Document:

Exhibit 10.2

 

BANK OF SCOTLAND

NEW YORK BRANCH

565 Fifth Avenue

New York, New York 10017

 

 

 

                                                                                                                October
31, 2007

 

 

 

FirstCity Financial Corporation

6400 Imperial Drive

Waco, Texas 76712

 

Gentlemen:

 

We refer to Amendment No.10 and Consent to Revolving Credit Agreement
dated as of August 22, 2007 (the “Amendment”) among FirstCity Financial
Corporation (the “Borrower”), the financial institutions which are parties to
the Agreement hereinafter referred to (the “Lenders”) and Bank of Scotland, as
agent (the “Agent”), for the Lenders under the Revolving Credit Agreement dated
as of November 12, 2004, among the Borrower, the Lenders and the Agent (as
amended to date, the “Agreement”).

The Agent and the Borrower hereby agree and confirm that the date in
Section 9.19 of the Agreement is amended to be November 16, 2007.

Except as expressly amended hereby, the Agreement remains in full force
and effect in accordance with its terms.

Please sign below to confirm the terms of this letter, which may be
executed in counterparts, which when taken together shall constitute one and
the same instrument.  This letter shall
be governed by, and construed in accordance with, the laws of the State of New
York without reference to choice of law doctrine that would result in the application
of the laws of another jurisdiction.  The
execution and delivery of this letter shall not obligate the Agent to agree to
any further amendments, waivers or consents.

On and after September 17, 2007, the “appointed day” for the
registration of the Bank of Scotland as a public limited company under the
United Kingdom Companies Act 1985, all references in this document to the Bank
of Scotland however expressed shall be deemed to be references to Bank of
Scotland plc.  Bank of Scotland plc is
registered in Scotland and has its registered office at The Mound, Edinburgh
EH1 1YZ.

 

 

 

This letter may be executed in counterparts, which when taken together
shall constitute one and the same instrument.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  BANK OF SCOTLAND,

  
	
   

  	
  Individually and as Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

 

AGREED:

FIRSTCITY FINANCIAL CORPORATION

 

	
  By:

  	
   

  	
   

  	 

	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

 

2Exhibit
10.1

 

 

 

PURCHASE
AND SALE AGREEMENT

 

 

 

Between

 

BANK OF
NEW YORK TRUST COMPANY, N.A., solely in its capacity as trustee of 

Santa Fe Energy Trust

 

 

And

 

 

 

AMEN
PROPERTIES, INC.

 

 

 

Dated

 

 

 

November
8, 2007

 

 

TABLE OF CONTENTS

	
  1.

  	
  Certain Definitions

  	
  1

  
	
  2.

  	
  Sale and Purchase

  	
  5

  
	
  3.

  	
  Sale Price

  	
  5

  
	
  4.

  	
  Deposit

  	
  5

  
	
  5.

  	
  Allocated Values

  	
  5

  
	
  6.

  	
  Seller’s Representations

  	
  6

  
	
  7.

  	
  Buyer’s Representations

  	
  6

  
	
  8.

  	
  Access to Records

  	
  8

  
	
  9.

  	
  Defects.

  	
  9

  
	
  10.

  	
  Consents and Preferential Rights.

  	
  12

  
	
  11.

  	
  Physical and Environmental Inspection

  	
  13

  
	
  12.

  	
  Period Pending Closing.

  	
  13

  
	
  13.

  	
  [Intentionally Omitted.]

  	
  14

  
	
  14.

  	
  Notification of Breaches

  	
  14

  
	
  15.

  	
  Sale Price Adjustment

  	
  14

  
	
  16.

  	
  Termination.

  	
  16

  
	
  17.

  	
  Conditions of Closing by Buyer

  	
  17

  
	
  18.

  	
  Conditions of Closing by Seller

  	
  17

  
	
  19.

  	
  Preliminary Closing Statement

  	
  18

  
	
  20.

  	
  Closing

  	
  18

  
	
  21.

  	
  Reservations and Exceptions

  	
  19

  
	
  22.

  	
  Payments

  	
  19

  
	
  23.

  	
  Assumption of Liabilities and Indemnities

  	
  19

  
	
  24.

  	
  Indemnification Action

  	
  21

  
	
  25.

  	
  Limitation on Actions

  	
  22

  
	
  26.

  	
  Casualty and Condemnation

  	
  23

  
	
  27.

  	
  Taxes

  	
  23

  
	
  28.

  	
  Sales Tax; Recording Fees

  	
  23

  
	
  29.

  	
  Records

  	
  23

  
	
  30.

  	
  Post-Closing Adjustments; Revenues

  	
  24

  
	
  31.

  	
  Notices

  	
  25

  
	
  32.

  	
  Further Assurance

  	
  26

  
	
  33.

  	
  Disclaimer of Warranties

  	
  26

  
	
  34.

  	
  Expenses

  	
  27

  
	
  35.

  	
  Due Diligence

  	
  27

  
	
  36.

  	
  Material Factor

  	
  27

  
	
  37.

  	
  Press Release.

  	
  27

  
	
  38.

  	
  Entire Agreement

  	
  28

  
	
  39.

  	
  Tax Reporting.

  	
  28

  
	
  40.

  	
  Assignability.

  	
  28

  
	
  41.

  	
  Choice of Law

  	
  28

  
	
  42.

  	
  Dispute Resolution

  	
  28

  
	
  43.

  	
  Counterpart Execution.

  	
  28

  
	
  44.

  	
  Severance of Invalid Provisions.

  	
  28

  
	
  45.

  	
  Limitation on Damages.

  	
  29

  
	
  46.

  	
  References.

  	
  29

  
	
  47.

  	
  Waivers

  	
  29

  
	
  48.

  	
  Third Person Beneficiaries

  	
  29

  
	
  49.

  	
  Capacity of Trustee

  	
  29

  
	
  50.

  	
  Acknowledgement

  	
  29

  

 

i

EXHIBITS AND SCHEDULES

	
  Exhibit A

  	
  Oil and Gas Properties

  
	
  Exhibit B

  	
  Allocated Values

  
	
  Exhibit C

  	
  Form of Deed, Assignment and
  Bill of Sale

  
	
  Exhibit D

  	
  Form of Non-Foreign Affidavit

  
	
   

  	
   

  
	
  Schedule 1(d)

  	
  Contracts

  
	
  Schedule 1(e)

  	
  Excluded Properties

  
	
  Schedule 10

  	
  Consents and Preferential Rights

  
	
  Schedule 15(h)

  	
  Subject Assets Excluded from Revised Reserve Report
  Adjustment

  

 

ii

INDEX
OF DEFINED TERMS

 

	
  Defined Term

  	
   

  	
   

  	
  Section

  	
   

  
	
   

  	
   

  	
   

  
	
  Accounting Arbitrator

  	
   

  	
  Section 30(a)

  
	
  Affiliate

  	
   

  	
  Section 1(a)

  
	
  Agreed Rate

  	
   

  	
  Section 15(k)

  
	
  Agreement

  	
   

  	
  Recitals

  
	
  Allocated Values

  	
   

  	
  Section 5

  
	
  Assumed Obligations

  	
   

  	
  Section 23(b)

  
	
  BNY

  	
   

  	
  Recitals

  
	
  Business Day

  	
   

  	
  Section 1(b)

  
	
  Buyer

  	
   

  	
  Recital

  
	
  Claim Notice

  	
   

  	
  Section 24(b)

  
	
  Claim

  	
   

  	
  Section 24(b)

  
	
  Closing

  	
   

  	
  Section 20

  
	
  Closing Date

  	
   

  	
  Section 20

  
	
  Closing Date WTI Price

  	
   

  	
  Section 15(j)

  
	
  Code

  	
   

  	
  Section 1(c)

  
	
  Commitment Letter

  	
   

  	
  Section 7(f)(ii)

  
	
  Confidentiality Agreement

  	
   

  	
  Section 8

  
	
  Contracts

  	
   

  	
  Section 1(d)

  
	
  current Tax period

  	
   

  	
  Section 27

  
	
  Damages

  	
   

  	
  Section 23(a)

  
	
  Deceptive Trade Practices Act

  	
   

  	
  Section 33

  
	
  Defect Amount

  	
   

  	
  Section 9(f)

  
	
  Defect Arbitrator

  	
   

  	
  Section 9(i)

  
	
  Defect Claim Date

  	
   

  	
  Section 9(d)

  
	
  Defect

  	
   

  	
  Section 9(a)

  
	
  Deposit

  	
   

  	
  Section 4

  
	
  Devon

  	
   

  	
  Section 1(e)

  
	
  Effective Time

  	
   

  	
  Section 1(f)

  
	
  Environmental Arbitrator

  	
   

  	
  Section 9(i)

  
	
  Environmental Defect

  	
   

  	
  Section 9(c)

  
	
  Environmental Interest

  	
   

  	
  Section 9(c)

  
	
  Environmental Laws

  	
   

  	
  Section 9(c)

  
	
  Excluded Properties

  	
   

  	
  Section 1(g)

  
	
  Excluded Records

  	
   

  	
  Section 1(h)

  
	
  Governmental Authority

  	
   

  	
  Section 1(i)

  
	
  Indemnified Person

  	
   

  	
  Section 24(a)

  
	
  Indemnifying Person

  	
   

  	
  Section 24(a)

  
	
  July Reserve Report

  	
   

  	
  Section 15(h)

  
	
  Laws

  	
   

  	
  Section 1(j)

  
	
  Leases

  	
   

  	
  Section 1(k)

  
	
  MMMF

  	
   

  	
  Section 33

  
	
  Net Profits Royalties

  	
   

  	
  Section 1(l)

  
	
  NORM

  	
   

  	
  Section 9(c)

  
	
  Party

  	
   

  	
  Recital

  
	
  Permitted Encumbrances

  	
   

  	
  Section 1(n)

  
	
  Person

  	
   

  	
  Section 1(o)

  
	
  Properties

  	
   

  	
  Section 1(p)

  
	
  Property

  	
   

  	
  Section 1(p)

  
	
  Records

  	
   

  	
  Section 1(q)

  
	
  Revised Reserve Report

  	
   

  	
  Section 15(h)

  
	
  Sale Price

  	
   

  	
  Section 3

  

 

iii

 

	
  Seller

  	
   

  	
  Recital

  
	
  Seller Group

  	
   

  	
  Section 23(a)

  
	
  Subject Assets

  	
   

  	
  Section 1(r)

  
	
  Suspended Royalties

  	
   

  	
  Section 1(s)

  
	
  Target Closing Date

  	
   

  	
  Section 20

  
	
  Tax

  	
   

  	
  Section 1(t)

  
	
  Treasury Obligations

  	
   

  	
  Section 1(u)

  
	
  Title Arbitrator

  	
   

  	
  Section 9(i)

  
	
  Title Defect

  	
   

  	
  Section 9(b)

  
	
  Trust

  	
   

  	
  Section 49

  
	
  Trustee

  	
   

  	
  Recitals

  
	
  Units

  	
   

  	
  Section 1(v)

  
	
  Wasson Royalties

  	
   

  	
  Section 1(w)

  
	
  Wells

  	
   

  	
  Section 1(x)

  

 

iv

PURCHASE AND SALE AGREEMENT

                This PURCHASE AND SALE
AGREEMENT, dated as of November 8, 2007 (“Agreement”), is  between The Bank of New York Trust Company, N.A. (“BNY”),
solely in its capacity as Trustee of Santa Fe Energy Trust (BNY, solely in its
capacity as trustee of Santa Fe Energy Trust, being herein called the “Trustee”;
and the Trustee, in its capacity as the seller of the Properties, being
sometimes called herein “Seller”), and Amen Properties, Inc., a Delaware
corporation (hereinafter referred to as “Buyer”).  Seller and Buyer are sometimes referred to
collectively as the “Parties” and individually as a “Party.”

WHEREAS, Seller desires to sell and Buyer
desires to purchase those certain interests in oil and gas properties, rights
and related assets that are defined and described as “Properties” herein.

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

1.             Certain Definitions.  As used herein:

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

(b)           “Business
Day” means any day other than a Saturday, a Sunday, or a day on which banks
are closed for business in New York, New York or Houston, Texas, United States
of America.

(c)           “Code”
means the United States Internal Revenue Code of 1986, as amended.

(d)           “Contracts”
means all currently existing contracts, agreements and instruments with respect
to the Properties, to the extent burdening or applicable to the Properties,
including operating agreements, unitization, pooling, and communitization
agreements, declarations and orders, area of mutual interest agreements, joint
venture agreements, farmin and farmout agreements, exchange agreements,
transportation agreements, agreements for the sale and purchase of oil and gas
and processing agreements, including, but not limited to, those contracts,
agreements and instruments set forth on Schedule 1(d), but excluding any
contracts, agreements and instruments included within the definition of “Excluded
Properties”.

(e)           “Devon”
shall mean Devon Energy Production Company, L.P., an Oklahoma limited
partnership.

(f)            “Effective
Time” shall mean October 1, 2007 at 7:00 a.m., local time, said time
to be determined for each locality in which the Properties are located in
accordance with the time generally observed in said locality.

(g)           “Excluded
Properties” shall mean the following:

(i)            the
Excluded Records;

(ii)           all
copies of other Records retained by Seller pursuant to Section 29;

(iii)          all
contracts, agreements and instruments whose transfer is prohibited or subjected
to payment of a fee or other consideration by an agreement with a Person other
than an Affiliate of Seller, or by applicable Law, and for which no consent to
transfer has been received or for which Buyer has not agreed in writing to pay
the fee or other consideration, as applicable;

 

1

(iv)          all
permits and other appurtenances for which transfer is prohibited or subjected
to payment of a fee or other consideration by an agreement with a Person other
than an Affiliate of Seller, or by applicable Law, and for which no consent to
transfer has been received or for which Buyer has not agreed in writing to pay
the fee or other consideration, as applicable;

(v)           all
claims against third Persons pending on or prior to the Effective Time, but
excluding any claims related to the Suspended Royalties;

(vi)          any
Tax refund (whether by payment, credit, offset or otherwise, and together with
any interest thereon) in respect of any Taxes for which Seller is liable for
payment or required to indemnify Buyer under Section 23 or 28;

(vii)         all
refunds relating from severance Tax abatements with respect to all taxable
periods or portions thereof ending on or prior to the Effective Time, but
excluding any refunds relating to the Suspended Royalties;

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

(ix)           all
cash, cash equivalents and amounts receivable held by the Trustee;

(x)            the
Wasson Royalties;

(xi)           the
Treasury Obligations;

(xii)          all
audit rights under any Contracts or the Leases to the extent related to periods
prior to the Effective Time, but excluding any audit rights related to the
Suspended Royalties;

(xiii)         any
surface rights related to the Leases, Units or Wells; and

(xiv)        any
other assets, personal property, contracts or other tangible or intangible
rights described on Schedule 1(g).

Notwithstanding
anything to the contrary in this Section 1(f) or elsewhere in this Agreement, “Properties”
shall not include any rights with respect to the Excluded Properties.

(h)           “Excluded
Records” shall mean:

(i)            all
corporate, financial, Tax and legal data and records of the Trustee that relate
to the Trust generally (whether or not relating to the Properties);

(ii)           any
data, software and records to the extent disclosure or transfer is prohibited
or subjected to payment of a fee or other consideration by any license
agreement or other agreement with a Person, or by applicable Law, and for which
no consent to transfer has been received or for which Buyer has not agreed in
writing to pay the fee or other consideration, as applicable;

(iii)          all
legal records and legal files of the Trustee including all work product of and
attorney-client communications with the Trustee’s legal counsel;

(iv)          all
data and records relating to the sale of the Properties, including
communications and correspondence with Stifel, Nicolaus & Company,
Incorporated, Devon and its Affiliates, representatives and agents and bids
received from and records of negotiations with third Persons;

(v)           all
data and records relating to the other Excluded Properties; and

 

2

(vi)          all
original data, software and records, or copies thereof, retained by Seller
pursuant to Section 29.

