Document:

EX-10.8

 

Exhibit
10.8

INDEMNIFICATION AGREEMENT

     This Indemnification Agreement, dated as of                     , 2007 (this “Agreement”), is
made by and between Stewart & Stevenson Inc., a Delaware corporation (the “Company”), and
                     (“Indemnitee”).

RECITALS:

     A. The General Corporation Law of the State of Delaware provides that the business and affairs
of a corporation shall be managed by or under the direction of its board of directors.

     B. In recognition of the need for corporations to be able to induce capable and responsible
persons to accept positions in corporate management, Delaware law authorizes (and in some instances
requires) corporations to indemnify their directors and officers, and further authorizes
corporations to purchase and maintain insurance for the benefit of their directors and officers.

     C. The Delaware courts have recognized that indemnification by a corporation serves the dual
policies of (1) allowing corporate officials to resist unjustified lawsuits, secure in the
knowledge that, if vindicated, the corporation will bear the expense of litigation and (2)
encouraging capable persons to serve as corporate directors and officers, secure in the knowledge
that the corporation will absorb the costs of defending their honesty and integrity.

     D. Under Delaware law, a director’s or officer’s right to be reimbursed for the costs of
defense of criminal actions, whether such claims are asserted under state or federal law, does not
depend upon the merits of the claims asserted against the director or officer and is separate and
distinct from any right to indemnification the director or officer may be able to establish, and
indemnification of the director or officer against criminal fines and penalties is permitted if the
director satisfies the applicable standard of conduct.

     E. Indemnitee is a director and/or officer of the Company and his/her willingness to serve in
such capacity is predicated, in substantial part, upon the Company’s willingness to indemnify
him/her in accordance with the principles reflected above, to the fullest extent permitted by the
laws of the state of Delaware, and upon the other undertakings set forth in this Agreement.

     F. Therefore, in recognition of the need to provide Indemnitee with substantial protection
against personal liability, in order to procure Indemnitee’s continued service as a director and/or
officer of the Company and to enhance Indemnitee’s ability to serve the Company in an effective
manner, and in order to provide such protection pursuant to express contract rights (intended to be
enforceable irrespective of, among other things, any amendment to the Company’s certificate of
incorporation or bylaws (collectively, the “Constituent Documents”), the Company wishes to
provide in this Agreement for the indemnification of and the advancement of Expenses (as defined in
Section 1(c)) to Indemnitee as set forth in this Agreement and for the coverage of Indemnitee under
the Company’s directors’ and officers’ liability insurance policies.

 

 

     G. In light of the considerations referred to in the preceding recitals, it is the Company’s
intention and desire that the provisions of this Agreement be construed liberally, subject to their
express terms, to maximize the protections to be provided to Indemnitee hereunder.

     NOW, THEREFORE, the parties hereby agree as follows:

     1. Certain Definitions. In addition to terms defined elsewhere herein, the following terms
have the following meanings when used in this Agreement with initial capital letters:

          (a) “Claim” means (i) any threatened, asserted, pending or completed claim, demand,
action, suit or proceeding, whether civil, criminal, administrative, arbitrative, investigative or
other, and whether made pursuant to federal, state or other law; and (ii) any threatened, pending
or completed inquiry or investigation, whether made, instituted or conducted by the Company or any
other person, including without limitation any federal, state or other governmental entity, that
Indemnitee determines might lead to the institution of any such claim, demand, action, suit or
proceeding.

          (b) “Disinterested Director” means a director of the Company who is not and was not a
party to the Claim in respect of which indemnification is sought by Indemnitee.

          (c) “Expenses” means reasonable, documented attorneys’ and experts’ fees and expenses
and all other reasonable, documented costs and expenses paid or payable in connection with
investigating, defending, being a witness in or participating in (including on appeal), or
preparing to investigate, defend, be a witness in or participate in (including on appeal), any
Claim.

          (d) “Indemnifiable Claim” means any Claim based upon, arising out of or resulting from
(i) any actual, alleged or suspected act or failure to act by Indemnitee in his capacity as a
director, manager, officer, employee or agent of the Company or as a director, officer, employee,
member, manager, trustee or agent of any other corporation, limited liability company, partnership,
joint venture, trust or other entity or enterprise, whether or not for profit, as to which
Indemnitee is or was serving at the request of the Company as a director, officer, employee,
member, manager, trustee or agent, (ii) any actual, alleged or suspected act or failure to act by
Indemnitee in respect of any business, transaction, communication, filing, disclosure or other
activity of the Company or any other entity or enterprise referred to in clause (i) of this
sentence, or (iii) Indemnitee’s status as a current or former director, manager, officer, employee
or agent of the Company or as a current or former director, officer, employee, member, manager,
trustee or agent of the Company or any other entity or enterprise referred to in clause (i) of this
sentence or any actual, alleged or suspected act or failure to act by Indemnitee in connection with
any obligation or restriction imposed upon Indemnitee by reason of such status. In addition to any
service at the actual request of the Company, for purposes of this Agreement, Indemnitee shall be
deemed to be serving or to have served at the request of the Company as a director, officer,
employee, member, manager, trustee or agent of another entity or enterprise if Indemnitee is or was
serving as a director, officer, employee, member, manager, trustee or agent of such entity or
enterprise and (i) such entity or enterprise is or at the time of such service was a Controlled
Affiliate, (ii) such entity or enterprise is or at the time of such service was an

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employee benefit plan (or related trust) sponsored or maintained by the Company or a
Controlled Affiliate, or (iii) the Company or a Controlled Affiliate directly or indirectly caused
or authorized Indemnitee to be nominated, elected, appointed, designated, employed, engaged or
selected to serve in such capacity. Notwithstanding the foregoing, Indemnifiable Claims will not
consist of any Claim to the extent indemnification in respect thereof is prohibited by the laws of
the State of Delaware in effect on the date hereof or as such laws may from time to time hereafter
be amended to increase the scope of such permitted indemnification.

          (e) “Indemnifiable Losses” means any and all Losses relating to, arising out of or
resulting from any Indemnifiable Claim.

          (f) “Independent Counsel” means a law firm, or a member of a law firm, that is
experienced in matters of corporate law and neither presently is, nor in the past five years has
been, retained to represent: (i) the Company (or any subsidiary of the Company) or Indemnitee in
any matter material to either such party (other than with respect to matters concerning Indemnitee
under this Agreement, or of other indemnitees under similar indemnification agreements), or
(ii) any other named (or, as to a threatened matter, reasonably likely to be named) party to the
Indemnifiable Claim giving rise to a claim for indemnification hereunder. Notwithstanding the
foregoing, the term “Independent Counsel” shall not include any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under
this Agreement.

          (g) “Losses” means any and all Expenses, damages, losses, liabilities, judgments,
fines, penalties (whether civil, criminal or other) and amounts paid in settlement, including
without limitation all interest, assessments and other charges paid or payable in connection with
or in respect of any of the foregoing.

     2. Indemnification Obligation. Subject to Section 7, the Company shall indemnify, defend and
hold harmless Indemnitee against any and all Indemnifiable Claims and Indemnifiable Losses;
provided, however, that, except as provided in Sections 4 and 20, Indemnitee shall not be entitled
to indemnification pursuant to this Agreement in connection with any Claim initiated by Indemnitee
against the Company or any director or officer of the Company unless the Company has joined in or
consented to the initiation of such Claim.

     3. Advancement of Expenses. Indemnitee shall have the right to advancement by the Company
prior to the final disposition of any Indemnifiable Claim of any and all Expenses relating to,
arising out of or resulting from any Indemnifiable Claim paid or incurred by Indemnitee.
Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of
conduct. Without limiting the generality or effect of the foregoing, within 10 days after any
request by Indemnitee, the Company shall, in accordance with such request (but without
duplication), (a) pay such Expenses on behalf of Indemnitee, (b) advance to Indemnitee funds in an
amount sufficient to pay such Expenses, or (c) reimburse Indemnitee for such Expenses; provided
that Indemnitee shall repay, without interest, any amounts actually advanced to Indemnitee that, at
the final disposition of the Indemnifiable Claim to which the advance related, were in excess of
amounts paid or payable by Indemnitee in respect of Expenses relating to, arising out of or
resulting from such Indemnifiable Claim. In connection with any such

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payment, advancement or reimbursement, Indemnitee shall execute and deliver to the Company an
undertaking, which need not be secured and shall be accepted without reference to Indemnitee’s
ability to repay the Expenses, by or on behalf of Indemnitee, to repay, without interest, any
amounts paid, advanced or reimbursed by the Company in respect of Expenses relating to, arising out
of or resulting from any Indemnifiable Claim in respect of which it shall have been determined,
following the final disposition of such Indemnifiable Claim and in accordance with Section 7, that
Indemnitee is not entitled to indemnification hereunder.

     4. Indemnification for Additional Expenses. Without limiting the generality or effect of the
foregoing, the Company shall indemnify and hold harmless Indemnitee against and, if requested by
Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within 10 days of such
request, any and all Expenses paid or incurred by Indemnitee in connection with any Claim made,
instituted or conducted by Indemnitee for (a) indemnification or reimbursement or advance payment
of Expenses by the Company under any provision of this Agreement, or under any other agreement or
provision of the Constituent Documents now or hereafter in effect relating to Indemnifiable Claims,
and/or recovery under any directors’ and officers’ liability insurance policies maintained by the
Company, regardless in each case of whether Indemnitee ultimately is determined to be entitled to
such indemnification, reimbursement, advance or insurance recovery, as the case may be; provided,
however, that Indemnitee shall return, without interest, any such advance of Expenses (or portion
thereof) which remains unspent at the final disposition of the Claim to which the advance related.

     5. Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to
indemnification by the Company for some or a portion of any Indemnifiable Loss but not for all of
the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion
thereof to which Indemnitee is entitled.

