
and gas sales, purchase, exchange, gathering, transportation and processing
contracts, operating agreements, joint venture agreements, farmout agreements,
partnership agreements, settlement agreements and all other agreements and
instruments, including without limitation the agreements, instruments, and
contracts described in Schedule A-3 attached hereto;

 

(d)  All right, title
and interest of Seller in or to all personal property, fixtures, equipment
leases, improvements, and other personal property, whether real, personal, or
mixed (including, but not limited to, well equipment, casing, tubing, tanks,
rods, tank batteries, boilers, buildings, pumps, motors, machinery, injection
facilities, disposal facilities, field separators and liquid extractors,
compressors, pipelines, gathering systems, docking facilities, air service
facilities, helicopter facilities, power lines, telephone and telegraph lines,
roads, and field processing plants, field offices and office furnishings
related thereto, field office leases, equipment leases, trailers and all other
appurtenances thereunto belonging), (the “Equipment”) and in and to all
easements, permits, licenses, servitudes, rights-of-way, surface leases and
other surface rights, to the extent now being used or proposed to be used in
connection with the exploration, development, operation or maintenance of the
properties and interests described in subsections (a), (b) and (c) of
this Section 1.2, or now being used or proposed to be used in connection
with the producing, treating, processing, storing, gathering, transporting or
marketing of oil, gas

 

2

 

and other hydrocarbons and other products produced in association
therewith attributable to such properties or interests, and all contract rights
(including rights under leases to third parties) related thereto (the “Easements”)
and in and to all natural gas, crude oil, condensate or other products produced
from the properties described or referred to in subsection (a) of this Section 1.2
placed into storage or into pipelines (the “Products”);

 

(e)  All of Seller’s
right, title and interest in and to any production imbalances or balancing
agreements relating to any of the Leases or otherwise arising by virtue of the
fact that Seller may not have taken or marketed its full share of oil, gas and
other hydrocarbons and other products produced in association therewith
attributable to its ownership prior to the Effective Time;

 

(f)  Subject to the
provisions of Section 1.3, all of Seller’s right, title and interest in
and to all causes of action, judgments, pending litigation, claims and demands
set forth on Schedule C; and

 

(g)  Copies of all of
Seller’s accounting records and books and files relating to any of the
foregoing matters set forth in this Section 1.2 including, without
limitation, all production records, operating records, correspondence, lease
records, well records, and division order records; prospect files; title
records (including abstracts of title, title opinions and memoranda, and title
curative documents related to the Leases and Wells), contracts, electric logs,
core data, pressure data, decline curves, graphical production curves, and a
non-exclusive license to all geophysical data owned by Seller (collectively,
the “Records”); provided, however, that the Records shall not include any
interpretive information, documents, or reports, shall not include any Records
that Seller is not contractually or legally permitted to assign, and, except as
specifically otherwise provided in Article XIV, shall not include payroll
or personnel records; and provided, further, that Seller shall be entitled to
retain copies of all accounting records and other files that Seller reasonably
believes it will need access to for future audit, tax, or reporting
requirements.

 

Section 1.3                                      Excluded Assets.

 

Seller shall reserve and retain all of the Excluded Assets.  “Excluded
Assets” shall mean:

 

(a) all of Seller’s corporate minute
books, accounting and financial records, and other business records that relate
to Seller’s business generally (including the ownership of the Assets);

 

(b) all trade credits, all accounts,
suspended funds not otherwise specifically accounted for pursuant to Section 8.5,
below, receivables (including from the results of audits), and all other
proceeds, income or revenues attributable to the Assets with respect to any
period of time prior to the Effective Time;

 

(c) all rights and interests of Seller (A) under
any policy or agreement of insurance or indemnity, (B) under any bond or (C) to
any insurance or condemnation

 

3

 

proceeds or awards arising, in each case, from acts, omissions or
events, or damage to or destruction of property occurring prior to the
Effective Time;

 

(d) all Hydrocarbons produced and sold
from the Assets with respect to all periods prior to the Effective Time;

 

(e) all claims of Seller for refunds of
or loss carry forwards with respect to (A) production or any other taxes
attributable to any period prior to the Effective Time, (B) income or
franchise taxes or (C) any taxes attributable to the Excluded Assets;

 

(f)  all personal computers and
associated peripherals and all radio and telephone equipment;

 

(g)  all of Seller’s computer
software, patents, trade secrets, copyrights, names, trademarks, logos and
other intellectual property;

 

(h)  all documents and
instruments of Seller that may be protected by an attorney-client privilege
other than title opinions;

 

(i)  all data that cannot be disclosed
to Purchaser as a result of confidentiality arrangements under agreements with
third parties;

 

(j)  all hedging transactions and gains
or losses attributable to any hedging activities, whether occurring before or
after the Effective Time;

 

(k) all correspondence, reports,
analyses and other documents relating to the transaction contemplated hereby
(including without limitation, environmental reports and analyses), whether
internal, with or produced by other prospective purchasers, produced by
consultants or other third parties or otherwise, and

 

(l) the assets and liabilities listed on
Schedule 1.3.

 

ARTICLE II

 

PURCHASE PRICE

 

Section 2.1             Purchase
Price.

 

The
aggregate purchase price payable by Purchaser to Seller for the Assets shall be
Ninety-Five Million Dollars ($95,000,000.00) (the “Preliminary Purchase Price”),
subject to adjustment as set forth in Section 2.4 below.

 

Section 2.2             Performance
Deposit.

 

Upon
execution of this Agreement, Purchaser shall pay to Seller by wire transfer a
deposit in the amount of Nine Million, Five-Hundred Thousand Dollars
($9,500,000.00) (“Performance Deposit”) to be held by Seller in accordance with
this Agreement.  In the event that the
transactions contemplated by this Agreement are consummated, the Performance
Deposit shall be applied to the Purchase Price as set forth in Section 2.5(b) below.  In the event this Agreement is terminated,
the Performance Deposit shall be applied in accordance with the provisions of Article X.

 

Section 2.3             Allocation
of the Purchase Price.

 

(a)           The Preliminary Purchase Price shall
be allocated among the Leases and equipment included in the Assets in
accordance with Section 8.3(b) and the allocations set forth

 

4

 

on
Schedule B.  Any adjustments to the
purchase price under Section 2.4 and Section 12.1 shall
correspondingly (as appropriate) adjust the allocations set forth on Schedule
B.

 

(b)           On or before the Closing Date, Seller and Purchaser
shall agree in writing as to the allocation of the Final Purchase Price among
the Assets under the methodology required by Section 1060 of the Internal
Revenue Code of 1986, as amended (the “Code”).  Such
agreed allocation shall be set forth on Schedule 2.3 attached hereto.  Seller and Purchaser must report the
transactions contemplated hereby on all tax returns, including, but not limited
to Form 8594, in a manner consistent with such allocation.  Any adjustments to the
purchase price under Section 2.4 and Section 12.1 shall
correspondingly (as appropriate) adjust the allocations set forth on Schedule
B.

 

Section 2.4             Adjustment to
Purchase Price.

 

The
Preliminary Purchase Price shall be adjusted as follows and the resulting
amount shall be herein called the “Final Purchase Price”:

 

(a)           The Preliminary Purchase Price
shall be adjusted upward by the following (on a cash basis and on a sales, not
an entitlement, method of accounting):

 

(i)  The amount of all
capital expenditures (net to Seller’s interest) incurred and paid by Seller
during the period on or after the Effective Time to the Closing Date (“Adjustment
Period”) in respect of the ownership and operation of the Assets;

 

(ii)  The amount of all
operating costs incurred and paid by Seller (excluding amounts paid in
connection with the transactions contemplated by this Agreement) in respect of
the ownership and operation of the Assets during the Adjustment Period;

 

(iii)  The value
(determined by the price most recently paid prior to the Effective Time for
such oil less all applicable deductions including, without limitation,
deductions for tank bottom sediment and water) of all oil in storage above the
wellhead as of the Effective Time which is credited to the Assets, less
applicable production taxes, royalty and other burdens on the production
payable on such oil and subsequently paid by Seller, the amount of oil in
storage as of the Effective Time to be based on gauge reports to the extent
available or on alternative methods to be agreed by the parties.

 

(iv)  The amount of
underproduced volumes of gas attributable to Seller as of the Effective Time,
multiplied by a price of $4.00/Mcf for such production (net of royalties and
taxes) in each case to the extent provided by existing balancing and other
agreements affecting the Assets.

 

5

 

(v)  The amount of any
Title Adjustment which is a net increase in the value of an Asset, as defined
in Section 3.4(b).

 

(b)           The Preliminary
Purchase Price shall be adjusted downward by the following (on a cash basis and
on a sales, not an entitlement, method of accounting):

 

(i)  Amounts received
by Seller for the sale of oil, gas, liquids or other associated minerals
produced during the Adjustment Period (net of any production royalties,
transportation costs and of any production, severance or sales taxes paid or to
be paid by Seller), and all other amounts received or to be received by Seller
relating to the ownership and operation of the Assets during the Adjustment
Period including but not limited to amounts attributable to prepayments, cash
calls, advance payments, gas transportation, take or pay payments and similar payments;

 

(ii)  Amounts received
by Seller for the sale, salvage or other disposition during the Adjustment
Period of any property, equipment or rights included in the Assets without
Purchaser having received full payment therefor;

 

(iii)  All amounts otherwise
received by Seller and attributable to the ownership of the Assets during the
Adjustment Period;

 

(iv)  An amount equal
to the value of the Assets set forth on Schedule B with respect to which
preferential purchase rights have been exercised in accordance with Section 3.6;

 

(v)  The amount of any
Title Adjustment which is a net reduction in the value of an Asset, as defined
in Section 3.4(b);

 

(vi) An amount equal to
the value of any Casualty Loss as defined in Section 3.5; and

 

(vii)  The amount of overproduced
volumes of gas attributable to Seller as of the Effective Time, multiplied by a
price of $4.00/Mcf for such production (net of royalties and taxes) in each
case to the extent provided by existing balancing and other agreements
affecting the Assets.

 

(viii)  An amount equal
to any adjustment set forth in Section 13.2(b), Section 13.2(d), and
13.2(e).

 

(c)           It is Seller’s
and Purchaser’s intent that the adjustments under this Agreement to the
Preliminary Purchase Price, and any components of such adjustments, shall not
be applied or computed in a manner that results in duplicative effect.

 

6

 

Section 2.5             Payment and
Calculation of Estimated Final Purchase Price; Payment at Closing.

 

(a)           Seller
shall prepare and deliver to Purchaser, at least five “Business Days” (which
term shall mean any day except a Saturday, Sunday or other day on which commercial
banks in New York, New York are required or authorized by law to be closed)
prior to the Closing Date, Seller’s estimate of the Final Purchase Price to be
paid at Closing, based upon the best information reasonably available to
Seller, (such estimated Final Purchase Price being herein referred to as the “Estimated
Final Purchase Price”), together with a statement setting forth Seller’s
estimate of the amount of each adjustment to the Preliminary Purchase Price to
be made pursuant to Section 2.4.  The
parties shall negotiate in good faith and attempt to agree on such estimated
adjustments prior to Closing.

 

(b)           At Closing, Purchaser shall pay to Seller the Estimated
Final Purchase Price determined as set forth in Section 2.5(a) less
an amount equal to the Performance Deposit without interest earned thereon.

 

ARTICLE III

 

ASSET INSPECTION AND TITLE
EXAMINATION

 

Section 3.1             Access to
Records and Properties of Seller.

 

Between
the date of this Agreement and Closing, Seller agrees, subject to Section 8.2,
to give Purchaser and its representatives full access at all reasonable times
to the Assets and to the Records for inspection and copying at Purchaser’s
expense at Seller’s office in Denver, Colorado. 
To the extent records are kept or maintained by Seller in other
locations, Seller agrees to make same available at such other locations.

 

Section 3.2             On-Site Tests
and Inspections.

 

Seller
shall permit or, in case of any third-party operated wells, use its
commercially reasonable efforts to cause the operator thereof to permit,
Purchaser’s authorized representatives to consult with Seller’s or third-party
operator’s agents and employees during reasonable business hours and to
conduct, at Purchaser’s sole risk and expense, on-site inspections, tests and
inventories of the Assets.  Purchasers
environmental investigation of the Properties shall be limited to conducting a
Phase I Environmental Site Assessment in accordance with the American Society
for Testing and Materials (A.S.T.M.) Standard Practice Environmental Site
Assessments: Phase I Environmental Site Assessment Process (Publication
Designation: E1527-05) (“Site Assessment”), and at Seller’s discretion, shall
be accompanied by Seller’s representative. If this agreement is terminated for
any reason, Purchaser shall furnish Seller, free of cost to Seller, a copy of
any written report prepared by or for Purchaser related to any Site Assessment
of the Properties as soon as reasonably possible.  All environmental reports prepared by or for
Purchaser shall be maintained in strict confidence by Purchaser and

 

7

 

shall be
used by Purchaser solely in connection with the evaluation of the Properties or
in any dispute with Seller involving the Properties.  Except as provided in the preceding sentence,
if Closing does not occur, such reports shall not be disclosed to any other
party.  If Closing does not occur, the
foregoing obligation of confidentiality shall survive for five (5) years
after the termination of this Agreement.