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

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

(k)           “Leases”
means, collectively, the oil and gas leases, oil, gas and mineral leases and
subleases, royalties, overriding royalties, net profits interests, mineral fee
interests, carried interests, and other rights to oil and gas in place, and
mineral servitudes, that are described on Attachment 1 to Exhibit A.

(l)            “Net
Profits Royalties” means the interests in the Subject Assets granted
pursuant to those instruments set forth in Part 1 of Exhibit A
attached hereto, including, but not limited to such interests constituting an
undivided variable royalty interest in and to the hydrocarbons that may be
produced, saved, and marketed from the Subject Assets equal to ninety percent
(90%) of the net proceeds attributable to the Properties, all as further described
in the instruments set forth in Attachment 1 of Exhibit A
attached hereto.

(m)          [Intentionally
Omitted.]

(n)           “Permitted
Encumbrances” means any or all of the following:

(i)            Lessors’
royalties and any overriding royalties, reversionary interests and other
burdens (other than the Net Profits Royalties) to the extent that they do not,
individually or in the aggregate, reduce the net revenue interests with respect
to the Subject Assets burdened by the Net Profits Royalties below that shown in
Attachment 2 of Exhibit A or increase the working interests above
that shown in Attachment 2 of Exhibit A without a corresponding
increase in the net revenue interest;

(ii)           All
leases, unit agreements, pooling agreements, operating agreements, production
sales contracts, division orders and other contracts, agreements and
instruments applicable to the Subject Assets, including provisions for
penalties, suspensions or forfeitures contained therein, to the extent that
they do not, individually or in the aggregate, reduce the net revenue interests
burdened by the Net Profits Royalties below that shown in Attachment 2
of Exhibit A or increase the working interests with respect to the
Subject Assets burdened by the Net Profits Royalties above that shown in Attachment
2 of Exhibit A without a corresponding increase in the net revenue
interest;

(iii)          Rights
of first refusal, preferential rights to purchase and similar rights with
respect to the Properties, but excluding, however, any preferential rights to
purchase or similar rights that are applicable to the sale of the Properties
contemplated by this Agreement, including those set forth on Schedule 10, and
for which the holder of such right has validly exercised such right;

(iv)          Third-Person
consent requirements and similar restrictions which are not applicable to the
sale of the Properties contemplated by this Agreement or with respect to which
waivers or consents are obtained from the appropriate Persons prior to the
Closing Date or the appropriate time period for asserting the right has expired
or which need not be satisfied prior to a transfer;

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

 

3

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

(vii)         All
rights to consent, required notices to, filings with, or other actions by
Governmental Authorities in connection with the transactions contemplated
hereby if they are customarily obtained subsequent to the sale or conveyance of
similar assets;

(viii)        Rights
of reassignment, termination or reversion of title or interest in the
Properties arising (A) upon final intention to abandon or release the Subject
Assets or Properties, or any of them; or (B) under any instrument set forth in Attachment
1 of Exhibit A;

(ix)           Easements,
rights-of-way, covenants, servitudes, permits, surface leases and other rights
in respect of surface operations;

(x)            Calls
on production under existing Contracts;

(xi)           Any
actual or asserted termination of title to any mineral servitude or any Subject
Asset held by production as a consequence of the failure to conduct operations,
cessation of production or insufficient production over any period;

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

(xiii)         Any
lien, charge, cause of action, claim or other encumbrance on or affecting the
Properties which is expressly waived, assumed, bonded or paid by Buyer at or
prior to Closing or which is discharged by Seller at or prior to Closing;

(xiv)        any
lien or trust arising in connection with workers’ compensation, unemployment
insurance, pension or employment Laws or regulations;

(xv)         Any
matter set forth on any schedule or exhibit hereto, or set forth on any
agreement or instrument identified on any schedule or exhibit hereto; and

(xvi)        Any
other liens, charges, claims, causes of action, encumbrances, defects or
irregularities which do not, individually or in the aggregate, materially
detract from the value of the Net Profits Royalties subject thereto or affected
thereby (as currently used or owned) and which would be accepted by a
reasonably prudent purchaser engaged in the business of owning oil and gas
interests similar in nature to the Net Profits Royalties, including, without
limitation, the absence of any lease amendment or consent by any royalty
interest or mineral interest holder authorizing the pooling of any leasehold
interest, royalty interest or mineral interest and the failure of Exhibit A
to reflect any lease or any unleased mineral interest where the owner thereof
was treated as a non-participating co-tenant during the drilling of any well.

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

(p)           “Property”
or “Properties” means all of Seller’s right, title and interest in and
to the Net Profits Royalties, the Suspended Royalties, the Contracts, and the
Records.

 

4

(q)           “Records”
means the data and records of Seller, to the extent relating solely to the
Properties, excluding, however, in each case, the Excluded Records.

(r)            “Subject
Assets” means the Leases, Wells and Units.

(s)           “Suspended
Royalties” means any amounts attributable to the Net Profits Royalties
payable out of production of oil or gas from the Leases, Units and Wells or the
proceeds thereof to Seller but held in suspense by any Person as of the Closing
Date (regardless of whether such amounts are attributable to production for
periods before, on, or after the Effective Time and any interest accrued in
escrow accounts for such suspended funds.

(t)            “Tax”
means all taxes, including any foreign, federal, state or local income tax,
surtax, remittance tax, presumptive tax, net worth tax, special contribution,
production tax, pipeline transportation tax, freehold mineral tax, value added
tax, withholding tax, gross receipts tax, windfall profits tax, profits tax,
severance tax, personal property tax, real property tax, sales tax, goods and
services tax, service tax, transfer tax, use tax, excise tax, premium tax,
stamp tax, motor vehicle tax, entertainment tax, insurance tax, capital stock
tax, franchise tax, occupation tax, payroll tax, employment tax, unemployment
tax, disability tax, alternative or add-on minimum tax and estimated tax,
imposed by a Governmental Authority together with any interest, fine or penalty
thereon.

(u)           “Treasury
Obligations”  means the United States
Treasury obligations held by BNY in its capacity as depository for the benefit
of the holders of beneficial interest in the Trust.

(v)           “Units”
means all pooled, communitized or unitized acreage which includes all or part
of any Leases, and all tenements, hereditaments and appurtenances belonging to
the Leases and Units.

(w)          “Wasson
Royalties” means (i) the interest held by the Trust known as the Wasson ODC
Royalty; and (ii) the interest held or previously held by the Trust in the
Wasson Willard Unit, each as described in the original conveyances of such
interests to the Trustee.

(x)            “Wells”
means any and all oil, gas, water, CO2 or injection wells located on
the Leases or on the pooled, communitized or unitized acreage that includes all
or any part of the Leases, including the interests in the wells shown on Attachment
3 of Exhibit A attached hereto.

2.             Sale and Purchase.     Subject to and upon all of the terms,
conditions, reservations and exceptions hereinafter set forth, Seller shall
sell, transfer, assign, convey and deliver the Properties to Buyer, and Buyer
shall purchase, receive, pay for and accept the Properties from Seller,
effective as of the Effective Time.

3.             Sale Price.    The sale price for the Properties shall
be fifty million and four hundred and forty thousand dollars ($50,440,000.00) (“Sale
Price”), subject only to any applicable price adjustments as provided for
in Section 15.

4.             Deposit.    Concurrently with the execution and delivery
of this Agreement Buyer  has caused the
delivery to Seller, via wire transfer of immediately available funds, of an
earnest money deposit in the amount of fifteen percent (15%) of the Sale Price
(such amount, together with all interest earned thereon, the “Deposit”).  Seller shall hold the Deposit in an interest
bearing account in accordance with written instructions from Buyer and
reasonably acceptable to Seller.  In the
event that this Agreement is terminated pursuant to Section 16, the Deposit
shall be distributed in accordance with Section 16, otherwise the Deposit shall
be distributed in accordance with Section 20(h).

5.             Allocated Values.     Buyer and Seller herein agree upon the
allocation of the Sale Price among the Properties (the “Allocated Value”).  Such Allocated Values are made a part of this
Agreement and are shown on Exhibit B, which is attached hereto.  The Allocated Value for any Net Profits
Royalties burdening a Lease, Well or Unit equals the portion of the Sale Price
that is allocated to such Net Profits 

 

5

Royalties
burdening the Lease, Well or Unit on Exhibit B, increased or decreased
as provided herein.  The share of each
adjustment allocated to a particular Well or Unit shall be obtained by
allocating that adjustment among the various Properties on a pro rata basis in
proportion to the Sale Price allocated to each such Property on Exhibit B.  Within three (3) Business Days after receipt
of the Revised Reserve Report, Buyer may amend Exhibit B by providing
Seller with a written copy of such amendment, provided, however, that such
amendment shall be void and of no force or effect if the changes reflected in
such amendment are not materially consistent with the differences between the
information set forth in July Reserve Report and the Revised Reserve Report
(after taking into account the values set forth on the original Exhibit B
attached hereto and the proposed amended Exhibit B) and, within three
(3) Business Days Seller of Seller’s receipt of such amendment, Seller provides
written notice to Buyer that Seller objects to such amendment.  Seller has accepted such Allocated Values for
purposes of this Agreement and the transactions contemplated hereby, but
otherwise makes no representation or warranty as to the accuracy of such
values.

6.             Seller’s Representations.   Seller represents and warrants to Buyer that
as of the date hereof:

(a)           Qualification
and Power.  Seller is validly
existing and in good standing under the Laws of its jurisdiction of formation
and has full power and authority to enter into and perform this Agreement (and
all documents required to be executed and delivered by Seller at Closing) and
to consummate the transactions contemplated by this Agreement (and such
documents).

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

(c)           Limitations.

(i)            Except
as and to the extent expressly set forth in this Section 6, (A) Seller
makes no representations or warranties, express or implied, and (B) Seller
expressly disclaims all liability and responsibility for any representation,
warranty, statement or information made or communicated (orally or in writing)
to Buyer or any of its Affiliates, employees, agents, consultants or
representatives (including, without limitation, any opinion, information,
projection or advice that may have been provided to Buyer by any officer,
director, employee, agent, consultant, representative or advisor of Seller or
any of their Affiliates).

(ii)           Exhibits
and Schedules may include matters not required by the terms of this Agreement
to be listed on the Exhibits and Schedules, which additional matters are
disclosed for the convenience of Buyer only, and inclusion of any such matter
does not mean that all such matters are included or that any of such matters
are material.

(iii)          A
matter scheduled as an exception to any representation, warranty or statement
set forth in this Section 6, set forth on any schedule or exhibit hereto, or
set forth on any agreement identified on any schedule or exhibit hereto shall
be deemed to be an exception to all representations, warranties and statements
to which it is relevant.

7.             Buyer’s Representations.   Buyer represents and warrants to Seller that
as of the date hereof:

 

6

 

(a)           Qualification
and Power.  Buyer (i) is a duly
organized corporation validly existing and in good standing under the Laws of
the State of Delaware; (ii) is, or as of the Closing Date shall be, duly
qualified as of the Closing Date to carry on its business in the states in
which the Properties are located, and (iii) has full power and authority to
enter into and perform this Agreement (and all documents required to be
executed and delivered by Buyer at Closing) and to consummate the transactions
contemplated by this Agreement (and such documents).

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

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

(d)           Consents,
Approvals or Waivers.  The execution,
delivery and performance of this Agreement by Buyer are not subject to any
consent, approval or waiver from any Governmental Authority or other Person.

(e)           Litigation.  There are no actions, suits or proceedings
pending, threatened in writing before any Governmental Authority or arbitrator
against Buyer or any Affiliate of Buyer which could impair or delay Buyer’s
ability to perform its obligations under this Agreement.

(f)            Financing.

(i)            Buyer
has sufficient cash, available lines of credit or other sources of immediately
available funds (in United States dollars) to enable it to pay the Sale Price
to Seller at the Closing.

(ii)           Prior
to the execution of this Agreement, Buyer has received and delivered to Seller
true and complete copies of commitment letters from First Southern National Bank,
Universal Guaranty Life Insurance Company, Jon Morgan and  Eric Oliver that, collectively commit to the
provision of all of the financing required by Buyer to pay the unadjusted Sale
Price, and any other amounts payable under this Agreement, and all agreements,
arrangements or undertakings related to that commitment letter to which Buyer
or any of its Affiliates is a party (whether contained in a fee letter or
otherwise) and all schedules, annexes, exhibits or other attachments to any
thereof, excluding any actual fee payment amounts (collectively, the “Commitment
Letters”).  The Commitment Letters
are in full force and effect and neither Buyer nor any of its Affiliates has
agreed to any material amendment or modification thereof and neither Buyer nor
any of its Affiliates is in breach or default thereunder.  Buyer and/or its Affiliates are in a position
to satisfy all conditions to advances under the Commitment Letters to the
extent such conditions are within their control.  The aggregate proceeds of the financings to
which the Commitment 

 

 

7

 

Letters
relate are, together with available funds of the Buyer (details in respect of
which have been delivered by Buyer to Seller), sufficient to pay the Sale Price.

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

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

(i)            Qualification.  Buyer is or as of the Closing will be
qualified under applicable Laws to own and hold the Properties.

(j)            Independent
Investigation; Reliance.  Buyer is
(or its advisors are) sophisticated and experienced and knowledgeable in the
oil and gas business and aware of the risks of that business.  Buyer acknowledges and affirms that
(i) it has completed its own independent investigation, verification,
analysis and evaluation of the Properties, and (ii) it has made all
reviews and inspections of the Properties and Subject Assets as it has deemed
necessary or appropriate.  Buyer
represents and affirms that in entering into this Agreement, Buyer has relied solely
on (i) the express representations and warranties made expressly by Seller in
Section 6 of this Agreement, (ii) Buyer’s independent investigation of, and
judgment with respect to, the Subject Assets and the Properties and (iii) the
advice of its own legal, Tax, economic, environmental, engineering, geological
and geophysical advisors and not on any comments or other statements of Seller or
of any representatives of, or consultants or advisors engaged by or on behalf
of Seller.  Except for the
representations and warranties expressly made by Seller in Section 6 of this
Agreement, Buyer acknowledges that there are no representations or warranties,
express or implied, as to the financial condition, liabilities, operations,
business or prospects with respect to the Properties and that in making its
decision to enter into this Agreement and to consummate the transactions
contemplated hereby, Buyer has relied solely upon its own independent
investigation, verification, analysis and evaluation, has evaluated the merits
and risks of purchasing the Properties from Seller and has formed its own
opinion based solely on Buyer’s knowledge and experience and, except for the
representations and warranties made expressly by Seller in Section 6, not on
any representations or warranties by Seller or any other Person, including any
representatives, consultants or advisors engaged by or on behalf of Seller.

8.             Access to Records.  After execution of this Agreement, Seller
shall give Buyer and its authorized representatives, during regular business
hours, at Buyer’s sole risk, cost and expense, access, with copying privileges,
to data and records, and to all contract, land, title and lease records, to the
extent such data and records are in Seller’s possession and relate to the
Properties, and to such other information in Seller’s possession relating to
the Properties as Buyer may reasonably request; provided, however,
that Seller shall have no obligation to provide Buyer access to any data or
information (a) where such access or disclosure would violate applicable Laws,
(b) which Seller considers proprietary or confidential or (c) to which Seller
cannot legally provide Buyer access because of third-Person restrictions on
Seller or the nature of the interests owned by Seller.  Seller agrees to use its commercially
reasonable efforts to obtain the consent of any such third Person to furnish
any such information to Buyer as reasonably requested by Buyer.  Such access by Buyer shall be limited to
Seller’s normal business hours, and Buyer’s investigation shall be conducted in
a manner that minimizes interference with the operation of the Subject Assets
and the operations of Seller.  Buyer
acknowledges that Seller is not the operator of the Subject Assets and that,
except as set forth in Section 6, Seller makes no representations or warranties
(i) regarding any rights to provide Buyer with access to any data, information,
or other materials relating to the Properties held by third Persons, or (ii) as
to the accuracy, completeness or the sufficiency of the Records or any other
access, or information, data or reports provided hereunder.  All information obtained by Buyer and its
representatives under this Section 8 shall be subject to the terms of that
certain confidentiality agreement between Stifel, Nicolaus & Company,
Incorporated, on behalf of 

 

8

 

Seller,
and Buyer dated September 6, 2007 (“Confidentiality Agreement”) and any
applicable privacy Laws regarding personal information.