     6. Procedure for Notification. To obtain indemnification under this Agreement in respect of
an Indemnifiable Claim or Indemnifiable Loss, Indemnitee shall submit to the Company a written
request therefor, including a brief description (based upon information then available to
Indemnitee) of such Indemnifiable Claim or Indemnifiable Loss. If, at the time of the receipt of
such request, the Company has directors’ and officers’ liability insurance in effect under which
coverage for such Indemnifiable Claim or Indemnifiable Loss is potentially available, the Company
shall give prompt written notice of such Indemnifiable Claim or Indemnifiable Loss to the
applicable insurers in accordance with the procedures set forth in the applicable policies. The
Company shall provide to Indemnitee a copy of such notice delivered to the applicable insurers, and
copies of all subsequent correspondence between the Company and such insurers regarding the
Indemnifiable Claim or Indemnifiable Loss, in each case substantially concurrently with the
delivery or receipt thereof by the Company. The failure by Indemnitee to timely notify the Company
of any Indemnifiable Claim or Indemnifiable Loss shall not relieve the Company from any liability
hereunder unless, and only to the extent that, the Company did not otherwise learn of such
Indemnifiable Claim or Indemnifiable Loss and such failure shall materially prejudice the ability
of the Company to defend such Indemnifiable Claim or otherwise to perfect rights to any insurance
coverage relating thereto..

     7. Determination of Right to Indemnification. (a) To the extent that Indemnitee shall have
been successful on the merits or otherwise in defense of any Indemnifiable Claim or any

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portion thereof or in defense of any issue or matter therein, including without limitation
dismissal without prejudice, Indemnitee shall be indemnified against all Indemnifiable Losses
relating to, arising out of or resulting from such Indemnifiable Claim in accordance with Section 2
and no Standard of Conduct Determination (as defined in Section 7(b)) shall be required.

          (b) To the extent that the provisions of Section 7(a) are inapplicable to an Indemnifiable
Claim that shall have been finally disposed of, any determination of whether Indemnitee has
satisfied any applicable standard of conduct under Delaware law that is a legally required
condition precedent to indemnification of Indemnitee hereunder against Indemnifiable Losses
relating to, arising out of or resulting from such Indemnifiable Claim (a “Standard of Conduct
Determination”) shall be made as follows: (i) by a majority vote of the Disinterested
Directors, even if less than a quorum of the Company’s Board of Directors (the “Board”),
(ii) if such Disinterested Directors so direct, by a majority vote of a committee of Disinterested
Directors designated by a majority vote of all Disinterested Directors, or (iii) if there are no
such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a
copy of which shall be delivered to Indemnitee. Indemnitee will cooperate with the person or
persons making such Standard of Conduct Determination, including providing to such person or
persons, upon reasonable advance request, any documentation or information which is not privileged
or otherwise protected from disclosure and which is reasonably available to Indemnitee and
reasonably necessary to such determination. The Company shall indemnify and hold harmless
Indemnitee against and, if requested by Indemnitee, shall reimburse Indemnitee for, or advance to
Indemnitee, within 10 days of such request, any and all reasonable, documented costs and expenses
(including attorneys’ and experts’ fees and expenses) incurred by Indemnitee in so cooperating with
the person or persons making such Standard of Conduct Determination.

          (c) The Company shall use its reasonable best efforts to cause any Standard of Conduct
Determination required under Section 7(b) to be made as promptly as practicable. If (i) the person
or persons empowered or selected under Section 7(b) to make the Standard of Conduct Determination
shall not have made a determination within 30 days after the later of (A) receipt by the Company of
written notice from Indemnitee advising the Company of the final disposition of the applicable
Indemnifiable Claim (the date of such receipt being the “Notification Date”) and (B) the
selection of an Independent Counsel, if such determination is to be made by Independent Counsel,
that is permitted under the provisions of Section 7(e) to make such determination and
(ii) Indemnitee shall have fulfilled his obligations set forth in the second sentence of Section
7(b), then Indemnitee shall be deemed to have satisfied the applicable standard of conduct (absent
(A) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee’s statement not materially misleading, in connection with the request for
indemnification, or (B) prohibition of such indemnification under applicable law); provided that
such 30-day period may be extended for a reasonable time, not to exceed an additional 30 days, if
the person or persons making such determination in good faith requires such additional time for the
obtaining or evaluation of documentation and/or information relating thereto.

          (d) If (i) Indemnitee shall be entitled to indemnification hereunder against any Indemnifiable
Losses pursuant to Section 7(a), (ii) no determination of whether Indemnitee has

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satisfied any applicable standard of conduct under Delaware law is a legally required
condition precedent to indemnification of Indemnitee hereunder against any Indemnifiable Losses, or
(iii) Indemnitee has been determined or deemed pursuant to Section 7(a) or (c) to have satisfied
any applicable standard of conduct under Delaware law which is a legally required condition
precedent to indemnification of Indemnitee hereunder against any Indemnifiable Losses, then the
Company shall pay to Indemnitee, within ten days after the later of (x) the Notification Date in
respect of the Indemnifiable Claim or portion thereof to which such Indemnifiable Losses are
related, out of which such Indemnifiable Losses arose or from which such Indemnifiable Losses
resulted and (y) the earliest date on which the applicable criterion specified in clause (i), (ii)
or (iii) above shall have been satisfied, an amount equal to the amount of such Indemnifiable
Losses.

          (e) If a Standard of Conduct Determination is to be made by Independent Counsel, the
Independent Counsel shall be selected by the Board, and the Company shall give written notice to
Indemnitee advising him of the identity of the Independent Counsel so selected. Indemnitee may,
within 10 days after receiving written notice of selection from the Company, deliver to the Company
a written objection to such selection; provided, however, that such objection may be asserted only
on the ground that the Independent Counsel so selected does not satisfy the criteria set forth in
the definition of “Independent Counsel” in Section 1(f), and the objection shall set forth with
particularity the factual basis of such assertion. Absent a proper and timely objection, the
person or firm so selected shall act as Independent Counsel. If such written objection is properly
and timely made and substantiated, (i) the Independent Counsel so selected may not serve as
Independent Counsel unless and until such objection is withdrawn or a court has determined that
such objection is without merit and (ii) the Company may, at its option, select an alternative
Independent Counsel and give written notice to Indemnitee advising him of the identity of the
alternative Independent Counsel so selected, in which case the provisions of the two immediately
preceding sentences and clause (i) of this sentence shall apply to such subsequent selection and
notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall
apply to successive alternative selections. If no Independent Counsel that is permitted under the
foregoing provisions of this Section 7(e) to make the Standard of Conduct Determination shall have
been selected within 30 days after the Company gives its initial notice pursuant to the first
sentence of this Section 7(e) or Indemnitee gives its initial notice pursuant to the second
sentence of this Section 7(e), as the case may be, either the Company or Indemnitee may petition a
court of competent jurisdiction (subject to Section 17) for resolution of any objection which shall
have been made by Indemnitee to the Company’s selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person or firm selected by the Court or by such other
person as the Court shall designate, and the person or firm with respect to whom all objections are
so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the
Company shall pay all of the reasonable, documented fees and expenses of the Independent Counsel
incurred in connection with the Independent Counsel’s determination pursuant to Section 7.

     8. Presumption of Entitlement. In making any Standard of Conduct Determination, the person or
persons making such determination shall presume that Indemnitee has satisfied the applicable
standard of conduct, and the Company may overcome such presumption only by clear and convincing
evidence to the contrary. Any Standard of Conduct Determination that is adverse to Indemnitee may
be challenged by Indemnitee in a judicial proceeding. No

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determination by the Company (including by its directors or any Independent Counsel) that
Indemnitee has not satisfied any applicable standard of conduct shall be a defense to any Claim by
Indemnitee for indemnification or reimbursement or advance payment of Expenses by the Company
hereunder or create a presumption that Indemnitee has not met any applicable standard of conduct.

     9. No Other Presumption. For purposes of this Agreement, the termination of any Claim by
judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea
of nolo contendere or its equivalent, will not create a presumption that Indemnitee did not meet
any applicable standard of conduct or that indemnification hereunder is otherwise not permitted.

     10. Non-Exclusivity. The rights of Indemnitee hereunder will be in addition to any other
rights Indemnitee may have under the Constituent Documents, or the substantive laws of the
Company’s jurisdiction of formation, any other contract or otherwise (collectively, “Other
Indemnity Provisions”); provided, however, that (a) to the extent that Indemnitee otherwise
would have any greater right to indemnification under any Other Indemnity Provision, Indemnitee
will be deemed to have such greater right hereunder and (b) to the extent that any change is made
to any Other Indemnity Provision which permits any greater right to indemnification than that
provided under this Agreement as of the date hereof, Indemnitee will be deemed to have such greater
right hereunder. The Company will not adopt any amendment to any of the Constituent Documents the
effect of which would be to deny, diminish or encumber Indemnitee’s right to indemnification under
this Agreement or any Other Indemnity Provision.

     11. Liability Insurance and Funding. For the duration of Indemnitee’s service as a director
and/or officer of the Company, and thereafter for so long as Indemnitee shall be subject to any
pending or possible Indemnifiable Claim, the Company shall use commercially reasonable efforts
(taking into account the scope and amount of coverage available relative to the cost thereof) to
cause to be maintained in effect policies of directors’ and officers’ liability insurance providing
coverage for directors and/or officers of the Company. The Company shall provide Indemnitee, upon
request, with a copy of all directors’ and officers’ liability insurance applications, binders,
policies, declarations, endorsements and other related materials. In all policies of directors’
and officers’ liability insurance obtained by the Company, Indemnitee shall be named as an insured
in such a manner as to provide Indemnitee the same rights and benefits, subject to the same
limitations, as are accorded to the Company’s directors and officers most favorably insured by such
policy. The Company may, but shall not be required to, create a trust fund, grant a security
interest or use other means, including without limitation a letter of credit, to ensure the payment
of such amounts as may be necessary to satisfy its obligations to indemnify and advance expenses
pursuant to this Agreement.

     12. Subrogation. In the event of payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the related rights of recovery of Indemnitee
against other persons or entities (other than Indemnitee’s successors), including any entity or
enterprise referred to in clause (i) of the definition of “Indemnifiable Claim” in Section 1(d).
Indemnitee shall execute all papers reasonably required to evidence such rights (all of
Indemnitee’s reasonable Expenses, including attorneys’ fees and charges, related thereto to be
reimbursed by or, at the option of Indemnitee, advanced by the Company).