 

Section 3.3            Title Matters.

 

(a)           For the sole
purpose of determining the existence of Title Defects prior to the Closing,
Seller warrants that it owns Defensible Title (as defined in Section 3.3(b))
to the Leases except to the extent affected by the litigation described on
Schedule C.

 

(b)           As used herein,
the term “Defensible Title” to the Assets shall mean such title of Seller
that,:

 

(i)            is deducible of record either from the records of the
applicable county or parish clerk and recorder or, in the case of federal
leases, from the records of the applicable office of the Bureau of Land
Management, or in the case of state leases, from the records of the applicable
state land office, or from some combination of the foregoing official records;

 

(ii)           entitles Seller to receive not less than the net revenue
interest (indicated by the letters “NRI”) of Seller set forth in Schedule B of
all oil, gas and associated liquid and gaseous hydrocarbons produced, saved and
marketed from the Leases throughout the life of such properties;

 

(iii)          obligates Seller to bear costs and expenses relating to the
maintenance, development and operation of the Leases in an amount not greater
than the working interest (indicated by the letters “WI”) set forth in Schedule
B throughout the life of such properties except to the extent such increase in
working interest is accompanied by a proportionate increase in net revenue
interest; and

 

(iv)          is free and clear of encumbrances, liens and defects other
than the Permitted Encumbrances.

 

(c)           The term “Permitted
Encumbrances”, as used herein, shall mean:

 

(1)           lessors’ royalties, overriding royalties, and division
orders and sales contracts covering oil, gas or associated liquid or gaseous
hydrocarbons, reversionary interests and similar burdens if and to the extent
the net cumulative effect of such burdens does not operate to reduce the net
revenue interest at any time in any property to less than the net revenue
interest set forth in Schedule B:

 

8

 

(2)   preferential
rights to purchase and required third-party consents to assignments and similar
agreements with respect to which prior to Closing;

 

(i)            waivers or consents are obtained from the appropriate
parties, or

 

(ii)           the appropriate time period for asserting such rights has
expired without an exercise of such rights;

 

(3)           liens for taxes
or assessments not yet due or not yet delinquent or, if delinquent, that are
not material and are being contested in good faith in the normal course of business;

 

(4)           all rights to
approve, required notices to, filings with, or other actions by governmental or
tribal entities in connection with the sale or conveyance of the Assets if the
same are customarily obtained subsequent to such sale or conveyance;

 

(5)           rights of
reassignment, to the extent any exist as of the date of this Agreement, upon
the surrender or expiration of any lease;

 

(6)           easements,
rights-of-way, servitudes, permits, surface leases and other rights in respect
of surface operations, pipelines, or the like; conditions, covenants or other
restrictions; and easements for pipelines, railways and other easements and
rights-of-way, on, over or in respect of any of the Assets which individually,
or in the aggregate, do not materially adversely affect the ownership,
operation, value or use of the Assets, or any of them;

 

(7)           all other
liens, charges, encumbrances, contracts, agreements, instruments, obligations,
defects and irregularities affecting the Assets (including, without limitation,
liens of operators relating to obligations not yet due or pursuant to which
Seller is not in default) that do not reduce the net revenue interest set forth
in Schedule B, or do not prevent the receipt of proceeds of production
therefrom, or do not increase the share of costs above the working interest set
forth in Schedule B, or that do not materially interfere with or detract from
the operation, value or use of any of the properties included within the
Assets;

 

(8)           liens, if any,
to be released at Closing in a form acceptable to Purchaser;

 

9

 

(9)           the terms and
conditions of all Leases, agreements, orders, pooling or unitization agreements
or declarations included in the Assets or to which the Assets are subject as long
as same do not reduce the net revenue interests for the Assets listed in
Schedule B or do not increase the working interests for the interests set forth
in Schedule B; and

 

(10)         rights reserved
to or vested in any municipality or governmental, statutory or public authority
to control or regulate any of the Assets in any manner, and all applicable
laws, rules and orders of governmental authority; and

 

(11)         Materialmen’s,
mechanics’, repairmen’s, employees’, contractors’, operators’ or other similar
liens or charges arising in the ordinary course of business incidental to
construction, maintenance or operation of the Assets

 

(i)            if they have not been filed pursuant to law,

 

(ii)           if filed, they have not yet become due and payable or
payment is being withheld as provided by law and Seller either indemnifies
Purchaser or agrees to reduce the Preliminary Purchase Price for the amount
claimed, or

 

(iii)          if their validity is being contested in good faith by
appropriate action provided that Seller either indemnifies Purchaser or agrees
to reduce the Preliminary Purchase Price for the amount claimed.

 

(d)           The term “Title
Defect” as used herein shall mean any encumbrance, encroachment, irregularity,
defect in or objection to Seller’s title to the Leases and Wells (excluding
Permitted Encumbrances) which would result in Seller not having Defensible
Title.

 

Section 3.4            Title
Adjustments.

 

(a)           “Defective Interest(s)” shall mean that portion of the Assets (as
determined in accordance with Section 3.4(c)) as to which the warranty
stated in Section 3.3(a) is breached or that Purchaser is otherwise
entitled under Sections 3.5 or 3.6 to treat as a Defective Interest, and of
which Seller has been given written notice by Purchaser not later than five (5) Business
Days before Closing or any later date specified in Section 3.6 for
Defective Interests described in that Section (“Defective Interest Notice
Date”).  Such written notice shall
include

 

(i)            a description of the Defective Interest,

 

10

 

(ii)           the basis for the defect that Purchaser believes causes
such Asset to be a Defective Interest,

 

(iii)          the Allocated Value of the affected Asset calculated in
accordance with Section 3.4(c), and

 

(iv)          the amount by which Purchaser believes the Allocated Value
of the affected Asset has been reduced by the Defective Interest;

 

provided however, that any Title Defect (or individual Title Benefit,
as defined in Section 3.8) for which the Title Adjustment, as determined
in Section 3.4(c), below, is less than twenty-five thousand dollars
($25,000) shall not be a Defective Interest or Title Benefit.  For purposes of determining Title Adjustments
pursuant to this Agreement, and without waiver of Purchaser’s rights under the
conveyances of the Assets to be delivered at Closing, Purchaser shall be deemed
to have waived all Title Defects of which Seller has not been given written
notice by the Defective Interest Notice Date. 
Prior to Closing, Seller shall have the option, but not the obligation,
to cure any Title Defect or other breach of title warranty for which timely
notice is given.  If Purchaser desires to
attempt to cure any Title Defect, Seller shall cooperate with Purchaser, prior
to the Closing Date, in endeavoring to cure any such Title Defect.

 

(b)           Defective
Interests and Title Benefits shall be conveyed to Purchaser hereunder, and the
Preliminary Purchase Price shall be reduced or increased, as the case may be,
in accordance with Section 2.4 by an amount determined in accordance with Section 3.4(c) for
such Defective Interests and Title Benefits (which net reduction or increase,
as applicable, shall be called a “Title Adjustment”) but only to the extent
that the total amount of all Title Adjustments exceeds one percent (1%) of the
Preliminary Purchase Price, unless prior to the Closing, the basis for treating
such Assets as Defective Interests has been removed in a manner satisfactory to
Purchaser.  For avoidance of doubt,
Seller and Purchaser agree that the foregoing threshold is a deductible.  If Seller and Purchaser cannot agree to the
amount of a Title Adjustment for a specified Title Defect or Title Benefit, all
information relating to the Defective Interest or Title Benefit shall be
submitted to a title attorney chosen by mutual agreement of the parties, who
shall have a minimum of ten (10) years experience in examining oil and gas
titles, who shall, in good faith, determine the Title Adjustment.

 

(c)           The value of
each of the Leases and Wells for purposes of determining Purchase Price adjustments
under this Section 3.4 (the “Allocated Value”) shall be determined in
accordance with Schedule B which Schedule shall be mutually agreed upon by the
parties.  The amount of the Title
Adjustment for a Defective Interest or Title Benefit shall be the Allocated
Value thereof if the Defective Interest or Title Benefit constitutes the entire
property given an Allocated Value.  If
the amount of a Title Adjustment cannot be determined directly because the
Defective Interests or Title Benefit constitute a property or interest included
within, but not totally comprising, the Assets to which an Allocated

 

11

 

Value is given, Purchaser and Seller shall proportionately reduce the
Allocated Value to reflect the present or potential impact of the Title Defect
or Title Benefit.  The amount of any
Title Adjustment shall reflect the anticipated reduction or increase of the
Allocated Value for the affected property caused by the breach of title
warranty or Title Benefit, taking into account the method for arriving at such
Allocated Value, the legal and practical effect of the Title Defect or Title
Benefit or other breach, the probability of adverse impact of the Title Defect
or breach of title warranty on the use and enjoyment of the property interest
affected, and the potential economic effect of the Title Defect or breach of
title warranty or Title Benefit over the life of the property involved;
provided, however that if the Title Defect is an actual reduction in net revenue
interest, , then the amount of the Title Adjustment shall be the product of the
Allocated Value of the Defective Interest multiplied by a fraction, the
numerator of which is the actual net revenue interest or ownership and the
denominator of which is the net revenue interest or percentage ownership stated
on Schedule B.

 

(d)           Notwithstanding any claimed Title Defect, Purchaser shall
have the right at any time up to the Closing Date to waive any such claim, and
purchase the affected property without reduction of the Purchase Price.

 

Section 3.5             Casualty Loss.

 

If,
prior to the Closing, any portion of the Wells or related equipment is
destroyed or impaired by fire or other casualty, Purchaser may elect:

 

(a)           to treat the Assets so affected by
such destruction as Defective Interests in accordance with Section 3.4,
provided however that neither the twenty-five thousand dollar threshold in Section 3.4(a) nor
the 1% of Purchase Price deductible in Section 3.4(b) will be
applicable to the exclusion of such Assets and the Preliminary Purchase Price
will be adjusted downward by the amount of the Allocated Value for such Asset,
or

 

(b)           to purchase such Assets notwithstanding any such
destruction (without adjustment to the Preliminary Purchase Price therefor), in
which case, Seller shall, at the Closing, pay to Purchaser all sums paid to
Seller by third-parties (including insurance proceeds relating thereto) and
assign to Purchaser all sums to which Seller is entitled, as the case may be,
by reason of the destruction of such Wells and the underlying Assets to be
assigned to Purchaser and shall assign, transfer and set over unto Purchaser
all of the right, title and interest of Seller in and to any unpaid awards or
other payments from third-parties arising out of the destruction of such Wells
and the Assets to be assigned to Purchaser.

 

Prior
to the Closing, Seller shall not voluntarily compromise, settle or adjust any
amounts payable by reason of any destruction of such Wells and the underlying
Assets without first obtaining the written consent of Purchaser.

 

12

 

Section 3.6             Identification
of Additional Defective Interests.

 

(a)           Seller has listed
all preferential rights to purchase the Assets on Schedule 3.6.   Seller shall promptly prepare and send (i) notices
to the holders of any required consents to assignment of any Assets requesting
such holder’s consent to assign such Assets to Purchaser and (ii) notices
to the holders of any applicable preferential rights to purchase any Asset
requesting waivers of such preferential rights to purchase; provided, however,
that Purchaser shall have the opportunity to review such notices before they
are sent.   The consideration payable
under this Agreement for any particular Assets for purposes of preferential
purchase right notices shall be the Allocated Value for such Assets. Seller
shall use commercially reasonable efforts to cause such consents and waivers of
preferential rights to purchase (or the exercise thereof) to be obtained and delivered
prior to Closing. Purchaser shall cooperate with Seller in seeking to obtain
such consents and waivers of preferential rights.

 

(b)           If
any preferential purchase right is exercised prior to or after the Closing,
Purchaser may elect to treat that portion of the Assets affected by such
preferential right as a Defective Interest, subject to the additional
provisions of this paragraph.  If Seller
receives notice of such exercise prior to Closing, Seller shall give Purchaser
notice thereof in accordance with Section 3.4(a) prior to the
Closing, in which event the property affected by such preferential purchase
right shall be treated as a Defective Interest; provided however that neither
the twenty-five thousand dollar threshold in Section 3.4(a) nor the
1% of Purchase Price deductible in Section 3.4(b) will be applicable
to the exclusion of such Assets and the Preliminary Purchase Price will be
adjusted downward by the amount of the Allocated Value for such Asset.  If Seller or Purchaser receive notice of such
exercise after the Closing, the party receiving such notice shall promptly give
notice to the other party, and Purchaser shall convey the affected property
interest to the holder of the preferential purchase right upon receipt of the
Allocated Value attributable thereto from such party.