9.             Defects.

(a)           For
the purpose of this Agreement, a “Defect” shall mean any Title Defect or
Environmental Defect.

(b)           “Title
Defect” shall mean any lien, charge, obligation, cause of action, claim or
title defect burdening the Properties, other than Permitted Encumbrances, that:

(i)            Entitles
the Seller to receive at any time throughout the duration of the productive
life of any Net Profits Royalty, LESS THAN
ninety percent (90%) of the net proceeds attributable to the “net revenue
interest” or “NRI” share shown in Attachment 2 of Exhibit
A of all oil, gas and other minerals produced, saved and marketed from such
Lease, Unit or Well, including decreases in connection with those operations in
which those Subject Assets burdened by the Net Profits Royalties are subject to
any non-consent or similar penalties, decreases resulting from reversion of
interest to co-owners with respect to operations in which such co-owners
elected not to consent, decreases resulting from the establishment or amendment
of pools or units, and decreases required to allow other working interest
owners to make up past underproduction or pipelines to make up past
underdeliveries and except as stated in Attachment 2 of Exhibit A;

(ii)           Obligates
the portion of the Subject Assets burdened by the Net Profits Royalties to bear
at any time a percentage of the costs and expenses for the maintenance and
development of, and operations relating to, any Lease, Unit or Well NOT GREATER THAN the “working interest” or “WI”
shown in Attachment 2 of Exhibit A without increase throughout
the productive life of such Unit or Well, except as stated in Attachment 2
of Exhibit A and except increases resulting from contribution
requirements with respect to defaulting co-owners under applicable operating
agreements or applicable Law and increases that are accompanied by at least a
proportionate increase in the net revenue interest.

(c)           “Environmental
Defect” shall mean the failure of the ownership and operation of the
Subject Assets to be in material compliance with all applicable Environmental
Laws or any contamination of groundwater, surface water, soil or seabed on the
Subject Assets resulting from hydrocarbon activities on such Subject Assets
required to be remediated under applicable Environmental Laws on or before the
date of this Agreement, in each case that are chargeable as Production Costs
(as such term is defined in the applicable instrument set forth on Attachment
1 of Exhibit A) to the Properties in accordance with the instrument
set forth on Attachment 1 of Exhibit A but which have not been
remediated, provided, however, the presence or absence of naturally occurring radioactive
material (“NORM”), asbestos, mercury, drilling fluids and chemicals, and
produced waters and hydrocarbons in or on the Subject Assets in quantities
typical for oilfield operations in the areas in which the Subject Assets are
located or usual and customary obligations to plug and abandon wells and
dismantle structures shall in no event
constitute an “Environmental Defect”. 
“Environmental Laws” means, as the same have been amended to the
date hereof, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. § 9601 et  seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. § 6901 et  seq.; the
Federal Water Pollution Control Act, 33 U.S.C. § 1251 et  seq.;
the Clean Air Act, 42 U.S.C. § 7401 et  seq.; the Hazardous
Materials Transportation Act, 49 U.S.C. § 1471 et  seq.; the
Toxic Substances Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil
Pollution Act, 33 U.S.C. § 2701 et  seq.; the Emergency
Planning and Community Right to Know Act, 42 U.S.C. § 11001 et  seq.;
and the Safe Drinking Water Act, 42 U.S.C. §§ 300f through 300j, in each
case as amended to the date hereof, and all similar Laws as of the date hereof
of any Governmental Authority having jurisdiction over the property in question
addressing pollution or protection of the environment or biological or cultural
resources and all regulations implementing the foregoing.

(d)           To
assert a claim for any Defect, Buyer must deliver a claim notice or notices to
Seller on or before the date ten (10) Business Days prior to the Target Closing
Date (“Defect Claim Date”).  Each
such notice shall be in writing and shall include: (i) a description of the
alleged Defect(s); (ii) the Leases, 

 

9

 

Units
or Wells affected; (iii) the Allocated Values of the Leases, Units or Wells
subject to the alleged Defect(s); (iv) supporting documents reasonably
necessary for Seller (as well as any title attorney, environmental consultant
or examiner hired by Seller) to verify the existence of the alleged Defect(s);
and (v) the amount by which Buyer reasonably believes the Allocated Values of
those Leases, Units or Wells are reduced by the alleged Defect(s) and the
computations and information upon which Buyer’s belief is based.  Buyer shall be deemed to have waived, and
hereby does waive, all claims for Defects of which Buyer has not provided
Seller notice on or before the Defect Claim Date.

(e)           Seller
shall have the right, but not the obligation, to attempt, at Seller’s sole
cost, to cure or remove on or before the Closing Date any Defects of which
Seller has been notified by Buyer in accordance with Section 9(d).  If the Defect is not cured prior to the
Closing Date, the adjustment required under this Section 9 shall be made
pursuant to this Section 9.  Seller’s
election to attempt to cure a Defect shall not constitute a waiver of Seller’s
right to dispute the existence, nature or value of, or cost to cure, the
Defect.

(f)            With
respect to each Lease, Unit or Well affected by Defects reported in accordance
with Section 9(d), the Net Profits Royalties burdening such Lease, Unit or Well
shall nevertheless be assigned to and acquired by Buyer at Closing, subject to
all uncured Defects, and the Sale Price shall be reduced by an amount (“Defect
Amount”) equal to the reduction in the Allocated Value for the Net Profits
Royalties burdening such Lease, Unit or Well caused by such Defects, as
determined pursuant to Section 9(h).

(g)           Seller
makes no warranty or representation as to the quantity or quality of title to
the Properties.  Buyer releases, remises
and forever discharges Seller and its Affiliates and all such Persons’
stockholders, officers, directors, employees, agents, advisors and
representatives from any and all suits, legal or administrative proceedings,
claims, demands, damages, losses, costs, liabilities, interest or causes of
action whatsoever, in law or in equity, known or unknown, which Buyer might now
or subsequently may have, based on, relating to or arising out of, any Defect
or other deficiency in title or environmental condition relating to the
Properties. Buyer affirms that Buyer has relied exclusively on its own
independent investigation of all title and environmental conditions relating to
the Properties, including all Defects, and that Buyer has not relied on Seller
or on any of the representatives, consultants, or advisors engaged by or on
behalf of Seller.

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

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

(ii)           if
the Title Defect is a lien, encumbrance, cause of action, claim, or other
charge which is undisputed and liquidated in amount, then the Defect Amount
shall be the liquidated amount necessary to be paid to remove, cure or
remediate the Defect, but only to the extent
such amount is chargeable as Production Costs (as such term is defined
in the applicable instrument set forth on Attachment 1 of Exhibit A)
to the Net Profits Royalties in
accordance with the instruments set forth on Attachment 1 of Exhibit
A;

(iii)          if
the Title Defect is that (A) the net revenue interest for any Lease, Unit
or Well is less than (B) the net revenue interest or percentage stated on Attachment
2 of Exhibit A, then the Defect Amount shall be the product of the
Allocated Value of the Net Profits Royalties burdening such Lease, Unit or Well
multiplied by a fraction, the numerator of which is the actual net revenue
interest or percentage ownership and the denominator of which is the net
revenue interest or percentage ownership stated on Attachment 2 of Exhibit
A, provided that if the Defect does not affect the Lease, Unit or Well
throughout its entire productive life, the Defect Amount determined under this
Section 9(h)(iii) shall be reduced to take into account the applicable time
period only;

(iv)          if
the Title Defect represents an obligation, encumbrance, burden or charge upon
or other defect in title to the affected Lease, Unit or Well of a type not
described in Sections 9(h)(i) through 9(h)(iii) above, the Defect Amount shall
be determined by taking into account the Allocated Value 

 

 

10

 

of
the Net Profits Royalties burdening such Lease, Unit or Well so affected, the
portion of Seller’s interest in the Net Profits Royalties burdening the Lease,
Unit or Well affected by the Defect, the legal effect of the Defect, the
potential economic effect of the Defect over the life of the Net Profits
Royalties burdening the affected Lease, Unit or Well, the values placed upon
the Defect by Buyer and Seller and such other factors as are necessary to make
a proper evaluation;

(v)           if
the Defect is an Environmental Defect, the Defect Amount shall be the lesser of
(A) the costs and expenses necessary to remediate the portion of the Subject
Assets burdened by the Net Profits Royalties, but only to the extent such costs
and expenses are chargeable as Production Costs (as such term is defined in the
applicable instrument set forth on Attachment 1 of Exhibit A) to
the Net Profits Royalties in accordance with the instruments set forth on Attachment
1 of Exhibit A, or (B) an amount equal to the adverse economic
effect of the Defect on the Properties;

(vi)          notwithstanding
anything to the contrary in this Section 9, (A) an individual claim for a
Defect for which a claim notice is given prior to the Defect Claim Date shall
only generate an adjustment to the Sale Price under this Section 9 if the
Defect Amount with respect thereto exceeds twenty thousand dollars
($20,000.00), (B) the aggregate Defect Amounts attributable to the effects
of all Title Defects upon the Net Profits Royalties burdening any given Lease,
Unit or Well shall not exceed the Allocated Value of the Net Profits Royalties
burdening such Lease, Unit or Well and (C) there shall be no adjustment to
the Sale Price for Defects unless and until the aggregate Defect Amounts that
are entitled to an adjustment under Section 9(h)(vi)(A) and for which Claim
Notices were properly delivered on or before the Defect Claim Date exceed two
percent (2%) of the unadjusted Sale Price, and then only to the extent that
such aggregate Defect Amounts exceed two percent (2%) of the unadjusted Sale
Price;

(vii)         if
a Defect is reasonably susceptible of being cured or remediated, the Defect
Amount determined under Sections 9(h)(iii), (iv) or (v) above shall not be
greater than the reasonable cost and expense of curing or remediating such
Defect, but only to the extent such costs and
expenses are chargeable as Production Costs (as such term is defined in
the applicable instruments set forth on Attachment 1 of Exhibit A)
to the Net Profits Royalties in
accordance with the instrument set forth on Attachment 1 of Exhibit A;

(viii)        if
a Title Defect is attributable to any asserted claim or cause of action that
has not been finally adjudicated or resolved prior to the Closing Date, the
Defect Amount with respect to such Title Defect shall equal the amount, if any,
that may be reasonably determined based on the final adjudication or resolution
of such claim or cause of action, as such adjudication or resolution may be
reasonably determined based on the facts known to the Parties hereto as of the
Closing Date; and

(ix)           the
Defect Amount with respect to a Defect shall be determined without duplication
of any costs or losses included in another Defect Amount hereunder, or for
which Buyer otherwise receives credit in the calculation of the Sale Price.

(i)            Notwithstanding
anything herein to the contrary, in the event that the aggregate of all Defect
Amounts attributable to Environmental Defects that Buyer has validly asserted
in accordance with this Section 9 exceeds twenty percent (20%) of the
unadjusted Sale Price, then Seller may elect, in its sole discretion, to
terminate this Agreement by delivering written notice to Seller prior to the Closing.

(j)            Seller
and Buyer shall attempt to agree on all Defect Amounts by the Closing
Date.  If Seller and Buyer are unable to
agree by the Closing Date, Seller’s estimate shall be used to determine the
adjusted Sale Price pursuant to Section 15, and the Defect Amounts in dispute
shall be exclusively and finally resolved by arbitration pursuant to this
Section 9(i).  During the 15-day period
following the Closing Date, Defect Amounts in dispute with respect to Title
Defects shall be submitted to a title attorney or attorneys reasonably
satisfactory to Buyer and to Seller 
having at least ten (10) years of experience in oil and gas title review
and examination in the state where the Properties subject to the disputed Title
Defects are located (“Title Arbitrator”).  During the 15-day period following the
Closing Date, Defect Amounts in dispute with respect to Environmental Defects
shall be submitted to E.Vironment or such other environmental consulting firm
as may be reasonably agreed upon by Buyer or Seller 

 

11

 

(“Environmental
Arbitrator” and  with the Title
Arbitrator, each a “Defect Arbitrator”.). The Defect Arbitrators shall
not have worked as an employee, consultant or outside counsel for either Party
or its Affiliates during the five (5) year period preceding the arbitration or
have any financial interest in the dispute. 
The arbitration proceedings shall be held in Houston, Texas and shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, to the extent such rules do not conflict with the
terms of this Section 9.  The Defect
Arbitrators’ determination shall be made within thirty (30) days after
submission of the matters in dispute and shall be final and binding upon the
Parties, without right of appeal.  In
making his determination, the applicable Defect Arbitrator shall be bound by
the rules set forth in Sections 9(h) and may consider such other matters as in
the opinion of the applicable Defect Arbitrator are necessary or helpful to
make a proper determination. 
Additionally, each applicable Defect Arbitrator may consult with and
engage disinterested third Persons to advise the arbitrator, including title
attorneys from other states and petroleum engineers.  Each applicable Defect Arbitrator shall act
as an expert for the limited purpose of determining the specific disputed
Defect Amounts submitted by any Party and may not award damages, interest or
penalties to any Party with respect to any matter.  Seller and Buyer shall each bear its own
legal fees and other costs of presenting its case.  Buyer shall bear one-half of the costs and
expenses of each Defect Arbitrator, and Seller shall bear the remaining
one-half of such costs and expenses.

10.           Consents and Preferential Rights.

(a)           Promptly
after the date hereof, Seller shall prepare and send (i) notices to the
holders of any required consents to assignment, if any, that are set forth on Schedule 10
requesting consents to the transactions contemplated by this Agreement and
(ii) notices to the holders of any applicable preferential rights to
purchase or similar rights, if any, that are set forth on Schedule 10
in compliance with the terms of such rights and requesting waivers of such
rights. Any preferential purchase right must be exercised subject to all terms
and conditions set forth in this Agreement, including the successful Closing of
this Agreement pursuant to Section 20. 
The consideration payable under this Agreement for any particular
Property for purposes of preferential purchase right notices shall be the
Allocated Value for such Property. 
Seller shall use commercially reasonable efforts to cause such consents
to assignment and waivers of preferential rights to purchase or similar rights
(or the exercise thereof) to be obtained and delivered prior to Closing,
provided that Seller shall not be required to make payments or undertake
obligations to or for the benefit of the holders of such rights in order to
obtain the required consents and waivers. 
Buyer shall use commercially reasonable efforts to cooperate with Seller
in seeking to obtain such consents to assignment and waivers of preferential
rights.

(b)           In
no event shall there be transferred at Closing any Property for which a consent
requirement has not been satisfied and for which transfer is prohibited or a
fee is payable (and which has not been paid by Buyer).  In cases in which the Property subject to
such a requirement is a Contract and Buyer is assigned the Net Profits
Royalties to which the Contract relates, but the Contract is not transferred to
Buyer due to the unwaived consent requirement, Buyer shall continue after
Closing to use commercially reasonable efforts to obtain the consent so that
such Contract can be transferred to Buyer upon receipt of the consent, the
Contract shall be held by Seller for the benefit of Buyer, Buyer shall pay all
amounts due thereunder, and Buyer shall be responsible for the performance of
any obligations under such Contract to the extent that Buyer has been
transferred the Properties necessary to perform under such Contract until such
consent is obtained.  In cases in which
the Property subject to such a requirement is a Net Profits Royalty and the
third Person consent to the transfer of the Net Profits Royalty is not obtained
by Closing, Buyer may elect to treat the unsatisfied consent requirements as a
Defect and receive the appropriate adjustment to the unadjusted Sale Price
under Section 15 by giving Seller written notice thereof in accordance with Section
9, except that such notice may be given up to one (1) Business Day prior to the
Closing Date.  If an unsatisfied consent
requirement with respect to which an adjustment to the unadjusted Sale Price is
made under Section 15 is subsequently satisfied prior to the date of the final
adjustment to the unadjusted Sale Price under Section 30, Seller shall be
reimbursed in that final adjustment for the amount of any previous deduction
from the unadjusted Sale Price, the Net Profits Royalty, if not previously transferred
to Buyer, shall be transferred, and the provisions of this Section 10(b) shall
no longer apply to such consent requirement.