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     13. No Duplication of Payments. The Company shall not be liable under this Agreement to make
any payment to Indemnitee in respect of any Indemnifiable Losses to the extent Indemnitee has
otherwise actually received payment (net of Expenses incurred in connection therewith) under any
insurance policy, the Constituent Documents and Other Indemnity Provisions or otherwise (including
from any entity or enterprise referred to in clause (i) of the definition of “Indemnifiable Claim”
in Section 1(d)) in respect of such Indemnifiable Losses otherwise indemnifiable hereunder.

     14. Defense of Claims. The Company shall be entitled to participate in the defense of any
Indemnifiable Claim or to assume the defense thereof, with counsel reasonably satisfactory to
Indemnitee; provided that if Indemnitee reasonably believes, after consultation with counsel
selected by Indemnitee, that (a) the use of counsel chosen by the Company to represent Indemnitee
would present such counsel with an actual or potential conflict, (b) the named parties in any such
Indemnifiable Claim (including any impleaded parties) include both the Company and Indemnitee and
Indemnitee shall reasonably conclude that there may be one or more legal defenses available to him
that are different from or in addition to those available to the Company, or (c) any such
representation by such counsel would be precluded under the then-applicable standards of
professional conduct, then Indemnitee shall be entitled to retain separate counsel (but not more
than one law firm plus, if applicable, local counsel in respect of any particular Indemnifiable
Claim) at the Company’s expense. The Company shall not be liable to Indemnitee under this
Agreement for any amounts paid in settlement of any threatened or pending Indemnifiable Claim
effected without the Company’s prior written consent. The Company shall not, without the prior
written consent of Indemnitee, effect any settlement of any threatened or pending Indemnifiable
Claim to which Indemnitee is or could have been a party unless such settlement solely involves the
payment of money and includes a complete and unconditional release of Indemnitee from all liability
on any claims that are the subject matter of such Indemnifiable Claim. Neither the Company nor
Indemnitee shall unreasonably withhold its consent to any proposed settlement; provided that
Indemnitee may withhold consent to any settlement that does not provide a complete and
unconditional release of Indemnitee.

     15. Successors and Binding Agreement. (a) The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form and substance
satisfactory to Indemnitee and his/her counsel, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent the Company would be required to perform if no
such succession had taken place (and such successor will thereafter be deemed the “Company”
for purposes of this Agreement). This Agreement shall be binding upon and inure to the benefit of
the Company and any successor to the Company, including without limitation any person acquiring
directly or indirectly all or substantially all of the business or assets of the Company whether by
purchase, merger, consolidation, reorganization or otherwise, but shall not otherwise be assignable
or delegable by the Company.

          (b) This Agreement shall inure to the benefit of and be enforceable by Indemnitee’s personal
or legal representatives, executors, administrators, heirs, distributees, legatees and other
successors.

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          (c) This Agreement is personal in nature and neither of the parties hereto shall, without the
consent of the other, assign or delegate this Agreement or any rights or obligations hereunder
except as expressly provided in Sections 15(a) and (b). Without limiting the generality or effect
of the foregoing, Indemnitee’s right to receive payments hereunder shall not be assignable, whether
by pledge, creation of a security interest or otherwise, other than by a transfer by Indemnitee’s
will or by the laws of descent and distribution, and, in the event of any attempted assignment or
transfer contrary to this Section 15(c), the Company shall have no liability to pay any amount so
attempted to be assigned or transferred.

     16. Notices. For all purposes of this Agreement, all communications, including without
limitation notices, consents, requests or approvals, required or permitted to be given hereunder
shall be in writing and shall be deemed to have been duly given when hand delivered or dispatched
by electronic facsimile transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return receipt requested,
postage prepaid or one business day after having been sent for next-day delivery by a nationally
recognized overnight courier service, addressed to the Company (to the attention of the Secretary
of the Company) and to Indemnitee at the applicable address shown on the signature page hereto, or
to such other address as any party may have furnished to the other in writing and in accordance
herewith, except that notices of changes of address will be effective only upon receipt.

     17. Governing Law. The validity, interpretation, construction and performance of this
Agreement shall be governed by and construed in accordance with the substantive laws of the State
of Delaware, without giving effect to the principles of conflict of laws of such State. The
Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the
State of Texas for all purposes in connection with any action or proceeding which arises out of or
relates to this Agreement and hereby waives any objections or defenses relating to jurisdiction
with respect to any lawsuit or other proceeding initiated in or transferred to such courts.

     18. Validity. If any provision of this Agreement or the application of any provision hereof
to any person or circumstance is held invalid, unenforceable or otherwise illegal, the remainder of
this Agreement and the application of such provision to any other person or circumstance shall not
be affected, and the provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent, and only to the extent, necessary to make it enforceable, valid or legal.
In the event that any court or other adjudicative body shall decline to reform any provision of
this Agreement held to be invalid, unenforceable or otherwise illegal as contemplated by the
immediately preceding sentence, the parties thereto shall take all such action as may be necessary
or appropriate to replace the provision so held to be invalid, unenforceable or otherwise illegal
with one or more alternative provisions that effectuate the purpose and intent of the original
provisions of this Agreement as fully as possible without being invalid, unenforceable or otherwise
illegal.

     19. Miscellaneous. No provision of this Agreement may be waived, modified or discharged
unless such waiver, modification or discharge is agreed to in writing signed by Indemnitee and the
Company. No waiver by either party hereto at any time of any breach by the other party hereto or
compliance with any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or

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conditions at the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by
either party that are not set forth expressly in this Agreement.

     20. Legal Fees and Expenses. It is the intent of the Company that Indemnitee not be required
to incur legal fees and or other Expenses associated with the interpretation, enforcement or
defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and
expense thereof would substantially diminish the benefits intended to be extended to Indemnitee
hereunder. Accordingly, without limiting the generality or effect of any other provision hereof,
if it should appear to Indemnitee that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes or threatens to
take any action to declare this Agreement void or unenforceable, or institutes any litigation or
other action or proceeding designed to deny, or to recover from, Indemnitee the benefits provided
or intended to be provided to Indemnitee hereunder, the Company irrevocably authorizes Indemnitee
from time to time to retain counsel of Indemnitee’s choice, at the expense of the Company as
hereafter provided, to advise and represent Indemnitee in connection with any such interpretation,
enforcement or defense, including without limitation the initiation or defense of any litigation or
other legal action, whether by or against the Company or any director, officer, stockholder or
other person affiliated with the Company, in any jurisdiction. Without respect to whether
Indemnitee prevails, in whole or in part, in connection with any of the foregoing, the Company will
pay and be solely financially responsible for any and all reasonable, documented attorneys’ and
related fees and expenses incurred by Indemnitee in connection with any of the foregoing.

     21. Certain Interpretive Matters. Unless the context of this Agreement otherwise requires,
(a) “it” or “its” or words of any gender include each other gender, (b) words using the singular or
plural number also include the plural or singular number, respectively, (c) the terms “hereof,”
“herein,” “hereby” and derivative or similar words refer to this entire Agreement, (d) “Section”
refers to the specified Section of this Agreement, (e) the terms “include,” “includes” and
“including” will be deemed to be followed by the words “without limitation” (whether or not so
expressed), and (f) the word “or” is disjunctive but not exclusive. Whenever this Agreement refers
to a number of days, such number will refer to calendar days unless business days are specified and
whenever action must be taken (including the giving of notice or the delivery of documents) under
this Agreement during a certain period of time or by a particular date that ends or occurs on a
non-business day, then such period or date will be extended until the immediately following
business day. As used herein, “business day” means any day other than Saturday, Sunday or a United
States federal holiday.

     22. Counterparts. This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original but all of which together shall constitute one and the same
agreement.

[Signatures Appear On Following Page]

10

 

     IN WITNESS WHEREOF, Indemnitee has executed and the Company has caused its duly authorized
representative to execute this Agreement as of the date first above written.

	 	 	 	 	 	 	 
	 	 	STEWART & STEVENSON INC.
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	Address for Notice:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	[Indemnitee]	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	Address for Notice:	 	 

11exv10w6

 

EXHIBIT 10.6

SPECIFIC
TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL

TREATMENT FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL

HAS BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,

AND THE REDACTED TERMS HAVE BEEN MARKED AT THE APPROPRIATE PLACE WITH TWO
ASTERISKS (**).

COOPERATIVE AGREEMENT

          This COOPERATIVE AGREEMENT (“Agreement”) is executed to be effective as of October 22,
2004, at 7:00 a.m. local time in the Greater Aneth Field, San Juan County, Utah (“Effective Time”)
between RESOLUTE NATURAL RESOURCES COMPANY (“Resolute”), a Delaware corporation, and NAVAJO NATION
OIL AND GAS COMPANY (“NNOG”), a Federal corporation.

ARTICLE I.

GENERAL

          1.01 Resolute and NNOG have entered into an Asset Sale Agreement (“ASA”) with
ChevronTexaco (“CVX”) dated October 22, 2004, covering certain assets in the Greater Aneth
Field in San Juan County, Utah, located in part within the exterior boundaries of the Navajo
Nation Reservation.

          1.02 Resolute and NNOG have agreed upon certain cooperative arrangements concerning the
assets to be acquired from CVX (the “Aneth Assets”). The Aneth Assets means (a) each and every
property, interest, right and benefit Resolute and NNOG acquire in the Greater Aneth Area from
CVX or its affiliates whether pursuant to the ASA or any formal or informal amendment or
supplement thereof, understanding in connection therewith or in furtherance of or resulting
from the sale and purchase transaction, (b) the ASA and any amendments or supplements thereof
and the rights and interests of the Buyers thereunder and (c) all liabilities, obligations and
burdens associated with the foregoing.

          1.03 The parties have agreed that Resolute (or one or more of its subsidiaries) will
acquire 75% and NNOG will acquire 25% of the Aneth Assets. Resolute and NNOG’s interests in
the Aneth Assets shall be several, not joint.

ARTICLE II.