 

(c)           If, prior to the Closing Date, Purchaser or Seller become
aware of any suit, action or other proceeding before any court or government
agency other than those listed in Schedule C that would result in loss or
impairment of Seller’s title to any portion of the Assets, or a portion of the
value thereof, Purchaser may elect to treat that portion of the Assets affected
thereby as a Defective Interest by giving Seller notice thereof in accordance
with Section 3.4(a) no later than the Closing Date, in which event
the procedures specified in Section 3.4 shall apply to the property
affected by such proceeding; provided however that neither the twenty-five
thousand dollar threshold in Section 3.4(a) nor the 1% of Purchase
Price deductible in Section 3.4(b) will be applicable to the
exclusion of such Assets and the Preliminary Purchase Price will be adjusted
downward by the amount of the Allocated Value for such Asset.

 

(d)           If with respect to any preferential purchase rights and
required third-party consents to assignment and similar agreements, one or more
of the conditions set forth in Section 3.3(c)(2) has not been met
prior to the Closing, Purchaser may elect to treat that

 

13

 

portion of the Assets affected thereby as a Defective Interest by
giving Seller notice thereof in accordance with Section 3.4(a) no
later than the Closing Date, in which event the procedures specified in Section 3.4
shall apply to the property affected by such third-party right; provided
however that neither the twenty-five thousand dollar threshold in Section 3.4(a) nor
the 1% of Purchase Price deductible in Section 3.4(b) will be
applicable to the exclusion of such Assets and the Preliminary Purchase Price
will be adjusted downward by the amount of the Allocated Value for such Asset.

 

Section 3.7             Termination Due
to Title Matters and Conditions.

 

If,
prior to Closing, the aggregate amount of the value of (a) all Title
Adjustments asserted in good faith under this Article III and (b) all
adjustments for Conditions pursuant to Section 13.2(b)(i), equals or
exceeds twenty percent (20%) of the Preliminary Purchase Price, then either
party, at its option exercised by the giving of written notice to the other
party not later than the Closing, may elect to terminate this Agreement, in
which event Seller and Purchaser shall be under no obligation to each other
with regard to the purchase and sale of any of the Assets, such termination to
be without liability to either party. 
Failure of either party to give timely notice to the other party of an
election to terminate this Agreement pursuant to this Section 3.7 shall be
deemed an election not to terminate this Agreement.

 

Section 3.8            Title Benefits.

 

(a)           If a Party discovers any Title
Benefit affecting the Assets, it shall promptly notify the other Party in
writing thereof on or before the expiration of the Defective Interest Notice
Date.   Subject to Section 3.4(a) and
3.4(b), Seller shall be entitled to an upward adjustment to the Purchase Price
pursuant to Section 2.4(a)(vi) with respect to all Title Benefits, in
an amount determined in accordance with Section 3.4(c).  For purposes of this Agreement, the term “Title
Benefit” shall mean Seller’s Net Revenue Interest in any Asset is greater than
that set forth in Schedule B or Seller’s Working Interest in any Asset less
than that set forth in Schedule B (without a corresponding decrease in the Net
Revenue Interest) subject to the restriction of Section 3.4(a). Any matters
that may otherwise constitute Title Benefits, but of which neither party has
been specifically notified in accordance with the foregoing, shall be deemed to
have been waived by Seller for all purposes.

 

(b)           Subject to Section 3.4(a) and
3.4(b), the aggregate amount of undisputed Title Benefits shall be netted
against the aggregate amount of undisputed Defective Interests prior to any
adjustment of the Purchase Price at Closing pursuant to Section 2.4.

 

(c)           If
with respect to a Title Benefit the Parties have not agreed on the amount of
the upward Purchase Price adjustment or have not otherwise agreed on such
amount prior to the Closing Date, Seller or Purchaser shall have the right to
elect to have such Purchase Price adjustment determined pursuant to Section 3.4(b).  If the amount of such adjustment is not
determined pursuant to this Agreement by the Closing, the

 

14

 

undisputed portion of the Purchase Price with
respect to the Asset affected by such Title Benefit shall be paid by Purchaser
at the Closing and, subject to Section 3.4(b), upon determination of the
amount of such adjustment, any unpaid portion thereof shall be paid by
Purchaser to Seller or shall be netted against the aggregate amount of any
disputed Title Adjustments that also are determined after Closing.

 

ARTICLE IV

 

SELLER’S REPRESENTATIONS AND
WARRANTIES

 

As used in this Article IV when referring to
Seller, “Knowledge”
means all information attributed to Seller that is actually known to the following
employees of Seller :  Glen J.
Mizenko, Senior Vice President Business Development & Engineering,
Scott Laverde, Vice President Acquisitions & Divestitures, Leonard
Gurule, Senior Vice President Western Region, Ralph Thomas, Director of Tax,
and Stephen Rawlings, Production Manager Western Region. Seller
represents and warrants to Purchaser as follows:

 

Section 4.1             Organization,
Standing and Power.

 

Forest
Oil Corporation is a corporation duly organized, validly existing and in good
standing under the laws of the state of New York and Forest Oil Permian
Corporation is a corporation duly organized and in good standing under the laws
of the state of Delaware.  Each Seller
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted.   Seller is duly qualified to carry on its
business in each state identified in Schedule A where failure to so qualify
would have a materially adverse effect upon its business or properties in such
state.

 

Section 4.2             Authority and
Enforceability.

 

The
execution and delivery by Seller of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly and validly authorized by all
necessary corporate action, on the part of Seller.  This Agreement is the valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability and to general equity
principles.  Neither the execution and
delivery by Seller of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by Seller with any of the provisions hereof,
will

 

(a)           conflict with or result in a breach of any provision of
Seller’s certificate of incorporation or bylaws,

 

(b)           except with respect to third-party consents or waivers
required in connection with agreements and properties to be assigned pursuant
to this Agreement (it being understood that Seller will make reasonable efforts
to obtain such required consents or waivers) result in a material default (with
due notice or lapse of time or both) or give rise to any right of termination,
cancellation or acceleration under any of the terms,

 

15

 

conditions or provisions of any note, bond, mortgage, indenture,
license or agreement to which Seller is a party or by which Seller or any of
Seller’s properties or assets may be bound or,

 

(c)           violate any order, writ, injunction, judgment, decree,
statute, rule or regulation applicable to any Seller, or any Seller’s
properties or assets, assuming receipt of all routine governmental consents
normally acquired after the consummation of transactions such as transactions
of the nature contemplated by this Agreement,

 

except,
in any of (a)-(c), where any such foregoing effect would not be likely to
affect Purchaser’s ability to own, possess, control or enjoy the Assets.

 

Section 4.3             Claims
Affecting the Assets.

 

Except
as disclosed on Schedule C, to Seller’s Knowledge, there is no suit, action,
claim, investigation or inquiry by any person or entity or by any
administrative agency or governmental body and no legal, administrative or
arbitration proceeding pending, or to Seller’s Knowledge, threatened against or
affecting the Assets.  Except as
disclosed on Schedule C, Seller has not received any notice in writing from any
Governmental Body or any other Person claiming any violation of or noncompliance
with any Law with respect to the Assets (including any such Law concerning the
conservation of natural resources).

 

Section 4.4             Claims
Affecting the Sale.

 

Except
as disclosed on Schedule C, to Seller’s Knowledge there is no suit, action,
claim, investigation or inquiry by any person or entity or by any
administrative agency or governmental body and no legal, administrative or
arbitration proceeding pending, or to Seller’s Knowledge, threatened against
Seller or any Affiliate of Seller which has affected or could affect Seller’s
ability to consummate the transactions contemplated by this Agreement.  In this Agreement, “Affiliate” means any
person or entity which controls, is controlled by or is under common control
with, the subject person or entity.

 

Section 4.5             No Demands.

 

Except
as disclosed on Schedule C, Seller has received no notice of any claimed
defaults, offsets or cancellations from any lessors with respect to the Leases,
and Seller has no Knowledge of the existence of any default existing with
respect to any of the Leases or any express or implied term of any Lease.

 

Section 4.6             Taxes.

 

(a)           To Seller’s
Knowledge all ad valorem, real property, personal property, production,
severance, excise and other taxes applicable to the ownership and operation of
the Assets prior to the Effective Time have been or will be duly and timely
paid except as may be contested by Seller in good faith.

 

16

 

(b)           With respect to
all taxes related to the Assets, (i) all material tax returns relating to
such taxes required to be filed on or before the Effective Time by Seller with
respect to any taxes for any period ending on or before the Effective Time have
been timely filed with the appropriate governmental authority, (ii) to
Seller’s Knowledge such tax returns are true and correct in all respects, and (iii) all
taxes reported on such tax returns have been paid or provided for, except those
being contested in good faith.

 

(c)           With respect to
all taxes related to the Assets (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 such taxes, and (ii) there
are no administrative proceedings or lawsuits pending against the Assets or
Seller with respect to the Assets by any taxing authority.

 

(d)           To Seller’s
Knowledge, none of the Assets were bound as of the Effective Time or will be
bound at Closing by any tax partnership agreement or other agreement binding
upon Seller that would preclude Seller from being entitled to dispose of the
property.

 

(e)           There are no
liens for taxes encumbering any of the Assets.

 

Section 4.7             Leases.

 

To
the Knowledge of Seller:

 

(a)           The Leases have been
maintained according to their terms, in compliance with the agreements to which
the Leases are subject; and

 

(b)           The Leases are presently in
full force and effect; and all other oil and gas leases covering the Lands have
expired and are no longer of any force or effect.

 

Section 4.8            Non-Foreign
Representation.

 

Seller
is not a non-resident alien, foreign corporation, foreign partnership, foreign
trust or foreign estate (as those terms are defined in the “Code” and the
Income Tax Regulations promulgated thereunder (the “Income Tax Regulations”).

 

Section 4.9            Commitments for
Expenditures.

 

Except
as set forth on Schedule E there are no outstanding authorities for
expenditures (AFE’s) which Seller has received from a third party operator, but
has not responded to. Except as set forth on Schedule E, Seller has not
consented to any AFEs that Seller reasonably anticipates will require
expenditures by the owner of the Assets after the Effective Time in excess of
$100,000.00 net to Seller’s interest.

 

Section 4.10          Compliance with Laws.

 

Except
as disclosed on Schedule 4.10, the Assets operated by Seller are, and Seller’s
operation of the same has been and currently is and to Seller’s Knowledge the
non-operated

 

17

 

Assets are and the operation
of the non-operated Assets has been and currently is, in substantial compliance
with the provisions and requirements of all Laws of all Governmental Bodies
having jurisdiction with respect to the Assets.

 

Section 4.11          Material Contracts.

 

(a)           Except as disclosed on Schedule 4.11(a), to Seller’s
Knowledge, Seller has paid its share of all costs payable by it under the
contracts set forth on Schedule A-3, and all such contracts are 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 that, which the passing of time or giving of
notice would create a breach or default) under any of such contracts, and no
breach or default by any third party (or situation that, with the passing of
time or giving of notice would create a breach or default) exists, except such
defaults as would not, individually or in the aggregate have a material adverse
effect.

 

(b)           To Seller’s Knowledge, Schedule A-3 sets forth all
of the following contracts, agreements, and commitments (excluding Leases and
surface contracts) to which any of the Assets will be bound as of the Closing: (i) any
agreement with any Affiliate; (ii) any agreement or contract for the sale,
exchange, or other disposition of Hydrocarbons produced from or attributable to
Seller’s interest in the Assets that is not cancelable without penalty or other
material payment on not more than 30 days prior written notice; (iii) any
agreement of or binding upon Seller to sell, lease, farmout, or otherwise
dispose of any interest in any of the Assets after the date hereof, other than
conventional rights of reassignment arising in connection with Seller’s
surrender or release of any of the Assets; and (iv) any tax partnership
agreement of or binding upon Seller affecting any of the Assets.

 

Section 4.12          Payments for Production and
Imbalances.

 

(a)           Except as set
forth on Schedule 4.12(a), Seller is not obligated under any contract or agreement
for the sale of gas from the Assets containing a take-or-pay, advance payment,
prepayment, or similar provision, or under any gathering, transmission, or any
other contract or agreement with respect to any of the Assets to gather,
deliver, process, or transport any gas without then or thereafter receiving
full payment therefor.

 

(b)           Schedule 4.12(b) sets
forth all of Seller’s Imbalances and penalties as of the Effective Time arising
with respect to the Assets and except as disclosed in Schedule 4.12(b) as
of the Effective Time (i) no Person is entitled to receive any portion of
the Seller’s Hydrocarbons produced from the Assets or to receive cash or other
payments to “balance” any disproportionate allocation of Hydrocarbons produced
from the Assets under any operating agreement, gas balancing or storage
agreement, gas processing or dehydration agreement, gas transportation
agreement, gas purchase agreement, or other agreements, whether similar or
dissimilar, (ii) Seller is not obligated to deliver any quantities of gas
or to pay any penalties or other amounts, in connection with the violation of
any of the terms of any gas contract or other agreement with shippers with

 

18

 

respect
to the Assets, and (iii) Seller is not obligated to pay any penalties or
other payments under any gas transportation or other agreement as a result of
the delivery of quantities of gas from the Wells in excess of the contract
requirements.