 

12

 

(c)           If
any preferential right to purchase any Properties is exercised prior to
Closing, (i) the Sale Price shall be decreased by the Allocated Value for such
Properties, (ii) the affected Properties shall not be transferred at Closing,
(iii) the affected Properties shall be deemed to be deleted from Exhibit A
for all purposes, (iv) Seller shall convey the affected Properties to the
holder of the preferential right to purchase on the terms and provisions set
out in the applicable preferential right provision, (v) Seller shall be
entitled to the consideration paid by such holder; and (vi) the effective date
of the sale of the affected Properties shall be the Effective Time, regardless
of the actual closing date of such sale.

(d)           Should
a third Person fail to validly exercise or waive its preferential right to
purchase as to any portion of the Properties prior to Closing and the time for
exercise or waiver has expired, then subject to the remaining provisions of
this Section 10, such Properties shall be included in the transaction at
Closing and there shall be no adjustment to the Sale Price at Closing with
respect to such preferential right to purchase.

(e)           Should
a third Person fail to exercise or waive its preferential right to purchase as
to any portion of the Properties prior to Closing and the time for exercise or
waiver has not yet expired, then subject to the remaining provisions of this
Section 10(e), such Properties shall be transferred to Buyer at Closing, there
shall be no adjustment to the Purchase Price at Closing with respect to such
preferential right to purchase, and Seller shall, at its sole expense, continue
to use commercially reasonable efforts to obtain a waiver of the preferential
purchase rights and shall continue to be responsible for the compliance
therewith.  Should the holder of the
preferential purchase right validly exercise such right after Closing, then:
(i) the Sale Price shall be decreased by the Allocated Value for such
Properties, (ii) the affected Properties shall be deemed to be deleted from Exhibit
A for all purposes, (iii) Buyer shall promptly convey the affected
Properties to the holder on the terms and provisions set out in the applicable
preferential right provision, and (iv) Seller shall be entitled to the
consideration paid by such holder.

11.           Physical and Environmental
Inspection.       After the
execution of this Agreement, Seller shall use commercially reasonable efforts
(but in no event shall Seller be required to make any payments or incur any
other obligations to any Person) to cause Buyer and its authorized
representatives to have physical access to the Properties and Subject Assets at
Buyer’s sole cost, risk and expense for the purpose of inspecting the same,
conducting such tests, examination, investigations and assessments as may be
reasonable and necessary or appropriate to evaluate the environmental and
physical condition of the Properties and Subject Assets. Buyer’s right of
access, if any, to the Properties and Subject Assets shall not entitle Buyer to
operate equipment or conduct intrusive testing or sampling, and any such access
shall be further limited by the Persons with rights to own, operate or use the
Subject Assets or the surface rights burdened thereby.  Buyer acknowledges that Seller is not the
operator or owner of the Subject Assets and Seller has no right or ability to
grant Seller access to the Properties or the Subject Assets and that Seller
makes no representations or warranties as to access to the Properties or the
Subject Assets by Buyer.  BUYER SHALL HOLD HARMLESS, DEFEND AND INDEMNIFY SELLER, ITS AFFILIATES,
THE OTHER OWNERS OF INTERESTS IN THE PROPERTIES AND ALL SUCH PERSONS’
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND REPRESENTATIVES FROM AND AGAINST ANY
AND ALL LIABILITY, CLAIMS, LOSSES, CAUSES OF ACTION, COSTS AND EXPENSES
(INCLUDING COURT COSTS AND REASONABLE ATTORNEYS’ FEES), INJURY TO BUYER’S
EMPLOYEES, AGENTS, CONTRACTORS, SUBCONTRACTORS OR INVITEES OR TO BUYER’S
PROPERTY, AND/OR INJURY TO SELLER’S PROPERTY, EMPLOYEES, AGENTS OR CONTRACTORS
WHICH MAY ARISE OUT OF OR ARE ATTRIBUTABLE TO ACCESS TO THE PROPERTIES OR BUYER’S
INSPECTIONS THEREOF, , EVEN IF CAUSED IN WHOLE OR
IN PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY
OR OTHER LEGAL FAULT OF ANY INDEMNIFIED PERSON.  Buyer agrees to provide to Seller a copy of
any environmental assessments, including any reports, data, and
conclusions.  Any and all data or
information acquired by all such examinations and results of all analysis of
such data and information shall be subject to the terms of the Confidentiality
Agreement.

12.           Period Pending Closing.  Except as may be required by the terms of
this Agreement or as may be approved by Buyer in writing, from the date hereof
until the Closing Date Seller shall not transfer, sell, hypothecate, encumber
or otherwise dispose of any of the Properties. 
Buyer’s approval of any action 

 

13

 

restricted
by this Section 12 shall not be unreasonably withheld or delayed and shall be
considered granted within ten (10) days (unless a shorter time is reasonably required
by the circumstances and such shorter time is specified in Seller’s notice) of
Seller’s notice to Buyer requesting such consent unless Buyer notifies Seller
to the contrary during that period. 
Notwithstanding the foregoing provisions of this Section 12, in the
event of an emergency, Seller may take such action as may be reasonably
necessary and shall notify Buyer of such action promptly thereafter.

13.           [Intentionally Omitted].

14.           Notification of Breaches.  Until the Closing,

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

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

(c)           If
any of Buyer’s or Seller’s representations or warranties is untrue or shall
become untrue in any material respect between the date of execution of this
Agreement and the Closing Date, or if any of Buyer’s or Seller’s covenants or
agreements to be performed or observed prior to or on the Closing Date shall
not have been so performed or observed in any material respect, but such breach
of representation or warranty or non-performance of covenant or agreement shall
(if curable) be cured by the Closing (or, if the Closing does not occur, by the
date set forth in Section 16(a)), then such breach shall be considered not to
have occurred for all purposes of this Agreement.

15.           Sale Price Adjustments.  The unadjusted Sale Price shall be
adjusted as follows, but only with respect to matters (i) in the case of
Section 15(a), for which notice is given on or before the Defect Claim Date,
and (ii) in the case of Sections 15(b), (c), (d), (e), (f), (g), (h)
(i) and (j) identified on or before the February 1, 2008:

(a)           Decreased,
as appropriate, in accordance with Section 9;

(b)           Decreased
as a consequence of Properties being excluded from this transaction as a
consequence of the exercise of preferential rights to purchase, as described in
Section 10;

(c)           Increased
by the aggregate amount (using a settlement price of three dollars ($3.00) per
thousand cubic feet (Mcf)) that the Subject Assets are underproduced, if at
all, as to the Net Profits Royalties share of total oil, condensate, gas or end
product production, any balancing obligation or credit arising from such
underproduction, and any pipeline imbalance underproduced, in each case
determined as of the Effective Time;

(d)           Decreased
by the aggregate amount (using a settlement price of three dollars ($3.00) per
thousand cubic feet (Mcf)) that the Subject Assets are overproduced, if
at all, as to the Net Profits Royalties share of total oil, condensate, gas or
end product production, any balancing obligation or credit arising from such
overproduction, and any pipeline imbalance overproduced, in each case
determined as of the Effective Time;

 

14

 

(e)           Decreased
by an amount equal to the amounts received by Seller that are attributable to
the ownership of the Properties for periods on or after the Effective Time and
received by Seller on or prior to the Closing Date;

(f)            Increased
by the expenses paid by Seller that are attributable to the ownership of the
Properties for periods on or after the Effective Time;

(g)           Decreased
by an amount equal to the portion of the Allocated Value of any Properties
transferred or sold by Seller during the period on or after July 1, 2007 but
prior to the Closing Date; provided, however, that any decreases made under
this Section 15(g) shall be shall be determined without duplication of any
costs or losses included in another adjustment, or for which Buyer otherwise
receives credit in the calculation of the Sale Price and shall exclude any
transfer or sale of any Properties to Buyer or its Affiliates at Closing as
contemplated hereunder;

(h)           Increased
by a positive amount, if any, equal to (i) ninety percent (90%) of the total
proved discounted future net income aggregate value (discounted at ten percent
(10%)) of all of the Subject Assets as of December 31, 2006 as shown in the
reserve report to be delivered by Ryder Scott Company after the date of this
Agreement and prior to November 30, 2007 (“Revised Reserve Report”) minus (ii)
$28,241,400 (such amount representing ninety percent (90%) of the total proved
discounted future net income aggregate value (discounted at ten percent (10%))
as reported in the reserve report covering the Subject Assets delivered by
Ryder Scott Company dated July 16, 2007 (“July Reserve Report”) minus (iii)
ninety percent (90%) of the total proved discounted future net income aggregate
value, discounted at ten percent (10%), of those Subject Assets set forth on Schedule
15(h) attached hereto  (as such value
is set forth in the Revised Reserve Report);

(i)            In
the event that the forward price of West Texas Intermediate Crude Oil for
December 2008 as posted by the New York Mercantile Exchange as of the close of
trading on the Business Day immediately preceding the Closing Date (“Closing
Date WTI Price”) is less then seventy four dollars and eighty cents ($74.80),
then decreased by an amount equal to the product of (i) the Sale Price, as
adjusted under clauses (a) through (h) of this Section 15, multiplied by (ii)
five tenths ((0.50), multiplied by (iii) the remainder of (A) ninety five one
hundredths (0.95), minus (B) the quotient of (1) the Closing Date WTI Price,
divided by (2) seventy eight dollars and seventy four cents (784.74); provided,
however, the adjustment to the Sale Price provided in this Section 15(i) shall
in no event exceed ten percent (10%) of the Sale Price, as adjusted under
clauses (a) through (h) of this Section 15;

(j)            In
the event that the Closing Date WTI Price exceeds eighty two dollars and sixty
eight cents ($82.68), then increased by an amount equal to the product of (i)
the Sale Price, as adjusted under clauses (a) through (h) of this Section 15,
multiplied by (ii) twenty five hundredths (0.25), multiplied by (iii) the
remainder of (A) the quotient of (1) the Closing Date WTI Price, divided by (2)
seventy eight dollars and seventy four cents (784.74), minus (B) one hundred
and five one hundredths (1.05);

(k)           Decreased
by an amount equal to the Deposit; and

(l)            In
the event that closing does not occur on or prior to the Target Closing Date
due to the sole fault of Buyer, increased by an amount equal to (1) the Agreed
Rate multiplied by (2)(A) the unadjusted Sale Price, as adjusted under clauses
(a) through (j) above, multiplied by (B)(y) the number of days in the period
from the Target Closing Date through and including the Closing Date divided by
(z) 365.  As used herein, the term “Agreed
Rate” shall mean the lesser of (i)  the one month London Inter-Bank
Offered Rate, as published on Telerate Page 3750 on the last Business Day prior
to the Effective Time, plus five percentage points (LIBOR +5%) and
(ii) the maximum rate allowed by applicable Law.

The
adjustments set forth in this Section 15 shall be determined in the order of
priority set forth in this Section 15, with the intent of the Parties being
that the adjustment set forth in Section 15(a) shall be made prior to the
adjustment set forth in Section 15(b) and the adjustment set forth in Section
15(b) shall 

 

 

15

 

be
made prior to the adjustment set forth in Section 15(c), and so on and so
forth.  The amount of each adjustment to
the unadjusted Sale Price described in Sections 15(e), and 15(g) shall be
determined in accordance with the United States generally accepted accounting
principles.

16.           Termination.

(a)           Right
of Termination.  This Agreement may
be terminated at any time prior to Closing:

(i)            by
the mutual prior written consent of Seller and Buyer; or

(ii)           by
Buyer if, through no fault of Buyer, any condition set forth in Section 17 has
not been satisfied or waived by Buyer by December 31, 2007, or

(iii)          by
Seller if, Seller has timely delivered to Buyer a valid notice of termination
in accordance with Section 9(i); or

(iv)          by
Seller if, through no fault of Seller, any condition set forth in Section 18
has not been satisfied or waived by Seller by December 31, 2007; or

(v)           by
Seller, no later than November 23, 2007 if Seller deems it reasonably
necessary, in its sole discretion, to do so in order to comply with its
fiduciary duties; or 

(vi)          by
Seller or Buyer if the aggregate adjustment to the Sale Price provided in
Section 15(h) exceeds four million dollars ($4,000,000), by delivery, within
two (2) Business Days after the delivery of the reserve report described in
Section 15(h)(i), to the other Party a written notice of termination.

(b)           Effect
of Termination.

(i)            If
this Agreement is terminated pursuant to Section 16(a)(i), as each Party’s
exclusive remedy, Seller shall promptly (but in no event later than three (3)
Business Days after such termination) return the Deposit to Buyer via wire
transfer of immediately available funds.

(ii)           If
this Agreement is terminated pursuant to Section 16(a)(ii), as each Party’s
exclusive remedy, Seller shall promptly (but in no event later than three (3)
Business Days after such termination) return the Deposit to Buyer via wire
transfer of immediately available funds.

(iii)          If this Agreement is terminated
pursuant to Section 16(a)(iii), as each Party’s exclusive remedy, Seller shall
promptly (but in no event later than three (3) Business Days after such
termination return the Deposit to Buyer via wire transfer of immediately
available funds.

(iv)          If
this Agreement is terminated pursuant to Section 16(a)(iv) above, then Seller
shall be entitled to retain the Deposit as liquidated damages and as
reimbursement for Seller’s out-of-pocket fees and expenses incurred in
connection with the transactions contemplated by this Agreement and Seller may,
at its option, assert its right of specific performance; provided, however, if
this Agreement is terminated pursuant to Section 16(a)(iv) solely due to the
failure to receive the opinion described in Section 18(d), then, as each Party’s
exclusive remedy, Seller shall promptly (but in no event later than three (3)
Business Days after such termination) return the Deposit to Buyer via wire
transfer of immediately available funds. 
The Parties hereby acknowledge that the extent of damages to Seller
occasioned by any breach or default or failure to proceed by Buyer would be
impossible or extremely impractical to ascertain and that the amount of the
Deposit is a fair and reasonable estimate of such damage.

 

 

16

 

 

(v)           If
this Agreement is terminated pursuant to Section 16(a)(v), as each Party’s
exclusive remedy, Seller shall promptly (but in no event later than three (3)
Business Days after such termination) return the Deposit to Buyer via wire
transfer of immediately available funds.

(vi)          If
this Agreement is terminated pursuant to Section 16(a)(vi), as each Party’s
exclusive remedy, Seller shall promptly (but in no event later than three (3)
Business Days after such termination) return the Deposit to Buyer via wire
transfer of immediately available funds.

(c)           If
this Agreement is terminated pursuant to this Section 16, this Agreement shall
become void and of no further force or effect (except for the provisions of
Section 1, 4, 8, 11, 16, 31, 33, 34, 37, 41, 44, 45, 46 48, and 49 and for the
Confidentiality Agreement, all of which shall continue in full force and
effect).  Notwithstanding anything to the
contrary in this Agreement, the termination of this Agreement under this Section
16 shall not relieve any Party from liability (including liability for
consequential damages) for any willful or negligent failure to perform or
observe in any material respect any of its agreements or covenants contained
herein that are to be performed or observed at or prior to Closing.  In the event this Agreement terminates under
Section 16 and any Party has willfully or negligently failed to perform or
observe in any material respect any of its agreements or covenants contained
herein which are to be performed or observed at or prior to Closing, then the
other Party shall be entitled to all remedies available at law or in equity
(including strict performance) and shall be entitled to recover court costs and
attorneys’ fees from the other Party in addition to any other relief to which such
Party may be entitled.