PAYMENTS AND OBLIGATIONS IN CONNECTION WITH THE ASA

          2.01 Prior to or contemporaneous with the closing of the CVX sale of the Aneth Assets,
Resolute will pay $(**) to NNOG in consideration for NNOG’s services in connection with
the acquisition of the Aneth Assets. If the value of the Aneth Assets is reduced or diminished
on account of title failures, exercises of preferential purchase rights, exclusions, casualty
losses or similar changes, the $(**) payment will be reduced in proportion to the
reduction in value of the Aneth Assets. If for any reason (i) the closing of the CVX
transaction does not occur, or is determined to be void, rescinded or otherwise not effective,
(ii) if the assignments of the Aneth Assets to Resolute and NNOG do not receive the required
Navajo Nation (“NN”) approvals or the NN denies such approvals or exercises its right of first
refusal, or (iii) at any time NNOG or the NN disclaims the effectiveness of this Agreement
including, without limitation, the waivers and consents in Article X, NNOG shall refund such
amount immediately to Resolute.

 

 

          2.02 At closing of the ASA, Resolute will pay 75% and NNOG will pay 25% of the adjusted
purchase price for the Aneth Assets as determined under the ASA. The obligations and
liabilities of the parties under the ASA shall be apportioned severally 75% to Resolute and 25%
to NNOG.

          2.03 NNOG agrees to use its best good faith efforts to obtain the support of the NN for
the closing of the ASA, as well as support for the implementation of the terms and provisions
of this Agreement. In particular, without limitation, NNOG will work with NN to obtain an
expedited approval of the assignment of interests from CVX to Resolute, or its designated
subsidiary, and NNOG, as well as a waiver of the NN preferential right to purchase the Aneth
Assets from CVX.

ARTICLE III.

NNOG OPTIONS

          3.01 Following the closing of the ASA, NNOG shall have options to purchase additional
interests out of Resolute’s interest at the various Payout points and in the percentages set
forth as follows:

     10% interest (or any lesser amount) at 100% of Payout (the “First Option”)

     10% interest (or any lesser amount) at 150% of Payout

     10% interest (or any lesser amount) at 200% of Payout

provided, however, no option will be exercisable prior to the fourth anniversary of the CVX
closing except as set forth below. The interest subject to each of the NNOG options shall be an
undivided, proportionally reduced 10% (or any lesser amount) of the 75% undivided,
proportionately reduced interest that Resolute acquires from CVX in the Aneth Assets.

          3.02 Payout is defined as the point in time when Resolute recovers from the revenue from
the sale of production from the Aneth Assets (including the effects of Resolute’s hedging
activity relative to the Aneth Asset production) net of all royalty and other payments out of
production and net of all NN, state and local taxes, assessments, fees, payments or similar
burdens (other than federal or state income taxes), (i) all of Resolute’s costs directly
associated with the acquisition of the Aneth Assets, and (ii) all of Resolute’s costs
chargeable to the Joint Account under Exhibit D to the Aneth Unit Operating Agreement as in
effect from time to time, but (iii) excluding the $(**) payment by Resolute to NNOG and
excluding interest under financing arrangements. Acquisition costs include, without limitation
legal (including legal costs associated with arranging financing for Resolute or NNOG),
accounting, consulting, title, environmental and other due diligence, engineering, travel and
all similar costs and expenses attributable to the acquisition of the CVX Assets. Revenue and
costs will be adjusted by certain amounts in the event a tax credit transaction occurs as
described below.

          3.03 The price for the purchase of any portion of the Aneth Assets pursuant to the options
granted herein shall be the Fair Market Value of such assets with an Effective Date of the date
that the relevant Payout point occurred. The Fair Market Value of

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assets for purposes of this Agreement shall be determined by the parties in good faith
based on the estimated future cash flows from reserves, the value of other material assets and
relevant market factors excluding the effect of the preferential purchase and consent rights of
the NN. Fair Market Value will be the most probable expected value in a transaction between a
willing seller and a willing buyer. If the parties fail to agree upon Fair Market Value within
30 days after the relevant notice by Resolute, or if either party believes such negotiations
will not lead to such agreement, either party may serve upon the other a notice demanding that
Fair Market Value be promptly determined by arbitration pursuant to Section 10.05 (“Market
Value Notice”).

          3.04 Each option shall be exercisable for a period ending on the later to occur of sixty
(60) days following notice by Resolute of the occurrence of the relevant percentage of Payout
or ten (10) business days following the determination of Fair Market Value. Resolute shall
calculate the status of the Payout account quarterly until such time as a Payout point could
likely occur in a shorter time than three months, after which time Resolute shall calculate the
status of the Payout account on a monthly basis. Resolute shall provide NNOG with the status
of the Payout account promptly following each such determination, providing reasonable
documentation and backup.

          3.05 In order to exercise any option, NNOG must give written notice to Resolute within the
applicable notice period. Once exercised, NNOG shall be obligated to acquire the option
interest under the terms and conditions of Exhibit A and shall pay cash therefor at the
closing. Closing of the purchase of an option interest shall occur at the offices of Resolute
on the first business day following the fourteenth day after the day of exercise. The amount
paid at closing shall be adjusted in accordance with the generally applicable adjustment
provisions of the ASA. If NNOG fails to close the acquisition of an option interest, Resolute
shall be entitled to terminate the right of NNOG to acquire the option interest and, unless
NNOG’s failure to close is for reasons outside of the reasonable control of NNOG, shall be
entitled to any other remedy provided by law or equity.

ARTICLE IV. TERMINATION UPON SALE, FIRST OPTION ACCELERATION,

AND FIRST RIGHT OF NEGOTIATION

          4.01 Except as set forth below, the NNOG options not previously exercised shall terminate
upon the sale by Resolute of the Aneth Assets, notwithstanding that such sale would otherwise
have caused Payout to occur, provided that if the right to exercise the option vests (i.e.,
when the relevant Payout has occurred) prior to such sale the option will not be terminated by
reason of the sale. A “Sale” for the purposes of this Agreement is defined to include a sale
other than to the party’s affiliates of all or substantially all of a party’s Aneth Assets, or
the production or revenue from production from such assets, or a change of control, direct or
indirect, of the Resolute entity holding the assets. A change of control shall be deemed to
occur as a result of any transaction or series of transactions whereby Resolute, its
shareholders and its subsidiaries no longer own or control, directly or indirectly, at least
50% of the voting control of the entity or entities holding the Aneth Assets.

-3-

 

          4.02 Notwithstanding Section 4.01, the First Option will become exercisable without regard
to the occurrence of Payout for a period of sixty (60) days (or the date that Fair Market Value
is determined, if later) following notice by Resolute of its intent to offer Resolute’s
interest in the Aneth Assets for Sale (as defined). The terms of the option, other than the
exercise thereof, shall be governed by the terms of Article 3, provided that the closing of the
purchase pursuant to the exercise shall occur simultaneously with the Sale giving rise to the
notice. If Resolute fails to consummate a Sale following the notice thereof, however, the
exercise of the option shall be void and the rights of the parties shall be as if no such Sale
notice had been given; provided, however, in such event, unless the failure to consummate the
Sale is due to the breach of a third party to consummate the sale, Resolute shall reimburse
NNOG for NNOG’s reasonable costs and expenses, including without limitation its attorney and
consultant fees, incurred by NNOG in pursuing such option.

          4.03 NNOG shall have a right of first negotiation concerning any proposed Sale of the
Aneth Assets by Resolute. Said right of first negotiation shall be in addition to the rights
that already exist in NN, if any. If Resolute intends to offer its interest in the Aneth
Assets for Sale, and prior to any announcement of such intent to, or negotiations or
discussions with, any third party, Resolute shall accord NNOG an exclusive right of first
negotiation for a period of sixty days (the “Exclusive Negotiation Period”). During such
Exclusive Negotiation Period, Resolute will negotiate in good faith directly and exclusively
with NNOG to arrive at a mutually agreeable Fair Market Value of such assets determined as
provided in Article 3 hereof, and any other mutually agreeable terms and conditions of a sale
of such Assets from Resolute to NNOG. This right of first negotiation is exclusive and personal
to NNOG and may not be assigned or transferred in any way. Such right shall terminate upon a
change in control of NNOG, such change of control defined substantially similarly to the
definition in Article 4.01. Such negotiation shall include only the Aneth Assets, whether
Resolute intends to include other assets as part of the Sale or not. This right of first
negotiation is not intended to be in derogation or substitution for any preference right that
NN may enjoy under Navajo law, or to preclude NNOG from obtaining the Aneth Assets in
cooperation with NN exercising such preference right. Similarly, such right of first
negotiation is not intended to give the NN any right, preference or concession it does not have
under applicable law. At either Resolute’s or NNOG’s election, the parties will engage a
mutually acceptable, nationally recognized energy evaluation firm to provide guidance on the
Fair Market Value of the assets, as determined above. The parties shall share equally the cost
of such firm. No contract of sale shall exist until definitive agreements fully agreeable to
both parties in their sole and absolute discretion as to each and every term including price
are executed.

ARTICLE V.

ASSISTANCE BETWEEN THE PARTIES

          5.01 For so long as Resolute, NNOG and their affiliates hold in the aggregate the largest
amount of working interest in the Aneth Unit, and Resolute’s working interest is greater than
NNOG’s, NNOG shall use its best good faith efforts to cause Resolute to be elected and remain
operator of the Aneth Unit and any non-unit properties within the Aneth Assets.

-4-

 

          5.02 Resolute and NNOG shall enter into a mutually acceptable joint operating agreement
concerning any properties not subject to a unit operating agreement. NNOG will support Resolute
in attempting to amend the Aneth Unit Operating Agreement to update and improve the form in
order to encourage development in any manner consistent with NNOG’s interest.