 

Section 4.13           Governmental Authorizations.

 

To Seller’s Knowledge, and
except as disclosed on Schedule 4.13, Seller has (i) obtained and is
maintaining all federal, state and local governmental licenses, permits,
franchises, orders, exemptions, variances, waivers, authorizations,
certificates, consents, rights, privileges and applications therefor (the “Governmental
Authorizations”) that are presently necessary or required for the ownership and
operation of the Assets operated by Seller as currently owned and operated and (ii) operated
the Assets operated by Seller in accordance with the conditions and provisions
of such Governmental Authorizations, except, in each of (i) and (ii) above,
to the extent that such failure does not have a material affect on the Assets
or the operation of the same.

 

Section 4.14           Payout Balances.

 

To Seller’s Knowledge,
Schedule 4.14 contains a complete and accurate list of the status of any “payout”
balance, as of the Effective Time, for the Wells and Units subject to a
reversion or other adjustment at some level of cost recovery or payout (or
passage of time or other event other than termination of a Lease by its terms).

 

Section 4.15           Bankruptcy.

 

To Seller’s Knowledge, there
are no bankruptcy, reorganization, or similar arrangement proceedings pending,
being contemplated by or, to Seller’s Knowledge, threatened against Seller or
any Affiliate.

 

Section 4.16           Brokerage Fees.

 

Purchaser shall not directly
or indirectly have any responsibility, liability or expense, as a result of
undertakings or agreements of Seller, for brokerage fees, finder’s fees, agent’s
commissions or other similar forms of compensation in connection with this
Agreement or any agreement or transaction contemplated hereby.

 

ARTICLE V

 

PURCHASER’S REPRESENTATIONS
AND WARRANTIES

 

Section 5.1             Organization, Standing and Power.

 

Linn Energy Holdings, LLC is a Delaware limited liability company duly
organized, validly existing and in good standing under the laws of the state of
its formation and Linn Operating, Inc. is a Delaware corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation and each has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.

 

19

 

Purchaser
is duly qualified to carry on its business in each state identified in Schedule
A where the failure to so qualify would have a materially adverse effect on
Purchaser’s business or properties in such state.

 

Section 5.2            Authority and Enforceability.

 

The execution and delivery by Purchaser of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly and
validly authorized by all necessary corporate action on the part of
Purchaser.  This Agreement is the valid
and binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
and to general equity principles. 
Neither the execution and delivery by Purchaser of this Agreement nor
the consummation of the transactions contemplated hereby, nor compliance by
Purchaser with any of the provisions hereof, will

 

(a)           conflict with or result in a
breach of any provision of its certificate of incorporation, formation or
bylaws (as applicable),

 

(b)           result in a material default
(with due notice or lapse of time or both) or give rise to any right of
termination, cancellation or acceleration under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license or agreement to
which Purchaser is a party or by which it or any of its properties or assets
may be bound or

 

(c)           violate any order, writ,
injunction, judgment, decree, statute, rule or regulation applicable to
Purchaser, or any of its properties or assets, assuming receipt of all routine
governmental consents normally acquired after the consummation of transactions
such as transactions of the nature contemplated by this Agreement.

 

Section 5.3            Independent Evaluation.

 

Purchaser is knowledgeable and experienced in the
evaluation, acquisition and operation of oil and gas properties.  Except as set forth in this Agreement,
Purchaser acknowledges that Seller has made no representations or warranties as
to the accuracy or completeness of such information, and, in entering into and
performing this Agreement, Purchaser has relied and will rely solely upon its
independent investigation of, and upon its own knowledge and experience and
that of its advisors’ with respect to, the Assets and their value.

 

Section 5.4            Suits Affecting the Sale.

 

There is no suit, action, claim, investigation or
inquiry by any person or entity or by any administrative agency or governmental
body and no legal, administrative or arbitration proceeding pending or, to
Purchaser’s knowledge, threatened against Purchaser or any Affiliate of
Purchaser which has affected or could materially affect Purchaser’s ability to
consummate the transactions contemplated by this Agreement.

 

20

 

Section 5.5            Eligibility.

 

The Purchaser is eligible under all applicable laws and regulations to
own the Assets, including, without limitation, the Leases.

 

Section 5.6            Financing.

 

Purchaser has the financial ability to purchase the Assets, and Closing
of the transaction is not contingent upon obtaining financing.

 

ARTICLE VI

 

ASSUMPTION OF OBLIGATIONS
AND INDEMNIFICATION

 

Section 6.1            Assumption and Retention of
Certain Liabilities and Obligations by Purchaser and Seller.

 

(a)           If the Closing occurs, (a) Purchaser assumes all obligations that are
attributable to the Assets on or after the Effective Time including, but not
limited to, any obligation for make-up gas according to the terms and conditions
of the applicable gas contracts, and all obligations to properly plug and
abandon all wells, pipelines and other facilities now or thereafter located on
the Leases (regardless of whether any such obligation to plug and abandon is
attributable to periods of time prior to or after the Effective Time) and
restore the surface of the Leases in accordance with applicable lease or other
agreements and governmental (including environmental) laws, orders and
regulations, and (b) Purchaser agrees to execute and deliver any specific
assumption agreements, bonds, or other financial assurances, if any, required
to effectuate the assumption of such obligations.

 

(b)           Notwithstanding anything to
the contrary in this Agreement, Seller will retain any liabilities of Seller or any of its Affiliates
with regard to the Seller Plans (as defined in Section 14.4(c) or
otherwise relating to any present or former employees of Seller or any of its
Affiliates (“Seller Employee Liabilities”).

 

Section 6.2            Indemnification by Purchaser.

 

If the Closing occurs Purchaser agrees to release,
indemnify, defend and hold harmless Seller, its agents and representatives from
and against any and all suits, judgments, damages, claims, liabilities, losses,
costs and expenses (including court costs and reasonable attorney’s fees)

 

(a)           that are attributable to the
use, ownership and operation of the Assets arising and attributable to periods
of time after the Effective Time (but including, the obligation to properly
plug and abandon all wells now or hereafter located on the Leases), regardless
of whether Seller, its agents and representatives were wholly or partially
negligent or otherwise at fault,

 

21

 

(b)           that arise out of any breach
by Purchaser of any representation, warranty, covenant or agreement hereunder.

 

Section 6.3            Indemnification by Seller.

 

If the Closing occurs, Seller agrees, for a period
of one (1) year, two (2) years in the case of the special warranty of
title described in Section 6.4(a), below, after the Effective Time, to
release, indemnify, defend and hold harmless Purchaser from and against any and
all suits, judgments, damages, claims, liabilities, losses, costs and expenses
(including, without limitation, court costs and reasonable attorneys’ fees)

 

(a)           that are attributable to
use, ownership or operation of the Assets attributable to periods of time prior
to the Effective Time (other than relating to the obligation to properly plug
and abandon wells located on the Leases) regardless of whether Purchaser was
wholly or partially negligent or otherwise at fault, or

 

(b)           that arise out of any breach
by Seller of any covenant, agreement, representation, or warranty, hereunder,
including the special warranty of title contained in the conveyances to be
delivered at closing,

 

(c)           that are attributable to
claims by third parties for damages caused by or arising out of the escape of
salt water prior to the Closing Date from the lands described on Schedule G,
attached hereto, (the “Schedule G Lands”) or that are attributable to claims by
the following former surface owners of said lands, Robert Milton O’Daniel,
Cindy O’Daniel, and Lorin Patrick O’Daniel;

 

provided,
however, that such indemnity, defense and hold harmless obligations shall not apply
to (A) any amount that was taken into account as an adjustment to the
Purchase Price pursuant to the provisions hereof, (B) any liability of
Purchaser to Seller under the provisions of this Agreement, and (C) any
amount in excess of twenty-five percent (25%) of the Purchase Price; and
provided further, that if Purchaser (i) provides Seller with a plan (the “Mitigation
Plan”) for mitigating the flow of water off of the Schedule G Lands by
installing a water recovery system (the “Mitigation System”), (ii) implements
the Mitigation Plan on or before March 31, 2010 (provided, however, that
such date will be extended in the event of a force majeure or other delay
caused by a third-party or governmental authority), (iii) maintains the
Mitigation System as a prudent operator would, (iv) provides Seller with
the opportunity to inspect the Mitigation System twice per year, once the
Mitigation System is installed, (v) upon request (but no more frequently
than once per year) provides the Seller with an annual report describing the
amount of water that has been collected by the Mitigation System, and
estimating the volume of water, if any, that has not been collected by the
Mitigation System, and (vi) has not caused the release of water from the
Schedule G Lands through Purchaser’s gross negligence or willful misconduct,
then the indemnity provided in Section 6.3(c), above, shall be extended
for so long as the foregoing described conditions are met by Purchaser, in no
event however to exceed six (6) years after the Closing Date.  As used herein, force majeure shall mean acts
of God; strikes, lockouts, or other industrial disturbances; acts of a public
enemy; wars; blockades; insurrections; riots; epidemics; landslides; lightning;
earthquakes; fires; storms (including but not limited to

 

22

 

hurricanes
or hurricane warnings); floods; washouts; arrests and restraints of the
government, either federal or state, civil or military; civil disturbances;
shutdowns for purposes of necessary repairs; relocation, or construction of
facilities; breakage or accident to machinery or lines of pipe; the necessity
for testing accidents; breakdowns and any other causes, whether of the kind
enumerated or otherwise, which are not reasonably in the control of the party
claiming suspension. It is understood and agreed that the settlement of strikes
or lockouts shall be entirely within the discretion of the party having the
difficulty and that the above requirement that any force majeure shall be
remedied with all reasonable dispatch shall not require the settlement of
strikes or lockouts by acceding to the demands of an opposing party when such
course is inadvisable in the discretion of the party having the difficulty.

 

Section 6.4            Interpretation.

 

The provisions of each of the foregoing Sections 6.2 and 6.3 shall be
interpreted as follows:

 

(a)           The indemnity provided for
by each of such Sections shall extend to any loss, cost, expense, liability or
damage (“Loss”) incurred or suffered by the indemnified party, including
reasonable fees and expenses of attorneys, technical experts and expert
witnesses reasonably incident to matters indemnified against.  The indemnity provided for in Section 6.3
with respect to a breach or failure of a special warranty of title of any
interest contained in the conveyance shall be for a period of two (2) years
following the Effective Time and shall be reduced by the value of production
from the interest actually received by Purchaser (to the extent such production
received is not subject to any repayment or offset), net of expenses incurred
for the interest by the Purchaser, for which a special warranty of title was
breached or failed, but only in proportion to and to the extent of such breach
or failure.  After the Defective Interest
Notice Date (prior to which the adjustment provisions of Section 3.4 also
shall be in effect) and subject to the provisions of Section 3.6, the
indemnity provided for herein shall be the sole and exclusive remedy, as
between the parties hereto, for a breach or failure of a warranty or
representation of title.  The adjustment
provisions for breaches of title representations and warranties as set forth in
Section 3.4 are applicable only as to breaches of title representations
and warranties for which notice has been given on or prior to the Defective
Interest Notice Date subject to the provisions of Section 3.6.  Subject to Section 3.6 and this Article 6,
after the Defective Interest Notice Date, the exclusive applicable
representations and warranties of title shall be the special warranty of title
by, through and under Seller, contained in the conveyances delivered pursuant
hereto, and not otherwise.

 

(b)           The amount of each payment
claimed by an indemnified party to be owing as described in each of such
Sections, together with a list identifying to the extent reasonably possible
each separate item of Loss for which payment is so claimed, shall be set forth
by such party in a statement delivered to the indemnifying party or parties, as
the case may be, setting forth the basis of such claim and shall be paid by
such indemnifying party or parties, as the case may be, as and to the extent
required herein with thirty (30) days after receipt of such statement.

 

23

 

(c)           Except each party’s
obligations in Section 3.5, Section 6.1(b), Section 8.2, Section 8.3,
Section 13.2(b)(iii), Article X, or Article XIV of this
Agreement, and as may be permitted under the conveyances delivered hereunder,
the remedies set forth in this Article VI shall be the sole and exclusive
remedies of Seller and Purchaser for any breach of a covenant, agreement,
representation or warranty, other than the special warranty of title to be
included on any conveyance delivered to Purchaser at Closing.

 

Section 6.5            Notices.