17.           Conditions of Closing by
Buyer.  The obligation of
Buyer to close is subject to the satisfaction of the following conditions:

(a)           All
representations and warranties of Seller contained in Sections 6(a) and 6(b) of
this Agreement shall be true and correct in all material respects as of the
Closing Date as though made on and as of the Closing Date, and Seller shall
have performed and satisfied in all material respects all agreements and
covenants required by Sections 8, 10, 11, 12 and 14 of this Agreement to be
performed and satisfied by Seller prior to or on the Closing Date;

(b)           No
suit, injunction, order or award, or other proceeding shall be pending or
threatened before any court or governmental agency seeking to restrain, enjoin
or prohibit the consummation of the transactions contemplated by this
Agreement; and

(c)           All
material consents and approvals of any Governmental Authority required for the
transfer of the Properties from Seller to Buyer as contemplated by this Agreement,
except consents and approvals that are customarily obtained after closing,
shall have been granted, or, if applicable, the necessary waiting period shall
have expired, or early termination of the waiting period shall have been
granted.

18.           Conditions of Closing by
Seller.  The obligation of
Seller to close is subject to the satisfaction of the following conditions:

(a)           All
representations and warranties of Buyer contained in Section 7 of this
Agreement shall be true and correct in all material respects as of the Closing
Date as though made on and as of the Closing Date, and Buyer shall have
performed and satisfied in all material respects all agreements and covenants
required by this Agreement to be performed and satisfied by Buyer prior to or
on the Closing Date;

(b)           No
suit, injunction, order or award, or other proceeding shall be pending or
threatened before any court or governmental agency seeking to restrain, enjoin
or prohibit the consummation of the transactions contemplated by this
Agreement;

 

17

 

(c)           All
material consents and approvals of any Governmental Authority required for the
transfer of the Properties from Seller to Buyer as contemplated by this
Agreement, except consents and approvals that are customarily obtained after
closing, shall have been granted, or, if applicable, the necessary waiting
period shall have expired, or early termination of the waiting period shall
have been granted; and

(d)           Seller
shall have received an opinion satisfactory to Seller from a nationally
recognized investment banking firm regarding the fairness, from a financial
point of view, of the transactions contemplated hereby to the Trust.

19.           Preliminary Closing
Statement.  Seller shall
prepare and furnish to Buyer at least three (3) days prior to Closing a
preliminary closing statement setting forth the adjustments, if any, to the
Sale Price and the total amount of funds to be paid by Buyer at Closing.  Such statement shall reflect each adjustment
and the calculation used to determine such amount.  The adjusted Sale Price shall mean the Sale
Price adjusted as provided herein.

20.           Closing. The consummation of the transactions
contemplated hereby (“Closing”) shall unless otherwise agreed to in
writing by Buyer and Seller, take place at the offices of Devon located at 20
N. Broadway, Oklahoma City, Oklahoma, at 10:00 a.m., local time, on December
17, 2007 (“Target Closing Date”), or if all conditions in Sections 17
and 18 to be satisfied prior to Closing have not yet been satisfied or waived,
as soon thereafter as such conditions have been satisfied or waived, subject to
the provisions of Section 16.  The date
on which the Closing occurs is referred to herein as the “Closing Date”.  At Closing the following shall occur:

(a)           Seller
and Buyer shall execute, acknowledge and deliver counterparts of a Deed,
Assignment and Bill of Sale substantially in the form and substance of Exhibit
C attached hereto, covering all of the Properties to be sold pursuant
hereto;

(b)           Buyer
shall deliver to Seller by wire transfer of immediately available funds the
total Sale Price as adjusted hereunder, subject to further adjustment after
Closing as provided for herein;

(c)           In
compliance with Section 1445 of the Code, Seller shall execute and deliver to
Buyer a Non-Foreign Affidavit in the form of Exhibit D attached hereto;

(d)           Seller
and Buyer shall execute and deliver assignments, if any, prepared by Buyer in
form required by federal, state or tribal agencies for the assignment of Net
Profits Royalties burdening any federal, state or tribal lands burdened by the
Subject Assets, duly executed by Seller, in sufficient duplicate originals to
allow recording in all appropriate offices;

(e)           Seller
and Buyer shall execute and deliver letters-in-lieu of transfer orders, if any,
with respect to the Properties, as applicable;

(f)            Buyer
shall deliver to Seller a certificate duly executed by the secretary or any
assistant secretary of Buyer, dated as of the Closing, (i) attaching and
certifying on behalf of Buyer complete and correct copies of (A) the
certificate of incorporation and the bylaws of Buyer, each as in effect as of
the Closing, (B)  resolutions of the Board of Directors of Buyer
authorizing the execution, delivery, and performance by Buyer of this Agreement
and the transactions contemplated hereby or an opinion of counsel to Buyer
addressed to Seller to the effect that board approval is not required (such
opinion to be in form and substance reasonably satisfactory to Seller and from
counsel reasonably satisfactory to Seller), and (C) any required approval
by the stockholders of Buyer of this Agreement and the transactions
contemplated hereby and (ii) certifying on behalf of Buyer the incumbency
of each officer of Buyer executing this Agreement or any document delivered in
connection with the Closing;

 

18

 

(g)           Buyer
shall deliver to Seller a certificate duly executed by an authorized corporate
officer of Buyer, dated as of the Closing Date, certifying on behalf of Buyer
that the conditions set forth in Section 18(a) have been have been fulfilled;

(h)           Seller
shall be entitled to retain the Deposit for its own account and the amount of
the Deposit shall be applied to the payment of the Sale Price in accordance
with Section 15(k); and

(i)            Seller
shall deliver to Buyer a certificate duly executed by an authorized corporate
officer of Seller, dated as of the Closing Date, certifying on behalf of Seller
that the conditions set forth in Section 17(a) have been have been fulfilled.

21.           Reservations and
Exceptions.  The sale and
purchase of the Properties is made subject to all reservations, exceptions,
limitations, contracts and other burdens or instruments which are stated
herein, on Exhibit A, or on any schedule or exhibit hereto, which are of
record or of which Buyer has actual or constructive notice, including any
matter included or referenced in the any schedule or exhibit hereto or any
materials made available by Seller to Buyer.

22.           Payments.  All payments made or to be made under
this Agreement to Seller shall be made by electronic transfer of immediately
available funds to an account of Seller that shall be designated by Seller in
writing prior to the Closing Date, for the credit of Seller, or to such other
bank and account as may be specified by Seller in writing on or before the
Closing Date.  All payments made or to be
made hereunder to Buyer shall be by electronic transfer of immediately
available funds to a bank and account specified by Buyer in writing to Seller,
for the credit of Buyer.

23.           Assumption of Liabilities and
Indemnities.

(a)           Damages.  As used in this Section 23, “Damages”
shall mean the amount of any actual liability, loss, cost, expense, claim,
award or judgment incurred or suffered by any Indemnified Person arising out of
or resulting from the indemnified matter, whether attributable to personal
injury or death, property damage, contract claims, torts or otherwise,
including reasonable fees and expenses of attorneys, consultants, accountants
or other agents and experts reasonably incident to matters indemnified against,
and the costs of investigation and/or monitoring of such matters, and the costs
of enforcement of the indemnity; provided, however, that Buyer
and Seller shall not be entitled to indemnification under this Section 23 for,
and Damages shall not include, (i) loss of profits or other special or
consequential damages suffered by the Party claiming indemnification, or any
punitive damages, (ii) any liability, loss, cost, expense, claim, award or
judgment to the extent resulting from or increased by the actions or omissions
of any Indemnified Person after the Closing Date or (iii) except with
respect to claims for breach of Section 6, any liability, loss, cost,
expense, claim, award or judgment that does not individually exceed two percent
(2%) of the Sale Price, and, provided, further, that “Damages”
shall not include any adjustment for Taxes that may be assessed on payments
under this Section 23 or for Tax benefits received by the Indemnified Person as
a consequence of any Damages.  “Seller
Group” shall mean Seller, and its current and former Affiliates, and its
and their respective directors, officers, employees, agents, contractors,
insurers and invitees.

(b)           Assumed
Obligations.  Without limiting Buyer’s
rights to indemnity under this Section 23, on the Closing Date Buyer shall
assume and hereby agrees to fulfill, perform, pay and discharge (or cause to be
fulfilled, performed, paid or discharged) all of the obligations and liabilities
of Seller and its Affiliates, known or unknown, with respect to the Properties,
regardless of whether such obligations or liabilities arose prior to or after
the Closing Date, including but not limited to, obligations to furnish makeup
gas according to the terms of applicable gas sales, gathering or transportation
Contracts, production balancing obligations, crude oil scheduling imbalances,
obligations to pay working interests, royalties, overriding royalties and other
interests held in suspense, obligations under any Environmental Laws,
obligations to plug and abandon wells and dismantle structures, and to restore
and/or remediate the Properties, ground water, surface water, soil or seabed in
accordance with applicable agreements and Laws, including any obligations to
assess, remediate, remove and dispose of NORM, MMMF, asbestos, mercury,
drilling fluids and chemicals, and produced waters and hydrocarbons, other
environmental 

 

19

 

liabilities
with respect to the Properties and continuing obligations under the Contracts
or any agreements pursuant to which the Seller or its Affiliates purchased
Properties prior to the Closing (all of said obligations and liabilities,
subject to the exclusions of the proviso below, herein being referred to as “Assumed
Obligations”); provided, however, that Buyer does not assume
any obligations to the extent that they are: (i) attributable to or arise out
of the Excluded Properties; (ii) required to be borne by Seller under Section
15; (iii) Tax obligations retained by Seller pursuant to Section 27 or 28; or
(iv) the responsibility of Seller under Section 23(d).

(c)           Buyer
Indemnification.  From and after
Closing, Buyer shall indemnify, defend and hold harmless Seller and its Affiliates
from and against all Damages incurred or suffered by Seller or any of Seller’s
Affiliates:

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

(ii)           otherwise
caused by or arising out of or resulting from the ownership, use or operation
of the Properties, whether before or after the Closing Date,

(iii)          caused
by or arising out of or resulting from Buyer’s breach of any of Buyer’s
covenants or agreements contained herein, or

(iv)          caused
by or arising out of or resulting from any breach of any representation or
warranty made by Buyer contained herein or in any certificate delivered by
Buyer at Closing pursuant to Section 20,

EVEN IF SUCH DAMAGES ARE CAUSED IN WHOLE OR IN
PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR
OTHER LEGAL FAULT OF ANY INDEMNIFIED PERSON, but excepting in each case Damages against which
Seller would be required to indemnify Buyer under Section 23(d) at the time the
claim notice is presented by Buyer.

 

(d)           Seller
Indemnification.  From and after
Closing, Seller shall indemnify, defend and hold harmless Buyer and its
Affiliates from and against any and all Damages incurred or suffered by Buyer
or any of Buyer’s Affiliates:

(i)            caused
by or arising out of or resulting from Seller’s breach of any of Seller’s
covenants or agreements contained in Section 12,

(ii)           caused
by or arising out of or resulting from any breach of any representation or
warranty made by Seller contained in Section 6 of this Agreement, or

(iii)          caused
by or arising out of or resulting from any the undertakings or agreements of
Seller for brokerage fees, finder’s fees, agent’s commissions or other similar
forms of compensation to an intermediary in connection with the negotiation,
execution or delivery of this Agreement or any agreement or transaction
contemplated hereby,

EVEN IF SUCH DAMAGES ARE CAUSED IN WHOLE OR IN
PART BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), STRICT LIABILITY OR
OTHER LEGAL FAULT OF ANY INDEMNIFIED PERSON.

 

(e)           Notwithstanding
anything to the contrary contained in this Agreement, Seller’s and Buyer’s
exclusive remedy against each other with respect to breaches of the
representations, warranties, covenants and agreements of the Parties contained
in Sections 6 through 14 (excluding Sections 9 or 10, which shall be separately
enforceable by Seller pursuant to whatever rights and remedies are available to
it outside of this Section 23) and the affirmations of such representations,
warranties, covenants and agreements contained in the certificates delivered by
Buyer at Closing pursuant to Section 20, is set forth in this Section 23 (and,
where applicable with respect to Section 16). 
Except for the remedies contained 

 

20

 

in
this Section 23 and Section 16, and any other remedies available to the Parties
at law or in equity for breaches of provisions of this Agreement other than
Sections 6 through 8 or 11 through 14, Seller and Buyer each release, remise
and forever discharge the other and their or its Affiliates and all such
Persons’ stockholders, officers, directors, employees, agents, advisors and
representatives from any and all suits, legal or administrative proceedings,
claims, demands, damages, losses, costs, liabilities, interest, or causes of
action whatsoever, in law or in equity, known or unknown, which such Parties
might now or subsequently may have, based on, relating to or arising out of
this Agreement or Seller’s ownership, use or operation of the Properties, or
the condition, quality, status or nature of the Properties, including rights to
contribution under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, breaches of statutory and implied
warranties, nuisance or other tort actions, rights to punitive damages, common
law rights of contribution, any rights under insurance policies and any rights
under agreements between Seller and any Affiliate of Seller, EVEN IF CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (WHETHER SOLE,
JOINT OR CONCURRENT), STRICT LIABILITY OR OTHER LEGAL FAULT OF ANY RELEASED
PERSON.  Without limiting the
generality of the preceding sentence, Buyer agrees that its only remedy with
respect to Seller’s breach of its covenants and agreements in Sections 8, 10,
11, 12 and 14 shall be the indemnity of Seller in Section 23(d), as limited by
the terms of this Section 23, and, if applicable, as set forth in Section 16.

(f)            The
indemnity to which each Party is entitled under this Section 23 shall be for
the benefit of and extend to such Party’s current and former Affiliates and its
and their respective directors, officers, employees, and agents.  Any claim for indemnity under this Section 23
by any such Affiliate, director, officer, employee or agent must be brought and
administered by the applicable Party to this Agreement.  No Indemnified Person other than Seller and
Buyer shall have any rights against either Seller or Buyer under the terms of
this Section 23 except as may be exercised on its behalf by Buyer or Seller, as
applicable, pursuant to this Section 23(f). 
Each of Seller and Buyer may elect to exercise or not exercise
indemnification rights under this Section on behalf of the other Indemnified
Persons affiliated with it in its sole discretion and shall have no liability
to any such other Indemnified Person for any action or inaction under this
Section.

(g)           This
Section 23 shall not apply in respect of title matters, which are exclusively
covered by Section 9, or Tax matters, which are exclusively covered by Sections
27 and 28.

(h)           The
Parties shall treat, for Tax purposes, any amounts paid under this Section 23
as an adjustment to the applicable Sale Price.

24.           Indemnification Actions.  All claims for indemnification under
Section 23 shall be asserted and resolved as follows:

(a)           The
term “Indemnifying Person” when used in connection with particular
Damages shall mean the Person having an obligation to indemnify another Person
or Persons with respect to such Damages pursuant to Section 23, and the term “Indemnified
Person” when used in connection with particular Damages shall mean a Person
having the right to be indemnified with respect to such Damages pursuant to
Section 23 (including, for the avoidance of doubt, those Persons identified in
Section 23(f)).

(b)           To
make a claim for indemnification under Section 23, an Indemnified Person shall
notify the Indemnifying Person of its claim, including the specific details of
and specific basis under this Agreement for its claim (“Claim Notice”).  In the event that the claim for
indemnification is based upon a claim by a third Person against the Indemnified
Person (a “Claim”), the Indemnified Person shall provide its Claim
Notice promptly after the Indemnified Person has actual knowledge of the Claim
and shall enclose a copy of all papers (if any) served with respect to the
Claim; provided that the failure of any Indemnified Person to give notice of a
Claim as provided in this Section 24 shall not relieve the Indemnifying Person
of its obligations under Section 23 except to the extent such failure results
in insufficient time being available to permit the Indemnifying Person to
effectively defend against the Claim or otherwise prejudices the Indemnifying
Person’s ability to defend against the Claim. 
In the event that the claim for indemnification is based upon an
inaccuracy or breach of a representation, warranty, 

 

21

 

covenant
or agreement, the Claim Notice shall specify the representation, warranty,
covenant or agreement that was inaccurate or breached.

(c)           In
the case of a claim for indemnification based upon a Claim, the Indemnifying
Person shall have thirty (30) days from its receipt of the Claim Notice to
notify the Indemnified Person whether it admits or denies its obligation to
defend the Indemnified Person against such Claim under this Section 24.  If the Indemnifying Person does not notify
the Indemnified Person within such thirty (30) day period regarding whether the
Indemnifying Person admits or denies its obligation to defend the Indemnified
Person, it shall be conclusively deemed obligated to provide such
indemnification hereunder.  The
Indemnified Person is authorized, prior to and during such thirty (30) day
period, to file any motion, answer or other pleading that it shall deem
necessary or appropriate to protect its interests or those of the Indemnifying
Person and that is not prejudicial to the Indemnifying Person.