          5.03 Resolute will work with NNOG in good faith to guide and assist NNOG in expanding its
oil and gas operating capability. In this regard, Resolute or its affiliates or other persons
on its behalf will share technical and other information with NNOG concerning the Aneth Assets;
provided (i) that Resolute will have the discretion to determine appropriate amounts and types
of data to share, it being understood that such sharing should not impede efficient day-to-day
operations and business nor become an unreasonable burden on NNOG, and (ii) that NNOG has the
legal right to share such data. NNOG ACKNOWLEDGES THAT RESOLUTE MAY NOT SHARE ALL INFORMATION
IT MAY HAVE. NNOG ACKNOWLEDGES THAT ANY SUCH INFORMATION PROVIDED TO NNOG, INCLUDING, WITHOUT
LIMITATION, ANY ASSESSMENTS, ESTIMATES, ANALYSIS, STUDIES, PLANS, MODELS, FORECASTS AND SIMILAR
INFORMATION ARE PROVIDED WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND. RESOLUTE SHALL HAVE NO
LIABILITY OR OBLIGATION TO NNOG CONCERNING THE QUALITY OF SUCH INFORMATION REGARDLESS OF THE
NATURE OF ANY INACCURACY, ERROR, INCOMPLETENESS OR OTHER PROBLEM WITH THE INFORMATION. NNOG
AGREES THAT RESOLUTE SHALL HAVE NO OBLIGATION TO KEEP ANY SUCH INFORMATION CURRENT OR TO
CORRECT OR ADJUST SUCH INFORMATION IF RESOLUTE SHOULD LEARN OF ANY INACCURACY, ERROR
INCOMPLETENESS OR OTHER PROBLEM WITH THE INFORMATION. RELIANCE BY NNOG ON ANY INFORMATION
PROVIDED BY OR ON BEHALF OF RESOLUTE OR ANY OF ITS AFFILIATES, AGENTS, REPRESENTATIVES,
ADVISORS, CONSULTANTS OR ANY OTHER PERSON IS AT NNOG’S SOLE RISK. IF AND TO THE EXTENT NNOG
SHARES ANY SUCH INFORMATION WITH RESOLUTE, RESOLUTE AGREES THAT SUCH INFORMATION SHALL BE
PROVIDED TO RESOLUTE ON THE SAME TERMS THAT RESOLUTE PROVIDES INFORMATION TO NNOG AS SET FORTH
ABOVE.

          5.04 If requested by NNOG, Resolute will use its best good faith reasonable efforts
(without the payment of consideration) to assist NNOG in its arranging acceptable financing for
NNOG’s purchase of its 25% initial interest in the Aneth Assets from CVX. Resolute will also
use its best good faith reasonable efforts to introduce NNOG to financing sources and to share
information with respect to financial structures that may further NNOG’s ability to finance its
acquisitions and operations.

          5.05 To further assist NNOG in its goal of enhancing its operating capability, Resolute
will fund on an ongoing basis two scholarships in petroleum engineering and/or petroleum
geology for qualified Navajo students for such time as Resolute is operating the Aneth Assets.
Scholarships will be granted by representatives of NNOG and Resolute as agreed to among the
parties.

-5-

 

          5.06 NNOG shall use its best good faith reasonable efforts to help maintain good
relationships among Resolute and its employees, the community and the NN, including areas of
cultural sensitivity. NNOG will advise Resolute of all material information of which it becomes
aware that could impact the efficient operation of the Aneth Assets or community or employee
relations. NNOG shall use its best good faith reasonable efforts to prevent confusion among
Resolute employees or the Aneth communities as to Resolute’s authority and role concerning
operations on the Aneth Assets.

          5.07 NNOG shall use its best good faith reasonable efforts to expand and develop its
operating capabilities and expertise and to enhance its financing sources.

          5.08 NNOG shall use its best good faith reasonable efforts to maintain cooperative efforts
among all parties and agencies concerned with operations concerning the Aneth Assets. NNOG
shall use its best good faith reasonable efforts to obtain the consents and approvals necessary
or convenient for the consummation of the CVX transaction and the efficient execution of future
operations concerning the Aneth Assets, including, without limitation, consents and approvals
of the NN, the Bureau of Land Management (“BLM”), Bureau of Indian Affairs (“BIA”), and all
other authorities having jurisdiction over the Aneth Assets.

          5.09 NNOG will use its best good faith reasonable efforts to cause NN to agree to grant or
renew any rights of way that may be needed or useful for the operation and utilization of the
Aneth Assets.

ARTICLE VI.

TAX MATTERS

          6.01 Except as provided below concerning New Markets Tax Credits (“NMTC”), NNOG will
retain the right to market to third parties or otherwise for its sole benefit any income tax
exemptions, allowances, deductions or credits available to it under applicable law arising from
its operations. The value of any tax benefits of NNOG that the parties may agree to allocate
to Resolute will be treated as revenue to Resolute for purposes of determining Payout.

          6.02 Resolute, as manager of Resolute NAD, LLC, (“RNAD”) is pursuing, at its discretion
and expense, an application for an allocation of NMTC under Section 45 D of the Internal
Revenue Code and the Community Development Financial Institutions Fund program for energy
investments on Native American lands. The allocation of credits will not be earmarked for
projects on Navajo lands. Nevertheless, Resolute will direct investments that produce NMTC if
an allocation is received by RNAD, to the acquisition of and/or operations on the Aneth Assets
if and to the extent such investments can be so directed consistent with law, regulation and
the application documents. It is acknowledged that Resolute, as manager of RNAD will consider
the advice of the Board of Advisors of RNAD in determining the use of NMTC. Subject to the
foregoing, the parties acknowledge that Resolute has ultimate discretion in the pursuit of
NMTC, the use thereof and whether to continue such pursuit.

-6-

 

          6.03 To enhance the possibility of obtaining an allocation of tax credits, NNOG has agreed
to act as a “controlling entity” with respect to RNAD. NNOG owns a voting membership interest
in RNAD. NNOG has provided the necessary control entity information for the NMTC application,
and shall provide such supplemental information and cooperation as may be reasonably requested
by Resolute to continue pursuing an allocation of NMTC. NNOG shall not be involved in
management of RNAD beyond the extent required by the NMTC program, and NNOG will not assume any
position involving liability. Resolute will be the manager of RNAD unless and until it is
removed as manager in accordance with RNAD’s operating agreement. NNOG may terminate its
involvement in RNAD at any time provided it gives 45 days’ advance notice thereof to Resolute
and provided NNOG conveys its interest in RNAD to Resolute or Resolute’s designee. Resolute
shall defend, indemnify and hold harmless NNOG from any expenses, including reasonable
attorneys’ fees, associated with third party claims for damages resulting from NNOG’s ownership
of a membership interest in RNAD. Resolute shall have the right to control the defense and
settlement of any such claim. If in the opinion of Resolute’s attorney’s or advisors Resolute
reasonably determines NNOG’s ownership of an equity interest in RNAD creates a reasonable risk
of material liability to Resolute or if it reasonably could impair the obtaining of an
allocation of NMTC, upon request of Resolute, NNOG shall convey its interest in RNAD to
Resolute or Resolute’s designee in a manner consistent with the NMTC program.

        .

          6.04 If Resolute allocates NMTC for activities in connection with the Aneth Assets, the
provisions of Exhibit B shall become operative and legally binding as between Resolute and
NNOG. The parties shall then promptly enter into good faith reasonable negotiations with a
view to executing definitive agreements consistent with the provisions of Exhibit B within 30
days following notice by Resolute of such allocation. The parties shall restructure the
transactions described in Exhibit B as necessary or appropriate in order to achieve the
contemplated economic and tax results. In general, if NNOG’s working interests participate in
the tax credit program, the benefits of the tax credits would be shared in proportion to the
working interests of the parties in the Aneth Assets, and Payout would also be credited with
all of such credits received by Resolute. If NNOG’s working interests do not participate in
the tax credit program, all such tax credit benefits would go to Resolute in the first
instance, but Resolute would apply 25% of these benefits to reduce the exercise price of NNOG’s
First Option, and Payout would also be credited with the 75% portion of such credits retained
by Resolute. Resolute and NNOG, as appropriate, would be entitled to recover their respective
out of pocket costs in pursuing such credits prior to determining the proper sharing or
allocation of such tax credits. The foregoing provisions and Exhibit B are intended, and
should be construed, to be complementary and mutually consistent. However, in the event of any
inconsistency between the two with respect to the New Markets Tax Credit program, the terms set
forth in Exhibit B shall control.

ARTICLE VII.

AREAS OF MUTUAL INTEREST

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               7.01 The Greater Aneth Field, consisting of the McElmo Creek, Ratherford and White Mesa
Units, but excluding the Aneth Unit shall constitute an Area of Mutual Interest (the “GREATER
AMI”) between the parties. If either party becomes aware of the opportunity to acquire any
right, title or interest in any oil and gas lease, mineral interest, facility, contract or
other right or interest in or affecting oil and gas, including, without limitation, any right
of way, easement or surface interest used or useful for the production of oil and gas, or any
contractual right to acquire such an interest (an “Oil and Gas Interest”) in the GREATER AMI,
it shall promptly notify the other party and the parties shall negotiate in good faith
exclusively with each other for a period of ninety days in an attempt to agree upon an
arrangement to acquire the Oil and Gas Interest with the expectation that they would share the
acquisition in proportion to their interests in the Aneth Assets. Neither party shall solicit,
entertain, discuss, review, analyze nor respond to any other proposals or requests during the
period of exclusive negotiations. Notwithstanding anything herein to the contrary, if a party
has not breached its obligations under this Section 7.01 and believes in good faith that
further negotiations would not likely result in definitive agreement, such party may give
notice to the other party of such circumstance and the obligations of good faith, exclusive
negotiations shall terminate fifteen (15) days following such notice. This Section 7.01 shall
not prevent a party from taking any action to pursue or capture the acquisition opportunity.

               7.02 The boundaries of the Aneth Unit, as it may be modified, or any successor unit area,
shall also constitute an Area of Mutual Interest (the “ANETH AMI”) between the parties. If
either party acquires an Oil and Gas Interest in the ANETH AMI it shall notify the other party
within 30 days of the acquisition giving full particulars concerning the acquisition, including
the price. The other party shall have 15 days within which to elect to require an assignment
of an interest in the acquired property proportional to its relative working interest in the
Aneth Unit compared to the acquiring party’s working interest in the Aneth Unit. If the
non-acquiring party elects to require such an assignment, it shall pay its proportionate share
of all acquisition costs in exchange for proper assignments at a closing to be held within 30
days following the election.

               7.03 The GREATER AMI and the ANETH AMI shall terminate upon the consummation of a Sale (as
defined in Section 4.01) by Resolute.

ARTICLE VIII.