 

(a)           Within sixty (60) days after
notification to an indemnified party with respect to any claim or legal action
or other matter that may or could result in a Loss for which indemnification
may be sought under Article VI, but in any event in time sufficient for
the indemnifying party to contest any action, claim or proceeding that has
become the subject of proceedings before any court or tribunal, such
indemnified party shall give written notice of such claim, legal action or
other matter to the indemnifying party and, at the request of such indemnifying
party, shall furnish the indemnifying party or its counsel with copies of all
pleadings and other information with respect to such claim, legal action or
other matter and shall, at the election of the indemnifying party made within
sixty (60) days after receipt of such notice, permit the indemnifying party to
assume control of such claim, legal action or other matter (to the extent only
that such claim, legal action or other matter relates to a Loss for which the
indemnifying party is liable), including the determination of all appropriate
actions, the negotiation of settlements on behalf of the indemnified party, and
the conduct, of litigation, through attorneys of the indemnifying party’s
choice.  In the event of such an election
by the indemnifying party,

 

(i)    any expense incurred by the indemnified party
thereafter for investigation or defense of the matter shall be borne by the
indemnifying party, and

 

(ii)   the indemnified
party shall give all reasonable information and assistance, other than
pecuniary, that the indemnifying party shall deem reasonably necessary to the
proper defense of such claim, legal action, or other matter.

 

In the absence of such an election, the indemnified party will use its
commercially reasonable efforts to defend any claim, legal action or other
matter to which such other party’s indemnifications under this Article VI
applies.

 

(b)           Failure to provide timely
notice pursuant to subsection (a) of this Section 6.5 shall not
deprive the party seeking indemnification of its right to indemnifications
pursuant to this Article VI, although such party shall be liable for any
damages occasioned by its delay in affording the party entitled to notice with
such notice and shall not be entitled to indemnifications for any costs
incurred during the period of such delay that

 

24

 

could reasonably have been avoided by the indemnifying party if timely
notice had been given.

 

Section 6.6             Tax Treatment of
Indemnification Amounts.

 

Seller
and Purchaser agree that any amounts recoverable by any party pursuant to this Article VI
shall be treated as adjustments to the Purchase Price for all tax purposes.

 

ARTICLE VII

 

SELLER’S OBLIGATIONS PRIOR
TO CLOSING

 

Section 7.1             Restrictions on Operations.

 

(a)            From the date hereof until the end of the Transition Period (as defined in
Section 14.1), Seller shall (or, with respect to non-operated Wells, shall
use its commercially reasonable efforts to cause the operator of all Wells in
which it owns working interests to):

 

(i)            not abandon any Well on any
Lease capable of commercial production, or release or abandon all or any part
of the Assets capable of commercial production, or release or abandon all or
any portion of the Leases without Purchaser’s written consent;

 

(ii)           not cause the Assets to be
developed, maintained or operated in a manner materially inconsistent with
prior operation;

 

(iii)          not commence or agree to
participate in any operation on the Assets anticipated to cost in excess of one
hundred thousand and NO/100 Dollars ($100,000.00) per operation net to Seller’s
interest without Purchaser’s written consent (except emergency operations,
operations required under presently existing contractual obligations, and
operations undertaken to avoid any penalty provision of any applicable
agreement or order);

 

(iv)          not create any lien,
security interest or other encumbrance with respect to the Assets (except for
Permitted Encumbrances), or, without Purchaser’s written consent, enter into
any agreement for the sale, disposition or encumbrance of any of the Assets, or
dedicate, sell, encumber or dispose of any oil and gas production, except in
the ordinary course of business on a contract which is terminable on not more
than thirty (30) days notice except production sold under a contract listed on
Schedule A-3;

 

(v)           not agree to any alterations
in the contracts included in or relating to a material portion of the Assets or
enter into any material new contracts relating to the Assets (other then
contracts terminable on not more than thirty (30) days notice) without
Purchaser’s written consent;

 

25

 

(vi)          maintain in force all
insurance policies covering the Assets;

 

(vii)         maintain the Leases in full
force and effect and comply with all express or implied covenants contained
therein (provided that this covenant shall not be deemed to expand Seller’s
title warranties beyond those expressly contained in this Agreement);

 

(viii)        furnish Purchaser with
copies of all AFE’s in excess of one hundred thousand dollars ($100,000.00)
received or issued by Seller prior to the Closing.

 

(b)           From and after the date of this Agreement until the
end of the Transition Period, Seller shall:

 

(i)            provide Purchaser with
access (or, where Seller is not an operator, use its commercially reasonable
efforts to arrange for access) to the Assets for inspection thereof at the sole
cost, risk and expense of Purchaser;

 

(ii)           use reasonable efforts to
obtain any and all necessary consents, waivers (including waiver of
preferential purchase rights), permissions and approvals of third parties or
governmental authorities in connection with the sale and transfer of the Assets
other than approvals of federal lease assignments to Purchaser;

 

(iii)          cause to be filed all
reports required to be filed by Seller with governmental authorities relating
to the Assets;

 

(iv)          provide prompt notice to
Purchaser of any notice received by Seller of a default, claim, obligation or
suit which affects any of the Assets; and

 

(v)           notify Purchaser of any
event, condition, or occurrence which results in any of the representations and
warranties made herein to be untrue.

 

Section 7.2             Seller’s
Operations

 

From the date hereof until the end of the Transition Period, Seller
will (i) continue the routine operation of the Assets operated by Seller
in the ordinary course of business; and (ii) operate the Assets operated
by Seller in material compliance with all applicable laws and in material
compliance with all Leases and contracts described in Schedule A-3.

 

Section 7.3             Operated Assets

 

Seller
makes no representations or warranties to Purchaser as to transferability or
assignability of operatorship of any Assets operated by Seller.  Rights and obligations associated with
operatorship of such Assets are governed by operating and similar agreements

 

26

 

covering the Assets and will
be decided in accordance with the terms of such agreements. However, Seller
will assist Purchaser in its efforts to succeed Seller as operator of any Wells
included in the Assets.  For all assets
operated by Seller, Seller shall execute and deliver to Purchaser and Purchaser
shall promptly file the appropriate forms with the applicable regulatory agency
transferring operatorship of such Assets to Linn Operating, Inc., to the
extent permitted or approved pursuant to the applicable operating agreement.

 

Section 7.4            Contract Operating, Marketing and
Financial Services Agreement

 

Seller
agrees to provide Purchaser those services listed in the Transition Services
Agreement (“TSA”), which shall be substantially in the form attached hereto as Exhibit D,
for the term as set forth in the TSA.

 

ARTICLE VIII

 

ADDITIONAL AGREEMENTS OF THE PARTIES

 

Section 8.1            Government Reviews and
Filings.

 

Both
prior to and after the Closing, as appropriate, each of Seller and the
Purchaser shall in a timely manner

 

(a)           make required
filings with, prepare applications to and conduct negotiations with each
governmental agency as to which such filings, applications or negotiations are
necessary or appropriate for the consummation of the transactions contemplated
hereby, and

 

(b)           provide such information as
each may reasonably request to make such filings, prepare such applications and
conduct such negotiations.

 

Seller
shall cooperate with and assist Purchaser in pursuing such filings,
applications and negotiations, and Purchaser shall cooperate with and assist
Seller with respect to such filings, applications and negotiations.  Each party shall be responsible for and shall
make any governmental filings occasioned by the ownership or structure of such
party.

 

Section 8.2            Confidentiality.

 

Until completion of the Closing (and without limitation in the event
Closing should not occur for any reason), except as required by law, Purchaser
and its officers, agents and representatives shall continue to be bound by the Confidentiality
Agreement between the parties dated July 20, 2009.

 

Section 8.3            Taxes.

 

(a)           Each party shall provide the
other party with reasonable information which may be required by the other
party for the purpose of preparing tax returns and responding to any audit by
any taxing jurisdiction.  Each party
shall cooperate with all reasonable requests of the other party made in
connection with contesting the imposition

 

27

 

of taxes.  Notwithstanding anything
to the contrary in this Agreement neither party shall be required at any time
to disclose to the other party any tax returns or other confidential tax
information.

 

(b)           Seller and Purchaser shall
report the information required by Section 1060 of the Code, (or any
corresponding state or local income tax statute), on all tax returns including,
but not limited to, Internal Revenue Service Form 8594, in a manner
consistent with

 

(i)            the allocations set forth on
Schedule 2.3(b), as adjusted pursuant to this Agreement and

 

(ii)           the requirements of such Section 1060.

 

If, contrary to the intent of the parties hereto as expressed in this Section 8.3(b),
any taxing authority makes or proposes an allocation different from the
allocation determined under this Section 8.3(b), Purchaser and Seller
shall cooperate with each other in good faith to contest such taxing authority’s
allocation (or proposed allocation), provided, however, that, after
consultation with the party adversely affected by such allocation (or proposed
allocation), the other party hereto may file such protective claims or tax
returns as may be reasonably required to protect its interests.

 

(c)           All ad valorem taxes, real
property taxes, personal property taxes and similar obligations (“Property Taxes”)
attributable to the Assets with respect to the tax period in which the
Effective Time occurs shall be apportioned as of the Effective Time between
Seller and Purchaser based on the number of days in such period which fall on
each side of the Effective Time (with the day on which the Effective Time falls
being counted in the period after the Effective Time).  The owner of record on the assessment date
shall file or cause to be filed all required reports and returns incident to
the Property Taxes and shall pay or cause to be paid to the taxing authorities
all Property Taxes relating to the tax period on which the Effective Time
occurs.  If Seller is the owner of record
on the assessment date, then Purchaser shall pay to Seller Purchaser’s pro rata
portion of Property Taxes within 30 days after receipt of Seller’s invoice
therefor, except to the extent taken into account as an adjustment to the
Purchase Price pursuant to Section 2.4. 
If Purchaser is the owner of record as of the assessment date then
Seller shall pay to Purchaser Seller’s pro rata portion of Property Taxes
within 30 days after receipt of Purchaser’s invoice therefor.

 

(d)           Subject to the provisions of
Section 8.3(e), Seller shall indemnify Purchaser for all liabilities that
are assessed against Purchaser for foreign, federal, state, local or Indian
Tribal taxes in respect of the ownership or operation of the Assets prior to
the Effective Time, together with penalties and interest thereon (provided such
penalties and interest do not result from the negligence, late filing, fraud or
acts of misfeasance or malfeasance of Purchaser), to the extent such
liabilities exceed the amounts of such taxes

 

28

 

paid by Seller; provided that Seller shall be entitled to all refunds
or rebates of taxes paid in respect of the ownership or operation of the Assets
prior to the Effective Time that may be received by Seller or Purchaser.  Subject to the provisions of Section 8.3(e),
Purchaser shall indemnify Seller for all liabilities which are assessed against
Seller for foreign, federal, state, local or Indian Tribal taxes, together with
penalties and interest thereon (provided such penalties and interest do not
result from the negligence, late filing, fraud or acts of misfeasance or
malfeasance of Seller), to the extent such liabilities relate to the ownership
or operation of the Assets from and after the Effective Time; provided,
however, that such indemnity shall not apply to such taxes to the extent (but
only to the extent) such taxes are included in the determination of the Final
Purchase Price, and provided further, however, that Purchaser shall be entitled
to all refunds or rebates of taxes attributable to the Assets on or after the
Effective Time that may be received by Seller or Purchaser, except to the
extent (but only to the extent) such refunds or rebates are included in the
determination of the Final Purchase Price. 
Seller and Purchaser agree that any amounts recoverable by any party
pursuant to this Section 8.3(d) shall be treated as adjustments to
the Purchase Price for all tax purposes.

 

(e)           In order for Seller or
Purchaser (“Claimant”) to make a claim against the other (“Indemnitor”) under
this Section 8, Claimant shall give prompt notice to Indemnitor of any
liability for which Claimant would claim indemnification under this Section 8.3,
which notice shall include the circumstances surrounding such liability.  Indemnitor shall then have the right but not
the obligation, to contest such liability at its sole cost and expense by
giving written notice to Claimant of such election within 30 days after
Indemnitor receives Claimant’s notice. 
Should Indemnitor fail to notify Claimant within such 30-day period,
Indemnitor shall be deemed to have elected not to contest such liability.  Should Indemnitor elect (or be deemed to have
elected) not to contest such liability, Indemnitor shall pay the full amount
due under Section 8.3(d) in respect of such liability to Claimant in
cash within 30 days after Indemnitor elects (or is deemed to have elected) not
to contest such liability.  Except as
specifically provided in this Section 8.3 with respect to certain tax
issues which must be combined or joined with other tax issues, if Indemnitor
elects to contest any such liability, Claimant shall give Indemnitor full
authority to defend, adjust, compromise or settle such liability and any
action, suit, or proceeding in which Indemnitor contests such liability, in the
name of Claimant or otherwise as Indemnitor shall elect.  In any administrative or legal proceeding,
Indemnitor shall employ counsel selected by it and reasonably acceptable to
Claimant.  With respect to tax issues
incident to any such liability that must be combined or joined with one or more
other tax issues which Claimant desires to contest, Claimant and Indemnitor
shall cooperate fully, and control of any administrative legal proceeding shall
rest with the party having the greater ultimate liability (including liability
under Section 8.3(d) for the taxes in dispute).  The party in control may not adjust,
compromise or settle taxes which are contested by or on behalf of the other
party without the consent of the other party. 
With respect to any liability contested by Indemnitor under the terms of
this Section 8.3(d), Indemnitor shall pay the full amount due under Section 8.3(d) in
respect of such liability to Claimant in cash within 30 days after the
liability is finally determined

 

29

 

either by settlement or pursuant to the final unappealable judgment of
a court of competent jurisdiction.