(d)           If
the Indemnifying Person admits its obligation, it shall have the right and
obligation to diligently defend, at its sole cost and expense, the Claim.  The Indemnifying Person shall have full
control of such defense and proceedings, including any compromise or settlement
thereof.  If requested by the
Indemnifying Person, the Indemnified Person agrees to cooperate in contesting
any Claim which the Indemnifying Person elects to contest (provided, however,
that the Indemnified Person shall not be required to bring any counterclaim or
cross-complaint against any Person).  The
Indemnified Person may participate in, but not control, any defense or
settlement of any Claim controlled by the Indemnifying Person pursuant to this
Section 24.  An Indemnifying Person shall
not, without the written consent of the Indemnified Person, settle any Claim or
consent to the entry of any judgment with respect thereto that does not result
in a final, complete and unconditional release of the Indemnified Person’s
liability with respect to the Claim.

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

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

25.           Limitation on Actions.

(a)           The
representations and warranties of the Seller in Section 6 and the covenants and
agreements of Seller in Section 12 shall survive the Closing for a period of
three (3) months after Closing.  All
other representations, warranties and covenants of Seller shall terminate as of
the Closing Date.

(b)           The
remainder of this Agreement shall survive the Closing without time limit except
as may otherwise be expressly provided herein. 
Representations, warranties, covenants and agreements shall be of no
further force and effect after the date of their expiration, provided that
there shall be no 

 

22

 

termination
of any bona fide claim asserted pursuant to this Agreement with respect to such
a representation, warranty, covenant or agreement prior to its expiration date.

(c)           The
indemnities in Section 23(d) shall terminate as of the termination date of each
respective representation, warranty, covenant or agreement that is subject to
indemnification, except in each case as to matters for which a specific written
claim for indemnity has been delivered to the Indemnifying Person on or before
such termination date.  The indemnities
in Section 23(c) shall continue without time limit.

(d)           Seller
shall not have any liability for any indemnification under Section 23 until and
unless the aggregate amount of the liability for all Damages for which Claim
Notices are delivered by Buyer exceeds two percent (2%) of the unadjusted Sale
Price, and then only to the extent the amount of such Damages exceeds two
percent (2%) of the unadjusted Sale Price.

(e)           Notwithstanding
anything to the contrary contained elsewhere in this Agreement, Seller shall
not be required to indemnify Buyer under Section 23 for aggregate Damages in
excess of twenty five percent (25%) of the unadjusted Sale Price.

(f)            The
amount of any Damages for which an Indemnified Person is entitled to indemnity
under Section 23 shall be reduced by the amount of any insurance proceeds
realized by the Indemnified Person or its Affiliates with respect to such
Damages (net of any collection costs).

26.           Casualty and Condemnation.  If, after the date of this Agreement but
prior to Closing Date, any portion of the Properties is destroyed by fire or
other casualty or is expropriated or taken in condemnation or under right of
eminent domain, Buyer shall nevertheless be required to close.  In the event that the amount of the
diminutions in value of the Properties attributable to such casualty,
expropriation or taking (determined by reference to the Allocated Value,
determined in the same manner as a Defect in accordance with Section 9),
exceeds fifty thousand dollars ($50,000.00), Seller and Buyer shall treat the
diminution of value of the Properties attributable to such casualty,
expropriation or taking (determined by reference to Allocated Value) as a
Defect under Section 9.  In each case,
Seller shall retain all rights to insurance and other claims against third
Persons with respect to the casualty or taking except to the extent the Parties
otherwise agree in writing.

27.           Taxes.  All ad valorem Taxes, real property
Taxes, and similar obligations with respect to the Tax period in which the
Effective Time occurs (the “current Tax period”) shall be apportioned
between Seller and Buyer as of the Effective Time based on the current Tax
period assessment.  Seller shall pay, and
indemnify, defend and hold Buyer harmless with respect to payment of all such
Taxes on the Properties for the current Tax period, together with any interest
or penalties assessed thereon.  Buyer
shall pay, and indemnify, defend and hold Seller harmless with respect to
payment of all such Taxes on the Properties for any time subsequent to the
current Tax period, together with any interest or penalties assessed thereon.

28.           Sales Tax; Recording Fees.  The Sale Price provided for hereunder
excludes any sales Taxes or other Taxes in connection with the sale
contemplated by this Agreement.  If a
determination is ever made that a sales Tax or other transfer Tax applies,
Buyer shall be liable for such Tax as well as any applicable conveyance,
transfer and recording fees, and real estate transfer stamps or Taxes imposed
on any transfer of property pursuant to this Agreement.  Buyer shall indemnify, defend and hold Seller
harmless with respect to the payment of all such Taxes, if any, including any
interest or penalties assessed thereon. 
Notwithstanding other provisions of this Agreement, Buyer shall be
responsible for the prompt filing and recording of the conveyances, assignments
or other instruments required to convey title to the Properties to Buyer in the
appropriate federal, state and local records. 
Buyer shall supply Seller with a true and accurate photocopy of all the
recorded and filed conveyances within a reasonable period of time after such are
available and in any event within sixty (60) days after the Closing Date.

29.           Records.  Within ten (10) days after the Closing Date,
Seller shall deliver or cause to be delivered to Buyer any Records that are in
the possession of Seller, subject to this Section 28.  Seller may retain 

 

23

 

the
originals of those Records relating to Tax and accounting matters and provide
Buyer, at its request, with copies of such Records that pertain to non-income
Tax matters solely related to the Properties. 
Seller may retain copies of any other Records.  Buyer, for a period of seven (7) years
following the Closing, shall: (i) retain the Records, (ii) provide Seller, its
Affiliates, and their respective officers, employees and representatives with
access to the Records during normal business hours for review and copying at
Seller’s expense, (iii) provide Seller, its Affiliates, and their respective
officers, employees and representatives with access for, during normal business
hours, to materials received or produced after Closing relating to (A) Seller’s
obligations under Section 27, or (B) any claim for indemnification made under
Sections 23 or 28 of this Agreement (excluding, however, attorney work product
and attorney-client communications with respect to any such claim being brought
by Buyer under this Agreement), for review and copying at Seller’s expense, and
(iv) provide Seller, its Affiliates, and their respective officers, employees
and representatives with access for, during normal business hours, to Buyer’s
personnel for the purpose of discussing any such matter or claim described in
Section 29(iii).

30.           Post-Closing Adjustments; Revenues.

(a)           As
soon as reasonably practicable after the Closing but not later than the later
of (i) the February 1, 2007 and (ii) the date on which the Parties or
the Defect Arbitrators, as applicable, finally determines all Defect Amounts
under Section 9, Seller shall prepare and deliver to Buyer a draft statement
setting forth the final calculation of the Sale Price and showing the
calculation of each adjustment under Section 15, based on the most recent
actual figures for each adjustment. 
Seller shall at Buyer’s request make reasonable documentation available
to support the final figures.  As soon as
reasonably practicable but not later than the fifteenth (15th) day following
receipt of Seller’s statement hereunder, Buyer shall deliver to Seller a
written report containing any changes that Buyer proposes be made in such
statement.  Seller may deliver a written
report to Buyer during this same period reflecting any changes that Seller
proposes to be made in such statement as a result of additional information
received after the statement was prepared. 
The Parties shall undertake to agree on the final statement of the Sale
Price no later than thirty (30) days after delivery of Seller’s statement.  In the event that the Parties cannot reach
agreement within such period of time, any Party may refer the items of
adjustment which are in dispute to Grant Thornton LLP or to any other nationally-recognized
independent accounting firm or consulting firm mutually acceptable to both
Buyer and Seller (“Accounting Arbitrator”), for review and final
determination by arbitration.  The
Accounting Arbitrator shall conduct the arbitration proceedings in Houston,
Texas in accordance with the Commercial Arbitration Rules of the American
Arbitration Association, to the extent such rules do not conflict with the
terms of this Section.  The Accounting
Arbitrator’s determination shall be made within thirty (30) days after
submission of the matters in dispute and shall be final and binding on all
Parties, without right of appeal.  In
determining the proper amount of any adjustment to the Sale Price, the
Accounting Arbitrator shall be bound by the terms of Section 15 and may not
increase the Sale Price more than the increase proposed by Seller nor decrease
the Sale Price more than the decrease proposed by Buyer, as applicable.  The Accounting Arbitrator shall act as an
expert for the limited purpose of determining the specific disputed aspects of
Sale Price adjustments submitted by any Party and may not award damages,
interest (except as expressly provided for in this Section) or penalties to any
Party with respect to any matter.  Seller
and Buyer shall each bear its own legal fees and other costs of presenting its
case.  Seller shall bear one-half
and Buyer shall bear one-half of the costs and expenses of the Accounting
Arbitrator.  Within ten (10) days
after the earlier of (i) the expiration of Buyer’s fifteen (15) day
review period without delivery of any written report or (ii) the date on
which the Parties or the Accounting Arbitrator finally determine the Sale
Price, (x) Buyer shall pay to Seller the amount by which the adjusted Sale
Price paid by Buyer to Seller on the Closing Date exceeds the final adjusted
Sale Price as determined pursuant to this Section 30 or (y) Seller shall
pay to Buyer the amount by which the final adjusted Sale Price as determined
pursuant to this Section 30 exceeds the adjusted Sale Price paid by Buyer to
Seller on the Closing Date, as applicable. 
Any post-adjusted Sale Price pursuant to this Section 30 shall bear
interest from the Closing Date to the date of payment at the Agreed Interest Rate.  Buyer shall assist Seller in preparation of
the final statement of the Sale Price under this Section 30 by furnishing
invoices, receipts, reasonable access to personnel and such other assistance as
may be requested by Seller to facilitate such process post-Closing.

 

24

 

(b)           With
respect to any proceeds attributable to the ownership of the Properties prior
to the Effective Time that are received after the Closing Date (other than the
Suspended Royalties), Seller shall be entitled to all such proceeds.  Should Buyer receive after Closing any
proceeds to which Seller is entitled under the immediately foregoing sentence,
Buyer shall fully disclose, account for and promptly, but in no event later
than thirty (30) days after receipt, remit the same to Seller.

(c)           With
respect to any proceeds attributable to (i) the ownership of the Properties on
or after the Effective Time or (ii) the Suspended Royalties that are, in each
case, received after the Closing Date, Buyer shall be entitled to all such
proceeds.  Should Seller or its
Affiliates receive after Closing any proceeds to which Buyer is entitled under
the immediately foregoing sentence, Seller shall fully disclose, account for
and promptly, but in no event later than thirty (30) days after receipt, remit
the same to Buyer.

31.           Notices. All communications required or permitted under
this Agreement shall be in writing, in English, and any communication or
delivery hereunder shall be deemed to have been fully made if delivered by
personal delivery or if sent by nationally recognized next-business-day
delivery courier service or sent by facsimile transmission, to the address as
set forth below:

If to Seller:                                                                                       The Bank of New York Trust Company, N.A.,
as trustee of Santa Fe Energy Trust

919 Congress, Suite 500

Austin, Texas 78701

Attention:              Mike Ulrich

Telecopy:              512-236-9275

 

With a copy to: 
                                                       The Bank of New York Trust Company, N.A.,
as trustee of Santa Fe Energy Trust

One Wall Street, 11th Floor

New York, New York 10286

Attention:              Robert E. Bailey

Telecopy:              212-635-6590

 

and with a copy to:                                                Bracewell & Giuliani LLP

111 Congress Avenue

Suite 2300

Austin, Texas 78701-4061

Attention:              Thomas W. Adkins

Telecopy:              512.479.3940

 

If to Buyer:                                                                                    Amen Properties, Inc.

303 W. Wall Street, Suite 2300

Midland, Texas 79701

Attention:              Jon Morgan

Telephone:            (432) 684-8200

Telecopy:              (432) 685-3143

 

With a copy to: 
                                                       Beckham, Rector & Eargle, L.L.P.

First Financial Bank Building

400 Pine Street, Suite 1020

Abilene, Texas  79604

Attention:              John L. Beckham

Telephone:            (325) 673-1393

Telecopy:              (325) 673-3504

 

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

 

25

 

is addressed, or in the
case by notice sent by courier service or mail, on the date three (3) Business
Days after the date sent.

32.           Further Assurance.  After Closing each of the Parties shall
execute, acknowledge and deliver to the other such further instruments, and
take such other actions as may be reasonably necessary to carry out the
provisions of this Agreement.  However,
Buyer shall assume all responsibility for notifying the purchaser(s) of oil and
gas production from the Properties, and such other designated persons who may
be responsible for disbursing payments for the purchase of such production, of
the change of ownership of the Properties, and Buyer shall take all actions
necessary to effectuate the transfer of such payments to Buyer.

33.           Disclaimer
of Warranties.  EXCEPT AS PROVIDED IN SECTION 6, ANY
INSTRUMENT OF CONVEYANCE OR SALE EXECUTED PURSUANT HERETO SHALL BE EXECUTED
WITHOUT ANY WARRANTY OF TITLE, EITHER EXPRESS, IMPLIED, STATUTORY, OR
OTHERWISE, WITHOUT ANY EXPRESS OR IMPLIED WARRANTY OR REPRESENTATION AS TO THE
MERCHANTABILITY OF ANY OF THE EQUIPMENT OR OTHER PERSONAL PROPERTY INCLUDED IN
THE PROPERTIES OR ITS FITNESS FOR ANY PARTICULAR PURPOSE, AND WITHOUT ANY OTHER
EXPRESS OR IMPLIED WARRANTY OR REPRESENTATION WHATSOEVER.  IT IS UNDERSTOOD AND AGREED THAT BUYER SHALL
HAVE INSPECTED THE PROPERTIES FOR ALL PURPOSES, INCLUDING WITHOUT LIMITATION
FOR THE PURPOSE OF DETECTING THE PRESENCE OF NORM AND MAN MADE MATERIAL FIBERS
(HEREINAFTER REFERRED TO AS “MMMF”) AND SATISFIED ITSELF AS TO THEIR
PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND SUBSURFACE, INCLUDING,
BUT NOT LIMITED TO, CONDITIONS RELATED TO THE PRESENCE, RELEASE, OR DISPOSAL OF
HAZARDOUS SUBSTANCES, AND THAT BUYER IS RELYING SOLELY UPON THE RESULTS OF SUCH
INSPECTION OF THE PROPERTIES AND SHALL ACCEPT ALL OF THE SAME IN THEIR “AS IS,
WHERE IS” CONDITION.  SELLER DISCLAIMS
ALL LIABILITY ARISING IN CONNECTION WITH THE PRESENCE OF NORM OR MMMF ON THE
PROPERTIES AND IF TESTS HAVE BEEN CONDUCTED BY SELLER FOR THE PRESENCE OF NORM
OR MMMF, SELLER DISCLAIMS ANY WARRANTY RESPECTING THE ACCURACY OF SUCH TESTS OR
RESULTS.  IN ADDITION, SELLER AND ITS
CONSULTANTS MAKES NO AND EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, AS TO (I) TITLE TO ANY OF THE PROPERTIES, (II) THE
CONTENTS, CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, ECONOMIC
INFORMATION OR REPORTS, OR ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT,
OR ANY GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE SUBJECT
ASSETS OR THE PROPERTIES, (III) THE QUANTITY, QUALITY OR RECOVERABILITY OF
PETROLEUM SUBSTANCES IN OR FROM THE SUBJECT ASSETS OR THE PROPERTIES,
(IV) THE EXISTENCE OF ANY PROSPECT, RECOMPLETION, INFILL OR STEP-OUT DRILLING
OPPORTUNITIES, (V) ANY ESTIMATES OF THE VALUE OF THE SUBJECT ASSETS OR
PROPERTIES OR FUTURE REVENUES GENERATED BY THE SUBJECT PROPERTIES OR SUBJECT
ASSETS, (VI) THE PRODUCTION OF PETROLEUM SUBSTANCES FROM THE PROPERTIES OR
SUBJECT ASSETS, OR WHETHER PRODUCTION HAS BEEN CONTINUOUS, OR IN PAYING
QUANTITIES, OR ANY PRODUCTION OR DECLINE RATES, (VII) THE MAINTENANCE,
REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE SUBJECT
ASSETS OR PROPERTIES, (VIII) INFRINGEMENT OF ANY INTELLECTUAL PROPERTY
RIGHT, OR (IX) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE
AVAILABLE OR COMMUNICATED TO SELLER OR ITS AFFILIATES, OR ITS OR THEIR
EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY DISCUSSION OR
PRESENTATION RELATING THERETO, AND FURTHER DISCLAIMS ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.  ANY AND ALL SUCH DATA,
INFORMATION AND OTHER MATERIALS FURNISHED BY SELLER IS PROVIDED TO BUYER AS A
CONVENIENCE AND BUYER AFFIRMS THAT IT HAS RELIED SOLELY ON ITS OWN EVALUATION
OF THE PROPERTIES AND NOT ON INFORMATION FURNISHED BY SELLER.  AFTER CONSULTATION WITH AN ATTORNEY OF ITS
OWN SELECTION, BUYER EXPRESSLY WAIVES THE PROVISIONS OF CHAPTER XVII,
SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION
17.555, 