REPRESENTATIONS AND WARRANTIES OF RESOLUTE

               8.01 Resolute represents and warrants to NNOG as follows:

     (a) Resolute is a corporation duly organized, validly existing and in good
standing under the laws of Delaware and has the requisite corporate power to carry
on its business as it is now being conducted. Resolute is duly qualified or
licensed to do business, and is in good standing, in each jurisdiction, in which the
character of the property or assets owned, leased or operated by it, or the nature
of the business conducted by it, makes such qualification or licensing necessary and
the failure to so qualify or be licensed would have a material adverse effect on the
transactions or performance contemplated under this Agreement.

-8-

 

     (b) Resolute has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement and the transactions
contemplated hereby have been duly and validly authorized by all requisite corporate
action on the part of Resolute.

     (c) Neither the execution and delivery of this Agreement nor the consummation
of the transactions and performance of the terms and conditions contemplated hereby
by Resolute will:

     (i) conflict with or result in any breach of any provision of
the certificate of incorporation or bylaws (or other similar
governing documents) of Resolute; or

     (ii) assuming that all required governmental approvals are
obtained, be rendered void or ineffective by or under the terms,
conditions or provisions of any agreement, instrument or obligation
to which Resolute is a party or is subject or by which any of the
Aneth Assets are bound.

     (d) Subject to applying for and obtaining all required governmental approvals,
no consent, approval, authorization or permit of, or filing with or notification to,
any person is required for or in connection with the execution and delivery of this
Agreement by Resolute or for or in connection with the consummation of the
transactions and performance of the terms and conditions contemplated hereby by
Resolute.

     (e) There are no actions, claims, suits, arbitration proceedings, inquiries,
proceedings, investigation or audit by or before any court or arbitration panel or
any governmental authority pending or, to the knowledge of Resolute, threatened
against Resolute which relate to the Aneth Assets or the transactions contemplated
by this Agreement and that would have a material adverse effect on the transactions
or performance contemplated under this Agreement.

     (f) Resolute has not received any notice of any violation or default or alleged
violation or default (or of any fact or circumstance which with notice or the
passage of time or both would constitute a violation or default) of or under any
applicable governmental law or regulation or term or provision of the ASA which
would have a material adverse effect on the transactions or performance contemplated
under this Agreement.

     (g) There are no bankruptcy, reorganization, arrangement, liquidation or
similar proceedings pending against, being contemplated by, or, to the knowledge of
Resolute, threatened against Resolute.

     (h) This Agreement constitutes a valid and binding agreement of Resolute
enforceable against it in accordance with its terms, subject to:

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    (i) applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general application with
respect to creditors;

    (ii) general principles of equity; and

    (iii) the power of a court to deny enforcement of remedies
generally based on public policy.

     (i) The representations and warranties of Resolute are limited to those set
forth in this Section, and NNOG acknowledges that there are no other representations
or warranties of Resolute, either express or implied, any rule of law or legislation
to the contrary.

ARTICLE IX.

REPRESENTATIONS AND WARRANTIES OF NNOG

          9.01 NNOG represents and warrants to Resolute as follows:

     (a) NNOG is a corporation organized under the Section 17 of the Indian
Reorganization Act, as amended, 25 U.S.C. § 477, validly existing and in good
standing under such and has the requisite corporate power to carry on its business
as it is now being conducted. NNOG is duly qualified or licensed to do business,
and is in good standing, in each jurisdiction, in which the character of the
property or assets owned, leased or operated by it, or the nature of the business
conducted by it, makes such qualification or licensing necessary and the failure to
so qualify or be licensed would have a material adverse effect on the transactions
or performance contemplated under this Agreement.

     (b) NNOG has all requisite corporate power and authority to execute and deliver
this Agreement and to perform its obligations under this Agreement. The execution,
delivery and performance of this Agreement and the transactions contemplated hereby
have been duly and validly authorized by all requisite corporate action on the part
of NNOG.

     (c) Neither the execution and delivery of this Agreement nor the consummation
of the transactions and performance of the terms and conditions contemplated hereby
by NNOG will:

    (i) conflict with or result in any breach of any provision of
the certificate of incorporation or bylaws (or other similar
governing documents) of NNOG; or

    (ii) be rendered void or ineffective by or under the terms,
conditions or provisions of any agreement, instrument or obligation
to which NNOG is a party or is subject or by which any of its
properties or assets are bound.

-10-

 

     (d) Subject to applying for and obtaining all required governmental approvals,
no consent, approval, authorization or permit of, or filing with or notification to,
any person is required for or in connection with the execution and delivery of this
Agreement by NNOG or for or in connection with the consummation of the transactions
and performance of the terms and conditions contemplated hereby by NNOG.

     (e) There are no actions, claims, suits, arbitration proceedings, inquiries,
proceedings, investigation or audit by or before any court or arbitration panel or
any governmental authority pending or, to the knowledge of NNOG, threatened against
NNOG which relate to the Aneth Assets or the transactions contemplated by this
Agreement and that would have a material adverse effect on the transactions or
performance contemplated under this Agreement.

     (f) There are no bankruptcy, reorganization, arrangement, liquidation or
similar proceedings pending against, being contemplated by, or, to the knowledge of
NNOG, threatened against NNOG.

     (g) This Agreement constitutes a valid and binding agreement of NNOG
enforceable against it in accordance with its terms, subject to:

    (i) applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general application with
respect to creditors;

    (ii) general principles of equity; and

    (iii) the power of a court to deny enforcement of remedies
generally based on public policy.

     (h) NNOG has given all prior notices required under Article XVI of the charter
of NNOG in order to make the provisions of Article X hereof fully effective and
binding on NNOG and the Navajo Nation as of the date of this Agreement. Copies of
all such notices have been provided to Resolute. NNOG has not withdrawn, rescinded
or taken any other action that would affect the validity of such notices and such
provisions. NNOG has received no objection or other indication from any party that
would call into question the efficacy of the notices or the provisions of Article X
hereof.

     (i) The representations and warranties of NNOG are limited to those set forth
in this Section, and Resolute acknowledges that there are no other representations
or warranties of NNOG, either express or implied, any rule of law or legislation to
the contrary.

ARTICLE X.

DISPUTE RESOLUTION; GOVERNING LAW

          10.01 Dispute Resolution – General.

-11-

 

     (a) Any dispute or difference arising under or out of, in relation to or in any
way connected with (i) this Agreement, the Aneth Unit Agreement or Unit Operating
Agreement (“JOA”), the ASA any contract or other obligation or right acquired from
ChevronTexaco under or on account of the ASA, or any amendment of the foregoing,
(ii) any property, right, interest contract or obligation jointly acquired by the
parties in the Greater AMI or Aneth AMI, or (iii) any operations, transactions,
actions or inactions conducted, arising under or out of, in relation to or in any
way connected with any of the items or matters listed in (i) or (ii) above (whether
contractual, tortious, equitable, statutory or otherwise including, without
limitation, the negotiation, execution, existence, amendment, validity,
enforceability, performance, non-performance, breach, termination, interpretation or
construction thereof), or the commercial or economic relationship of the parties
hereto, and all questions as to whether or how specific disputes are to be resolved
pursuant to this Article (the foregoing referred to individually or collectively as
“Dispute”) shall be resolved in accordance with the procedures of this Article X.
Without limiting the generality of the foregoing, Disputes include disputes over the
existence, validity, interpretation or scope of the agreement under which
arbitration is sought, and who are proper parties to the arbitration. In any
arbitration under this Article, the arbitration panel shall have the power to rule
on its own jurisdiction, including any objection to the initial or continuing
existence, validity or the effectiveness of the arbitration agreement. For the
purposes of challenges to the jurisdiction of the arbitration panel, the arbitration
clause shall be considered as separable from any contract of which it forms a part.

     (b) The procedures specified in this Article will be the sole and exclusive
procedures for the resolution of Disputes; provided however that, prior to the
appointment of the arbitrators, a party may seek a preliminary injunction or other
preliminary judicial relief in U.S. District Court in New Mexico if in the judgment
of that party such action is necessary to avoid irreparable damage or to preserve
the status quo. Despite the initiation of any such judicial proceedings, the parties
will continue to participate in good faith in the procedures specified in this
Article. Each party is required to continue to perform its obligations under this
Agreement pending final resolution of any Dispute. The parties’ commitment to
resolve Disputes pursuant to this Article survives the expiration or termination of
this Agreement. All deadlines specified in this Article may be extended by mutual
written agreement. As between the parties, all applicable statutes of limitation
shall be tolled while the procedures specified in this Article are pending and the
parties will take all actions, if any, required to effectuate such tolling. The
existence of this provision regarding tolling shall not be deemed to imply that the
parties have access to court in lieu of the dispute resolution under this Article.

     (c) Except for Disputes over the determination of Fair Market Value under §3.03
of this Agreement (“Value Disputes”), Disputes will be addressed using a three-step
sequenced process that includes: (1) direct negotiation as described §10.02, (2) a
convening meeting with a mediator as described in §10.03, and (3) submittal to
binding arbitration as described in §10.04. Because

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the parties have agreed that Value Disputes must be resolved on an expedited
schedule, Value Disputes will be finally resolved by arbitration in accordance with
the CPR Rules for Non-Administered Arbitration as set forth in §10.05 without formal
or preliminary negotiations or steps.

          10.02 Direct Negotiation. The parties shall attempt in good faith to resolve any Dispute
promptly by negotiation between executives who have authority to settle the controversy and who
are at a higher level of management than the persons with direct responsibility for
administration of the relevant contracts. Either party may give the other party written notice of
any Dispute that has not been resolved in the normal course of business. Within 10 days after
delivery of the notice, the receiving party shall submit to the other a written response. The
notice and response shall include: (a) a statement of that party’s position and a summary of
arguments supporting that position, and (b) the name and title of the executive who will
represent that party and of any other person who will accompany the executive. Within 20 days
after delivery of the initial notice, the executives of both parties shall meet at a mutually
acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt
to resolve the Dispute. All reasonable requests for information made by one party to the other
will be honored. All negotiations pursuant to this clause are confidential and shall be treated
as compromise and settlement negotiations for purposes of applicable rules of evidence.