 

(f)            Purchaser shall pay and be
liable for all sales taxes occasioned by the sale of the Assets and all
documentary, transfer, filing, licensing, and recording fees required in connection
with the processing, filing, licensing or recording of any assignments, titles,
or bills of sale.

 

(g)           The provisions of Article VI
limiting the obligations of Seller notwithstanding, the obligations of the
parties pursuant to this Section 8.3 shall survive for a period of four (4) years
following Closing.

 

Section 8.4            Receipts and Credits.

 

Subject to the terms hereof and except to the extent
same have already been taken into account as an adjustment to the Purchase
Price, all monies, proceeds, receipts, credits and income attributable to the
ownership and operation of the Assets (a) for all periods of time from and
subsequent to the Effective Time, shall be the sole property and entitlement of
Purchaser, and to the extent received by Seller, Seller shall within 10
business days after such receipt, fully disclose, account for and transmit same
to Purchaser and (b) for all periods of time prior to the Effective Time,
shall be the sole property and entitlement of Seller and, to the extent
received by Purchaser, Purchaser shall fully disclose, account for and transmit
same to Seller within 10 business days. 
Subject to the terms hereof and except to the extent same have already
been taken into account as an adjustment to the Purchase Price, all costs, expenses,
disbursements, obligations and liabilities attributable to the Assets (i) for
periods of time prior to the Effective Time, regardless of when due or payable,
shall be the sole obligation of Seller and Seller shall promptly pay, or if
paid by Purchaser, promptly reimburse Purchaser for and hold Purchaser harmless
from and against same and (ii) for periods of time from and subsequent to
the Effective Time, regardless of when due or payable, shall be the sole
obligation of Purchaser and Purchaser shall promptly pay, or if paid by Seller,
promptly reimburse Seller for and hold Seller harmless from and against same.

 

Section 8.5            Suspense Accounts.

 

At the Closing, Seller agrees to transfer to
Purchaser and provide information regarding all of Seller’s payable accounts
holding monies in suspense attributable to the Assets.  Purchaser agrees to take and apply such
monies in a manner consistent with prudent oil and gas business practices and
to indemnify Seller against any claim relating to the failure to pay such funds
after the Closing.

 

ARTICLE IX

 

CONDITIONS TO CLOSING

 

Section 9.1            Seller’s Conditions.

 

The obligations of Seller at the Closing are
subject, at the option of Seller, to the satisfaction at or prior to the
Closing of the following conditions.

 

30

 

(a)           All representations and
warranties of Purchaser contained in this Agreement shall be true in all
material respects at and as of the Closing as if such representations and
warranties were made at and as of the Closing, and Purchaser shall have
performed and satisfied all agreements in all material respects required by
this Agreement to be performed and satisfied by Purchaser at or prior to the
Closing.

 

(b)           Seller shall have received a
certificate dated as of the Closing, executed by the President or any Vice
President of Purchaser, to the effect that the statements in Section 9.1(a) are
true in all material respects at and as of the Closing.

 

(c)           No order shall have been
entered by any court or governmental agency having jurisdiction over the
parties or the subject matter of this contract that restrains or prohibits the
purchase and sale contemplated by this Agreement and which remains in effect at
the time of Closing, except

 

(i)            any order affecting a matter
with respect to which Seller has been adequately indemnified by Purchaser or

 

(ii)           any order affecting only a
portion of the Assets, which portion of the Assets could be treated as a
Casualty Loss in accordance with Section 3.5.

 

(d)           Seller shall have been
provided with such documentation or other assurance as Seller deems necessary
that Purchaser has obtained all bonds or approvals as may be required for
assigning, owning or operating the Assets and all obligations associated with
the Assets; or as may be necessary to comply with Purchaser’s assumption of
obligations as described in Section 6.1, hereof.

 

Section 9.2            Purchaser’s Conditions.

 

The obligations of Purchaser at the Closing are
subject, at the option of Purchaser, to the satisfaction at or prior to the
Closing of the following conditions:

 

(a)           All representations and
warranties of Seller contained in this Agreement shall be true in all material
respects at and as of the Closing as if such representations were made at and
as of the Closing, and Seller shall have performed and satisfied all agreements
in all material respects required by this Agreement to be performed and
satisfied by Seller at or prior to the Closing.

 

(b)           Purchaser shall have
received a certificate dated as of the Closing, executed by the President or
any Vice President of Seller, to the effect that

 

(i)            the statements in Section 9.2(a) are
true in all material respects at and as of the Closing, and

 

31

 

(ii)           the covenants and agreements
contained in Article VII have been performed in all material respects.

 

(c)           No order shall have been
entered by any court or governmental agency having jurisdiction over the
parties or the subject matter of this contract that restrains or prohibits the
purchase and sale contemplated by this Agreement and which remains in effect at
the time of closing, except

 

(i)            any order affecting a matter
with respect to which Purchaser has been adequately indemnified by Seller or

 

(ii)           any order affecting only a portion
of the Assets, which portion of the Assets could be treated as Casualty Loss in
accordance with Section 3.5.

 

ARTICLE X

 

RIGHT OF TERMINATION AND
ABANDONMENT

 

Section 10.1          Termination.

 

This Agreement and the transactions contemplated hereby may be
terminated in the following instances:

 

(a)           by Seller if the conditions
set forth in Section 9.1 are not satisfied or waived as of the Closing
Date;

 

(b)           by Purchaser if the
conditions set forth in Section 9.2 are not satisfied or waived as of the
Closing Date;

 

(c)           by Seller if, through no
fault of Seller, the Closing does not occur on or before November 30,
2009;

 

(d)           by Purchaser if, through no
fault of Purchaser, the Closing does not occur on or before November 30,
2009;

 

(e)           by either party as provided
in Section 3.7; or

 

(f)            at any time by the mutual
written agreement of Purchaser and Seller and in accordance with any other
express provisions of this Agreement.

 

Section 10.2          Liabilities Upon Termination.

 

If this Agreement is terminated pursuant to Section 10.1(a),
except by reason of a failure of the condition set forth in Section 9.1(c),
or is terminated as a result of the negligence, fault or willful failure of
Purchaser to perform its obligations hereunder, Seller shall be entitled to
retain the Performance Deposit, plus any interest earned thereon, as liquidated
damages for lost

 

32

 

opportunities and not as a penalty.  If this Agreement is terminated for any other
reason, Seller shall return the Performance Deposit to Purchaser, plus any
interest earned thereon.  Upon
termination of this Agreement by Seller pursuant to an express right to do so
set forth herein, Seller shall be free to enjoy immediately all rights of
ownership of the Assets and to sell, transfer, encumber and otherwise dispose
of the Assets to any party without any restriction under this Agreement.  In no event shall either party ever be
entitled to consequential or speculative damages including, without limitation,
lost profits.

 

ARTICLE XI

 

CLOSING MATTERS

 

Section 11.1          Time and Place of Closing.

 

(a)           The purchase by Purchaser
and the sale by Seller of the Assets, as contemplated by this Agreement (the “Closing”),
shall, unless otherwise agreed to in writing by Purchaser and Seller, take
place at the offices of Seller.  The time
of the Closing shall be at 10:00 a.m., local time, on September 30,
2009.

 

(b)           The date on which the
Closing occurs is referred to herein as the “Closing Date.”

 

Section 11.2          Closing Obligations.

 

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

 

(a)           Seller shall execute,
acknowledge and deliver to Purchaser

 

(i)            a General Assignment and
Bill of Sale of the Assets in the form of Schedule F-1 attached hereto,

 

(ii)           assignments, bills of sale
and conveyances (in sufficient counterparts to facilitate recording)
substantially in the form of Schedule F-2 (the “Conveyance”) together with any
transfer forms to be filed with governmental and tribal agencies conveying the
Leases and Wells effective as of the Effective Time to Purchaser,

 

(iii)          letters in lieu of transfer
orders in a form acceptable to both parties, and

 

(iv)          deeds, assignments, bills of
sale and any other specialized instruments of transfer necessary to convey to
or perfect in Purchaser the Assets other than the Leases and Wells;

 

(b)           Seller and Purchaser shall
execute and deliver a preliminary settlement statement (the “Preliminary
Settlement Statement”) prepared by Seller that shall set forth

 

33

 

the Estimated Final Purchase Price together with the calculations of
all adjustments using for such adjustments the best information available;

 

(c)           Purchaser shall deliver to
Seller the Estimated Final Purchase Price by wire transfer in immediately
available funds;

 

(d)           Seller shall deliver to
Purchaser possession of the Assets;

 

(e)           Seller shall deliver to the
Purchaser the certificate referred to in Section 9.2(b).

 

(f)            Purchaser shall deliver to
Seller the certificate referred to in Section 9.1(b);

 

(g)           Purchaser shall assume the
obligation to disburse all royalty, overriding royalty and other payments due
under or with respect to the Leases to the extent Seller was responsible for
such payments prior to the Closing, except to the extent described otherwise in
the TSA;

 

(h)           Seller shall deliver a certificate of Non-Foreign
Status of Seller that meets the requirements of Treasury Regulations § 1.1445-2(b)(2);

 

(i)            Seller and Purchaser shall execute the TSA; and

 

(j)            Seller and Purchaser shall execute and deliver all
other documents or agreements called for herein.

 

ARTICLE XII

 

POST-CLOSING OBLIGATIONS

 

Section 12.1          Post-Closing Adjustments.

 

As soon as practicable after the Closing, but in no
event later than one hundred eighty (180) days thereafter, Seller shall prepare
and deliver to Purchaser a final settlement statement (the “Final Settlement
Statement”) setting forth each adjustment or payment that was not finally
determined as of the Closing and showing the calculation of such adjustments
and the resulting Final Purchase Price. 
Seller shall make its workpapers and other information available to
Purchaser to review in order to confirm the adjustments shown on Seller’s
draft.  As soon as practicable after
receipt of the Final Settlement Statement, but in no event later than ninety
(90) days thereafter, Purchaser shall deliver to Seller a written report
containing any changes that Purchaser proposes to make to the Final Settlement
Statement.  Any failure by Purchaser to
deliver to Seller the written report detailing Purchaser’s proposed changes to
the Final Settlement Statement within ninety (90) days following Purchaser’s
receipt of the Final Settlement Statement shall be deemed an acceptance by
Purchaser of the Final Settlement Statement as submitted by Seller.  The parties shall agree with respect to the
changes proposed by Purchaser, if any, no later than sixty (60) days after
Seller receives from Purchaser the written report described above

 

34

 

containing Purchaser’s proposed changes.  If the Purchaser and the Seller cannot then
agree upon the Final Settlement Statement, the determination of the amount of
the Final Settlement Statement shall be submitted to a mutually agreed firm of
independent public accountants (the “Accounting Firm”).  The determination by the Accounting Firm
shall be conclusive and binding on the parties hereto and shall be enforceable
against any party hereto in any court of competent jurisdiction.  Any costs and expenses incurred by the
Accounting Firm pursuant to this Section 12.1 shall be borne by the Seller
and the Purchaser equally.  The date upon
which such agreement is reached or upon which the Final Purchase Price is
established, shall be herein called the “Final Settlement Date.”  In the event

 

(a)           the Final Purchase Price is more than the Estimated Final Purchase Price,
Purchaser shall pay to Seller the amount of such difference, or

 

(b)           the Final Purchase Price is
less than the Estimated Final Purchase Price, Seller shall pay to Purchaser the
amount of such difference,

 

in
either event by wire transfer in immediately available funds or, if the amount
of such difference is less than Twenty-Five Thousand and No/100 Dollars
($25,000.00), by check.  Payment by
Purchaser or Seller, as the case may be, shall be within five (5) days of
the Final Settlement Date.

 

Section 12.2          Files and Records.

 

Within thirty (30) business days following the
Closing Date, Seller shall deliver to Purchaser at Purchaser’s expense the
Records, to the extent not previously delivered.  For a period of seven (7) years after
the Closing Date, Purchaser shall maintain the Records, and Seller shall have access
thereto during normal business hours upon advance written notice to Purchaser
to audit the same in connection with federal, state or local regulatory or tax
matters, resolution of existing disputes or contract compliance matters
affecting Seller.

 

Section 12.3          Further Assurances.

 

From time to time after Closing, Seller and
Purchaser shall execute, acknowledge and deliver to the other such further
instruments, and take such other action as may be reasonably requested in order
more effectively to assure to said party all of the respective properties,
rights, titles, interests and estates intended to be assigned and delivered in
consummation of the transactions contemplated by this Agreement.

 

ARTICLE XIII

 

ENVIRONMENTAL MATTERS

 

Section 13.1          Purchaser Acknowledgment Concerning Possible
Contamination of the Assets.