 

26

 

WHICH
IS NOT WAIVED), VERNON’S TEXAS CODE ANNOTATED, BUSINESS AND COMMERCE CODE (THE “DECEPTIVE
TRADE PRACTICES ACT”) AND IF ANY OF THE PROPERTIES ARE LOCATED IN LOUISIANA
AND ARE SUBJECT TO LOUISIANA LAW, BUYER EXPRESSLY WAIVES THE WARRANTY OF
FITNESS FOR INTENDED PURPOSES OR GUARANTEE AGAINST HIDDEN OR LATENT REDHIBITORY
VICES UNDER LOUISIANA LAW, INCLUDING LOUISIANA CIVIL CODE ARTICLES 2520 (1870)
THROUGH 2548 (1870) AND THE WARRANTY IMPOSED BY LOUISIANA CIVIL CODE ARTICLES
2476; WAIVES ALL RIGHTS IN REDHIBITION PURSUANT TO LOUISIANA CIVIL CODE
ARTICLES 2420, ET SEQ; ACKNOWLEDGES THAT THIS EXPRESS WAIVER SHALL BE
CONSIDERED A MATERIAL AND INTEGRAL PART OF THIS SALE AND THE CONSIDERATION
THEREOF; AND ACKNOWLEDGES THAT THIS WAIVER HAS BEEN BROUGHT TO THE ATTENTION OF
BUYER AND EXPLAINED IN DETAIL AND THAT BUYER HAS VOLUNTARILY AND KNOWINGLY
CONSENTED TO THIS WAIVER OF WARRANTY OF FITNESS AND/OR WARRANTY AGAINST
REDHIBITORY VICES AND DEFECT FOR THE PROPERTIES.  BUYER ACKNOWLEDGES THAT THIS EXPRESS WAIVER
SHALL BE CONSIDERED A MATERIAL AND INTEGRAL PART OF THIS SALE AND THE CONSIDERATION
THEREOF; AND ACKNOWLEDGES THAT THIS WAIVER HAS BEEN BROUGHT TO THE ATTENTION OF
BUYER AND EXPLAINED IN DETAIL AND THAT BUYER HAS VOLUNTARILY AND KNOWINGLY
CONSENTED TO THIS WAIVER.  ALL
INSTRUMENTS OF CONVEYANCE TO BE DELIVERED BY SELLER AT CLOSING SHALL EXPRESSLY
SET FORTH THE DISCLAIMERS OF REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS
PARAGRAPH.  IN ORDER TO EVIDENCE ITS
ABILITY TO GRANT SUCH WAIVER, BUYER HEREBY REPRESENTS AND WARRANTS TO SELLER THAT
BUYER (A) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION AND (B) IS
REPRESENTED BY LEGAL COUNSEL, OF ITS OWN SELECTION, IN SEEKING OR ACQUIRING THE
INTERESTS.

34.           Expenses.  Except as expressly otherwise provided
herein, all expenses incurred by Seller in connection with this Agreement, and
all other matters related to the Closing, including without limitation, all
fees and expenses of counsel, accountants and financial advisers employed by
Seller, shall be borne solely and entirely by Seller, and all such expenses
incurred by Buyer shall be borne solely and entirely by Buyer.

35.           Due Diligence.     Buyer represents that it has performed, or
will perform prior to Closing, sufficient review and due diligence with respect
to the Properties, which includes reviewing well-data, title, and other files,
and performing necessary evaluations, assessments, and other tasks involved in
evaluating the Properties, to satisfy its requirements completely and to enable
it to make an informed decision to acquire the Properties under the terms of
this Agreement.  Buyer is capable of
making such investigation, inspection, review and evaluation of the Properties
as a prudent purchaser would deem appropriate under the circumstances,
including with respect to all matters relating to the Properties, their value, operation
and suitability.  Each of Seller and
Buyer has had the opportunity to exercise business discretion in relation to
the negotiation of the details of the transactions contemplated hereby.  This Agreement is the result of arm’s-length
negotiations from equal bargaining positions. 
It is expressly agreed that this Agreement shall not be construed
against any Party, and no consideration shall be given or presumption made, on
the basis of who drafted this Agreement or any particular provision thereof.

36.           Material Factor.  Buyer acknowledges that Buyer’s
representations herein are a material inducement to Seller to enter into this
Agreement with, and close the sale to, Buyer.

37.           Press Release.  Until the Closing, except as approved by
the Parties there shall be no press release or public communication concerning
this purchase and sale or any other transaction contemplated hereby by either
Party or their Affiliates; provided, however, the foregoing shall
not restrict disclosures by Buyer or Seller (i) to the extent that such
disclosures are required by applicable securities or other Laws or the
applicable rules of any stock exchange having jurisdiction over the disclosing
Party or its Affiliates, (ii) to Governmental Authorities and third
Persons holding preferential rights to purchase, rights of consent or other
rights that may be applicable to the transactions contemplated by this
Agreement, as reasonably necessary to provide notices, seek waivers. amendments
or terminations of such rights, or seek such consents, or (iii) to third
Persons to the extent required by the Contracts.  Seller and Buyer shall each be liable for the
compliance of its respective Affiliates with the terms of this Section

 

 

27

37.  The Parties will endeavor to consult each
other in a timely manner on all press releases required by applicable Law.  Seller has advised Buyer that Seller will be
required under applicable Law to make certain disclosures regarding this
Agreement and the transactions contemplated hereby.

38.           Entire Agreement.               This Agreement and the
Confidentiality Agreement and the agreements and instruments contemplated
hereby and thereby state the entire agreement between the Parties regarding the
subject matter hereof and thereof and may be supplemented, altered, amended,
modified or revoked by writing only, signed by both Parties.  This Agreement supersedes any prior
agreements between the Parties concerning sale of the Properties, except that
the Confidentiality Agreement shall survive the execution and of this Agreement
and shall terminate at Closing.  The
headings are for guidance only and shall have no significance in the
interpretations of this Agreement.

39.           Tax Reporting.     The allocated values set forth on Exhibit
B shall be completed in the manner required by Section 1060 of the
Code.  Buyer and Seller further agree to
comply with all filing, notice and reporting requirements described in
Section 1060 of the Code, including the timely preparation and filing of Form 8594
based on the allocated values.  Buyer and
Seller hereby agree that they will report the federal, state, foreign and other
Tax consequences of the transactions contemplated by this Agreement in a manner
consistent with the allocated values set forth on Exhibit B (as such may
be revised per the terms hereof).

40.           Assignability.       This Agreement and the rights and
obligations hereunder shall not be assignable or delegable by either Party
hereto without the prior written consent of the other, which consent may be
given or withheld at the sole discretion of the Party entitled to grant such
consent, and any transfer or delegation made without such consent shall be
void.  Notwithstanding anything to the
contrary in this Section 40, Buyer may, prior to Closing, assign its rights
hereunder to a wholly-owned Affiliate of Buyer by delivering to Seller prior to
Closing an assignment agreement in form and substance mutually acceptable to
Seller; provided, however, such assignment shall not release, and Buyer shall remain
liable for, all obligations to be performed by Buyer under this Agreement and
the instruments delivered by Buyer or its Affiliates hereunder.  Subject to the foregoing, this Agreement
shall be binding upon and inure to the benefit of the Parties hereto and their
respective successors and assigns.

41.           Choice
of Law.     This Agreement
shall be governed by the Laws of the State of Texas, without regard to
principles of conflicts of laws that would direct the application of the Laws
of another jurisdiction.

42.           Dispute Resolution.  Each Party consents to personal jurisdiction
in any action brought in the United States federal courts located in the State
of Texas with respect to any dispute, claim or controversy arising out of or in
relation to or in connection with this Agreement, and each of the Parties
hereto agrees that any action instituted by it against the other with respect
to any such dispute, controversy or claim (except to the extent a dispute,
controversy, or claim arising out of or in relation to or in connection with
the allocation of the Sale Price pursuant to Section 5, the determination of a
Defect Amount pursuant to Section 9 or the determination of Sale Price
adjustments pursuant to Section 15 is referred to an expert pursuant to those
Sections) will be instituted exclusively in the United States District Court
for the Southern District of Texas, Houston Division.  The Parties hereby waive trial by jury in any
action, proceeding or counterclaim brought by any Party against another in any
matter whatsoever arising out of or in relation to or in connection with this
Agreement.

43.           Counterpart
Execution.     This
Agreement may be executed in counterparts and each counterpart shall constitute
a binding agreement as if the Parties had executed a single document.

44.           Severance
of Invalid Provisions.      If, for any reason and for so long as, any
clause or provision of this Agreement is held by a court of competent
jurisdiction to be illegal, invalid, unenforceable or unconscionable under any
present or future Law (or interpretation thereof), the remainder of this
Agreement shall not be affected by such illegality or invalidity.  Any such invalid provision shall be deemed
severed from this Agreement as if this Agreement had been executed with the
invalid provision eliminated.  The
surviving provisions of this Agreement shall remain in full force and effect
unless the removal of the invalid provision destroys the legitimate purpose of
this Agreement; in which event this 

 

28

 

Agreement
shall be null and void.  The Parties
shall negotiate in good faith for any required modifications to this Agreement.

45.           Limitation on Damages.  Notwithstanding anything to the contrary
contained herein, none of Buyer, Seller or any of their respective Affiliates
shall be entitled to special, consequential, lost profits or punitive damages
in connection with this Agreement and the transactions contemplated hereby
(other than special, consequential, lost profits or punitive damages suffered
by third Persons for which responsibility is allocated between the Parties) and
each of Buyer and Seller, for itself and on behalf of its Affiliates, hereby
expressly waives any right to special or punitive damages in connection with
this Agreement and the transactions contemplated hereby.  The Parties acknowledge that the waivers and
indemnities set forth herein constitute a specifically bargained for allocation
of risk among the Parties, which the Parties agree and acknowledge satisfies
the express negligence rule and conspicuousness requirement under Texas Law.

46.           References.  In this Agreement: (a) references to any
gender includes a reference to all other genders; (b) references to the
singular includes the plural, and vice versa; (c) reference to any Section
means a Section of this Agreement; (d) reference to any Exhibit or Schedule
means an Exhibit or Schedule to this Agreement, all of which are incorporated
into and made a part of this Agreement; (e) unless expressly provided to the
contrary, “hereunder”, “hereof”, “herein” and words of similar import are
references to this Agreement as a whole and not any particular Section or other
provision of this Agreement; (f) references to “$” or “dollars” means United
States dollars; and (g) “include” and “including” shall mean include or
including without limiting the generality of the description preceding such
term.

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

48.           Third Person Beneficiaries.  Nothing in this Agreement shall entitle any
Person other than Buyer and Seller to any claim, cause of action, remedy or
right of any kind, except the rights expressly provided to the Persons
described in Sections 11 and 23.

49.           Capacity as Trustee.  Seller is executing and delivering this
Agreement solely in its capacity as Trustee of Santa Fe Energy Trust (the “Trust”),
and the Parties intend that the rights of Buyer shall be strictly limited to
those expressly set forth in this Agreement, and that any and all liabilities
and obligations of Seller arising hereunder or in connection with the
transactions contemplated hereby shall be satisfied, if at all, only by
recourse to the assets of the Trust, and that in no circumstance whatsoever
shall BNY be liable or responsible for any liability or obligation arising
hereunder or in connection with the transactions contemplated hereby.

50.           Acknowledgement.  BUYER ACKNOWLEDGES THAT IT HAS READ THIS
AGREEMENT IN ITS ENTIRETY, AND THAT IT UNDERSTANDS ALL THE PROVISIONS SET FORTH
THEREIN, INCLUDING, BUT NOT LIMITED TO, THOSE PROVISIONS LOCATED IN SECTIONS 11
AND 23 WHEREIN BUYER AGREES TO INDEMNIFY SELLER GROUP IN CERTAIN CIRCUMSTANCES
EVEN THOUGH THE LOSSES, COSTS, EXPENSE AND/OR DAMAGES MAY HAVE BEEN CAUSED BY
THE GROSS, SOLE, CONCURRENT, ACTIVE OR PASSIVE NEGLIGENCE OF THE SELLER, ITS
EMPLOYEES, OR ANY THIRD PARTY AND EVEN THOUGH THE SELLER MAY BE RESPONSIBLE FOR
SUCH LOSSES, COSTS, EXPENSES AND/OR DAMAGES UNDER ANY THEORY OF LAW, INCLUDING
BUT NOT LIMITED TO STRICT LIABILITY

[Remainder of Page Intentionally Left Blank.  Signature Page to Follow]

 

 

 

 

29

 

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

 

 

	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  THE
  BANK OF NEW YORK TRUST COMPANY, N.A.,

  solely in its capacity as Trustee of Santa Fe Energy Trust

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Mike Ulrich

  
	
   

  	
  Name:

  	
  Mike Ulrich

  
	
   

  	
  Title:

  	
  Vice President

  
					

 

 

 

	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
  AMEN
  PROPERTIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Eric Oliver

  
	
   

  	
  Name:

  	
  Eric Oliver

  
	
   

  	
  Title:

  	
  Chairman

  
					

 

 

 

 

 

 

 

 

Signature Page to
Purchase and Sale Agreement

 

 

EXHIBIT C

 

FORM OF ASSIGNMENT, BILL OF SALE AND CONVEYANCE

 

 

ASSIGNMENT, BILL OF SALE AND CONVEYANCE

 

The Bank of New York Trust Company, N.A., solely in its
capacity as Trustee of Santa Fe Energy Trust (“Assignor”), whose address is 919 Congress, Suite 500, Austin, Texas 78701 for
Ten Dollars and other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), does hereby GRANT, BARGAIN,
SELL, CONVEY, ASSIGN, TRANSFER, SET OVER, and DELIVER unto [Amen Properties,
Inc.], a Delaware
corporation, whose address is
303 W. Wall Street, Suite 2300, Midland, Texas 79701  (“Assignee”), effective as of October 1, 2007 at 7:00 a.m., local time (“Effective
Time”), said time to be determined for each locality in which the Properties (as
such term is defined below) are located in accordance with the time generally
observed in said locality, all of Assignor’s right, title and interest in and
to the following:

A.                                   any
and all interests in the instruments set forth in Attachment 1 of Exhibit
A attached hereto, including, but not limited to such interests
constituting an undivided variable royalty interest in and to the hydrocarbons
that may be produced, saved, and marketed from the Subject Assets equal to
ninety percent (90%) of the net proceeds attributable to the Properties, all as
further described in the instruments set forth in Attachment 1 of Exhibit
A attached hereto (“Net Profits Royalties”);

B.                                     any
and all interests in the oil and gas leases, oil, gas and mineral leases and
subleases, royalties, overriding royalties, net profits interests, mineral fee
interests, carried interests, and other rights to oil and gas in place, and
mineral servitudes, that are described on Attachment 2 of Exhibit A (“Leases”);

C.                                     any
and all interests in any and all oil, gas, water, CO2 or injection
wells located on the Leases or on the pooled, communitized or unitized acreage
that includes all or any part of the Leases, including, but not limited to the
interests in the wells shown on Attachment 3 of Exhibit A
attached hereto (“Wells”):

D.                                    any
and all interests in all pooled, communitized or unitized acreage which
includes all or part of any Leases (“Units”, and together with the Leases and
the Wells, the “Subject Assets”), and all tenements, hereditaments and
appurtenances belonging to the Leases and Units.