          10.03 Convening Meeting. If the Dispute has not been resolved by negotiation as provided
herein within 30 days after delivery of the initial notice of negotiation, or if the parties
failed to meet within 20 days after delivery, the Parties agree to attend and participate in a
convening meeting (“Convening”), facilitated by a knowledgeable mediator, to discuss use of
alternate dispute resolution methods to resolve the Dispute. Either party may demand a Convening
regarding a Dispute by sending written notice to the other party. Within 5 days after the date of
such notice, the receiving party shall submit a written response to the other. For such a
Convening, the Parties agree that they will cooperatively and jointly select the mediator,
schedule a Convening in Santa Fe, New Mexico at a mutually acceptable time, and will equally
share the mediator’s fees. Each Party agrees to attend such a meeting for at least four hours,
but is free to withdraw from the Convening after attending for that time period. The parties
anticipate that such a Convening, among other things, would include discussion of the following:
(a) the mode of proceeding further (for example, mediation, neutral evaluation, mini-trial,
etc.); (b) a procedure and schedule for exchange of documents and other information related to
the Dispute; (c) ground rules and a schedule for conducting the selected mode of proceeding; and,
(d) selection and compensation of the neutral evaluator (if any). Each party is required to
continue to perform its obligations under this Agreement pending final resolution of any Dispute.

          10.04 Arbitration of Disputes Other than Value Disputes.

     (a) If the Dispute has not been amicably resolved within 30 days after the
initial notice for a Convening, or if either party will not participate in
Convening, the Dispute shall be finally resolved by arbitration in accordance with
the CPR Rules for Non-Administered Arbitration then currently in effect (“CPR
Rules”), by three arbitrators of whom each party shall appoint one in accordance

-13-

 

with the ‘screened’ appointment procedure provided in CPR Rule 5.4; provided,
however, that if one party fails to participate in either the negotiation or
mediation as agreed herein, the other party can commence arbitration prior to the
expiration of the time periods set forth above. In the event of any conflict between
the CPR Rules and the arbitration procedures set forth in this Section, the
arbitration procedures set forth in this Section shall govern and control. The
arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§1–16, and
judgment upon the award rendered by the arbitrators may be entered as provided in
§10.06.

     (b) In any Dispute submitted to arbitration by NNOG, the arbitration hearing
shall take place in a location selected by Resolute. In any Dispute is submitted to
arbitration by Resolute, the arbitration hearing shall take place in a location
selected by NNOG.

     (c) The Arbitrators shall apply the substantive law of the State of New Mexico
exclusive of its conflict of law rules. The Arbitrators shall have authority to
award any remedy or relief that a court of the State of New Mexico could order or
grant, subject to the limitation that the only form of damages that may be awarded
are compensatory damages based in contract law. Therefore, each party hereby
irrevocably waives any damages (i) in excess of compensatory damages, including a
waiver of any indirect, exemplary, punitive or multiple damages, (ii) for lost
profits or business opportunity, (iii) arising in consumer protection statutes, and
(iv) based in tort rather than contract law.

     (d) The following procedures will guide arbitration conducted under this
Section:

    (i) Pre-hearing conference. The parties and arbitrators will
schedule a comprehensive pre-hearing conference to be completed as
soon as practicable after the selection of arbitrators that is
intended to result in the issuance by the arbitrators of a order
that specifically identifies the issues and claims submitted to
arbitration, and establishes dates for the hearing and actions to be
completed prior to the hearing.

    (ii) Discovery. Consistent with the expedited nature of
arbitration, each party will, upon the written request of the other
party, promptly provide the other with copies of the documents
relevant to the issues raised by any claim, cross claim or counter
claim. Any dispute regarding their production, or the scope thereof,
shall be determined by the chair of the panel, which determination
shall be conclusive. The arbitrators shall permit and facilitate
such additional discovery as they determine is appropriate in the
circumstances, taking into account the needs of the parties and the
desirability of making discovery expeditious and cost-effective.
Such discovery may include pre-hearing depositions, particularly
depositions of witnesses who will not appear personally to testify,

-14-

 

if there is a demonstrated need therefor. The arbitrators may
issue orders to protect the confidentiality of proprietary
information, trade secrets and other sensitive information disclosed
in discovery.

    (iii) Time limitations and management of proceedings. The
arbitration proceedings shall be conducted in an expeditious manner
and, to the extent possible, with the goal of having the final award
rendered within 45 days after the selection of the arbitrators has
been completed. The Arbitrators shall actively manage the
proceedings as they deem best so as to make the proceedings fair,
expeditious, economical, and less burdensome than litigation. The
arbitrators are empowered to impose reasonable time limitations for
each phase of the proceeding including, but not limited to,
limitations on the time allotted to each party for the presentation
of its case and rebuttal.

    (iv) Provisional and equitable remedies. The arbitrators may,
in the course of proceedings, order any provisional remedy or
conservatory measure, including but not limited to attachment,
specific performance, preliminary injunction or the deposit of
specified security, which they consider to be necessary, just and
equitable. The failure of a party to comply with such an interim
order, after due notice and opportunity to cure such noncompliance,
may be treated by the arbitrators as a default and all or some of
the claims or defenses of the defaulting party may be stricken and
partial or final award entered against such party, or the
arbitrators may award such lesser sanctions as they deem
appropriate. A request for interim or provisional relief to a court
under §10.01(b) shall not be deemed incompatible with the agreement
to arbitrate or as a waiver of that agreement.

    (v) Attorney’s fees. The parties agree that the prevailing
party in any Dispute finally resolved by arbitration is entitled to
an award of the reasonable legal fees, costs, expert fees, and
expenses (collectively “Fees”) incurred in the arbitration provided
that such award of Fees may not exceed the amount of the Fees
incurred by the losing party in the arbitration process. The parties
further agree that the award of Fees made in the arbitration may
include both: (a) Fees incurred in the arbitration, and (b) Fees
incurred in any litigation concerning the Dispute (including but not
limited to litigation to compel arbitration or stay court
proceedings).

     (e) Award. The parties intend that the award will be a reasoned
award that will be issued within thirty days after the completion of the taking of

-15-

 

evidence, argument by counsel before the panel, and submission of any
post-hearing filings.

     (f) Consolidation. The parties wish to avoid multiple arbitration cases in
which similar evidence is presented. The parties agree that the following factors
bear upon whether independent arbitration proceedings should be consolidated: the
procedural status of the various proceedings; the effect and cost of conducting
multiple rather than a single arbitral proceedings; whether there are one or more
common questions of law or fact in the multiple proceedings; and whether the
interests of justice, judicial economy and expedition would be served by
consolidation. Therefore, except as provided in §10.05(f), either party may move to
consolidate any arbitration proceeding under this §10.4 with another arbitration or
arbitrations under this Section. The arbitrators in the first initiated arbitration
proceeding shall receive and rule upon motions or requests to consolidate
proceedings, and shall also determine the venue for the consolidated proceeding. The
parties agree to cooperate to the extent possible on any consolidation of
proceedings under this Section with an arbitration proceeding under the ASA where
the factors above support consolidation.

               10.05 Special Arbitration Procedures for Value Disputes.

     (a) Value Disputes shall be finally resolved by arbitration in accordance with
the CPR Rules as modified in this Agreement. The arbitration of Value Disputes shall
be governed by the Federal Arbitration Act, 9 U.S.C. §§1–16, and judgment upon the
award rendered by the arbitrator may be entered as provided in §10.06. The
arbitrator shall apply the substantive law of the State of New Mexico exclusive of
its conflict of law rules.

     (b) Because special expertise is needed to adjudicate a Value Dispute, a
nationally recognized energy valuation firm, acting through one of its principals as
selected by such firm, will serve as the single neutral and impartial arbitrator
(“Value Arbitrator”). Within 5 days of the Market Value Notice served under Section
3.03, the parties will confer and attempt to agree upon one of the following
nationally recognized energy valuation firms to serve as arbitrator: Randall &
Dewey; Petrie Parkman & Company; or Albrecht & Associates. A successor of any such
company that generally has continued the business of the predecessor company shall
be considered the same as the predecessor company. Changes of name of any of the
above companies shall not affect the company’s qualification as an arbitrator.
Value Arbitrators must comply with the CPR Rules, including Rule 7 concerning
arbitrator independence and impartiality. If the parties cannot reach agreement on
the identity of the arbitrator or if any other dispute arises concerning the
selection of the Value Arbitrator, the Value Arbitrator will be promptly selected by
the President of the CPR Institute or his designee (“CPR President”).

-16-

 

     (c) The sole issue submitted to, and to be ruled upon in the award by, the
Value Arbitrator is the determination of Fair Market Value as defined in §3.03.

     (d) Although the Value Arbitrator has expertise to determine Fair Market Value,
the Value Arbitrator may be unfamiliar with the details of arbitration and the CPR
Rules. Therefore, to assist the Value Arbitrator with questions concerning
arbitration process, the CPR President will appoint from the appropriate CPR Panel a
single person who will advise and assist the Value Arbitrator as needed to ensure
that CPR Rules are understood and followed, including those provisions concerning
neutrality and impartiality. (“CPR Advisor”).

     (e) The Value Arbitrator will determine the process to be used in the
arbitration of the Value Dispute so as to render an award that determines the Fair
Market Value within 30 days of selection of identity of the Value Arbitrator. The
fees and expenses of the Value Arbitrator, the CPR Advisor and CPR will be shared
equally by the parties. Each party shall bear its own legal fees incurred in the
Value Dispute.

     (f) Because Value Arbitration arbitrations under this §10.05 require prompt
resolution, no arbitration conducted under this §10.05 will be joined with any other
arbitration.

          10.06 Venue, Jurisdiction, Waiver of Defenses, Governing Law.

     (a) NNOG irrevocably agrees that, to the extent that it has or hereafter may
acquire any right of immunity against Resolute or its successors and assigns,
whether characterized as sovereign immunity or otherwise, from any legal proceedings
to resolve a Dispute, whether in the courts of the United States of America, any
State of the United States of America, or the Navajo Nation, or in an arbitration
proceeding, or elsewhere, including, without limitation, immunity from service of
process, immunity from jurisdiction or judgment of any court or tribunal, immunity
from execution of judgment and immunity of any of its property from attachment prior
to entry of judgment, or from attachment in aid of execution upon a judgment, NNOG
expressly, unconditionally and irrevocably waives any such immunity and consents and
submits to arbitration pursuant to §10.04 or §10.05, as applicable, and further
consents to be sued to the extent and in the manner such suit is authorized by
§10.06(b).