 

Purchaser is aware that
the Assets have been used for exploration, development, and production of oil
and gas and that there may be petroleum, produced water, wastes, or other
materials located on or under the Assets or associated with the Assets.  Equipment and sites

 

35

 

included in the Assets may contain asbestos,
hazardous substances, or naturally-occurring radioactive materials (“NORM”).  NORM may affix or attach itself to the inside
of wells, materials, and equipment as scale, or in other forms; the wells,
materials, and equipment located on the Assets or included in the Assets may
contain NORM and other wastes or hazardous substances; and NORM-containing
material and other wastes or hazardous substances may have been buried, come in
contact with the soil, or otherwise been disposed of on the Assets.  Special procedures may be required for the
remediation, removal, transportation, or disposal of wastes, asbestos,
hazardous substances, and NORM from the Assets.

 

Purchaser
will assume liability for the assessment, remediation, removal, transportation,
and disposal of wastes, asbestos, hazardous substances, and NORM from the
Assets and associated activities and will conduct these activities in
accordance with applicable federal, state, and local laws, including statutes,
regulations, orders, ordinances, and common law, currently enacted or enacted
in the future and relating to protection of public health, welfare, and the
environment, including those laws relating to storage, handling, and use of
chemicals and other hazardous materials; those relating to the generation,
processing, treatment, storage, transport, disposal, cleanup, remediation, or other
management of waste materials or hazardous substances of any kind; and those
relating to the protection of environmentally sensitive or protected areas (“Environmental
Laws”).

 

Section 13.2          Adverse Environmental
Conditions.

 

(a)           Purchaser will have until 5 Business Days before the
Closing to notify Seller of any material adverse environmental condition of the
Assets that Purchaser finds unacceptable and provide evidence of the condition
to Seller.  An environmental condition is
a material adverse environmental condition (“Condition”) only if all the
following criteria are met:

 

(i)            The environmental condition
is required to be remediated at the Effective Time under the Environmental Laws
in effect at the Effective Time.

 

(ii)           The total of the cost to remediate
each environmental condition identified by Purchaser to levels required by the
Environmental Laws in effect at the Effective Time is reasonably estimated to
be more than twenty-five thousand dollars ($25,000) (net to Seller’s interest).

 

(iii)          The environmental condition
was not disclosed on Schedule G.

 

(b)           For any Condition Purchaser notifies Seller of in
accordance with Section 13.2(a), Seller will have until two (2) Business
Days before the Closing Date to elect any of the following:

 

(i)            adjust the Allocated Value
for an Asset by a mutually acceptable amount reflecting Seller’s proportionate
share, based on its working interest, of

 

36

 

the cost reasonably estimated to remediate a Condition affecting the
Asset and adjust the Purchase Price in accordance with Section 2.4
(b)(viii),

 

(ii)           remove the
affected Asset from this Agreement and adjust the Purchase Price by the
Allocated Value for the affected Asset in accordance with Section 2.4
(b)(viii), or

 

(iii)          indemnify the
Purchaser for the Condition.  For
avoidance of doubt Seller and Purchaser agree that if Seller elects to
indemnify Purchaser for any Condition pursuant to this subsection, the duration
and maximum amount of liability will be negotiated by the parties at the time
of such election, and, if Purchaser and Seller are unable to agree on the
duration and maximum amount of liability prior to Closing, Seller will elect to
proceed under either subsection (i) or subsection (ii) with respect
to the Affected Asset.

 

(c)           If Seller and
Purchaser agree to an adjustment under subsection (b) (i), the adjustment
will be the estimated cost to remediate the Condition, but only to the level
required by the Environmental Laws in effect at the Effective Time, and only to
the extent that the total value of all Conditions exceeds one percent (1%) of
the Preliminary Purchase Price, it being understood by Purchaser and Seller
that such amount is a deductible.

 

(d)           If the
estimated cost to remediate any Condition exceeds one percent (1%) of the
Preliminary Purchase Price, Purchaser may, prior to Closing, elect to remove
the affected Asset from this Agreement and adjust the Purchase Price by the
Allocated Value for the affected Asset in accordance with Section 2.4(b)(viii).

 

(e)           If, prior to
Closing, Seller and Purchaser are unable to reach an agreement as to whether a
Condition exists, or if it does exist, the cost estimated to remediate the
Condition, each party shall have the right to submit the dispute to an
independent expert (the “Independent Expert”),
who shall serve as sole arbitrator.  If
either party so elects, the affected Asset shall be removed from the Closing
and the Preliminary Purchase Price shall be adjusted by the Allocated Value of
the affected Asset in accordance with Section 2.4(b)(viii).  For a period of sixty (60) days following
Closing the parties shall make good faith efforts to negotiate an agreement as
to the affected Asset failing which the parties shall submit the dispute to the
Independent Expert in accordance with the following procedure.  The Independent Expert shall be appointed by
mutual agreement of Seller and Purchaser from among candidates with experience
and expertise in the area that is the subject of such dispute, and failing such
agreement, such Independent Expert for such dispute shall be selected in
accordance with the Commercial Arbitration Rules of the AAA (the “Rules”).  Disputes to be resolved by an Independent Expert
under this subsection shall be resolved in accordance with mutually agreed
procedures and rules and failing such agreement, in accordance with the
Rules.  The Independent Expert shall be
instructed by the parties to

 

37

 

resolve such
dispute as soon as reasonably practicable in light of the circumstances.  The decision of the Independent Expert shall
be binding upon the parties as an award under the Federal Arbitration Act.   Subject to Seller’s right to remove the
affected Asset from this Agreement and terminate all further proceedings
related to the affected Asset, the parties shall conduct a delayed Closing as
to the affected Asset as soon as reasonably possible following the decision of
the Independent Expert.  Except for the
Closing Date, all other terms and provisions of this Agreement, including
without limitation the Purchase Price adjustment provisions of Article II,
shall apply to the delayed Closing of the affected Asset and all other conditions
to Closing shall have been deemed satisfied as of the date of the delayed
Closing.

 

Section 13.3           Disposal of Materials, Substances, and
Wastes; Compliance with Law.

 

Except as provided for in Section 13.3,
above, Purchaser will store, handle, transport, and dispose of or discharge all
materials, substances, and wastes from the Assets (including produced water,
drilling fluids, NORM, and other wastes), whether present before or after the
Effective Time, in accordance with applicable local, state, and federal laws
and regulations.  Purchaser will keep
records of the types, amounts, and location of materials, substances, and
wastes that are stored, transported, handled, discharged, released, or disposed
of onsite and offsite.  When any lease
terminates, an interest in which has been assigned under this Agreement,
Purchaser will undertake additional testing, assessment, closure, reporting, or
remedial action with respect to the Assets affected by the termination as is
necessary to satisfy all local, state, or federal requirements in effect at
that time and necessary to restore the Assets.

 

ARTICLE XIV

 

Employee Matters

 

Section 14.1           Continuing Employees.

 

From and after the date
hereof, and throughout the term of the TSA (the “Transition
Period”) Seller will assist Purchaser in seeking to retain certain of Seller’s
employees to effectuate a smooth transition of the operation of the Assets to
the Purchaser.  Within 10 days from the
date hereof, Seller will provide Purchaser with a list of employees (the “Seller
Employees”) available for employment with Purchaser, which will include the
following data: name, job title, salary or wage, bonus eligibility, vacation
eligibility, hire date, and service date. 
The Seller Employees that Purchaser hires and who complete one hour of
actual service with Purchaser are referred to as the “Continuing Employees.”

 

Section 14.2           No Obligation to Hire Seller Employees.

 

Nothing in this Agreement shall require or be construed or interpreted as
requiring the Purchaser to offer employment to any employee of Seller or its
Affiliates or to continue the employment of any employee of Seller or its
Affiliates (including any Continuing Employees) following their respective Hire
Date, or to prevent Purchaser thereof from changing the terms and conditions of
employment (including compensation and benefits) of any of its employees
(including any Continuing Employees) following their respective Hire
Dates.  Seller and the

 

38

 

Purchaser
hereby acknowledge and agree that any employment offered by Purchaser to a
Continuing Employee will be “at will” and may be terminated by the Purchaser or
such Continuing Employee at any time for any reason (subject to applicable Laws
and to any specific written commitments made to the contrary by Purchaser or by
such Continuing Employee).  Further, any
such offer of employment shall be on such terms and conditions as Purchaser
determines and may be conditioned upon the Seller Employee’s passage of
Purchaser’s pre-employment screening requirements.

 

Section 14.3           Interview, Screening, and Offers to
Seller Employees.

 

(a)           Seller will notify the Seller Employees
of Purchaser’s desire to interview them. 
Seller and Purchaser will assist one another in providing such employees
one or more meetings with representatives of Purchaser to discuss the capacity
in which such persons may be employed by Purchaser and the terms and conditions
under which such employment would be offered; provided, however, that no
employee of Seller shall be required to accept an offer of employment with
Purchaser thereof if such an offer is made. 
Seller will retain all liability for all severance benefits owed to the
employees of Seller who do not become Continuing Employees (including but not
limited to any Seller Employees who receive but do not accept offers of
employment from Purchaser) under Seller’s employment agreements, offer letters,
or severance plans or policies, if any, as well as liability arising under the
Worker’s Adjustment and Retraining Act (“WARN Act”).  During the Transition Period, Purchaser will
provide offers of employment to the Seller Employees the Purchaser desires to
hire, with each offer stipulating that the date for commencement of work is the
date immediately following the termination date of the TSA (the “Hire Date”).  Purchaser will provide Seller with notice of
the names of those Seller Employees to whom Purchaser intends to make
employment offers two (2) days prior to making such offers.

 

(b)           No Seller Employee will become a
Continuing Employee unless he or she (i) accepts Purchaser’s offer of
employment under the terms provided in Purchaser’s offer, (ii) passes any
required pre-employment screening required by Purchaser, and (iii) on the
termination date of the TSA, is actively at work, on sickness or disability
leave, or an approved leave of absence and (iv) completed one hour of
actual service with Purchaser.

 

Section 14.4           Employee Benefits.

 

(a)           Purchaser will grant to the Continuing Employees
credit for their past service years as outlined in the data provided by Seller
to Purchaser pursuant to Section 14.1 for the following: (i) vesting
and eligibility purposes under any employee benefit programs maintained by
Purchaser in which they are available to participate and (ii) determining
the duration and amount of their benefits under any sick pay or sick leave
policy or vacation policy, maintained by Purchaser in which they are eligible
to participate.  Seller must use
commercially reasonable efforts to provide Purchaser with all necessary
transition assistance, including any applicable service credit information

 

39

 

relating to Continuing Employees, to enable Purchaser
to develop and implement compensation and benefit plans and programs for any
Continuing Employees.

 

(b)           Effective as of each Seller Employee’s
respective Hire Date, such Seller Employee that becomes a Continuing Employee
will cease to actively participate or be eligible to actively participate in
any Seller Plan except where Seller Plan provides for continuation of benefits
or conversion to individual insurance polices upon termination of employment
with Seller.  Purchaser will not assume
any Seller Plan or be liable in any respect for the funding of, or contributions
to, or liabilities under any Seller Plan. 
Until each Continuing Employee’s respective Hire Date, such Continuing
Employee shall remain the employee of Seller and Seller shall provide his or
her wages and employee benefits at Seller’s sole expense.  Without limiting the foregoing, or Section 6.1(b) or
Section 6.3 of this Agreement for all periods prior to the Closing Date
and from the Closing Date until each Seller Employee’s respective Hire Date,
under the TSA, Seller shall be responsible for (i) the base salaries or
wages and overtime payments of the Seller Employees along with any bonuses to
which such Seller Employee may be entitled, (ii) the costs of the Seller
Employees’ participation in the retirement, medical, dental and other employee
benefit plans sponsored by Seller, (iii) workers’ compensation coverage of
the Seller Employees, (iv) vacation and leave pay for the Seller
Employees, (v) the employer’s portion of any health, life, disability or
other insurance provided as a part of Seller’s employee benefit plans in effect
after the Closing Date and in which the Seller Employees participate, (vi) the
employer’s portion of all employee taxes (including Social Security, Medicare
and unemployment taxes) and any tax withholdings required of the employer, and (vii) all
payroll processing, payroll deduction, tax withholding and tax reporting
services, employee benefit administration, claims processing, personnel
administration, and all such related human resources services with respect to
the Seller Employees.