E.                                      any
and all any amounts payable to Assignor that are attributable to the Net
Profits Royalties that are, on or after the Closing Date, held in suspense by
any Person as of the Closing Date (regardless of whether such amounts are
attributable to production for periods before, on or after the Effective Time
and any interest accrued in escrow accounts for such suspended funds (“Suspended
Royalties”);

F.                                      all
currently existing contracts, agreements and instruments with respect to the
Properties, to the extent burdening or applicable to the Properties, including
operating agreements, unitization, pooling, and communitization agreements,
declarations and orders, area of mutual interest agreements, joint venture
agreements, farmin and farmout agreements, exchange agreements, transportation
agreements, agreements for the sale and purchase of oil and gas and processing
agreements (“Contracts”); and

G.                                     all
data and records of Assignor, to the extent relating solely to the Net Profits
Royalties, the Suspended Royalties or the Contracts.

1

 

All of the real and personal properties, rights, titles, and
interests described in paragraphs
(A) through (D) above are hereinafter collectively called the “Properties” or,
individually, a “Property”, subject to the limitations and
terms expressly set forth herein and in Exhibit A and Exhibit B; provided, however, the
Properties shall in no event include any of the Excluded Properties (as such
tem is defined in the Purchase Agreement.

TO HAVE AND TO HOLD the Properties unto Assignee, its
successors and assigns, forever.

This Assignment, Bill of Sale and Conveyance (the “Assignment”)
is made and accepted expressly subject to the following terms and conditions:

1.     This Assignment is executed and delivered pursuant to and made
subject to that certain Purchase and Sale Agreement dated November 8, 2007 (the
“Purchase Agreement”) between Assignor, as Seller, and Assignee, as Buyer, and
in the event of any conflict or inconsistency between any term hereof and any
term of the Purchase Agreement, the terms of the Purchase Agreement shall in
all respects control.  All capitalized
terms not defined herein shall have the meaning ascribed to such term in the
Purchase Agreement

2.     THIS ASSIGNMENT IS MADE AND DELIVERED WITHOUT ANY WARRANTY OF
TITLE, EITHER EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, WITHOUT ANY EXPRESS OR
IMPLIED WARRANTY OR REPRESENTATION AS TO THE MERCHANTABILITY OF ANY OF THE
EQUIPMENT OR OTHER PERSONAL PROPERTY INCLUDED IN THE PROPERTIES OR ITS FITNESS
FOR ANY PARTICULAR PURPOSE, AND WITHOUT ANY OTHER EXPRESS OR IMPLIED WARRANTY
OR REPRESENTATION WHATSOEVER.  IT IS
UNDERSTOOD AND AGREED THAT ASSIGNEE HAS INSPECTED THE PROPERTIES FOR ALL
PURPOSES, INCLUDING WITHOUT LIMITATION FOR THE PURPOSE OF DETECTING THE
PRESENCE OF NORM AND MAN MADE MATERIAL FIBERS (HEREINAFTER REFERRED TO AS “MMMF”)
AND SATISFIED ITSELF AS TO THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH
SURFACE AND SUBSURFACE, INCLUDING, BUT NOT LIMITED TO, CONDITIONS RELATED TO
THE PRESENCE, RELEASE, OR DISPOSAL OF HAZARDOUS SUBSTANCES, AND THAT ASSIGNEE
IS RELYING SOLELY UPON THE RESULTS OF SUCH INSPECTION OF THE PROPERTIES AND
SHALL ACCEPT ALL OF THE SAME IN THEIR “AS IS, WHERE IS” CONDITION.  ASSIGNOR DISCLAIMS ALL LIABILITY ARISING IN
CONNECTION WITH THE PRESENCE OF NORM OR MMMF ON THE PROPERTIES AND IF TESTS
HAVE BEEN CONDUCTED BY ASSIGNOR FOR THE PRESENCE OF NORM OR MMMF, ASSIGNOR
DISCLAIMS ANY WARRANTY RESPECTING THE ACCURACY OF SUCH TESTS OR RESULTS.  IN ADDITION, ASSIGNOR AND ITS CONSULTANTS
MAKES NO AND EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO (I) TITLE TO ANY OF THE PROPERTIES, (II) THE CONTENTS,
CHARACTER OR NATURE OF ANY DESCRIPTIVE MEMORANDUM, ECONOMIC INFORMATION OR
REPORTS, OR ANY REPORT OF ANY PETROLEUM ENGINEERING CONSULTANT, OR ANY
GEOLOGICAL OR SEISMIC DATA OR INTERPRETATION, RELATING TO THE SUBJECT ASSETS OR
THE PROPERTIES, (III) THE QUANTITY, QUALITY OR RECOVERABILITY OF PETROLEUM
SUBSTANCES IN OR FROM THE SUBJECT ASSETS OR THE PROPERTIES, (IV) THE
EXISTENCE OF ANY PROSPECT, RECOMPLETION, INFILL OR STEP-OUT DRILLING
OPPORTUNITIES, (V) ANY ESTIMATES OF THE VALUE OF THE SUBJECT ASSETS OR
PROPERTIES OR FUTURE REVENUES GENERATED BY THE SUBJECT PROPERTIES OR SUBJECT
ASSETS, (VI) THE PRODUCTION OF PETROLEUM SUBSTANCES FROM THE PROPERTIES OR
SUBJECT ASSETS, OR WHETHER PRODUCTION HAS BEEN CONTINUOUS, OR IN PAYING
QUANTITIES, OR ANY PRODUCTION OR DECLINE RATES, (VII) THE MAINTENANCE,
REPAIR, CONDITION, QUALITY, SUITABILITY, DESIGN OR MARKETABILITY OF THE SUBJECT
ASSETS OR PROPERTIES, (VIII) INFRINGEMENT OF ANY INTELLECTUAL PROPERTY
RIGHT, OR (IX) ANY OTHER MATERIALS OR INFORMATION THAT MAY HAVE BEEN MADE
AVAILABLE OR COMMUNICATED TO ASSIGNOR OR ITS AFFILIATES, OR ITS OR THEIR
EMPLOYEES, AGENTS, CONSULTANTS, REPRESENTATIVES OR ADVISORS IN CONNECTION WITH
THE TRANSACTIONS CONTEMPLATED BY THIS ASSIGNMENT OR ANY DISCUSSION OR
PRESENTATION RELATING THERETO, AND FURTHER DISCLAIMS ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS 

2

 

FOR A PARTICULAR
PURPOSE.  ANY AND ALL SUCH DATA,
INFORMATION AND OTHER MATERIALS FURNISHED BY ASSIGNOR IS PROVIDED TO ASSIGNEE
AS A CONVENIENCE AND ASSIGNEE AFFIRMS THAT IT HAS RELIED SOLELY ON ITS OWN
EVALUATION OF THE PROPERTIES AND NOT ON INFORMATION FURNISHED BY ASSIGNOR.  AFTER CONSULTATION WITH AN ATTORNEY OF ITS
OWN SELECTION, ASSIGNEE EXPRESSLY WAIVES THE PROVISIONS OF CHAPTER XVII,
SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION
17.555, WHICH IS NOT WAIVED), VERNON’S TEXAS CODE ANNOTATED, BUSINESS AND
COMMERCE CODE (THE “DECEPTIVE TRADE PRACTICES ACT”) AND IF ANY OF THE
PROPERTIES ARE LOCATED IN LOUISIANA AND ARE SUBJECT TO LOUISIANA LAW, ASSIGNEE
EXPRESSLY WAIVES THE WARRANTY OF FITNESS FOR INTENDED PURPOSES OR GUARANTEE
AGAINST HIDDEN OR LATENT REDHIBITORY VICES UNDER LOUISIANA LAW, INCLUDING
LOUISIANA CIVIL CODE ARTICLES 2520 (1870) THROUGH 2548 (1870) AND THE WARRANTY
IMPOSED BY LOUISIANA CIVIL CODE ARTICLES 2476; WAIVES ALL RIGHTS IN REDHIBITION
PURSUANT TO LOUISIANA CIVIL CODE ARTICLES 2420, ET SEQ; ACKNOWLEDGES THAT THIS
EXPRESS WAIVER SHALL BE CONSIDERED A MATERIAL AND INTEGRAL PART OF THIS SALE
AND THE CONSIDERATION THEREOF; AND ACKNOWLEDGES THAT THIS WAIVER HAS BEEN
BROUGHT TO THE ATTENTION OF ASSIGNEE AND EXPLAINED IN DETAIL AND THAT ASSIGNEE
HAS VOLUNTARILY AND KNOWINGLY CONSENTED TO THIS WAIVER OF WARRANTY OF FITNESS
AND/OR WARRANTY AGAINST REDHIBITORY VICES AND DEFECT FOR THE PROPERTIES.  ASSIGNEE ACKNOWLEDGES THAT THIS EXPRESS
WAIVER SHALL BE CONSIDERED A MATERIAL AND INTEGRAL PART OF THIS SALE AND THE
CONSIDERATION THEREOF; AND ACKNOWLEDGES THAT THIS WAIVER HAS BEEN BROUGHT TO
THE ATTENTION OF ASSIGNEE AND EXPLAINED IN DETAIL AND THAT ASSIGNEE HAS
VOLUNTARILY AND KNOWINGLY CONSENTED TO THIS WAIVER.  ALL INSTRUMENTS OF CONVEYANCE TO BE DELIVERED
BY ASSIGNOR AT CLOSING SHALL EXPRESSLY SET FORTH THE DISCLAIMERS OF
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS PARAGRAPH.  IN ORDER TO EVIDENCE ITS ABILITY TO GRANT
SUCH WAIVER, ASSIGNEE HEREBY REPRESENTS AND WARRANTS TO ASSIGNOR THAT ASSIGNEE
(A) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION AND (B) IS
REPRESENTED BY LEGAL COUNSEL, OF ITS OWN SELECTION, IN SEEKING OR ACQUIRING THE
INTERESTS.

3.     To the extent permitted by law, Assignee shall be subrogated to
Assignor’s rights in and to representations, warranties and covenants given by
others with respect to the Properties, and Assignor hereby grants and transfers
to Assignee, its successors and assigns, to the extent so transferable and
permitted by law, the benefit of and the right to enforce the covenants,
representations and warranties, if any, which Assignor is entitled to enforce with
respect to the Properties.

4.     Assignee hereby assumes and agrees to fully and timely pay,
perform, and discharge in accordance with their terms, the all duties,
liabilities and obligations directly and primarily arising out of the
Properties.

5.     This Assignment is made expressly subject to and Assignee hereby
assumes and ratifies all Leases and Contracts, of which Assignee has actual
notice, (collectively, the “Assumed Contracts”).  Assignee shall observe and comply with all
covenants, terms and provisions, express or implied, to the extent of Assignee’s
interest in the Properties, in the Assumed Contracts, and shall execute such
instruments of ratification and joinder as may be required by the terms thereof
or the other parties thereto.

6.     Assignor agrees to execute, acknowledge and deliver, or cause
its affiliates to execute, acknowledge and deliver, to Assignee, from time to
time, such other and additional instruments, notices, and other documents, and
to do all such other and further acts and things as may be necessary to more
fully and effectively grant, convey and assign to Assignee the Properties.

7.     This Assignment shall be binding upon and inure to the benefit
of Assignor and Assignee and their respective successors and assigns and are
covenants running with the land and with each subsequent transfer or assignment
of the Properties or any part thereof.

3

 

8.     This Assignment may be executed in any number of counterparts,
each of which will for all purposes be deemed to be an original, and all of
which are identical except that, to facilitate recordation, in any particular
county or parish counterpart portions of Exhibit A hereto which describe
properties situated in counties or parishes other than the county or parishes
in which such counterpart is to be recorded may have been omitted.

[Remainder of Page
Intentionally Left Blank]

 

4

 

IN WITNESS WHEREOF, Assignor and Assignee
have executed this Assignment, Bill of Sale and Conveyance on the date set
forth in their respective acknowledgments below, but effective as of the
Effective Time.  

	
   

  	
  ASSIGNOR:

  
	
  WITNESSES:

  	
   

  
	
   

  	
  THE BANK OF NEW YORK TRUST COMPANY, N.A., 

  solely in its capacity as Trustee of Santa Fe Energy Trust

  
	
   

  	
   

  	
   

  
	
  Printed Name:

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
          Name:

  
	
  Printed Name:

  	
   

  	
          Title:

  

 

 

	
   

  	
  ASSIGNEE:

  
	
  WITNESSES:

  	
   

  	
   

  
	
   

  	
   

  	
  AMEN PROPERTIES, INC.

  
	
   

  	
   

  	
   

  
	
  Printed Name:

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
          Name:

  
	
  Printed Name:

  	
   

  	
          Title:

  

 

 

5

 

[INSERT APPROPRIATE
NOTARY BLOCKS PER EACH APPLICABLE STATE]

 

 

 

 

 

 

 

6

 

EXHIBIT A

 

PROPERTIES

 

 

Attachment 1:  Net Profits Royalties Conveyances

 

Attachment 2:  Leases

 

Attachment 3:  Wells

 

 

1

 

EXHIBIT D

 

FORM OF
NON-FOREIGN AFFIDAVIT

CERTIFICATE
OF NON-FOREIGN SELLER

 

Section 1445 of the Internal Revenue Code provides
that a transferee of a U.S. real property interest must withhold tax if the
transferor is a foreign person.  For U.S.
tax purposes (including section 1445 of the Internal Revenue Code), the owner
of a disregarded entity (which has legal title to a U.S. real property interest
under local law) will be the transferor of the property and not the disregarded
entity. To inform the transferee, Amen Properties, LLC, a Delaware corporation,
(“Buyer”), that withholding of tax is not required upon the disposition of a
U.S. real property interest by The Bank of New York Trust Company, N.A. (“BNY”)
solely in its capacity of trustee of Santa Fe Energy Trust (the Trust”) (BNY,
in its capacity as trustee of the Trust, being herein called “Trustee”; and the
Trustee, in its capacity as the seller of the properties, being called herein “Seller”),
the undersigned hereby certifies the following on behalf of the Trust and the
Seller:

 

1.             [Seller is a national association;

2.             Trust is a trust;

3.             Neither Seller nor the Trust is a
foreign corporation, foreign partnership, foreign trust, or foreign estate (as
those terms are defined in the Internal Revenue Code and Income Tax
Regulations);

4.             Neither Seller nor the Trust is a
disregarded entity as defined in Treasury Regulations Section
1.1445-2(b)(b)(2)(iii);

5.             Seller’s U.S. employer
identification number is                                     ;

6.             Trust’s U.S. employer
identification number is                                     ;

7.             Seller’s office address is:  303                                                               ;

8.             Trust’s office address is:                                                                       .]

                Seller understands
that this certification may be disclosed to the Internal Revenue Service by
Buyer and that any false statement contained herein could be punished by fine,
imprisonment, or both.

 

                Under penalties of
perjury I declare that I have examined this certification and to the best of my
knowledge and belief it is true, correct, and complete, and I further declare
that I have authority to sign this document on behalf of Seller.

 

	
  SELLER:

  
	
   

  
	
  THE BANK OF NEW YORK TRUST COMPANY, N.A., solely in its capacity as Trustee of
  Santa Fe Energy Trust

  
	
   

  
	
   

  
	
  By:

  	
   

  
	
  Name:

  
	
  Title:

  
	
  Date:

  

 

 

2

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