     (b) NNOG hereby expressly, unconditionally and irrevocably waives any immunity
described in §10.06(a) and any right of exhaustion of tribal remedies, with respect
to any suit, action or other proceeding brought in the United States District Court
for the District of New Mexico in connection with any Dispute between NNOG and
Resolute for the limited purpose of (1) compelling arbitration, (2) granting preliminary relief described in §10.01(b)
and/or (3) enforcing an arbitration award, and consents to the jurisdiction of such

-17-

 

federal court for such purposes. NNOG hereby waives and agrees not to assert by way
of motion or as a defense or otherwise in any such suit or proceeding (i) any claim
that it is not subject to the personal jurisdiction of such federal court (provided
process is served pursuant to law), and (ii) that such suit, action or proceeding is
brought in an inconvenient forum or that venue is improper. In the event that the
above-named federal court has determined that it does not have jurisdiction over
such matters brought before it, or at the election of Resolute, NNOG hereby
expressly, unconditionally and irrevocably waives any immunity described in
§10.06(a) with respect to an action or other proceeding in the state courts of the
State of New Mexico for such relief related to arbitration and consents to the
jurisdiction of such court for such purposes.

     (c) Any judgment against NNOG or Resolute resulting from arbitration as
authorized by §10.04 or §10.05, as applicable, may be satisfied out of any of such
party’s assets.

     (d) This Agreement shall be governed by and construed, interpreted and applied
in accordance with the laws of the State of New Mexico, excluding any choice of law
rules or conflicts of law principles which would refer the matter to the laws of
another jurisdiction.

ARTICLE XI.

TERM

          11.01 The provisions of this Agreement creating rights or obligations that terminate upon
the occurrence of certain events shall so terminate. Subject to Section 4.02, the remaining
terms of this Agreement shall terminate if and when there occurs a Sale, as defined herein,
with respect to either Resolute or NNOG.

ARTICLE XII.

MISCELLANEOUS PROVISIONS

          12.01 This Agreement constitutes the entire agreement between the parties regarding the
subject matter hereof and supersedes all warranties and representations made and all previous
agreements, arrangements or understandings between the parties relating to the subject matter
hereof whether oral or in writing made or dated prior to the date of execution and delivery of
this Agreement. Resolute confirms to NNOG that Resolute has not relied on any representations
save those set forth in this Agreement. NNOG confirms to Resolute that NNOG has not relied on
any representations save those set forth in this Agreement. This Agreement may not be
supplemented, altered, amended, modified, or terminated other than by agreement in writing
hereafter executed and delivered by both parties hereto.

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          12.02 Subject to the restrictions on assignment herein contained, the terms and provisions
of this Agreement shall inure to the benefit of and be binding upon Resolute and NNOG and their
respective successors, assigns and legal representatives.

          12.03 Neither Resolute nor NNOG shall assign this Agreement, in whole or in part, save to
an affiliate of such party, without the written consent of the other party, and any purported
assignment in violation hereof shall be null and void. In the event either party consents to a
proposed assignment or in the case of an assignment to a party’s affiliate, such assignee must
agree to be expressly bound hereby and the assigning party shall remain liable for such
assignee’s obligations hereunder.

          12.04 Any notices, communications or documents that either party to this Agreement desire
to deliver or that may be required to be delivered to the other party to this Agreement shall
be sent via telecopy, delivered in person, delivered by recognized courier service (such as
Federal Express) or sent certified mail, postage prepaid, return receipt requested, received
during normal business hours for the receiving party and addressed to the respective parties at
the following address stated for each:

   RESOLUTE:

Resolute Natural Resources Company

1675 Broadway, Suite 1950

Denver, Colorado 80202

Attention: James M. Piccone

President and General Counsel

Fax: 303-534-4600

   NNOG:

Navajo Nation Oil & Gas Company

P.O. Box 4439

Window Rock, Arizona 86515

Attention: Wilson Groen

President and General Manager

Fax: 928-871-4862

Notices or other communications shall be effective upon receipt by the party to be notified,
except that, for purposes hereof, if telecopy or personal delivery is not possible, refusal by
any party to accept correspondence sent by certified mail shall be deemed receipt of such
correspondence. A party may change its address for notices by giving notice to the other in the
manner herein provided. The notice provisions of this Section shall not supercede the notice
provisions of the applicable joint operating agreement for the matters covered thereby.

          12.05 If any term or provision of this Agreement is invalid, illegal or incapable of being
enforced by reason of any rule of law or public policy, all other terms and provisions of this
Agreement shall nevertheless remain in full force and effect so long

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as the economic and legal substance of the transactions contemplated hereby are not
affected in a manner that is materially adverse to either party.

          12.06 Nothing in this Agreement is intended to or shall inure to the benefit of or be
enforceable by any person other than the parties to this Agreement and their successors, legal
representatives and permitted assigns, and nothing in this Agreement shall entitle any other
person to any claim, cause of action, remedy or right of any kind.

          12.07 Titles or headings of Articles of this Agreement are only for the convenience of the
parties shall not limit or be construed to have any effect or meaning with respect to the other
content of such Articles.

          12.08 As used herein, the following terms have the following meaning:

     (a) “affiliate” means, when used with respect to any person, any other person
which directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with such first mentioned person, with the
term “control” (including the terms “controlled by” and “under common control with”)
meaning the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a person, whether through the ownership
of voting stock or any equity interest, by contract or otherwise.

     (b) “governmental approvals” means all consents and approvals of the government
of the Navajo Nation, the State of Utah, the United States or any agency,
department, representative or official thereof with respect to a particular
transaction or action which are required by applicable laws and regulations.

     (c) “person” means an individual, corporation, partnership, limited liability
company, association, government or governmental agency, department or
representative, or any other entity.

          12.09 Unless otherwise herein stated, references herein to a numbered “Section” are to the
section of this Agreement bearing the corresponding number.

          12.10 Resolute and NNOG each declare that they have contributed to the drafting of this
Agreement and have had it reviewed by their counsel before signing it. It is expressly agreed
that this Agreement shall not be construed against either party hereto on the basis of who
drafted this Agreement or who supplied the form of Agreement. Each party agrees that this
Agreement has been purposefully written and correctly reflects that party’s understanding of
the transactions that it contemplates.

          12.11 No waiver by any party of any breach of any provision of this Agreement shall be
binding unless made expressly in writing. Further, any such waiver shall relate only to the
breach to which it expressly relates and shall not apply to any subsequent or other breach.

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          12.12 Each party shall maintain in confidence for a period of one year following the
termination of this Agreement the terms of this Agreement and any other non-public agreement
between the parties, any opportunities to acquire interests in the Aneth AMI or the Greater
AMI, and any proprietary technical and financial data of the other party (the foregoing,
“Information”). Such obligation means that a party shall not disclose such Information except
to such party’s representatives or as required by law. Information means all information,
tangible or intangible and in whatever form or medium, disclosed by a party or any of a party’s
affiliates or representatives concerning any asset or any business, business opportunity,
operations, activities, interests or other matters relating to any together with all
information generated by the recipient or by recipient’s affiliates or representatives which
contains, reflects or is derived from the information; specifically including but not limited
to, geological and geophysical data, models, analyses, compilations, estimates of reserves,
notes, summaries, interpretations, data, studies, reports, contractual and financial
information and other data in whatever form or medium maintained, whether oral, written,
documentary, electronic, computer storage or otherwise. “Representatives” means directors,
officers, employees, members, shareholders, lenders, agents, financial advisors and sources,
consultants, contractors, attorneys and accountants of the parties.

A party has no obligations with regard to any Information which, other than by breach of this
Agreement, is: (A) already in or subsequently comes into its possession without restriction on
disclosure or (B) in or subsequently comes into, the public domain through no fault of the
party or any affiliate or representative of the party.

If a party or any representative or affiliate of a party shall be requested or required to
disclose confidential Information by law, order, decree, regulation or rule (including without
limitation, those of any regulatory agency, securities commission or stock exchange) or if any
person seeks to legally compel (by interrogatories, document requests, subpoena or otherwise) a
party or any representative or affiliate of the party to disclose any Information, the party
shall provide the other party prompt written notice so the other party may seek a protective
order or other appropriate remedy (including participation in any proceeding). A party shall
consult with the other party with respect to the timing, manner and content of any such
disclosure and any action the party may wish to take to prevent or limit such disclosure. In
any event, a party shall disclose only that portion of the Information which its counsel
advises the party is legally required to be disclosed.

          12.13 Upon execution by both Resolute and NNOG this Agreement shall become effective as of
the Effective Time. This Agreement may be executed by signing the original or any counterpart
thereof, and, if this Agreement is executed in counterparts, all counterparts taken together
shall have the same effect as if both the parties hereto had signed the same instrument and
shall constitute but one and the same Agreement.

          12.14 Each party shall subordinate its rights and interest under and pursuant to this
Agreement if and to the extent reasonably requested by the other party in order to facilitate
the other party’s financings while preserving each party’s respective rights and interests as
between the parties to this Agreement.

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     IN WITNESS WHEREOF, the parties have caused their duly authorized signatories to execute and
deliver this Agreement on the dates set out opposite their signatures below to be effective as of
the Effective Time.

	 	 	 	 	 	 	 	 	 	 	 
	   Date:	 	11/30/04 	 	 	 	RESOLUTE NATURAL RESOURCES COMPANY	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	/s/ Nicholas J. Sutton 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	Nicholas J. Sutton 	 	 
	 

	 	 	 	 	 	Title:	 	Chief Executive Officer 	 	 

	 	 	 	 	 	 	 	 	 	 	 
	   Date:	 	November 30, 2004 	 	 	 	NAVAJO NATION OIL AND GAS COMPANY	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	/s/ Manual Morgan 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	Manual Morgan 	 	 
	 

	 	 	 	 	 	Title:	 	Chairman 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	/s/ Wilson Groen 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name:	 	Wilson Groen 	 	 
	 

	 	 	 	 	 	Title:	 	President 	 	 

-22-

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