 

(c)           When used in this Agreement:

 

(i)            the term “Seller Plan” means any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, change-in-control, termination pay, deferred
compensation, retirement or pension payments, bonuses, performance awards,
retention payments, incentive compensation, stock or stock-related awards,
fringe benefits or other employee benefits or remuneration of any kind, whether
written or unwritten or otherwise, funded or unfunded, including without
limitation, each “employee benefit plan,” within the meaning of Section 3(3) of
Employee Retirement Income Security Act of 1974,
as amended (“ERISA”)
and any plans that would be “employee benefit plans” within the meaning of Section 3(3) of
ERISA if they were subject to ERISA (such as foreign plans and plans for
directors) which, in each case, is or ever has been sponsored, maintained,
contributed to, or required to be contributed to, by Seller or any ERISA
Affiliate of the Seller (present or former) for the benefit of any present or
former

 

40

 

employee
or officer, consultant or similar representative of Seller or any of such ERISA
Affiliates, and with respect to which Seller or any of such ERISA Affiliates
has or may have any liability or obligation on behalf of any of such
individuals.

 

(ii)           the
term “ERISA Affiliate” means, with respect to any entity, any entity, trade or
business that is a under common control with such entity, within the meaning of
Section 414(b), (c), (m) or (o) of the Code or Section 4001
of ERISA.

 

Section 14.5           Control of Seller
Employees.

 

Prior to the Hire Date, if any, of a Seller Employee, Seller has the right
to control and direct the Seller Employees as to the performance of duties and
as to the means by which such duties are performed, including the right to
terminate the employment of any Seller Employee, provided that Purchaser will
not be liable for any costs, expense, liabilities, severance benefits, or WARN
Act liability, if any, related to any such terminated Seller Employee.    Notwithstanding the foregoing, prior to
each Seller Employee’s respective Hire Date, Seller has the right to direct
such employee to perform reasonable administrative duties on behalf of Seller
in connection with the winding down of Seller’s services with respect to the
Assets and the termination of any Seller Plan. 
During the Transition Period, but prior to the Seller Employees’
respective Hire Dates, Seller will not permanently reassign, make compensation
changes, promote or relocate any Seller Employee, other than in the ordinary
course of business or as required by any Seller Plan or applicable law, without
the written consent of Purchaser.  Seller
will be responsible for complying with all safety, health and work-related
laws, regulations and rules with respect to the Seller Employees employed
by Seller during the Transition Period. 
Nothing herein is intended to affect Seller’s status as employer of each
Seller Employee while employed by Seller or Seller’s control over such
individual until his or her respective Hire Date.

 

Section 14.6           Solicitation of
Continuing Employees.

 

For the period beginning on each Continuing Employee’s Hire Date and
ending on the date that is two (2) years after the Closing Date, neither
Seller nor any of its Affiliates may, unless acting in accordance with
Purchaser’s prior written consent, solicit, encourage or otherwise induce such
Continuing Employee to leave the employment of Purchaser or become an employee
of Seller or any of its Affiliates. 
Notwithstanding the foregoing, neither Seller nor its Affiliates will be
prohibited from hiring or contracting for the services of a Continuing Employee
who has terminated his or her employment relationship with Purchaser without
solicitation or inducement from Seller or its Affiliates.  A general advertisement by Seller or its
Affiliates for employment that is not targeted at any Continuing Employee or
group of Continuing Employees will not constitute a breach of the obligations
of Seller or its Affiliates under this Section 14.6.

 

41

 

Section 14.7           Waiver of Restrictions
on Continuing Employees.

 

On or
before each Continuing Employee’s Hire Date, if any, Seller must (i) take
and must cause its Affiliates to take any necessary action to waive any
covenants not to compete, confidentiality provisions or similar restrictions
under agreements between Seller and/or such Affiliates and the Continuing
Employee that may be applicable to any Continuing Employee, but only to the
extent any of the foregoing would preclude a Continuing Employee from accepting
employment with Purchaser, and (ii) not restrain such Continuing Employee
in any way in performing his services for the Purchaser.

 

Section 14.8           No Third Party
Beneficiaries.

 

Notwithstanding
any other provisions of this Agreement, the provisions of this Article XIV
are not intended to and shall not create or confer any third-party beneficiary
rights respecting any Seller Employee or Continuing Employee.

 

Article XV

 

MISCELLANEOUS

 

Section 15.1           Notices.

 

All communications required or permitted under this Agreement shall be
in writing and any communication or delivery hereunder shall be deemed to have
been duly made if actually delivered or if mailed by registered or certified
mail, postage prepaid, or if sent by overnight courier service, charges
prepaid, or if sent by telecopy or facsimile machine, addressed to the party
being notified as set forth below.  Any
party may, by written notice so delivered to the other, change the address to
which delivery shall thereafter be made. 
Notices to Seller and Purchaser shall be made at the addresses set forth
below:

 

(a)           If to Seller,
to:

 

Forest Oil Corporation

707 17th Street, Suite 3600

Denver, CO  80202

FAX:  (303) 812-1445

ATTN:  General Counsel

 

42

 

(b)           If to
Purchaser, to:

 

Linn Energy Holdings, LLC

600 Travis Street, Suite 5100

Houston, Texas  77002

FAX:  281-840-4001

ATTN: Charlene A. Ripley, Senior Vice President, General Counsel and
Corporate Secretary

 

All
notices shall be deemed given at the time of receipt by the party to which such
notice is addressed.

 

Section 15.2           Binding Effect.

 

This Agreement shall bind and inure to the benefit of the parties
hereto and their respective heirs, successors and permitted assigns.

 

Section 15.3           Counterparts.

 

This Agreement may be executed in any number of counterparts, which
taken together shall constitute one and the same instrument and each of which
shall be considered an original for all purposes.

 

Section 15.4           Expenses.

 

All expenses incurred by Seller in connection with or related to the
authorization, preparation or execution of this Agreement, the conveyances and
the Schedules hereto, and all other matters related to the Closing, including
without limitation, all fees and expenses of counsel, engineers, accountants
and financial advisors employed by Seller shall be borne solely and entirely by
Seller; and all such expenses incurred by Purchaser shall be borne solely and
entirely by Purchaser.

 

Section 15.5           Section Headings.

 

The Section headings contained in this Agreement are for
convenient reference only and shall not in any way affect the meaning or
interpretation of this Agreement.

 

Section 15.6           Entire
Agreement.

 

This Agreement, the documents to be executed hereunder, and the
Schedules attached hereto constitute the entire agreement between the parties
hereto pertaining to the subject matter hereof and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written of the
parties pertaining to the subject matter hereof, and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as specifically set forth herein or in documents
delivered pursuant hereto.  No
supplement, amendment, alteration, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the parties
hereto.  All of the Schedules referred to
in this 

 

43

 

Agreement
are hereby incorporated in this Agreement by reference and constitute a part of
this Agreement.

 

Section 15.7           Conditions.

 

The inclusion in this Agreement of conditions to Seller’s and Purchaser’s
obligations at Closing shall not, in and of itself, constitute a covenant of
either Seller or Purchaser to satisfy the conditions to the other party’s
obligations at Closing.

 

Section 15.8           Governing Law.

 

THE VALIDITY OF THE VARIOUS CONVEYANCES AFFECTING THE TITLE TO REAL
PROPERTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
JURISDICTION IN WHICH SUCH PROPERTY IS SITUATED.  THIS AGREEMENT, THE OTHER DOCUMENTS DELIVERED
PURSUANT HERETO AND THE LEGAL RELATIONS AMONG THE PARTIES HERETO SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
TEXAS AND THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF TEXAS SHALL BE
THE SOLE VENUE FOR THE RESOLUTION OF ANY DISPUTES ARISING HEREUNDER.

 

Section 15.9           Assignment.

 

Neither Party may assign all or any portion of its respective rights or
delegate any portion of its respective duties hereunder without the prior
written consent of the other Party.

 

Section 15.10         Public Announcements.

 

Prior to making any public announcement or statement with respect to
the transactions contemplated by this Agreement, the party desiring to make
such public announcement or statement shall consult with the other party hereto
and attempt to obtain approval of the other party or parties hereto to the text
of a public announcement or statement to be made solely by Seller or Purchaser,
as the case may be; provided, however, if Seller or Purchaser is required by
law to make such public announcement or statement, then the same may be made
without the approval of the other party; provided further, however, neither
party may identify the other party by name in any such announcement or
statement or filing with the Securities and Exchange Commission without the
other party’s prior written consent.

 

Section 15.11         Notices After
Closing.

 

Each of the parties hereto shall notify the others of
its receipt, after the Closing Date, of any instrument, notification or other
documents affecting the Assets while owned by such other party or parties.

 

Section 15.12         Waiver of
Compliance with Bulk Transfer Laws.

 

Purchaser waives compliance with any applicable bulk
transfer laws relating to the transactions contemplated by this Agreement.

 

44

 

Section 15.13         Waiver.

 

The parties agree that to the extent required by applicable law, rule or
order to be operative the disclaimers of certain warranties contained in this Section and
in the conveyancing documents to be delivered pursuant to this Agreement are “conspicuous”
disclaimers for the purposes of any such applicable law, rule or
order.  SELLER EXPRESSLY DISCLAIMS AND
NEGATES ANY WARRANTY AS TO THE CONDITION OF ANY PERSONAL PROPERTY, EQUIPMENT,
FIXTURES AND ITEMS OF MOVABLE PROPERTY COMPRISING ANY PART OF THE ASSETS,
INCLUDING:

 

(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
PURCHASER UNDER APPLICABLE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION, AND

 

(e)           ANY CLAIM BY PURCHASER FOR DAMAGE BECAUSE OF DEFECTS, WHETHER KNOWN OR
UNKNOWN, IT BEING EXPRESSLY UNDERSTOOD BY PURCHASER THAT SAID PERSONAL
PROPERTY, FIXTURES, EQUIPMENT, AND ITEMS ARE BEING CONVEYED TO PURCHASER “AS IS”,
“WHERE IS”, WITH ALL FAULTS, AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR
AND THAT PURCHASER WILL MAKE, PRIOR TO CLOSING, SUCH INSPECTIONS THEREOF AS
PURCHASER DEEMS APPROPRIATE.

 

Except
as otherwise expressly set forth herein, Seller also expressly disclaims and
negates any implied or express warranty as to the accuracy of any of the
information furnished with respect to the existence or extent of reserves or
the value of the Assets based thereon or the condition or state of repair of
any of the Assets (it being understood that all estimates of quantities of oil
and gas reserves on which Purchaser has relied or is relying have been derived
by individual evaluation of Purchaser). 
Purchaser EXPRESSLY WAIVES THE PROVISIONS OF CHAPTER XVII, SUBCHAPTER E,
SECTION 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555,
WHICH IS NOT WAIVED), VERNON’S TEXAS CODE ANNOTATED, BUSINESS AND COMMERCE CODE
(the “Deceptive Trade Practices Act”).

 

45

 

Section 15.14         Bonds.

 

Except for bonds, letters of credit and
guarantees related primarily to the Excluded Assets, Schedule 15.14 identifies
the bonds, letters of credit and guarantees posted by Seller in conjunction
with ownership or operation of the Assets as of the date of this Agreement.

 

The signature page follows

 

46

 

	
  SELLER:

  	
  FOREST
  OIL CORPORATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Glen J. Mizenko

  	
   

  
	
   

  	
  Name:

  	
  Glen
  J. Mizenko

  	
   

  
	
   

  	
  Title:

  	
  Senior
  Vice President Business Development and Engineering

  
	
   

  	
   

  	
   

  
	
  SELLER:

  	
  FOREST
  OIL PERMIAN CORPORATION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Glen J. Mizenko

  	
   

  
	
   

  	
  Name:

  	
  Glen
  J. Mizenko

  	
   

  
	
   

  	
  Title:

  	
  Vice
  President Business Development

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PURCHASER:

  	
  LINN
  ENERGY HOLDINGS, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Mark E. Ellis

  	
   

  
	
   

  	
  Name:

  	
  Mark
  E. Ellis

  	
   

  
	
   

  	
  Title:

  	
  President
  and Chief Operating Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  PURCHASER:

  	
  LINN
  OPERATING, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Mark E. Ellis

  	
   

  
	
   

  	
  Name:

  	
  Mark
  E. Ellis

  	
   

  
	
   

  	
  Title:

  	
  President
  and Chief Operating Officer

  	
   

  

 

47Exhibit
10.1

 

FIRST AMENDMENT TO THE GFI GROUP INC.

2008 EQUITY INCENTIVE PLAN

 

This First Amendment (this “First Amendment”) to the 2008 Equity
Incentive Plan (the “Plan”) of
GFI Group Inc. (the “Company”)
has been deemed advisable and has been adopted pursuant to the terms of Section 10.1
of the Plan by the Company’s Board of Directors, subject to stockholder
approval. Terms used herein but not otherwise defined shall have the meanings
given to such terms in the Plan.

 

1.                                      Amendments to the Plan.

 

a)                                      The first
sentence of Article 4.1 of the Plan is hereby amended by deleting “8,250,000”
and substituting “14,900,000” therefor.

 

b)                                     The last
sentence of Article 6.8 of the Plan is hereby amended by deleting “1,000,000”
and substituting “2,000,000” therefor.

 

2.                                      The Plan.  In all other respects the Plan is ratified
and shall, as so changed by this First Amendment, continue in full force and
effect.

 

* * * * *

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